Executive Summary
The case study of Tesla is the primary subject of this document, in particular its external and internal analyses. The company’s current ratio was the lowest, which shows that Tesla needs a steady and sufficient level of assets to cover immediate obligations and support everyday activities. Some of Tesla’s competitors include BYD, GM, Volkswagen, BMW, Mercedes, SAIC, Volvo, Audi, and Hyundai. The most important areas for executing Tesla’s plan and gaining a competitive edge are the production of electric automobiles and energy-producing systems. Tesla has become a top employer for employees thanks to its innovation and diverse capabilities. According to this PESTEL/PESTLE analysis of Tesla Inc., there are several opportunities for the company to expand. For instance, free trade agreements reduce the sector’s size. To capture the market share, particularly outside of America, Tesla needs expand operations to remote locations and ramp up its marketing efforts.
Introduction
Tesla’s two primary key business divisions are the automotive and clean energy industries. The company used a variety of strategies during the period covered by the case study, including fully electric automobile design, development, manufacture, sales, leasing, and providing services for its goods. Tesla’s automotive division creates, develops, produces, lets, and vends electric vehicles and sells regulatory credits. Services including unwarranted after-sales vehicle services, used-car auctions, retail goods sales, vendues by its developed businesses to third-party consumers, and vehicle cover are all ways that Tesla makes money, and all of them contribute to its overall financial success. Tesla thus belongs to the automobile and energy industries.
A company must assess its competitive environment following Porter’s five forces to succeed. Porter’s Five Forces is a well-known paradigm for analyzing the competitive elements that impact many business sectors. A Five Forces study can help businesses develop strategies and gain a competitive edge. Douglas McGregor asserts that two aspects of human behavior are at work in his Theories X and Y. (employees).1 According to Theory X, the typical team member hates their jobs intrinsically and seeks out methods to avoid them whenever feasible. The team member must be convinced, forced, or threatened with a penalty to work to achieve organizational goals.
Managers must keep a close eye on their workforce. The managers adopt a more autocratic stance. Many individuals place a high priority on job stability yet have few goals or ambitions. Workers dislike being given new responsibilities or change and need direction from above. Employees might consider their work to be relaxing and routine, according to hypothesis Y. They unavoidably must use their physical and cerebral abilities when working. Employees may apply self-direction and self-control to sanctions, controlled systems, and coercion if they are serious and devoted to achieving company goals. Group member participation and company loyalty will increase if the work is fulfilling and engaging. A typical team member is capable of accepting and assuming responsibilities.
Companies may harness their workforce’s innovation, ingenuity, and creativity to solve internal problems. The Ansoff matrix paradigm states that companies should look for ways to increase profits by creating fresh commodities or “tapping into” new markets. Because Tesla’s strategies failed to boost competitive advantage, persuade employees, and identify opportunities that could maximize Tesla’s profits, it can be concluded from the assumptions made by Porter’s five forces analysis mode, Theories X and Y, and the Ansoff matrix framework that these strategies were not appropriate. In the next five years, Tesla’s business model will be the most effective, based on selling cars directly to customers. It also aids in understanding consumer requirements and preferences so that the business may tailor its offerings to meet those needs and interests.
Additionally, keeping existing clients’ costs significantly less than recruiting new ones. According to the completed analysis, understanding the target audience when producing automobiles is the recommended future approach for the selected automotive SBU and Tesla. To generate better leads and more sales, Tesla may design the most focused marketing campaigns by learning as much as possible about its audience. Tesla should concentrate more on its customers since it is simpler to sell a new car to a customer who has already had a positive experience with the brand and the dealer. Tesla can start by learning about its audiences, such as their geographic location, age, gender, and other essential factors. It is no accident that a McKinsey poll found that the customer’s service experience is more critical when purchasing a new car than the previous purchase.
Internal Analysis
Financial Analysis
Tesla’s current ratio margin climbed in 2020 and decreased in 2021 throughout the four years, as predicted by the current ratio. In 2020, Tesla had a high current ratio margin of 1.88, which decreased to 1.39 in 2021. The firm’s current ratio was the lowest, indicating that Tesla needs a consistent and sufficient level of possessions to pay short-term responsibilities and maintain daily actions.2 2020 saw the company’s quick ratio margin reach its most extraordinary level, possibly due to the rising number of assets. In 2020, Tesla had the highest quick ratio of 1.59 and a lower quick ratio of 1.22 in 2021.3 Tesla would quickly convert its cash-generating assets to money with a better quick ratio to retain its financial stability and pay off its immediate debts.4 Tesla’s cash proportion increased over the last four years among the liquidity ratios. Tesla’s current cash availability can be seen by the more significant growth edge of the cash ratio.5 Therefore, the company has an advantage of thriving during sudden events or emergencies due to the increasing quick ratio.
Segmentation Analysis
Five significant departments or divisions comprise Tesla’s organization: Energy, engineering and manufacturing, communication and human resources, and sales and software. The sales division inside Tesla’s organizational structure meticulously develops, prepares, and executes a series of moves as part of the firm’s segmentation, focusing, and positioning, which is done with the full support of other divisions within Tesla. These procedures involve segmenting particular populations or population groups. Tesla and the segments have similar goals and objectives. According to Tesla, these markets have the highest likelihood of regular consumers purchasing its products and services.6 The needs and desires of each section of the population are then ascertained after identifying those segments. Tesla produces goods like electric cars that can satisfactorily meet customers’ demands within the defined population categories. Then Tesla developed a marketing strategy to portray itself as the market and industry leader.
Market segmentation is the first of several tasks completed by Tesla’s sales division. According to Tesla, the four main categories are geographic, demographic, psychological, and psychographics. Area and population density are taken into account by the Tesla Divisional structure. Age, gender, profession, and life stage are considered in demographic segmentation. The behavioral segmentation technique considers consumer position, loyalty, character attributes, and needs for Tesla products and services. Hence, Tesla’s segmentation approaches, which include psychographics and behavioral give it core competencies of focusing on clients who require environment-friendly automobiles.
Competitor Analysis
BYD, GM, Volkswagen, BMW, Mercedes, SAIC, Volvo, Audi, and Hyundai are some of Tesla’s rivals. With a brand worth about 75.9 billion US dollars, the Tesla nameplate was acknowledged as the most valuable in the automobile industry in 2022. Mercedes-Benz is now in front of Toyota, the 2020 market leader. In 2021, Tesla was at the top of the list of the most valuable automakers after steadily climbing. The Toyota Motor Company, which was created in the late 1930s, is the parent company of Toyota, the runner-up. One of the biggest firms in the world’s automotive sector, the Japanese producer operates in several markets, including trucks, motorcycles, SUVs, and crossovers. The ranking of the most valuable automotive brands worldwide includes manufacturers of vehicles like BMW and Mercedes-Benz. Mercedes-Benz manufactures luxury and crossover cars, buses, and lorries. Tesla had the highest sales of any electric vehicle brand in 2020. Consequently, Tesla’s occupational model, which is based on direct services and sales, gives it a core competence of meeting customer needs hence, increasing its sales.
Marketing Analysis
The product and place elements are given more weight in the Tesla 7ps of marketing than in other parts of the marketing mix. Additionally, as the main drivers of Tesla’s competitive rewards, the marketing mix’s elements of brand and place have been adjusted. Tesla, in particular, produces fast and attractive all-electric vehicles.6 The electric car producer also avoids interacting with auto distribution partners by selling its vehicles straight to end users. People and households worried about the environment and the negative consequences of CO2 emissions are part of Tesla’s target market niche. 7 Telsa’s referral project has successfully enhanced the client experience by giving away a $1,000,000 credit along with many extras and advantages.6 The marketing analysis of Tesla shows that Tesla has the core competency of open communication from the CEO’s interaction with customers on social media, which attracts media attention, which usually works in the brand’s favor.
HRM Analysis
The company tries to be the best in every category to advance global change to supportable energy. According to Porter’s competitive strategies of innovation and cost reduction, which are visible in Tesla’s human resources practices, Tesla’s primary focus is on battery technology, which will allow them to produce affordable, high-volume electric cars without noise, pollutants, or dirt. Tesla encourages its staff to take the initiative to develop creative ideas that will set the business apart from its competitors in the automotive industry. For instance, Tesla’s organizational culture preserves and utilizes team members’ abilities for effective strategy execution and commercial success (Meyer, 2019). Therefore, the company has a core competency of producing cutting-edge cars by incorporating team members’ suggestions with this open innovation model.
Tesla currently is the most innovative business in the world. Innovation is characterized by team members involved in the design and model selection process since it motivates and inspires employees to be more involved, creative, and passionate about their work. However, adopting a competitive innovation strategy has disadvantages because the business would undergo erratic, continual change, demanding continuing modifications to HR policies to meet organizational needs. Tesla hence has the core competency of verifying the veracity and dependability of applicants by putting them through a trial period to assess their aptitudes.
Operations Analysis
The activities that describe Tesla’s operations include developing, designing, selling, manufacturing, and leasing energy generation systems and electric vehicles. Manufacturing electric vehicles and energy generation systems are the most significant categories in delivering Tesla’s strategy, attaining a competitive edge. Tesla uses a direct selling business model and vertical integration when selling its products. It recognizes a complex supply chain and integrates various production phases, from battery manufacturing to self-driving algorithms. From the case study, Tesla’s value-adding activities include Human Resource Management, innovation, sales, marketing, after-sale services, and logistics. From Tesla’s operations analysis, it is clear that the company has a core competence of developing its sales, client relationships, and marketing competencies since it can closely associate with its consumers.
Strengths and Weaknesses Analysis
Tesla has several strengths, which include the following: it is a leading employer firm, has valuable automobiles, is best in manufacturing electric cars, has diverse employees, and enhances creativity. Tesla’s diversity and innovation capability have helped it become a top employer for employees. Despite these challenges, Tesla generated $53.8 billion in sales revenue in 2021 by selling 936,172 motors to customers.8 The company’s market worth increased to above $1 trillion due to the rise in sales and its $5.6 billion profit, which enabled it to outpace the combined market valuation of the five largest manufacturers.9 Tesla has trailed every other symbol in the race for the most excellent electric motors.7 Tesla’s electric engines are superior across even the most extended ranges when evaluated by their range. The most recent study has Tesla in the top three categories for variety.7 Tesla delivered an exceptional overall performance in 2021, despite the delivery chain issues and semiconductor shortage.7 As a result, the market anticipates and assumes that the company will increase valuable and competitive goods, which leads to significant economic gains.
Tesla’s weaknesses include manufacturing complications, difficulty attaining client demand, lack of adequate production, battery shortages, and financial uncertainties. Mechanical challenges and production risk issues will increase as general innovation increases. Tesla experiences ongoing production, ramp, and release delays as it introduces new vehicles and products.7 Tesla may encounter an uneven supply in the future and be unable to meet demand due to very complex procedures and testing.7 Elon Musk claims that their manufacturing charge has fallen due to the limited availability of batteries.7 Unfortunately, Elon Musk has a lot on his plate to provide the company with all it needs.7 Unfortunately, the CEO performs most of the decision-making without involving its workers.
External Analysis
PESTLE Analysis
Political stability is one of the most vital political elements affecting the enterprise. Authority’s subsidies to sell alternative gasoline automobiles due to the negative results of CO2 emanations are an incredible political component for Tesla. This factor has a helpful impact, and Tesla has to date, been able to take absolute advantage of it. International exchange agreements manipulate the opportunity fuel vehicle producer’s bottom line because of the scope of their business operations. For example, the trade dispute between the USA and China under the Trump management has considerably impacted Tesla. The organization has even taken the legal movement to forestall the Trump management from enforcing responsibilities on imported elements from a Chinese electric-powered automobile manufacturer. Tesla engages in lobbying to persuade public policy more than its operations. Its lobbying finances are smaller than some different predominant global automakers, even though.
The economy as an entire can also affect Tesla. Amongst them shift in tax prices, the availability and satisfaction of infrastructure for the manufacture of gasoline-green motors, and the macroeconomic climate. The manufacturing of vehicles may also be impacted using critical financial issues, which include growing inflation, interest costs, and complex work charges. Since the producer of alternative fuel vehicles operates worldwide, the forex price volatility is the most extraordinary monetary element affecting Tesla. Tax legal guidelines and charges are different elements that directly affect corporations. A vital external financial thing for producers of electrical motors is the declining rate of batteries. The increasing call for renewable power, the improvement of the earnings distribution in developing economies, and the popularity of low-carbon existence are the three major external elements essential to Tesla’s commercial enterprise (possibility).
Based on the widening wealth gap in growing nations, Tesla has a chance to enhance its economic performance. This fashion in wealth distribution will increase the populace of capability customers of the employers as an alternative to steeply-priced cars. How far Tesla’s car and electricity solutions businesses expand will depend on cutting-edge technology. 10For example, the overall performance and economics of the corporation’s batteries are ruled through the materials engineering era. For Tesla, Inc.’s car business, excessive fees of technological change (opportunity and threat), growing enterprise automation degrees (possibility), and expanded use of cell internet structures are all essential technological outside elements (possibility). Ecological developments, for example, impact the availability of resources used in the enterprise’s manufacturing tactics.
In this situation, the market for Tesla is impacted by outside environmental elements, including weather change (possibility), expanding environmental tasks (possibility), and tightening rules for waste disposal (opportunity). Laws and prison structures affect managerial choices and business growth. For instance, Tesla uses its 4P or advertising mix while abiding using the regulation. The organization follows legal restrictions in its human resource planning and business alliances. The following external legal considerations for Tesla, Inc.’s corporate strategy must be taken into account: extending global patent protection (opportunity), imposing energy usage laws (opportunity) and restricting dealership retail sales (opportunity & threat). As a result, Tesla can significantly expand its business abroad without risk if international intellectual property protection is increased.
Conclusion
With time, Tesla Inc. becomes more profitable. A few factors affecting this result are Elon Musk’s leadership and reputation. The company can take steps to address the competitive environment. Tesla competes extra efficaciously in the worldwide automobile market. Tesla must constantly adjust to keep up with competitors since such trends impact all companies in the car, battery/energy garage, and power technology industries. Therefore, the enterprise should consider how its monetary status stacks up against that of different producers and companies of electricity-associated goods. This PESTEL/PESTLE analysis of Tesla Inc. suggests that there are many probabilities for the agency to grow. Free trade agreements, for example, make the sector smaller. Tesla should extend its operations to distant places and increase its marketing tasks to seize the marketplace percentage, particularly outside of America. Because of Tesla’s restricted foreign places income operations, this choice might also reduce market-based total risk.
Reference List
Anon ‘Tesla’s revenue between FY 2019 and FY 2021, by segment’ Statista. Web.
Anon 2022 ‘Tesla SWOT Analysis – Strategic Analysis of Tesla Motors’ someka. Web.
Dharejo, N. and Dharejo, A, The Impact of Theory X and Theory Y on Organization Performance in the Private Banking Sector of Sindh, Pakistan. International Journal of Business and Economic Affairs, 7(3), 2022. Web.
Dudovskiy, Jogn 2021 ‘Tesla Marketing Strategy: a brief overview’ methodology. Web.
Ibrahim, M, Measuring the Financial Performance of a Telecommunications Corporation. International Journal of Recent Technology and Engineering, 8(4), 2019
Rosini, I. & Gunawan, J, Financial ratio and performance airlines industry with DEA and TOPSIS model. International Journal of Pure and Applied Mathematics, 119(10), 2018
Saxena, N. and Vibhandik, S, Tesla’s Competitive Strategies and Emerging Markets Challenges. IUP Journal of Brand Management, 18(3), 2021. Web.
Shah, M., 2022. Adapting vs Standardizing Electric Vehicle: Challenges and Opportunities in Marketing (Doctoral dissertation, School of Petroleum Management). Web.
Tesla.com, 2021. Web.
Footnotes
- Dharejo, N. and Dharejo, A., 2022. The Impact of Theory X and Theory Y on Organization Performance in the Private Banking Sector of Sindh, Pakistan. International Journal of Business and Economic Affairs, 7(3), pp.49-58. Web.
- Ibrahim, M, Measuring the Financial Performance of a Telecommunications Corporation. International Journal of Recent Technology and Engineering, 8(4), pp.4992–4994, 2019
- Anon ‘Tesla Quick Ratio 2010-2022 | TSLA’ macrotrends. Web.
- Tesla.com, 2021. Web.
- Rosini, I. & Gunawan, J., Financial ratio and performance airlines industry with DEA and TOPSIS model. International Journal of Pure and Applied Mathematics, 119(10), pp.367–374, 2018
- Saxena, N. and Vibhandik, S., 2021. Tesla’s Competitive Strategies and Emerging Markets Challenges. IUP Journal of Brand Management, 18(3). Web.
- Dudovskiy, Jogn 2021 ‘Tesla Marketing Strategy: a brief overview’ methodology. Web.
- Anon ‘Tesla’s revenue between FY 2019 and FY 2021, by segment’ Statista. Web.
- Anon 2022 ‘Tesla SWOT Analysis – Strategic Analysis of Tesla Motors’ someka. Web.
- Shah, M., 2022. Adapting vs Standardizing Electric Vehicle: Challenges and Opportunities in Marketing (Doctoral dissertation, School of Petroleum Management). Web.