Business Strategies for Tesla: PESTLE, SWOT, and Strategic Directions
Verified
Added on  2023/01/23
|15
|4113
|85
AI Summary
This document discusses the business strategies of Tesla, including PESTLE and SWOT analyses. It explores the political, economic, social, technological, legal, and environmental factors affecting Tesla. The document also highlights the strategic directions available to the organization for growth and success.
Contribute Materials
Your contribution can guide someone’s learning journey. Share your
documents today.
Business strategies
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
INTRODUCTION Businessstrategy is thedecisions of company that aid the firm in accomplishing its goal significantly(Galpin, 2019). Strategic planning is helpful in securing competitive position of the firm.duration .Current assignment will be based onTesla; it is the leading American firm that offers electric cars to wide range of consumers across the world. In the year 2018, entity has generated 21.46 Billion revenues. Current assignment will conduct environment analyses of Tesla through Pestle, Swot analyses. It will apply porter’s five force model in order to analyses competitive environment of Tesla. In addition, report will evaluate different strategic direction available to organisation.Furthermore, it will produce plan that will include strategies, tactics of organisation. TASK 1 PESTLE, SWOT and organisational capabilities Pestle analysis of tesla Pestleanalysesistheenvironmentalanalysestoolthathelpsinevaluatingexternal environment of business unit. Political factors There are so many politicalfactors which are affecting the auto-mobile industrialist. Specifically, it includes corruption and bureaucracy in market, freedom for press trade unions activities(Hoelzlhammer, 2018). Trade policies of UK are free hence Tesla has opportunity to enter into new market and expand its business across the world.Government of UK is supporting Electric cars. This helps Tesla in running business successfully.Political instability creates threats for business because changing government policies impacts negative on Tesla as it has to make modifications in its practices and process as per the new regulations. Economic factors The economic factors can diversely affect the Tesla. Changes in economic policy of UK directly affects the Tesla. When there are changes in foreign currency exchange rate then it can affect the Tesla(Dixit, Clouse and Turken, 2019).Strategic Business Location Decisions: Importance of Economic Factors and Place Image.Rutgers Business Review,4(1). . Due tothechange in FER intheyear 2017, $26.2 million wasgainedby the company inthe year 2016.Theannual profits for both the year was $52.3 and $26.1 respectively. Volatile exchange rates impact on the investment strategies of Tesla and long term performance of 3
business get affected. In the condition of inflation Tesla face the issue because it affects purchasing power of consumers. By this way firm fails to generate profit in the market(Tesla motors,2019). Social factor Changes in preferences of buyer’s impact on the demand of products of Tesla., as nowadayspeople are demanding sporty cars and entity is offering them such kind of products. It raises trust and loyalty of consumers and sales of business unit get increased significantly. Electric car idea of Tesla is loved by people this has created positive brand image in the mind of consumers(Peytcheva-Forsyth, Yovkova and Ladonlahti, 2017). This has affected production strategy of business and has helped in increasing revenue of business unit. Preference of renewable energy cars are increasing, this impacts positively on sales of business and help in gaining competitive advantage to the organisation. Technological factors Technology isexpanding and growing with the exponential rates. This is why Tesla accept to upgrade its technology and adopt new changes which are required to sustain in market and compete with competitors(Raje and eta.l., 2015). Tesla implements artificial intelligence system and automotion techniques which make it unique from its competitors. This advancement impacts positively on tesla and help in minimising wastage and manufacturing cost as well. Legal factors Thisfactors include rule and regulation part which are governed by government. UK government has made laws in favour of environment, these legal regulations impacts positive on Tesla as by this way company can promote its Electric cars easily(Teece, 2018). Dealership sales regulations restrict the firm hence it impacts on sales strategy of Tesla and impact on its profitability as well Environmentfactors Tesla have to take care about the environment. They have to ensure that proper dispose of waste generated by production.Nowadayseveryone is going for low carbon and eco-friendly environment. Dependence on old sources of energy is less becausethey are not renewable, so uses of new sources of energy are in bulk and renewable.So, that the Tesla's idea of electric car is loved by the peoples and because these cars are fuel efficient and maintenance is cheaper than traditional vehicles(Yi and Bauer, 2015). 4
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
SWOT analyses Strengths ï‚·Strong brand image:One of the great strong point of Tesla which supports in attracting potential buyers across the world. ï‚·Financial condition:Itis generating huge revenuesand it has gained competitive advantage in auto mobile industry(Afonso, 2018). Weaknesses ï‚·Costly products: It sales its products at high cost, hence middle income class people do not buy such cars hence entity can target only limited number of buyers . ï‚·High research and development cost: It invests huge amount in research and development which affects its profitability in negative manner(Li, 2018). Opportunities ï‚·Technologicaladvancement:Teslacanuseadvancetechnologiessuchasartificial intelligence system, online mobile applications etc., it would help in developing its products and offering wide range of goods and services to its buyers. Threats ï‚·Regulations: Government makes changes in laws and regulation which create problem for the company and it has to make changes in its entire practices as per the new norms which create pressure on business unit(Yu, 2015). Capabilities of Tesla VRIO model ValuesProduct portfolio (range of products) Financial background and strong supply chain management are core capabilities of Tesla. Innovative culture RareIts manufacturing techniques are amazing that is why investors like to invest in Tesla so that they can get high return over their investments ImitationRetail and distribution strategy Supercharger network 5
OrganisationFuturistic designing TESLA -PORTERS FIVE FORCES Rivalry Among Existing Competitors: - Tesla is competing in market, so it is havinghighrivalry among existing competitors. Many companies areoperating in US market and giving tough competition to TESLA an automotive industry . As TESLA is adopting electric vehicles there are no such rivals in the market as it is the only electric luxury brand. But in next few year high end car makers will be expanding their segment which may result in tough competition. There are various brands in market which are taking help of research and development to enhance their technology and can compete market. Company have to focus on their research and development so that in near future no company can became rivalry for their brand(Sharma, 2016). Threat of New Entrants:- Threat of new entrants arelowas companies are not having such huge amount of capital or resource to invest and for entering in new market, new technology is required. For having good technology high cost in research and development is in need, then only one can compete in market. Tesla is a brand with innovation and have created great image in eyes of customers because of which it is setting a trend mark and reputation of the brand is increasing. Because of this reputation in market one can not compete to Tesla as customers are loyal towards their brand. Threat of Substitutes:- Presently threats of substitute arelowbut it may increase in near future. There are only few substitutes for the model 3 but it is more expensive than its competitors because of which various substitutes are available at low prices. These substitutes can become competition to the company in production part. Nowadays hydrogen-fuelled cars are attacking markets which attract different customers and companies’ loyal customers can also switch the brand(Musonera and Cagle, 2019). So these substitutes can become threat for the growth of organisation. Bargaining Power of suppliers:- 6
Bargaining power of suppliers arelowas suppliers available in market are in huge number and company is having various alternatives for the same. Company need different raw materialswhosepricechangefrequentlyduetochangeinmarketconditionand demand(Kancherla and Daim, 2018). In such condition suppliers have control over price of materials and can add value to these resources to make their material more costly. Tesla also have bargaining power due to good reputation in market and they easily influence their suppliers. Because of which it can extract different resources easily at low cost. Bargaining powers of Buyers:- Due to price sensitivity bargaining power of buyers is quite high. As Research and development of luxury brand are increasing so in future it may be possible that company can face competition and demand of product may go down. So, company should work on this part so that it may not lose its potential customers in near future(McCain, 2019). TASK 2 Strategic directions for organisation Strategic direction is an action taken to reach organisation objective. It is a process of making plans, strategy and tactics to achieve organisation goals. It provides guidance to the organisation. Different type of strategic direction available to Tesla is: 7
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
Illustration1: Ansoff matrix (Source: Ansoff matric of company,2018) ï‚·Market penetration:It is a process of selling products and services in specific market. It is the activity to increase the market share of existing product by using low price to create demand of product. Selling existing product in same market by developing new strategies is called market penetration. Tesla can use this strategy to extensively. Tesla can focus on selling it products like model S, X, 3 electric vehicles, inverters, power-pack 2 energy storage products, solar panel, racking and Electric hardware devices in US and many other countries. Tesla want to increase the market share of its product. High market share is important to keep competitors away. Tesla can use aggressive marketing strategy which can be beneficial for promotional campaigns, expand distribution channel and new pricing strategies. It is beneficial as well as has some disadvantages like if production is expensive then company would not be able to sell its products in lower price to attract new customers(Orr, 2019). ï‚·Productdevelopment:firm can use product development strategy in order to grow well in the market. Company can implement strategy as product development is a process modifying existing product or create new product as per the need of the customers. Tesla is currently working on the semi-truck, pick-up truck and energy storage products. Tesla 8
can design new products for the new consumers. Product development can be risky because when new product is introduced to customers may or may not want it. It is safe to stick with old product which company and customer know(Lyyra and Koskinen, 2017). ï‚·Market development strategy:This strategy emphasis on selling new product in existing market. Tesla is assessing to undertake new markets in which India has been shortlisted. Deepak ahuja, chief financial officer of the company wants Tesla to enter in India. India will become third-largest auto market by 2020 it Tesla enters. It will be strategically the appropriate decision to increase its market share. Tesla's focuses on luxury market areawith respect to product distribution.It can be difficult to introduce new product in existing market because customers may or may not take risk to purchase that product or they do not have need of that product thus this decreases the market share of the product. ï‚·Product diversification strategy:This strategy focuses on creating new market for new product. Tesla has diversified through past years. Tesla first started with manufacturing of electric vehicles and after purchasing Solarcity to enter in energy storage sector it name changed to Tesla motors Inc(Dana, 2018). It has good network and potential hence company can implement diversification strategy. For attracting new customers in new market Tesla will have do advertising according to culture which can focus on building brand awareness and create a competitive advantage towards similar prices products. Product diversification can be costly because it will incur cost of 2 sales team. Recommending the most appropriate growth strategy Company can implement product development strategy to sustain in the market because it can be beneficial for Tesla to bring innovation in market. It is a process of upgrading existing product to motivate existing market or to produce new product that market wants. Product development is important for society betterment, it provides value to the customer and helps company to grow(Almeida, 2017).. As Tesla does not engage in the product development frequently because it incurs huge cost. Tesla should do research and development properly and identify the needs of customers, new technology available for product enhancement, identify the market segment, test the concept used in the product and before launching it in market, first it should be checked in the market, whether it is liked by the customer or not. If a company 9
develops new product it has to make sure that it has sufficient funds to market its product so that customers know about your product. This strategy can be used as a benchmark to help in measuring the progress of the product. Tesla should invest in new technology to differentiate its products.There is a threat to enter in the industry because it incurs huge cost, resources and technology. Tesla is the innovator of electric car, this makes it difficult for competitors to enter in the industry. Strategic management plan It is a planning process which defines organisational goals, objectives, set priorities, making strategies, mission, vision to achieve organisational objective. It ensures that all the employees and stakeholders are working towards common goals(Akakpo and et.al., 2019). It is a process of continuous planning and monitoring which is necessary for organisation to achieve its goals. This is beneficial for Tesla company leaders to check company's present situation, what strategies is being used and if they are not proper or does help in achieving company's mission then those strategies should be deployed and new strategies should be implemented. Strategic management helps company to analyse its strengths and weakness, formulate and execute the plan and evaluating the success of plan. Vision:To develop wide range of products and gain global brand presence. Mission:To become a leading brand in the industry Strategic goal:To increase the sales of electric vehicles by 20 % till the end of 2019. SWOT analysis: STRENGTHS ï‚·Strong brand image ï‚·Strong financial condition WEAKNESS ï‚·Costly products ï‚·High research and development cost 10
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
OPPORTUNITIES ï‚·Globalisation ï‚·Technological advancement THREATS ï‚·Regulations Key strategies/ tactics: Tesla can use these following tactics: ï‚·Product development: Tesla can innovate or introduce new products or make changes in existing products. It is an important strategy to improve the quality of the products by product development campaigns to increase sale. It helps company to improve its own quality standards(Lyyra and Koskinen, 2017). Company can use new design or new production process to meet quality specifications. By improving quality of product market share of product will increase, productivity also increases which helps in reducing cost of product and compete in the market. Company can offer lower price productswhenproductioncostislowwhichincreasesprofitmargin.Aproduct development strategy can fail because it is unable to meet the needs of the customers. Proper research should be done in the market to identify the needs of customers, new technologies that can be used in production process or in the product. Company must ensure that ideas can turn into finished products with all the available resources. ï‚·Marketing: Marketing plays an important role in creating brand positioning in mind of customers. Tesla's competitive advantage is to product and place, it produces electric cars with attractive designs and position it in different segments. Company uses market diversification strategy for culture based advertising for creating brand awareness and gain competitive advantage. Tesla should also use social media marketing by creating its business profile various social media platforms(Almuzel and et.al., 2018). Through social media marketing company can find out insights that shows how much your product is liked by customers, company can market their new products through social media and find out the reaction of customers whether it is positive or negative by their 11
comments, how much your product is shared by the customers and can also find the needs of customer that company can satisfy. ï‚·Segmentation: It can be done through demographics by segmenting people on the basis of gender, age and income. It is beneficial for company because company can provide products according to the need of age group such as age group of 25-30 like sporty cars, 30-35 prefer safer cars. Company can also provide car on the basis on income such as model 3 cars for middle class and luxury cars like BMW, Audi for high class. Tesla has entered into new markets i.e. Solarcity(Walter And et.al., 2017). ï‚·Targeting: Tesla will target middle income class people and old age people because Electricvehicles are easy to drive and available at reasonable prices.Company will take assistance of differentiated targeting strategy. This strategy is beneficial for business unit as it would be beneficial in order to attract mass audience and targeting range of people. ï‚·Positioning: Tesla will take assistance of cost positioning strategy as it will emphases more on cost reduction so that it can offer cost effective products to consumers. This would help business unit in gaining attention of mass audience and targeting range of consumers as well. Financial projection MonthsJanFebMarchAprilMayJune Cash inflow Revenues200002200024200266202928232210.2 total cash inflow200002200024200266202928232210.2 Cash outflow Rent500050005000500050005000 Salaries400041004100410041004100 marketing cost100010001000100010001000 administration cost500600700500600600 Total expenses105001070010800106001070010700 Net cash flow95001130013400160201858221510.2 12
Monitoring and controlling Monitoring will be done through benchmarking system, this will help in analysing whether strategies of business are giving expected result or there is need to make modifications. Furthermore, it will use sales report in order to control over entire strategic plan, if cash inflow is less than cash outflow then Tesla is require to make changes in its strategies but if it is positive that shows strategies are giving desired results. Evaluation If Teslaspend hugeamount in marketing then it would be able to gain profit, as it will gain attention of buyers and they will spend money in buying such cars. CONCLUSION From the above study it can be concluded that companies are required to analyses their internal and external business environment and has to make strategies accordingly so that it can sustain in the market for longer duration. It his essential design products as per the needs of buyers so that people take interest and buy its products frequently. It would be beneficial in order to raises sales of the company to great extent. Ansoff matrix helps in analysing strategic direction of business and implementing right strategy for the growth of organisation. Tesla should apply products development strategy as it would help the firm in gaining attention of mass audience and enhancing their satisfaction level as well. 13
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
REFERENCES Books and journals Afonso, N.A., 2018.Project of the implementation of driverless technology in vehicles of Tesla company(Doctoral dissertation, Instytut Organizacji Systemów Produkcyjnych). Akakpo, A. and et.al., 2019. Foresight, organization policies and management strategies in electric vehicle technology advances at Tesla. InFutures Thinking and Organizational Policy(pp. 57-69). Palgrave Macmillan, Cham. Almeida, J.R.S.D., 2017.Tesla, Inc.: equity valuation(Doctoral dissertation). Almuzel, M. and et.al., 2018. Tesla Solar Roof Marketing Plan. Dana, C., 2018. A Strategic Audit of Tesla, Inc.: Electrifying our Future or About to Run out of Energy?. Galpin, T., 2019. Strategy beyond the business unit level: corporate parenting in focus.Journal of Business Strategy. 40(3). pp.43-51. Hoelzlhammer, A., 2018. A Strategic Audit of Tesla. Kancherla, Y.D. and Daim, T.U., 2018. Technology Roadmap: A Roadmap for Tesla. In Infrastructure and Technology Management(pp. 347-366). Springer, Cham. Li, Z., 2018. Strategic Audit on Tesla. Lyyra, A.K. and Koskinen, K.M., 2017. With software updates, Tesla upends product life cycle in the car industry.LSE Business Review. Lyyra, A.K. and Koskinen, K.M., 2017. With software updates, Tesla upends product life cycle in the car industry.LSE Business Review. McCain, C., 2019. A Strategic Audit of Tesla, Inc. Musonera, E. and Cagle, C., 2019. Electric Car Brand Positioning in the Automotive Industry: RecommendationsforSustainableandInnovativeMarketingStrategies.Journalof Strategic Innovation and Sustainability,14(1). Orr, M., 2019.HITTING THE ACCELERATOR: WILL TESLA CRASH THE LOS ANGELES GRID?(Doctoral dissertation, Monterey, CA; Naval Postgraduate School). Peytcheva-Forsyth, R., Yovkova, B. and Ladonlahti, T., 2017. The potential of the TeSLA authenticationsystemtosupportaccesstoe-assessmentforstudentswithspecial educational needs and disabilities (sofia university experience).ICERI2017 Proceedings, pp.4593-4602. Raje, A. and eta.l., 2015. A review of Tesla turbine.International Journal of Mechanical Engineering and Technology,6(10). Sharma, S., 2016. The Tesla Phenomena A Business Strategy Report. Teece, D.J., 2018. Tesla and the Reshaping of the Auto Industry.Management and Organization Review.14(3). pp.501-512. Walter, S.S. And et.al., 2017. Combination of integrated dynamic shimming and readout- segmented echo planar imaging for diffusion weighted MRI of the head and neck region at 3 Tesla.Magnetic resonance imaging.42.pp.32-36. Yi, Z. and Bauer, P.H., 2015, October. Sensitivity analysis of environmental factors for electric vehicles energy consumption. In2015 IEEE Vehicle Power and Propulsion Conference (VPPC)(pp. 1-6). IEEE. Yu, C.J., 2015. Competitive Analysis on Battery Electricc Vehicle (BEV) Market: A Case Study of Tesla Motor. ONLINE 14