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 - – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, technology disruption, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, geopolitical disruptions,
increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, 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 -
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.
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.
Successful track record of launching new products
– Wechat Tencent has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Wechat Tencent 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.
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.
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.
Analytics focus
– Wechat Tencent 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, Jiafang Yin 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
- 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.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Wechat Tencent digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Wechat Tencent 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.
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.
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.
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.
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.
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 -
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.
Products dominated business model
– Even though Wechat Tencent 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: Innovating in China's Mobile Payment Industry should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Wechat Tencent products
– To increase the profitability and margins on the products, Wechat Tencent needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– It come across in the case study Tencent: Innovating in China's Mobile Payment Industry 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: Innovating in China's Mobile Payment Industry can leverage the sales team experience to cultivate customer relationships as Wechat Tencent is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Tencent: Innovating in China's Mobile Payment Industry, is just above the industry average. Wechat Tencent needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Tencent: Innovating in China's Mobile Payment Industry, in the dynamic environment Wechat Tencent has struggled to respond to the nimble upstart competition. Wechat Tencent has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
Increasing silos among functional specialists
– The organizational structure of Wechat Tencent is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Wechat Tencent needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Wechat Tencent to focus more on services rather than just following the product oriented approach.
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.
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.
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 -
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.
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 Tencent in the consumer business. Now Wechat Tencent can target international markets with far fewer capital restrictions requirements than the existing system.
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. Wechat Tencent can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Wechat Tencent can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Wechat Tencent has opened avenues for new revenue streams for the organization in the industry. This can help Wechat Tencent to build a more holistic ecosystem as suggested in the Tencent: Innovating in China's Mobile Payment Industry case study. Wechat Tencent can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Wechat Tencent can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Wechat Tencent to increase its market reach. Wechat Tencent 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.
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.
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.
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.
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.
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.
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 -
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.
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.
Technology acceleration in Forth Industrial Revolution
– Wechat Tencent has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Wechat Tencent needs to keep up with the evolution of technology in the Leadership & Managing People 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.
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.
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.
Increasing wage structure of Wechat Tencent
– 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 Tencent.
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 .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Wechat Tencent can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Tencent: Innovating in China's Mobile Payment Industry .
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 Tencent 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.
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.
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.
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.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Wechat Tencent can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.