Tencent Holdings: Service Concept, Operating Strategy, Competitive Strategy and Service Differentiation

This report discusses the service aspects of Tencent Holdings including service concept, operating strategy, competitive strategy and service differentiation. It also provides recommendations for the company's expansion.

Running head: SERVICES MANAGEMENT
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Name of the Student
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Author Note

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Introduction
Tencent Holdings Limited was founded in November 1998 and is one of the leading
providers of value added services for Internet in China. Tencent have always maintained a
steady rate of growth since its inception. Tencent Holdings Limited went public on the 16th of
June, 2014 on the Hong Kong stock exchange main board (De Wet 2015). Tencent’s mission
have always been to make the lives of human beings more efficient through their internet
services. Tencent have been successful in influencing the lifestyles of millions of people with
their internet service. This report will discuss about the four service aspects of the company
namely service concept, operating strategy, competitive strategy and service differentiation.
Service Concept
Tencent provides digital services and social platforms under the connection strategy.
They have formed various products and services which have enabled them to meet the
different needs and demands of the people regarding the usage of Internet. The services of
Tencent have helped people to increase the communication, share information, financial
services, entertainment and such other services (Perera et al. 2014). The different internet
services and social platforms provided by Tencent are QQ Instant Messenger, QQ.com,
Qzone, QQ Games, Weixin/WeChat, Tenpay, Tencent Cloud, Tencent Open Platform and
other such applications. According to the recent updates of the company, almost 783 million
users have been actively sing QQ every month. WeChat and Weixin has a user base of 989
million combined. The company has brought a huge change in the internet industry of China
with the advent of it various applications (Gilchrist 2016). Tencent have always focused on
the innovation and development of new products and services to strengthen their relationship
worldwide. The research & development staff in the company consists of more than 50%.
The company have patents of various technologies in different areas such as e-commerce,

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search engine, gaming, instant messaging, online payments, information security and others.
Tencent invests in various services related to technological advancement so that they can
grow their service horizon. They have invested almost RMB100 million in the year 2007, for
setting up the first research institute in China which is known as the Tencent Research
Institute. The campuses for this institute is situated in different areas like Shenzhen, Beijing
and Shanghai. The main purpose of the institute is to bring development in the core areas of
internet technologies and bring innovation in the technological industry. Along with bringing
changes in their service, Tencent have also focused on fulfilling their responsibility towards
the society and help the internet communities to promote themselves.
Source : (Gilchrist 2016)
Operating Strategy
Tencent Holdings is one of the biggest technological company in the world and they
have always focused on becoming much bigger than they already are. This growth have been

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evident by the increase in their annual revenue. The company generates most of its revenue
from the popular messaging application which is WeChat which is primarily a dominant app
in China. They had an increase of 48% from the year 2012 and generated an annual revenue
of a total of RMB 151.9 billion which is $21.9 billion for the year 2016. Tencent had an
enormous and impressive growth in its annual sales. The final quarter of the company had an
increase of 44% revenue which was RMB 10.6 billion or $1.5 billion. WeChat had a
popularity of 889 million users per month worldwide (Yang, Yang and Plotnick 2013).
Tencent had acquired Supercell, who was a game maker with a share of about billion dollars.
It has also made several investments in several studios and creates its own games. It also
build partnerships with different publishers to distribute their titles in China and globally as
well. Their application App Annie had been ranked the top mobile publisher in the year 2016
on the basis of their revenue (Tang 2016). Smartphone games have generated a revenue of
RMB 10.7 billion or $1.55 billion during the last quarter of Tencent. The business of online
games have generated the most revenue for the company and have made it evident that the
company still has a stronghold over the online technology industry. Tencent have develop a
payment system known as Weixin in China. This payment system is integrated in the WeChat
application. This payment system was able to get a user base of almost 600 million. The
company have recently been making innovations in different mini programs to develop
themselves and expand their operations in the internet market.

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Source : (Tang 2016)
Competitive Strategy
The biggest competitors of Tencent Holdings in China is Alibaba (Leong et al. 2016).
They are the two companies who have a huge customer base and most of the people in China
spent their time with applications made by these three companies. Tencent is considered as
the number one company in the mobile and e-commerce industry. Tencent have always been
in close competition with Alibaba who is also a technology company who have made their
place in the Chinese market. To maintain their foothold in the market Tencent have taken
many steps which would help them to stay strong in the internet market. Tencent have several
investment one of which is the subsidiary, Tencent Industry Win-Win Fund, which mostly
concentrates on the internet, online games and media. There have also been investment in
Tencent Industry Collaboration Fund and Tencent Public Space (Shim and Shin 2016). There
is the existence of many data which proves that Tencent have made almost 266 investment
since its establishment. These investments are more in number than that of its competitors.
This has led Tencent to become an investment holding company from a chat software
developer company. They have the largest revenues for online-games in the world. They have

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been able to achieve this by following a strategy of being at the right place which is their
home base China at the right time which is the time period when on-liner games were at a
hike. They took the advantage of their strong hold in the on-line market to launch their on-
line games through their QQ desktop messenger and WeChat (Goldfarb and Trefler 2018).
They moved their popular titles of PCs to mobiles or even developed several new titles which
had the same features. They also used eSports as a way to create excitement for the on-line
games of their sports. They were able to gain advantage over their competitor with these
competitive strategies.
Service Differentiation
The most important strategy that is focused on by Tencent is the fact that it is a home-
grown company who has a great understanding of the local language and culture of the
Chinese population. They have taken this as an advantage by possessing a clear
understanding of the internet market in China as compared to other companies of the
industry. They have been able to get a foothold in the e-commerce market of China with its
various strategies which have helped them to grow, develop and make innovations in their
sector. The major difference that Tencent has with its competitors is that they are a company
who provides diverse services from mobile applications, gaming, mobile payments and
others. These diverse services have been an advantage for them because their customers are
able to get all kinds of electronic services from one company only. The most revenue
generating and popular service is WeChat which is a mobile messaging application with a
vast range of users (Wu and Wan 2014). It is the most famous instant messenger app which
has penetrated to almost all regions of China. They use extensive advertising techniques to
attract crowd towards their product which they have been successful in doing. They have
always been focused towards new innovations which will be of great advantage to the people
and they have constantly evolved in their functions, bringing new ones with quick frequency.

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They have added search options and news feeds which have enabled the elimination of
outside help for the gaining of information and current news. The gaming industry is also
dominated by them both in China and all around the world (Jia and Kenney 2016). The
greatest advantage of Tencent is that is has a very strong distribution channel which has the
ability to distribute any game no matter which is popular at that time. They have been able to
maintain their position in the market with their specialized efforts in their service.
Conclusion
Hence, it can be concluded that Tencent is one of the most popular companies for on-
line gaming and services including messaging, serrate engines, news feeds and others. They
have been able to gain precedence over the e-commerce industry with their strong strategies
and operational techniques and innovative ideas which have gained them a loyal customer
base. They are also able to gain new customers due to their continuous and attractive
advertising techniques which have helped in the further distribution and recognition of its
services, thereby making it a strong company worldwide. Thus the strategies that have been
mentioned in the above study has been of great advantage to the company.
Recommendation
Despite the strong foothold that the company holds over the market, there are certain
suggestions that could benefit the company and help them to expand their services to more
areas and thereby expand their business space and increase in their revenue. The company
could try to expand their reach to other countries by developing a stronger advertising
technique and features which will be user friendly so that customers do not have any other
option to choose from. They have also started in the video business but have to become
strong in the sector so that they are bale to ward off their competitors since they are still at an
early in that sector.

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References
De Wet, D., 2015. Tencent Holdings Limited: an IPO case study (Doctoral dissertation,
University of Cape Town).
Gilchrist, A., 2016. Industry 4.0: the industrial internet of things. Apress.
Goldfarb, A. and Trefler, D., 2018. AI and International Trade(No. w24254). National
Bureau of Economic Research.
Jia, K. and Kenney, M., 2016. Mobile internet business models in China: Vertical
hierarchies, horizontal conglomerates, or business groups. BRIE Working Paper 2016-6.
Leong, C.M.L., Pan, S.L., Newell, S. and Cui, L., 2016. The Emergence of Self-Organizing
E-Commerce Ecosystems in Remote Villages of China: A Tale of Digital Empowerment for
Rural Development. Mis Quarterly, 40(2), pp.475-484.
Perera, C., Zaslavsky, A., Christen, P. and Georgakopoulos, D., 2014. Sensing as a service
model for smart cities supported by internet of things. Transactions on Emerging
Telecommunications Technologies, 25(1), pp.81-93.
Shim, Y. and Shin, D.H., 2016. Analyzing China’s fintech industry from the perspective of
actor–network theory. Telecommunications Policy, 40(2-3), pp.168-181.
Tang, A.K., 2016. Mobile app monetization: App business models in the digital
era. International Journal of Innovation, Management and Technology, 7(5), p.224.
Wu, J. and Wan, Q., 2014. From Wechat to we Fight: Tencent and China Mobile's Dilemma.
In PACIS (p. 265).

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Yang, L., Yang, S.H. and Plotnick, L., 2013. How the internet of things technology enhances
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