Tesla Case Study

An organization should periodically conduct a strategic assessment. This should be in line with the company’s strategic plan, which it is implementing. A strategic assessment helps a manager evaluate the status of the firm and the direction the company (Choi, Myungweon & Wendy 50). This essay focuses on the phases and steps for strategic assessment and planning for Tesla. The company began its operations in 2003 to manufacture electric vehicles, which use renewable energy.

Business Strategy

Tesla Motors initial business strategy, which was led by the then CEO Elon Musk, was to start with higher tier vehicles that targeted an exclusive market. These expensive vehicles gave the firm global attention, consumer desire, and exclusivity in the luxury cars category. Consequently, the firm built its brand image, as it gained exposure. Eventually, the company produced lower priced cars, which used funds gained from their high priced automobiles.

The company’s current business strategy focuses on four objectives. According to Musk, in order for the company to accelerate sustainability, the firm needs to install solar roofs and storage back up that will produce and store energy in homes. Second, the company will venture into the public transport industry with electric busses. Third, Musk seeks to improve its autonomous driving software. Therefore, all their cars will become fully autonomous. Lastly, the company wants to offer clients an option of leasing its vehicles when not in use through Tesla shared fleet application.

Global Strategy

Hoelzlhammer states that Tesla employs five strategies on the international market by using economies of scale and location economies to achieve low cost and differentiate its products from others. First, the firm uses local responsiveness; it meets the locals’ tastes and preferences. For instance, the company modified Tesla Model S in China to include an executive rear seat. Secondly, the organization uses Certified Pre-Owned (CPO) Program that buys back Tesla Model S from users after three years (John). The customer gets a forty-three percent refund of the original price. The company then refurbishes the car and resells it at a profit. Thirdly, the company sells cars directly to their customers. Consequently, the company cuts on dealer costs such as inventory, advertising, and sales commissions (Dana n.d). In addition, the company has direct contact with customers. Therefore, the firm improves its customer satisfaction. Musk points out that, selling cars through a dealer raises a conflict of interest since most of them are selling gasoline motor vehicles as well. The fourth strategy Tesla adopts is the strategic positioning of showrooms and galleries. Mangram observes that, in the foreign markets, the company sets up showrooms in malls and streets with high human traffic to make their automobiles visible (300)

Social Responsibility

Tesla is committed to corporate social responsibility. The company has based its business model to ensure it produces clean energy and utilize renewable energy to power its automobiles, therefore, focusing its CSR (Corporate social responsibility) towards sustainable and eco- friendly solutions. More importantly, Tesla has shared its patent with other companies to contribute to a reduction in carbon footprints in the environment (Tesla Inc.). Musk focuses on entrepreneurial generation in which he has engaged the government on accelerating the renewable energy age to build a sustainable future. Moreover, he has become a role model for the youth, as he seeks to solve society’s problems

Mission, Vision and Type of Business

Tesla builds clean energy all-electric automobiles and backup batteries to individuals and companies. In addition, the firm produces energy solutions for homes and businesses such as powerwall, powerpack, inverters, solar roofing and solar panels (Tesla Inc.). The equipment enables users to generate, consume, and store renewable energy. These solutions align with their mission statement to create a sustainable energy ecosystem.

Tesla will conduct an assessment to establish the mission, the managers’ responsibilities and analyze its external environment during the strategic assesment. The company’s mission statement is “to accelerate the world’s transition to sustainable energy.” This statement reflects the aim of Tesla to become the dominant company in all-electric car manufacturing and battery business. According to Burke, the company’s expansion indicates the market is consuming Tesla’s clean energy products, thus, asserts suitability of its mission statement, which provides guidance on strategic decisions (102). In addition, the firm aims to become an industry leader in electric automobile production. This is attainable as the company’s popularity is rising as well as its brand image.

Tesla’s vision statement is to create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles.” (Tesla Inc.). David states that a vision statement helps guide the management on the company’s organizational expansion (65). Tesla has greatly achieved the mission and vision statement goals, therefore, indicating business development and effective operations.

According to Tesla Inc, the company aims to produce affordable, efficient and safe automobiles in every category. Engineers aim to combine safety, performance, and efficiency in every car model. As a result, this sets new global standards in electric car manufacturing to consumers and competitors. Furthermore, in order to ensure the adoption of clean transport, Tesla is making its products affordable and accessible to a larger population. Hence, this accelerates the introduction of clean energy as per the mission statement of the organization.

The leadership style of the CEO as a visionary leader has helped Tesla actualize its vision in a shorter time. Musk’s transformational leadership style has influenced the employees to be innovative. He leads by example and this inspires the staff towards their full potential. Collins argues that Musk makes people believe in his vision and this is important to lead such a corporation (12). Moreover, the CEO is committed to customer service as indicated by his interaction with customers on social media platforms.

The company’s clientele includes individual customers who want a high-performance electric car. These customers often include successful entrepreneurs, business executives, young professionals seeking a luxury eco-friendly car and the upper middle class. In addition, the organization has commercial relationships with companies such as Daimler, Toyota, and Panasonic. Tesla sells battery packs and chargers to Daimler for its Smart Fortwo electric cars. Panasonic supplies Tesla with battery cells for its battery packs. The company has collaborated with Toyota to help build some of its car models such as the RAV 4 Model by supplying the electric powertrain system.

Pratap says an organization should analyze its environment internally and externally during the strategic assessment using a SWOT analysis or Porter’s Five model. The Porters five forces analyzes Tesla’s environment as follows; the firm’s threat to new entrants is low due to barriers to entry in the electric cars market. This is due to the large capital and human skills requirement. The threat to substitution is medium. The existing car companies have expressed interest in joining electric car manufacturing in the future. As stated earlier, it is hard for a startup company to enter this market due to the barriers to entry in the industry.Therefore, the major threat is from existing automobile companies only. The supplier power is a force that poses a high risk for Tesla because of the high requirements of electrical parts for the electric vehicles. Consequently, the suppliers raise the product prices. The buyer power influence on the Tesla’s products is moderate due to few options in the electric cars market. However, it is a problem for Tesla if the customer’s need is only a high-end luxury car and not the fuel efficiency. Lastly, the competitive rivalry force poses a medium risk for the company due to few options offered in the electric cars market segment. However, with increasing demand for the automobile, there will be competition in the future.

Challenges

The company has one automobile factory and manufactures three cars, therefore, does not offer its customers variety. In addition, it lacks a luxury car for every segment as compared to other automakers. Moreover, Jaguar has developed an all-electric SUV, which has a lower price as compared to Tesla’s cars. According to Pratap, Tesla lacks the manufacturing capacity for market segmentation, therefore, limiting the number of cars assembled. Additional plants require an investment that the company does not have currently (Tesla Inc.).

Strategy Recommendations and Implementation

Tesla has operated at a loss for the past few years due to economies of scale and manufacturing setbacks. Therefore, the recommendation is that Tesla focuses on improving manufacturing. In addition, the company should seek to diversify its supply chain instead of the current strategy of single sourcing (Burke 22). Moreover, the organization’s move to foreign markets and venturing into the public transport system is ineffective due to the limited manufacturing capacity of the company. Tesla should add more personnel that are skilled over the next few years to meet their future expansion strategy.

Conclusion

An organization must begin with an assessment of its current situation and its external environment to inform on the direction the company is heading. Hence, it should identify the key processes and systems that lead to success and failure in the organization (Myungweon & Ruona 56). Periodic strategic assessment should form part of the organizational culture of an organization to indicate its importance and create awareness.

About the Author: Russell White