China's Tencent: Leading the Way in Monetizing Platforms SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of China's Tencent: Leading the Way in Monetizing Platforms
Worldwide, there is no parallel comparison to China's Tencent Holdings. The $22 billion tech giant is a collective answer to Facebook, WhatsApp, Spotify, Kindle, Skype, Pinterest, Apple Pay and others. This case explains how Tencent built a digital platform business from scratch over a period of nearly two decades. Undoubtedly, it gained significant benefits from being an early mover in developing a massive one-billion-strong user base on its gaming and messaging platforms. However, what is exceptional about Tencent is that it has been able to successfully monetize its social audience at scale - a tough challenge for most digital platform companies. Tencent's double digit growth boosted investor confidence that the company would continue to tap the spending power of its users while leveraging the growth potential of its still-nascent advertising and payments businesses. Could the most valuable company in Asia, continue to meet shareholder expectations in 2017 and beyond? Learning objective: 1. Understand the platform business model compared to the traditional pipeline business model; 2. Recognize how network effects create value on a platform; 3. Examine the three types of value that digital disruptors deliver - cost value, experience value and platform value; 4. Comprehend the challenges in monetizing platforms effectively.
Authors :: Salvatore Cantale, Ivy Buche, Joel Barbier
Swot Analysis of "China's Tencent: Leading the Way in Monetizing Platforms" written by Salvatore Cantale, Ivy Buche, Joel Barbier includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Tencent Platform facing as an external strategic factors. Some of the topics covered in China's Tencent: Leading the Way in Monetizing Platforms case study are - Strategic Management Strategies, Networking and Finance & Accounting.
Some of the macro environment factors that can be used to understand the China's Tencent: Leading the Way in Monetizing Platforms casestudy better are - – technology disruption, there is backlash against globalization, increasing commodity prices, increasing government debt because of Covid-19 spendings, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies,
increasing household debt because of falling income levels, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of China's Tencent: Leading the Way in Monetizing Platforms
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in China's Tencent: Leading the Way in Monetizing Platforms case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tencent Platform, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tencent Platform 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 China's Tencent: Leading the Way in Monetizing Platforms can be done for the following purposes –
1. Strategic planning using facts provided in China's Tencent: Leading the Way in Monetizing Platforms case study
2. Improving business portfolio management of Tencent Platform
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Tencent Platform
Strengths China's Tencent: Leading the Way in Monetizing Platforms | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tencent Platform in China's Tencent: Leading the Way in Monetizing Platforms Harvard Business Review case study are -
Analytics focus
– Tencent Platform 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 Salvatore Cantale, Ivy Buche, Joel Barbier 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.
Learning organization
- Tencent Platform is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Tencent Platform is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in China's Tencent: Leading the Way in Monetizing Platforms Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Tencent Platform has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Tencent Platform to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Tencent Platform 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.
Superior customer experience
– The customer experience strategy of Tencent Platform in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Tencent Platform is present in almost all the verticals within the industry. This has provided firm in China's Tencent: Leading the Way in Monetizing Platforms 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.
Organizational Resilience of Tencent Platform
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Tencent Platform does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Tencent Platform has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in China's Tencent: Leading the Way in Monetizing Platforms Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Operational resilience
– The operational resilience strategy in the China's Tencent: Leading the Way in Monetizing Platforms 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 Tencent Platform 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.
Innovation driven organization
– Tencent Platform is one of the most innovative firm in sector. Manager in China's Tencent: Leading the Way in Monetizing Platforms Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to lead change in Finance & Accounting field
– Tencent Platform 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 Tencent Platform in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses China's Tencent: Leading the Way in Monetizing Platforms | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of China's Tencent: Leading the Way in Monetizing Platforms are -
Lack of clear differentiation of Tencent Platform products
– To increase the profitability and margins on the products, Tencent Platform needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the segment, Tencent Platform 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.
Aligning sales with marketing
– It come across in the case study China's Tencent: Leading the Way in Monetizing Platforms 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 China's Tencent: Leading the Way in Monetizing Platforms can leverage the sales team experience to cultivate customer relationships as Tencent Platform is planning to shift buying processes online.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study China's Tencent: Leading the Way in Monetizing Platforms, it seems that the employees of Tencent Platform don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Capital Spending Reduction
– Even during the low interest decade, Tencent Platform 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.
Low market penetration in new markets
– Outside its home market of Tencent Platform, firm in the HBR case study China's Tencent: Leading the Way in Monetizing Platforms needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Tencent Platform 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Tencent Platform is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study China's Tencent: Leading the Way in Monetizing Platforms can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Salvatore Cantale, Ivy Buche, Joel Barbier suggests that, Tencent Platform is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the China's Tencent: Leading the Way in Monetizing Platforms 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 Tencent Platform has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Tencent Platform is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Tencent Platform needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Tencent Platform to focus more on services rather than just following the product oriented approach.
Opportunities China's Tencent: Leading the Way in Monetizing Platforms | 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 China's Tencent: Leading the Way in Monetizing Platforms are -
Better consumer reach
– The expansion of the 5G network will help Tencent Platform to increase its market reach. Tencent Platform 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.
Buying journey improvements
– Tencent Platform can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. China's Tencent: Leading the Way in Monetizing Platforms 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Tencent Platform in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Tencent Platform can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Tencent Platform is facing challenges because of the dominance of functional experts in the organization. China's Tencent: Leading the Way in Monetizing Platforms 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.
Building a culture of innovation
– managers at Tencent Platform 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 Finance & Accounting segment.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Tencent Platform can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Tencent Platform 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
– Tencent Platform 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 China's Tencent: Leading the Way in Monetizing Platforms - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tencent Platform to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Tencent Platform 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, China's Tencent: Leading the Way in Monetizing Platforms, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, Tencent Platform can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Loyalty marketing
– Tencent Platform has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Tencent Platform can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Tencent Platform can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats China's Tencent: Leading the Way in Monetizing Platforms External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study China's Tencent: Leading the Way in Monetizing Platforms are -
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. Tencent Platform needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Regulatory challenges
– Tencent Platform 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 Finance & Accounting industry regulations.
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. Tencent Platform 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study China's Tencent: Leading the Way in Monetizing Platforms, Tencent Platform may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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 Tencent Platform in the Finance & Accounting sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Tencent Platform 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.
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 Tencent Platform.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Tencent Platform in the Finance & Accounting industry. The Finance & Accounting 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 Tencent Platform is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Technology acceleration in Forth Industrial Revolution
– Tencent Platform has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Tencent Platform needs to keep up with the evolution of technology in the Finance & Accounting 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Tencent Platform with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Tencent Platform business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of China's Tencent: Leading the Way in Monetizing Platforms 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 China's Tencent: Leading the Way in Monetizing Platforms 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 China's Tencent: Leading the Way in Monetizing Platforms 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 China's Tencent: Leading the Way in Monetizing Platforms 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 China's Tencent: Leading the Way in Monetizing Platforms 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 Tencent Platform needs to make to build a sustainable competitive advantage.