Strategic Analysis of Tesla Assignment

Unit 32 – Business Strategy

Introduction - Unit 32 – Business Strategy

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The study would provide a deep insight about the Tesla Company's SWOT and pestle analysis too. It will also enhance knowledge about porter's five forces for ascertaining the competitiveness of Tesla. On the other hand, it will reflect an evaluation of the authentic strategies and tactical objectives for obtaining entire strategic motives. Moreover, it will enhance discussion about the analysis of several categories of strategic path present to the firm along with reflecting recommendation and justification of the highest appropriate growth platforms and strategies. Finally, it would additionally provide a conclusion about entire lessons that had been learned from this evaluation. 

Part A: An internal and external analysis that provides a platform for strategic decision making:

Swot analysis and Pestle analysis

SWOT

Strength

The biggest strength of the Tesla Company is its huge brand value and global market in the automobile sector that it has been able to sustain for a long time. Moreover, it has also been recognized that they have huge profits from both domestic and overseas markets. On the other hand, it has also been recognized that this company has a huge number of high-income group people as target customers which is their strength to sell their electric cars at an expensive rate and earn huge at once (McCain, 2019). Moreover, it additionally produces a high-quality electric car that seems to be their biggest strength in retaining their market share.

Weaknesses

One of the biggest weaknesses of the Tesla Company is that it had been facing several types of complications during the manufacturing of the new models of electric cars due to the lack of innovative machines, software, and other technologies on time. This further led to the delay of the production ramp and the launching of new models in the global automobile market (Alghalith, 2018). On the other hand, they sometimes fail to address the demand level of the target customers due to some sort of lack of presence of all the facilities in a new model of an electric car that the customers wanted.

Opportunities

They have the biggest opportunity of expanding their manufacturing sites and sale of their electric vehicles to all those countries and markets which are still untapped by them. This will help them in gaining scope to raise their status from international company to multinational company. Moreover, they have the opportunity of maximizing their sales rather than profit for dominating the automobile market through manufacturing and selling the cars that can be afforded by common citizens too (Matthews et al., 2020). Tesla is also needed to bring manufacturing technology in-house which would assist the company in incrementing their rate of manufacture along with diminishing their cost of production. 

Threats

The biggest threat that is being faced by the Tesla Company is the huge competition they had to face from other big and renowned global automobile companies such as Ford, Bentley Motors, Toyota, BMW, and others (Mas, 2018). On the other hand, they also had to face a huge burden of liability claims along with facing the challenges of several defects that had been found in their already launched models of electric cars. It also faces threats of sustaining its sustainability for a long duration in the global automobile market and rising changes in the tastes and preferences

Pestle

Political factors

The present political condition of the UK is in a volatile situation as they are facing a large economic recession and financial complications because of a decline in their GDP as a pandemic has led to a shutdown of shops, car stores, and manufacturing activities for restricting the spread of Covid-19. Moreover, there had also been a decline in international trade because of the closure of global flights which further disrupted the supply chain (Lugtu Jr, 2019). This led to the downfall of the business and the growth of Tesla Motors too. However, Tesla is needed to create a healthy relationship with the current ruling party for gaining exemptions from tax and export duties. 

Economic factors

Although the economic situation of the UK is not in a very good position, they are currently recovering the losses they faced as restrictions had been removed after double vaccinations of the majority populations. Hence, they are now achieving a certain positive rate of growth in their GDP rather than the negative marks that they were suffering for the last two years (Gafarov, 2019). This is an opportunity for Tesla too to reopen their automobile showrooms and manufacturing sites so that they could be able to again sell their cars to target customers and generate profits which will further help them in recovering their losses. 

Social factors

The society of England is very modern, broad-minded, and highly literate with good achieving human development in terms of science and technologies. On the other hand, their rate of literacy is 99% and the common masses of the country are very well adaptive to all sorts of innovative things that seem to be acquired in all sectors (Kissinger, 2019). This will be very much beneficial for Tesla to sell their latest models of electric cars as the customers are already having a huge craze for innovative cars. In this way, they would be able to sustain their customers for a long tenure.

Technological factors

England has seen a huge speedy advancement and improvements of its technology sector in the recent decades with the emergence of latest software and uses of artificial intelligence such as robotics, cloud computing, blockchain system, and automation tools. This further helped the Tesla Company in producing technologically advanced Model X, Y, and 3 (Lugtu Jr, 2019).

Legal factors

There had been huge amendments in the international trade rules of every sector including that of automobiles after the Brexit event. Thus, all companies are needed to go through legal procedures, authorization, and permission. Tesla is also needed to abide by consumer privacy law, health and safety law, antitrust law, and others.

Environmental factors

The atmospheric situation of England is in a balanced position and sustainable with appropriate NGOs and governmental start-ups for bringing and retaining greenery. It needs to be maintained by Tesla too by waste management, reusing, recycling, diminishing emission of carbon, and others (Gafarov, 2019).

Porter’s five forces

Competition level

Tesla had to face huge and tough competition from rival automobile companies which have a global market and profit share and brand value such as Ford, Bentley Motors, Toyota, BMW, and others. Thus, it can be said that the competition level for Tesla is globally very high (Bruijl, 2018).

Threats of substitutes

It has been identified that there are a large number of automobile companies that are indulged in the manufacture, distribution, and sale of electric cars and vehicles such as Bently Motors, Lucid Motors, Enjoy Technologies, Revel, Hyzon Motors, and others (Isabelle et al., 2020). This proves that if Tesla fails to supply the latest model of electric cars in the market on time then their own target customers will shift towards these rival electric car companies. Thus, the threat of substitutes is very high for Tesla.

Threats of new entrants

As the automobile industry is huge globally with so big market size, profits, shares, and brand value that it would be impossible for the new start-up automobile companies to get a place to settle themselves in this hugely competitive market (Mahat, 2019). Moreover, there are also huge expenditures for establishing automobile manufacturing sites which would not be possible for new companies. Thus, it signifies that threats of new entrants for Tesla are very low.

Bargaining power of buyers

It has been identified that electric cars are being sold by Tesla and other renowned firms at a fixed price with an already discounted offer. Hence, the bargaining power of buyers is low.

Bargaining power of suppliers

Tesla maintains a diverse range of suppliers who belong from different parts of the world thereby, making it impossible for those suppliers to charge delivery fees as per their wish as they are not only suppliers for them. Hence, the bargaining strength of suppliers is also very low (Carraher, 2018). 

Valid strategies and tactical goals for achieving whole strategic objectives

The valid strategies that Tesla must adopt for gaining strategic objectives are increasing their employee strength which will help them in boosting their productivity along with increasing the number of electric cars that are to be manufactured. Moreover, they are also required to adopt strategies such as adopting new technologies, marketing programs, and increasing the skills of employees which would further help them in developing better work culture and reputation. Moreover, the improvement of skills of employees would assist Tesla Company in retaining talented and experienced staff for a long tenure (Radanliev, 2019). On the other hand, the tactical goals that are needed to be achieved by Tesla such as outlining timelines for production work, increasing competitiveness, increasing partnership with other big automobile firms, hiring new sales representatives, and others. They are required to establish a tactical goal of developing the best and most advanced HR policies so that the fresh candidates can be recruited by them within a short span of time, thereby increasing the number of employees. 

Part B: On the basis of this analysis critically evaluate and justify strategic options for the organization:

Critical analysis of the various sorts of strategic directions present to the company

Strategic direction is defined as the foundational thoughts or movements that permit more consistency in approach through the years. It in the long run facilitates a business enterprise to gain its imagination and prescient and facilitates it to satisfy the desires of its organizational approach. It additionally facilitates uniting a corporation's strategies and gives for extra balance into the destiny. While an employer has a strategic route, it allows to decide the corporation's goals and the way it plans to perform them, it allows deciding of the specified assets and it enables one to become aware of the way an enterprise desires to perform with a view to discovering achievement (Schühly et al., 2020). The different types of strategic directions that are present to Tesla are the mission, vision, culture, ideology, values, grand strategy, and principles. The mission of Tesla is to transform the entire transportation system from fuel-oriented into electric based which will lead to the emission of less polluted smoke in the air. On the other hand, the vision of Tesla seems to be expanding its electric car business to other continents outside of Europe. The value of Tesla is to sustain discipline, dedication, and commitment within the managers and employees that are working in the organization along with increasing the ethical practices while manufacturing and promoting the new models of the electric cars (Beenakker et al., 2019). Another strategic direction of Tesla is to make entry at the market of high-end nature where the consumers are ready to generate a payment of a premium and thereby enhance the market as early as possible for low charges and large unit volume.

Moreover, this company has also taken strategic decisions that made the biggest quality electric car producers of the world such as the adoption of superior technology, vertical integration, and supercharge network. All the electric cars of Tesla are completely equipped with proprietary magnets which seem to be small in size, efficient and cheaper compared to their rivals. Tesla's energy garage system includes hundreds of singular lithium-ion batteries organized in the collection. This element is produced with the aid of Panasonic and with the aid of a long way the heaviest section of the automobile weighing extra than 500 kg (Rindova and Courtney, 2020). That is why the energy storing device is positioned at the lower of the automobile to assist with balance and managing. Professionals within the area keep in mind Tesla’s battery generation to be more than one year’s beforehand of rivals. It has been recognized that this company had also adopted automatic driving technology which upgraded the electric cars to the unmanned level. On the other hand, it is miles worth in short evaluating Tesla's independent riding abilities while in comparison to different automakers. Self-riding aspects appoint auditory networks that require gobs of statistics to expand – the extra information one has, the greater strength and correct the self-riding set of rules could be. In reference to riding information, Tesla is only 2nd to Waymo. With greater than ten million miles on the street and seven billion replicated miles, Waymo has the maximum riding information. Even Tesla which is based on greater than 1,000,000 motors and the usage of the autopilot system has covered 1.3 billion miles (Schühly et al., 2020).

Justification and recommendation of the much accurate growth strategies and platforms

The accurate growth strategies that are needed to be followed by Tesla in the future for sustaining their dominance in the automotive sector are enhancing the addition of new manufacturing and selling locations that seems to attract new target customers, franchising the scopes, facilitating huge funding in the acquisition of customers and generating expansion of the product line too. Moreover, it is also necessary for Tesla to do additional research on their rival companies to ascertain knowledge about their strengths and weaknesses depending on which they would bring improvement in all those regions of their new and existing models of electric cars in which they are far behind the competitors’ products (Rindova and Courtney, 2020). On the other hand, it is also necessary for them to understand the changes that are taking place in the shape of the automotive market along with the analysis of the alterations that are taking place among target customers regarding the choice of new cars. They are needed to consider the young age people as the new additional target customers along with the high income group of people as the teenage and youth masses have a huge craze for driving cars. There is a necessity to enhance logical planning of different courses of action that should be taken by managers of Tesla so that timely delivery of cars can be sustained. Thus, it can be stated that growth strategies that should be adopted and practiced by this company are product development, market penetration, diversification, and market expansion. Market development is defined as the way of introduction of goods or services to the new markets where the existing company does not have any presence at all. This can be done by Tesla through entering into a new nation, city, or state and creating a new target market (Radanliev, 2019). Market development would assist this company in increasing their overseas revenue in huge proportions.

Expansion through market penetration does no longer contain getting into new markets or developing new merchandise; it is an effort to boom marketplace proportion through the usage of their cutting-edge services or products. Tesla should perform this approach with the aid of decreasing the rate of services or goods, or by means of growing advertising and marketing efforts to entice clients away from rival companies. Product improvement signifies developing new merchandise to serve the equal marketplace. As an example, a corporation that manufactures ice cream for target consumers increases its line to encompass sorbet and gelato. The organization could promote those new goods to present clients and develop its commercial enterprise in the absence of tapping innovative markets. Diversification is the maximum radical shape of a boom. It includes developing a completely new product for a totally new marketplace. It is the challenging increase approach due to the fact that it is a very much unsure factor (Schühly et al., 2020). Failure is a different probability, despite the fact that the ability of an excessive payoff can be really worth the chance for agencies with enough monetary method. On the other hand, platforms that Tesla must use are social media platforms such as Facebook, YouTube, Instagram, and Twitter for the promotion of their new brand model of electric cars. This is because it would increase the awareness among the global customers about the new automobile that is to be launched by them at a particular price, thereby reaching different parts of the world.

Evaluation of means and ways through which selected strategy could be regulated for ensuring success

The way through which selected strategies could be inspected and regulated by Tesla is through generating regular meetings with the CEO and board members to ascertain the progress that has been made in the production activities. Moreover, there must be a better understanding of the issues that are being faced by employees while doing their tasks in the workplace so that the tactical goal of retaining talented employees can be secured. This would further increase the goodwill reputation of this firm in the eyes of their own employees along with improving the working culture and environment (Rindova and Courtney, 2020). In order to ensure success, the chosen strategy of ideology and principles, the production manager and the HR managers are required to ascertain that all employees are strictly following the company guidelines regarding the ethics that should be kept in mind while doing their tasks and communicating with their senior managers and co-workers.

Conclusion 

From the above study, it has been analyzed that the Tesla Company has a huge number of high income group people as target customers which is their strength to sell their electric cars at an expensive rate and earn huge at once. Moreover, it additionally produces a high quality electric car that seems to be their biggest strength in retaining their market share. It has been known that there had also been a decline in international trade because of the closure of global flights which further disrupted the supply chain. This led to the downfall of the business and the growth of Tesla Motors too.

The above study further assisted in analyzing that they have the opportunity of maximizing their sales rather than profit for dominating the automobile market through manufacturing and selling the cars that can be afforded by common citizens too. On the other hand, it has been observed that they are also required to adopt strategies such as adopting new technologies, marketing programs, and increasing the skills of employees which would further help them in developing better work culture and reputation. Moreover, the improvement of skills of employees would assist Tesla Company in retaining talented and experienced staff for a long tenure.

References:

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Rindova, V. and Courtney, H., 2020. To shape or adapt: Knowledge problems, epistemologies, and strategic postures under Knightian uncertainty. Academy of Management Review, 45(4), pp.787-807.

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