Struggling With Tencent Case Study?

Industry Structure and economic feature

Tencent is a major international organization of the Chinese IT industry and the extraordinary levels of growth that have been depicted by the sector in last few decades has attracted investors from different parts of the world. The various aspects that showed the growth of China include the unemployment rate and inflation rate. The growth of GDP of the country has played an important role in ensuring that various companies which are a part of IT industry can gain major levels of revenues. The economic health of China has been a major factor that has an influence on the strategies being implemented by a company like Tencent. The achievements that have been made by Tencent are quite huge based on overall revenues gained by the firm. The entertainment factors related to software world have expanded faster in comparison to other segments of Chinese economy. Tencent aims at introducing Chinese games on a global basis and this has an impact on the overall profit margins that the company has gained over the years.

Tencent Strategic

i) Business Level Strategies

The M&A strategy of Tencent has been provided with great levels of emphasis based on purchasing the majority of stakes within video games that have their operations outside China. The company has made heavy investments in the overseas businesses of games and it has shown interest in gaining a majority and thereby controlling the stakes within companies that are mainly based within Europe. The merger and acquisitions have been the most important aspect of the business level strategy implemented by Tencent in the gaming and IT industry. The company has relied on M&As for ensuring its organic growth in different countries and ensuring that the best quality of products can be offered to the customers.   

ii) Corporate Level Strategies

The corporate level strategy of Tencent is based on covering a large area and providing diversified services to the users. The aggressive strategy of Tencent has been able to play an important role in ensuring its growth over the years and the competitive position that it has developed in the industry. The fast-changing IT and technology industry has been able to depict major levels of changes and this has also affected the strategies of companies like Tencent that operate on a global basis.

Competitive Analysis and Advantage in the industry

The IT industry is considered to be highly competitive in nature due to presence of various companies and the fast changes that are taking place in the sector as well. The major competitors of Tencent that have an impact on the strategies and revenues of the company include IAC, Net Ease, Agora, Meta and Meituan. The levels of competition are increasing continuously due to the fast changes that are constantly taking place in the industry and the improvements that are being made in the products and services being offered to the customers in various countries. The major competitive advantage that has been gained by Tencent is based on the super app named We Chat and the excellent allocation of capital along with the engineers who are a part of the company.

SWOT Analysis

i) Strengths

  The research and development facility of Tencent is considered to be quite excellent and the employees mainly provide their focus on enhancement of the levels of research. The business portfolio of Tencent is diversified and the company provides various services on internet for attracting customers. Tencent has also become a leader in the internet services that are provided to customers in China. The firm has formed an effective presence in the fields like fintech solutions, robotics and artificial intelligence.

ii) Weaknesses

Tencent has become highly vulnerable to the risks due to its presence only in China and the increasing levels of competition that are faced by the company from different online portals.

iii) Opportunities

The growth in levels of internet usage in China within different fields provide future growth opportunities to Tencent. The expansion of strategic business will be based on the new patents and services that are offered by Tencent. The growth in market of the value-added services is considered to be quite high.

iv) Threats

The threats being faced by Tencent are based on increase in the activities of competitors and the changes that are taking place in the government policies. Threats related to competition have increased due to global operations of Tencent and the strict government policies and laws that influence operations of the business.

PESTLE Analysis

Political factors – Tencent has its operations in various countries and the government policies and capacities are different based on which the company can aim at developing the strategies. The political unrest in different companies can affect the operations and revenues of the company.

Economic factors – The slowdown that has occurred globally has a negative impact on the revenues of Tencent. Reduction in sales of the smartphones are also important factors that have an impact on revenues of Tencent. Economic aspects can affect the operations and decisions made by Tencent and the countries that offer high rates of interest can attract the firm for making investments.

Social factors – The expectations of users related to innovative services and products related to the surge in the applications on the mobile platforms have influenced strategies of Tencent. Social factors that are mainly based on the cultural aspects and norms can influence the types of products that can be offered by Tencent.

Technological factors – The aspects of artificial intelligence and the AI apps have a major impact on the access that have been gained by users to the content like videos, games, books and music. The technological advancements in the different countries have increased the importance of social media for marketing and promotional activities of Tencent.

Environmental factors – Tencent has faced major criticisms along with the other companies like Alibaba for the environmental impact. The growth in concern related to global changes in climate and increase in levels of pollution are considered to be major environmental aspects that influence the strategies of the company.

Legal factors – Tencent aims at collecting huge amounts of personal data from the users and has to maintain the tight security for the purpose of preventing data leak. The laws related to anti-discrimination and human resources influence the strategies of Tencent.

Target Market Analysis of Tencent

i) Demographic Characteristics of Market

The various demographic characteristics that are a part of the target customers of Tencent include the age, income levels, gender, geographic location and education levels. The customers belonging to high income groups and belonging to various ages are a part of the target market of Tencent.

ii) Demographic Characteristics of Market

The various demographic characteristics that are a part of the target customers of Tencent include the age, income levels, gender, geographic location and education levels. The customers belonging to high income groups and belonging to various ages are a part of the target market of Tencent.

iii) Psychological Characteristics of the Market  

The factors that depict the psychological characteristics of the target customers include personality, lifestyle, social class, interests, behaviours and habits. The behaviours of the affluent customers of Tencent are influenced by the psychological characteristics.

iv) Behaviours of the Target Market

The behavioural aspects that are related to the segmentation of target customers are based on the types of the products that are consumed by them and the interactions that are developed by them with the apps and services offered by Tencent.

v) Strategies Appealing to Market

Tencent is mainly focussed on the process of gaining the majority and thereby controlling the stakes within the game companies that operate outside China. The M&A strategy of Tencent has been tweaked for the purpose of providing more emphasis towards purchasing the majority of stakes within the video game-based companies that have their operations outside China.

Marketing Mix of Tencent

i) Product Strategy (Product Mix)

Tencent provides its products to the customers through various subsidiaries that include social networking apps, mass media-based web portals, antivirus software, artificial intelligence, payments systems, multiplayer-based games development and film production. The app has gained more than 700 million users and the company has enjoyed major traction in the sector.

ii) Pricing Strategy

Tencent has operated various internet-based businesses and the company faced major levels of competition in the IT industry. The prices of the services are mainly based on the subscription base of the company. The users aim at paying one-time based token amounts and enjoying services for long duration.

iii) Promotional/ Advertising Plan 

The promotional strategies of Tencent are heavy and are mainly completed through the public relations and the company markets its discounts that are offered through different applications. The various types of media that are used Tencent for promoting its products include mass media, e-commerce, social networking-based websites, online games and software. The overall reach that has been gained by Tencent is mainly based on the wide usage of social media by the customers who are a part of various countries.

Tencent Competitive Analysis

i) 4Ps’ comparisons with competitors

The major competitors of Tencent Cloud in the technology industry include Alibaba Cloud, Google, Microsoft, Oracle and Amazon Web Services or AWS.

iii) Price – The competitors of Tencent provide their services to customers at lower and competent prices in comparison to the company. Prices of products of competitors are affordable.

Research and development are done by competitors.

vii) Weaknesses’ comparison with competitors

Lawsuits are not always faced by other companies.

viii) Organization’s Competitive Advantage

 The competitive advantage of Tencent is based on the diverse portfolio of services and products offered to customers.

Key success factors

 The large customer base of Tencent is considered to be a major success factor of the company.

Problems and Issues in Tencent Organization

 The over dependence of Tencent on the China market is a major issue faced by the company.