Tencent Holdings Limited Analysis - Business Model, Operating and Competitive Strategies

This analysis discusses Tencent Holdings Limited's business model, operating and competitive strategies. It covers their services and products, research and development, partnerships, and service differentiation. The paper also recommends expanding the company's global market.

Tencent Holdings Limited Analysis 1
Tencent Holdings Limited Analysis
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Table of Contents
Introduction......................................................................................................................................3
Business Model................................................................................................................................3
Service Concept...........................................................................................................................3
Operating Strategy.......................................................................................................................5
Competitive Strategy....................................................................................................................6
Service Differentiation.................................................................................................................7
Recommendations............................................................................................................................8
Conclusion.......................................................................................................................................8
References......................................................................................................................................10

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Tencent Holdings Limited Analysis
Introduction
Tencent Holdings Limited is a company located in China that deals with offering internet
services in the country. Founded in the year 1998, the company continues to grow tremendously.
The mission of the company is to promote quality life to its consumers through internet services.
Achieving the mission is made possible through the provision of different products that help
consumers in their life. The products include digital content services as well as social platforms.
Such platforms have made communication and interaction possible through the internet. As the
company grows, there are plans to improve on the innovations and to develop better products to
continue meeting the consumer demands (Tencent, 2018a). The paper, therefore, outlines the
business model, market, and competition at Tencent Holdings Company.
Business Model
There are different aspects of the business model that the company uses to generate
revenue and maximize its profits. They are in the form of the service concept, the operating
strategy, competitive strategy and the service differentiation.
Service Concept
Tencent's main mission is enhancing the quality of life for its consumers. In its aim to
achieve the mission, the company has several services and products offered to its consumers. The
services and products are subdivided into social networks, payments, entertainment, information,
utilities, platform and artificial intelligence. Social network entails applications used for social
interaction. QQ Instant Messaging is used for communication on social platforms (Tencent,
2018b). The application is used to communicate through messages, videos, and images. It is a

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popular social platform used by many young Chinese due to its diversity in services and services
offered. Additionally, the application allows users to access other applications offered by the
company such as QQ wallet, bank accounts, and online shopping. By the end of the year 2017,
the application had 783 million active users who were a significant number in the market
(Tencent, 2018a).
Weixin/WeChat is also a social network application at Tencent Holdings Company. The
application was launched in the year 2011 to help enhance the experiences and lives of the users.
Its main features are real-time experiences where the users can record their moments using the
application. An account owner can also invite friends with whom they can share real-time
experiences in the form of video calls and photos. Other services made possible in the
application is enabling payment services through Weixin/WeChat pay (Tencent, 2018b). By
March 2017, the application had 938 million active users, and the numbers continue growing
monthly. Qzone is the last social network application offered at Tencent. It was created in 2005
and is the largest social platform in the country. It mainly operates by allowing users to upload
videos and photos. Other features allowed is writing blogs, live streaming, decorating the space
and playing games. By March 2017, the platform had about 2 trillion uploaded through the social
network (Tencent, 2018a).
Payment services offered by the company entail the Tenpay, Weixin/WeChat pay, and
QQ wallet. Tenpay enables users to pay for services on the online platform. Consumers make
payments for goods and products purchased online. Most consumers are attracted to the platform
due to the convenient, secure and reliable services offered. Weixin/WeChat pay is another
payment service integrated into the Weixin/WeChat application that enables consumers to pay
using their mobile phones. It is a fast paying method that utilizes swift payment methods.

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Payments are enabled by linking banks accounts and cards to the platform to enable transactions
(Tencent, 2018a). QQ Wallet is also a mobile payment feature in the company. The feature
incorporates several payment methods that include QR Code payment, bank card, and NFC
payment. Improvements made to the application so far enables access to government services,
public services, life services and comprehensive experiences (Tencent, 2018b).
Other products in the company offer entertainment, information, utilities, platform and
artificial intelligence. Entertainment products entertain through offering music, games, and radio.
They include Tencent Games, Tencent Comic, Tencent Literature, QQ Music, NextRadio among
others. Information is made available through QQ.Com, Tencent News, Tencent Video and
Tencent Microblog. Utilities are other products offered by the company. They include QQ mail,
Pitu, QQ Browser among others. Platforms in the company are offered through Tencent Cloud
and Tencent Open Platform. The company also provides artificial intelligence services using
Tencent Al Lab and Tencent You Tu Lab (Tencent, 2018b).
Operating Strategy
China posses the largest internet users who have been growing in numbers for the last ten
years. The users have enabled Tencent operation strategy to succeed in targeting the internet
users. Focusing on research and development is a strategy the company has incorporated into its
operations. Research and development are essential in the company due to the technological
advancement in the field. Investment in Research and Development (R&D) enables development
of new products to keep up with the market demands. For instance, 50% of the employees in the
company are R&D staff (Stone & Chen, 2017). Such an operation strategy has enabled in
developing products that suit the consumers' preferences.

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Another strategy the organization has been using is ensuring a strong online presence. For
a product to be acceptable to the consumers, there has to be familiarity with the products.
Tencent has mastered the concept through ensuring that their products are launched through their
popular sites to ensure acceptability by the consumers. For instance, while launching online
games, the company uses WeChat and QQ messaging service, products that are popular among
its users. Such enables more consumers to access to the new product easily (Rutherford, 2017).
Another way of having a strong online presence is through moving Personal Computer (PC)
applications to mobile platforms. Many internet users access internet services through the mobile
phones. In ensuring that the products remain available to the consumers, games like King of
Glory were moved to mobile platforms as League of Legends. The strategies enabled the
company to earn $14.3 billion in the year 2016 alone (Mourdoukoutas, 2016).
Operation of unmanned stores is a new operating strategy launched in January 2018. The
strategy entails operating the stores without the assistance of the attendants. All customers
require is WeChat application on their mobile phone. It works through the customer scanning a
Quick Response (QR) code that enables the entrance to the stores. The customer picks on the
items they require. They then scan the product at the QR while exiting and payments are made in
the applications. The systems design also enables detection of products previously purchased to
avoid double payments (Zhang, 2018). Such experience has attracted a lot of consumers who
would like to experience the shopping method, therefore, increasing revenue in the company.
Competitive Strategy
Tencent Company remains to be the largest internet company in China due to its
competitive natures. The company utilizes partnership and patent to remain on the competitive
edge compared to its competitors Ong, 2018). The partnership between the company and

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Walmart retail stores is a competitive strategy that has enabled the company to remain at the top
of its competitors. Walmart is a large retail outlet located in many parts of the world. In China
alone, Walmart has more than 400 outlets. The partnership between Tencent and Walmart
enables shoppers to use the WeChat services to enable the purchase of products from the outlet
(Liu, 2018). Another partnership the company has is with Lego in developing video games
suitable for children. Such partnerships have enabled the company to gather more users from the
companies they partner with therefore expanding its market share in the country (Ong, 2018).
Patenting products developed by the company is another competitive strategy the
company uses. Technologies such as e-commerce, instant messaging. Games, internet security,
and others are products developed by the company. In ensuring that the products solely remain
the company’s property, patenting has been done on all its products. Such moves enable the
company to offer unique services from those of competitors and preserve intellectual property of
developers. The company has ensured that it produces unique products by setting up an Internet
Research Institute (Yoo, 2017). Patenting of products has therefore enabled the company to gain
a competitive advantage over its competitors in the market.
Service Differentiation
Service differentiation is an essential aspect of companies offering internet services. The
increased competition in the markets influences companies to have a differentiating factor from
other competing companies. Tencent Company has managed to master its service differentiation
strategy to ensure the needs of its consumers are met. In having service differentiation, the
company has products that are easy to use. Nowadays people prefer online shopping as opposed
to the traditional window shopping. The demand for e-commerce services is on the rise in China
which makes many companies set up the option for online shopping. Tencent enables online

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shopping through its application and makes payments of goods bought (Bhasin, 2017).
Introduction of unmanned outlets is also a unique shopping experience that the company has
brought to its consumers. The new way of shopping has prompted many consumers to try the
new experience which is the first in the country. Other service differentiation used in the
company is easy to use products, consumer education and fast internet connections (Priority
Metrics Group, 2016). Such unique services have differentiated the company from its
competitors.
Recommendations
Tencent Company remains to be a company for the Chinese only. It needs to expand its
market to target other consumers globally. In ensuring the company expands globally, they need
to form a partnership with global companies to enable them to venture into new markets. For
instance, partnering with other Walmart branches in other parts of the world will enable
consumers to use QQ Pay as a payment method, therefore, creating a unique selling point to
incorporate. Another way of expanding is carrying out Research and Development on its main
products to give additional features. For instance, the applications may be added to the English
language to enable users from other parts of the world to understand how to operate the
applications (Zhou, 2017). By incorporating partnership and English language in products, the
company will achieve expansion globally.
Conclusion
In conclusion, there are different aspects of the business model that Tencent Company
uses to generate revenue and maximize its profits. They are in the form of the service concept,
the operating strategy, competitive strategy and the service differentiation. Service concept

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entails services and products offered. They are social networks, payments, entertainment,
information, utilities, platform and artificial intelligence. In the operations, the company
incorporates research and development, strong online presence and operation of unmanned
stores. In maintaining the company's competitive advantage, the company has formed a
partnership with other companies as well as patenting its products. The services offered by the
company are different in that they are easy to use and fast internet connections.
Recommendations to the company would be an expansion of the global market.

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References
Bhasin, H., 2017. Service Differentiation and 7 Ways to Differentiate Service from Competitor.
[Online] Available at: https://www.marketing91.com/service-differentiation/ [Accessed 2 August
2018].
Liu, J., 2018. Tencent to cooperate with Walmart on retail business. [Online] Available at:
https://technode.com/2018/06/07/tencent-walmart-china/ [Accessed 2 August 2018].
Mourdoukoutas, P., 2016. Tencent’s Winning Game Strategy. [Online] Available at:
https://www.forbes.com/sites/panosmourdoukoutas/2016/03/06/tencents-winning-game-
strategy/#159bc7867d16 [Accessed 2 August 2018].
Ong, T., 2018. Lego partners with Tencent to make online games for China. [Online] Available
at: https://www.theverge.com/2018/1/16/16896058/lego-partnership-tencent-china-pivot
[Accessed 2 August 2018].
Priority Metrics Group, 2016. Six Ways of Differentiating Your Business from the Competition.
[Online] Available at: https://blog.marketresearch.com/6-ways-to-differentiate-your-business-
from-the-competition [Accessed 2 August 2018].
Rutherford, S., 2017. 5 Things to Know About Tencent, the Chinese Internet Giant That's Worth
More than Facebook Now. [Online] Available at: https://gizmodo.com/5-things-to-know-about-
tencent-the-chinese-internet-gi-1820767339 [Accessed 2 August 2018].
Stone, B. & Chen, Y. L., 2017. Tencent Dominates in China. Next Challenge Is Rest of the
World. [Online] Available at: https://www.bloomberg.com/news/features/2017-06-28/tencent-
rules-china-the-problem-is-the-rest-of-the-world [Accessed 2 August 2018].

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Tencent, 2018a. About Tencent. [Online] Available at:
https://www.tencent.com/en-us/abouttencent.html [Accessed 2 August 2018].
Tencent, 2018b. Products and Services. [Online] Available at:
https://www.tencent.com/en-us/system.html [Accessed 2 August 2018].
Yoo, E., 2017. Report shows Tencent is the king of patents. [Online] Available at:
https://technode.com/2017/07/12/report-shows-that-tencent-is-the-king-of-patents/ [Accessed 2
August 2018].
Zhang, M., 2018. Tencent beats Amazon to launch unmanned shop but lags other Chinese tech
rivals. [Online] Available at:
https://www.scmp.com/business/companies/article/2130062/tencent-beats-amazon-launch-
unmanned-shop-lags-other-chinese-tech [Accessed 2 August 2018].
Zhou, A., 2017. What would be next challenge of the Chinese internet giant: Tencent? [Online]
Available at: https://medium.com/@annezhou618/what-would-be-next-challenge-of-the-chinese-
internet-giant-tencent-bb3d3d69b096 [Accessed 2 August 2018].