Introduction
Tesla is an American electric vehicle and clean energy company based in Palo Alto, California. The company was founded in 2003 by a group of engineers in Silicon Valley with the vision of creating the most compelling car company of the 21st century. Accelerating the world towards realization of sustainable energy is the firm’s mission. Elon Musk, the chairman and CEO of Tesla, is a driving force behind the company’s success. Under his leadership, Tesla has become the most valuable car company in the world, with a market capitalization of over US$185 billion (Naor, 2022). Tesla is also the leading seller of electric vehicles, with 367,820 units sold in 2019. The company’s main products are electric vehicles, solar energy systems, and batteries. Tesla’s electric vehicles include the Model S, Model X, Model 3, and Roadster.
The Model S is an electric luxury sedan, while the Model X is an electric SUV. The Model 3 is an electric sedan that is more affordable than the other two. The Roadster is an electric sports car. Solar energy systems from Tesla include solar panels, solar roofs, and Powerwall batteries. Tesla’s batteries are used to store energy generated by solar panels and can be used to power homes and businesses. The company is facing several challenges in the coming years, including sustaining its competitive advantage in the electric vehicle market and confirming its position as a transformational leader in the usage of sustainable energy. However, with careful strategic planning, Tesla can overcome these challenges and continue to be a driving force in the transition to a sustainable future.
Strategic Planning For Value Chain Analysis
The strategic planning process for Tesla should include an external analysis of the business environment using PESTEL Analysis. PESTEL Analysis is a framework that is used to analyze the macro-environmental factors that can have an impact on an organization. The acronym PESTEL stands for Political, Economic, Social, Technological, Environmental, and Legal factors. The electric vehicle market is a rapidly growing industry with great potential. Tesla is a leading player in this industry and has a substantial competitive advantage. However, several macro-environmental factors can impact Tesla’s business. The most important factors are political, economic, social, technological, environmental, and legal.
Political factors: The political environment in a country can have a significant impact on Tesla’s business. For example, if a country’s government supports electric vehicles, it can create incentives for consumers to purchase them. This can lead to increased demand for Tesla’s products. On the other hand, if the government is not supportive of electric vehicles, it can create barriers to entry and make it difficult for Tesla to operate in that market.
Economic factors: The economic environment is another crucial factor to consider. Electric vehicles are still a relatively new technology and they are generally more expensive than traditional gasoline-powered vehicles. This can make them unaffordable for many consumers, especially during an economic recession. Another economic factor to consider is interest rates. Higher interest rates can make it more difficult for consumers to finance the purchase of an electric vehicle.
Social factors: The social environment can also have an impact on Tesla’s business. For example, electric vehicles are often seen as being more environmentally friendly than gasoline-powered vehicles. This can make them more attractive to consumers concerned about the environment. On the other hand, electric vehicles may not be considered as reliable or durable as gasoline-powered vehicles. This can make them less attractive to consumers who are looking for a long-term investment.
Technological factors: The technological environment is also an essential consideration for Tesla. Electric vehicles are a relatively new technology, and there is still a lot of research and development being done in this area. This can lead to breakthroughs that make electric vehicles more efficient and cheaper to produce. However, it can also lead to new challenges, such as developing new infrastructure to support electric vehicles.
Environmental factors: The environmental factor is a significant consideration for Tesla. Electric vehicles produce zero emissions and are much better for the environment than gasoline-powered vehicles. This makes them attractive to consumers who are concerned about the environment. However, electric vehicles still need to be plugged into the electrical grid, which can lead to emissions from power plants.
Legal factors: The legal environment is also an essential consideration for Tesla. Electric vehicles are subject to different laws and regulations than gasoline-powered vehicles. This can make it difficult for Tesla to operate in some markets. For example, some countries may have laws requiring electric vehicles to be equipped with certain safety features or limiting their maximum speed.
The Five-Forces Analysis
The Five-Forces Analysis is a tool used to assess a company’s competitive environment. It is a framework to identify the principal forces affecting the company’s ability to compete in the market. The Five Forces Analysis is a helpful tool for companies to use when developing their strategic plans.
The Five-Forces Analysis will take into account the following factors
The competitive rivalry within the electric vehicle market
The competitive rivalry within the electric vehicle market is intense. A large number of companies compete for market share, including established players such as General Motors, Toyota, and Volkswagen, as well as new entrants such as Tesla. The competition is intense because the market is proliferating, and there is much growth potential. The companies are all trying to gain a competitive advantage by offering innovative products, investing in new technology, and expanding their manufacturing capacity. The intensity of the competitive rivalry within the electric vehicle market will likely continue to increase as the market grows and more companies enter the market. This will pressure margins and make it difficult for companies to differentiate their products. The competitive rivalry within the electric vehicle market is an essential factor that Tesla needs to consider when developing its strategy. The company must find ways to differentiate its products and keep costs low to compete effectively.
The bargaining power of suppliers
The bargaining power of suppliers is one of the five forces that Michael Porter identified that could shape strategy. This force refers to the pressure suppliers can put on companies by raising prices or reducing the quality of their products; in the case of Tesla, the primary raw materials that the company needs are lithium, cobalt, and nickel. These materials produce the batteries that power Tesla’s electric vehicles. The prices of these materials have been rising in recent years due to increased demand from the electric vehicle industry. This has put pressure on Tesla’s margins. To offset this, Tesla has been working on developing its battery manufacturing facility. This will allow the company to integrate vertically and have more control over the supply of its raw materials. In the long run, this should help reduce suppliers’ bargaining power and improve Tesla’s profitability.
The development of Tesla’s battery manufacturing facility is a response to the increased pressure the company is facing from suppliers. This is an example of how Tesla uses vertical integration to improve its position in the marketplace. Tesla is one of many companies that are facing pressure from suppliers. The entire electric vehicle industry is experiencing similar challenges. The high cost of batteries is one of the main barriers to the widespread adoption of electric vehicles (MacDuffie, 2018). If the industry cannot find a way to reduce the cost of batteries, it will not be easy to achieve the goals set for adopting electric vehicles.
According to Porter’s Five Forces Analysis, the bargaining power of buyers is one of the five forces that determine the competitive intensity and attractiveness of a market. The bargaining power of buyers is also known as the “buyer’s power”. The bargaining power of buyers refers to the pressure that buyers can exert on companies in an industry to get them to lower their prices or improve the quality of their products. This pressure comes from buyers unsatisfied with the prices or quality of a company’s products and can choose to purchase from another company.
Several factors can affect the bargaining power of buyers, including the following
- The number of buyers: The more buyers there are in a market, the less power each has. This is because if one buyer decides to switch to another company, the impact on the company will be relatively small.
- The size of buyers: The larger the buyers, the more power they have. Large buyers can exert more pressure on companies by threatening to switch to another supplier.
- The degree of differentiation: The more differentiated a product is, the fewer power buyers have. This is because buyers are less likely to find a perfect substitute for a differentiated product.
- The switching costs: The higher the switching costs, the fewer power buyers have. This is because buyers are less likely to switch to another company if it involves high costs.
The bargaining power of buyers is vital when conducting a Five-Forces Analysis of a company’s competitive environment. The high bargaining power of buyers can pressure companies to lower their prices or improve the quality of their products. One way to address the threat of buyers is to develop a competitive advantage that makes it difficult for buyers to find a perfect substitute for your product (Matizamhuka, 2018). Another way to address the threat is to build strong relationships with your buyers so they are less likely to switch to another supplier.
The threat of new entrants
The threat of new entrants is a significant force in the business environment of Tesla. The company faces competition from several established car manufacturers and new entrants into the market. The main competitors of Tesla have established car manufacturers such as General Motors, Ford, Toyota, Volkswagen, and BMW (Okanga, 2022). These companies have significant advantages over Tesla regarding financial resources, brand recognition, and manufacturing experience. In addition, there are several new entrants into the market for electric vehicles, such as Nissan, Mitsubishi, and Honda.
The threat of new entrants is a significant force in Tesla’s business environment, and the company needs to develop strategies to address this threat. One strategy that Tesla could adopt is focusing on its strengths and innovating. The company has a strong brand and is known for its innovation. It must continue developing new and innovative products that appeal to customers. Another strategy that Tesla could adopt is to invest in marketing and promotion. The company needs to raise awareness of its brand and products and ensure that potential customers are aware of the advantages of its products over those of its competitors. Tesla also needs to ensure that it has a strong distribution network in place so potential customers can easily purchase its products.
The threat of substitute products
The main threat to Tesla comes from substitute products. Many companies are working on electric vehicles and have already launched products that compete with Tesla. The most notable of these is the Nissan Leaf, which was launched in 2010. Other companies that have launched electric vehicles include BMW, Chevrolet, Ford, and Volkswagen. Tesla faces a significant threat from these companies, as they have the financial resources and the manufacturing capabilities to mass-produce electric vehicles (Lugtu, 2019). They also have the brand recognition and customer base to sell electric vehicles in large numbers. Tesla needs to continue innovating and differentiating its products to stay ahead of the competition. It also needs to expand its manufacturing capacity to meet the growing demand for its products.
The Strategic Planning Process Needs of Tesla’s Capabilities And Resources
The first step in the strategic planning process is the company’s internal analysis. This includes an evaluation of the company’s capabilities and resources. The company’s value chain analysis is crucial to this internal analysis. The value chain analysis helps identify the company’s core competencies and how it can create a competitive advantage. The second step in the strategic planning process is external analysis. This includes an evaluation of the company’s competitive environment. The competitive environment includes factors such as the competitive landscape, economic, and political/regulatory environment.
The third step in the strategic planning process is the development of strategic options. This step includes the identification and evaluation of different strategic options. The different options must be evaluated based on their ability to create value for the company. The fourth and final step in strategic planning is implementing the chosen strategy. This step includes the development of a plan to implement the chosen strategy. The implementation plan must be designed to ensure the company’s competitive advantage is sustainable.
SWOT Analysis
The Most Convincing Strategy For Tesla To Maintain And Strengthen
The most effective strategy for Tesla to maintain and strengthen its position as the most compelling car company of the 21st century is to continue to focus on innovation and to be the first mover in the electric vehicle market. Tesla has been successful in innovation, with the development of the Roadster, the Model S, and the Model X, and the launch of the Model 3. The company has also been quick to market, with the Roadster launched just two years after the company was founded. This focus on innovation and speed to market has allowed Tesla to establish a strong position in the electric vehicle market and to build a strong brand.
Critical problems affecting Tesla
Lack of a mass-market car: The Tesla Model 3 is the company’s first mass-market car and is still facing production delays (Teece, 2018). This is a crucial problem because Tesla needs to sell large numbers of cars to be profitable, and it still needs to be able to do so.
High costs: Tesla’s cars are expensive, and the company still needs to produce them at a scale that would allow it to reduce costs significantly. This is a crucial problem because it limits Tesla’s ability to compete with other car companies.
Dependence on government subsidies: Tesla relies heavily on government subsidies and tax breaks, which it has been able to secure due to its status as a green energy company. However, this dependence could become a problem if the subsidies are reduced or eliminated.
Reputation for quality problems: Tesla has a reputation for quality problems, leading to some customers returning their cars or refusing to buy Tesla cars. This is a crucial problem because it damages Tesla’s brand and makes it harder for the company to sell its cars.
Lack of profitability: Tesla has yet to be profitable, a crucial concern for investors. Tesla needs to achieve profitability to attract more investment and ensure its long-term viability.
Conclusion
In conclusion, Tesla’s success is due to its vision to be the most compelling car company of the 21st century and its careful and long-term strategic planning. Tesla’s strategy aims at creating a unique and valuable position in the marketplace by offering the best-quality electric vehicles. This has allowed Tesla to become the most valuable car company in the world, with a market capitalization of over US$185 billion. The key to Tesla’s success has been its focus on innovation and its ability to quickly bring new technologies to market. This has allowed Tesla to create a strong brand identity and command a premium price for its products. Tesla has a unique approach to the car market and its commitment to its vision. Looking to the future, Tesla’s success is likely to continue as the company innovates and brings new products to market.
The company’s focus on quality, performance and customer service will likely ensure that Tesla remains the world’s leading electric vehicle manufacturer for many years. Tesla’s success is due to its long-term strategic planning and its vision to be the most compelling car company of the 21st century. The firm’s careful strategic planning has allowed it to become the most valuable car company in the world, with a market capitalization of US$ 185 billion. Tesla is also the market leader in sales of electric vehicles, with 367,820 units sold in 2019. Looking to the future, it is evident that Tesla’s success is set to continue as it innovates and brings new, game-changing products to the market. With Tesla’s strong track record of execution and its large and loyal customer base, there is no doubt that Tesla will continue to be a force to be reckoned with in the automotive industry in the future generation.
References
Lugtu Jr, R. C. (2019). Tesla: Testing a business model at its (R) evolutionary best. Journal of International Academic Review
MacDuffie, J. P. (2018). Response to Perkins and Murmann: Pay attention to what is and isn’t unique about Tesla. Management and Organization Review, 14(3), 481-489.
Matizamhuka, W. (2018). The impact of magnetic materials in renewable energy-related technologies in the 21st century industrial revolution: The case of South Africa. Advances in Materials Science and Engineering.
Naor, M. (2022). Tesla’s circular economy strategy to recycle, reduce, reuse, repurpose and recover batteries. In Recycling-Recent Advances. Intech Open Journal. Doi:10.5772/intechopen.107256
Okanga, B. (2022). Radical and incremental innovations as critical leveragers of a firm’s financial performance: Best Practices from Tesla and Toyota. Universal Journal of Financial Economics, 1(1), 2-22.
Teece, D. J. (2018). Tesla and the reshaping of the auto industry. Management and Organization Review, 14(3), 501-512.