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Tencent SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Tencent managers to do a situational analysis of the company . It is a handy technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Tencent is facing in its current business environment.
The Tencent is one of the leading companies in its industry. Tencent maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the firm such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Tencent to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The core purpose of SWOT matrix is to identify the strategies that a firm can use to exploit external opportunities, counter threats, and build on & protect Tencent strengths, and eradicate its weaknesses.
Step by Step Guide to Tencent SWOT Analysis
Strengths of Tencent – Internal Strategic Factors
As one of the leading companies in its industry, Tencent has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Tencent are –
- Strong Brand Portfolio – Over the years Tencent has invested in building a strong brand portfolio. The SWOT analysis of Tencent just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Good Returns on Capital Expenditure – Tencent is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Successful track record of developing new products – product innovation.
- Strong distribution network – Over the years Tencent has built a reliable distribution network that can reach majority of its potential market.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
- Automation of activities brought consistency of quality to Tencent products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Superb Performance in New Markets – Tencent has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
Weakness of Tencent – Internal Strategic Factors
Weakness are the areas where Tencent can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
- Limited success outside core business – Even though Tencent is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Tencent needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
- High attrition rate in work force – compare to other organizations in the industry Tencent has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
- Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Tencent is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Tencent is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
Opportunities for Tencent – External Strategic Factors
- The new technology provides an opportunity to Tencent to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Tencent to capture new customers and increase its market share.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Tencent to increase its profitability.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Tencent.
- New trends in the consumer behavior can open up new market for the Tencent . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Tencent. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- The market development will lead to dilution of competitor’s advantage and enable Tencent to increase its competitiveness compare to the other competitors.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Tencent’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
Threats Tencent Facing - External Strategic Factors
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Tencent
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- Liability laws in different countries are different and Tencent may be exposed to various liability claims given change in policies in those markets.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
Limitations of SWOT Analysis for Tencent
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Tencent
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Tencent
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Tencent managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Tencent
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
Example of Weighted SWOT Analysis
You can email us to get an example document of Weighted SWOT analysis.
SWOT Worksheet & Template
If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.
References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)