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 - – geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings,
banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, 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 -
Innovation driven organization
– Wechat Envelope is one of the most innovative firm in sector. Manager in Tencent: The WeChat Red Envelope Initiative Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Highly skilled collaborators
– Wechat Envelope has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Tencent: The WeChat Red Envelope Initiative HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
Superior customer experience
– The customer experience strategy of Wechat Envelope in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Wechat Envelope has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Tencent: The WeChat Red Envelope Initiative - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
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.
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.
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.
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.
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 -
Aligning sales with marketing
– It come across in the case study Tencent: The WeChat Red Envelope Initiative that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Tencent: The WeChat Red Envelope Initiative can leverage the sales team experience to cultivate customer relationships as Wechat Envelope is planning to shift buying processes online.
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.
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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Wechat Envelope supply chain. Even after few cautionary changes mentioned in the HBR case study - Tencent: The WeChat Red Envelope Initiative, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Wechat Envelope vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Wechat Envelope is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Wechat Envelope needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Wechat Envelope to focus more on services rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Wechat Envelope has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
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.
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 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.
Skills based hiring
– The stress on hiring functional specialists at Wechat Envelope has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
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.
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 -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Wechat Envelope to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Wechat Envelope to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Wechat Envelope can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Wechat Envelope in the consumer business. Now Wechat Envelope can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Manufacturing automation
– Wechat Envelope can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
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.
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.
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Wechat Envelope can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 -
Consumer confidence and its impact on Wechat Envelope demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Wechat Envelope has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Wechat Envelope needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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.
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Wechat Envelope.
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.
Stagnating economy with rate increase
– Wechat Envelope can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
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.
Regulatory challenges
– Wechat Envelope needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
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.
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.