Competitive Advantage and Sustainability of Tesla: A Strategic Report

Desklib provides past papers and solved assignments for students. This report analyzes Tesla's corporate strategy and sustainability.

CORPORATE STRATEGY

Table of Contents
INTRODUCTION......................................................................................................................... 3
STRATEGIC GOAL AND OBJECTIVE OF TESLA...............................................................4
EXTERNAL ANALYSIS..............................................................................................................5
SUGGESTIONS FOR TESLA THROUGH ANALYSIS OF PORTER FIVE FORCES..........7
INTERNAL ANALYSIS...............................................................................................................8
STRENGTH AND WEAKNESSES OF TESLA.....................................................................10
EVALUATION........................................................................................................................... 11
THREE SAF TEST..................................................................................................................11
CONCLUSION........................................................................................................................... 13
REFERENCES............................................................................................................................ 14

INTRODUCTION
Corporate strategy is the highest plan in the hierarchy of the organisations in which Corporate
strategies define and deal with the way of completion of business goals and objectives for
business management. It is a prominent overall strategy and specific strategy which is committed
to a specific area of operation of the organization (personal strategy or financial strategy etc.)
Corporate strategy refers to the decision making through case approach by looking everywhere
and covering the entire firm’s business existing in the market by determining how to generate the
most value. To grow the corporate strategy one firm should observe that how the multi-business
is healthy together, how it affects each other, and how the investment structure is set in order to
optimize the human capital, administration and affairs. It is known as the topmost business
strategy which is related to the decision making of business.
Corporate strategy has important elements which should be focused by top management of the
organization and the head functions of corporate strategy are:
 Allotments of resources- allotment of resources are mostly focused on two things of a
firm that are capital and people. The allocation of these two must be appropriate so that
the value of firm can be enhanced, there should be optimum utilization of these two in the
business through the leaders. Availability of talent must be appropriate by ensuring the
competencies through the better distribution and the capital allotment should be in a way
to earn the highest risk of return by investing in external and internal opportunities.
 Blueprint of an organization- organizational design refers to ensure that corporate
structure and system of a firm is created in a way that maximizes the value of a firm.
Leader or head must consider that what are the roles of each and every one who is
working in the firm, what approach should be adopted for decision making(centralization
or decentralization), what reporting structure should be there in the business (vertical
hierarchy or matrix, etc.)
 Management of portfolio- it is the complete observation about business that where it will
play, what can be their connections, how business will run and in what segment business
would not enter, how the risk can be reduced, what are the opportunities in which firm
can seed through appropriate strategy and investing and ensuring market portfolio is well
balanced and maintained.

 Strategic replacement- it is the most difficult feature of corporate strategy as it has to
balance the substitutions of risk and returns of the firms.it is essential to have a
comprehensive view of all the integrated business by ensuring the estimated return
generation on the risk management. Corporate strategy work towards the improvement
and instrumentation of return by managing the high risk by choosing a suitable strategy.
STRATEGIC GOAL AND OBJECTIVE OF TESLA
 To build the first broad network charging station for all-electric vehicles.
 Enter with new models in the mass market.
 Sell cognizable electrifying powertrain elements and parts to other automobile makers.
 Produce constant production of 400 cars in a week.
 Develop the third-generation cars in affordable ranges.

EXTERNAL ANALYSIS
Porter five force models is a complete strategy framework by which analysis of present and
future competition can be done so that it can take a strategic decision. This model will focus on
how Tesla can develop a competitive advantage in auto manufacturers in major industries as well
as explore the profitable opportunities in the consumer goods sector. This porter model will help
in developing a deliberated position for auto manufacturers.
 Threats of new entrants- new beginners in auto manufacturing sectors always come up
with the major innovations, new methods of doing things which are directly putting force
on Tesla, through various tactics like lower prices of the product, providing new value to
the schemes and reducing overall cost. Thus, these are the major challenges to Tesla, so it
needs to be developing strong fencing to protect its competitive border.
How Tesla can address the threats of new entrants:
1. By creating innovative products and services, Tesla needs to give the reason for
its customers why they should buy Tesla products instead of other company
products.
2. Lower the cost per unit by constructing a cost advantage.
3. Investment in research and development. New entrants are less expected to come
in the dynamic environment of industry especially when the players like Tesla are
operating and explaining the higher standards. Which demoralize the new players
in the industry as they cannot earn the exceptional or remarkable profit in this
competitive environment.
 Bargaining power of suppliers- there is a number of suppliers in the auto manufacturing
major industry to buy the raw material. When the suppliers are in a ruling position it can
decrease earning a percentage of Tesla in market powerful suppliers can use their
negotiation power to bring out the higher prices from the auto manufacturing firms. The
effect of higher power to a supplier for bargaining can lower the overall profitability of
major auto manufacturers.
How Tesla can address the bargaining power of suppliers-

1. By developing a well-organised supply chain with several suppliers.
2. By carrying out trials and creativity with product designs by using different
material so that the company can shift to another material or substitution for raw
material if the price of one raw material goes up.
3. Creating the suppliers who are dedicated and dependent upon the firms. Tesla
should learn how Wal-Mart and Nike have created the third-party manufacturer
whose businesses are completely dependent on the firm thus; tesla must develop
this scenario so that there could be less bargaining power for suppliers.
 Bargaining power of buyers- a lot of time buyers are very challenging and demanding.
Buyers want the best product at minimum possible prices. The customer of Tesla has a
higher power to bargain as there is an increment in discounts and offers showed by many
competitors, so the customer base of Tesla has higher bargaining power (Akakpo et al.,
2019).
How Tesla can address the bargaining power of buyers
1. By increasing the large base of customers. This will help the Tesla in many ways
first it will give the opportunity to Tesla run smoothly its production process as
well as its sales and the most importantly it will help in reducing the bargaining
power of customers.
2. By innovating new products tesla can introduce offers and discount which will
attract the customers who are seeking for discounts and special offers. This will
restrict the bargaining power of the customer.
3. Existing customers can be reducing the absconding if the new products are
introduced by Tesla to its competitors.
 A threat of substitute products and services- profitability of industry suffers when the
similar customer needs are met in a different way with a new product or services. For
example, Loral and body shop products are a substitute for skincare health because both
the products are dealing with organic products. But the threat increases when the
substitute product or services give higher satisfaction by offering conspicuously different
from the current contribution of the industry.

How Tesla can address the substitute product or services
1. Rather than being product-oriented tesla should be service oriented also just.
2. The focus should not be on what customer is buying, the firm should concentrate
on the fundamental needs of customers.
3. Cost of switching must be increased for customers.
 Rivalry among the existing competitors- when the rivalry among the existing
competitors is very heated it will beat down the prices and, in a result,, the overall profit
of industry will decrease. As Tesla is exercising in very competitive auto manufacturers.
And this environment affects the profitability of an organisation.
How Tesla can address the intense rivalry among existing competitors in auto
manufacturers-
1. Through the development of supportable differentiation.
2. By drawing and defining the scale for healthy and better competition.
3. By making the alliance with the competitors to enhance the market size instead of
challenging in just a small market.
FACTORS THAT ARE ACCOMPANYING THE TESLA-
The huge scope of more advanced evolution in battery technology.
Low electricity price and high oil prices are expected in the upcoming years.
Availability of charging stations and home charging facilities will be there.
SUGGESTIONS FOR TESLA THROUGH ANALYSIS OF PORTER FIVE
FORCES
After analysing all the five competitive factors, the strategist of Tesla will come to know that
how the five forces impact on their profitability of the firm in major auto-manufactures. Now
they can quickly respond to utilize the appearing opportunity by identifying the early game-
changing trends. Corporate strategist of Tesla may shape these five forces in their favour through
the detailed understanding of this analysis.

INTERNAL ANALYSIS
By using this VRIO analysis we can evaluate the confirmable competitive advantage of Tesla
manufacturer:
 Value- tesla is providing a very needy product that is solving the crucial problems for
mankind, it is reducing dependency on fossil fuels. Tesla is providing clean power
product which is becoming conventional with upgraded technology and super affordable
that is resolving energy confrontation for the whole world.
 Rarity- tesla is a company who has graspable technology and in progress of research and
development to create new and more innovative and improved energy products such as
cars and batteries rare as expected and the advantage of technology is satisfying to be
sure to all the consumer’s needs.
 Imitability- to imitate the unique Tesla technology is very difficult as they are having
building or manufacturing strength, research and development potentiality, placing in the
different vehicle and energy space. To replicate the Tesla on this stages by the players is
very difficult as they have spent so much money and energy to reach here on this well-
balanced stage.
 Organization- tesla has strong organizational culture, strong leadership and applications
indeed which had made the company capable to encourage in this competitive market by
grabbing opportunities in different energy sections.
capability Value rarity imitability organization Competitive

suggestions
Tesla stores Yes yes Difficult Yes  Short-
term
competitive
edge
Charging
networks
Yes Yes Difficult yes  Short-
term
competitive
edge
manufacturin
g
Yes Yes Difficult yes  Short-
term
competitive
edge
Self-learning
cars
yes Yes difficult yes  Short-
term
competitive
edge
STRENGTH AND WEAKNESSES OF TESLA
Strength-
 Brand recognition- tesla is a well-recognized brand for vehicle and also known for its
sustainable products. This brand has gained a recognizable and reputed position
throughout the world because of its product and services. Brand recognition is the
important aspect in any business to increase the sales in case of Tesla it's a major leverage
for this firm.
 Innovation- it is the most critical strength of Tesla, the innovation model adopted by this
firm from its vehicle to solar energy and energy storage system. All the products of Tesla
are related to sustainability as their focus is on energy efficient world. It’s all the products
are highly innovated such as energy storage system, solar energy system and its vehicles
which are made by uncommon functions and class technology.

 Rising in vehicle sales- Company owned the stores across the world because of these sales
is keep growing globally. This results in the growth of its revenue. This is happening due
to sound marketing strategies applied by this company.
 Engineering and technological proficiency- tesla is also famous for technological and
engineering proficiency as they have generated in-house capabilities in the designing of
electric vehicles and systems. And their engineering team is expertise in lightweight
material which is very important in making of electrical vehicles.
Weakness-
 The high cost of vehicles- Tesla vehicles comes under the premium category of vehicles
that's why these vehicles are costlier than other normal vehicles. Most of the model of
Tesla vehicle is very costly which are not affordable by middle-class consumers. This is
an important weakness which is prohibiting the sales to grow fast.
 Presence is limited- the sales of Tesla is dependent on its supercharger networks when
the super network charger grows the sales of a brand will also grow but till now it has
limited existence and it will take huge investment as well as long time to grow its
existence.
 High competition- the need for a supercharger to charge the Tesla vehicles is a very
important aspect which is affecting the competitive strength of Tesla. Competition is high
and the prices of Tesla vehicle are also high which threats the sales of Tesla. If Tesla will
manage these two factors, then they are able to fight with this threat.
 High production and operation cost- the operation and production cost of Tesla are
high although it has managed to reduce its manufacturing cost the cost of laws and
regulations are high which again leads an increase of total cost.

EVALUATION
SAF TEST
Sustainability
Sustainability is a process of keeping in existence through a change in balance in the living
world, in where investment directions, taking advantage of resources, aim for technological
development and changes in practices of the organisation to increase the efficiency and make the
possibilities to meet the current and future needs and desire of human.
Tesla is becoming the most valuable car company in the USA as the market value of Tesla is
USD $ 50.84 billion and other general motors have USD $ 50.79 billion. A small company of 14
years old has become the largest US automaker by the directorship shown by Tesla through its
absorbed concept that is sustainability considered as the heart of its business strategy.
Tesla has decided from the beginning of the firm to acquire a large concept approach by giving
attention to the imperatives of sustainability instead of short-term goals as other car makers do.
Changes to duplicate impartial economy and need for a desperate sustainable business model for
cars and machines which emit no harmful pollutants. Government policy has requested to all the
automaker to enhance the efficiency in energy to reduce the atmosphere footmarks engendered

by engines. In other words, the government is demand from the automakers to produce
automobiles which create less pollution and consumes less energy and resources.
The focus of Tesla is on increasing the customer value and social value at large and lessen the
harm and problem to environment generated through automobiles. Their concentration is
sustainable energy through renewable energy, and their vision for the 21st century is to operate
the change in the world towards electric vehicles. Tesla has focused on societal demands with the
mindset of long-term business model.
Tesla can the leader for the car industry in the near future, but this can be possible only when
Tesla understands its responsibility and accept them as its cars caused some serious accident due
to slow systems. There are huge challenges waiting for Tesla as its autopilot system has failed
many times which caused accidents and unfortunate deaths. Therefore, Tesla is kept improving
its systems that will help in achieving long-term profit by preserving the resources of nature and
contribution to sustainable society.
Feasibility
A feasible word comes from faire the French verb which means "to do'' or capable of doing
something.
Low-cost batteries give the extremity to Tesla Company over this competition. Battery storage is
economically workable indicated introductory calculations. And this company is installing
battery storage from the years. According to the report of California’s SGIP self-generation
incentive program, Tesla has successfully installed trading scale at 11 Wal-Mart sites in
California put together with PV systems from a solar city and also managed to install storage
systems in more than 330 residential. The success of the pilot project now company is planning
to double the production in upcoming years.
Tesla's director said in an interview that: Tesla is coming up next year with new units of
convincing price points, as there was a report in Germany about the expensive batteries of Tesla
and this statement disappoint the Tesla company. So, all we can say that Tesla is very feasible in
economic as well as in a financial way.
Accessibility-