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 – technology disruption, wage bills are increasing, increasing transportation and logistics costs, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, increasing household debt because of falling income levels,
geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -
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.
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.
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.
Superior customer experience
– The customer experience strategy of Tencent Holdings in Computer Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous 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.
Digital Transformation in Computer Services industry
- digital transformation varies from industry to industry. For Tencent Holdings digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Tencent Holdings 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.
Successful track record of launching new products
– Tencent Holdings has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Tencent Holdings 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.
Organizational Resilience of Tencent Holdings
– The covid-19 pandemic has put organizational resilience at the centre of everthing Tencent Holdings does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Computer Services industry
– Tencent Holdings has clearly differentiated products in the market place. This has enabled Tencent Holdings to fetch slight price premium compare to the competitors in the Computer Services industry. The sustainable margins have also helped Tencent Holdings to invest into research and development (R&D) and innovation.
High brand equity
– Tencent Holdings has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Tencent Holdings to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
Weaknesses of Tencent Holdings | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tencent Holdings are -
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.
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.
Products dominated business model
– Even though Tencent Holdings has some of the most successful models in the Computer Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Tencent Holdings should strive to include more intangible value offerings along with its core products and services.
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.
Ability to respond to the competition
– As the decision making is very deliberative at Tencent Holdings, in the dynamic environment of Computer Services industry it has struggled to respond to the nimble upstart competition. Tencent Holdings has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of United States, Tencent Holdings needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
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.
Lack of clear differentiation of Tencent Holdings products
– To increase the profitability and margins on the products, Tencent Holdings needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
Tencent Holdings Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Tencent Holdings are -
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.
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.
Building a culture of innovation
– managers at Tencent Holdings 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 Computer Services industry.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Tencent Holdings can use these opportunities to build new business models that can help the communities that Tencent Holdings operates in. Secondly it can use opportunities from government spending in Computer Services sector.
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.
Buying journey improvements
– Tencent Holdings can improve the customer journey of consumers in the Computer Services industry by using analytics and artificial intelligence. It 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 Holdings in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Computer Services industry, and it will provide faster access to the consumers.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Computer Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Tencent Holdings 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 Holdings 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.
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.
Loyalty marketing
– Tencent Holdings 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.
Using analytics as competitive advantage
– Tencent Holdings has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Computer Services sector. This continuous investment in analytics has enabled Tencent Holdings to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tencent Holdings to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
Threats Tencent Holdings External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Tencent Holdings are -
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.
High dependence on third party suppliers
– Tencent Holdings 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.
Shortening product life cycle
– it is one of the major threat that Tencent Holdings is facing in Computer Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Regulatory challenges
– Tencent Holdings 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 Computer Services 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 Holdings 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, 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.
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.
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.
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.
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.
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 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.
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.
