Strategic Management Report for TC Company

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Strategic Management Report for TC Company

Executive Summary

This is a strategic management report, aiming to help develop strategies and provide recommendations to TC that is one of the largest online gaming companies in China by collecting information relating to various components of strategic management and presenting an analysis.

This report firstly provides an overview of TC, including number of employees, assets, sales, performance, products it provides, location including an organization chart showing the formal structure of the organization. This is followed by an analysis of external macro environment of China's online gaming industry based on PEST model as well as Porter's Five Forces model. And then an internal environment analysis of TC is made by using SWOT model and strategies are developed through TOWS matrix, finally recommendations regarding the implementation of established strategies are discussed and overall conclusions are reached.

China's online gaming industry is currently on its fast-growing stage.

Through the PEST analysis, China has a relative stable political environment and relatively good socio-cultural environment. In addition, although economy growth of China is still on its fast growing stage, the speed will slow sharply this year and next. This may be a threat to the industry. And technologies of both hardware and software are making big progress. The online gaming industry is basically attractive through Porter's Five Forces analysis. Urgent affairs for China's online gaming industry should focus on integrating resources, further improving game quality, and avoiding excessive competition. In addition, strategic group map reveals that TC should strive to win more market share to accomplish its short-term goal and consolidate its long-term goal. Moreover, through SWOT analysis as well as TOWS application, relevant strategies are developed for TC (refer to section 8.2). Further, the implementation of strategies is recommended in section 9.

Table of Contents

Executive Summary

1. Introduction

2. An Overview of TC

3. TC's Vision, Mission, Goal and Objectives

4. The stage of life cycle of China's online gaming industry

5. PEST Analysis

5.1 Political Factors

5.2 Economic Factors

5.3 Socio-cultural Factors

5.4 Technological Factors

5.5 Summary

6. Industry Environment Analysis Using Porter's Five Forces Model

6.1 Rivalry among Existing Competitors

6.2 Threat of Entrants

6.3 Bargaining Power of Suppliers

6.4 Bargaining Power of Buyers

6.5 Competitive Forces of Substitutes

6.6 Summary

7. Strategic Group Map

8. Internal environment analysis of TC

8.1 SWOT Analysis of TC

8.2 TOWS Matrix

9. Recommendations

10. Conclusions

List of references

Appendix: TC's organizational chart

1. Introduction

This is a strategic management report, aiming to help develop strategies and provide recommendations to TC that is one of the largest online gaming companies in China by collecting information relating to various components of strategic management and presenting an analysis.

Relevant data collected for this report is mainly from second data including knowledge and information from textbooks, journal articles, annual reports of TC, Internet, and so on. Such data collected aims to serve both external environment analysis (through PEST model, five forces model and strategic group map) and internal environment analysis (through SWOT and TOWS Matrix).

The limitations of this report are listed as follows: First, current China's online game industry is on its fast developing stage, and hence the strategies developed for TC can merely be references for current TC or the near future because of the rapidly changing market.

2. An Overview of TC

TC founded in 1998 is now one of the largest online gaming companies in China, and went into public by driving into Hong Kong Stock Exchange. Through 10-year development, TC is able to grow their business steadily. Currently, TC is operated by more than 2,000 employees and reported total revenue of RMB2.025 billion in the third quarter of 2008 with profit rate of 40 %, increased by 26.6% than the second quarter (see Figure 1) (TC 2008). Appendix 1 indicates its organizational chart.

Figure 1: Revenue Growth of TC (06Q4-08Q3)

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(Source: http://news.newhua.com/news1/net/2008/1113/0811131630135DC5FBE04K

9J22AEF70C9HI9000525CEBJKE78357FBAK.html)

TC's online gaming provides chess-card games, casual games, competitive games, and online chatting rooms. Yesteryear, TC launched "C Fantasy", "C Velocity of Sound", and "C Three Countries" that are medium- or large-sized multi-role online games. (TC 2008)

3. TC's Vision, Mission, Goal and Objectives

Vision: To be the most popular online gaming company in the future.

Mission: To improve human life based on Internet-related technologies and providing excellent online games.

Long-term goal: To be the most popular Internet-based enterprise.

Objective: In 2009, total revenue is expected to increase by 30%.

Business Philosophy: To develop a safe, healthy and active platform in order to create values for customers.

4. The stage of life cycle of China's online gaming industry

China's online gaming industry is currently on its fast-growing stage. China's online gaming industry represented RMB10 billion domestic market in 2007, sharply increased by 52% compared with 2006. As of the end of 2007, China's online game players reached 41.8 million. And compound annual growth rates reached as high as 37.8% from 2002 to 2007. (Chen 2008) There are currently 192 medium- and large-sized online games, which increased by 76% compared with last year. However, the industry lacks of game technicians, and is demanding another 15,000 technicians. (Chew 2008)

5. PEST Analysis

The PEST Model includes political, economic, socio-cultural, and technological factors focused on the external environment and important factors that can affect present and future business (Kotler & Armstong 2001).These factors need to be analyzed before a company develops a strategy. Example items of each factor are listed as follows:

Political factors: Regulations, taxes, or the political party in power.

Economic factors: National and global growth, interest rates, and employment.

Socio-Cultural factors: Age distribution of population, education levels, and life-styles.

Technological factors: New technologies being developed, automation, technology incentives, and rate of technological change.

Below is an analysis of macro environment of China's online gaming industry based on PEST model.

5.1 Political Factors

China has currently a relatively stable political environment. After China being one of the members of WTO, although Chinese government has released various policies in order to encourage the domestic companies, competitive pressures from foreign online gaming companies (e.g. Blizzard Entertainment, EA, Sony) are visible, and the legislative protection of virtual properties of online games is far from perfect, which results in loss to the interests of many game players (Xinhua 2007). However, Chinese government is developing relevant policies to support the domestic online gaming industry (Xinhua 2007).

Further, established "China's online gaming publication and administration methods" advocates domestic online games, and lays a low tax on domestic game developing companies (Enews 2008). This is obviously good news to TC that is an independent developer, publisher, and marketer of online games.

In addition, due to the pressure from the society, the Press and Publication Administration established an "anti-obsession system standard" in August 2005 in order to standardize the online gaming industry (Zhen 2006). This means the industry is growing towards more and more standard. Hence, such political factors are favorable for online gaming companies of China, including TC.

5.2 Economic Factors

Although game development has a good perspective in China, rampant piracy has caused huge losses to many non-online game developers, and hence such game developers begins to shift to online gaming development because there are almost no such problems. (Cein.gov.cn 2007) However, this also intensifies the competition of the industry.

Moreover, China's economy is currently projected to grow by 7.5% in 2009, less than the figure (9%) predicted a few months ago (Birstow 2008). On the other hand, the world economy will slow sharply this year and next due to the economic crisis (Chinadaily 2008). Such economic factors are to some extent unfavorable to TC in the following few years.

In addition, the consumption price index (CPI) rises by 7.9% in the first half year of 2008 compared with that of the last year (finance.sina.com.cn 2008). Further, the investment price of fixed assets has increased by 5.6% (Xinhua 2007). The high inflation rate is unfavorable to companies as the actual money value has decreases.

5.3 Socio-cultural Factors

Living standards are greatly improved and more people begin to enjoy the online games because Internet cafes and broadband are popularized and people are seeking new forms of entertainment. (Xinhua 2007) In addition, large population of China provides customer base for online game market. As of Nov. 2008, China has a population of 1.4 billion, of which there are more than 41.8 million online game players (EastAsiaEconomicRiew 2008). Moreover, the majority of online game players are preteens, teenagers, and young adults (between the ages of 20-40). The average age of game players is rising (Xinhua 2007).

There are various places, purposes and types of online games for online game players (see Figure 2).

Figure 2: The demand structure analysis of online games

5.4 Technological Factors

Rapid development of Internet and advanced game servers provides strong hardware support for online gaming development and publishing. For example, improved game developing software increases the quality of both graphics and play, and current types of CPU as well as video card provides hardware support for such new game developing technologies.

In addition, as Internet cafes and broadband are popularized and their prices as well as PC prices decrease, online gaming can be widespread. Learning and experience curve effects are also boosting the development of the industry.

5.5 Summary

Through the PEST analysis, China has a relative stable political environment for China's online gaming industry, which makes the industry grow towards more and more standard. In addition, although economy growth of China is still on its fast growing stage, the speed will slow sharply this year and next. This may be a threat to the industry. Moreover, relatively good socio-cultural environment is favorable for the industry though pressure from the society as to anti-obsession voice. Finally, technologies of both hardware and software are making big progress, which has provided a good technical support for games development.

6. Industry Environment Analysis Using Porter's Five Forces Model

Porter's five forces tool is used to determine the competitive intensity and therefore attractiveness of a market (Thompson, Strickland & Gamble 2005). The five forces are summarized in Figure 3.

Figure 3: Porter's five forces model

6.1 Rivalry among Existing Competitors

There are currently a large number of competitors due to the rapid development of the industry over the past ten years (Zhen 2006). The differences of competitive competences between large-sized online gaming companies seem small under the control of law within the industry (Zhen 2006).

The similar competitive model forces online gaming competitors to face bigger threat. Competitors can easily learn the service model from other online gaming companies to compete for the market share, for example, reduce price of game card and relevant virtual products, upgrade game server, etc. However, such business models may not be good guiders since the online gaming industry of China has only been developed for ten years-far from mature in both technology and service quality and game players' quality (Chew 2007), and hence it leads to the phenomenon of survival of the fittest. Thereby, if competitors cannot afford sufficient capital for new technology as well as solid human resources, they will be wiped out by the market when the new generation of online games come.

On the other hand, huge potential revenue, popularization of computer and broadband that provide opportunity for more people to play online games, and increased average age of game player bring good opportunity for the industry development (Thompson, Strickland & Gamble 2005). However, product differentiation is the key to obtain persistent competition advantages for competitors by building niche markets. for example, games with cartoon style are specially developed for female players; highly competitive online games are particularly developed for professional players. Although this may reduce competition within the industry, there can be many competitors competing for the same niche market. In China, The West Netease who is operating online games with cartoon style is currently the largest online gaming operators. The NineCity who acts as an agent of WARCRAFT in China reported total revenue of RMB450 million last year (Chew 2009). In addition, C leisure games have become popular amongst many game players, which makes TC's quarterly sales growth by more than 9% (TC 2007). Moreover, other large-sized online gaming companies, e.g. Shengda, Jinshan, also have their its own products differentiated from competitors.

These factors indicates that the competition in China's online gaming industry is via not only price competition, but also companies' internal reform. Both threats and opportunities makes online game industry develop more rapidly and competitively.

Summary: Rivalry amongst existing competitors is not only a strong competitive force, but is also one which may well intensify with further growth in the number of online games and competitors.

6.2 Threat of Entrants

It requires large capital in the initial stage for potential entrants (both game developers and game agents) to enter into the industry. With sufficient capital, any potential entrants are able to develop or introduce new games by employing relevant game development experts. However, many of such games have been proved to be inferior products that will eventually be eliminated by the market. As a result, the costs for game development or introduction sink. Over the past few years, there have been many online gaming companies who went bankrupt before the products being introduced to the market.

Differences among online games are caused by their own characteristics, such as long life cycle, operable, etc. However, games with special characteristics are usually imitated by competitors. As a result, it causes some of game players to shift to the new games introduced by competitors or new entrants. This is a big threat to existing competitors. However, players usually choose the game introduced first, and hence such games often have long life cycle among the similar games.

Technologies and talents for game development are the key obstacles for potential entrants. Hence talents turnover in this industry is frequent through headhunting companies. However, without a solid team for game development, it is still difficult for the new entrants to survive.

In addition, online gaming-related organizations consist of online game developers, online game agents, game operators, game websites, and software developers. Many companies have integrated several such business functions. Hence any of the online gaming-related organizations are likely to be the new competitors. Moreover, there are even other organizations from other industries hopes to be one of the members of this industry because of the huge profits, causing the industry to fall into disorder.

Summary: the power of threat of entrants is weak to moderate.

6.3 Bargaining Power of Suppliers

The suppliers of online gaming industry consist of hardware suppliers, ISPs (Internet service providers), the talent market and the game developers.

Hardware refers to game servers used for data storage for game players. Currently, there are a number of suppliers providing such hardware, such as HP, IBM, and hence competition among such suppliers is intense. Foreign game server suppliers enter China's online gaming market with products of lower prices compared with China's domestic game server suppliers. Thereby, the intense competition has lowered the bargaining power of such suppliers. In addition, although ISPs is monopolized by Telecom and Netcom, they cannot threaten clients as a public resource. Talent is one of the key for online gaming companies to further develop. In an open market, however, it is difficult for job seekers to intervene in the industry. Finally, online game developers are the main threat to online game operators most of who are merely the agents and cannot completely buy out a game. Hence game operators have to cooperate with the developers once they signed an agreement. There are few companies that are both independent developers and operators. Therefore, the bargaining power of online game developers is relatively strong compared with other types of suppliers.

Summary: bargaining power of suppliers is weak to moderate.

6.4 Bargaining Power of Buyers

First, as of May, 2008, the total number of Internet users of China is 220 million, of which the number of online users 103 million, increased by 9.6 percent compared with 2007 (Chen 2008). This indicates that China has a huge base of Internet users the number of which continues to grow. Although the future growth rate of Internet users may decrease, the huge base of Internet users provides a large number of potential online game players. And this coupled with existing online game players significantly reduces the bargaining power of buyers (game players). This is because the larger the number of buyers, the easier for sellers to find alternative buyers when a customers is lost to a competitor (Thompson, Strickland & Gamble 2005, p.65).

Second, game players usually need to spend a lot of time and money in playing one online game after they choose it. If they shift to a competitor's game, they have to spend time and money to rebuild their world in a new game. In addition, games are usually not identical, and hence game players' costs of switching to competitors' games or substitutes are relatively high. Thereby, this reduces the bargaining power of buyers (Thompson, Strickland & Gamble 2005).

Third, however, if buyer demand is weak toward an online game, game operators are scrambling to secure additional sales of their games. Under the circumstances, weak or declining demand creates a "buyers' market" and shifts bargaining power to buyers (Thompson, Strickland & Gamble 2005).

Summary: Bargaining power of buyers is weak to moderate.

6.5 Competitive Forces of Substitutes

First, one online game can be substitute of other online games. However, only few games have absolute advantage, but others pose almost no threats due to evident differentiation, such as "Street Basketball" and "Street overlord". In addition, any online game has a product life cycle, and finally steps into a declining stage due to technical advancement, social-cultural changes, changes of customer preferences or their tastes, customer service quality, and so on. Although the barriers for new games to enter the market are relatively high, in the long term, only high-quality games can win the market. For example, the South Korean game "Miracle" had to quit the market after existing only two years because of a severe bug in the game and the low quality of customer service. However, "World of Warcraft" which is created in America quickly won many of the game players due to its high quality of customer service as well as solid technical support. Hence, competitive forces of substitutes of other online games are usually moderate.

Second, the effect of substitutes is significantly limited due to personal values and living conditions amongst different game players. Every type of online game has a fixed customer group. Often, it is difficult for the majority of players to change their concept and values to turn to other types of online games. For example, people who are always busy in doing other things will be less likely to choose role-playing games, such as "World of Warcraft." and "Legend", but they may be more likely to choose leisure games that are less time- and energy-consuming.

Third, competitive forces of substitutes of non-online games are very weak in China. The competitive position of online games is higher than many of other types of entertainment, especially amongst youth population. There are Internet cafes everywhere, the number of which is larger than that of any other foreign countries. As of now, there are more than 100 million Internet cafes in China, with an average annual growth rate of 5% (iResearch 2008). Domestic Internet cafes are full of online game players at almost anytime (Chew 2008). This means the absolute competitive position of online games compared with other types of entertainment in China.

Summary: competitive forces of substitutes are weak to moderate.

6.6 Summary

The online gaming industry is basically attractive through the above analysis of China's online gaming industry based on Porter's Five Forces tool. It is clear that online games are recognized as one of the most important entertainment activities by Chinese consumers along with the popularity of Internet cafes and broadband, which leads to the growing demand for playing online games. Hence this is a good opportunity for online game companies. On the other hand, threats are also obvious in the China's online gaming industry. First, a large number of competitors intensify the competition, and there are even other organizations from other industries hopes to be one of the members of this industry because of the huge profits, causing the industry to fall into disorder, which negatively impact the profitability of the industry. Second, along with the globalization, some foreign online games are entering into the domestic online gaming market, making the competition intenser. Hence, urgent affairs for China's online gaming industry should focus on integrating resources, further improving game quality, and avoiding excessive competition.

7. Strategic Group Map

Strategic group map refers to the technique for revealing the market positions of industry competitors (Porter 1980). A strategic group consists of those industry members with similar competitive approaches and positions in the market (Porter 1980).

Competitive characteristics that differentiate firms in the online gaming industry are price/quality as well as market share. Hence, the comparative market positions of selected online gaming companies are produced as follows (see Figure 4).

(Source:http://game.china.com/zh_cn/onlinegame/news/10003534/20071121/14488500.html)

From the strategic group map, it can be seen that Shengda, Wangyi and Juren are the market leaders of China's online gaming industry. In 2008, these three companies' market shares are 19.3%, 17.1%, and 13.5 respectively (game.china.com 2008). The product quality amongst competitors seems very close. However, product differentiation is obvious. For example, TC's online games are based on its "C culture". TC's market share in 2008 was 5.5% (game.china.com 2008). The company is currently competing with many strong competitors in terms of the map, especially with Shengda, Wangyi, Juren, NineCity and WL. In general, the closer strategic groups are to each other on the map, the stronger the cross-group competitive rivalry tends to be (Porter 1980). Thereby, for TC, the current strongest competitors should be NineCity and WL. Quality (including product quality and customer service quality) of online games is always crucial as games with low quality (e.g. Miracle) cannot survive the highly competitive market. Hence, TC should continue to focus on product quality, just like what other competitors are doing. The price difference between competitors is very low with a slight change. Thereby, at the same time, TC should strive to win more market share to accomplish its short-term goal and consolidate its long-term goal.

8. Internal environment analysis of TC

SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats for an organization. It helps identify the internal and external factors that are favourable and unfavourable to an organization to achieve its objective(s). (Thompson, Strickland & Gamble 2005)

8.1 SWOT Analysis of TC

Strengths

▪Strong financial structure: TC entered into the market of Hong Kong at the end of 2004, and collected huge capital (TC 2007). The company's online gaming business has rapidly developed over the past five years (Eshare.sgst.cn 2008).

▪Strong team cooperation: Headed by CEO, Ma Huateng, TC has been one of the major competitors of China's online gaming industry based on its strong team cooperation. Moreover, TC has successfully induced some first-class talent from some famous companies, e.g. MSN over the past few years (Eshare.sgst.cn 2008).

▪Strong market research ability: TC' mission is to improve the standard of living of people based on Internet. This is based on its relatively strong market research ability on the basis of studying user's needs.

▪Popularity of C culture: TC's C culture has been very popular among game players and C.com has been one of China's largest websites.

▪The ability of making the games popular: TC is able to make its games popular based on its website C.com and its instant communication software. In addition, cooperating with other famous brands, e.g. Coca-Cola, Pepsi, also helps popularize its games.

▪Strong distribution channels: TC's distribution network is relatively strong via TV, newspaper, cooperation with various websites.

Weaknesses

▪Relatively low independent R&D: TC's games are developed based on imitating other famous games, and hence its own independent R&D is relatively low (Eshare.sgst.cn 2006).

▪Relatively low ability to introduce other new games: TC mainly develops their games independently, but never be an agent of games developed by other companies though the company has been planning to do so.

▪Quality Control System: TC needs to enhance valueless information management and control stealing of registered game numbers.

▪After-service quality: TC has problems in managing its virtual currency used in its games, and hence it should improve its after-service quality by improving security of its virtual products (Eshare.sgst.cn 2006).

Opportunities

▪Industry policy: TC is located in Shenzhen High-Tech area, Guangdong province, China, where companies enjoys income tax rate of less than 20 percent and less impacted by "anti-obsession system standard" (TC 2008).

▪Good social-cultural tradition: TC's online games have caused big influence among Chinese game players. This provides a good opportunity for TC to further develop online games.

▪Technical environment: Rapid development of China's IT industry (both in hardware and software) has significantly impacted TC's online games.

▪Bargaining power of suppliers: TC develops and operates games by itself, but never be an agent of games developed by other companies, and hence less impacted by the bargaining power of suppliers (TC 2008).

▪Potential market: TC's online games have been very popular based on its instant communication software, coupled with popularized Internet cafes and broadband, China's large population base as well as increased average age of game players, and so there are a number of potential game players.

▪Various consumption levels of game players: Low prices of TC's online games coupled with broad consumer groups bring great potential game players with various consumption levels.

Threats

▪Differentiation among online games: Although product differentiation is evident among many games, imitation of popular games is prevalent. TC's games are developed by imitating other famous games, and hence it has lost some competitive advantage to those games. In other words, games that TC imitated can be strong threat to TC.

▪Rivalry among existing competitors: Rivalry amongst existing competitors is not only a strong competitive force, but is also one which may well intensify with further growth in the number of online games and competitors.

▪Threat of substitutes: Although competitive forces of substitutes are weak to moderate, their threat exists since there are many types of entertainment, products and other online games.

▪Economic influence: Both China and the world economy will slow sharply this year and next due to the economic crisis.

8.2 TOWS Matrix

TC's TOWS matrix is shown as follows:

Strengths (S)

S1.Strong financial structure

S2.Strong team cooperation

S3.Strong market research ability

S4.Popularity of C culture

S5.The ability of making the games popular

S6.Strong distribution channels

Weaknesses (W)

W1. Relatively low independent R&D

W2. Relatively low ability to introduce other new games

W3. Quality Control System

W4. After-service quality

Opportunities (O)

O1. Industry policy

O2. Good social-cultural tradition

O3. Technical environment

O4. Bargaining power of suppliers

O5. Potential market

O6. Various consumption level of game players

SO strategy

O1-S1, S3, S4: TC enjoys preferential taxation, and is less impacted by "anti-obsession system standard" because its games are mainly casual games. Hence based on strong market research ability and popularity of C culture, it is favorable for the company's further development.

O5, O6-S3, S4, S5, S6: Pay close attention to developing new markets, research consumer needs, and develop value-added services.

WO strategy

O3-W1: Enhance independent R&D based on improved technical environment.

O4, O5-W2: For larger market share from China's online gaming industry, introducing suitable games for Chinese players is a shortcut. But price of excellent games is relatively high, which TC should negotiate with the game suppliers.

Threats (T)

T1. Differentiation among online games

T2. Rivalry among existing competitors

T3. Threat of Substitutes

T4. Economic influence

ST strategy

T1, T2, T3,T4-S4, S5: Although product differentiation is evident among many games, imitation of popular games is prevalent. TC can enhance the relationship between its games and players through strong public propaganda and its C culture, and hence retains players during the time period of economic crisis and compete against substitutes.

WT strategy

T2-W1, W2: Under the rapidly changing market, there are no permanent winners. But continually developing new games, or introducing other new games developed by other companies, can help TC to survive the intense competition.

T2-W4: Facing fierce competition, high level of after-service quality is crucial, which TC needs to enhance.

In conclusion, based on casual games, TC should continue to expand the business of other types of online games, and develop the new games. In addition, TC should pay close attention to develop new markets, research consumer needs, and develop value-added services to support its online games. To do this, TC should continue to pay significant attention to R&D and innovation, and introduce the new games that are suitable for Chinese players. This is done in order to meet various customer demands and needs. Further, TC can enhance the relationship between its games and players through strong public propaganda and its C culture, and hence retains players during the time period of economic crisis and compete against substitutes. Finally, since high level of after-service quality is crucial, TC needs to enhance such service.

9. Recommendations

(1) Based on casual games, TC should continue to expand the business of other types of online games, and develop the new games. To do this, it game development team should continue to focus on R&D. Hence, much more investment is necessary to successfully carry out its expansion strategy. And if TC lacks of the needed skills and expertise, a recruitment plan should be carried out as soon as possible, say, before Feb. 2009. In addition, as an alternative, acquisitions are much-used strategic options (Thompson, Strickland & Gamble 2005). An acquisition is a combination in which one company, the acquirer, purchases and absorbs the operations of another, the acquired (Thompson, Strickland & Gamble 2005). Companies frequently make acquisitions to build a market presence in places where they currently do not compete. Hence, TC can make acquisitions to close gaps in resources or technology, build important technological capabilities, and move into position to launch next-wave products and services. Through acquisition, TC's competitive competences can be enhanced in any of several ways-lower costs; stronger technological skills; wider geographic coverage; and/or greater financial resources with which to invest in R&D, add capacity, or expand into new areas (Thompson, Strickland & Gamble 2005). However, an acquisition requires sufficient financial resources. TC's Strong financial structure can afford this.

(2) Developing new markets, researching consumer needs and value-added services requires efforts of TC's marketing department. Marketing research can be carried out through various research methodologies, such as questionnaire, online survey, etc. online survey is an effective way since its C.com is very famous in China. And a marketing plan should be prepared. To retain players during the time period of economic crisis, public propaganda should be enhanced through various activities. Budgets for such activities should be in process. Marketing department of TC is responsible for this.

(3) Since high level of after-service quality is crucial, TC needs to enhance such service. This requires TC's game development team to enhance security of virtual products of their game players. Strong R&D is necessary to solve such problems.

(4) Information and operating systems enable TC personnel to better carry out their strategic roles day in and day out (Thompson, Strickland & Gamble 2005). Hence such systems should be set up, and its budget is estimated to be RMB 25,000.

(5) In addition, to drive implementation forward and keep improving strategy, relevant leadership style is required (Thompson, Strickland & Gamble 2005). The best leadership style should base on different situations (Eden 1992). A participative style is suitable when employees know their job and want to be part of the team, while managers know the problem, but do not have all the information. A delegative style is used when an employee knows more about the problem than managers. However, when a procedure is not working correctly and a new one must be established, authoritarian style is suitable.

10. Conclusions

China's online gaming industry is currently on its fast-growing stage. Through the PEST analysis, China has a relative stable political environment and relatively good socio-cultural environment. In addition, although economy growth of China is still on its fast growing stage, the speed will slow sharply this year and next. This may be a threat to the industry. And technologies of both hardware and software are making big progress. The online gaming industry is basically attractive through Porter's Five Forces analysis. Urgent affairs for China's online gaming industry should focus on integrating resources, further improving game quality, and avoiding excessive competition. In addition, strategic group map reveals that TC should strive to win more market share to accomplish its short-term goal and consolidate its long-term goal. Moreover, through SWOT analysis as well as TOWS application, relevant strategies are developed for TC (refer to section 8.2). Further, the implementation of strategies is recommended in section 9.

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14488500.html>

iResearch 2008. The number of Internet Cafes of China, viewed January 8, 2009, < http://www.donews.com/Content/200602/d75c6de52e3140b7acba9a15f354972d.shtm>

Philip Kotler & Gary Armstong 2001. Principles of marketing, 11th edn, Pearson Prentice Hall, America, p.665.

Porter, M. E. 1980. Competitive Strategy. Techniques for Analyzing Industries and Competitors, Free Press, New York, p.185.

TC 2008. About the company, viewed January 16, 2009, <http://www.TC.com>

TC 2008. Activities of 2007, viewed January 16, 2009, <http://www.TC.com/ir/pdf/news20071114b.pdf>

Thompson, Arthur A., Strickland ,Jr, A.J. & Gamble, John E. 2005. Crafting and Executing Strategy, The Quest for Competitive Advantage: CONCEPTS & CASES, 14th edn, Mc Graw Hill, America, p.38, pp.44-105.

Xinhua 2007. China's online game industry, viewed January 17, 2009,

<http://english.mofcom.gov.cn/aarticle/newsrelease/commonnews/200740/20071005154543.html>

Zhen Ke 2006. Online games in 2006, viewed January 5, 2009,

<http://it.sohu.com/20060120/n241531553.shtml>

Appendix: TC's organizational chart

1-28

3-28

3-28

4-28

4-28

5-28

5-28

6-28

7-28

8-28

9-28

9-28

10-28

11-28

13-28

13-28

14-28

15-28

16-28

18-28

18-28

21-28

23-28

25-28

26-28

28-28

Price/Quality

Low

High

Low

High

Market Share

Shengda

Wangyi

Juren

TC

NineCity, WL

Figure 4: Comparative market positions of selected online gaming companies

Othe-rs

External factors

Internal factors

online chatting rooms

Casual game team

competitive games

chess-card games team

Game development department

Financial department

Marketing department

Online advertisi-ng

Executive president

Vice President

President

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