Question 1
a) The physical-measure method utilizes the physical measures such as the weight, quantity,
or even the volume of products produced to allocate per unit joint costs. The spread sheet
below shows the per unit joint costs of the HK Electronics using the physical-measure
method:
Advanced
Allocation of costs using the Physical-Measure Method Basic (B) (A) Premium (P) Total
Physical Measure of the total production 10000000 8000000 2000000 20000000
Weights (10000000÷20000000; 8000000÷20000000;
2000000÷20000000) 0.5 0.4 0.1
The allocated joint costs (0.5×150000000; 0.4×150000000;
0.1×150000000) $75,000,000 $60,000,000 $15,000,000 $150,000,000
$120,000,00 $250,000,00
Additional Processing Costs 0 $72,000,000 0 $442,000,000
$195,000,00 $132,000,00 $265,000,00
Total joint costs 0 0 0 $592,000,000
Joint production cost per unit= Total costs ÷ Total production
(195000000÷10000000; 132000000÷8000000;
265000000÷2000000) $19.5 $16.5 $132.5
The gross margin using the physical measure method can be computed as shown below.
Allocation of joint gross profit using the Physical-
Measure Method Basic (B) Advanced (A) Premium (P) Total
Revenue (10000000 units×70; 8000000 units×110;
2000000 units×130) $ 700,000,000 $ 880,000,000 $ 260,000,000 $1,840,000,000
Deduct Total costs $ 195,000,000 $ 132,000,000 $ 265,000,000 $1,840,000,000
Gross margin $ 505,000,000 $ 748,000,000 $ (5,000,000)
Percentage margin (505000000÷700000000;
748000000÷880000000; 5000000÷260000000) 72.14% 85.00% -1.92%
b) The unit cost can also be computed using the sales value at split-off method. This method
entails allocation of joint costs based on total sales value at split-off. The unit costs of HK
Electronics can be computed as follows:
Allocation of Joint Costs using Sales Value at Split-
Off Basic (B) Advanced (A) Premium (P) Total
Sales value of total production at split off point
(10000000 units×50; 8000000 units×80; 2000000
units×100) $ 500,000,000 $ 640,000,000 $ 200,000,000 $ 1,340,000,000
Weight (500000000÷1340000000;
640000000÷1340000000;
200000000÷1340000000) 0.373134328 0.47761194 0.149253731
Using the weights to allocate joint costs
(0.373×150000000; 0.478×150000000;
0.149×150000000) $ 55,970,149.25 $ 71,641,791.04 $ 22,388,059.70 $ 150,000,000.00
Per unit joint production cost
(55970149.25÷10000000;
71641791÷8000000;22388059.70÷2000000) 5.60 8.96 11.19
The joint profit margin using sales value at split off can be computed as shown below:
Allocation of Joint Gross Profit using
Sales Value at Split-off Basic (B) Advanced (A) Premium (P) Total
Revenues
(10000×50;8000×80;2000×100) $500,000,000 $640,000,000 $200,000,000 $1,340,000,000
Cost of Goods Sold
Using the weights to allocate joint
costs (0.373×150000000;
0.478×150000000; 0.149×150000000) $ 55,970,149.25 $ 71,641,791.04 $ 22,388,059.70 $ 150,000,000.00
Gross Margin $ 444,029,850.75 $ 568,358,208.96 $ 177,611,940.30 $ 1,190,000,000.00
Percentage gross
margin(444029850.70÷500000000;
568358209÷640000000;
177611940.30÷200000000) 88.81% 88.81% 88.81%
Question 2
a) Competitive Analysis of Tencent Holdings
Unified Business Structure
Tencent offers unified business approach where customers can access multiple services
through a single mobile application. According to Shang (2022), the company offers instant
messaging, advertising, e-commerce, entertainment, and online media through one app. The
company draws its financial strength from WeChat and QQ services. In 2024, the Tencent
boasted of 1.371 billion users in WeChat and 571 monthly active users (Tencent Holdings
Limited, 2024). The integration of services leading to a large pool of users enables the company
to retain most of its users and hence being able to monetize most of its services.
Massive Investment in Innovation
Tencent draws a significant competitive advantage from its innovative culture. The
company has invested heavily in talent and a culture of creativity and innovation. This culture
has led the company into market-driven products such as gaming and data-based online ads.
According to Che (2018), Tencent has always emerged as the world’s largest supplier of online
games. The company releases a new game every year into the market, which has resulted in the
company gaining a large number of online consumers and a tremendous increase in revenues.
The company also made a strategic move of acquiring companies that created competition to
expand its gaming innovation and retain its market share. For instance, Tencent acquired Riot
games, Epic games, and Supercell, all which are good at creating games.
Harnessing and Nurturing of Talent
Tencent is keen to retain its culture of innovation and creativity through nurturing talent and
remunerating them well. According to Cui et al. (2022), Tencent focuses on business acumen
and technology acumen when recruiting. The business acumen ensures that the technical
employees understand the business value they will add to the company. The technical acumen
enables the business employees to understand the technical aspect of the company’s business.
The employees are then introduced to the innovative culture, enhancing their independent
thinking and progressive drive, which enhances their productivity. This results in a pool of
workers with high productivity and consistency. This makes Tencent to be competitive in the
industry.
b) Industry Analysis
Threat of New Entrants
The threat of new entrants is low in magnitude. The technology industry is open to new
players. However, to achieve the level of Tencent, heavy outlay of capital is needed. According
to Tencent Holdings Limited (2024), the company’s expenditure on research and development is
increasing every year. The 6-month moving average for June 2024 was RMB32,955 million,
which was higher than that of June 2023 which was RMB31,191. This investment is huge for a
new company to invest. Therefore, Tencent is evolving rapidly to cushion itself against new
entrants.
Bargaining Power of Suppliers
Tencent is supplied by raw materials and services from limited suppliers who have high
bargaining power. For instance, the company orders most of its hardware supplies from the
United States. For instance, the company relies on Apple’s App Store and Google Play to supply
its games to its customers. The suppliers can can hike prices due to their high power. However,
Tencent has entered price agreements with suppliers to avoid price hiking.
Buyers’ Bargaining Power
Tencent’s customers have high bargaining power since they can access the services from
competitors. For instance, according to Cui et al. (2022), companies like Alibaba entered the
market earlier, and they have diversified services for customers too. To exist in the environment
with high buyers’ power, Tencent has differentiated its products and stood out in the gaming and
online payment aspect (Shang, 2022). Also, the company has unified its products to make it easy
to use for customers.
Threat of Substitutes
The threat of substitutes is high. TikTok is emerging to be strong in the region, and it is
replacing the social media (Lartey, 2024). The companies operating in the same space as
Tencent are able to develop similar products and pose competition for the company. However,
Tencent has invested heavily in innovation to reduce the risk of substitution.
Competition
The threat of competition is also high. The international market has tough competitors such
as Meta, Google, Amazon, Microsoft, among other giant corporations. However, the
international corporations are not able to operate in Hong Kong due to the local policy. Also,
Tencent has patented its products to shove off competition. The company has also differentiated
its products to attract and retain more customers.
c) A Strategy Map
A strategy map is a chart that gives a visual representation of how core activities can be
aligned with an organization’s strategic plan. According to Kumar et al. (2023), a strategy map
demonstrates how intangible assets can contribute to tangible outcomes in an organization. The
strategy map connects the strategic objectives in a loop to demonstrate how each strategic
objective affects each of the perspectives in the balanced scorecard. The strategic objectives are
joined by casual links which can be strong, moderate or weak. A strategy map makes it easy to
identify key strategic objectives (focal points) and what can lead to their realization. This will
enable the manager to communicate logically and to develop activities that will result in the
realization of the objectives. In essence, the strategy map shows how each employee participates
in the implementation of the balanced scorecard perspectives, and it enhances the
communication of strategic moves within the organization.
Question 3
a) The following is the BSC of Tencent Holdings
Financial Perspective
Financial Target Actual
Perspecti Performa Performa
ve Measure Initiatives nce nce Justification
Operatin Managing the The company's
Growing g income costs and operating income was
the from the utilizing the 103.288 in June 2024.
operationa productiv untapped Initiating the objectives
l income ity gains capacity 110B 103.288B will boost the income
Intensifying
advertising to
increase sales
Increasing Intensify
the innovation
revenues through Tencent is known for its
from the empowering the gaming products. More
gaming Increased research and products will increase
stream revenues development 8%YoY 6% the company's revenues
Improve
engagements in
video accounts
Customer Perspective
Custom
er Target
Perspect Perform Actual
ives Measure Initiatives ance Performance Justification
Improve the
engagement High number
strategies with 1.5 of customers
WeChat customers on the biilion will build the
and QQ platforms users on reputation of
Increasin monthly through WeChat the company
g market active broadening and WeChat+Weixin=1. among
share users services Weixin 37billion customers
600
million
users on
QQ
Broaden the The company
Growth in number of competes with
Increase the services that can Alipay which
WeChap volume of be transacted has significant
pay transaction through WeChat presence in the
usage s pay 20%yoy 15%yoy market
Increase in
the
average Enhancing
time content will
Enhance customers enhance
content spend on Personalize advertising and
engagem the content through game
ent platforms utilizing data 12% 20% purchases
Internal Business Process Perspective
Internal
Business-
Process Target Actual
Perspecti Performa Performa
ve Measure Initiatives nce nce Justification
Utilize the
great talents In 2024, the AI driven
Expansio AI to enhance advertising revenue was 19%
n of AI powered machine YoY. Fter implementation of
revenue revenue learning the objective, the revenue will
growth growth models 20%YoY 22% YoY grow.
Enhance Cloud Strengthen 100% 99% The company will improve
ment of service the efficiency through investment
cloud uptime company's in more infrastructure such as
computin IT high-end computers and
g infrastructur servers
reliability e
Reductio
n in
game The reduction in time cycle
Accelerat develop Optimizatio will accelerate development
ion of ment n of the and increase efficiency, hence
new game cycle developmen increasing customer
launches time t process -15% -10% engagement and satisfaction
Supporting
innovation
Learning and Growth Perspective
Learning Target Actual
and Growth Performa Performa
Perspectives Measure Initiatives nce nce Justification
Strengthen
Enhance Growth innovation In 2024, the company
Innovation in through invested heavily in
through Research activities Hunyuan AI services.
increased and such as This led to revenue
investment in Develop product growth. Further growth in
Research and ment developmen R&D spending would
Development spending t fairs 20% YoY 15% YoY enhance more learning
Increase
in
Enhancement employee This will ensure the
of Employee training employees remain
expertise hours Workshops 25% 20% competitive in their work
Introduce
AI related
employee
assessment
Enhance
innovation
through
acquisition of Increase
related in the
businesses number investment Strategic acquisitions will
with of in 10 4 enhance innovation and
competent acquisitio technology acquisitio acquisitio broaden gaming product
cultures ns start-ups ns ns base.
b) Features of a Good Balanced Scorecard
As Kumar et al. (2022) posits, a good BSC assesses strategic progress and outlines future
direction of an organization. A good BSC should have the following features.
Alignment with Strategy
A good BSC aligns all the activities of an organization with the vision and strategy. For
instance, Tencent aligns its AI innovations and digital content with its long term financial goals.
On the other hand, a manufacturing company such as Tesla aligns its production and energy
sources with its growth objectives.
Cause and Effect Connections
The cause and effect connections enhances an organization’s understanding of where to put more
attention and resources. For instance, Tencent derives its revenues from personalized ads and
high engagement of customers. A merchandising organization such as Amazon would focus
more on customer satisfaction and faster deliveries which would in effect increase sales.
Contain Measurable Objectives and KPIs
A good BSC should clearly define ways of measuring objectives and easily understood
KPIs. From the above BSC of Tencent, the financial objectives are measured through revenue
growth, customer perspective is measured though MAUs and the volume of transactions.
Learning is measured through spending on training. In a manufacturing company, measurements
would include reduction in production time and reduction in the number of defective products.
References
Che, J. (2018). Investment Analysis about China’s IT Company—The Tencent Holdings
Limited. Modern Economy, 9(6), [Link]
paperid=85391.
Cui, J., Yan, C., Hong, A. (2022). Tencent's Corporate Strategic Organizational Digital
Management and Digital Transformation: A Case Study. Journal of Business and Social
Sciences, Vol. 2, [Link]
Kumar, S., Lim, W., Sureka, R. (2023). Balanced scorecard: trends, developments, and future
directions. Review of Managerial Science, 18(8):1-43, DOI:10.1007/s11846-023-00700-
6.
Lartey, S. (2024). The Future Influence of TikTok on Evolving Social Media Trends: A
Comprehensive Analysis.
[Link]
on_Evolving_Social_Media_Trends_A_Comprehensive_Analysis.
Shang, Y. (2022). Tencent’sBusinessModelandBusinessStrategy. Frontiers in
Business, Economics and Management, 4 (2), DOI:10.54097/fbem.v4i2.631.
Tencent Holdings Limited. (2024). 2024 Interim Report.
[Link]
.pdf: Tencent.
