Tencent: Innovating in China's Mobile Payment Industry SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Tencent: Innovating in China's Mobile Payment Industry
By 2014, Tencent Holdings Limited, headquartered in Shenzhen, China, had become one of the most innovative companies in Asia. It had created several leading Internet platforms to form China's largest Internet community. WeChat (or Weixin, as known to Chinese users) was one of the company's most popular mobile platforms, having grown to 200 million active users in the first two years after its launch in 2013. Shortly thereafter, WeChat rolled out a payment platform that sought to capitalize on its customer base across China. However, its president was concerned about how to expand WeChat Payment in the country's emerging mobile payment industry. Where was the next major opportunity? Tencent had to be highly creative in navigating the world's largest economy.
Authors :: Ning Su, Yulin Fang, Yukun Yang, Jiafang Yin
Swot Analysis of "Tencent: Innovating in China's Mobile Payment Industry" written by Ning Su, Yulin Fang, Yukun Yang, Jiafang Yin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Wechat Tencent facing as an external strategic factors. Some of the topics covered in Tencent: Innovating in China's Mobile Payment Industry case study are - Strategic Management Strategies, Innovation, Internet, IT and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Tencent: Innovating in China's Mobile Payment Industry casestudy better are - – cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, increasing transportation and logistics costs, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , geopolitical disruptions,
increasing commodity prices, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Tencent: Innovating in China's Mobile Payment Industry
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Tencent: Innovating in China's Mobile Payment Industry case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Wechat Tencent, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Wechat Tencent 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: Innovating in China's Mobile Payment Industry can be done for the following purposes –
1. Strategic planning using facts provided in Tencent: Innovating in China's Mobile Payment Industry case study
2. Improving business portfolio management of Wechat Tencent
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Wechat Tencent
Strengths Tencent: Innovating in China's Mobile Payment Industry | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Wechat Tencent in Tencent: Innovating in China's Mobile Payment Industry Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Tencent: Innovating in China's Mobile Payment Industry 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.
Innovation driven organization
– Wechat Tencent is one of the most innovative firm in sector. Manager in Tencent: Innovating in China's Mobile Payment Industry Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High switching costs
– The high switching costs that Wechat Tencent 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.
Sustainable margins compare to other players in Leadership & Managing People industry
– Tencent: Innovating in China's Mobile Payment Industry firm has clearly differentiated products in the market place. This has enabled Wechat Tencent to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Wechat Tencent to invest into research and development (R&D) and innovation.
Learning organization
- Wechat Tencent 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 Wechat Tencent is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Tencent: Innovating in China's Mobile Payment Industry Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Leadership & Managing People field
– Wechat Tencent 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 Tencent in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Wechat Tencent 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.
Effective Research and Development (R&D)
– Wechat Tencent 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: Innovating in China's Mobile Payment Industry - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Wechat Tencent in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Wechat Tencent is present in almost all the verticals within the industry. This has provided firm in Tencent: Innovating in China's Mobile Payment Industry 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.
Highly skilled collaborators
– Wechat Tencent 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: Innovating in China's Mobile Payment Industry HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Wechat Tencent is one of the leading recruiters in the industry. Managers in the Tencent: Innovating in China's Mobile Payment Industry are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Tencent: Innovating in China's Mobile Payment Industry | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tencent: Innovating in China's Mobile Payment Industry are -
Skills based hiring
– The stress on hiring functional specialists at Wechat Tencent 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.
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 Tencent supply chain. Even after few cautionary changes mentioned in the HBR case study - Tencent: Innovating in China's Mobile Payment Industry, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Wechat Tencent vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As Tencent: Innovating in China's Mobile Payment Industry HBR case study mentions - Wechat Tencent 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Tencent: Innovating in China's Mobile Payment Industry 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 Tencent has relatively successful track record of launching new products.
Need for greater diversity
– Wechat Tencent has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Capital Spending Reduction
– Even during the low interest decade, Wechat Tencent 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Tencent: Innovating in China's Mobile Payment Industry 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 Tencent 's lucrative customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Ning Su, Yulin Fang, Yukun Yang, Jiafang Yin suggests that, Wechat Tencent 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Tencent: Innovating in China's Mobile Payment Industry, it seems that the employees of Wechat Tencent 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Wechat Tencent 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Wechat Tencent is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Tencent: Innovating in China's Mobile Payment Industry can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Tencent: Innovating in China's Mobile Payment Industry | 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: Innovating in China's Mobile Payment Industry are -
Leveraging digital technologies
– Wechat Tencent 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.
Building a culture of innovation
– managers at Wechat Tencent 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 Leadership & Managing People segment.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Wechat Tencent 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. Wechat Tencent 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Wechat Tencent 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: Innovating in China's Mobile Payment Industry, 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 Tencent can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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.
Using analytics as competitive advantage
– Wechat Tencent 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: Innovating in China's Mobile Payment Industry - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Wechat Tencent 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 Tencent can use these opportunities to build new business models that can help the communities that Wechat Tencent operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Learning at scale
– Online learning technologies has now opened space for Wechat Tencent 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.
Buying journey improvements
– Wechat Tencent can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Tencent: Innovating in China's Mobile Payment Industry 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.
Loyalty marketing
– Wechat Tencent 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Wechat Tencent in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Low interest rates
– Even though inflation is raising its head in most developed economies, Wechat Tencent 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Wechat Tencent 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 Tencent to hire the very best people irrespective of their geographical location.
Threats Tencent: Innovating in China's Mobile Payment Industry External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Tencent: Innovating in China's Mobile Payment Industry are -
Environmental challenges
– Wechat Tencent 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 Tencent can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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 Tencent needs to understand the core reasons impacting the Leadership & Managing People 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.
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 Tencent in the Leadership & Managing People sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Wechat Tencent 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 Tencent business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Wechat Tencent 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 Leadership & Managing People industry regulations.
Consumer confidence and its impact on Wechat Tencent 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.
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: Innovating in China's Mobile Payment Industry, Wechat Tencent may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Wechat Tencent with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Stagnating economy with rate increase
– Wechat Tencent 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Wechat Tencent in the Leadership & Managing People industry. The Leadership & Managing People 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.
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 Tencent.
Weighted SWOT Analysis of Tencent: Innovating in China's Mobile Payment Industry 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: Innovating in China's Mobile Payment Industry 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: Innovating in China's Mobile Payment Industry 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: Innovating in China's Mobile Payment Industry 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: Innovating in China's Mobile Payment Industry 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 Tencent needs to make to build a sustainable competitive advantage.
