Process of strategic planning
It is easy to start a business but it is not an easy task to make it successful. To maintain the strong position in the market, every company must learn the art of formulating, evaluating, and implementing the new strategies to keep the organization running. One of the fastest growing industries is Automobile industry in the market. There is the trend of hybrid cars and electric cars these days. Along with this, there is the requirement for electric vehicles provided by the Tesla Motors (CSR Hub, 2016). Tesla motors are the award winning company which was founded in 2003. Headquarter of the company is in Palo Alto, California. It is a famous American company which deals in the designing, manufacturing, and wholesaling electric cars and vehicle power train components. This report is focused on the strategy formulation of Tesla motors to improve the financial performance of the company (Zucchi, 2015).
Mission statement of the company can be considered as the function or commitment by which an organization wishes to meet the expectations of the stakeholders. The mission statement basically describes how the organizations are running their businesses, identify the range of products or services, identify the customers and serve the customers with theproducts and the services. The missions of Tesla Motors that inform strategic planning are:
- To provide safety cars to the customers,
- Accelerate the world’s transition to electric mobility, and
- Increase the affordable electric cars for all the consumers (MacKenzie, 2013).
Vision-
Vision statement of the company basically describes the overall outlook of the company for the future. It shows the growth potential advantage of the company to the investors and the stakeholders. The vision statement of Tesla Motors is:
- To be the most convincing car company in the 21stcentury, and
- To drive the transition of the world to electric vehicle (Muller, 2013).
Goals and objectives-
Goals and objectives are the important part of the business strategy of any company. Those are the specific results that a company wants to achieve in a specific period of time. Objectives can be considered as the stages to achieve the goals so, objectives can be proposed for the short-term plan which expresses more details. On the other hand, goals can be proposed for long-term plan which have general expression (Kachaner, Lindgardt & Michael, 2011). The goals and objectives of Tesla Motors are as follows:
Goals of the Tesla motors are very simple. The objective of the company is to make electric vehicles desirable, for the consumers. The concept of oil and gas will become very expensive in future so, electric motors will be in maximum demand (Miller, 2012).
Core competencies-
Core competencies are the important part of the company which makesthe company outstanding among the competitions. There can be various core competencies in a company such as skills, specific products, reputation and quality. Along with this, core competencies help the business to maintain the trust in the mind of customers and make the company famous in the market. The core competencies of Tesla Motors are simple application updates, personalization, quality products and R&D, open source technology and affordable prices (Hill, Jones & Schilling, 2014).
Strategic planning is the important process for the company by which the company can define the strategy for the future business. By the strategic planning, the company is able to make the decisions to allocate the resources to pursue the strategy. Strategic planning provides the guidelines to the company for implementing the strategy. There are some factors which must be considered by the company while formulating strategic planning (Schilling, 2010). Those factors are as follows:
Considered Factors in formulating strategic plan
The industry-
In case of strategic planning, it is important to evaluate overall industry. The past and potential growth, the market size, new market entrance, future threats and profitability must be considered while evaluating the industry (Clausen et al, 2012).
The competition-
It is essential to analyze the position of competitors in the market while creating strategic planning. A company cannot get achievement without identifying the nature of entrants in the market. The company should be able analyze the strengths and weaknesses of the competitors (Hitt et al, 2009).
Strengths and weaknesses-
SWOT analysis is important to formulate strategic planning for the company. In this, strengths and weaknesses of the company are the inner factors and the opportunities and threats are the outer factors of the company. The company must determine the internal strengths of the business and try to improve those strengths. Along with this, it is also important for the company to identify the weaknesses to reduce the risks (Olsen, 2012).
For Tesla Motors, there are two techniques which can be considered for developing strategic plans.
BCG growth share matrix:
There are four types of situations which are presented by the BCG matrix. Those four situations may be faced by the company during the business. According to the BCG matrix, Tesla would face four types of situations in the business process.
- Stars –this situation indicates high market share and high growth of the company. In this type of situations, company would need large amount of money to implement effective decision making process; company needs large amount to take decisions about sustaining growth and high share in the market.
- Cash cows-This situation specify low development of the company with high share in the market. In this type of condition, company may face low growth in the market during the business process. But at that time, the company will have high level of market share by which the company will be able to generate revenue.
- Dog-This situation indicates low growth of the company with the low share in the market. In this condition, there is the need to cut off the needless expenses by the company. If the product stops to generate profit for the company, then company should close the business of that product and should start a new one (Akpoyomare, Adeosun & Ganiyu, 2012).
- Question marks-This situation indicates the high growth of the company with the low market share. In this type of situation, risk is involved with the business as low market share is the cause of loss of the company. It also indicates newly made products in the market (Jobber & Ellis-Chadwick, 2013).
Advantage of BCG matrix-
BCG growth matrix helps the company to understand important factors for the business such as:
- When to invest in the business for the future growth,
- When to divest the earning from the market,
- When to focus and start a new business for the profit.
- It helps the company to analyze the current portfolio of the business, and
- It also helps the company to make decision about the future actions.
Disadvantage of BCG matrix-
Having many advantages, there are some disadvantages of this matrix. Those are as follows:
- This matrix avoids the synergies which affects the business in the market,
- It depends on the market share of the company but success of the company cannot be indicated by the market share,
- In this matrix, it is hard to obtain data about the market share and growth, and
- In this matrix, the term ‘market’ is not defined clearly.
SWOT analysis:
SWOT analysis is a crucial model to analyze and research the position and status of the business. So, companies implement the SWOT analysis for the business strategy to identify the strengths, weaknesses, opportunities and threats. By all these four factors, the company is able to create four strategies for the business i.e. strengths and opportunities, strengths and threats, Weakness and Opportunities and weaknesses and threats in the business (Eccles & Serafeim, 2013).
Advantage of SWOT analysis-
- Company will analyze their strengths and will be able to take advantage to improve and develop the brand image in the market.
- By the SWOT, company will understand the weakness which will be helpful for the company to avoid the risks in the market. Further, they can also improve the weak point for the future.
- By the SWOT analysis, company can identify the opportunities in the special moments so that it can be able to gain competitive advantage over the competitors in the market.
- By identifying the threats in the business, the company can adopt appropriate strategy tio deal with those threats in the business process.
Disadvantage of SWOT-
Having many advantages, there are some disadvantages also in the SWOT analysis. The disadvantages are as follows:
- SWOT analysis does not provide solution in some situations which is drawback of this,
- SWOT analysis provides many information to the organization but it is not necessary that all information are valuable for the organization,
- SWOT analysis can create many ideas for the organization but its nit helpful for the business to select the best.
Profit impact of market strategy:
This strategy assists the company to get competitive advantage in the market. Profit impact of market strategy provides evidence to the company to assist plan and actions. So, Tesla Motors would be capable implement policies and procedures with the effective business strategy. The PIMS strategy includes some facts i.e. nature of the business environment, production process structure, operating activities, strategic development, budget allocation, and business competitive position (Dyer & Bryce, 2014).
The appropriateness of alternative strategies relating to market entry, substantive growth, limited growth, or retrenchment is as follows:
Market entry:
The aim of the Tesla motors is to be the best car manufacturing company in the world. To achieve the goals, it is important for the company in the new market. For entering in new market, there are some factors which must be considered by Tesla motors:
- Organic growth- When a company wants to enter in the new market, it must understand to nature of that market. Under the organic growth, company can conduct development over its own organization, it is called organic growth.
- Merger- This is a significant process for entering in new market. By this process, two organizations can combine together and act like a single company. To capture the new market, Tesla motors also can merge itself with another company in international market.
- Strategic alliances- another important method which can be adopted by the company is strategic alliances. In this, two or more companies share their assets in the business to accomplish the goals of the business. That is called strategic alliances.
- Licensing-Licensing is the design by which a company allows other company to use the trademarks of parent company in replace of some fees. The parent company is called licensor and another company is called licensee. Tesla Motors can use licensing method to enter in the new market.
- Franchising-by using franchising method, parent company provides the trademark to the other company with many other facilities such as formula, strategy, maintenance cost etc. This also can be the best method for Tesla motors to enter in new market (Andrews & Johansen, 2013).
Effectiveness of techniques used in strategic business plan
Substantive growth:
Like entering in the new market, there are some factors that must be considered by Tesla motors for the growth and success in the market. Those factors are as follows:
- Diversification-Tesla motors can make diversification for its products for growth. When a company makes diversification in the product line it is called diversification. By doing diversification, Tesla can gain competitive advantage over the competitors. There are related and unrelated diversifications which can be adopted by Tesla motors (Harryson & Keller, 2014).
- Integration- There is two types of integration i.e. horizontal and vertical integration. In the horizontal integration, the companies are involved in the same age of production which is called horizontal integration. On the other hand, in the vertical integration companies involved in the different stage of production. Tesla Motors can use one of the integration for the growth (Collis &. Rukstad, 2008).
Limited growth:
The factors in the limited growth are as follows:
- Market Penetration- market penetration means penetrating the existing market. Tesla Motors can penetrate the market by increasing market share of its product or fostering new products by different strategies. For penetration, the company can use various strategies such as discount, advertising etc.
- Product development- It means creating, designing, and marketing brand new products by the company. Tesla Motors can develop the product according to the needs of the customers. It will also be helpful in increasing the revenue for the company.
- Market development- The Company can adopt this strategy. Under this strategy, company can offer existing products and services in the different market to the customers (Chen & Perez, 2015).
Retrenchment:
The factors under retrenchment are as follows:
- Turnaround-this strategy can be used by the company to convert an underperforming company to a profitable company. Tesla motors can use this strategy to increase the profit and financial performance in the market.
- Liquidation-This strategy can be taken by Tesla motors at the last stage of its life cycle. But that is the last stage and there will not be any need to adopt this strategy the Tesla motors (Mckeown, 2012).
The main aim of the Tesla Motors is to be the successful care manufacturing company in the market. To fulfill the objectives of the company, Tesla Motors should accept the market growth strategy. By this strategy, Tesla will be able to begin its production activities in various countries by providing electric cars as per the demand of the consumers. Along with this, Tesla can also join other companies and strategic alliances in the other countries by adopting this strategy. This strategy will also be helpful for the Tesla Motors to expand further strategies for increasing revenue in the market. Further, Tesla can adopt new product development strategy to differentiate the products from the competitors’ whole entering in new market (Lorenzen, 2006).
There is the requirement of a person in the strategy implementation who can manage over other personnel. The persona can be able to divide the work among the employees based on their function and stage of the company. The employees of the Tesla Motors are charged to execute the strategy so; they must have some roles and responsibilities. To implement the strategy successfully, the roles and responsibilities of those employees should be clear. Along with this, CEO of the Tesla Motors must have the responsibility to talk about the information related to the strategy to the employees in the company. He must also be responsible to guide the employees for strategic planning in the company (Allison & Kaye, 2005).
In case of strategic planning, the personnel of the Tesla Motors should have the responsibility to maintain proper record while implementing strategy in the company. It is very important for the strategic planning as it helps in avoiding the legal responsibilities. For maintaining legal and ethical standards in the company, person should also be responsible in the strategic management process. Further, proper monitoring is also required for successful strategy implementation in the company. Controlling and monitoring is crucial to take a periodic overview of the business activities. Monitoring is helpful to identify to proper and actual steps which must be taken by the employees to implement the strategy in the business. It also allows the company to take corrective actions if requires. Along with this, it also encourages the performance of the employees during the strategic planning (Mun, 2010).
For the strategy implementation, there are three types of resources required while implementing new strategy in the business of Tesla Motors. Those resources are financial resources, human resources and time and material resources.
Financial resources:
The meaning of financial resources is to maintain the financials of the company during the strategy implementations. It means how Tesla finances its strategy to make it more effective for its business. Finance of the strategy can be done by two ways i.e. debt or equity. Equity will be more preferable for the company as there is no interest bearing cost on principle.
New Strategy
Human resource:
To implement the strategy successfully, human resources must have to be considered by Tesla motors. Human resource is the important part to implement the strategy in business process as it will improve the performance of the company. For the Tesla motors, HR must have technical knowledge and skills of productivity for implementing the strategy (Thompson & Martin, 2005).
Time and material resource:
For implementing any strategy, there are the requirements of specific time limit. Along with this, there is the requirement of some substance also for executing the project. Tesla should use high capable equipments, skills, to accomplish the accepted growth strategy (Witcher & Chau, 2010).
SMART target can be considered as the targets and the goals which are set by the Tesla. The goals must be precise in nature attainable in time, assessable with the established criteria and must also be practical.
Significance of SMART goals:
- If the targets are not precise for the company i.e. the goals are not specified for the employees then all the efforts will be waste at that situation.
- If the set targets by the company are not assessable according to the set goals then it will not be probable to get success in the market.
- If Tesla Motors set the targets which are not achievable in the nature than company have to find out new ways to achieve the targets. They must set new targets which can be achievable.
- Each and every thing has a time limit. So, the set targets should have time and within that time, targets must be achieved by the Tesla (Wit & Meyer, 2005).
Conclusion
The main business aim of the Tesla Motors is to provide electric cars in the future. The company wants to be best car manufacturing company in the world. So, it is recommended that Tesla can develop its business operations in new countries. For this manner, more deep analysis must be essential. Tesla can use product development strategy for the target market for operating the business in the market. Effective execution of the business strategy depends upon the existing condition of target market. So, Tesla should have awareness of those conditions
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