Tesla's Business Model Analysis

This assignment requires a thorough analysis of Tesla's business model. Students need to apply Porter's Five Forces to evaluate the competitive landscape, utilize the VRIO framework to assess Tesla's internal resources and capabilities, and conduct an activity analysis to understand its primary and secondary activities contributing to profitability. The analysis should provide insights into Tesla's strengths, weaknesses, opportunities, and threats within the electric vehicle industry.

APPLIED CORPORATE STRATAEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
External analysis (business environment and industry) to identify Opportunities and Threats
and assess industry attractiveness...........................................................................................4
Analysis of Resources and key competences of company to identify core competences......9
..............................................................................................................................................12
SAFe criteria applied to be a strategy implemented by organisation...................................16
REFERENCES..............................................................................................................................18

INTRODUCTION
Corporate strategy refers to the direction as well as scope of actions of
company in alignment with the stipulated organisational goals and objectives
(Davies, 2016). Every organisation has a unique corporate strategy which is applied
by them to gain a strategic and competitive edge in marketplace. It is largely
concerned with the management of resources, risks and returns done by an entity
which provides an opportunity to the firm to become a leader in corporate world
within the specific business industry
The following report is based on Tesla Motors which is an American
automotive and energy organisation that enjoys a leading stature within the global
marketplace. Tesla Motors is a leading name within the vehicle manufacturing
sector owing to the wide variety of cars that the entity offers to public as per their
choice and relevance. This organisation is having its head office located at Palo
Alto, in Silicon Valley. Company mainly is a car manufacturer unit established in the
year 2003. Entity is one of the leading car manufacturer company having more than
79 stores around the world and have approximate number of 10,161 employees in
its organisational structure.
This report consists of external business environment and industry analysis
by way of PESTLE and Porter Five Force analysis. Further, it includes the resources
and key competences of entity to determine the core competences. And lastly, it
constitutes of SAFe criteria applied to a strategy executed by organisation in
marketplace.
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External analysis (business environment and industry) to identify Opportunities and
Threats and assess industry attractiveness
PESTEL Analysis
Political:
Some of the basic political factors that put their impact on functioning of Tesla
include environmental regulation that created an opportunity for company to
manufacture a product with controlled emission levels. Political factor consists,
different types of trade regulations such as EU & NAFTA, entry mode regulation,
stability of government, social policies and more. Tesla started its business by
trading cars in the region of North America and later expanded their business
services in Western Europe and Asia. This expansion brings numerous political
factors that influence its culture. For this, it has been encouraged to produce
environment friendly cars. Government institution of US created a programme in
which they provide energy loan programmes that will effectively encourage
industries to use new vehicles technologies. For instance, in Europe, Norway
government encourage industries in market by providing certain measures like,
nationwide access bus lanes and offering free parking of electric vehicles (Du and
et. al., 2013). All these political decisions adopted by countries effectively represents
opportunities for Tesla in order to find new market and make further investments in
those market as to gain more growth and maximise profitability of company.
Economic:
These factors are mainly related to, current level of inflation, economic
growth rate, credit accessibility, interest rates and more. As demand of sustainable
car rose around the globe as price of fuel-engine vehicles is rapidly raising with the
fast phase increment in fuel prices worldwide this factor will work as an effective
opportunity for Tesla to offer their environment friendly cars in global market and
acquire large market share. Along with this, increase in GDP rate lead towards
significant rise in buying power of customers that will automatically increase sale of
electric cars in global market.
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Social:
Change in lifestyles and trends, education level, distribution of wealth are
some of the factors which are covered in this aspect of PESTEL analysis. Social
factor is related to buying behaviour and attitude of customers related to a product or
a service. In today’s modern world, there is an increase in environmental
awareness. Recently individuals prefer to buy eco-friendly products rather than
purchasing the pollutants ones (Engert and Baumgartner, 2016). People like to
spend their money on environment friendly products as to save both environment
and their money. Convinced individual’s acts as a great opportunity for Tesla to
produce fuel cells and hydrogen based clean energy in market and generate
effective growth of their products in a global level in order to satisfy demands of
consumer on a great base.
Technological:
These include new and innovative discoveries, different types of new
technological platforms and more. Technological factor effectively benefits rapid
growth of organisational effectiveness. With the adoption of highly advanced
technological measure in its manufacturing process Tesla can find numerous sets of
opportunities in order to improve its level of efficiencies and decrease overall cost of
input in their fuel cells and hydrogen based clean energy. While on the other hand,
in order to find different types of effective technological measure for company it is
required for Tesla to input more cost in their R&D expenditure budget (Gnan,
Montemerlo and Huse, 2015). This will act as a threat as it is quite hard to find out
one of the best effective and suitable technological measure for company which can
effectively stimulate its growth.
Environmental:
There are different types of factors included in environmental section such
as, attitude towards environment, waste disposal law, energy consumption law etc.
As individuals in all over the world are getting aware about environmental concern
so this factor can be seen as a threat for Tesla to face more competition in order to
produce eco-friendly vehicles in both economical and affordable way. While Tesla is
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planning to bring eco-friendly car in the market this concern of environment results in
increased demand of company products at global market.
Legal:
There are a variety of legal factors which are required to be considered by
companies in order to perform their functions in a manner desirable by law. Some of
these factors include product regulation, patent infringement, health and safety
regulation, employment regulation etc. World is leading towards, go green
movements which brings large and leading manufacturers to build vehicles in an
eco-friendly way. There are different types of legal regulations implemented by
government such as, carbon tax, green policies and more (Lam and O'Higgins,
2012). All these regulations and laws acts as an opportunity for Tesla in order to
boost their demand of electric cars in global market.
Tesla has been running successfully within the global market by making use of the
opportunities that the external business environment presents and overcoming the
threats that are placed by macro environmental factors of the entity. Further, the
manager of this organisation has carried out Porter Five Force analysis in order to
gain knowledge of industry attractiveness of the sector in which this entity operates
and to identify who possess the largest influential power within this industry. In this
regard, industry analysis of automobile sector relatively taking into consideration the
position of Tesla is given below: -
PORTER FIVE FORCES
Threat of New Entrants - Low
The threat of new entrants within automobile sector is low. This is so, owing
to a number of reasons. One of the most dominant reasons of this is the
requirement of huge capital which is necessary to gain an entry into automobile
sector, specifically the electric vehicle segment. Also, the expertise required to carry
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out the high-tech operations associated with manufacturing and other related
activities is not easy to be gained by every new entrant.
Threat of Substitutes - High
The threat of substitution is found to be quite high within the automotive
sector. In this regard, Tesla Motors faces the threat of substitution from hybrid cars,
electric cars, solar power cars and other diesel cars which are offered by rival firms
within the same sector (Tesla Porter’s Five Forces Analysis, 2019). Further, the
threat of substitutes also exists in case of people opting to make use of bus, train or
bicycles as a mode of transportation instead of acquiring an electric vehicle.
Bargaining Power of Buyers - Moderate to High
The power possessed by buyers within this sector is ranging from moderate
to high. This is due to the increasing awareness among customers which makes
them crave for high quality and innovative products with prices lower than that of
other companies dealing within automotive sector. If customers realise that they can
get the same product at a lower price from another enterprise, they may switch to
that entity (McCahery, Sautner and Starks, 2016). Thus, it is required by Tesla to
adopt diversification so as to keep the loyal base of customers intact.
Bargaining Power of Suppliers – High
The bargaining power of suppliers within the automotive sector is high owing
to the specific technologies that the firms operating at large scale make use of to
gain strategic edge in marketplace over rival firms. In this regard, Tesla is
dependent upon suppliers for the necessary prerequisites to utilise lean
management system across the organisational premises (Tesla Porter’s Five Forces
Analysis, 2019).
Competitive rivalry - High
In the global marketplace, the competition in automotive industry is fierce and
owing to this the competitive rivalry is high in this sector. Various firms operating as
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a part of this industry offer diverse categories of vehicles as per the preferences and
convenience of customers. In relation to electric vehicles, the cars designed by
Tesla have no close substitutes yet companies such as Nissan which produce
affordable electric cars stand a chance to out power Tesla across the global market.
Figure 1: Porter Five Force Analysis Model
As per the analysis of the automobile sector, it has been evaluated that Tesla
faces a number of threats owing to which they need to focus their attention
specifically towards the high quality of cars and the differentiating element present
within them to gain a strategic and competitive edge over rivals in marketplace.
Further, it has been analysed that the threat of the existence of other dominating
and well-established brand names within the industry which provides close
substitutes of the vehicles produced by Tesla is significant enough to take over the
current share of company in global marketplace. This organisation has made use of
hydrogen fuel to design and develop high tech cars which possess the capability to
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persuade customers to make a purchase. Additionally, it has been assessed that
automobile sector is still not much accessible owing to the high capital investment
which is required to be done by new entrants and the skills that are required to
execute the high-tech operations to successfully tap in the industry as a key player
(Herrmann and Felfe, 2014).
Analysis of Resources and key competences of company to identify core
competences
RESOURCES
Human Resources –
The CEO of Tesla is the most powerful resource of Tesla as he is the one
who directs the behavioural characteristics of employees of company to improve
their performance so that organisational goals and objectives can be achieved in a
timely manner within due course of time.
Physical Resources –
The equipments and machineries used by Tesla act as a strength for the
organisation as they provide assistance to the organisation for effectively executing
the activities and processes of company.
Financial Resources –
Being a large scale company, the funds that Tesla has is enough to carry out
the day to day activities as well as the execution of new techniques and
technologies across the organisational premises.
Intangible Resources –
Brand image is one of the most effective resources of company as this is the
reason why the organisation is at such a high stake and position within marketplace.
Further, this provides assistance to company in generating high sales.
Negative publicity can serve as a threat within the resources of Tesla as it is
a large scale company and an adverse publicity would harm the global reputation of
entity across the globe. Further, it would serve as a threat because it will lead to loss
of sales and profits to entity in marketplace.
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VRIO ANALYSIS
VRIO’s framework assists an organisation in determining the areas which render the
company a competitive advantage within the industry (Marsh, 2013). Identification of
the most valuable skills, resources and competences is necessary for an enterprise.
In this regard, VRIOS framework is used to analyse the resources and core
competences of Tesla Motors.
V: Value creating potential
R: Rarity
I: Imitability
O: Organization Appropriateness
V R I O STRATEGIC IMPLEMENTATIONS
RESOURCES
Elon Musk YES YES YES YES The award-winning CEO of Tesla is its
most important resource. The success of
company is owing to his strategic vision
and leadership in the right direction.
Funds &
Grants
Raise
YES NO NO YES Owing to its socially responsible vision
and mission as well as its promising
leadership have the access to funds and
grants which assist the enterprise in
product launch (Tesla’s mission is to
accelerate the world’s transition to
sustainable energy, 2019).
Design and
engineering
excellence
NO NO NO YES Tesla vehicles, especially the Model S is
an architectural excellence which is a
result of the extreme design and
engineering efficiencies within the
enterprise which act as a powerful
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resource for the success of this entity
(Tesla's High-End Disruption Gamble,
2019).
V R I O STRATEGIC IMPLEMENTATIONS
COMPETENCES
Innovative
and creative
design
thinking
culture
YES YES YES YES Owing to the heavy investment of Tesla
within R&D, the culture of this organisation
is driven by innovative and high design
creativity. The technological innovations
brought in by this firm render it a
competitive advantage within the industry
(VRIO FRAMEWORK, 2019).
Diversificati
on strategy
YES YES NO YES The long-term diversification strategy of this
enterprise has assisted the organisation in
turning itself into an energy innovative
company which develops sustainable
goods for power industry. This renders a
strategic as well as competitive advantage
to the firm over rivals as this is a unique
concept anew to Tesla Motors.
Marketing
Strategy
YES NO NO YES Owing to the lack of a well designed and
formulated marketing and advertising
campaign, this organisation has not been
much successful in creating awareness
about electric vehicles manufactured by
Tesla and its high-tech features which
regards it the value that it holds within
global marketplace
Business
Model
NO NO NO YES Tesla’s corporate as well as sales strategy
is capable to provide assistance to
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company in achieving their expansion
goals. The owned revenue and service
centres of this organisation are too
expensive and not at all conducive for the
attainment of sales targets.
Figure 2: DISRUPTIVE INNOVATION DONE BY TESLA
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Value Chain
Tesla makes use of DS Software's version 6 PLM for doing forecast of sales.
Further, this entity carries out remote diagnostics of operations of car. The charging
of electric cars of company are done by way of 534 Supercharger Stations with 3024
supercharges, the stations being shown on car's 17” touchscreen Google Maps. The
engineering of this company is by way of utilising own technology and also using
licensing networks. In relation to manufacturing, this entity is creating Solar
powered GIGABYTE factory. The free charging of cars is done at Tesla
Superchargers.
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Primary Activities
P
R
O
F
I
T
Sec
ond
ary
Acti
vitie
s

TOWS MATRIX
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One distinctive competence (ideally core)
Over a period of last 14 years, Elon Musk being the CEO of company has
directed the employees, processes and techniques of the organisation in a way that
it is one of the leading entities within the automotive industry. Further, Musk is the
person who undertakes several measures so as to motivate and encourage the
employees in a way that they perform by utilising their full potential. He has always
focussed upon facilitating coordination and cooperation among the team members
so that organisational objectives are attained in a timely manner.
Besides this, the biggest strength of company in terms of resources is Elon
Musk, the CEO of organisation while the biggest strength in terms of competences
is Innovative and creative design thinking culture. In this regard, Elon Musk is
comprehended to be the major reason behind the excellent alignment of company
with the strategic vision so as to ensure timely achievement of organisational goals
and objectives. Further, innovative and creative design thinking culture is the major
reason behind the adoption of latest and unique technologies and techniques by
company at regular intervals. This is the major reason behind organisation being at
a top position in the present context. In relation to weakness, it has been
ascertained that the biggest weakness of Tesla is the limited presence of company.
This can be gained from the fact that the major revenue of Tesla comes from US
and this entity has a small presence within China and some other developing
countries. This is the major reason that the organisation still lags behind some of the
top companies within auto-mobile sector. Yet the enterprise possesses the potential
to convert this weakness into strength by gaining entry into emerging markets to
enhance sales and market share.
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SAFe criteria applied to be a strategy implemented by organisation
Over years, Tesla has been known for making use of innovation and
creativity within products so as to design and develop such products which possess
the capability to disrupt automotive industry as well as the overall global market
place. In this regard, the strategy of company to enter the segment of electric
vehicles taking into account the aspect that not many entities are present within this
segment to compete with Tesla Motors was excellent in terms of the strategic choice
and intelligent mindset. With the passage of time, the decision of this organisation to
enter this segment of vehicle production has assisted the entity in gaining increasing
name and stake within marketplace (McCahery, Sautner and Starks, 2016). By
introducing new models of electrical cars at regular intervals, company strives to
enhance the share in global market with a significant quantum every time that a new
product is launched into the industry that aims at disrupting the sector in terms of its
high-tech features and excellent architectural design. The manager of this
organisation has applied SAFe criteria to analyse the suitability, acceptability and
feasibility of this generic strategy of company to adopt innovation and tap new
product segments: -
Suitability: Taking into account the behavioural characteristics of their target
consumers, Tesla analysed that customer prefer innovative products. Innovation is a
strategy that belongs to SO quadrant of TOWS matrix owing to the fact that this
organisation has been bringing up innovative products at frequent intervals and
further posses the capability to come up with more innovations in future. The
excellent vendor network, availability of resources and motivated team of engineers
will provide assistance to organisation in making this possible. This strategy of
adopting innovation to tap new product segments is suitable to meet the needs and
demands of people as with this, the organisation stays aligned with the latest tools
and technologies prevailing in marketplace.
Acceptability: The generic strategy of company to adopt innovation so as to
enter new markets segments such as electrical vehicles is easily acceptable by
people as customers in today's era are more inclined towards uniqueness and
innovation. The various stakeholders of Tesla are employees, shareholders,
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customers, community, government. Their interest and power in relation to the
proposed strategy is stated below:-
In this regard, every stakeholder group realises that innovation is the key to
success of an organisation and coming up with innovative products at rapid intervals
will render a strategic edge to company in marketplace. Thus, every stakeholder
group easily accepts this generic strategy of entity to launch innovative products.
Feasibility: The generic strategy of Tesla to make use of innovative practices
to enter new product segments is feasible as this renders organisation the
opportunity to enable growth of business operations within global marketplace.
Engineers with high technical skills and competence along with huge investment are
together required to come up with new and unique products at rapid intervals of
time.
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