Strategic Management of Tencent

This report provides a detailed analysis of the strategic management of Tencent, a Chinese multinational investment-holding conglomerate. It explores the importance of strategic management, analyzes the current strategies and approaches of Tencent, and suggests new strategies and techniques for enhancing performance. The report also discusses the challenges faced by Tencent in adopting new strategies and provides recommendations for improvement.

Running head: STRATEGIC MANAGEMENT
tENCENT
Strategic Management
12/24/2018

STRATEGIC MANAGEMENT 1
Executive Summary
The term strategic management is used to signify a management branch that is related to the
establishment of company's vision, objectives, creating and executing strategies and
presenting remedial procedures for the deviations to reach the strategic intent of the business.
Strategic management is one of the aspects of every business that can break or make it.
Deprived of strong planning, numerous businesses will falter. Therefore, it is very essential to
formulate strategic directions in order to have proper control over the procedures and
continuous development. The aim of this report is to enhance the understanding of the reader
regarding the importance of strategic management in an organization. The report will be
comprised of a detailed analysis of the Tencent Company, which is a Chinese multinational
investment-holding conglomerate. The report is intended towards suggesting some strategies
to Tencent Company such that it can enhance its performance in the coming future.

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Table of Contents
Executive Summary...................................................................................................................1
Introduction of Tencent..............................................................................................................3
Pest Analysis of Tencent........................................................................................................3
Political Factors..................................................................................................................3
Economic Factors...............................................................................................................4
Social Factors.....................................................................................................................4
Technological Factors........................................................................................................4
Current Strategies and approaches of Tencent.......................................................................4
Marketing Mix of Tencent.................................................................................................4
Advantages of Tencent Strategies......................................................................................5
Disadvantages of Tencent Strategies.................................................................................6
Goals and Objectives of Tencent.......................................................................................6
Recommendations of New Strategies and Techniques..........................................................6
Porter’s Generic Strategies.................................................................................................6
Challenges for Tencent to adopt New Strategy (Uncertainty, Ambiguity)........................8
Analysis Tools........................................................................................................................9
Analysis of Current Product and Market.........................................................................10
Strategy Analysis.............................................................................................................11
Current Business Model...................................................................................................11
Key Success Factors.........................................................................................................12
Weaknesses of Company and strategies to Overcome.....................................................12
Conclusion................................................................................................................................13
Recommendations....................................................................................................................13
References................................................................................................................................15

STRATEGIC MANAGEMENT 3
Introduction of Tencent
Tencent Holdings Limited is a multinational investment holding company of China
established in 1998, whose firms specialize in numerous Internet, connected products and
services, technology, artificial intelligence, and entertainment in China and rest of the world.
Its twin, skyscrapers head office that is Tencent Seafront Towers is established in Nanshan
District, Shenzhen (Tencent, 2018a). Tencent is said to be one of the biggest social media and
gaming company, also known as the most appreciated company in the world. Besides this, it
is the largest venture capital company and Investment Corporation in the world. Numerous
services of the company comprise web portals, mobile games, payment systems, social
network, smartphones, e-commerce, multiplayer online games, music, and internet services,
which are all included in the most successful and biggest services in the world. Services in
China market comprise Tencent QQ the instant messenger and the major web portals that are
QQ.com. The mobile chat service that is WeChat has supported the expansion of Tencent
Company into the services of a smartphone and attributed as the most powerful applications
in the world (Tencent, 2018b).
Pest Analysis of Tencent
Political Factors
The society of China is stable and living standard of people is improving (Bardoloi, 2017).
After country registered itself in the WTO is has opened out to different nations, that
maximum number of foreign online games company can enter into the nation, such that
Tencent Company has more competitive pressure.

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The country possesses little legislative security related to the virtual products in online
games, which has decreased the interest of numerous players. Because of this, the nation
introduced the real-name verification in order to protect the interest of the customer.
Economic Factors
People are ready to invest extra money on online games as the standard of living in China is
improving. Today, we are living in the network economy era, so high profits can be earned
through online shopping platforms. Considering this, Tencent is focused on improving the
networks in the country.
Social Factors
As the lifestyle of people is changing, they are being involved in the internet chatting to
communicate with each other. This offers a great opportunity to Tencent to offer Tencent QQ
as an instant messenger to make the smooth flow of communication between people
(Tencent, 2017).
Technological Factors
The development of science and technology in the country has allowed Tencent Company to
develop more and perfect technological products, which has become a great inspiration for
the whole company.
Current Strategies and approaches of Tencent
Marketing Mix of Tencent
Product Strategy
Tencent is the foremost company of China that possess a strong position in the investment
and technology and investment sector. Tencent offers as an umbrella brand to various sub-
businesses, which comprises mass Media Web Portals, Payments system, social networking

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app QZone, E-Commerce, Web Brower, multiplayer Game development, Antivirus Software,
Film production, Artificial Intelligence, and music app. On the music app of Tencent there
are around 700 Million active users and correspondingly all the other fronts enjoy a same or
more traction as well (MBA Skool, 2018).
Price Strategy
As per the system of any conglomerate, the price for each product is based on the user and
the investments made in order to create that front. Tencent is involved in different internet
associated businesses and hence deals with huge competition. The strategy of pricing should
be predatorily and must possess a competitive edge. In terms of services, the cost is
maintained based on subscription. Users are allowed to pay up a one-time token amount and
enjoy the services for a long time duration (MBA Skool, 2018).
Place
All the products of Tencent are based on the Internet and most of them can only be retrieved
by visiting the website or by an application. They even possess an e-commerce portal that is
focused on dealing with different products in the inventories (MBA Skool, 2018).
Promotion
Tencent makes use of different promotional strategies and most of them are done by public
relations. Tencent also markets its offerings through offering various types of discounts on
different applications. The varied portfolio of the product is comprised of mass media, online
games, social networking websites, e-commerce, and software, etc. Freedom is provided to
every subsidiary to exercise their strategies of promotion. For example, Riot Games promote
its games at its discretion. The website of social networking possesses its own reach, which
creates altogether a diverse audience. In fact, different brands with needs of advertising have
touched doorsteps of Tencent to advertise (MBA Skool, 2018).

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Advantages of Tencent Strategies
The product strategy to introduce WeChat in the market is of great success. It offered the
company an advantage to cover the market outside China (Liao, 2018). This product has
attained a flagship, as it is uniquely positioned to absorb the data of the users. Besides this,
the mass media strategy of Tencent in order to promote its services in the market has been
proved a great strategy that has covered a wide market.
Disadvantages of Tencent Strategies
The major disadvantage for Tencent is the wide product portfolio, as it hinders the capability
of the management to expertise in one particular field. This will affect the productivity of the
overall organization (Combe, 2014). Moreover, the company is not able to manage
effectively all its units that can overall influence the productivity and profit of the company.
Goals and Objectives of Tencent
The goals and objectives of Tencent are to enhance the life’s quality by offering internet
value-added services in the market. This is achieved by company offer integrated internet
solutions. Moreover, it is aimed towards offering services and platform that connect
everything (Tencent, 2018b).
Considering the above specified advantages and disadvantages of Tencent Strategies reflects
that business does not focus towards any specific product or service in its wide product
portfolio. Therefore, it is required to change their objective from enhancing the quality of life
to focusing towards customer base and specific product or service.
Recommendations of New Strategies and Techniques
Porter’s Generic Strategies
Generic strategies of Porter define how a business follows competitive advantage across its
selected scope of the market. There are three types of generic strategies, that are focus,

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differentiated, and cost. A business selects to follow anyone or two types of competitive
advantage. The generic strategy reproduces the selections made about the type of competitive
advantage and the scope. Michael Porter defined the concept in 1980 (Zoephel and Zapf,
2011).
A competitive advantage helps an organization to makes its services and products superior in
comparison to other products present in the market. The term is generally utilized for
businesses. The plans work for any individual, organization, or country in a competitive
environment (Rao, 2017).
The three key strategies outlined by Porter to create a competitive advantage in the market
and attain a sustainable advantage.
Cost leadership
Cost leadership is the strategy adopted by businesses to offer affordable value at a lower
price. Business does this through continuous enhancement in their operational competence.
This directly reflects that business pays less to its workers. Some of the businesses
recompense by posing intangible benefits like benefits, promotional opportunities, or stock
options (Zoephel and Zapf, 2011). Others take benefits of untrained labor. In addition, these
companies develop; they can utilize economies of scale and bulk purchase. Costco and Wal-
Mart are some of the goods instances of cost leadership. However, occasionally they pay less
to their employees than the living cost.
Differentiation
Differentiation means businesses deliver superior profits as compared to its competitors in the
market. A business can attain differentiation by offering an exclusive or excellent quality
product. Another technique is to distribute it quicker. A third is to advertise in a manner that
helps business in reaching the customers easily. A business with the strategy of

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differentiation can alter a premium price. This reflects that the business possesses a superior
profit margin (Zoephel and Zapf, 2011).
Focus
Focus means the leaders of the business comprehend and serve their target audience in a
superior manner in comparison to anyone else in the market. The main agenda of focusing is
to select a particular target market (Amadeo, 2018).
From the above analysis about Tencent Company, it has been identified that the company is
involved in different types of businesses such as e-commerce, music app, film production,
artificial intelligence, mass media portals, etc. In its place, the company must be focused
towards any specific part of the business such that it can effectively manage all its operations
and earn more profit in the market. Presently, the company is majorly known in the market
due to its WeChat application, which has also become the flagship of the business. This
application is being widely used in the market; therefore, the company must focus towards
this subsidiary and offer different innovations in the same business line. Moreover, the
company can introduce a similar type of social media applications that support people in
interacting with their friends and relatives very conveniently.
According to the reports, WeChat has reached to 1 billion users for the very first time, which
resulted in increasing 55% of its revenue in the market (BBC News, 2018). This reflects that
if the company will shift its focus towards WeChat application, it will increase its revenue to
60% that will be around 17.10 billion.
Challenges for Tencent to adopt New Strategy (Uncertainty, Ambiguity)
Ineffective Leadership
Implementation of a leading strategy requires a balancing act that is the capability to operate
effectively with the partners to form cohesion and support for the strategy of the firm while

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upholding the objectivity essential to make tough decisions. Implementation of the strategy
regularly fails because of weak leadership, proven by the leaders of the firm unwilling to
carry out the tough decisions settled upon in the plan (Despacho, 2010).
Inappropriate Strategy
In the process of strategic planning, the absence of honest and realistic firm assessment will
result in the development of an inappropriate, potentially unachievable, or week strategy. A
weak strategy can also be the consequence of excessively aspirational or impractical firm
partners or leaders who accept an ill-fitting strategy in the current market of the company or
competitive market. Deprived of a feasible strategy, companies struggle in taking actions
towards efficiently executing the identified plan (Despacho, 2010).
Resistance to Change
The struggle of driving important change in the industry entrenched in self-sufficiency and
individual lawyer behaviors is not to be undervalued. Mostly, implementing a strategy
requires accepting a change in terms of new ways of performing a task (Gland, 2015).
Analysis Tools
Brainstorming is said to be the group creativity techniques through which efforts are made in
order to get a conclusion for a precise problem by collecting ideas to list impulsively backed
by the members. In other words, brainstorming is a condition where a group encounter to find
out innovative ideas and solutions related to a particular interest domain by eliminating
inhibitions (Wilson, 2013). Group members are capable to think freely and propose numerous
impulsive new ideas as much as possible. The presented ideas in the meeting are recorded or
noted, criticism is avoided at the highest level, and after the session of brainstorming, all the
noted ideas are assessed. The term brainstorming promoted in 1953 by Alex Faickney Osborn
in his book Applied Imagination (Siegel, 2014).

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Tencent can make use of Brainstorming as an analytical tool in order to avoid all the above
presented weakness or challenges to adapt focus strategy in the organization. Through
brainstorming, Tencent can arrange a meeting and can present the benefits of adopting a
focus strategy in the organization. Moreover, through brainstorming all the members of the
group can represent their opinion that will offer more and innovative ideas to the business for
the future growth in the market.
Analysis of Current Product and Market
WeChat offers the best features of WhatsApp and Facebook into a single application. Tencent
has taken this application as a Swiss-Army knife and has extra features that have created
WeChat a vital constituent of life of the users. For example, in China, all the activities are
done with the help of WeChat. Besides messaging, WeChat also provide voice calling,
gaming, blog posts, video calling, geolocation searching, mobile commerce, QR coding and
capture, brand channels, emotions/stickers, etc. (WeChat, 2018)
According to the news, the recent merger news between different messaging applications
such as Viber and WhatsApp, a major concentration has been shifted to the worth of
messaging application in the mobile space. The feature of WeChat that is mobile commerce
has been ahead from all other things. TenPay has been created by the WeChat mobile
commerce platform. With the help of TenPay, customers have to coordinate with the real-
world bank account to add credits and make transactions through the application. This
information reflects that WeChat possesses a strong basis through which it can give tough
competition to its competitors in the market, therefore it will be viable to invest and focus on
WeChat (WeChat, 2018).

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Strategy Analysis
Television advertising provides a chance to influence mass audience since watching
Television is the most common activity in the country. Radio audiences incline to be
segmented due to the major number of local stations in comparison to television. Because
local television stations are very less in number, audiences are funneled into bigger segments
who are interested in the advertisement (Leonard, 2018). Besides this, companies are capable
to influence the targeted market by buying advertisement spots during television shows their
envisioned demographic is probable to be watching.
Current Business Model
Key Partners
 Content
Providers
 Developers
 Twenty
subsidiarie
s and four
foreign
owned
enterprises
 Joint
Ventures
 Investors
Key Activities
 Entertainme
nt
 Web Portals
 Online
Game
 Identifying
need of the
users
 Social
Network
 Designing
relevant
services
 Media
Value
Proposition
 One-stop
Services
 Differentiate
membership
levels
 Diverse
services mix
Customer
Relationship
 Personalized
 Community
 Exploit
information of
the customer
 Social
 Digital
 Analyze
internet
behavior
 Self Service
 Co-creation
 Automated
Customer
Segments
 All individual
citizens
 Advertisers
 Corporates
Key Resources
 Brand Image
 Algorithms
 Human
Capital
 Intellectual
Property
 Big Data
 Values
 Reputation
Channels
 Digital device
 Websites
 Utilities
 Payment (QQ
Wallet,
Tenpay)
 Third Party
integration
Cost Structure
 Legal
Revenue Streams
 Trademark

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 Traffic
acquisition
cost
 R&D
 General
and
administrat
ive
 Offices
 Personnel
(Vizologi,
2018)
licensing
 Digital
content
subscription
services
 Development
of software
 Social
Network
Business
 Sale of
Software
Key Success Factors
Tencent is focused towards product engagement, which is a principle that has been
understood by the company, which is essential for the survival of the company.
The company has attained this growth due to its skilled and experienced management, which
are capable enough to take important business decisions for short-term as well as long-term.
The advanced technology used by the company support it in offering the best services to its
customers in the market.
Weaknesses of Company and strategies to Overcome
 The weakest point of Tencent is its inefficiency in forecasting the product demand in
the market as compared to its competitors. The company must have an effective
system that can help in evaluating the demand of the market such as a survey.
 Besides this, the company is investing the low amount in the research and
development in the industry. In order to have advanced technology and solutions to
different business problems business should invest more in the research and
development.
 Financial planning of Tencent is improper in order to improve this company should
make use of its cash more efficiently (Fern Fort University, 2018).

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 Tencent is majorly present in China, which makes it weak to overcome the risk (MBA
Skool, 2018). The company must develop its market expansion strategy that can help
it by placing its strong feet towards different markets and industries.
 Increasing rivalry from numerous online portals resulting in decreasing the company’s
share in the market
Conclusion
The above report has effectively provided the analysis of Tencent Company which is a
conglomerate to operating its business operations in numerous areas. One of the strengths of
Tencent is its mobile application WeChat, which has offered the company the market growth
of 55% in the market. The report has performed a detailed analysis of the strategies used by
the company in the market to deal with the competition in the market. Focus strategy from
Porter’s Generic model has been suggested for Tencent, such that it can focus on some
specific areas of business such as WeChat in order to earn increase growth and profit in the
market. The report has projected the future revenue for the company if it follows the focus
strategy in the market. Besides this, an analytical tool that is Brainstorming has been
suggested for the company to use in order to overcome the challenges of prescribed strategy.
In the end, the report has evaluated Tencent’s current product, market, as well as market to
evaluate the performance of the business.
Recommendations
 From the above analysis, it could be suggested that the company must focus on its
specific business markets such that it can earn more profit in the specific market.

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 The company must enter into different markets such that it can increase its market
share and customer base. It can move its footsteps towards the European market to
cover the more developed areas that can increase the productivity of the business.
 Business must focus on increasing the user base of the WeChat application as it
represents a huge opportunity for the company to increase its revenue.
 Tencent should put its efforts to re-align its e-commerce and gaming business in order
to drive its top line.

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