The main purpose of this essay is to evaluate the strategic business management of the company Tesla.
Strategic Position Along With The Current Strategies Of The Organisation Will Be Analysed In Order To Understand The Present Condition Of The Selected Company.
Tesla is a North American based company, which was founded in the year 2003, by Martin Eberhard and Tarpenning. The former name of this company was Tesla Motors, and the current CEO of the company is Elon Mask. According to the latest reports, in the mid of 2021, the revenue of the company reached up to 1.62 billion US Dollars, which grew further. By the end of the year 2021, the revenue of the Tesla Company was 2 billion US Dollars, which is anticipated to grow further, making it one of the most valuable companies in the American as well as the global motor market. The main mission of Tesla is to make the environment better by producing cars that are run by sustainable energy, and help in escalating the world transition to follow more sustainable energy. Tesla produces high quality and high technology integrated electric cars which prevent customers from consuming natural or harmful resources such as diesel or fuels. This company further plans to acquire the Chinese and European market especially by increasing the production of electric vehicles, which will help the target of reducing carbon footprint up to 50% by the end of 2050. In addition, Tesla is also considered as one of the fastest growing brands in all over the world, and currently the CEO Elon Musk is also considered as the richest man of the world (Perkins and Murmann 2018). In terms of market, there are not many competitors who are close to the company in terms of market value, however companies like Ford Motors or General Motors are also growing, and producing sustainable electric cars.
In order to understand the growth strategy and the other strategic planning of Tesla, which is assisting the company to grow in the market, several models will be used in this essay. Several analysis models will be used in this study, in order to understand the growth strategy of the company. Pestle analysis will be used in order to determine the external factors that influence the business. In addition, the strength and weaknesses of this company will also be evaluated, in order to understand the positive and negative factors that influence the business growth. A gap analysis will be conducted in this study, in order to identify the strategic choices that the company makes and the current strategic position the company is in right now. In addition, in order to maintain the relevancy of this study, several evidence-based theories will be incorporated, which is also important for providing logical explanation. In addition, lastly, several recommendations will be provided, that is beneficial for the company to enhance the strategic choices in order to further grow in the market and also acquire more market share.
Political- USA has 0.44 points within the political stability index, which has indicator from -2.5 to 2.5 (TheGlobalEconomy.com, 2022). This number indicates that the government of USA is quite stable; however, the rank of the country in the political stability index has decreased in 2020. If the rank further decreases, then the point will hit the negative mark, resulting in the unstable government. In terms of corruption rate, within the last few years the points of USA fell to 67 out of 100, which is extremely low. This point indicates that corruption has increased among the government or the public companies in the country. This indicates that the businesses have to overcome corrupted public authorities in order to acquire a safe position in the market, which is challenging.
Economic- according to the latest reports, it has been seen that most of the billionaire resides in this country. The current GDP rate of US is 24.49 trillion dollars, which is also considered as one of the largest GDP values in the world (Data, 2022). In terms of GDP nominal rank, US is ranked at 1, which shows that this country is financially extremely strong. In terms of inflation, the rate decreased from the previous year and currently it is 1.4%, which also shows a positive economic progress (Statista 2022). This indicates that businesses have an opportunity to lower the product prices, which is also beneficial for the customers.
Social- Every year North American countries witness a 0.45 growth in the population level. Currently, USA is densely populated with approximately 331,002,651 people all over the continent (Data Commons, 2022). According to the latest reports it has been found out that approximately 94 people live in per square kilometre. The per capita income of the people in the country is 66,060 PPP dollars, which is anticipated to grow further by the end of this year, due to growing industries in the country, which is a positive factor for the businesses (Data Commons, 2022). The adult literacy rate of the country is 88%, which is comparatively lower than the other countries, however the literacy rate has increased than the previous year (ThinkImpact.com 2022).
Technology- According to the reports, in the year 2019, there have been over 50 trillion dollars, which are 656 billion dollars investments made by US. The majority of the investments were made by the private sectors of the country, which is almost 486 billion dollars. It has been observed that all of this research and develop investments represents almost 3% of the overall GDP of America. Over the past few years, the government has introduced several technological programs, that have increased the technological awareness among people. In addition, 89.4% of the overall population has been recognised as internet users, indicating that majority of the population are aware of technological benefits (Data Commons, 2022).
Environmental- America has established several policies as well as acts that are beneficial for safeguarding the environment. Some of the important laws are the clean Air Act 1970, The Clean water Act 1977, The Comprehensive environmental Response, and Compensation and Liability act 1980 are few of the environmental protection acts (Findlaw 2022). In addition, the government has opened up facilities of waste management, which prevents the businesses from creating wastes on a regular basis.
Legal- In terms of customer protection the businesses have to follow several practices according to the policies set by the government, such as Fair debt collection practices Act, Fair credit reporting Act and several others. In addition, the government has also implemented copyright laws, which safeguards the products and services of a particular company from the frauds. Therefore, it can be stated that businesses have several opportunities to grow within this market without much of complications.
Apart from the external factors, the business strategy of Tesla is also influenced from the internal factors. There are several strengths and weaknesses of this company, which determines its position in the market. In terms of strengths, Tesla is considered as the leading automotive company in the world, and also the main company who introduced the importance of electric cars in the market. In addition, Tesla is also known for implementing innovative technology for manufacturing purposes. The automobile products produced by the company, also have innovative unique features that provides the company competitive advantages. In addition, it has been found out that the company invested around 1.8 billion dollars in order to bring advanced technologies, to increase the quality of the products, which manages to increase the customer satisfaction.
In terms of weaknesses, Tesla faces difficulties regarding manufacturing process, and also the production rate of the company is relatively lower than the other automotive companies. One of the major weaknesses of this company is that, the target customer group is low. The particular reason behind this circumstance is that, the products are expensive and not everyone can afford it. Therefore, expansion of the business can be difficult for this company, as there are not many customers in the market. In addition, in 2016, this company was under a 2.5 billion dollars debt, because there was not much profit. According to the reports, the company is still yet to recover the debts, because the company lacks profitability.
Tesla focuses on the differentiation strategy as off now, in order to attract the customers. It also provides the company competitive advantage in the market. This company uses the differentiation focus strategy and offers unique products to the market, because it helps in attracting the attention of the customers. In addition, Tesla also focuses on a limited target customer group, who are loyal to the company (Ingram 2018). These customers have the high tendency to buy products that are implemented with high quality technology. One of the major benefits of this generic strategy is that, once the company offers aunique item to the customers, the number of competitors in the market automatically decreases. Tesla is the only company that introduced the concept of electric driven cars in the market, and there are still to potential customers in the market that offers same technologically advanced automobile product in the market. Currently, Tesla has adapted to the broad differentiation as the competitive strategy in order to expand the customer group. Tesla has planned to reduce the product prices to a certain level, that few more customers become able to purchase the vehicle. This strategy will also be beneficial in terms of increasing the brand popularity, not only in the local market but also in the international market. With this new pricing strategy, it will be easier for the company to penetrate into a new market, where the per capita income is relatively lower than the USA, resulting in the further growth of the company. Still now, Tesla has invested a huge amount on the research and development department, in order to become more technologically reliable in front of the customers. This also satisfies the customer demand, which currently is to use a smart car, with severalbuilt-in facilities.
In terms of interactive strategy, this company do not rely on the paid advertising facilities, and in fact close to no product promotion. Social media influence, plays a huge role behind the popularity of the products among the customers. Without any promotional strategies, the profitability of the company is highly dependent on the brand image only. In addition, this company has a strong presence over the digital media instead of the traditional media, which attracts the customers who are aware regarding the technological advances (Dai 2020). The main intensive strategy, which Tesla currently applies, is to increase the profitability by gaining maximum return over a product, and increasing the market, by using market penetration strategy. In order to push the sales further into the international market, the company offers discounts over the vehicle prices that attract the customers of different markets (Fisher and McCabe 2019). It can also be observed that Tesla has often used the aggressive marketing tactics in order to gain customers from the competitive consumer market. In terms of market penetration strategy Tesla focuses on increasing sales by reducing the actual price of the products, which provides the customers a chance to afford the new product. Once the company gets satisfied by the sales and revenues, Tesla increases the vehicle prices to the original level, which also assures profitability and a segmented customer group within the new market.
In terms of product development, Tesla has introduced a large product line with different as well as innovative product line. Due to this the company focuses on the research and development, and offers customers a lot of vehicle option to select from (Kozlovskyi et al. 2018). Investments for innovation are the main purpose of Tesla, for the product development purpose. The new ranges or the broad ranges of products are also beneficial for attracting the existing customers, which is also beneficial for the company’s overall bottom-line.
Tesla has also adapted to the blue ocean strategy, in order to increase the rate of sales and revenue. Tesla’s objectives are to expand the quantity and diversity of the electric vehicles accessible to the general public in order to minimise reliance on harmful chemicals and oil pollutants. It attempted to satisfy consumers providing more safety and reliability at a reasonable cost. The main objective of the sustainable automobiles was their minimal energy consumption, which appeared to be odds with the high end sport car’s attributes. Tesla Motors is the only company to incorporate the aforementioned characteristics in a single vehicle and named it as Tesla Roadstar, also the first produced vehicle model of the company. The company displayed the vehicle as a quick car with a lot of torque and no pollution. Tesla can be given credit for developing a market for electric cars, which is an entirely new market that has never existed previously.
Product innovation- Tesla can be considered as the most successful vehicle brand that successfully launched new products in the market. The plug in electric driven cars never existed before; however Tesla efficiently acquired 2% of the automotive market share in the US, just by launching innovative electric cars (Gali 2020). Tesla decided to input more unique features, making the car digitally independent, as the torque can be controlled without even manual force. Therefore, it can be considered that Tesla focused on developing new products, investing on technology in order to attract the customers and increase their sales.
Process innovation- Tesla used process innovation by altering the methods in which they develop and distribute their vehicles. They shifted their development method from tight innovation to accessible innovation in the beginning. In addition, this company also formed alliances with firms like Toyota, and Panasonic. It helped the company to truly achieve open innovation on the technologies and the electric cars by collaboration with the aforementioned firms, along with their research and development teams (Kim 2020). As a result, Tesla obtained greater resources and assistance from others in terms of process innovation. This opens up more opportunities for Tesla to introduce new products and extend current product life cycles.
Paradigm innovation strategy- Consumers are being sent a new notion from Tesla, which is that avoiding the environmental harm is the best possible way to increase the quality of life (Lang, Reber and Aldori 2021). Therefore, the electric cars are mutually beneficial for both the quality of life and environmental factors. This paradigm attracts the customers who are concerned regarding the sustainability factors.
Position innovation strategy- Tesla pioneered a new sector for premium electric vehicles and has now established itself as the industry leader. This company’s new market is distinct from the traditional automobiles, as well as less priced gas-driven vehicles. People that are interested in sophisticated green environmental ideas are considered as Tesla’s target consumers.
In this section of the study, the strategic choices and the strategic position of Tesla in the market will be analysed in order to understand the gaps of the company. Tesla’s declared aim is to help the world transition to sustainable energy, which is extremely beneficial for the environment. The firm began out as a unique differentiator in the automotive sector, producing market disrupting items in the form of premium electric automobiles. Furthermore, the firm expands via the utilisation of innovative technology to produce new goods as part of its rigorous expansion plan. As a result, Tesla’s aggressive expansion plan includes an emphasis on product differentiation strategic choice.
Tesla is helping to move the global transportation industry and the whole planet away from the harmful gasoline engines and towards more sustainable and environment friendly energy sources. The firm creates unique electric automobiles and lithium-ion batteries to help this strategy become a reality (Toumi 2018). Furthermore, under the intense growth plan, the firm’s second primary strategy is substantial research and development, which allows the corporation to offer distinctive goods and generate larger sales. Tesla also utilises expansion plans as a secondary intensive growth strategy, in which the firm concentrates on expanding its market reach and increasing sales by penetrating into new markets throughout the world.
Tesla has implemented a D2C also referred as direct to customer business strategy, in which the firm distributes its vehicles to the consumers directly, by removing any intermediaries from its supply chain, like the dealers. Tesla's supply chain processes are also deeply integrated, as the business owns and controls the factories that produce electric automobiles (Shao, Wang and Yang 2021). Tesla has also been focusing on the research and development mainly, such as software updates, automation and material costs. As the company thrives on incorporating unique features in the vehicles, it becomes necessary for the company to focus on innovative factors. The significant investment in R&D is intended to produce more advanced technologies for their goods, hence raising the obstacle to entry into the electric car and battery sectors. This company holds the unique status of being the market’s inventor and leader due to its much larger R&D expenditure in comparison with other organisations in this particular industry (Taylor 2022). This keeps Tesla in the distinct position of having a durable comparative benefit in the electric automotive market.
Despite of concentrating on the research and development department, it has been noted that there are several reports of customers against the product quality of Tesla. The electric cars of Tesla are noted for their high performance, eco friendly energy usage, and innovative design. However, previously balancing and enhancing production without compromising quality has proven to be significant issue for Tesla (Zhang and Wang, 2019). In the initial phases, difficulties with unfulfilled promises and failing to deliver were common. The major gap that has been found in the strategic position is that Tesla vehicles are the cost of the cars, which are extremely overpriced. The company has become aware of this problem, since the customer count has become stagnant, because many cannot afford the products. The company however, has vowed to unveil a 25,000 dollar Tesla vehicle within three years, which is relatively lower than the other prices. Currently, the cheapest Tesla cost over 38,000 dollars with a range of 250 miles per hour (Business Strategy Hub 2022). The other model’s pricing ranges from 100,000 dollars to 200,000, which is extremely high end for the average customers. Colours, luxury interiors, wheels, and many other digitally control feature are not included in these cars, of these price ranges (Wang and Peng 2020). Therefore, the customers often complain about the limited quality and extreme high prices of the cars.
Tesla has also failed to satisfy the customers in terms of providing accurate customer service. Tesla does not enable owners to work on or repair their cars. All repairs and maintenance must be done at a Tesla Service centre, with the exception of replenishing washer fluid (Wu 2021). Infact, many customers has reported that the servicing process is extremely slow. Despite charging high prices from the customers, the company do not provide accurate services to customers that have become a big issue for the company. Since Tesla only authorises certain repair shops to repair on their vehicles, this is the case (Furrier 2022). Furthermore, Tesla is the only company that offers body components for its vehicles. After an accident, clients must locate a Tesla approved body shop, which will then order components from Tesla, which will be shipped to the body shop, and the repair process will begin. Tesla has a horrible reputation for shipping repair components to body shops in a timely manner. They can take anywhere from 3 to 4 months.
Apart from the issues, the main idea to increase sustainability has been widely accepted by the people. Although people are not being able to afford the car, they have appreciated the ideology of the company. Tesla sells electric vehicles to both men and women, but its client profile is mostly made up of men who are searching for high-end luxury and sports automobiles. Tesla's target clientele are tech-savvy, environmentally concerned, and green-friendly individuals. Due to technology advancements and the reputation involved with owning a Tesla automobile, need for Tesla cars is increasing not just among environmentally aware buyers, but also among tech-savvy consumers.
Tesla can concentrate on the quality management process, in order to prevent any defects that damage the overall quality of the final product. It can be referred that prior to the delivery process, Tesla can additionally perform efficient quality control assessment methods to further detect quality concerns and minimise various flaws (Thomas and Maine 2019). The quality of the cars can be further improved if the company implemented different types of quality standards, to enhance the overall quality of the items as well as their services to the customers, for which the customers often complains.
It is recommended that apart from focusing on the product differentiation strategy, the company can adopt market development strategies, in order to reach to higher number of people. Due to lack of promotional strategies, people are often unaware of the true message regarding the sustainability. Various market development strategies will be beneficial for the company in terms of acquiring a leading position not only in the local market, however the international markets.
The company can also follow the Consumer Decision making Process Theory, in order to understand the basic demands of the customers. It has been found that, the sales and revenue often remain stagnant for the company. The particular reason behind this circumstance is that, the vehicle prices are too high. Therefore, in order to increase the sales, the company can lower the prices of logistics, suppliers or find new alternatives, as per the theory.
Fast charging equipments are also required to boost electric car demand and handle the problem of restricted charging capacity. As a consequence, additional charging points needs to be built by the company, as the necessity for charging points has increased as the number of electric cars sold has increased.
It can be concluded from the overall discussion that, Tesla is the most well known electric car manufacturers, with a strong reputation for providing eco friendly solutions. Furthermore, the electric car sector’s external market study assisted in identifying that need for electric vehicles is expanding in contemporary times due to growing concern for sustainability. However, there are few issues that have been identified in the study such as supply shortage, expensive services and products, inventory shortage and many more. In addition, there is also marketing strategy shortage in the company, which is an issue in terms of acquiring further customers in the international market. Tesla is highly focused on product differentiation strategy. In order to penetrate into the international market, as the company desires, it is important for the company to increase its sales and revenue. Furthermore, to grow its market presence and fulfil its purpose of speeding the global transition to adapt to sustainable energy, the firm should implement a market development plan.
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