Managing Innovation in Business

This report analyzes the innovation strategies of Tesla Inc., a leading electric vehicle manufacturer. It examines the company's history, innovation performance, and capabilities, using SWOT, PEST, and Porter's Five Forces analysis. The report also explores the automotive industry in 2016, highlighting key trends and challenges.

Managing Innovation
in Business

EXECUTIVE SUMMARY
The following report summarises various topics like description of innovation, overview
of Tesla Inc. as it was chosen for the study of innovation. Evaluation of the industry with all the
innovations that are made in prior years. The detailed analysis of automotive industry have been
conducted with the help of SWOT, PEST and Porter's five forces. Analysis of the sector in which
history of innovation and its status in year 2016 have also been discussed under this porject
report.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
THE ORGANISATION AND INDUSTRY OVERVIEW.............................................................1
Overview of the organisation and industry evaluation with its history......................................1
Existing innovation performance and capabilities of Tesla Inc..................................................2
Industry in 2016..........................................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Innovation refers to modify the existing product with the help of a new idea that may help
to attain organisational goals in more effective manner. It is very important fro all the
organisations to maintain innovations in their operations so that business can be operated
appropriately. Main objective of this assignment is to develop to knowledge about innovation
and its impressive management (Biemans, 2018). Tesla Inc. has been selected for the analysis in
this report. This assignment covers various topics like a detailed overview and innovation history
of the company. Different types of analysis like SWOT, PEST and porter's five forces have been
used to determine capabilities and performance of Tesla Inc. and industry evaluation have also
been addressed in this report.
THE ORGANISATION AND INDUSTRY OVERVIEW
Overview of the organisation and industry evaluation with its history
Tesla Inc. is an American automotive and energy company which is mainly based in Palo
Alto, California. The organisation is manufacturing electric cars with its solar panel and solar
city subsidiary. The company was founded in July 2003 and its founders were Martin Eberhard
and Marc Tarpenning, both of them are engineers by profession. Earlier Tesla Inc. was funded by
the two persons who have founded the company and few time after they called for outside
funding. Currently the business is executed by Tesla Inc. in two different segments that are
energy generation and storage and automotive (Tesla Inc, 2018). Energy generation and storage
segment is related to manufacturing, designing, installing and selling solar products and
automotive is related to developing, designing, and selling electric vehicles. Various innovations
are implemented by Tesla Inc. and all of them has benefited the organisation and resulted
positively (Brown and Osborne, 2012). All the innovations are as follows:
Innovations Description
Effective
business
model
An effective business model was maintained by Tesla Inc. which was not
depended upon after sales maintenance services.
Battery
technology
Battery in the vehicles of Tesla Inc. is very good and it has also announced that
the batteries are going to be more enhanced and advanced in year 2019.
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Mega
charger
An innovation which is related to Tesla Inc. is mega charger in which it can help
to charge the phone in less time and it was named as Supercharger V3.
Model 3 It was an innovative model which was launched in the and the interiors of the
cars were very good.
Auto pilot These are firstly launched by Tesla in year 2015 which was made with semi
autonomous technology.
There are various types of internal and external forces that may influence its business
operations in the market and also affect its capability to perform operations. All the factors can
be analysed with the help of PEST analysis and those are as follows:
Political factors: These type of factors are mainly related to the rules and regulations of
government that are required to be followed by the companies. As Tesla is operating its business
in UK hence if legal authorities of UK impose a rule like to keep minimum employees of a
specified number the employers of Tesla have to hire new employees so that it can meet all the
regulations.
Economical factors: Economy of UK is considered as a stable economy where
operations can be executed appropriately. But this stability can be influenced by inflation or
deflation rate that directly affects purchasing power of customers. As the purchasing power
decreases than it may affect sales of Tesla Inc.
Social factors: All such type of factors depends upon the behaviour and perception of
customers that includes education level, gender, age etc. If Tesla Inc. is not able to offer
attractive products to the customers than it may reduce its market share and profits as sales will
get affected due to this reason.
Technological factors: New and innovative technologies are used by Tesla Inc. in its
vehicles and now a days customers becoming technology friendly and this will help the
organisation to target a large market segment and acquire higher profits. Use of new technology
has resulted positively for the company as local public of UK is very much involved in new
technology (Drucker, 2012).
Existing innovation performance and capabilities of Tesla Inc.
Innovation can be defined as the tool which is required to attain competitive advantage in
the market as it may help to enhance operational efficiency. Tesla Inc. in executing business in
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automotive sector where competition is very tough. In its sector the organisation is considered as
the most innovative company as it is using different types of innovative methods to enhance its
sales and profits. Those innovations include vehicles like model s and model 3. Both are the
impressive innovations of the company and benefited by enhancing sales and profits for the
company. Model S was a fully electric sedan which was the best selling model of the electric car
in the world in year 2015 and 2016. This model has helped Tesla Inc. to increase its market share
as the car was very innovative and also attracted large number of customers. The organisation is
selling all its products by it self and have no dealer network, it was an innovation for the
company which has helped to reduce distribution costs. It also helped to build customers trust in
Tesla Plc as they can directly contact to the organisation they do not have to involve dealers
while they are facing problems (Drucker, 2014).
After getting a huge success in market with the help of Model S Tesla has launched
Model 3 in the market. It was expected that this model will also result positively and increase the
market share of Tesla Inc. according to the expectations this model have also resulted favourably
for the organisation and a higher success was recorded with the help of this model.
Model S was expensive but customers loved the products as its features are very good
and giving appropriate mileage. Model 3 was was very interesting and potentially disruptive and
grabbed attention of market segment. Both are the best innovation examples of Tesla Inc. as they
have helped to enhance capability to execute business activities in appropriate manner.
To understand the innovations in more effective manner SWOT analysis is very
advantageous which is a combination of four different elements that are strengths, weaknesses,
opportunities and threats. All of them are as follows:
Strengths: New and innovative strategies are used by Tesla Inc. in order to increase
market share by targetting large number of customers. These technologies are related for battery
advancement and new engines for the cars so that most of the customers may get such vehicles
that they are willing to buy. Organisation is having government support as all the rules and
regulations are followed by Tesla Inc. In market there is a monopoly of the company as it offers
best quality alternate energy and electric cars. As the organisation have started its business from
a niche market and later expanded it in large market. It considers demand and needs of customers
and than provide them those cars that they are willing to buy on appropriate prices.
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Weaknesses: Tesla Inc. is having poor liquidity as compare to its competitors this may
affect its operational efficiency in future because it is possible that organisation may not have
funds to operate business in future. Maximum production is limited as Tesla Inc. is having only
one plant which is in California and have capacity to manufacture 500000 vehicles at a time. As
the number of vehicles is limited than the sales have also been restricted due to this reason.
Whether the demand increases or not organisation is not able to produce more than 500000
vehicles.
Opportunities: Now a days technology in continuously advancing with time and Tesla
Inc. is also focused to use innovations in its products which is a good opportunity for the
company as it may help to increase sales. Tesla Inc. have also been launched various new
products that are based on the advance technology. Model S and Model 3 are the best examples
of new technology because they have more powerful engines as compare to other vehicles. In
future Tesla Inc. is also going to introduce new cars in market with more innovative ideas in
order to capture more market share (Ngo and O'cass, 2013).
Threats: Tesla Inc. have various competitors who are trying to acquire its market share.
These companies are Ford, Fiat, General motors etc. Other organisations are copying the design
of Tesla Inc. and now launching them in the market it has become threat for the company
because it may affect its sales and profitability.
It is very important for the owner of Tesla Inc. to take appropriate action in order to
operate its business in market continuously.
Industry in 2016
Automotive industry in a large sector that contributes a large amount in the GDP (Gross
Domestic Products) of the nation. Various ups and downs have been recorded during year 2016
in automotive sector. Business of auto mobile companies have been affected and their
profitability have been decreased. UK have a special relation with auto mobile sector as it is the
largest car exporter in the world. This industry is contributing to the development of economy. In
the beginning of the year different cars and vehicles are launched and the organisations are
willing to be accepted in the market but it has gone totally opposite they sales of all the
companies have been decreased because customers have end number of choices (Rajala,
Westerlund and Möller, 2012).
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Beginning of year 2016 was not good for automotive sector, as the time passed away
situations changes and organisations started to overcome all the challenges and established them
selves again. Tesla Inc. have also affected due to the economic changes and also get benefited as
the sales of Model S was very high in year 2016. In order to analyse the automotive industry in
depth porter's five forces model is an appropriate model. All the five forces of this model are as
follows:
 Threat of substitute: In automotive market there are various types of substitutes are
available in the market that may change the buying decision of customers. Tesla is a part
of this industry and substitute items may influence its buyers as because they have
multiple options (Tidd and Bessant, 2014).
 Threat of new entrant: Now a days new companies are launching in the market of
automotive sector. As Tesla Inc. is operating business in this sector it has a threat of a
new competitor in the market who may affect its business.
 Existing rivalry: All the companies who are executing business under automotive sector
have various competitors in the market. Tesla Inc. is also dealing with same threat as
there are various competitors like Ford, Fiat and other companies.
 Bargaining power of customers: Bargaining in the automotive sector is continuously
increasing as options in the sector are increasing continuously. Tesla Inc.'s customers are
also bargaining on the prices of the vehicles because they think that price of the products
is not appropriate (Seebode, Jeanrenaud and Bessant, 2012).
 Bargaining power of suppliers: Suppliers supply material to the organisations and if
there is a few number of suppliers than it may increase their bargaining power. They may
increase the prices of the material which is supplied by them to Tesla Inc. Suppliers
increase the prices of the material when they analyse that there are not other suppliers
who may provide good material as compare to them. It is very important for Tesla to
have good bargaining power so that it may bargain with its suppliers and get the material
on appropriate prices.
All the above mentioned points can describe that an organisation who is operating
business under automotive sector have to face challenges and find appropriate ways to deal with
the same.
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CONCLUSION
From the above project report it has been analysed that innovations is a concept in which
a new idea is launched in the market so that organisations can acquire large market share. In
automotive sector new companies are launching in the market and the competition in th same
industry in increasing. It is very important for the companies to have proper and appropriate
information of the competitors so that effective strategies can be formulated. The analysis of the
industry can be conducted with the help of SWOT, PEST and Porter's five forces.
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REFERENCES
Books and Journals:
Biemans, W., 2018. Managing innovation within networks. Routledge.
Brown, K. and Osborne, S. P., 2012. Managing change and innovation in public service
organizations. Routledge.
Drucker, P., 2012. Managing in turbulent times. Routledge.
Drucker, P., 2014. Innovation and entrepreneurship. Routledge.
Ngo, L.V. and O'cass, A., 2013. Innovation and business success: The mediating role of
customer participation. Journal of Business research. 66(8). pp.1134-1142.
Rajala, R., Westerlund, M. and Möller, K., 2012. Strategic flexibility in open innovation–
designing business models for open source software. European Journal of Marketing.
46(10). pp.1368-1388.
Seebode, D., Jeanrenaud, S. and Bessant, J., 2012. Managing innovation for sustainability. R&D
Management. 42(3). pp.195-206.
Tidd, J. and Bessant, J., 2014. Strategic innovation management. John Wiley & Sons.
Online
Tesla Inc. 2018. [Online]. Available through:
<https://www.reuters.com/finance/stocks/company-profile/TSLA.O>
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