Tencent PESTLE Analysis
Detailed PESTLE analysis of Tencent examining political, economic, social, technological, legal & environmental factors.
Political Factors:
Tencent is a Shenzhen-based technology conglomerate company, providing value-added and online advertising services. The company has to comply with various regulations in China as well as other countries it operates in. Any regulation which increases the cost of compliance impacts the financial performance of the business. These regulations can be related to areas such as data security, internet information, cyber security, intellectual property, gaming, internet finance, etc. Also, new developments in other industries could be impacted by new regulations as well. The company has taken several measures to ensure compliance. These are creation of specialist teams, working with external consultants to ensure any changes in laws is complied with.
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This concludes the political factors in the Tencent PESTLE Analysis.
Economic Factors:
Below are the economic factors in the PESTLE Analysis of Tencent:
The spread of Covid-19 impacted the revenues of the firm positively. Due to lockdowns imposed by various national governments, many users were forced to stay at home.
This increased demand for online gaming. Tencent’s advertising revenues and online gaming has been growing. Even other mobile applications like WeChat registered a growth in monthly active users. At the same time, the pandemic has caused a global slowdown. With lockdowns or restrictions in place, Tencent’s financial performance in international markets is likely to be impacted. Due to unemployment, consumers will spend less on discretionary items. Due to this, sale of smartphones would reduce too, as spending is focused on essential items. Also, as companies look to cut marketing expenditure, the company would lose advertising revenue.
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Social Factors:
Following are the social factors impacting Tencent PESTLE Analysis:
There are many developments taking place in the Internet and technology industry. User expect innovative products and services amidst a surge in applications on mobile platforms. The company has to constantly adopt to these changes and satisfy with appealing products to its consumers. For instance, Tencent has come up with many innovations to cater to the needs and wants of the users. The company partnered with many universities like Tsinghua University, Peking University, Singapore Nanyang Technological University to make joint laboratories. This helped the company come up with innovative results like real-time route recommendation system. The company also launched WeChat mini-programs. These include JD.com, which is also the second largest B2C e-commerce platform in China. Other mini-programs like Tesla allow users to track charging stations, even arrange a test-drive and share their experiences. This has resulted in gain in users for WeChat.
Technological Factors:
The technological factors in the PESTLE Analysis of Tencent are mentioned below:
Tencent has technology at its core. Thus, it takes advantage of the opportunities in its technological environment. For instance, the company’s products Weixin and QQ allow users to access huge content such as games, videos, music, books, etc. It has also invested in Artificial Intelligence. In 2016, the company set up a lab in Shenzen. The aim is to research on technologies like machine learning, speech recognition, natural language processing, computer vision, etc. This would help it develop useful AI apps in the field of content, online games, cloud computing, social media, etc. The YouTu Lab has already produced several innovations in the area of image, audio and face analysis. The company also actively invests in Artificial Intelligence firms. For example, Tencent has invested $120 million in UBTech, a humanoid robotics startup. Also, the company has partnered with Beijing Automotive Group to develop self-driving vehicles.
All these steps would help the company realize more future gains in technology and improve its financial performance.
Legal Factors:
Following are the legal factors in the Tencent PESTLE Analysis:
The Tencent company collects huge personal data of its users. Thus, it has to maintain tight data security to ensure there is no misuse or leakage of such data. Any potential lapse in this area could lead to litigation against the company. The company also faces other legal cases. In 2020, Bytedance, another big technology company filed a case with the Beijing Intellectual Property Court. The allegation was regarding Tencent not complying with antitrust laws in China. The Chinese government has even initiated checks into one of company’s subsidiary company.
Environmental Factors:
In the Tencent PESTLE Analysis, the environmental elements affecting its business are as below:
The company partnered with World Wildlife Fund to develop a digitally-driven ecological partnership. The aim of both the entities is to work in the Guangdong-Hong Kong-Macao Bay for ecological protection projects. These projects would be based on digital technology – digital landmarks, classrooms and rescue. Such projects would raise public awareness to protect ecology and also create goodwill for the company in the market. In 2020, Greenpeace came out with a report, in which it criticized China’s technology companies like Alibaba, Tencent and GDS. The report made an observation that the companies need to improve their procurement on clean energy and act more transparently. These companies also did not show any progress in using more renewable energy sources.
Moreover, there was lack of any disclosure regarding energy usage and greenhouse gas emissions. Such reports can create a negative perception in the minds of the consumers. This would negatively affect demand and impact the financial performance of the business.
To conclude, the above Tencent PESTLE Analysis highlights the various elements which impact its business performance. This understanding helps to evaluate the criticality of external business factors for any brand.
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