Tencent: The WeChat Red Envelope Initiative SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Tencent: The WeChat Red Envelope Initiative
Just before the celebration of the 2014 Chinese Lunar New Year, Tencent, the world's fourth largest Internet company, launched a mobile application for its popular WeChat platform: the Red Envelope. By clicking on a virtual red envelope icon, gifts of money could be sent to or received from friends and family to celebrate this special occasion. Combining a Chinese cultural tradition with modern social networks, this simple initiative soon became a major milestone in China's mobile market. It brought more than eight million users to Tencent's WeChat Payment platform in the first eight days after the New Year, helping the company break the barrier of mobile payment adoption among its vast user base and giving it a significant advantage in the country's competitive mobile payment market. This somewhat unexpected, record-making success, also made many companies rethink how to survive and thrive in China's rapidly growing technology sector.
Swot Analysis of "Tencent: The WeChat Red Envelope Initiative" written by Ning Su, Yulin Fang, Yukun Yang includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Wechat Envelope facing as an external strategic factors. Some of the topics covered in Tencent: The WeChat Red Envelope Initiative case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Tencent: The WeChat Red Envelope Initiative casestudy better are - – supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, wage bills are increasing, increasing commodity prices, cloud computing is disrupting traditional business models,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Tencent: The WeChat Red Envelope Initiative
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Tencent: The WeChat Red Envelope Initiative case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Wechat Envelope, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Wechat Envelope operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Tencent: The WeChat Red Envelope Initiative can be done for the following purposes –
1. Strategic planning using facts provided in Tencent: The WeChat Red Envelope Initiative case study
2. Improving business portfolio management of Wechat Envelope
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Wechat Envelope
Strengths Tencent: The WeChat Red Envelope Initiative | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Wechat Envelope in Tencent: The WeChat Red Envelope Initiative Harvard Business Review case study are -
Ability to lead change in Strategy & Execution field
– Wechat Envelope is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Wechat Envelope in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Wechat Envelope in the sector have low bargaining power. Tencent: The WeChat Red Envelope Initiative has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Wechat Envelope to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Wechat Envelope has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Diverse revenue streams
– Wechat Envelope is present in almost all the verticals within the industry. This has provided firm in Tencent: The WeChat Red Envelope Initiative case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Operational resilience
– The operational resilience strategy in the Tencent: The WeChat Red Envelope Initiative Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Ability to recruit top talent
– Wechat Envelope is one of the leading recruiters in the industry. Managers in the Tencent: The WeChat Red Envelope Initiative are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Wechat Envelope are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Sustainable margins compare to other players in Strategy & Execution industry
– Tencent: The WeChat Red Envelope Initiative firm has clearly differentiated products in the market place. This has enabled Wechat Envelope to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Wechat Envelope to invest into research and development (R&D) and innovation.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Wechat Envelope digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Wechat Envelope has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
High brand equity
– Wechat Envelope has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Wechat Envelope to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Wechat Envelope has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Wechat Envelope has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Analytics focus
– Wechat Envelope is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Ning Su, Yulin Fang, Yukun Yang can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses Tencent: The WeChat Red Envelope Initiative | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tencent: The WeChat Red Envelope Initiative are -
Slow decision making process
– As mentioned earlier in the report, Wechat Envelope has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Wechat Envelope even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Tencent: The WeChat Red Envelope Initiative, in the dynamic environment Wechat Envelope has struggled to respond to the nimble upstart competition. Wechat Envelope has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Wechat Envelope products
– To increase the profitability and margins on the products, Wechat Envelope needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Wechat Envelope has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
No frontier risks strategy
– After analyzing the HBR case study Tencent: The WeChat Red Envelope Initiative, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow to strategic competitive environment developments
– As Tencent: The WeChat Red Envelope Initiative HBR case study mentions - Wechat Envelope takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Products dominated business model
– Even though Wechat Envelope has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Tencent: The WeChat Red Envelope Initiative should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Wechat Envelope has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Workers concerns about automation
– As automation is fast increasing in the segment, Wechat Envelope needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High operating costs
– Compare to the competitors, firm in the HBR case study Tencent: The WeChat Red Envelope Initiative has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Wechat Envelope 's lucrative customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Tencent: The WeChat Red Envelope Initiative HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Wechat Envelope has relatively successful track record of launching new products.
Opportunities Tencent: The WeChat Red Envelope Initiative | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Tencent: The WeChat Red Envelope Initiative are -
Buying journey improvements
– Wechat Envelope can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Tencent: The WeChat Red Envelope Initiative suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Building a culture of innovation
– managers at Wechat Envelope can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Wechat Envelope to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Creating value in data economy
– The success of analytics program of Wechat Envelope has opened avenues for new revenue streams for the organization in the industry. This can help Wechat Envelope to build a more holistic ecosystem as suggested in the Tencent: The WeChat Red Envelope Initiative case study. Wechat Envelope can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Wechat Envelope is facing challenges because of the dominance of functional experts in the organization. Tencent: The WeChat Red Envelope Initiative case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Wechat Envelope can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Tencent: The WeChat Red Envelope Initiative, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Wechat Envelope to increase its market reach. Wechat Envelope will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Wechat Envelope in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Leveraging digital technologies
– Wechat Envelope can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Learning at scale
– Online learning technologies has now opened space for Wechat Envelope to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Using analytics as competitive advantage
– Wechat Envelope has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Tencent: The WeChat Red Envelope Initiative - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Wechat Envelope to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Wechat Envelope can use these opportunities to build new business models that can help the communities that Wechat Envelope operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Developing new processes and practices
– Wechat Envelope can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Threats Tencent: The WeChat Red Envelope Initiative External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Tencent: The WeChat Red Envelope Initiative are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Wechat Envelope with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Wechat Envelope in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Shortening product life cycle
– it is one of the major threat that Wechat Envelope is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Wechat Envelope in the Strategy & Execution sector and impact the bottomline of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Tencent: The WeChat Red Envelope Initiative, Wechat Envelope may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
High dependence on third party suppliers
– Wechat Envelope high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Wechat Envelope business can come under increasing regulations regarding data privacy, data security, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Wechat Envelope will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Wechat Envelope needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Environmental challenges
– Wechat Envelope needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Wechat Envelope can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Increasing wage structure of Wechat Envelope
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Wechat Envelope.
Weighted SWOT Analysis of Tencent: The WeChat Red Envelope Initiative Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Tencent: The WeChat Red Envelope Initiative needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Tencent: The WeChat Red Envelope Initiative is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Tencent: The WeChat Red Envelope Initiative is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Tencent: The WeChat Red Envelope Initiative is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Wechat Envelope needs to make to build a sustainable competitive advantage.