Introduction
The strength of the strategies used by a firm’s administration determines its performance levels. Nevertheless, corporate strategies could frequently be modified to adjust more effectively to developments in the company’s fiscal and environmental circumstances. Strong corporate systems typically do not produce corporate competitiveness during worldwide economic downturns (Danso et al., 2019). Due to this, the study aims to highlight Tesla’s operational expertise and investors’ goals by presenting the organisation’s overall strategic change. It outlines how well both internal and external surroundings impact the company’s strategy, in addition to providing strategic choices and recommendations. Moreover, an action plan for implementing the company’s strategic options is provided at the end.
Strategic Audit
The strategic audit is an essential instrument for determining how effectively the company has worked in relation to its objectives. It really is a crucial tool to evaluate the successes and flaws in addition to helping reevaluate current objectives (Reshetko et al., 2020). The three primary environmental layers of Tesla will be evaluated in the following section as the foundation for strategically designing the required changes.
Macro-Environmental Analysis (PEST)
Political
Businesses can benefit from a variety of political opportunities within the United States. The US also engages in open trade discussions and partnerships for technological advancement with several other countries. As a result, it serves as a definite advantage for automobile manufacturers like Tesla (Grid, 2022). Using governmental subsidies, Tesla does have the chance to improve its economic health. Additionally, Tesla’s general positioning advantage and aggressive expansion tactics, which encompass brand recognition, are supported by a distant or external context: political stability in important countries.
Economical
Tesla has been able to get involved in the creation of the company’s own battery packs because affordable battery packs enhance their functionality. On a broader scale, Tesla’s unique offering has been enabled to become increasingly obtainable and affordable, as well as expected to be less expensive and more effective. The global financial system is also related to the growing popularity of electric automobiles (Teece, 2018). Therefore, the cheaper the manufacturing costs, which then, in turn, allows Tesla’s electric motors more affordable for the general populace, the greater the consumer base supports them.
Sociological
Tesla’s first objective is to make electric vehicles because around 15-20 per cent of people seek vehicles with superior performance and absolute reliability (Ahmad and Khan, 2019). The option of purchasing an electric automobile is intriguing, particularly for those who are concerned with environmental sustainability. Aside from using less petroleum than a conventional automobile, electric cars are also thought to be less expensive to operate over time. Hence, the demand for green energy and also the rising acceptance of low-carbon habits present growth prospects for Tesla (Earl et al., 2018). The standard of living of even possessing an electric automobile seems to be another consideration because individuals might be appraised by the kind of automobile they use.
Technological
Technology’s rapid advancements could be viewed as either an advantage or a risk for Tesla. The quick degradation of the current innovations constitutes a danger to the corporation, but on the one hand, the increasing percentage offers the opportunity to advance the innovations of its offerings. Because of how quickly individuals are developing, the latest equipment or tools could be outdated. Additionally, Tesla is setting the bar for how robotics and machine learning will be integrated into cars in the future (Calabrese, 2016). As a result, there seems to be potential for development due to the growing automated processes within their company operations.
Micro-Environmental Analysis
SWOT Assessment
| Strengths
● Tesla appears to have emerged as a worldwide behemoth in the EV industry. ● The company’s CEO, Elon Musk, is generally recognised as a transformational leader who inspires his staff to create cutting-edge innovations (Teece, 2018). ● Tesla’s revenues are also rising consistently each and every year. |
Weaknesses
● Tesla struggles with its poor market visibility. ● Tesla’s shortcoming prohibits the corporation from swiftly entering new markets: limited access to cutting-edge resources (Earl et al., 2018). ● Tesla is unable to expand its client group and market dominance due to high costs. |
| Opportunities
● The corporation can enhance its earnings by starting new Asia-based operations. ● Tesla has the potential to extend its distribution network to enable the growth of its manufacturing and distribution activities across the globe (Ahmad and Khan, 2019). ● The corporation must produce more rechargeable batteries on its own and increase its solar energy expenditures. |
Threats
● The increasing competition in the automotive industry would be difficult for Tesla to overcome (Jiang, 2022). ● Dealership rules are another risk that the corporation must cope with. ● Lithium, a component utilised in electric cars, has a volatile and constantly rising price. |
Table 1. SWOT Analysis
(Source: Created by Author)
VRIO Analysis
The most valuable asset for Tesla is its reputation as a premium business. It is quite uncommon for a business to possess a portfolio that enables them to command a hefty price tag for every one of its items (Teece, 2018). Tesla seems to have been successful in achieving this. It creates a severe threat to their rivals and a challenge given that they are unable to duplicate this. Tesla aimed to reduce emissions while increasing vehicle reliability. Tesla clearly meets the zero-emission requirement, and similarly could be attributed to the rarity factor in regards to Tesla’s capabilities and resources with its electric motor variants (Earl et al., 2018). The corporation insisted on maintaining the good name it had worked so hard to establish by refusing to sacrifice effectiveness in an attempt to reduce pollution. Tesla has continuously prioritised advancement. The corporation’s efficient features were created to guarantee a reduction in emissions, enabling them to maintain a competitive advantage over time. Tesla’s battery distribution technology is a key component of its competitiveness because its power supplies are usually preferable to those offered by its rivals (Teece, 2018). Tesla had innovatively structured, valuable, uncommon, and distinctive assets that provided them with a continuous edge over its competitors.
Industrial Analysis (Porter’s Five Forces)
Competitive Rivalry (Strong)
Tesla faces intense competition in the marketplace. Several major companies, such as Ford Motors, Audi, Volkswagen, and Mercedes Benz, among others, are active in the electric vehicle market (Jiang, 2022). Due to this external factor, companies like Tesla are not as negatively impacted by competitors. Additionally, these companies frequently sell their products by innovating quickly and successfully.
Buyer’s Bargaining Power (Medium)
Tesla’s revenue from sale prices is strongly impacted by the number of customers the company serves. Lower switching costs for Tesla customers make it easier for them to purchase cars from other manufacturers. However, the availability of substitutes is frequently quite constrained, which weakens buyers’ negotiating position with Tesla.
Supplier’s Bargaining Power (Strong)
For Tesla’s business to run smoothly, suppliers must be dependable. The level of advanced connection with the network of suppliers is modest. As an illustration, while some suppliers openly provide Tesla materials, others do this via distributors (Teece, 2018). Moreover, most of these providers are conducting business as usual, which restricts their capacity to meaningfully modify the ecology of the automotive industry. Because Tesla suffers when a supplier seems unable to supply products and materials, suppliers possess significant negotiating power.
Substitute Threats (Medium)
The ecological effects of alternatives in the automotive and electrical service sectors have an impact on Tesla. As a result, the influence of suppliers in this area is constrained by the restricted number of choices. For example, there are few available options to customers in the marketplace. Many rivals only perform relatively well in this area to satisfy clients’ genuine needs.
New Market Entrance (Weak)
Due to the high cost of maintaining a positive brand reputation, it is extremely difficult to remain competitive against Tesla’s business. For example, the company’s corporate reputation, which is also one of its assets, is difficult for new opponents to adopt (Jiang, 2022). Consequently, it could be claimed that only established automakers with substantial assets at their disposal could take an active role in this industry.
Strategic Formulation
Competitive Strategy
Any business should strategise how it would interact with its rivals. Establishing a unique position within the industry and even in the hearts of its customers will offer the corporation a strategic advantage over rivals (Reshetko et al., 2020). In this situation, the business must understand the best strategy to use to differentiate its goods from the rival companies. Nevertheless, Tesla could decide to use a differentiation focus approach in this circumstance. The corporation can highlight the distinctiveness of its offerings and concentrate on fast technology adoption inside the high-end electric car industry by using the differentiation focus strategy (Lugtu Jr, 2019). Meanwhile, the corporation needs to know if they are focusing on the overall customer marketplace or possibly a specific market group.
Options for Strategic Transformation
Strategies could be connected to domains like product development and diversification after using the Ansoff Matrix for Tesla. Tesla’s aggressive growth plan may include product development. By using this robust method, the business can expand by creating new items that lead to increased sales (An, Chen and Luo, 2022). This approach can be used by Tesla to create new goods that use cutting-edge technology with no negative influence on the ecosystem. For instance, the business might supply solar panels or manufacture unique battery packs for electric cars. Additionally, a diversification plan can assist Tesla in expanding by launching new businesses (Lugtu Jr, 2019). Hence, Tesla could produce different electric vehicles like motorbikes and bicycles through diversification to encourage more individuals to utilise electric automobiles. Consumers frequently like using this mode of transportation for local travel and short trips (An, Chen and Luo, 2022). Most importantly, as electric bikes and bicycles seem to be very widespread in Asian nations, it may be essential to launch these items in the Asian marketplace.
Growth Factors
Tesla could create new product revenue sources by producing solar panels or innovative battery chargers for hybrid vehicles. By using industry study to devise a practical strategy for marketing goods, product development could help a corporation’s business prosper (Reshetko et al., 2020). The techniques and methods Tesla would use all across the product development cycle must be included in the overall plan. Also, a diversification strategy could allow Tesla to promote its products like electric bikes and bicycles to create growth opportunities in the Asian continent. In nations like India, there seems to be a trend in consumer preferences toward environmental protection, providing Tesla with the possibility to produce sustainable innovations (Freyssenet, 2016). All electric automobiles would be allowed to use the charging stations; thus, Tesla could build its own network of stations.
Examining the Potential Strategic Options (SAF Framework)
| Suitability | Acceptability | Feasibility | |
| Product Development | The times are changing quickly, making it suitable for Tesla to provide solar electricity in an effort to improve a secure atmosphere. | Incorporating solar energy for electric vehicles can be an effective strategy for Tesla. Since modern people are more focused towards environmental sustainability, Tesla’s this endeavour will be acceptable to people. | The partnership between Tesla and SolarCity would succeed because it has the necessary workforce, efficiency, and stakeholder involvement. |
| Diversification | In the upcoming years, electric cars will become broadly common. Hence, the creation of electric bikes and motorcycles is a good or even rational decision with respect to the suitability requirement. | Since people prefer motorbikes and bicycles for short trips and because sustainability issues are being raised, electric motors will become the ideal choice. | If the plan is carried out correctly, it should also be effective. Tesla has substantial capabilities that could be applied to the creation of a unique kind of transportation. |
Table 2: SAF Framework Analysis
(Source: Created by Author)
After the assessment using the SAF model, it can be proposed that Tesla concentrates on these two approaches to boost its prospective development and progress. The approaches have some obstacles; however, if the approaches are used correctly, they could be effectively overcome.
Strategic Recommendations
For Tesla to effectively carry out their product development and diversification objectives, some suggestions are presented.
Targeting Broader Market
Tesla must enhance its approach to product development. Their strategy of developing an electric motorcycle could do remarkable things for expanding their audience and providing them with a competitive edge (Ahmad and Khan, 2019).
Effective Pricing Strategy
The company must manage its pricing strategies for two-wheelers in an effective manner. They should expand their market by reducing the cost of their scooter, which will assist them in staying competitive.
Overcoming Production Challenges
Tesla needs to overcome all of the production obstacles. They could have a lot of issues, and their credibility could suffer (Earl et al., 2018).
Conclusion
As a result of the analysis above, it is clear that Tesla is known throughout the world for its environmentally friendly practices. Nevertheless, the company needs to start working on developing products and diversifying its business model in order to take advantage of growth prospects and expand internationally.
References
Freyssenet, M., (2016). The Second Automotive Revolution Is Under Way: Scenarios in Confrontation. The Greening of the Automotive Industry, p.304. Accessed from: http://freyssenet.com/files/The%20second%20automobile%20revolution%20is%20underway.%20Scenarios%20in%20confrontation.pdf
Calabrese, G., (2016). Innovative Design and Sustainable Development in the Automotive Industry. The Greening of the Automotive Industry, p.13. Accessed from: https://link.springer.com/chapter/10.1057/9781137018908_2
Ahmad, S. and Khan, M., (2019). Tesla: Disruptor or Sustaining Innovator. Journal of Case Research, 10(1). Accessed from: https://xim.edu.in/jcr/cases/Case02-June2019.pdf
Kim, H., 2020. Analysis of How Tesla Creates Core Innovation Capability. International Journal of Business and Management, 15(6), pp.42-61. Accessed from: https://pdfs.semanticscholar.org/1424/81e9a7f04faa376cad9ea5cc583a97e35742.pdf
Reshetko, N., Vakulenko, S., Kakhrimanova, D., Belozerov, V. and Gašparík, J., (2020). Analysis of the electric vehicle market and the company’s competitive development strategy on it (on the example of “Faraday Future”). In MATEC Web of Conferences (Vol. 329, p. 01016). EDP Sciences. Accessed from:
Accessed from: https://www.matec-conferences.org/articles/matecconf/pdf/2020/25/matecconf_icmtmte2020_01016.pdf
Teece, DJ, (2018). Tesla and the reshaping of the auto industry. Management and Organization Review, 14(3), pp.501-512. Accessed from: https://www.cambridge.org/core/journals/management-and-organization-review/article/tesla-and-the-reshaping-of-the-auto-industry/5E551257839D03D5E430F61CB93AFA62
Earl, T., Mathieu, L., Cornelis, S., Kenny, S., Ambel, C.C. and Nix, J., (2018, May). Analysis of long haul battery electric trucks in EU. In Commercial Vehicle Workshop, Graz. Accessed from: https://www.transportenvironment.org/wp-content/uploads/2021/07/20180725_T&E_Battery_Electric_Trucks_EU_FINAL.pdf
Jiang, T., (2022, March). A Business Model to Analyse the Tesla Based on SWOT Analysis and POCD. In 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022) (pp. 2896-2899). Atlantis Press. Accessed from: https://www.atlantis-press.com/article/125971646.pdf
Danso, A., Adomako, S., Amankwah‐Amoah, J., Owusu‐Agyei, S. and Konadu, R., (2019). Environmental sustainability orientation, competitive strategy and financial performance. Business Strategy and the Environment, 28(5), pp.885-895. Accessed from: https://bradscholars.brad.ac.uk/bitstream/handle/10454/16791/Adomako_BSEJ.pdf?sequence=1&isAllowed=y
Lugtu Jr, R.C., (2019). Tesla: Testing a Business Model at its (R) Evolutionary Best (Doctoral dissertation, DE LA SALLE UNIVERSITY-MANILA). Accessed from: https://www.academia.edu/download/58423192/Case_3-_Tesla.pdf
An, J., Chen, Z. and Luo, J., (2022, July). Whether Chinese New Energy Vehicle Can Beat Tesla in a Foreseeable Future. In 2022 2nd International Conference on Enterprise Management and Economic Development (ICEMED 2022) (pp. 1175-1180). Atlantis Press. Accessed from: https://www.atlantis-press.com/article/125975412.pdf
Grid, (2022). A Grid analysis of Musk’s companies shows more than $7 billion in government contracts alone. Available at: https://www.grid.news/story/technology/2022/04/30/elon-musk-hates-the-government-his-companies-love-it/
write