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Business strategy is a set of competitive moves and actions that a business uses to attract customers, compete successfully, strengthening performance, and achieve organizational goals. It outlines how business should be carried out to reach the desired ends. This report cover questions such as impact and influence of the macro environment on a given organization and its strategies, Internal environment and capabilities of a given organization using appropriate frameworks, Porter’s Five Forces model evaluate the competitive forces of a given market sector for an organization, Range of theories, concepts and models, interpret and devise strategic planning for a given organization.
Political Factors affecting Tesla
This aspect identifies impacts which government decisions does to a business in the macro environment. Entities or bodies of government are the main ones to lead to the societal forces which affects the business and several industries. For instance, the government can limit the trade for industries which will affect the revenue of the company. Sometimes incentives from government can help the company strengthen the financial performance of the company. This factor directly relates with the issues of emissions released from the cars which must be minimum. It also expands the agreements of trading freely and provide opportunities which are open and help them to expand the business internationally. Political stability is also a another major threat which company needs to be aware of. For operations of Tesla it is favorable and it also includes penetrating the market. This aspect of the model basically provides opportunities for Tesla so that they can grow the automotive business. (Razak and et.al., 2016)
This aspect focuses on the economic conditions on the behalf of macro environment. Conditions related to growth in markets, levels of trade, currencies and other factors that helps in moving the business positively or negatively. For instance, the market of panels of solar energy has seen increase in rate of growth which also tells the companies the opportunities for growth in the market of solar energy. Tesla follows these factors that shift their market on the positive side such as they are decreasing the cost of batteries which is an opportunity for them. They are working on decreasing the cost of renewable energy which is also an opportunity for them but the only threat to the company is issues in economic stability. The performance of Tesla benefits from the low cost of battery. This states that the affordability of electric vehicles will be increased and more people will buy them. By the help of this analysis the company is trying to decrease the cost of renewable energy which as an external factors make the products of Tesla more attractive. As it is believed that their business will improve if the sources of renewable energy become more popular. Still the company faces a threat due to the stability in the economy as it threatens the performance of the company financially especially in countries such as Asia and Europe. This aspect of this model highlights opportunities of growth for Tesla despite the fact that the company has to take care about the conditions of the economy. (Hsieh, Ma and Novoselov, 2018)
Trends that affect the firm are known as social factors. It is done by investors, companies and employees. This aspect helps the company to align with trends that are targeting the markets socially. The managers of the company make it sure that the strategies help the company to maximize the benefits and profits of external factors. This aspect increases the operations of business internationally which are based on socio cultural opportunities.
This aspect determines how the factors which are related to technology affect the company. Tesla has advanced and developed resources of automobiles and solutions to energy. Most of the business of Tesla depends on technology. The high rate of change in technology is a threat for company. On the other side it enhances the technology of its products. These are the same factors which stands in the barriers of development and obsolescence of the technology rapidly. Basically this model shows the growth and opportunities for Tesla in the technological environment. (Pisano, 2015)
This aspect is concerned with effects of ecological conditions in the business globally. Company has the portfolio of electric cars which is a great measure to counter the effects of climate change and increasing the production for more aspects. Company has the opportunity to expand the programs which are environmental and concerned with the standards of rising on disposal of waste.
This aspect is concerned with the factors which are regulatory and which are related to the lawful and legal systems and those which helps in shaping the management of the business for developing it. For instance, Tesla follows the 4 Ps of marketing legally. The partnership of the business and the management of human resources are also in the legal measures set up by the government. (Strategy, 2017)
SWOT analysis of Tesla
Tesla has brought many innovations in the market. They are known especially for launching their sports car which is fully electric. These factors have empowered the company and it is a core strength for them which helps to develop products of these kind. Also Tesla is a strong brand in the market for innovation which brings solution for the renewable energy and innovation with their CEO as Elon Musk it is hard for any company to beat that. These all factors combined gain the trust of people and help in attracting the new customers and retaining the old customers. (Buckley and Ghauri, 2015)
The biggest weakness Tesla suffers from is that they have limited presence in the market. For instance, most of the revenues of the company are generated from United States and has a small presence in China and the developing countries. This is the factor which stops the growth of the company according to developing the economy and the overseas market. Supply chain of the company is limited which is the reason for the company that the company is expanding slowly in the international market. To add cars that Tesla make is slightly expensive than others because of the technology they use.
Tesla wants to increase its revenue so the company has the chance or opportunity to increase their operations and expand them into different markets. They have many opportunities for increasing the revenue. They can expand their production globally and support the supply chain of the company for increasing the sales of the company. They can also try diversification it will also help improve the performance of Tesla by acquiring businesses which are new so that they can reduce the exposure of risk in the industry. This aspect helps the company to expand their work and operations internationally. (Ghemawat, 2016)
The market in which Tesla operates is highly competitive market. This threatens the company in producing the electric car. The fluctuation in the market of prices are shown in SWOT analysis. Threat of regulations of dealership is faced a lot by the company as Tesla don't have dealerships they sell directly to their consumers which helps in saving the cost of products. But it has been an issue for the company as every state or company has different regulations and not everyone allows them to sell their products without dealership. This aspect of the analysis tells that the company needs to maintain the competitive advantage.
Valuable- It has been analysed that the manufacturing units of Tesla is been the most valuable resource for them. They have been engaged in making those products which produces less of carbon emission. It has supported Tesla the company in increasing their market share. The stores of organization are also well furnished and has made use of various attractive products inside the stores. This has created value for firm. It has supported Tesla in gaining competitive advantage. It has also been analysed that the production cost of company is also been low. This has supported them in gaining more consumers and also retaining them. This has assisted firm in growing and establishing their market share in new areas. Also the stores are situation in location which are easily accessible to public.
Rare- The design given by Tesla to their cars and jeeps are really rare. They give a tough competition to their competitors and to companies running along with them. Also the manufacturing units have high productivity capacity which has increased the internal capabilities of resources. They have made use of those resources which produces less carbon which is rare and has positively impacted the performance of company. Global network of manufacturing facilities in strategic locations is also high. Also it has supported Tesla in gaining competitive advantage. It has supported firm in growing and reaching out large number of consumers. This competency refers to the development and integration of information technologies that assist or at least partially automate driving
Imitable The logo which has been used by Tesla is really innovative and creative and it cannot be imitated by any other company who can act as competitor for them. They have made use of various new approaches like just in time so that they can deliver the cars and jeeps on timely basis. This has supported them in making efficient use of resources. It has also helped them in reducing the waste. Now Tesla is being able to focus on more important aspects. (Dahlberg, Hokkanen and Newman, 2016)
Organization- Tesla is being engaged in providing efficient training to their employees which has helped them in enhancing performance of them. It has supported company in increasing their efficiency. It has also helped them in gaining competitive advantage. They have also made use of total quality management which has supported them in enhancing quality of the products and goods supplied by them. This has supported firm in growing. (Lieder and et.al., 2017)
Tesla takes strategic measures to address the challenges which are competitive and maintain their profitability with the help of porter's model of five force analysis on the global level so that they can take out measures which affect the automotive industry. It is used to analyze the external forces of the market and helps the company figure out the impact and measures of any situation. Tesla is one of the biggest segment leaders in the electric car market and they use this model effectively as they face competition and rivalry from many companies such as companies like Honda Motors Company, Ford Motors Company, Toyota Motor Company, Nissan Motor Company, Volkswagen, BMW etc. Tesla provides many things related to electric cars such as solar panels, batteries, electric automobiles.(Amran and et.al., 2016)
Competitive Rivalry of Tesla
The market in which Tesla operates is highly competitive. With the help of five force analysis model company outlines the fact that from where they can extract the energy and take out solutions in the automotive industry. Tesla faces strong competitive rivalry such as small number of companies which is a weak force, highly aggressive companies which is a strong force and low switching costs which is also a strong force. (Moseley, 2017)
There are not too many firms which operate on a small scale in the automotive industry. But this analysis limits the competition from other companies on Tesla. Still these firms are aggressive and give tough competition to their products as they bring innovation and ways to promote their products. Companies who operate on a large scale conducts aggressive campaigns of marketing. The 4 Ps of marketing mix which Tesla follows and meets the level of aggressiveness as other companies which strengthen the effects of competitors who are against the company. It also helps in impeding the customers and shift them to buy the cars from other companies as cost of switching is low which also leads to increase in competition. This aspect of this model helps the company sets the priority against their competitors and helps the industry of automobiles figure out the solutions.
Bargaining Power of Suppliers
Tesla manufactures solar panels, batteries for the development of the industry they operate in which also influence the customers. The revenue which is generated from sales of the company is a direct factor. The factors which are external to the company intensifies it so that forces can be kept moderate of the bargaining powers of customers who are specifically related to the company. As the cost of switching to other brands is low it reduces the barriers of shifting for the customers to move to other companies. This factor imposes a force strongly which is against the company and which affects other companies too. Still the factor of availability of substitutes is moderate in several cases which limits the bargaining power of the customers of Tesla. For instance, customers who live in suburban areas have access to public transportation which is limited which forces the customers to derive the urge of buying their own car. If the volume of sales is low, then the influence of Tesla is reduced on the customers. Thus this tells that this aspect states that bargaining power of buyers of Tesla is moderate and the priority is managed on a secondary basis. (Higgins, Omer and Phillips, 2015)
Bargaining Power of Suppliers
Business of Tesla depends on the reliability of Tesla. This aspect helps the company to know the suppliers and how they shape the industry by getting the resources and materials available for firms. The intensity of this aspect is also moderate to external factors. Suppliers of Tesla have low level of forward integration. Suppliers have limited control in distributing and selling the products. Some of the suppliers are in third party contracts and they use the help of them to sell the materials to Tesla whereas other suppliers directly make the transaction with companies. Most of these suppliers are sized moderately which gives them limited influence and access in this industry. Another factor which concerns is that level of supply is moderate. This also affects Tesla but on a small level. (Bentley-Goode, Newton and Thompson, 2017)
Threat of Substitutes
Many types of threat are faced by Tesla from the substitutes available in the market. Competition is enabled and enhanced by low price of switching cost which also enables the substitutes which attracts the customers such as public transportation. Strong force is imposed by the external factor in this aspect. But on the bright side the availability of substitutes is moderate which limits the influence of suppliers. For instance, customer has many customers don't have many options in the market and some of them don't satisfy the customers practical need due to their performance. Public transportation does not give a feeling of pride as a car of their own. This condition and situation limits the factor of substitutes for Tesla.
Threat of New Entrants
The firms which are new in the market is known as new entrants which impacts the environment in industry and performance of the companies such as Tesla is determined. This aspect of this model gives a threat to the company with a weak force. As it is difficult to compete with Tesla because developing a brand at high level requires a lot of money which is difficult for a new company and to compete with Elon Musk is a whole different level. It is difficult for new companies to match the goodwill of old companies which is also highlighted in the strengths of SWOT analysis. This aspect is entry barrier in this model. Operating in the automobile industry require a large sum of money which brings difficulty for new firms. To add the companies who are already existing in the market enjoys the benefit of increasing economies of scale, which the new companies can only achieve by increasing their production and selling more of their cars. This aspect is a minor threat for Tesla. (Olson and et.al., 2018)
Mission of Tesla is to make the transport of the world sustainable to accelerate the transition of world. After 2015 Elon Musk came and he changed the mission from sustainable transport to sustainable energy.
Vision of Tesla is to create the most compelling car company of the 21stcentury by driving the world’s transition to electric vehicles.
Objective - To increase the sale of new product by 20% till the end of year 2020
To enhance consumer experience by 10% in upcoming 6 months
To increase profitability by 20% till the end of year 2021. (Thompson, Strickland and Gamble, 2015)
Ansoff Matrix of Tesla-
This strategy states that selling of existing products to existing markets. Tesla usually use this strategy extensively. Focus of the company is selling models particularly their Model X, Model 3 and Model S their electric vehicles. It also includes the storage of energy products such as solar panels, racking, inverters, powerwall 2 and powerpack 2 and devices for monitoring in the US and 29 more countries.
When the company sells new products in existing markets. Tesla often engages in this strategy. This is mainly because of the high cost in developing the vehicles which are electric and storage of power sectors. Currently they are working on developing the trucks and semi trucks to make it electric with storage of products.
This strategy is concerned with finding new markets for existing products. As Tesla wants to enter in various markets. One of their main approach is to making way for Coming to India as the chief financial officer of Tesla Deepak Ahuja is an Indian and is recently in talk with the CEO of the company Elon Musk. He suggested that coming to India will be really beneficial for the company because by 2020 the automobile market of India will become the 3rdbiggest market in the world. (Akter and et.al., 2016)
In this strategy business develops new products for new markets. Tesla has been using this strategy for many past years. History of the company was it started in 2003 as electric vehicle manufacturer then changed their name to Tesla and further they bought a solar company in 2016 which was named as Solar City so that they can enter into the market of storage sector. Now the company is looking to diversify into more operations but only after recovering themselves from the financial crisis.
Marketing Strategy of Tesla
Products of Tesla
It helps in identifying the company that how much their output is as in how much products they have sold to their target customers. Tesla deals in automobiles, components of electric vehicles, storage of energy, batteries, solar panels. Their products are profitable because they give them the feeling of value for money. In this variable company uses the product development so that they can fulfill their objectives. The company is known for making electric cars with high range of efficiency.
Company uses promotional tools such as viral marketing, personal selling, public relations, sales promotions, direct marketing. They depend mostly on the aspect of viral marketing and it has been the factor which has given them the biggest contribution in promoting the products to their target customers. Programs such as these improve the perception of the consumers and the company. On the other hand, these tools also includes discounts for their products by using referral codes. Sometimes Tesla use direct marketing such as selling products like batteries to other firms. This element states that Viral marketing is their most effective tool of promoting the brand. (Johnson, 2016)
From the above studies it has been concluded that this report gives a brief description and analysis of Tesla with the knowledge of where the company has the potential to grow, where they can improve and where they have opportunities to expand their business and diversify into another product line. Tesla is known for their innovation and launching cars which are fully electric with features such as cars with autonomous driving. It has been cleared by this research that the company is bringing futuristic cars in the current market. Though the cars they offer are slightly expensive than others but they are worth every penny.
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