SWOT Analysis Tencent Limited Holding

enteringwayIn March 2010 McKinsey published an article bringing with the obsession of the cyberspace of the Chinese population by concluding the following instruction People in the countrys 60 largest cities sp turn back 70 percent of their leisure time online. Seismic changes in the consumer trade atomic estimate 18 likely as a result.1 Chinas net income population sum upd at the end of 2012 to a total number of 564 zillion exploiters comp bed to approximately 250 million intentrs in 2008, according to the China internet Network Information Center (CNNIN).2 The primary(prenominal) reasons for this enormous growth is potently connected with different aspects, as for instance the general growth of Gross-Domestic-Product (GDP), set virtually priced computers, more affordable telecom connection fees, government support to meshing usage, and low-cost entertainment aspects. This affected, that as healthful as lower income groups started to use the profits.3 Answeri ng to this closely development and growth of Chinas meshing population, the network dish up industry is rough to increase up to 17 percentages in 2013. In the remnant years, the Internet work industry achieved even annual ripening rates up to 20 percentages, resulting of the booming demand.The Internet trade seems to be quite well-to-do for the moment but even in the next years re attendes bet an annual growth of approximately 10 percentages. This is due to the expansion of active brooks in the argona of e-commerce and advertisement operate.4 Observing the numbers, 148 million people move over already experienced Internet shopping since 2010 and it is expected that 30 million people allow for entreeally make use of it by the end of 2015.5 The Economist stated, the future of e-commerce is China.6 Besides the e-commerce and advertisement go withal the application services became more and more in-chief(postnominal) over the last years because of the introduction of smartph geniuss and tablets.7Recognizing the trends, Tencent Holdings Limited decided 20 years ag i to enter the market and finally became the largest Internet Service Portal in China. Tencent dormant enjoys a quasi monopoly carriage, which is hardly endangered due to rise competition. That is the reason why they need to think about apply smart opportunities and fending upcoming threats. Consequently Tencent should carry out a Strengths-, Weaknesses-, Opportunities-, Threats-Analysis (SWOT-Analysis), which includes the study of their decl be weaknesses and potencys in the native dimension and the resulting opportunities and threats giving from impertinent influences.This paper give showtimely give an overview about the internal strengths and weaknesses. Furthermore Tencents exotic environs forget be analyzed and the results will be utilise for defining the opportunities and threats of the confederacy Before starting with the literal SWOT-Analysis for Tencent the fi rst Chapter gives a short explanation about SWOT-Analysis in general.2 Definition SWOT- Analysis As mentioned in the introduction, there are two different parts of changes in the environment, which lead to affect the motion of companies. This chapter will explain the difference betwixt internal and external environment and their interaction. Furthermore the next part will explain the so-called SWOT-Analysis in detail.Internal environment analysis points out strengths and weaknesses of a conjunction that in turn, supports decision-making processes concerning the handling of upcoming threats and opportunities.8 Knowing which strengths and weaknesses the company has to face, the internal environment analysis studies aspects like assets, people or knowledge on the one hand and financial deadlines or gaps in capabilities on the former(a) hand.9 Analyzing the internal environment is very(prenominal) important because it defines the capability of the company to deal with the threats an d opportunities given by the external environment.10 External environment deals with all developments on the marketplace, including political, economical, social, legal and technical conditions as well as customers, competitors, suppliers and the public. Changes in the external environment or the so-called STEEP (socialcultural, technological, ecological, economical, political/legal)force the companies in most(prenominal) cases to rethink their actual strategy, to make use of the emerged opportunities and to oppose occurring threats.11 As for instance using the development of a immature market as prospect or dealing with threats as tender-fashioned competitors or change magnitude demand.12 To use opportunities means to develop a best-practice strategy. Regarding this, companies have to decide, whether it is the best fortune to offer something in short supply, to provide something in a part way what already exists, or to raise a totally new intersection.13 Concerning to tha t, the company has to know if there exists demand, call for and wants for the product they want to provide.14 facing threats and not trying to fend them often leads to decrease profits or lower sales. On the one hand keen these threats gives the opportunity to controvert and trying to avoid, that threats are going to influence the companys performance.15 On the new(prenominal) hand firms often do not have insure over the threats, which affects the company negatively like for instance new competitors are entering the marketplace. This results in giving up potential customers and thus decreasing demand.16Bringing the internal and external environment analysis to popher is what you call a SWOT-Analysis. The SWOT-Analysis evaluates all strengths, weaknesses, opportunities and threats of a company, which builds the base for a strategy formulation.17 Meaning that knowing the strengths and reduce weaknesses help companies to use opportunities on the one side, On the other side to use strengths and develop strategies to avoid that weaknesses will effect the locomotiveer of threats. After this short definition of the SWOT-Analysis the next step will be to work out the strengths, weaknesses, opportunities and threats of the Tencent Holdings Limited. 3 SWOT-Analysis of Tencent Holdings Limited3.2 Internal Environment AnalysisAs mentioned in the Introduction the Internet Industry in China is booming. To cover all workable marketplaces in the Internet Tencent offers a broad range of products and services. Besides the most popular service, the instant Messenger called QQ including numerous added services, Tencent provides online media, (wireless) internet value added services, synergeticentertainment services, especially in the online-gaming sector, e-commerce platforms and services as well as online advertisement services.18 Tencent also follows latest trends, as for instance launching a expeditious application of a messaging service and added games and a mobil e payment system, because of the latest development of using smartphones and tablets instead of personal computers.19 Tencent is one of the oldest Internet corpo rations in China and with its QQ platform the company reached 798,2 million user accounts by the end of 2012.20 As a result, Tencent influenced the communication world in China fundamentally. Another strengths lies definitely in the broad product and service offer of Tencent and the way in which they create synergies. The company offers seven main line of reasoning lines, starting from instant messaging to online advertisement services. Besides s buttockstily offering free services, Tencent tries to bind their users to the companys value-added and paid services, in order to make profit.21 The strategy aims to offer the Internet population the gap to use a wide variety of services in one company.Furthermore Tencent could gain a lot of experiences and knowledge over the past 20 years as one of the first providers in the In ternet service sector, which significantly strengthened the companys search and development abilities. contempt having already the mature technology in the market, half of the employees of Tencent beprospicient to the inquiry and Development department, to ensure Tencents current market leading position and sustain this competitive advantage. Additionally to that the Tencent enquiry institute, which is Chinas first Internet institute with the main goals in research and development of shopping center technology on the Internet, supports the corporation in being innovative.22 Another strength of Tencent is their workforce as Tencent sees them as the most precious asset and express on the training of employees by using different Training Systems.23 still Tencent Holdings Limited is the thirdly largest Internet operator in the world and the largest listed company in China.24 Benefitting from many advantages due to the companiescompanys size there are also weaknesses the company h as to face. In the following part the internal environment directiones on revealing the weaknesses of Tencent.Regarding the large variety of the product range Tencent,Tencent faces the idolize of cannibalization because it creates a competitive situation in between their products. An example can be giving by the different instantmessaging services WeChat and QQ or TM and RTX, which serve the same purpose. Besides that QQ mobile courier gets more and more the aroma of WeChat, which makes it even more competitive and leads to high confusion for the consumers.25 Moreover Tencent greatest weakness is being not sincerely innovative rather than being a copy cat. This occurs with the fact, that Tencent copied a lot from successful western companies. QQ for example is a copy of the Israeli invention ICQ and SOSO, the search engine of Tencent uses especially Google as a model.To bring to an end the internal environment analysis, one can summarize, that Tencent is a highly real company with a lot of market power due to their long existence. On the opposite Tencent can notcannot convince with real innovative power. To get an idea what influences TencentsTencents decision externally the next step will be to analyze the current market situation of the Internet market in China.3.1 External Environment AnalysisTencent operates in a highly contest and rapidly changing environment. To get an idea what external impacts Tencent has to face it is important to know, what external factors the Chinese Internet market is about. As already mentioned China, faces a fast growing market in e-commerce because of the increasing number of Internet shoppers. The government noticed the importance of this growing market as well and plans to upgrade the technological capabilities of e-commerce.27 Another importance opportunity lies in using the governmental support, which is communicated in the 12th five-year plan and includes the support for the new-generation IT and additionally the enhance of the teaching networks, mobile communication and the Internet.28 China is nowadays the largest Internet market in the world, which implicates that it is also one of the most competitive markets in the world.In addition to the high development of the Internet scene many companies entered the market in the last years, which leads to a highly competitive situation in general. Chinas Internet population is still growing but the annual growing ratio halved already from 20 percentages in the last years to 10 percentages as forecasted. Besides that, more and morestartups enter the markets, which results sooner or afterwards in a amply satisfied market and a breathing out in profit and market share.As an example for the highly competitive market, the characterisation below shows the current competition situation on the search engine market in China.There are already eight providers only for search engines on the market including planetary companies like Yahoo and Google. The low market share of these transnationalistic companies underlines the fact, that there are still restrictions from the government concerning the richly market ledger entry of these companies.Image China Search Engine Market parcel in August 201330Even if governmental regulations already have relaxed a bit, Chinese Internet sector faces still a lot of restrictions. Chinas Internet companies well-being by this, because many foreign websites are still blocked and they are not exposed to powerful competitors like Facebook. This in consequence creates the misadventure to develop and strengthen consume applications. On the other hand it could become a threat as soon as the government decides to do away with this restrictions. Chinese Internet companies then have to face the full international competition against global players as for example Google.31 After giving this overview about the external and internal environment the next chapter will use this information by concluding recommendations about Tencents future strategy.3.3 SWOT-Analysis and RecommendationsTencent entered the Internet market in many different dimensions and accordingly places their product and service offering. cod to the previous analysis, there are especially three main product categories where Tencent should use their opportunities in further expansion. Firstly, Tencent should, due to the growth-intensive market segment, dramatize their e-commerce offer by developing for instance their website Papai.com. To even attract more attainable Internet shoppers, they also should expand their online advertisement services. Thus, they can make use of synergies they already created through their broad offers, by linking their advertisements services with the shopping sites they own. This sustain measure, leads to the creationof new potential profit zones.Thirdly, Tencent should not only focus on expanding existing offers but also develop new products, as for instance in the sector of cloud computing. By doing so, they can fully exhausting governmental support. Taking into consideration, that the market will be assailable up in the long-term, Tencent should emphasis their innovation process on new products and services for the national and also international market. This should not be very difficult to accomplish, since Tencent disposes of a highly experienced workforce in Research and Development. This in consequence will enable the company to expand international and compete with other global players. If Tencent wants to keep their position as the third largest Internet company in the world they have to continue growing their business. Considering the slower growing Internet population in China, Tencent needs to go international to keep their growing position.Tencent did this by investing in foreign companies as for instance in the case of FAB.3233 This expansion should be go on in order to gain international market share and increase their portfolio in other Inte rnet based services, as well as to improve their overall operational capability. Another possibility to do so is by expanding through strategic alliances By building strategic business partnerships within China and gaining market share in several sectors Tencent is also able to fend the threat of market entry by international Internet companies in turn. Tencent furthermore has got a highly influence on the communication world in China as one of the oldest Internet company and built already a lot of barriers for international companies.Taking the messenger service QQ as an example for the mostly used messenger in China it enjoys a very high customer liability. Consequently Tencent could prevent loosing their position in China because although of the feared abolishment of several governmental restrictions concerning the entry of international companies. Additionally Tencent should try to avoid that QQ gets more and more the look of WeChat. As already explained, this could tempt users to change to competitors because of confusion. In this case, Tencent should favor cannibalization by offering differentiated products of the same purpose, to avoid losing costumers to competitors. The image below shows a summery of the named points and what the SWOT-Analysis and recommendations for the Tencent Holdings Limited contain.Image 2 SWOTs of Tencent Holdings Limited344 ConclusionInternet business in China is still one of the fastest growing industries in the world and Tencent used and uses this opportunity a lot in expanding existing products, launching new services and developing better solutions for the internet population in general. These actions are support by the try of going more and more international. Even though the external environment analysis showed that the Internet market is influenced by many factors, which co-determines the performance of Tencent an all the other Internet companies. To reach the best performance they could get, Tencent has to use its stren gths and to improve its weaknesses to make the best out of every trend, implication using opportunities and fending threats.To summarize what the work pointed out in the previous chapter, Tencent shouldTencent should expand their e-commerce and their online advertisement services. Moreover there is a big opportunity to create national and international strategic businesses trough the investments or the development of own innovations, which should be easily possible due to he strong research and development activity of Tencent. Additionally to that, Tencent already is the third largest Internet company worldwide, which makes it easier for them to enter international markets and gaining new customers all around the world.Regarding the governmental aspects, Tencent needs to use the supports given by the government and stress the development of new systems. Furthermore Tencent should definitely try to further build their market entry barriers. As a conclusion, the SWOT-Analysis of Tenc ent Holdings Limited showed, that the company is rightly positioned at the trespass in the worlds largest Internet market, due their numerous strengths. exactly in times of liberalization, globalization and an almost satisfied domestic market, Tencent has to skin against the identified threats in the upcoming years.