Strategic Management: Tesla Case Study

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The Tesla brand is generally seen as the antithesis of the conventional automobile. For example, one of its business strategies was to first target the high-end market with an aspirational luxury product before expanding into the middle- and lower-end sectors with the inexpensive Model 3 car. The unique selling proposition of the product is predicated on an out-of-the-box approach to market research (Thomas, 2019). Considering how crucial this is to the companys success, Tesla will need to reevaluate its manufacturing and supply chain strategies to ensure the timely and efficient delivery of the vehicle. Furthermore, from a commercial perspective, Tesla has endeavored to become an environmentally friendly organization, which has provided the company with a lot of benefits from government and regulation.

Customers

Tesla plans to break into both the luxury and mainstream markets with the introduction of its Model S sedan and its lower-priced Model 3. Thus, the consumer is a primary driver of Teslas financial success; they care about the quality of the product and believe it is reasonably priced. The company is now attempting to reduce the cost of vehicle batteries so that it can satisfy this demand without compromising on quality (Thomas, 2019). To that end, Tesla is working to establish battery production in-house as an alternative to continuing to get batteries from Panasonic. The corporation places a premium on increasing customer satisfaction, and one of its main aims is to do so by establishing a worldwide network of charging stations. This ensures that Tesla is satisfying its customers, a crucial stakeholder group.

Suppliers and the alliance partner

The greatest brake discs are imported from Europe for use in Tesla vehicles, while the company employs Japanese battery technology. Timely product development, manufacturing, and customer service rely heavily on the companys excellent ties with its suppliers and the synergy that arises from cooperation with its suppliers as well as its alliance partners (Hoelzlhammer, 2018).

Investors

During Teslas formative years, it was crucial to have support from important stakeholder groups including Investors. They play a vital role in the companys ability to raise funds and make payments, just as they would for any other firm. Investors are the stockholders of a company, and they are continuously concerned with the companys development and profitability. The companys CSR is working to address these issues via game-changing, long-term projects (Lugtu Jr, 2019). Teslas development may be aided and investors interests are served by allowing other firms to use Teslas patents. For instance, this might increase the number of brands and goods that use energy and the demand for such things. The areas in which Tesla does business are at the center of the companys environmental concerns, as we said previously. This can be good news for shareholders and investors as well, as a positive company image will allow Tesla to expand, maintain its focus on new product development, and steadily increase its profits from the sale of its cars.

The Government

The government is a key stakeholder in Teslas efforts to create a sustainable vehicle industry because it has an interest in the companys ethical business practices and its impact on the economy of the states in which it operates. Teslas worldwide growth strategy and track record more than meet the requirements of such government interests (Sathish, 2017). Also, given that oil prices and the governments of providing nations remain unstable, the United States government views Tesla as strategically important since it is the only mode of mass transportation that is not reliant on oil. Along with many other large American companies, Tesla employs a considerable workforce and makes a significant contribution to the economy. The company has been instrumental in the creation of groundbreaking goods and services, and it keeps growing while rewarding its best employees (Matejun, 2019). Based on the results of the aforementioned Stakeholder Analysis, it is clear which parties have the most influence on and responsibility for the companys strategy and its overall performance.

Repositioning

Suppliers are the stakeholder group that has to be repositioned for the organization to prioritize them over the following 12 months. Before, Tesla had trouble getting the early capacity guarantees from suppliers they required because of the distance between Silicon Valley and its regular suppliers. The need for vertical manufacturing was frequent. With production assurances and an increase to 100,000 units per year, Tesla is aggressively seeking suppliers to set up shop in the area and start making parts.

Once Tesla proved its dependability and good faith to its suppliers, the latter began allocating more resources and even moving closer. The takeaway here is that even a small firm may benefit from excellent supplier relationships if supported by production commitments. Teslas annual output of 100,000 vehicles is well below what is needed for the car sector to survive. Managers should be aware of the most common causes of misunderstandings between customers and vendors.

According to the results of a recent survey by The Faculty, there has been a communication breakdown. Second, executives should not assume that the only way to gain from relationships with suppliers is via monetary incentives. Finally, vendors may contribute to projects like demand forecasting and resource allocation (Rengarajan et al, 2021). The cost-to-serve is determined by the complexity of the procurement process, the value of the company, and the strength of the relationship. Teslas early difficulties with its supply chain probably taught the company to value its commercial relationships more highly, which has helped both parties succeed.

Five Porter Analysis

Competitive Rivalry or Competition with Tesla, Inc. (Strong Force)

The industry in which Tesla, Inc. works is quite cutthroat. In this phase of the Five Forces Analysis, we examine how competition affects the car and renewable energy industries (Liu and Meng, 2017). Following is a list of factors both within and outside of Tesla that contributes to the cutthroat nature of the companys industry:

Only a few organizations are involved (weak force)
Companies are very competitive and aggressive (strong force)
Low barriers to entry (strong force)

The car industry is dominated by a few major players. Companies like Tesla, Inc. benefit from this external component since it mitigates the threat posed by rivals in the context of Porters Five Forces study. However, these businesses are notoriously bold when it comes to introducing new features and advertising their wares (McCain, 2018). Large car manufacturers, for instance, often use heavy-handed advertising strategies. Consumers have few barriers to switching to vehicles from other brands, which further increases the competitive pressure in the market. The intense rivalry in the auto and energy solutions industry is highlighted as an important strategic management aspect in this section of Tesla Inc.s Five Forces analysis.

Bargaining Power of Teslas Customers/Buyers (Moderate Force)

The influence of customers on enterprises and the industry landscape as a whole is analyzed for the vehicle, battery, and solar power sectors. Having a dedicated customer base is essential to Teslas success (McCain, 2017). Clients bargaining power is relatively stable as a result of the following exogenous influences and the relative strengths of those elements:

Low barriers to entry (strong force)
Availability of Substitutes Is Considerable (moderate force)
Weak Purchasing Activity (weak force)

Customers of Tesla have fewer obstacles to moving to other suppliers when it comes to buying automobiles due to the low switching fees. The analysis of Porters Five Forces shows that this external factor poses a danger to the business and its competitors in the car industry (Chen, 2019). When customers have few or no other options, they have less negotiating power with Tesla Inc

Bargaining Power of Teslas Suppliers (Moderate Force)

Tesla, Inc.s supply chain is critical to the companys future. This part emphasizes the role suppliers play in determining the accessibility of inputs for enterprises (Hoelzlhammer, 2018). The following medium-level external forces contribute to Teslas suppliers medium-level bargaining strength:

The incorporation into the future is somewhat progressive (moderate force)
Most vendors are a reasonable size (moderate force)
Sufficient Supply, but Not Too Much (moderate force)

Few of Tesla Inc.s vendors are fully integrated into the companys supply chain. Because of this uncontrolled third party, producers and retailers have little influence in the distribution and sale of their products. While some component makers work with Tesla via intermediaries, others do business with the company directly (Jing, 2020). The majority of these vendors are also medium-sized, which means they only have a moderate impact on the automotive industry. The modest amount of supply is another external issue that gives suppliers some, but not much, ability to impact Tesla.

The threat of Substitutes or Substitution (Moderate Force)

The competitive landscape in which Tesla, Inc. operates, which includes the automobile and energy solutions industries, is being impacted by replacements (Jing, 2020). Concerning the moderate intensity of the danger of substitution against the firm, the Five Forces Analysis takes into account the following external factors:

Low expenses associated with making a change (strong force)
To a modest extent, equivalent options are readily available (moderate force)
Replacements Acceptable Efficiency (moderate force)

As discussed in the previous sections of this Porters Five Forces analysis of Tesla Inc., competitive pressure is aided by low switching costs. The external research suggests that customers might easily be enticed away by alternatives such as public transportation due to the low switching costs involved. Tesla is facing significant resistance from this external factor in the industrial setting in which it works (Eltoumi et al, 2021). However, providers cannot do too much because of the modest availability of replacements

The threat of New Entrants or New Entries (Weak Force)

Companies like Tesla Inc. have their success or failure depending on the presence of new entrants in their field. According to this section of the Five Forces study, the following external variables have a very minimal impact on the danger of new entrants:

Marketing a new product or company may be expensive (weak force)
Incredibly high operational expenses (weak force)
Extremely low unit cost (weak force)

To compete with Tesla, other firms would need to spend a lot of money advertising their products and Elon Musk would need to be less well-known. The stellar reputation of Tesla Inc. is a valuable asset that is difficult to duplicate. Concerning Porters Five Forces analysis, this external factor stands in for entrant resistance (Matejun, 2019). As an added downside, the high costs of making vehicles discourage new entrants to the market. The likes of Tesla have a substantial head start, and new competitors wont be able to compete until they reach a specific manufacturing threshold.

VRIO/VRIN Analyses

Brand Image

As a company, Teslas strong reputation in the marketplace is a major asset. It is also a significant factor that differentiates this make from the competition. Even though many other automakers exist, some of which produce electric and hybrid vehicles, Tesla has carved out a unique market niche for itself (Matejun, 2019). In the transportation industry, Tesla is largely regarded as a forerunner due to the companys groundbreaking products and pioneering dedication to a sustainable business approach. Consumer interest and sales volume are only two of several indicators that are affected by the car industrys brand image. This is why many car companies value their reputation so highly.

Technological innovation

Technology advancement is critical for the car sector to keep up with the competition. If they want to keep their dominant market share, theyll need to pour a lot of money into automobile R&D. As a result, every company in the vehicle sector has to always be coming up with new ways to better serve their customers and stand out from the crowd (Lugtu, 2019). The name Tesla has become synonymous with cutting-edge innovation and premium-grade goods. Companies now provide a Tesla app that allows owners to remotely control their cars, complementing the cars designed self-driving technology as well as the owners massive display.

Customer experience

The Tesla driving experience is superior in many ways and unlike anything else on the market. This is a key contributing factor to Teslas automobiles rising popularity relative to those of its competitors. Stunning in design and potent in performance, Teslas luxury electric cars are the epitome of driving excellence. Their outside design is as appealing as that of competing vehicle types, and they also provide greater safety. The zero-carbon impact of Tesla vehicles is another selling feature (Chen, 2019). Todays customers are more curious about fuel-efficient, environmentally friendly automobiles. The rising demand for Teslas in both the United States and China is a sign that people are moving toward more sustainable transportation alternatives.

Product range

As expected, demand is high for Teslas latest offerings. Although it has a more limited selection of vehicles than rivals like BMW or Volkswagen, it nonetheless does a good job of catering to its primary market segment of affluent buyers. The Model 3 is the companys entry-level car, and its success has helped propel Tesla to the forefront of the luxury auto industry throughout the world (Rengarajan, 2021). Increasing production capacity is necessary for the company to keep up with client demand. In addition to the more economical Model 3, the company has also developed the pricier Model S, Model X, and Model Y.

Market Position

Since its inception, Tesla has successfully established itself as a frontrunner in both the car sector and the EV market. Because of its huge market share and overall superiority over the competition, the corporation enjoys a significant and sustainable competitive advantage. The market share of Teslas main competitors is much smaller. Despite intense competition, Teslas market share is increasing because of the companys continued dedication to technology and the amazing performance of Tesla vehicles (Rengarajan, 2021). As a consequence of more people becoming aware of it, sales have gone up and critical praise has been broadened to include people all over the globe.

There are a lot of factors that will lead to its continued commercial supremacy in the years ahead. Teslas success may be ascribed in large part to the companys remade image, as well as the increasing global demand for electric automobiles. Attempts by other companies to unseat Tesla from its dominant market position are likely to be fraught with difficulty. Attempts by other manufacturers to improve battery life and safety features for drivers will take several years (Liu and Meng, 2017). As a whole, Teslas market position provides the company with a considerable and lasting competitive advantage.

Human Resource Management

The human resources division of any technology business will be a key differentiator for the brand. While it does produce automobiles, Tesla Motors is also a technical pioneer. It stands apart from other automakers in the market by prioritizing technical advancement. While the companys technical competence in the EV industry is evident, it is the special approach to HR management that has given the firm a competitive edge (Jing, 2020). The company recognizes that it must pay as much attention to retaining its brilliant and dedicated staff as it does to attract new talent. The firm fosters a climate of innovation and originality. To stay ahead of the competition, businesses must pay careful attention to the strategic management of their human resources. In addition to generous pay, employees have access to a wide range of learning and promotion possibilities at this company. Human resource management is essential to a companys competitive edge, but it cannot be relied upon indefinitely because other companies also spend substantially on HRM strategies.

Strategies to sustainable competitive advantage

Improving battery technology

At this time, Tesla is the only carmaker producing more kWh of batteries than all others combined. Teslas battery cell pricing will continue to fall as the Gigafactorys output increases and other facilities start to open in the future due to economies of scale, creative production, reduced waste, and the basic efficiency of standardizing most production tasks.

A significant part of Teslas competitive edge is the quality and dependability of its battery supply chain. Why? Panasonic, whose cells are utilized in the batteries, deserves some of the glory. The packs and battery chemistry are also constantly being improved upon by Tesla. Modern technical advances have made batteries an essential component of sustainable transportation systems. Households may be supplied with power and grid stability can be improved by tapping into the energy stored in these portable batteries.

Upgrading customer experience

The creation of individual profiles for each Tesla owner is the companys crowning achievement in the realm of customization. Each driver only needs to click a button to make adjustments to their preferences. The steering wheel and mirror positions, for example, can be customized for each driver without any intervention from the passenger. While other automakers may remember a users key fob and move the seats accordingly, Teslas driver profiles may customize the cars handling, brakes, lighting, radio stations, and even the way the driver leans into turns.

Price moderation of vehicles

In terms of pricing strategies, value pricing may be the most crucial. Customer perceptions of the items usefulness, quality, and significance are taken into consideration. There are several obstacles to fully capitalizing on the market potential of your newest breakthroughs, such as the presence of rivals, the relative brevity of product life cycles, and the use of inefficient methods. More than ever, technology providers need to pay attention to price inefficiencies that are stunting development and diminishing their perceived value in todays volatile economic climate.

Consistent product differentiation

There are several approaches to differentiation, such as offering a novel product design, exceptional service, or technical superiority. Teslas goods are in high demand because of their cutting-edge technology, distinctive appearance, and easy acquisition and upkeep. Tesla advertises the speed, security, and maximum potential driving range of its vehicles. These cars also set the standard for semi-autonomous driving and had the largest displays ever seen in a car. Due to the software-centric nature of modern vehicles, they may get updates and upgrades wirelessly, without the need to visit a service center. The branding initiatives are headed by Elon Musk, the companys legendary founder, CEO, and Product Architect. Musk is known to have direct conversations with consumers and to make rapid iterations of the product in response to their feedback. In addition, Musk has been outspoken about the role that consumers can play in improving the world, into a less polluted place by encouraging the widespread use of electric cars. He values his customers loyalty and support. To get all the extras that come equipped on every Tesla model, customers are willing to pay a premium.

Reference List

Chen, Y. et al. (2018) Mirroring hypothesis and integrality: Evidence from Tesla Motors, Academy of Management Proceedings, 2018(1), p. 11563. Web.

Eltoumi, F. M. et al (2021). The key issues of electric vehicle charging via hybrid power sources: Techno-economic viability, analysis, and recommendations. Renewable and Sustainable Energy Reviews, 138, 110534.

Hoelzlhammer, A. (2018). A Strategic Audit of Tesla. Honors Thesis, University of Nebraska-Lincoln

Jing, N. (2020) Research on Teslas Customer Care Innovation, 2020 Management Science Informatization and Economic Innovation Development Conference (MSIEID) [Preprint]. Web.

Liu, J.H. and Meng, Z. (2017). Innovation model analysis of new energy vehicles: taking Toyota, Tesla and BYD as an example. Procedia engineering, 174, pp.965-972.

Lugtu Jr, R.C. (2019). Tesla: Testing a Business Model at its (R) Evolutionary Best. Doctoral Dissertation, De La Salle University-Manila.

Matejun, M. (2019) Dynamic capabilities and the development of small business resource potential. In J. Paliszkiewicz and K. Chen (Eds.), Trust, organizations and the digital economy: Theory and practice (pp. 214-231). New York: Routledge.

McCain, C. D. (2019). A strategic audit of Tesla, Inc. Undergraduate Honors Thesis. University of Nebraska-Lincoln. Web.

Rengarajan, S., Moser, R. and Narayanamurthy, G. (2021). Strategy tools in dynamic environmentsAn expert-panel study. Technological Forecasting and Social Change, 165, p.120560.

Sathish, S. and Weenk, E. (2017). Case Study of Tesla. Maastricht School of Management.

Thomas, V. J., & Maine, E. (2019). Market entry strategies for electric vehicle start-ups in the automotive industryLessons from Tesla Motors. Journal of Cleaner Production, 235, 653-663.

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