Alibaba And Tencent Among The World’s Smartest Companies In 2017

China’s companies are joining the world’s smartest companies. That’s according to the recently published MIT Technology Review’s annual listing of the 50 smartest companies, which surveys both small and large companies based on their ability to innovate and execute.

Overall, seven Chinese companies made it to the list, up from five last year, three in 2015, and none in 2014, beating their Japanese and Korean counterparts.

Two of these companies that made it to the list this year are Tencent (8th position) and Alibaba 41th. That’s the second time the two companies appear on the list, Tencent (TCEHY) occupied the 15th position in 2015, while Alibaba (BABA) occupied the 4th position.

What sets these two companies apart from the rest of Chinese companies?

Both Tencent and Alibaba have been developing innovative technologies and effective business models to monetize them.

Tencent Holdings has managed to transform itself from a chat software developer to an investment holding company and the world’s largest company when it comes to on-line game revenues, according Newzoo.

Tencent has been riding the rapid growth in on-line games with a threefold strategy.

First, by leveraging its strong on-line presence to develop and distribute on-line games. Tencent has been launching games through its QQ desktop messaging service and WeChat, China’s most popular mobile chat app with hundreds of millions of users.

Second, by moving its popular PC titles to the mobile platform, or by developing new titles with similar key features — like King of Glory, the mobile version of League of Legends, which topped the Android list shortly after its launch at the end of 2015.

Third, by using eSports to create hype and buzz for its games.

While faddism comes and goes in the gaming industry, Tencent has demonstrated that it can adopt and adapt very quickly to win the next game.

Alibaba continues to grow by leaps and bounds, as evidenced by its recent earnings report, which showed revenues growing at 98.50% year-on-year.

Alibaba’s growth has been fueled by five advantages.

The first advantage is location—China, the world’s largest Internet market.

The second advantage is economies of scope; the cost savings associated with offering a portfolio of products for sale through the same sales channels. In this case, sites. Alibaba has two retail sites – Taobao, which features thousands of non-brand name products sold by smaller-unknown merchants; and Tmall, for brand name products.

The third advantage is scale, the cost savings associated with a larger volume of sales. Alibaba’s 350 million active buyers have helped the company enjoy hefty operating margins (see table).

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