In the first stages of growth and development, many organizations have a primary strategy of making profits. Indeed, profit-making has always been the norm for every new business because of the need to ascertain their continuity by acquiring revenues and creating value (Lopez & Franch, 2013). The main goal of profit-making is to outshine competitors in the industry. However, with time, technology has been advancing, and this gradually affects the manner in which different organizations carry out their business activities. This technology change led to new ways of thinking, which were manifested by the nature of organizations that grew with unique and revolutionary goals. Among these new-age organizations is Tesla Inc.
Tesla Inc. was birthed in 2003, by Marc Tarpenning and Martin Eberhard. It is headquartered in Palo Alto, California. Before changing its name, the company was initially known as Tesla Motors and the business strategy adopted was to stand out as electric automobile manufacture through the making of an electric sports vehicle. Eventually, in 2016, Tesla Motors acquired SolarCity, a solar panel organization that caused it to change its name to Tesla Inc. (Gregersen & Schreiber, 2019). Following this change, the organization took a futuristic view for its operations by taking on the mission of accelerating the global transition towards sustainable energy. Its drive towards changing and shaping part of the future is evident in its manufacture of high-grade performance automobiles which are not only rated among the best in the world, but also the best-selling vehicles that purely run on electricity.
Tesla operates in two segments; automobile manufacture, and energy storage and generation (Reuters, 2019). Therefore, the organization operates in the automotive manufacture industry while having diversified into the energy generation and storage industry. Its competitors in the automotive industry include a mix of traditional and modern automotive makers like Honda Motor Company, Ford Motor Company, General Motors, Audi, Toyota Motor Corp., and Nissan, among others.
Tesla is a key representation of the global drive towards a ‘green’ environment. This means that it is crucial in the move from the use of non-renewable energy to the renewable sources which assure the sustainability of the environment. Due to the growing global sensitivity concerns towards protecting the environment by adopting the most sustainable means of transport, national governments are beginning to set bans on the production of fossil-fuel-powered vehicles (Broom, 2019). For example, in Europe, nations like Germany intend to halt the sale of new diesel and petrol vehicles from 2030 onwards. Scotland aims at making a similar ban from 2032, and the UK and France will follow suit from 2040.
As electric vehicles (EV) grow popular, there is a need to know whether there exist enough members in the public who can afford them. It would be futile for the electric automotive industry to exist without a potent market that is large enough to sustain it. With these concerns, it is revealed that electric cars and their accessories are much more affordable. 10 years ago, electric vehicles were regarded as a luxury and the price of 1KwH ranged between $800 and $1000. In 2019, the same amount of kWh can be purchased at $100 (Phillips, 2019). The reason for this price reduction is due to the increase in infrastructure for charging EV. With this progress, there will be more charging stations which will be found densely in many areas because there is a looming belief that EV is the future (Nhede, 2019).
EV is easily associated with many positive aspects; mainly the drive towards a sustainable environment. However, there exist ethical challenges tied with the manufacture of EV in the automotive industry. According to Amnesty International, certain human rights are abused in the event of extracting minerals vital to the manufacture of particular components of EV (Broom, 2019). For instance, child labour is used in the extraction of cobalt from mineral deposits, in nations like DR Congo, which is used in the manufacture of EV batteries. This undermines the ethicality of the EV automotive industry. As a result of this ethical claim, relevant international institutions, such as the London Metal Exchange and Amnesty International are devising means of rein in on this challenge (Broom, 2019). On a consensus, it was agreed that banning the trade of tainted cobalt will only cause the trade to be made using illegal black markets. Therefore, workable alternatives are currently being explored.
The attitudes and beliefs of the public play a significant role in the progress of the EV automotive industry. Since Tesla’s Roadster, the first vehicle that was fully electric-powered, there has been a growing public opinion in favour of the manufacture of EV (Schmid, 2017). EV has grown popular because people are getting concerned about global warming and the impact of greenhouse gas emissions coming from fossil-fuel-powered vehicles. In addition, there is a growing need for environmental sustainability, which is in favour of utilizing the existing resources without the jeopardizing the ability of the future society to meet its needs.
The EV automotive industry is hailed for its energy efficiency. The technology used in propelling EV is way more efficient than gasoline-powered vehicles (Energy Sage, 2019). Electric cars are efficient because an average of 60% electric energy is used in propelling the vehicles. The traditional petrol-powered vehicles have an average energy efficiency level of 20%. Key to the high energy efficiency level of EV is the use of Lithium-ion (Li-ion) batteries that stores energy used to power the car. Experiments in physics labs have continually illustrated how Li-ion batteries are very stable systems for energy storage, with a coulombic efficiency (CE) rate of over 99% (Miao, et al., 2019). The CE determines the charge efficiency level in batteries, which is the ratio of total electron input to total charge output from the battery.
Many studies that have been deliberated show optimistic results concerning the relationship between EV and the environment. Schmid (2017) asserts that EV is acquiring the reputation of being a potential solution to a multitude of problems present both in the economy and the environment. Environmental lobbyists have, for a long time, pushed for the advancement of alternative and renewable fuel technologies. EV is representative of this advancement by helping reduce the number of greenhouse gases being emitted into the earth’s atmosphere. In the USA, 28% of greenhouse gas emissions are accounted for by the transportation sector (Schmid, 2017). Therefore, the EV automotive industry is crucial in reducing these emissions in the transport sector by a great margin.
The business environment, as discussed above, presents a variety of opportunities for Tesla. These opportunities include the ability to expand its operations internationally, explore new markets, invest in research and development activities, initiate environmental conservation projects, and transform the image of the organization. The threat which is presented by the business environment is legal action being brought against it due to the acquisition of cobalt that is tainted with child labour.
O1-Expanding Tesla’s operations internationally will be crucial in reaching closer to its suppliers and buyers. Developing economies prove to be the most fertile regions for expansion in terms of their flexibility to adopt new technologies to bolster growth in their economies. Also, Tesla can easily have a hands-on approach toward the mining of cobalt in order to avoid cases of child labour being associated with its sourcing activities.
O2-Tesla can explore new markets due to the growing optimism towards electric vehicles and their significance in the global move toward environmental sustainability. To add, electric cars are becoming more affordable; therefore, in order to explore the new markets effectively, Tesla can diversify its versions of electric vehicles to suit the needs of different customers.
O3-Tesla can further invest in research and development activities to ensure that the performance of its electric cars is high enough to beat its competitors in the industry. Research and development can lead to finding better chemical components for batteries which have greater energy efficiency rates than the current Lithium-ion battery systems.
O4-Tesla can initiate projects to conserve the environment particularly because its continuity, to a great extent, relies on the well-being of the environment and the people. Tesla can initiate conservation projects oriented towards reforestation, which will aid in the removal of greenhouse gas emitted in the earth’s atmosphere. Reforestation will increase precipitation and rainwater can increase water in rivers and dams to sustain hydro-electric power plants.
O5-Transforming the image of the organization is a lucrative opportunity because there is a need for the organization to demonstrate to its sincerity to the public of being empathetic and aware of child labour being used in cobalt mines abroad. It will show that, apart from helping create a better environment, Tesla respects human rights. This opportunity will supplement the growing optimism concerning its electric cars being the future.
T1- Tesla could face legal charges for acquiring tainted cobalt used in the manufacture of its Li-ion battery management systems. This threat seems inevitable because over 50% of the world’s cobalt is extracted from southern DR Congo. Tesla would be held responsible for children working in mines under harmful conditions; for instance, some of the children suffer lung diseases due to being exposed to cobalt dust (Broom, 2019). This legal charge can damage the reputation of Tesla.
Since its establishment and the growing global match towards ‘green energy,’ Tesla’s unique invention of electric-powered vehicles has been duplicated by several other organizations. These other organizations in the automotive industry make up its competitors. The competitors are spread across the world. To mention a few, Tesla’s competitors include Toyota, Tata, Nissan, Mitsubishi, Mercedes, Ford Motor Co. and Volkswagen, among others. Its competitors consist of companies which have a high reputation in their region of operation (Investopedia, 2019). For instance, Toyota is a multinational automotive producer, and Tata is India’s largest automotive maker. On account of well-established competitors who deliver electric vehicles of comparable quality performance provisions to Tesla, the competitive rivalry for the organization is high.
As a large organization, Tesla has a number of key suppliers. The company may have some fundamental components of its vehicles, such as the electric motor, charger and battery pack made by itself, but it sources extra parts from suppliers who are located in Europe, Asia and USA. Tesla relies on single-source suppliers for extra components for its vehicles. For instance, in its Model S, 2000 parts are purchased globally from more than 300 single-source suppliers. single-source suppliers are a preference for Tesla, although this does not necessarily mean that there lack alternative sources of supply for its components. Therefore, the suppliers’ bargaining power is low.
As in the second quarter of the financial year 2019, Tesla acquired more orders for its electric cars than the deliveries it made (Tesla, 2019). This means that the company has a large number of buyers. The company’s buyers are majorly found in the USA, while others are located internationally. Even though it is yet to happen, there is a likelihood that buyers can influence the price of Tesla’s vehicles in the event where they opt to act in unison in a request for lower prices. Also, there are other competitors available selling different electric vehicles; this lowers the switching costs of buyers. Therefore, in this case, the bargaining power of the buyers is moderate.
The electric automotive manufacture industry requires a large amount of capital and other resources to enter. It is no surprise that competitors found in the industry mostly include organizations which are originally manufacturers of fuel combustion engines, like Toyota. Therefore, the threat of new entrants in the industry is low.
There exist many alternative organizations which manufacture electric vehicles. This presents low costs of switching from Tesla’s vehicles to another company’s vehicles. Also, there is a large number of people who would opt to rely on public means of transport compared to buying a Tesla electric car. Thus, the threat of substitutes in the industry is high.
S1-Organizational. Unique Value Proposition. Unlike other automotive manufacturers, Tesla stands out with its unique drive to steer the world into a future with electric vehicles. Tesla is making this achievement by delivering new kinds of technology to its market majorly consisting of luxurious and long-range electric vehicles. The organization has competitors building electric cars, but this has not shaken Tesla from dominating its market. Therefore, this is a strength for the company
S2-Innovation. Since its inception, Tesla has grown at an incredible pace. Part of this growth can be attested to free marketing done through public debates. Its Model S has proven a key driver for sales maximization as it was responsible for an increase in Tesla’s sales in 2015 by 27%. Model X that was brought into the market in the third quarter of the financial year 2015 experienced five times increase in sales by the first quarter of 2016. This is a strength for Tesla.
S3-Financial. Recently, Tesla has been experiencing loses on a yearly basis following its IPO announcement. Although the organization has remained resilient all along, and this can be attested to the vast amount of capital it acquired to reinforce its growth. Over $365 million has been acquired from the US Department of Energy by Tesla in support of its initiatives to manage energy. This large capital base serves as a strength for Tesla.
S4-Technological. Cutting-edge technology. Tesla has grown into a successful organization primarily because of its advanced technology. The organization is applauded for its highly innovative capacity, which resulted in technology that engineered the world’s first sports car running completely on electricity. Also, Tesla incorporates energy storage from the sun as part of its core activities.
W1-Limited presence in the market. Electric vehicles are in demand across the world. However, Tesla’s market is majorly concentrated in the United States. Little market extension has been done to various places in the world, especially in China and a variety of other developing nations.
Tesla has a variety of competences. Its core competence is its outbound logistics. According to the question of value, the organization’s outbound logistics does not allow Tesla to exploit its opportunities in the environment fully. However, it allows the organization to neutralize impending threats in the environment, such as costly distributors and third-party retail outlets. One the question of rarity, the outbound logistics can only be adopted by a few organizations. Firms without outbound logistics face a cost disadvantage because high costs will be incurred in the facilitation of transport of finally assembled electric vehicles to points of sale. Outbound logistics is also exploited by the organization as it makes a significant investment in warehousing and the distribution of its vehicles.
Another distinctive competence that the organization possesses is its operations. It is important because Tesla’s operations are in two segments, which is automotive manufacture and energy storage and generation. The automotive segment involves the development, design and manufacture and the sale of electric vehicles. The energy storage and generation segment involve the design, making, installation and selling of solar energy systems and other stationery products of storing energy.
The strategy being evaluated in this context is Tesla’s merger with SolarCity
This strategy falls in the strength and opportunities (SO) quadrant of the TOWS matrix. This strategy is a strength because it reinforces Tesla’s drive to revolutionizing technology in the future through its electric vehicles. This presents an opportunity to the company because it will be able to manufacture better electric vehicles which takes advantage of advanced research and development tools in the future by creating energy storage systems that assure even longer ranges of travel. This will be crucial in affirming the position of Tesla’s electric vehicles in the automotive market, and potentially knocking its competitors out of the game.
Some of the stakeholders that would be interested in this strategy include customers, the shareholders, the government, suppliers, and the public. These stakeholders will be analysed using the power/interest matrix as follows.
The stakeholders who will and need to be kept satisfied following the strategy to merge with SolarCity include the shareholders and the customers. They have high interest and have high power in the progress of the company. The strategy promises better inventions from Tesla in future, and the organization will be better positioned to proceed with its mission of changing the future. Therefore, these prospects of the merger appeal to both the stakeholders and the customers.
The stakeholder that needs to be managed closely is the government. The role of the government in any industry is that of regulation. This means that the government has high power and less interest in the turn out of the merger. It will only impose restrictions where it is felt that the merger threatens to violate certain industrial regulations and standards.
The stakeholder who needs to be monitored is the suppliers. They have low power over the company’s activities and are to a certain less interested in the merger. They will only be relevant after the merger because Tesla will be capable of engaging in more business with them. The longer Tesla works with certain suppliers, the more their power and interest increases.
The stakeholders who will be kept informed is the public. They have low interest and power over the outcome of the merger. Contact with the public can be kept through communication by means of informative advertisements and reasonable disclosure of proprietary information such as financial statements.
To finalize the strategy, specific financial resources and skills will be required. Tesla acquires financial support from the government for its energy initiatives. This guarantees a vast amount of capital for the company to merge its operations with SolarCity in developing sustainable electric vehicles. The skills that will be needed will be sources from human capital in both organizations and the recruitment of new engineers and specialists that are well-knowledgeable concerning the integration of solar energy and automotive manufacture.
Continue your journey with our comprehensive guide to Strategic Innovation at HelloFresh.
Miao, Y., Hynan, P., von Jouanne, A. & Yokochi, A., 2019. Current Li-Ion Battery Technologies in Electric Vehicles and Opportunities for Advancements. Energies, 12(1074).
Schmid, A., 2017. An Analysis of the Environmental Impact of Electric Vehicles. Missouri S&T's Peer to Peer, 1(2).
It is observed that students take pressure to complete their assignments, so in that case, they seek help from Assignment Help, who provides the best and highest-quality Dissertation Help along with the Thesis Help. All the Assignment Help Samples available are accessible to the students quickly and at a minimal cost. You can place your order and experience amazing services.
DISCLAIMER : The assignment help samples available on website are for review and are representative of the exceptional work provided by our assignment writers. These samples are intended to highlight and demonstrate the high level of proficiency and expertise exhibited by our assignment writers in crafting quality assignments. Feel free to use our assignment samples as a guiding resource to enhance your learning.