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BC12-2 Foundation To Business Strategy
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BC12-2 Foundation To Business Strategy
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Course Code: BC122
University: Majan College
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Country: Oman
Question:
Read the attached case and write a report that addresses the following tasks:
A review on the need and importance of environmental analysis by organizations using relevant academic literature.
An evaluation of the trends in the macro environment that would influence the U.S. Automobile Industry using PEST Model.
Analysis of the competitiveness of U.S. Automobile Industry using Porter’s Five Forces Model.
Analysis of the SWOT for Tesla Motors, Inc.
Tesla Motors, Inc.
Tesla Motors, Inc. is in the business of developing, manufacturing, and selling technology for high-performance electric automotive and power train components. Hoping to develop a greater worldwide acceptance of electric vehicles as an alternative to the traditional internal combustion, petroleum-based vehicles that dominate the market, Tesla is the first company that commercially produced a federally compliant electric vehicle with the design styling and performance characteristics of a high-end performance automobile. Tesla currently offers one vehicle, the Roadster, for sale, as well as supplying electric power train components to Daimler for use in its Smart EV automobile. Additionally, Tesla has a partnership with Toyota Motors to develop and supply an electric power train for Toyota’s Rav4 SUV.
Strategic Direction
Tesla desires to develop alternative energy electric vehicles for people who love to drive. While most car companies are developing small, compact electric cars, Tesla has focused on a high-priced, high-performance electric vehicle that competes against traditional performance cars such as those offered by BMW and Porsche.
Tesla’s Competition
Tesla’s products participate in the automotive market based on its power train technology. It currently competes with a number of vehicles in the non-petroleum powered (alternative fuel) automobile segment from companies such as Mitsubishi, Nissan, General Motors (Chevy), Toyota, BMW, and Honda to name a few. Within this market segment, there are four primary means of power train propulsion which differentiate the various competitors in this market.
Tesla’s Future: Success or Bust?
In a nutshell, Tesla has limited sales in a limited market, and is making low margins due to high product costs and the lack of economies of scale. However, if oil prices continue to climb toward US$200 a barrel and new electric cars, such as the Chevy Volt and Nissan Leaf, catch on with consumers, the upside for Tesla could be enormous. Can Tesla reach the tipping point? Or will it become just a footnote in automotive history? Time will tell.
Answer:
Introduction
The primary objective of this report is to highlight and evaluate the functions and operations of Tesla motors which is popular brand in electric and automotive industry. Tesla motors is an energy and automotive company that specializes in electric car manufacturing (Tesla, 2018).The paper discusses that how environmental analysis is extremely important for every organization to stand out over the rivals. The study further emphasizes on the PESTLE analysis that is needed to identify and measure the opportunities and challenges of the market. Along with this, the paper provides a brief information about the porter five forces model and SWOT analysis. More detail of the task has been elucidated below.
Backgrounds of Tesla motors
Tesla Inc. is an American company which was incorporated in 2003 in Palo Alto California (Tesla, 2018). The company manufactures, develops, designs and sells energy storage systems, electric vehicles and solar energy products in the global market. There are two segments of the company including automotive and energy generation and storage. The automotive segment includes the development, manufacturing, design and sales of electric vehicles (Mangram, 2012). On the other hand, energy segment includes the installation, manufacture, design and sale of stationary energy storage products. Tesla builds energy storage products for commercial and home use. Tesla struggles with BMW, Honda, Toyota, Nissan, Ford, Mercedes, Samsung, and Lexus to be a leader in the automotive industry. The mission of the company is to accelerate the entire world’s transition to sustainable energy (Tesla, 2018). To generate global sustainable energy ecosystem, the company also manufactures a unique and dynamic set of energy solutions, Solar roof, powerwall, enabling homeowners, powerpack and businesses to manage and handle the renewable energy generation, consumption and storage (Rowland, 2018).
Need and importance of environmental analysis
Environmental analysis is an effective and unique strategic tool. It is a process to evaluate and identify the internal and external factors that may affect the company’s performance and productivity. Environmental analysis is needed to identify and measure the threats and challenges of the market. To identify and analyze the environmental scanning, it is significant to measure and evaluate the business and how it may affect the environment business across the world. Environmental scanning may be defined as a process of identifying, analyzing, gathering and dispensing facts, and information for strategic and tactical purpose. According to Bass and Dalal-Clayton (2012), environmental analysis would help the organizations to evaluate and understand what is happening both outside and inside the company and to maximize the probabilities that the organizational policies and strategies developed would significantly reflect the company’s environment. The environmental analysis is needed to identify and measure the strength of the organizations that further helps in gaining competitive benefits in the global market. Thus, environmental analysis plays a major role in measuring strengths and weaknesses of the organizations effectively. A literature is given by Dixon (2013), environmental analysis helps to evaluate and measure the opportunities and threats in the market. Early recognition of threat and risk are always beneficial as it helps to diffuse off some threat. Proper and dynamic environmental analysis and scanning help to make optimum utilization of natural, scare human and capital resources. Systematic and effective analysis of business environment helps the companies to minimize wastage and make effective use of available resources without evaluating and analyzing the internal and external environment resources could not be utilized in a hassle free manner. Therivel and Paridario (2013), analyzed that effective and unique analysis of business environment helps the company to increase and enhance their strength, reduce the weaknesses, diffuse the risks and grab the ample of opportunities. This enables the organizations to grow and survive in the global market. Decision making is a tool of choosing the best alternative from among multiple available alternatives. An environmental analysis is extensively significant and dynamic method in understanding and decision making in all the circumstances of the business. The success and growth of the organizations depend upon on the unique and precise decision making capability. The analysis and study of environment enable the organization to choose best option for the growth and progress of the firm. In this way, environmental analysis plays a major role in boosting revenue and returns internationally. Without undertaking environmental analysis and scanning, the organization cannot build and improve a strategy and plan for the progress and growth of the business.
Macro environment analysis of Tesla motors
A macro environment is a situation that exists in the economy as a whole instead of only one region. It has been studied that macro environment can affect the long term targets and goals to a large extent. The macro environment is a wide context within which a firm conducts its long term activities and operations. An organization cannot control on the macro environment factors, these factors are considered uncontrollable. If a company wants to become a leader in the global market then it needs to focus on the external environment. It will help the firm to struggle with rivals in the competitive market. Tesla is famous for its sustainable innovation business strategy and model. The PEST analysis is done by Tesla motors to identify and evaluate the risks, threats and opportunities in the market. The PEST analysis for Tesla has been discussed below.
Political factors: It has been studied that political environment of any country may impact its business environment negatively and positively as well. It also affects the economic environment of the country directly. The political factors may affect the regulatory environment also. It has been investigated that US is the second biggest democracy across the world. The country enjoys a stable and dynamic political climate however there are have been some major issues and challenges currently. The USA promotes and advocates democracy in all over the world. With a dynamic and stable political environment, technology advanced infrastructure, US positions itself as an excellent destination for FDI, thus Tesla motors can take ample of advantages while expanding and exploring the business. On the other hand, U.S also faces some international challenges for some of its interventionist plans and policies in some part of the world. The political system of the country is stable and dynamic to beat the competitors (David, 2018).
Economic factors: It is investigated from the various studies that USA is a biggest and growing economy across the world in terms of nominal GDP. In the third quarter of 2018, the GDP figure was $5,164,757 million, United states is the global growing and leading economy with regard to GDP, as it could be seen in the ranking of quarterly GDP of the 50 countries (Countryeconomy, 2018). It can provide ample of benefit to Tesla to increase market share and sale of the products. The GDP of the country grew 0.9% in the third quarter of 2018 as compared to the previous quarter (Countryeconomy, 2018). Hence, Tesla can uplift its revenue and returns while initiating the business in such market. On the other hand, various challenges or issues are also presented in the country that is putting adverse impact on the sale and growth of Tesla. It is worth noting that labor is not cheap in the country particularly when compared to Mexico, India and China. Along with this, global economic landscape is changing constantly which is a biggest risk for the U.S. There is no suspicious that the nation is global leader and economic superpower. On the other hand, interest rate, exchange rate and inflation rate may also put direct impact on the long term goals and objectives. Increased economic activity during the recession is a significant and unique element that has impacted growth of Tesla motors. All the economic factors need to be considered while growing business at international level (David, 2018).
Social factors: The socio-cultural factors are imperative and unique that may have a major influence on the supply and demand of automotive products internationally. The socio-cultural factors include customer, culture, values, income level, and buying behavior of the consumers. The environment is sustainable and dynamic for automotive vehicles in the country (Somers, Owens and Piliawsky, 2008). USA is a third most populous nation across the world with a total population of around 326 million (David, 2018). Along with this, the country is a diverse therefore, Tesla can attract and retain majority of people in U.S. Furthermore, it is noted that US education system is excellent and unique in the world. It is investigated people in U.S possess high income level thus; Tesla can increase the sale of automotive vehicles internationally. Most of the people in the country buy luxury vehicles to maintain a highest standard in the society. Therefore, Tesla motors can improve and enhance productivity and results in U.S (Hillson and Murray-Webster, 2017).
Technological factors: The USA is an international player in technology and science. Americans have a longstanding fascination for advanced and innovative technology thus, the organization can increase profits and market share in this country. The country is adapting and implementing the innovative technologies in various fields to attract maximum companies for doing business smoothly. Advanced technology has changed the various ways many things are done. Innovative technology can help Tesla motors to reduce and eliminate the extra production costs. The rate of technological innovation and change is highly quick in the USA. However, the nation faces strong and unique risks and challenges from ample of countries like India, China and South Korea. Before initiating the business, Tesla motors needs to focus on the technological factors to compete with rivals in the global market (David, 2018).
Porter five forces model
Tesla motors is an innovative producer of electric vehicles that provides innovative and attractive vehicles to the customers in all over the world. To evaluate and analyze the position of the competitors, porter five forces model is used by Tesla motors. The porter five forces model for Tesla motors has been elucidated below.
Competitive rivalry: Tesla, Inc. manages and operates business in a highly and effective competitive market. This force highlights the impact of competition on the energy and automotive industry environment. Rivalry in the US and the international automotive industry is high and strong. There is ample of companies in USA that have expertise in producing or making in electric cars. Due to which, there are various competitors which could impact on the performance and productivity of Tesla motors. The overall competition in automotive and electric sector is high and intense but due to unique and dynamic positioning of Tesla motors does have a competitive benefit in the market in which it works or functions (Ayala, 2016).
Threat of new entrants: It is studied that there is low and weak threat of new entrants for Tesla motors in the U.S market. Due to entry barriers such as low acceptability, and initial investment of the electric vehicles, there issues or barriers are significantly high, which also contradicts the threat of new entrants. The threat of new entrants is low because the firm is using dynamic and innovative strategies and approaches to cope up with rival globally (Warner, 2010).
Bargaining power of buyers: It has been studied that Tesla motors has introduced innovative products like electric and energy cars which are quite unique and dynamic as compared to other competitors. The bargaining power in the hand of the customers is relatively low and weak. The overall product presentation and designing of the electric cars is unique and dynamic thus, it can attract wide range of customers in the U.S market. In today’s era, there is no other firm which can compete with Tesla motors in electric car segment. Most of the customers prefer to buy the electric products of Tesla motors therefore; bargaining power of the buyers is weak as well (Rothaermel, 2015).
Bargaining power of suppliers: It is examined that Tesla motors has gained technical expertise in producing electric cars, it becomes natural the firm has strong and effective supplier system which is dynamic and effective and has taken long time to develop products. The success and growth of Tesla motors depend on the suppliers to ensure smooth and dynamic process of manufacturing of its electric cars. After the various studies, it has been found that bargaining power of suppliers is high for Tesla motors (Stringham, Miller and Clark, 2015).
Threat of substitute: The threat of substitute is low and weak in electric and automotive vehicle industry. There are few substitutes including hybrids, hydrogen transportation and hydrogen vehicles that can affect the profitability and market share of Tesla motors in U.S market. However, Tesla consumers are very environmentally cautious thus, they do not buy substitute products in the competitive market. It is noted that the substitute products are of lower quality hence substitute products cannot impact on the productivity and performance of the firm (Kancherla and Daim, 2018).
SWOT analysis of Tesla motors
SWOT analysis of Tesla motors has been elaborated below.
Strengths
Weaknesses
· Tesla motors is built and enhanced 1st fully electric sports car “The roadstar”
· The company maintains strong and unique relationship with suppliers.
· Tesla motors has the ability to develop electric vehicles in the U.S market (Mbaskool, 2018).
· The prices of their products are higher as compared to competitors.
· The economies of scale are not attained due to high cost of vehicles.
Opportunities
Threats
· There is high and growing market
· Maximizing gas and oil prices
· The firm is receiving support from government.
· There is high and immense competition.
· Limited range of electric products.
· Concentrated industry is another weakness (Mbaskool, 2018).
Conclusion
It is measured from the above analysis that U.S is a very competitive and unique market because there are many sellers in the market of the electric vehicles. Tesla motors would be able to be effective and successful through the deployment of high and advanced technology in the electric cars. The above analysis reveals that environmental scanning and analysis are needed to initiate the business activities at minimum risk. By conducting environment analysis, the risks can be minimized and highest opportunities can be taken effectively. Apart from this, Pestle analysis, porter five forces analysis and SWOT analysis are done by the company to judge and evaluate the issues and obstacles of U.S market.
References
Ayala, R., 2016. Lowering Global Consumption of Petroleum, While Increasing Profit: Tesla Motors Ridesharing (Doctoral dissertation, Cardinal Stritch University).
Bass, S. and Dalal-Clayton, B., 2012. Sustainable development strategies: a resource book. Routledge.
Countryeconomy.2018. United States (USA) GDP-Gross domestic product [Online]. Available from https://countryeconomy.com/gdp/usa [Accessed as on 15th November 2018].
David.J.2018. PESTEL analysis of the USA [Online]. Available from https://www.howandwhat.net/pestel-analysis-usa/ [Accessed as on 15th November 2018].
Dixon, J., Scura, L., Carpenter, R. and Sherman, P., 2013. Economic analysis of environmental impacts. Routledge.
Hillson, D. and Murray-Webster, R., 2017. Understanding and managing risk attitude. Routledge.
Kancherla, Y.D. and Daim, T.U., 2018. Technology Roadmap: A Roadmap for Tesla. In Infrastructure and Technology Management (pp. 347-366). Springer, Cham.
Mangram, M.E., 2012. The globalization of Tesla Motors: a strategic marketing plan analysis. Journal of Strategic Marketing, 20(4), pp.289-312.
Mbaskool.2018. Tesla motors SWOT analysis, competitors & USP[Online]. Available from https://www.mbaskool.com/brandguide/automobiles/4475-tesla-motors.html [Accessed as on 15th November 2018].
Panwar, N.L., Kaushik, S.C. and Kothari, S., 2011. Role of renewable energy sources in environmental protection: a review. Renewable and Sustainable Energy Reviews, 15(3), pp.1513-1524.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Rowland.C.2018. Tesla, Inc.’s Mission statement & Vision statement (An analysis)[Online]. Available from https://panmore.com/tesla-motors-inc-vision-statement-mission-statement-analysis [Accessed as on 15th November 2018].
Somers, C.L., Owens, D. and Piliawsky, M., 2008. Individual and social factors related to urban African American adolescents’ school performance. The High School Journal, pp.1-11.
Stringham, E.P., Miller, J.K. and Clark, J.R., 2015. Overcoming barriers to entry in an established industry: Tesla Motors. California Management Review, 57(4), pp.85-103.
Tesla.2018. About Tesla [Online]. Available from https://www.tesla.com/about [Accessed as on 15th November 2018].
Therivel, R. and Paridario, M.R., 2013. The practice of strategic environmental assessment. Routledge.
Tietenberg, T.H. and Lewis, L., 2016. Environmental and natural resource economics. Routledge.
Warner, A.G., 2010. Strategic analysis and choice: A structured approach. Business Expert Press.
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