Business Analysis

Assignment 1: Tesla Motors: Disrupting the Auto Industry

Ronnie L. Taylor

Prof. Dr. Obioma Iwuanyanwu

MGT 599 – Management Capstone

25 JAN 2021

Tesla Motors: Disrupting the Auto Industry

Definition of Strategy and Fit with Tesla

The strategy is a critical term defined by the action plan designed to achieve a set goal. The strategy considers choosing decisions that would set a direction company can take in years to come to gain success in terms of achieving specific goals. Implementation of decisions can take time to implement. Arriving at a decision takes a rational aspect.

Like any other leading company, Tesla Motors aligned its strategic journey back to 2006, where it considered creating new better brands that would gain high demand in the market pollutants (Grant, 2016). The company hoped to develop affordable cars that operate with a generation of power with no carbon emission. It applied a secretive strategy that would define a new future for the firm. It was set to outline the strategic decisions once they were ready for implementation.

Tesla succeeded in implementing the decision bus and started reloading new car models target g sports. It released Roadster sports car in 2007. Later, it released the car's models progressively, including model S, Model X and Model 3 with decreasing prices. So far, the company has successfully managed to produce electric cars.

Tesla’s Main Strategies

Tesla has come a long way to arrive in its current position. The company has applied unique strategies to promote its achievement of set goals. Under Elon Musk's leadership, Tesla Motors applied the obliquity concept to help achieve the objects directly. The strategy appeared weird but would help the company to come up with a unique product. The company-new product was unique such that it would create a revolution in the industry.

The company targeted to start with the production of expensive cars before narrowing down to consider those looking for cheap options. The move was set to create the right brand name for the company and its products with value. It would also create a strong impression on the firm hence crate a big name to the company. However, the management understood that it was a risky strategy to enter the market. The strategy was successful where after the sale of the roadster, Tesla managed to create cheaper models from revenues gained. In this regard, the company developed affordable cars that would compete with those from competitors.

With zero-emission, Tesla managed to offer differentiated vehicles to the market. It was a pivotal response to lowering global warming pollutants (Grant, 2016). So far, Tesla ranks among leading firms in the automobile sector owing to electric vehicles that are less pollutant and fast-tracking.

Tesla’s Industry and Main Competitors

Reflecting on Tesla’s operations and manufacturing units, the company may do several industries where it holds production lines. In the automobile sector, Tesla has significantly created a lead in electric cars' production and sale at affordable prices (Moritz et al., 2015). The company faces massive competition from Chevrolet, Renault-Nissan, BAIC, and Hyundai. Each of these companies has a different way they approach the market to remain competitive.

Tesla competitors such as Hyundai apply product diversity strategy. Hyundai has a wide range of products where it doesn’t limit its manufacture to just electric vehicles. Hyundai also produces the convectional fuel-based cars hence expanding its market. Since customers find electric vehicles expensive, Hyundai does not suffer from the low demand associated with electric cars.

Another strategy competitors apply includes market focus. Most competitors have a broader market, unlike Tesla. Companies such as Nissan, Chevrolet and Hyundai sell their cars to expounded global markets; thus, they achieve a higher demand, sale and revenue (Schmitt, 2017). Despite the risk associated with expanded market reach, competitors enjoy continued demand and sales that promote their growth.

Industry Analysis and Tesla’s Current Standing

Tesla is a growing company and a key market player in the automotive industry. To analyze the firm, we apply the porter’s five forces model. The model considers factors that include the threat of new entrants, threats from substitute products, supplier power, buyer power, and competitive rivalry.

There is a low Ease of entry firms to the automotive industry. Despite the many benefits accrued with the sale of cars such as high revenue generation, the cost of starting a business becomes a significant barrier to entry. The manufacture of its production line targeting electric cars is still new, attracting huge expenses (Dudovskiy, 2019). Other companies are still attempting to create clean energy vehicles as they seek to capture the growing demand. However, even though the entry of new firms is moderate, a high level of competition exists. Tesla is currently facing stiff competition from Honda, general motors and Toyota.

Suppliers hold moderate bargaining power in the market. Currently, multiple suppliers if automotive parts exist. However, there is still a lower number of those who specify the market's electric power components, making them hold a moderate power (Grant, 2016). Even though Tesla has identified itself with affordable electric cars, the other automobile industry players and their products still offer alternatives to the market (Dudovskiy, 2019). Thus, the buyers are torn between many factors; hence they hold high power in the bargain. Also, the moderate threat from substitutes exists in the market. Customers who don’t afford to purchase electric cars can still prefer conventional cars that use fuel. Concerning the industry dynamics, Tesla is still far from the leading car manufacturers such as Toyota.

Proposed Performance Goals

Tesla needs to make the following goals for the one and five years periods, respectively.

Next-One Year

1. Increase its vehicles sales by a minimum of 20% in one year through the extensive market in emerging become such as China.

2. Increase production capacity by 10% to meet rising demands from a growing market.

3. Continue with research and innovation to continue developing better cars in the next year.

Subsequent Five Years

1. Grow the market share to cover its reach to the extended global market to strengthen its industry position.

2. Introduce newer and more affordable cars that will attract more customers leading to higher demand and increased revenue and profits.

3. Open at least three more production facilities situated in different regions to lower the costs of reaching expanded global markets.

References

Dudovskiy, J. (2019). Tesla Porter’s Five Forces Analysis-Research-Methodology. Research-Methodology.

Grant, R. M. (2015). Contemporary strategy analysis: Text and cases. 9th Ed. John Wiley & Sons.

Moritz, M., Redlich, T., Krenz, P., Buxbaum-Conradi, S., & Wulfsberg, J. P. (2015). Tesla Motors, Inc.: Pioneer towards a new strategic approach in the automobile industry and the open-source movement?. In 2015 Portland International Conference On Management Of Engineering And Technology (picmet) (pp. 85-92). IEEE.

Schmitt, B. (2017). World’s top ten EV makers, and the case of the missing Teslas. Forbes. Retrieved from https://www.forbes.com/sites/bertelschmitt/2017/05/05/worlds-top-ten-ev-makers-and-the-case-of-the-missing-teslas/#22d6ad8565be