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To begin with, it is important to make a brief description of Tencent, Inc. in order to understand the main grounds for the following strategy of internationalization. Tencent Incorporated was initiated in Shenzhen, China in 1998. The company performs in the industry of telecommunications, web-based advertising, and media so that it had to compete proactively in order to increase its market share. The company was listed on the Hong Kong stock exchange in June, 2004. This time frame should be regarded as a period of substantial investments so that Tencent Incorporated managed to develop its own service of quick text messaging, obtained a meaningful cloud-based storage, and launched the development of its branded mailing software. Needless to say, this evidence witnesses a thriving performance of the company, so the decision to initiate a subsidiary organization was quite reasonable as long as it gave the parental company the opportunity to grow and obtain new target segments (Gr?nig & Morschett 2012).
As a consequence, the company has chosen the industry of video games that is quite widespread all over the world. That is why a subsidiary company named Riot Games was initiated in 2006, in Los Angeles, California. This action can be considered as the first step of Tencent, Inc. towards international expansion. The location and industry have been chosen in accordance with the obvious fact that the USA is capable of making substantial investments in the company so that it will succeed and returns on investments are guaranteed. In fact, Riot Games managed to develop only one game, which is called League of Legends, but this point does not have to be regarded as a failure because the company gathered approximately $100, 000, 000 of investments. As a result, the game has become quite popular within gaming community and was even included in the list of disciplines of international cybersport championships. Still, the company needs to keep growing as long as the first successful project has finished making its positive impact on both organizations (Verbeke 2013).
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Nowadays, the company keeps performing and has implemented a meaningful social campaign; therefore, it is possible to say that Tencent, Inc. is planning to act in the broader context of its performance within the related markets (Hipsher 2006). There are no official announcements regarding new projects from Riot Games, but it is worth saying that the success and gained capital after the development of League of Legends should be considered as a perfect basis for a new start-up in the same industry. This point will be discussed in terms of network analysis, as well. To return to the subject of the future direction, it is to be said that impacts of proceeding in the improvement of video game products can be different (Bradley 2006). The positive one is based on the obvious possibility to gain high revenues in a relatively short period while the negative one is the risk of failure as the trends are quite changeable within the industry of video games.
Regarding the subsidiary impacts on the company, it is necessary to admit that Riot Games is the primary party, which causes certain effect on Tencent Incorporated. The company obtains the highest number of Riot Games shares so that the influence is quite evident. First of all, the company has meaningful investing opportunities. As it has been already mentioned, only one project managed to collect nearly $100, 000, 000 of investments. The subsidiary company demonstrated itself as an efficient team as it developed a quality product in a relatively short period. In the same way, new projects can be launched in accordance with Gannts chart so that several tasks are completed simultaneously (Bolt & Fichera 2012). This is an obvious strength of Riot Games, and that is why Tencent, Inc. should pay attention to that.
Besides that, it is possible to assume that parental organization can become an object for investments, as well. Needless to say, there are some complications in the related industry in China regarding competitive pressure of Korean and Japanese telecommunications companies (Pinheiro 2011). However, this condition makes the company more attractive from the perspective of creation of a strong opposition to the market leaders. It is crucial to mention that this opportunity has to be regarded as a long-run opportunity. That is why Tencent Incorporated needs to focus on the short-run projects that can be embodied via the subsidiary company.
Therefore, Riot Games is able to launch a project similar to League of Legends, so that the subsidiary company can develop in the same direction. To be more specific, the subsidiary company is capable of designing an online-based video game that will attract a substantial number of users all over the world. In fact, Riot Games possess sufficient capabilities such as cloud-based technologies, efficient team, and meaningful investments. The development of bigger projects is the obvious progress for the subsidiary as well as parental companies. That is why Tencent Incorporated relies heavily on the subsidiary investments. It is worth saying, however, that these opportunities do not have to be overestimated because focusing on the subsidiary projects will thwart Tencent Incorporated performance at the main market. The main threat is based on the possibility that the company will become excessively subsidiary-dependable (Chappell 2000). It can become an advantage though, but the company will be supposed to purchase the rest of the shares in order to switch to the subsidiary industries.
As long as the company is expected to be proactively influenced by its subsidiary organization, it is necessary to choose a proportional approach for further analysis. As a consequence, the main metric is a balance between the parental capital and subsidiary ones. Despite the fact that the similar metric is used in the sphere of network security, it can be applied to the parental-subsidiary relationships. The balance in these relationships is measured by the involvement of the related capitals and investments in the opposite party so that it is possible to forecast potential scenarios for further performance (Atteveldt 2008). The forecasting addresses negative as well positive outcomes so that the visual representation can be interpreted from different perspectives. What is more, this approach is utilized in the industry of video games; therefore, the team of Riot Games may be aware of that (Conti 2007). That is why this metric is easier to apply. Still, it is recommended to hire a consulting group that will regulate the analysis in order to preserve the accuracy and adequacy of the results. All in all, the suggested metric of the balance between the parental and subsidiary capitals can be presented as the following visualization.
Needless to say, the outcomes can be different and they depend on the current decisions of the company. Regarding positive outcomes, it is to be said that the company is expected to keep developing proactively owing to the investments and gained capital of the subsidiary Riot Games. As a consequence, that leads to obtaining more capitals and investments as long as the companys shares value will grow in terms of the initial public offering. Tencent Incorporated will act in this way as this decision is obviously reasonable. As Riot Games is capable of designing trendy video games, there is a real possibility that the next project of the subsidiary company will become a trend. It is even possible without this aspect because Riot Games possess meaningful human resources, cloud-based technologies, and financial backup for investing in game engine development (Armstrong 2006). These factors give the company an opportunity to become a market leader worldwide. That will make positive impacts on Tencent Incorporated so that it can be easily integrated to Riot Games and parental-subsidiary relationships will be conversed. Still, it is pivotal to mention that the company needs meaningful capital for its proactive development.
Even though Riot Games made big profits on the project of League of Legends, it needs a part of the parental capital in order to start proactive development of new projects and attract more foreign investors. That is why Tencent, Inc is supposed to withdraw its capital from its key products and services investment. This action will create a risky situation: in case the subsidiary company fails to make big profits on its new projects, both organizations will suffer a considerable loss that will lead to decline. In addition, the expenses will be enlarged by the need to rearrange the corporate layout of the company. An early amendment to the parental-subsidiary relationships can result in negative outcomes, as well. The main threat in this case is based on the fact that the corporation will depend heavily on its factual stock value (Laws & Scott 2013). It is becoming increasingly apparent that stocks change randomly and the companys stock may lose its value. Moreover, a dubious situation will occur to the company. To be more specific, trading its stocks at any initial public offering leaves a risk to lose substantial amounts of capital and make the parental-subsidiary relationships more complicated. Conversely, the decision to quit trading will imply the fact that the stock value keeps decreasing and will confuse the majority of investors. It is a negative side of the subsidiary influence on Tencent Incorporated, but it can be controlled and amended. The parental company may invest less capital in order to launch new projects of the same size. Needless to say, it will take more time to complete, but the team of Riot Games can utilize a method of critical path in order to analyse given parental support and proceed with the project completion in accordance with the results of the analysis and step-by-step approach that can be also designed on the basis of the critical path method (Haugdahl 2000).
Impacts of Organizational Network Structure on Innovative Performance
To speak about organizational network structure and its implications for the intensity of innovative activities within the company, it is necessary to admit that they are generally positive. First of all, the parental-subsidiary relationships render a strong cooperation between the parties. Collaborative projects, development of new software, and improvement of the companys technical capacities can be achieved via involvement of the parental and the subsidiary companies in a common strive for a certain objective (Nobre 2012). The boarders between the parental and subsidiary sides should be dismissed, though. Second, the companies are able to exchange their experience and utilize them mutually. This advantage implies that there is no need to hire a third party for consulting, assessment, and support in the developmental considerations. Namely, the parental as well as the subsidiary companies can get sufficient knowledge regarding the sphere of their performance. Third, the corporate layout makes a contribution to the ethical code of the company. The reasons are various, so it is necessary to note that it renders an overall sophistication of the organizational behaviour. It is a comprising component of a successful innovative performance of the company that is why the impacts of the organizational structure on this aspect are also essential.
In regard to the cooperation, it should be noted that spheres of both companies are similar.,The industries of video games and telecommunications are mutually related to a great extent. The most explicit benefit of this cooperation is an advantage of the parental-subsidiary advertising. In other words, introduction of a particular product or service can contain advertising of the related products and services (Ricciardi 2014). For instance, League of Legends can be advertised together with Internet provider services of Tencent, Inc. The commercial can suggest that Tencents services should be combined with Riot Games products. As it has been already mentioned, the companies can share the capital and investments so that both of them are financially secure in case of an unpredicted loss. The subsidiarys influence on the parental company does not matter in this case; thus, the cooperation may obtain any possible forms.
Concerning experience exchange, it is to be said that the companies can share their experience and technologies as long as their spheres are connected. As a consequence, such experience exchange can result in the improvement of both companies. Namely, Riot Games as well as Tencent Incorporated will be able to compete in larger markets. This benefit implies the fact that both companies are capable of aiming and uniting their performance at the development of innovative technologies that are the key advantage from the perspective of entering larger markets (Knoben 2008). In fact, it is the most distinct and the most effective impact of the organizational structure as long as reasonable use of mutual experience is the biggest contribution to the innovative activity of Riot Games and Tencent Incorporated.
Eventually, the organizational ethics will progress considerably. It is quite evident that all employees will feel parts of a large team that strives for the development of innovative technologies and popular video games. It is hard to deny the effectiveness of this motivation booster. As a result, an increase in the employees commitment and efficient team work can be expected. In contrast, some complications concerning hierarchical relationships can emerge, but in case human resources managers are able to solve such sophisticated issues, new corporate ethics will be created. In such a way, the changes in the organizational behaviour will render more capacity of development innovations (Kratzer 2007).
Implications for Further Development of Innovative Capacity
In fact, the proceeding of the development of the innovative capacity of Tencent Incorporated is tending to produce a generally positive effect. Regarding the statements of the already conducted network analysis, the company has enough capabilities to keep improving its innovative performance. An increase in this aspect is obvious as long as the company obtains substantial capital, and its investing ability can be considered as effective, as well (Kodama 2011). Therefore, the corporation will be able to enter larger markets because of its opportunity to offer more innovative products and services. The further life-cycle of the enterprise is simple: it collects meaningful investments and designs more innovative products and services (Trott 2008). As a consequence, the management of the company does not have to be concerned about the future planning as it will follow the same pattern. Needless to say, it is the most apt scenario that Tencent, Inc. is recommended to follow. It is worth mentioning that the stock value of the company will grow accordingly, though. It is becoming increasingly apparent that innovative organizations are harder to compete as their initial public offerings are usually higher. That is why the company is secured against the perspective of a proactive behaviour of the key competitors. Provided that the corporation is experiencing decline because of competitive pressure, it will be able to start selling its stocks at an excessive price. The related revenues will be sufficient for initiating a new company and the shareholders of Tencent Incorporated will be expected to pay interest rates to the owners (Furgang 2011). Besides that, the company may start performing in terms of random walk theory and leave the market.
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On the contrary, the parental and the subsidiary companies may have to merge together in order to proceed with the improvement of the innovative capacity. This procedure will presuppose certain expenses and complications from the perspective of the organizational behaviour as the team of the parental company will become equal to that of Riot Games. These changes will take some time, therefore, the risk to lose an investing opportunity emerges. As a result, it will lead to a certain loss and decline in the already reformed company. In such a way, a proactive development of the innovative capacity of the company may become poorly justified. Still, it is quite possible that Tencent Incorporated should purchase another subsidiary company in order to enlarge its innovative abilities. Outcomes of such purchase are evidently unknown, so the management team will be expected to switch the focus to the stability planning as the situation with the subsidiarys influence will be tending to occur again (Luo 2002). Hence, the company will be supposed to preserve its capacities. It will secure the company against a disaster, but higher level of innovative performance will not be achieved. Eventually, it is important to note that this scenario is possible only in case the company fails to use its advantages that have been described above.