SWOT Analysis of Tesla
Question:
Discuss about the Strategic Management Process In Context Of Tesla.
Strategic management is a vital part of the organization to gain competitive advantages in the business. In the context of energy storage organization battery backup is beneficial to store the energy. This allowing the organization in improving the sturdiness regarding the electrical grid, doing the reduction of the expenses relating to energy regarding businesses as well as residencies, and providing a backup regarding power supply. This study aims to discuss the strategic management process in context of Tesla. However, the SWOT analysis of Tesla has been addressed in this section. On the other hand, different strategies will be discussed in this section that have been taken by Tesla.
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S-Strength · Physical assets · Technological asset · Confidentiality of low expenditure |
W-Weakness · Difficulty in retaining profit · Low volume of manufacturing · Existence of limited fund |
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O-Opportunity · Business expansion in the global market · Collaborative operation with other organization · Maintenance of the environmental sustainability |
Threats · Entry of new organization in the automobile industry · Strong market competition · Changing market trend · Government regulation |
It can be stated that the company’s strength will be including the physical as well as technological assets like intellectual property as well as its factories. The organizational strength will also be including its increased confidentiality level, the organization’s low expenditure related to marketing as well as being considered as a distinctive manufacturer of electronic vehicle (Wheelen, 2017).
The company’s weaknesses will be associated with the difficulty in retaining the profit due to the expenses related with research and development that are reason for the losses to occur. Another weakness associated with the organization is its low volume of manufacturing. Moreover, the negative occurrences will be adversely impacting the organization’s business operations and another significant weakness associated with the organization is the existence of limited funds for introducing as well as launching new products within the market.
The opportunities relating to the organization is to do its business expansion in the global market since, the marketing of electric vehicles is in the stage of development. Moreover, there is the opportunity for the organization towards having a collaborative operation with the other organizations like Daimler as well as Toyota. Moreover, there also exists the scope for the organization in having the ability for fulfilling the policies of the environment since, the product electric vehicles are considered being friendly towards the environment.
The threats associated with Tesla Motors is stating that there is occurring the entry of new organizations in the automobile industry and these organizations are the reason for the rise in strong market competition. Another threat cited in this regard is that with the market getting developed, the new market research will be changing the present industrial trend. Moreover, the imposing of the rules as well as regulations by the government might be having an adverse impact upon the organization’s business operations (Wheelen, 2017).
Current Strategies of Tesla
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Internal and external environment |
Strength · Low threat of the substitutes · Physical and technological assets · Industry is in the developmental stage |
Weakness · Less economic sell due to low volume of production · Limited funding |
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Opportunity · Business expansion in the international market · Collaborative work with other organization · Environment friendly business |
SO strategies · Recruitment of the skilled employees · Innovation of new products |
WO opportunities · Increasing the production by adding new features in the manufacturing process · Partnership working to enhance the funding |
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Threat · Entry of new threat · Competitive rivalry is high |
ST strategy · Development of the competitive strategy to mitigate the threat of new rivalry |
WT strategy · Managing the financial resources to compete in the global market and resist the new rivalry |
In this regard, it could be stated that there should occur the evaluation of four current strategies regarding Tesla Motors. This will be including the business level strategy, diversification, international strategy as well as acquisition strategies.
In respect of the diversification strategy, it can stated that from the historical perspective of the organization, it has been focusing almost entirely upon the process of offering electric vehicles to the customers throughout the world. In recent years, however, there has occurred the organizational diversification of its offerings into somewhat adjacent sectors of business associated with the commitment of the organization to the use of electric energy by acquiring Solar City Corporation in late 2016 (Stead, 2013). With the help of the diversification strategy, Tesla Motors will be having a potential shift from a single-business organization to a dominant-business organization, till the time its storage of energy as well as solar roof components will be gaining acceptance within the market. There can be a noticeable observation of the motivation regarding Tesla motors to do the implementation of this specific strategy regarding diversification. First and foremost, the technologies such as Powerwall as well as Solar Roof will be sharing a functional economies relating to the opportunities associated with the EV operation of the organization (Stead, 2013). In respect of the Powerwall regarding Tesla motors, this functional economy of scope will be taking the structure of a shared activity, such as the aspect of producing the lithium battery technology regarding Tesla, which has been used for powering its electric vehicles. Since, the organization is already making a heavy investment regarding its production of these batteries at its Gigafactories, the diversification of Tesla into Powerwall technology will be standing out as a cost advantage source (Stead, 2013). Due to the fact that there occurs the marketing of Powerwall in respect of its present customers of electric vehicles and those who are not driving the Tesla EVs, the organization will be having the ability to do the diversification of its customer base while sharing majority of the similar activities related to value chain in respect of both the products, which includes various input activities as well as activities of production associated with the manufacturing of lithium battery, warehousing, and making distribution via its Gigafactories, as well as companion sales and strategies related with marketing. Moreover, the corporate diversification strategy of the organization in respect of solar roof offerings can be appropriately be characterized as sharing in respect of the core competency regarding the organization (Slack, 2015). Because of the technical expertise of the organization in storage of energy effectively, this move fits within one that is having an alignment in an adjacent manner with the strategic model of business regarding Tesla without falling into an outer-segment regarding a discrete activity (Rothaermel, 2015).
Diversification Strategy
In respect of the international strategies of Tesla Motors, it can be stated that organizations do the implementation of international strategies when they do the pursuing of opportunities relating to business that do the crossing of country borders. In similarity to every strategies of diversification, international strategies must do the exploitation of real economies of scope, which the external vendors are finding very expensive for exploiting on their own for being costly (Peppard, 2016). Five economies of scope that are considered to be potentially valuable regarding international strategies are firstly associated with the aspect of gaining accessibility in respect of new customers or an organization’s present products or services, secondly to gain accessibility in respect of low-cost production factors, thirdly doing the development of core competencies that are considered to be new, fourthly leveraging present core competencies in new processes as well as fifthly, doing the management of corporate risks (Morschett, 2015).
In respect of the acquisitions regarding Tesla Motors, in August 2016 it made the announcement of an agreement to do the purchase of SolarCity Corp, which is the provider of solar power systems. In May 2015, Tesla made the agreement for doing the purchasing of Riviera Tools that is making stamping die systems. The target organization would be considered as Tesla Tool & Die (Morden, 2016). By stating his view regarding organic growth, Elon Musk, the CEO of Tesla, told the investors that he is open to take into consideration the process of acquisition, provided they are serving the objective of doing the expedition regarding the production of Model 3, the mass-market electric car of the organization that is being prepared.
In respect of the business level strategies of Tesla Motors, it can be stated that the strategy of Tesla was based primarily upon the automation of vehicle manufacturing. Each robot is having single multi-jointed arms that did the performing upto four varied tasks, including the activity related to wielding, riveting, bonding as well as installing elements (Hill, 2014). The robots were having the ability to do the production of up to eighty-three percent vehicles every day. The decision of Musk to own as well as operate all the dealership on his own was considered being a strategic aspect that none of the organization has ever tried earlier (Gamble, 2014).
Strategic Issue 1: Lithium Price is likely to skyrocket – Tesla is having the expectation of spending huge amount of money regarding huge factory for battery. This might be considered being a sensible step, but it will not fully do the solving of the battery problem regarding Tesla (Frynas, 2015). If the organization is successful in doing the production of 500,000 cars, up from 35,000, they will be having the requirement of doubling the production of lithium ion batteries, and will be required doubling the amount of lithium mined out of the ground (Tesla.com, 2017).
Strategic Issue 2: Competitors will eventually be catching up – Tesla is still required dealing with the reality that it will not be dominating the sales of electric car forever. Organizations such as Honda, Toyota, Nissan, Ford all are making great efforts for entering into the business.
Strategic Issue 3: $30,000 is not “Mass-Market” – Tesla is having the thought process that it can do the selling of a more affordable, mass-market vehicle in the range of $30,000 to $40,000. This might be considered being a deal when compared to the Model S, but it is still a very costly vehicle (Tesla.com, 2017).
Conclusion
To conclude it can be stated that, while Tesla does the production of all its vehicles within North America, it did not stop its international strategy of serving the new segments of the market outside of the US. The international strategy of Tesla Motors is associated with the process of serving the new segments of the market, which is considered being a great scope of growth in respect of Tesla Motors.
References
Durand, R., Grant, R. M., & Madsen, T. L. (2017). The expanding domain of strategic management research and the quest for integration. Strategic Management Journal, 38(1), 4-16.
Eden, C., & Ackermann, F. (2013). Making strategy: The journey of strategic management. Sage.
Frynas, J. G., & Mellahi, K. (2015). Global strategic management. Oxford University Press, USA.
Gamble, J. E., & Thompson, A. A. (2014). Essentials of strategic management. Irwin Mcgraw-Hill.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.
Morden, T. (2016). Principles of strategic management. Routledge.
Morschett, D., Schramm-Klein, H., & Zentes, J. (2015). Strategic international management. Springer.
Peppard, J., & Ward, J. (2016). The strategic management of information systems: Building a digital strategy. John Wiley & Sons.
Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.
Slack, N. (2015). Operations strategy. John Wiley & Sons, Ltd.
Stead, J. G., & Stead, W. E. (2013). Sustainable strategic management. ME Sharpe.
Tesla.com (2017). Tesla .Retrieved 9 November 2017, from https://www.tesla.com/
Wheelen, T. L., & Hunger, J. D. (2017). Strategic management and business policy. pearson.
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