Strategic Management Assignment: Business Planning for Tesla

Question

Task:
This strategic management assignment asks you to consider the long-term sustainability of a business in the ever-changing, and often hostile, global business environment. You should weigh up a range of complex issues, such as the business environment, culture, leadership, corporate governance and others when developing a strategy for an international business.

Answer

Introduction:

Tesla has been selected as the case study industry to prepare the strategic management assignment.  This report will discuss Tesla's internal, external analysis, SWOT analysis. And based on that analysis, some recommendations will be made for the strategic advancement of Tesla's business. The main goal of this report is to draw up plans for Tesla's business direction.

Brief Background of Tesla:

Tesla Inc. is an American company originally known as Tesla Motors. The company is primarily a manufacturer of electronic automobiles, cars, home power storage, batteries, etc. Martin Eberhard and Marc Tarpenninc were the founders of Tesla Inc, which was founded in 2003. The company has been booming since 2004 when Elon Musk was elected as the chairman of the company.

Internal Analysis: Porter's five-force model has been used as Tesla's internal analysis tool.

1. Threat of new entrants: As an electronic vehicle manufacturer, Tesla has to face competition mainly from the Chinese market.  They have a large number of customers due to their popularity and improved supply chain in the big consumer market. So Chinese companies are Tesla's main threat (Dai, 2020). Also, US and UK vehicle companies are no less competitive. The GM company will be fully electric by the year 2035. Volvo also going to be fully electronic by the year 2030.  Mercedes Benz and BMW have become fifty per cent electronic, so this issue has become very challenging.
2. Bargaining power of suppliers: Very high bargaining power is the result of Tesla's limited supply chain.  Tesla's core parts are imported from a German company, in which case any pandemic situation could affect the business (Qin, Xiao and Yuan, 2021). Many electronics companies are currently struggling to cope with the shortage of computer chips and have had to shut down for some time, but Tesla has not had to worry about the chip because of their supplier's high bargaining power.
3. Bargaining power of buyers: In the Tesla company buyer's bargaining power is low.  Tesla has to face a lot of competition in the luxury market. There is low bargaining power for huge SUVs and diversity.  Their popularity is much higher than other companies for unique service applications, so there is no need to bargain so much. Tesla Bergen controls power by providing innovative subscriptions instead of traditional financing and leasing (Lagtu Jr, 2019). They are also active in maintaining security and safety around the world.
4. Threat of substitute: Tesla's substitute threat is much higher because Tesla shares 1.2 per cent of the Global automobile market. Also, the number of Tesla followers for Elon Musk is very high and quite loyal (McCain, 2019). Mask's huge fan following on social media helps to increase the company's popularity and gain loyal followers.
5. Industry rivalry: Tesla's industry rivalry is very intense.  Following the different strategies used by Tesla, other automobile companies are building their position in the market. Their electronic-based automobiles, pricing strategies, differentiation strategies are all followed by other companies for the market gains. The government policy change, import of product material, etc. also makes the competition tougher.

External Analysis: Tesla's PESTEL Analysis will be discussed in this report as an external analysis tool.

1. Political: As a country's political environment stabilizes, it similarly induces economic dependence as well as offers higher economic activity and prosperity (de Sousa and Castañeda-Ayarza, 2022). Especially in countries where a huge portion of the production network of a global business is found, political instability or bedlam inventory can disrupt the network and subsequently lead to business misfortune. Political factors support Tesla's growth and are conducive to ensuring its enhancement to other countries.
2. Economical: The popularity of electric cars is on the rise, affecting the global economy. Global economic growth depends on having 3% in 2019 and 2020. The electric car market in 2018 was $ 39.8 billion which can reach nearly $ 1.5 trillion by the end of 2025. Tesla's Model X is recognized as a fully-fledged electric SUV having bird's wing access (Wouters, Gierlichs, and Preneel, 2021). Sales of its SUVs have spread worldwide with higher economic activity.
3. Social: Social factors recognize how certain products are viewed in a particular social order and how much they can be accepted in a clear culture (Thumiger, 2021). People's eco-friendly attitude and popularity of renewable energy resources; are conducive to Tesla's business growth. Tesla should be careful about investing in strong developing markets.  These markets can help the company generate better revenue. In addition, it is important to consider some of the geographical features of Tesla because of the variations of the regions as well as their readiness for such products. For example, China is known as a promising region, while some Asian states require additional analysis as demanded.
4. Technological: The Tesla car is in proportion to technological advancement. These luxury cars with modern gadgets are leading Tesla to significant success in the global market, and these feature cars attract buyers (Zhao, 2021). The features of online mobile systems and automation like Tesla are incomparable.
5. Environmental: Tesla cars are environmentally friendly; they rely more on electricity and less on fuel. As a result, environmentally conscious customers are more enthusiastic about buying electric cars, which is expanding the company's growth.
6. Legal: Numerous states accidentally block Tesla sales directly from the manufacturer to the buyer. According to these states, producers need to build a connection with outside vendors. Patent rights and vital energy use guidelines are notable among other legal issues.

SWOT analysis:This report discusses in detail the strengths, weaknesses, opportunities, and threats of TESLA as a SWOT analysis.

• Strengths: Tesla's strength focuses on efficiency, effectiveness and its benefits. Tesla has a significant position in the market against competitors due to its unique position, advanced technology and innovation. Tesla is also honored for its innovative products, especially in the introduction of the world's first fully electric sports car. In addition to the range of vehicles, Tesla also plays a significant role in creating solar energy as well as energy storage systems (Du and Li, 2021). All three aspects of their current products are highly innovative and equipped with the highest quality as well as the most advanced technology. Due to resource limitations, companies and businesses need to use their limited resources to support and target their strength.
• Weaknesses: Due to Tesla's use of advanced technology and advanced quality resources, many of its supporters are unable to present and purchase the car on their own due to the high price of the car (Alghalith, 2018). Tesla plays a significant role in fully developing vehicles as well as their sub-assemblies, resulting in higher production costs per vehicle. It will not be easy for Tesla to make cars affordable because it has the potential to reduce profits. Despite the use of advanced technology, Tesla's productivity is significantly weaker than others. The company's failure to close the possibility of losing money or loss negatively affects investor opinion towards the company and the company's share price.
• Opportunities: The Asian market could be considered as the most effective opportunity for Tesla at present, which is still unrelated to the automotive as well as renewable energy market. Tesla has recently launched a Model 3 that is affordable and more convenient than the Model S (Maamoun, 2021).  This is an opportunity for the company to increase its audience in the global market. Tesla is focusing on building its battery cell (Aityan, 2022). If this succeeds, it will have a positive effect on the manufacturing of the company, on the one hand, the production will increase and on the other hand, the production cost will decrease.
• Threats: Tesla has launched several autopilot vehicles, some of which have failed in accidents (Yacoub and Briggs, 2022). As a result, the company has faced lawsuits over technology failures in its products. Other companies have been able to launch eco-friendly and self-driving cars with the same benefits at a much lower cost than Tesla, which is having a negative impact on Tesla customers.

The strategic approach of TOWS: The TOWS strategy helps to reconcile external and internal factors. Tesla's TOWS Analysis:

1. Strength-opportunity strategy: One of the strengths of Tesla is the Tesla Model Y and Model 3. These two models and also the rest of Tesla's models provide so much mileage that they have received a lot of response in the world market, especially in the United States. In Sweden, Denmark, China and Germany, Tesla is given priority for its demandable renewable energy.  Tesla is in high demand in these countries for electric automobiles.  These work as opportunities. There are also Tesla Giga factories in China and Germany.  This has created unprecedented opportunities for the development of this company.
2. Strength-threat analysis: The threat comes from companies that have begun preparing electric automobiles to compete with Tesla.  Tesla is highly competitive with BMW, Mercedes, Lexus and Audi.  Toyota, Volvo, etc. are competing in terms of the price range (Maiyusril, 2018). Although Tesla is being led by someone who is very successful and whose fan following range is huge. Also, Tesla's vision and value are so unique that no company has yet been able to place it in the market as its substitute. Tesla is also far ahead of the rest of the electric automobile companies in terms of brand value.
3. Weakness-opportunity strategies: Currently, Tesla's biggest weakness is that it promised to launch a fully automatic vehicle in 2018, but has not yet been able to do so. When it comes to opportunity, they are in dire need of high-quality hardware and software systems.  This system makes it possible to accelerate very quickly.  Tesla is also making discoveries through the use of artificial intelligence year after year. Although in some cases the vehicle can be self-driving. This technology acts as one of the opportunities for Tesla.
4. Weakness-threat strategies: Tesla's weakness is that they have delayed much manufacturing in the past.  When the Tesla Y model comes out in 2020, some changes will be noticed. An unwanted Flaw can be considered a threat in any case. Although Tesla has struggled with this weakness with great vigour and as a result two Giga factories have been built, one in China and one in Germany. As a result, production issues have dropped significantly, and manufacturers have increased their numbers. Their production will be further improved in the future.

Recommendations:

Tesla is a very popular and leading company in the field of electric automobiles. Yet the company should add some new strategies. Two of them are discussed here, and if these strategies are applied following the SAF criteria, there will be unprecedented improvements.

Tesla should launch two-wheeler electric vehicles.  Not all classes of people use cars or can afford them, so if Tesla brings electric scooters and electric bicycles to the market, their customers will grow a lot more. If they are able to do this, their business will expand across a large part of the Asian market. As a result, there will be diversity in the product, new customers will come into the company, and business will improve in every way. This can be considered as a suitability criterion. The market is always able to catch new products nicely. A table showing the changes of new products and existing products in the market:

Evaluating the strategy by applying SAF's criteria indicates its effectiveness for the Tesla company. As a first recommendation judging by the suitability criteria, the launch of electric bicycles and scooters is a logical and just decision (Thomas and Maine, 2019). People mainly use bicycles and scooters as a means of transportation to cover short distances. There is also a huge demand for these two mediums in the Asian market, and electric scooters and bicycles are especially popular in these countries. In terms of acceptability criteria, people in most parts of the world prefer these two vehicles. So the demand for this vehicle in the world market is already high. So there is no doubt that this new development will grow the company's business. 

In terms of feasibility criterion, it can be said that if this strategy can be implemented properly, then it will be profitable. Tesla has plenty of resources through which it can properly develop a new electric vehicle (Hoelzlhammer, 2018). An alliance could be formed with Asian bicycle and scooter manufacturers to reduce costs.  This will enable Tesla to develop new products at a lower cost.

The second recommendation is made using SAF criteria because through this tool it can be examined whether the strategy is potentially beneficial for the company. As a criterion of suitability, the electric car market is booming, and giants like Mercedes and Volkswagen are starting to look at the region as well as the market. This could be a definite challenge for Tesla as competition grows.

Significantly, Tesla products have gained popularity in China, and new offers, such as the Model X, have taken over the Chinese market (Jing, 2020). At the same time, the development of the electric vehicle market is expected to cover large areas of Asia.  Therefore, Tesla could gain a lot, if it develops a supercharger network. If people in different regions start using electric vehicles, it will gain opportunities for exceeding entrepreneurial activity as well as increase sales.

From the analysis of the Acceptability Criterion, it can be said that the company has to face some challenges. To implement the strategy as a financial component, the company needs to invest significant funds for the implementation of the strategy. The Chinese government subsidizes local manufacturing companies for which foreign manufacturers are liable to survive (Wang, Qin and Zhang, 2021). So Tesla will be able to get government support if it forms a partnership with a local company that specializes in making electric vehicles. Therefore, it is important to be prepared that this strategy will bring far-reaching benefits to the company and there is no possibility of any short-term gain.

Finally, the feasibility criteria of the assessment help to identify an important aspect that will be taken into consideration. Sufficient resources will be needed to develop the supercharger network as well as to expand dealers in China, which is very low in a time of some financial constraints on the global economy (Liu, 2021). The company reported sales growth, but they fell short of expectations, indicating a certain weakness. So it needs to be recommended that the company should allocate funds wisely. Therefore, the development of supercharging networks should be started as soon as possible in areas where interest in electric vehicles, as well as sales, are increasing.

Using the SAF tool, these two strategies will be able to increase Tesla's business growth and enhance its entrepreneurial opportunities through innovation.  Although the company may face some challenges while using these strategies, they can be easily overcome if the strategies are applied properly.

Conclusion:

Tesla is a world-renowned company.  From the creation of this company till now all the ups and downs, processes of various internal and external activities, weaknesses, strengths, threats in the market, competition, revolutions are all discussed here, and finally, two roads through which the company can improve.

References:

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Dai, R., 2020. The Analysis of Tesla's Competitive Strategy for the Chinese Market.https://webofproceedings.org/proceedings_series/ECOM/EDBM%202020/EDBM20229.pdf

de Sousa, G.C. and Castañeda-Ayarza, J.A., 2022. PESTEL analysis and the macro-environmental factors that influence the development of the electric and hybrid vehicles industry in Brazil. Case Studies on Transport Policy. https://doi.org/10.1016/j.cstp.2022.01.030

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McCain, C., 2019. A Strategic Audit of Tesla, Inc. https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1165&context=honorstheses

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