Tencent: A case study on expanding through micro-innovation and strategic partnerships

Abstract

Tencent is a Chinese IT company that offers a wide variety of products in the e-commerce, online advertising, online games and social network markets. Most of these services are centered around the central hubs of QQ and Weixin/WeChat. This allows for a spillover of users and a brand name that can be used for a variety of products. Most of Tencent's software products are free to use, but allow users to buy small cosmetic upgrades. For Tencent, these value-added services are the main source of income. This differentiates the company from most of its competitors, which still rely mostly on online advertisements to monetize users of free services. Tencent focuses on 'micro-innovation', taking a proven concept and adjusting it to the Chinese market. The company is very strong in the domestic market, but has had trouble in foreign markets. More recently, Tencent started strategic partnerships with companies in segments where the company cannot become market leader on its own. Perhaps the company could also use this strategy for foreign market entry.