SWOT Analysis / TOWS Matrix for Tencent Holdings (United States)
Based on various researches at Oak Spring University , Tencent Holdings is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation,
increasing energy prices, there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Tencent Holdings can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tencent Holdings, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tencent Holdings 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 Holdings can be done for the following purposes –
1. Strategic planning of Tencent Holdings
2. Improving business portfolio management of Tencent Holdings
3. Assessing feasibility of the new initiative in United States
4. Making a Computer Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Tencent Holdings
Strengths of Tencent Holdings | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tencent Holdings are -
Operational resilience
– The operational resilience strategy of Tencent Holdings comprises – understanding the underlying the factors in the Computer Services 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.
Low bargaining power of suppliers
– Suppliers of Tencent Holdings in the Technology sector have low bargaining power. Tencent Holdings has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Tencent Holdings to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Tencent Holdings has one of the best training and development program in Technology industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Strong track record of project management in the Computer Services industry
– Tencent Holdings is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Tencent Holdings has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Tencent Holdings staying ahead in the Computer Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Tencent Holdings 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 Holdings is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Tencent Holdings emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Tencent Holdings is one of the leading players in the Computer Services industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Tencent Holdings has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Computer Services industry. Secondly the value chain collaborators of Tencent Holdings have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Tencent Holdings 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.
Analytics focus
– Tencent Holdings 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 Computer Services industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Cross disciplinary teams
– Horizontal connected teams at the Tencent Holdings 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.
Ability to lead change in Computer Services
– Tencent Holdings is one of the leading players in the Computer Services industry in United States. Over the years it has not only transformed the business landscape in the Computer Services industry in United States but also across the existing markets. The ability to lead change has enabled Tencent Holdings in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Tencent Holdings | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tencent Holdings are -
High operating costs
– Compare to the competitors, Tencent Holdings has high operating costs in the Computer Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Tencent Holdings lucrative customers.
High cash cycle compare to competitors
Tencent Holdings has a high cash cycle compare to other players in the Computer Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Workers concerns about automation
– As automation is fast increasing in the Computer Services industry, Tencent Holdings needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on Tencent Holdings ‘s star products
– The top 2 products and services of Tencent Holdings still accounts for major business revenue. This dependence on star products in Computer Services industry has resulted into insufficient focus on developing new products, even though Tencent Holdings has relatively successful track record of launching new products.
Need for greater diversity
– Tencent Holdings 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.
Interest costs
– Compare to the competition, Tencent Holdings 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 strategic competitive environment developments
– As Tencent Holdings is one of the leading players in the Computer Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Computer Services industry in last five years.
High bargaining power of channel partners in Computer Services industry
– because of the regulatory requirements in United States, Tencent Holdings 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 Computer Services industry.
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 Tencent Holdings supply chain. Even after few cautionary changes, Tencent Holdings is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Tencent Holdings vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, Tencent Holdings 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 Computer Services industry using digital technology.
Aligning sales with marketing
– From the outside it seems that Tencent Holdings needs to have more collaboration between its sales team and marketing team. Sales professionals in the Computer Services industry have deep experience in developing customer relationships. Marketing department at Tencent Holdings can leverage the sales team experience to cultivate customer relationships as Tencent Holdings is planning to shift buying processes online.
Tencent Holdings Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Tencent Holdings are -
Manufacturing automation
– Tencent Holdings can use the latest technology developments to improve its manufacturing and designing process in Computer Services sector. 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Tencent Holdings is facing challenges because of the dominance of functional experts in the organization. Tencent Holdings can utilize new technology in the field of Computer Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Developing new processes and practices
– Tencent Holdings can develop new processes and procedures in Computer Services 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Tencent Holdings 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 Tencent Holdings to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Tencent Holdings 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 Tencent Holdings to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Use of Bitcoin and other crypto currencies for transactions in Computer Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Tencent Holdings in the Computer Services industry. Now Tencent Holdings can target international markets with far fewer capital restrictions requirements than the existing system.
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 Tencent Holdings 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Tencent Holdings can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Holdings can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Tencent Holdings to increase its market reach. Tencent Holdings 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.
Learning at scale
– Online learning technologies has now opened space for Tencent Holdings 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Tencent Holdings 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Computer Services industry, but it has also influenced the consumer preferences. Tencent Holdings 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 Holdings External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Tencent Holdings are -
Easy access to finance
– Easy access to finance in Computer Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Tencent Holdings can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Tencent Holdings has witnessed rapid integration of technology during Covid-19 in the Computer Services industry. As one of the leading players in the industry, Tencent Holdings needs to keep up with the evolution of technology in the Computer Services 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.
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 Holdings business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Tencent Holdings 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 Tencent Holdings prominent markets.
Consumer confidence and its impact on Tencent Holdings 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 Computer Services industry and other sectors.
Increasing wage structure of Tencent Holdings
– 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 Tencent Holdings.
Stagnating economy with rate increase
– Tencent Holdings 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 Computer Services industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Tencent Holdings may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Computer Services sector.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Computer Services industry are lowering. It can presents Tencent Holdings with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Computer Services sector.
Environmental challenges
– Tencent Holdings 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. Tencent Holdings can take advantage of this fund but it will also bring new competitors in the Computer Services 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. Tencent Holdings needs to understand the core reasons impacting the Computer Services industry. This will help it in building a better workplace.
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 Holdings in the Computer Services sector and impact the bottomline of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Weighted SWOT Analysis of Tencent Holdings Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Tencent Holdings 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 Tencent Holdings 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 Tencent Holdings 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 Holdings 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 Holdings needs to make to build a sustainable competitive advantage.