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WeChat is a multi-purpose messaging, calling and social media app that allows one to connect with their family and friends across countries. It is a Chinese app and was developed and first released in 2011 by Tencent (Che & Ip, 2018). By 2018, the app had grown to become one of the largest standalone mobile apps in the world based on the monthly active users. The app is said to have an estimate of about 1 billion monthly users. WeChat's development began in 2010 as a project at Tencent Research and Project center and the original version of the app was named "Weixin" by Tencent's CEO before being launched in 2011 (Fan & Cao, 2017). It is after the number of users of this app reached 100 million that it was rebranded to "WeChat" to suite the international market. Although 90% of WeChat users were from China as of 2016, the app now enjoys a significant number of users from Europe, South America, and Australia (Ma, 2017). As such, the following paper identifies the issues that WeChat has been confronted with at the global environment by conducting a SWOT analysis while looking at the Porter's Five Forces and the related PESTLEEG factors in connection to the Chinese company.
WeChat enjoys a wide range of strengths given that the company is one of the leading firms in its industry. These strengths are key to WeChat's operations and expansion as they help the company penetrate new markets in addition to protecting its market share in existing markets. One of the company's strengths is the fact that it has a strong distribution network which has been established over the years. WeChat has a wide distribution network that is reliable and has the potential to reach a majority of the company's potential market (Liu, 2017). Also, WeChat has a superb performance when it comes to new markets. The company is proficient in new market entry and turning the new markets into success. The expansion that the firm has undergone has been significant to the creation of additional revenue streams (Jinfang, 2015).
Another strength associated with WeChat is the presence of a strong dealer community. The company has established a culture among dealers and distributors where dealers are encouraged to invest in sales team training to provide explanations to the customers regarding how they can reap maximally from WeChat products. This is in addition to promoting the firm's products. Other strengths linked to the company include its strong brand portfolio, good returns on capital expenditure and good reputation in new product development (Kuang, 2017).
Some of the weaknesses associated with WeChat include its inability to tackle challenges arising from new entrants leading to a loss of small market share, poor product demand forecasting which leads to missed business opportunities, poor integration of firms whose work culture is different, gaps in the company's product range and high work force attrition rate (Ma, 2017; Yang et al., 2016).
WeChat has opportunities such as new online customers and hence the possibility of expanding further globally, rapid technological development and the increasing penetration of the internet (Harwit, 2017).
WeChat is also faced by a number of threats which include intense competition, changes in consumer preferences, changes in government regulation, law suits as well as the availability of substitute products (Che & Ip, 2018).
Porter's Five Forces
The internet industry's evolution is happening at a first rate and competition is likely to further intensify. WeChat faces competition from other communication companies, most of which have sufficient funding from venture capital or private equity funds (Liu, 2017). This has given rise to an industry landscape that is increasingly competitive.
Threat of New Entry
Though it is quite difficult for new entrants to enter the specific industry due to the large number of consumers that are already using WeChat, there is still the possibility of other companies introducing their messaging apps to compete with WeChat.
WeChat's suppliers include application developers, content providers and advertising agencies (Kuang, 2017). However, due to the fact that these suppliers depend on WeChat's platform to make profit, they have a low bargaining power.
Since WeChat provides services that are also offered by other applications, such as Whatsapp and Viber, the presence of substitutes from other venders gives consumers a high bargaining power.
Threat of Substitution
WeChat enjoys a large number of users which results in high user stickiness. This keeps the threat of substitution at minimal levels.
In terms of technology and process, WeChat has used advanced technology to come up with a multipurpose app that supports numerous processes such as messaging, posting of photos, calling and making payments. The company continues to perform well in the market and as of 2017, WeChat had an estimated 963 million monthly active users and the number is expected to have risen to one billion users in 2018 (Che & Ip, 2018). Further, WeChat is said to have one of the largest customer basis among the many chat apps available and is among China's largest social networks (Ma, 2017). As aforementioned, WeChat works with a number of suppliers which include application developers, content providers, advertising agencies and device manufacturers.
Factor Europe, South America, and Australia (Host countries) China (Sending country)
Political Forces Low market entry barriers
WeChat has received enough support from authorities in these countries which has encouraged the company's expansion internationally. For instance, in Australia, political parties have used the application to win votes from the Chinese diaspora (Harwit, 2017). Low market entry barriers
Given that most of WeChat's operations are based in China, its financial condition, processes and prospects are subject to Chinese regulatory developments. China's telecommunication industry is highly regulated by relevant government authorities such as State Council, GAPP, MIIT and MOC (Liu, 2017).
Economic Forces Economic activities in the host countries have played a major role in making WeChat a success. In these countries, the app has been used for interaction between coworkers, businesses and its potential to increase productivity through easy and fast communication has enhanced WeChat's at the global market. Similarly, economic conditions in China affect WeChat's financial conditions to a larger extent. The fast growing Chinese economy has influenced WeChat's growth as well due to improved business operations and additional capital availability
Social Cultural Forces Like is the case in China, Internet has been part of the society's way of life and a culture that fully embraces online services is strongly rooted in these countries. Thus, WeChat has gained popularity as it continues to be used in social services such as community organizations, health care providers, and government offices. Over the years, China has undergone rapid development including Internet incorporation into almost every aspect of the citizens' life and hence an essential part of daily life.
Technological Forces Availability of new technologies at reasonable costs
The advancements in Information Technology in these countries encourage the use of new modes of communication. WeChat being of these companies, therefore, gains from the technological forces in terms of customers and revenue. Like in the host countries, Information technology processes in China have enhanced efficiency in WeChat while saving on costs.
High investments in research and development
Legal Forces Legal costs could be high
The countries have some legislations that influence or restrict some activities and operations of WeChat. The law in these countries requires communication firms to respect the privacy of users' failure to which firms are vulnerable to legal suits. These laws serve as legal barriers The laws in China affect the operations of WeChat. For instance, the Chinese government has introduced new laws that target the instant message industry. Further restrictions have been proposed that leave WeChat legally exposed. For example, in 2014, smartphone users in China were barred from sharing political stories without obtaining some official approval (Jinfang, 2015).
Ethical Forces There are ethical barriers. It has been considered unethical for the company to collect users' information or entire address book and retain the information without the user's consent. Similar to the case in the host countries, WeChat also experiences ethical barriers in China.
Environmental Forces Availability of already existing telecommunication services in these countries have eased the penetration of WeChat into these markets due to the availability of infrastructure. The environment in China has fostered the country's speedy growth into the biggest internet market in the world which serves as a major boost to companies that rely on expansion like WeChat.
Geographical Dimensions Due to the nature of WeChat's services, the firm is able to overcome geographical barriers and access a significant portion of potential customers and capital. Since WeChat's operations and services are primarily available over the internet, geographical dimensions lack significant influence on the business.
Che, X., & Ip, B. (2018). WeChat. Social Networks in China, 45-70. doi:10.1016/b978-0-08-101934-4.00002-9
Fan, H., & Cao, H. (2017). A Study on the Discourse Construction of WeChat Salesmen's Personal Identities: Based on Data from the Moments of WeChat. World Journal of Social Science Research, 4(4), 307. doi:10.22158/wjssr.v4n4p307
Harwit, E. (2017). WeChat: social and political development of China's dominant messaging app. Chinese Journal of Communication, 10(3), 312-327.
Jinfang, Y. A. N. (2015). A review of the researches on wechat. In 2015 International Conference on Social Science and Technology Education. Atlantis Press.
Kuang, W. (2017). Development Report on China's WeChat in 2013. In Development Report on China's New Media (pp. 35-46). Springer, Singapore.
Liu, Y. (2017). Werbung auf WeChat. Social Media Marketing in China Mit WeChat, 171-182. Doi: 10.1007/978-3-658-17497-2_9
Ma, W. (2017). Going Overseas: A Bumpy Road. China's Mobile Economy: Opportunities in the Largest and Fastest Information Consumption Boom, 253-277.
Yang, X., Sun, S. L., & Lee, R. P. (2016). Micro-innovation strategy: the case of WeChat. Asian Case Research Journal, 20(02), 401-427.
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