Tencent Strategy and future

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Analysis of Tencet’s Risks, Justification and Recommendations
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Department, Institutional Affiliation
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A SWOT analysis of Tencent- Risks, Justification and Recommendations
When one mentions Tencent, whatever clouds many people's mind is that it is a social network
due to the popularity of QQ and WeChat. However, Tencent derives 53% of its revenues from
online games, with the social network being its fastest-growing sector accounting for 25% of its
total revenues (Huang, 2021). Tencent is one of China's most valuable and fastest-growing
companies, worth over $480 billion.
Risks Issues
The biggest problem associated with its reliance on gaming revenues is the difficulty in gaining
loyal customers. Tencent relies primarily on mobile gaming. However, for mobile games, gamers
often switch very quickly, so it is difficult to maintain a consistent set of customers (Jiang,
2021). Unlike search engines and e-commerce which, once scaled up, have wide moats,
Tencent's gaming business risks disruption if not for its constant acquisitions of smaller
competitors.
Secondly, Tencent faces a political risk of losing control over online gaming, given that it has
direct access to the entire Chinese population under the age of 40 years. The implication is that
the central Government may place Tencent under more scrutiny, possibly stunting its growth.
Considering that the biggest shareholder in Tencent is a South African company (Naspers), the
Central Government would not be willing to give so much customer data to a private company,
let alone a company whose biggest shareholder is a foreign company.
Strategic Forecasts
However, investors still place so much value on Tencent. WeChat, a subsidiary of Tencent, has
enormous potential with its numerous capabilities like buying train tickets, making bank
transfers, and ordering food, among other things (Zhang-Zhang et al., 2020). WeChat not only
has the potential to make payments and spending easier, but it can also make it into a social

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experience. An App like PDD is embedded into WeChat, encouraging consumers to shop with
friends. Combining e-commerce and social network is a powerful blend making it difficult for
users to opt-out.
Tencent has been able to amass a brilliant investment portfolio. Unlike Alibaba and Baidu,
Tencent's acquisition strategy is much more focused and expands its key competencies. Tencent
has invested in JD, Wuba, Riot Games, and Epic Games. These acquisitions are incorporated into
Tencent's core business areas helping Tencent to develop further as a consumer platform.
Justification
Since WeChat is predominantly linked to phone numbers, the user ID is already verified, thus
implying that WeChat users can use it to sign into other apps, making the customer experience
more pleasant and trustworthy (Napitupulu, 2020). All these factors combined make Tencent a
very potent competitor to Baidu's search engine and Alibaba's e-commerce business.
Recommendations
Generally, Tencent's benefits and rewards outweigh its risks, and that is because of the
widespread dangers in various business sectors. Therefore, Tencent should diversify its market
outside China to stay atop its dangers or threats.

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Reference
Huang, J., 2021, December. Analysis of Tencent’s Successful Development Strategy. In 2021
3rd International Conference on Economic Management and Cultural Industry (ICEMCI
2021) (pp. 2513-2516). Atlantis Press.
Jiang, Z., 2021. Research on China ten-cent's competitive strategy in the Chinese market.
Napitupulu, B.E.P., 2020. What Makes Tencent Becomes A Successful Business? A Case Study
Analysis of Tencent (Doctoral dissertation, STIE Perbanas Surabaya).
Zhang-Zhang, Y., Rohlfer, S. and Rajasekera, J., 2020. An eco-systematic view of cross-sector
fintech: The case of Alibaba and Tencent. Sustainability, 12(21), p.8907.