Tesla's Business Environment in France: A Case Study

Desklib provides past papers and solved assignments for students. This case study analyzes Tesla's business environment in France.

Business organizations and
environment in a global context
A case study of France and Tesla

TABLE OF CONTENTS
Introduction................................................................................................................................1
Background................................................................................................................................3
Business environment.................................................................................................................5
Analytical tools...........................................................................................................................7
Data graphs.................................................................................................................................9
Conclusion................................................................................................................................12
References................................................................................................................................13

LIST OF FIGURES
Figure 1: Tesla Model S.............................................................................................................1
Figure 2: Model S registration in France....................................................................................2
Figure 3: France GDP annual growth rate..................................................................................9
Figure 4: Preferences for self-driving feature in cars...............................................................10
Figure 5: electric car sales in several countries........................................................................10
Figure 6: Governmental practices for electric car market........................................................11

Introduction
The increasing consumption of fuel based cars and energy sources are not sustainable. Tesla
is an automotive and energy company in America. The organisation is well-known for
electric cars whereas the organisation also provides batteries and panels based on solar
energy technology. The organisational success with Model X and Model S, there is an
increasing demand for electric cars at a global level (About Tesla, 2019). Business has the
main function of the production and assembly through several in-country plants.
Figure 1: Tesla Model S
Tesla also has expanded the operations in France which is one of the leading and emerging
markets for the organisation. The market has increased sales to 115% over the year whereas
the global sales of Tesla have achieved a 280% increase in comparison of the year 2017. The
inclination of the French market for luxury cars has increased competition also. Renault-
Nissan alliance is the main competitor for the organisation. The market is highly occupied by
the businesses delivering battery-powered vehicles, but increasing focus on electric cars is
gathering customer base (Erik and Barbara, 2019). The presented report will discuss business
and business environment in France to understand capabilities and opportunities.
1

Figure 2: Model S registration in France
2

Background
Tesla is a Palo Alto-based automotive and energy company. The organisation has
specialisation in the manufacturing of electric cars whereas Solar-City subsidiary has the
main focus on the solar panel, roof tiles, power wall and power pack product manufacturing.
Under the chief executive officer, Elon Musk, the organisation is a public organisation listed
under Nasdaq stock exchange. The organisation is also based on the legal structure under the
European Union (Erik and Barbara, 2019). The organisation also use of the countrywide
registration processes and approaches to achieve legal operations.
The organisation operates several production and assembly plants within the country. Giga-
factory 1 in Nevada is an assembly plant whereas Tesla Factory in Fremont, California is a
vehicle manufacturing unit. The main productions of the organisation in the electric car and
their accessories are Model S, Model X and Model 3 vehicles. It also provides support for
older models such as Roadsters and Semi. The organisation is also launching Model Y in the
year 2020. It provides batteries for the electric cars and other purposes such as Power-wall
and Power Pack Batteries. Besides it, solar roof tiles and solar panels are other products from
the organisation. It has several EV stations to support the sales of the cars and availability of
the electric fuel during the journey (About Tesla, 2019).
The organisation has international operations. Besides the controlling and management of the
business from the Palo Alto, the organisation has operations in Canada, Netherlands,
Germany, China, Japan, United Arab Emirates and Australia. The organisation has recently
started the operation in Shanghai and since 2017; the organisation has focused on the Middle
East. Besides, the organisation has international operations due to the partnership with other
businesses. In later 2007, the organisation started a partnership with Daimler AG. Also, Tesla
manufactures the electric-powertrain for Mercedes-Benz along with electric batteries. Smart
ED2s gets power batteries and powertrain from Tesla. In the year 2010, Toyota also started
working with Tesla, but later in the year 2017, Toyota has created its division for the electric
car and so that partnership ended (Tesla Automotive, 2019). Besides to it, the organisation has
supplies of electric batteries and solar components to Freightliner Trucks, Airbnb, liberty
mutual and Panasonic.
The organisation has a market share of 12% in the plug-in segment sale. Also, in comparison
of the year 2017, the sales in the year 2018 increased by 138% at global level. The market
3

structure of the organisation is limited to electric vehicles. However, innovative and creative
functions and features in the vehicles are becoming the major reasons for the customers to get
attracted to the brand and products. Besides to it, supercharge network of the business across
the global level has benefits to achieve a rigid market structure. The products are also cost-
effective and enrich in features. After starting a separate division of Toyota for electric cars,
the organisation has competition (Tesla Statics, 2019). Also, Volkswagen and Nissan are
major competitors for Tesla in the USA market. However, the organisation is gaining
financial advantages on the technology of powertrain, autopilot and unique glass design.
4

Business environment
Since 2015, the organisation has started operations in France. It was time when the
organisation has used Model S as the mode of the entrance in the market. The Europe
continental has already a good reach for the organisation. The neighbour countries of France
such as Germany, Belgium and Spain have already business operations to serve the
community. Therefore, operations management in France is simple and effective for the
organisation as the organisation has control over the neighbour markets to achieve raw
materials and international trading. France has a population of 6.72 Cr as of the year 2018
which 0.85% of the global population (French economy, 2019). As of the year 2017, the
country has gross domestic product 2.58 USD billion which is mostly powered from the
private and medium-size businesses.
The country also has $44,600 as GDP per capita, and according to this figure, the country is
at 20th position in the world. Paris is considered as the most elegant city in the world whereas
France tourism industry is the most significant components of the economy. Besides it, the
chemical industry is the key sector to support the operations of manufacturing of the other
organisations. Also, the fashion industry has a high contribution to the national economy.
However, income is highly unequal in the departments. The average salary of people working
in governmental departments is €4,750 per month (Economy of France, 2019). In the poorest
department, the household income is €1,826 per month. In an urban area, average income is
€5,939 per month whereas the richest community has an income of €8,000 per month
(French economy, 2019). Therefore, the estimated wealth of France is US$14.0 trillion for 63
million people. From the economic strength of the country, it can be said that the
organisation has opportunities to achieve high profitability and sales.
The average unemployment in the country is 9.4% which is on the continuous decrease from
the year 2015. The organisation has a high scope of the cost saving with unemployment as it
can help to achieve economic benefits. The organisation can optimise the production and
assembly cost and can increase the economic returns on the practices. The inflation rate of
the country is 1.2% as measured in the year 2017 (About France, 2019). However, the
country has not faced major inflation and so that there is high stability for the businesses in
the country.
5

However, the exchange rate of the business is high as currently, the cost of one Euro is
approximately equal to 1.13 dollars. Therefore, the country has strength in the economic
environment and so that the organisations have opportunities to achieve competitive benefits.
For long-term operations, the interest rate in France is 0.65% whereas it was 0.86% last year.
For the short-term, the interest rate is near to 2.99%.
Therefore, France as a business environment for the organisation has opportunities to
establish operations and services. Adequate income level and strengths in the economy
empower the people to enjoy the luxury products and services. Tesla has already several
stores and centres within the country, but expansion has to consider the capabilities and
competition in the market (French economy, 2019). The main advantage of the organisation
is that there is less competition in electric cars and solar products. However, the market share
of the fashion and chemical industry is high in the country so that the organisation might face
issues to establish the roots in the vehicle industry to attract the customers.
6

Analytical tools
Micro and macro environment of France can be analysed for Tesla through the several
analytical tools and techniques. The organisation can examine the environment through the
pestle analysis tool.
Political: The country is developed and so that there is high stability in the political
environment. It is one of the most interesting factors to attract investors and businesses. Also,
the government has fix amount on taxation and investment in the country. However, there are
no conflicts and issues with many entrances in the business (Davidson, 2013). Therefore, the
organisation has benefits to establish the stores and can empower the trade in neighbour
countries also.
Economic: From the analysis of the income, inflation rate, interest rate and gross domestic
product, the country has economic strengths. The economic values are attractive for
businesses to achieve competitive benefits through the business establishment. However,
increasing unemployment is a concern for the government, but businesses have benefits of it
to optimise the cost (French economy, 2019).
Social: Most of the societies live in the urban area whereas people speak Catalan and France.
The society is more oriented to luxury products and services. The social environment is also
stable to achieve effective performance and quality in the operations. The organisation has
opportunities to introduce products with high profitability (Guerrero, 2017).
Technological: The country is considered as the fourth leader in the industrial power whereas
it is a global leader in the space technology. The country invests 2.2% of the GDP on the
technological advancements whereas the technological index of the country is 4.65 (Gilpin,
2015). Therefore, there is high availability of the technology for the business and individual
so that efficient market, customer services and business operations can be achieved.
Legal: The organisation has standard taxation and subsidy policies whereas labour code and
employment laws are in favour of the business to achieve competitive growth. From the legal
aspect, the organisations have to follow the regulations strictly during the hiring and firing of
the resources (Davidson, 2013). It also empowers the satisfaction toward the business culture
and operations.
7

Environment: Around 30% of the land in the country is covered under the forests. It also
indicates that the country has a high availability of natural resources and raw materials to
support the business product line. The environmental strengths are valuable to achieve
effective services to the customers.
Besides it, Porter’s five forces can be used to analyse the business and business environment
as interrelation to each other. The model can help to understand the business capabilities to
establish or expand the business operations in the country.
The threat of new entrants: There is a need for the high cost to establish the business in the
country whereas strong knowledge and technological protection are required to achieve
economic scalability and growth. Tesla has main barriers for others in the form of technology
and costs to enter the market (E. Dobbs, 2014).
The threat of substitutes: The product substitution is low in the industry as an individual
needs high cost and customer market and performance. The organisation has a unique selling
point in the form of solar energy and powertrain in the products so that it is not available to
the other organisations and so that there is less threat of the substitution.
Bargaining power of suppliers: The organisation has established several stores in the
country. Also, the size and number of the suppliers are high along with uniqueness in the
services. The organisation has mainly a limitation of dependency on the suppliers to achieve
customer base as most of the operations are managed as internal operations. Therefore, there
is less bargaining of the suppliers for the raw material and technological support.
Bargaining power of the buyers: The products and services of the organisation are
innovative for the customers and ahead in the market so that customers are loyal to the
business. Due to the lack of strong competitors in France for electric cars, the organisation
has fewer bargaining power of the customers (Dälken, 2014). Also, a strong EV station
network and customer services are major reasons to establish a market.
Competitive rivalry: There is a high difference in the quality and cost of the products from
the available competitors in the country. The organization has high customer loyalty and so
that there is less impact on the competitive environment. Therefore, the organization has a
suitable environment in the country to achieve high profitability.
8

Data graphs
The presented graph has mainly a discussion of the core factors and benefits from the country
for Tesla. The organisation has strengths and capabilities from the following major things:
Economic stability: The country has an increasing graph of the gross domestic product. The
graph shows that the country has achieved a growth rate since January 2017. At the end of
the year, the country has achieved an annual growth rate of 2.2, and it is determined as
improving over time (Caron, 2014). In the year 2018, it is determined as 2.5 USD million.
Therefore, there is economic stability in the country, and the organisation has high benefits to
achieve customer marker and sales.
Figure 3: France GDP annual growth rate
One of the attracting purchasing points of Tesla is innovation. The organisation is providing
first-class technology in the cars including self-driving features with minimum attention of
the drivers and high security against the sudden failures and accidents. The given graph
shows various countries and their orientation toward self-driving cars. In France, the peoples
are expecting that self-driving vehicle is preferences for them (Karamitsios, 2013). However,
most of them also think that fully self-driving cars are risky. Although, the overall orientation
toward the technological products and service is high and so that peoples are moving toward
Tesla cars.
9