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Tesla’s Strategic Management Review
In this age of development and globalization, organisations require proper analysis and formulation of abilities so that they could provide the employees with framework and strategies to improve the growth and development of the organisation (Lyyra and Koskinen 2016, p. 61). Through the implementation of strategic management, the organisations are able to develop abilities to meet their goals (Almuzel et al. 2018, p.191). However, in such conditions, it should be mentioned that prior to implementing the strategic management associated interventions, the resources available, the assessment of the internal and external processes and others could be understood (Jazouli, A. and Mitchell 2017, p. 10). Hence, this provides a framework for the population so that using these strategies; the organisation could develop its long term strategies and could help each other to achieve the goals. Perkins and Murmann (2018, p. 475) also add to it by saying that application of strategic management helps the organisations to fairly distribute the resources and help each of the team member to reach its organisation development associated goals.
The primary aim of this paper would be to analyse the strategic management of the Tesla organisation. Further, in the process, it will discuss different aspects such as the focal organisation analysis, critical analysis of the business environment of the process, industry and competitor analysis, and Future trends and key drivers.
Focal organisation analysis
Strength
- Branding: technological progression has always been considered as the brand of this organisation and this brand recognition is the biggest strength of this organization. As per the effective brand with their innovative ideation has helped them to earn a worldwide buzz for the organisation and it is beneficial for everyone in this organization.
- Product and technological success: the cars developed by this organisation are sustainable and are proven to have effective and high performances. The organisation has invested primarily in the research and development section so that new and developed technologies could be included in these products (Cheong, T., Song, S.H. and Hu, 2016, p. 123).
Weaknesses
- Increasing cost for the research and development units: while discussing the weaknesses of this organisation the revenue generated should be discussed. As the organization did not earn the proper amount of revenue due to its high investment in its Research and Development unit. As perMacDuffie (2018, p. 482), this organisation spends 14% of its revenue in these units so that they could develop cost-effective batteries.
- Expensive products: the over price of products limits the consumer base of this organisation and hence, this is one of the primary weakness for the entire organisation. As per Cheong, T., Song, S.H. and Hu (2016, p. 123) majority of people are unable to buy their products due to the high price and creates an obstacle for the growth of this company.
Opportunities
Increasing and sustainable market trends: despite the limited and restricted consumer base, this organisation has observed a proper up and high market trend in recent years and this creases a room for opportunities for the growth and development of this organisation. The new and developing products of this organisation promise to be green, environmentally friendly and budget-friendly to the middle-class families.
Ability to expand internationally: the organisation has developed its base in the western market and now through their expansion strategies, is not ready to expand in Asia. The organisation has planned to use the inexpensive labour costs so that they could develop products depending upon their consumer needs in the Asian market (Teece 2018, p. 123).
Resources and capabilities: the organisation has spread its base in multiple sectors due to which they have become unstoppable and irreplaceable. One of the best resources of this organisation is its brilliant engineers that have developed this organisation as one of the most technologically advanced organisation. Secondly, after acquiring the Solar City, the organisation now has developed solar panels for its products, defining its capabilities in future (Akakpo et al. 2019).
Critical analysis of the business environment
As per Välikangas et al. (2018, p. 470), differentiation should be considered as the primary business strategy of this organisation as due to their high production rates, high operation costs and consumer processes have affected the profit ratios of this organisation. Despite this, the organisation is observing a steady and sustainable growth due to its differentiate abilities. The organisation focuses upon working their products differentiate from others and hence, despite focusing upon the low-cost processes, Tesla invests upon newer technologies so that they could help the organisations through the implementation of innovation. In this aspect, it should be mentioned that the organisation focuses upon developing and implementing sustainable growth so that they could compete with their competitors and implement success for its technological performances in their market (Teece 2018, p. 123).
Besides this, the organisation’s abilities to implement its innovation and technological processes in the research and development section should be discussed effectively so that they could develop new and sustainable abilities (MacDuffie2018, p. 482). This organisation has dedicated completely its resources and revenues in the growth and development of new and efficient technologies. Due to this prospect, they and their products could be distinguished from others. Despite having higher revenue rate than other automobile organisations, Tesla spends 14% of its revenue in the research and development and hence, this organisation is a major cause of buzz among the automotive consumers that thrive for development and innovation in products (Teece 2018, p. 123).
The functional strategy should also be discussed in this aspect. As per MacDuffie (2018, p. 482), Tesla has a stable commitment towards its value chain and production and as per Teece (2018, p. 122), it is the dealership and abilities that help the organisation to understand that their products are their primary branding tools. Therefore, despite all these, their primary focus should be upon their product, its quality and sustainability. As per Lyyra and Koskinen(2016, p. 61), due to the sustainability and urge for development, the organisation has also trained its employees so that they could also completely focus upon the abilities of the organisation. Further, the organisation has also developed abilities so that their focus for the environment could be understood and through the development of environmental consciousness among its employees as well as consumer base. Therefore, the development of these, the organisation has developed abilities so that they could connect to every aspect in these processes (Teece 2018, p. 123).
Industry analysis
While discussing the type of industry and analysing its functions, the organisation and its existing rivalry with others should be discussed effectively. Tesla organisation works in a highly competitive and as an automotive organisation due to which this organisation holds the most significant place in the global market place (Teece 2018, p. 123). There are multiple rivals for this organisation and as per the business trends, General Motors, Ford Motor Company, and Fiat Chrysler are the organisations that are associated with the critical competition with Tesla in global market place. However, depending upon the new innovations and technologies, this organisation does not have any rival. However, with the development of abilities and critical market complications, it should be mentioned that with the development of technological aspects and research and development, other organisations would soon develop new and technologically developed products. This would eventually hamper the loyal consumer base as those organisations would sell their products at less price. As per Lyyra and Koskinen (2016, p. 61), these models would directly compete with the new and technologically developed products in the market. One of the primary reason for this situation would be limited number of high-class consumers associated with Tesla organisation and high price of its products. All other organisations are focusing upon developing cheaper and developed version of products, electrical vehicles and others due to which majority of the population would be able to afford those products and they would be able to provide effective service to its consumers. Besides this price related rivalry, the organisation is about to face complications with critical market competition associated with luxury car brands as well such as BMW, Mercedes-Benz, Maserati, Audi, Porsche, and Jaguar (Teece 2018, p. 123). These products are involved in the increased competition and hence, it has become important for this organisation to implement critical aspect and focus upon implement strategies so that every product of this organisation could work effectively for the development of products that would be affordable and appealing to every individual associated with it. Besides this, competition could also be present due to the presence of critical health complications associated with the car parts collected from the processes due to which majority of the organisations develops parts that could be used within the products developed by Tesla organisation. Hence, this competition is associated with the usage of care parts that could be used within the process of making innovative cars. Therefore, these are the complication that arises after the analysis of market in the process (Lyyra and Koskinen 2-16, p. 61).
Competitor analysis
The industry has a wide range of market competitors ranging from Luxury Competitors to American Automotive competitors. The analysis for the luxury competitors Bavarian Motor Works and Mercedes Benz is given below (Kauerhof 2017, P.80):
BMW (Bavarian Motor Works)
- Strength: Excellent quality, performance, strong brand value.
- Weakness: Poor in associated partnerships and operational cost-efficiency.
- Capabilities and Competencies: Versatile, strong financial hold and innovative in terms of technology.
- Business Strategy: Market segmentation and differentiation.
Mercedes Benz
- Strength: Excellent performance, quality and strong brand value.
- Weakness: Costly maintenance.
- Capabilities and Competencies: Financially stable and excellent engineering and automobile technology.
- Business Strategy: Market segmentation and differentiation.
The above mentioned BMW and Mercedes Benz are two distinct luxury brands that are consistent competitors of TESLA motors. In the coming years, BMW plans a launch of 25 electronic vehicles with 12 of them being completely electronic and possessing a useable range till 435 miles (Kancherla and Daim 2018, P.348). Mercedes Benz also plans to spend $ 1 billion to commence the production of electronic vehicles and introduce a total of 10 novel electronic vehicles (Kancherla and Daim 2018, P.350,351). At the same time, Volvo which is a mass-market brand also plans to launch hybrid and fully electronic vehicles in the year 2019 (Mortiz et al. 2015, P. 88). Considering the innovative measures being undertaken by luxury brands, it can be said that Tesla Motors is vulnerable and is going to witness strong market challenges.
American Automotive Competitors: Ford Motor Company and General Motors.
Ford Motor Company
- Strength: Stable U.S market position, excellent design and precision.
- Weakness: lack of innovation.
- Capabilities and Competencies: Manufacturing and mass production.
- Business Strategy: Cost leadership.
General Motors
- Strength: Multiple collaboration with Chinese companies and strong market positioning within the U.S.
- Weakness: Dependence majorly on the U.S market for revenue.
- Capabilities and Competencies: Global supply-management and innovative strategic supplier engagement program.
- Business Strategy: Poor cost strategy
The two companies General Motors and Ford Motor Company have invested heavily on artificial intelligence, fostering improvement in car design and autonomous car designs which can pose a threat to TESLA motors.
Current trends and key drivers
The luxury brands BMW, Mercedes Benz as well as the American Automotive Competitors have levied efforts in the field of technology so as to improve the car design and transition the traditional car designs into semi or completely electronic operated car designs (Bilbeisi and Kesse, 2017). It is worth noting in this context that For Motor Company has recently announced about the investment of $1 billion for fostering innovation and developing the technology of autonomous driving (Ayala 2016, P.77). The strong market competitors of TESLA motors are integrating effort to make use of advanced AI to launch the concept of ‘Self-driving’ cars. Therefore, it can be anticipated that the current trend in the automobile industry would mostly be reliant upon the development of artificial intelligence and for the same TESLA motors would need to invest in rigorous research and development for the purpose of introducing innovation aligned to the technology of AI. TESLA motors are known for its experienced and skilled manpower and therefore with the employment of skills and expertise of the employees, the enterprise would be able to evolve and integrate innovation so as to produce cars that are of superior quality and unmatched in terms of specifications (Gaya Ferra and Tresserras 2016, P.67). This would help TESLA motors to maintain an edge over the stable market competitors.
Future trends and key drivers
At present, TESLA motors remain unmatched within the automobile industry in terms of specifications and performance in the 21st century. In this context, it is worth noting that the introduction of electronic cars based on the lithium ions has helped to enhance the brand value of TESLA motors against all other market competitors. At present, the market position can be considered stable and through the market size and large infrastructure the company is also provided with a number of strategic opportunities as well as options that can help to enhance the competence of the company (Stringham et al. 2015, P. 88). Factors such as sales as well as supply chain expansion, introduction of budget-friendly models, introduction of mobility services and creation of new market segments and business expansion can help to improve the brand image and sustainability of the company (Mosey and Kirkham 2017, P. 27). In this regard, it is important to acknowledge that the mentioned aspects must be intricately evaluated and taken into consideration such that brand image can be enhanced. It is also essential to consider the risks involved such that appropriate mitigation strategies can be developed so as to ensure that the brand image and reputation of the organization is not impacted and that the organization develops manifold to acquire stability within the International market.
Key factors and opportunities for Tesla
This section would present a brief discussion on the mentioned factors where TESLA motors could work so as to expand the business and acquire market stability. TESLA motors have an opportunity to improve sales within the regions of Asia, Europe and South America. A number of regions within the mentioned continents are unexplored or underexplored and offer an exhaustive opportunity for business expansion. There is a huge opportunity for TESLA motors to make use of improved automobile engineering and technology such as solar cells and other means of sustainable technology so as to expand business within the untapped markets of the mentioned regions (Wen 2016, P. 67). Therefore, expanding the business to the mentioned areas can help the company to grow multi-fold which would add to the revenue of the company. Demographic studies mention that the maximum proportion of the world population includes, people who fall under the category of middle-class income. This means that the company can work on launching economically optimised models which would fit the demands of the people who belong to the lower or middle-class income category. Market segmentation and introduction of economically optimized car models would help TESLA motors to acquire market revenue, expand and diversify (Bilbeisi, K.M. and Kesse, 201. TESLA motors can also work on ride-sharing or mobility services which would potentially serve as a market innovation that would help to boost market revenue. The mobility service by TESLA would intend to serve as an inexpensive solution to customers wherein customers would be able to make use of luxury cars for sharing cab rides to office at an affordable price range. This innovation would not only ease commute route but at the same time would also help to control carbon emissions which would further boost the revenue of TESLA motors (Stringham et al. 2015, P.88). Another application-oriented initiative can be undertaken where the customer would be able to summon a TESLA car at the doorstep similar to that of UBER and commute via a luxury car at an affordable price range. In addition to this, TESLA motors also contain opportunities in the form of mergers, acquisitions and collaboration to expand market and boost the revenue of the company (Ivanov, Tsipoulanidisand Schönberger 2017). It can be expected that long term investment and innovative initiatives can help the brand acquire improved profitability and a larger customer base that would help to attain a stable market position within the international market.
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