STRATEGIC ANALYSIS OF PRACTICES IN TESLA Inc. (Essay Sample)

STRATEGIC ANALYSIS OF PRACTICES IN TESLA Inc. By (Name) Name of the class Professor Name of school Date 1 Introduction Presently, there has been a global shift towards sustainability with new companies deciphering cleaner ways for production. The ever-growing environmental concerns have prompted the evolution and expansion of automotive manufacturing that encompasses clean energy generation and storage. In this industrial sector, Tesla Inc. has emerged as pioneer being renowned for its groundbreaking electric vehicles, solar products and energy storage solutions. The company was founded in 2003 by Elon Musk, JB Straubel, Martin Eberhard, Marc Tarpenning, and Ian Wright (Long et al., 2019). With its focus on Tesla, this report is aimed at facilitating a strategic analysis that unravels its current capabilities and strategic positioning. The selection of Tesla is poised on the company’s success in having a disruptive impact on traditional industries and the consequent impact of redefining the market landscape. The report majors on the key aspects of Tesla’s strategic practices focusing on analyzing the internal and external environment it operates in and its strategic methods and directions. Based on the analysis conducted, the report proceeds to evaluate the strategic practices to formulate discussions and recommendations. 2 Analysis of environment – 700 words  1 External Environment The collective processes and functions of an organization are often influenced by the prevailing conditions that exist within the particular industry. Ideally, organizations exist within a larger environment that encompasses various factors that directly or indirectly influence organization decisions. These conditions can effectively be illustrated through the adoption of external environment analysis tools PESTEL and Porter’s five forces framework. First, PESTEL facilitates the evaluation of relevant factors in line with Political, Economic, Social, Technological, Ecological, and Legal factors. * Political Political factors revolve around the government’s involvement in an industry and how different policies and restrictions affect the industry. Tesla’s operations and success is affected by government policies, incentives and regulations especially tied to electric vehicles. Tesla’s dependence on electricity and less on fuel promotes environment friendliness prompting tax credits for consumers using electric vehicles (Barrie, 2023). Political support for sustainable practices is a key driver for companies with sustainable practices. In the case of Tesla Inc. government incentives have strengthened its financial performance owing to its pursuit for environmental sensitivity. * Economic Businesses exist within the larger economic sphere upon which the profitability of the organization is determined. Economic factors influence the potential profitability of a company through aspects such as interest rates, exchange rates, inflation and consumer’s income. Prevailing economic conditions have been established to impact Tesla’s sales and production costs (De Sousa et al., 2022). Ideally, Tesla is susceptible to economic downturns. For instance the rapid growth of the automotive industry in 2016 and 2017 saw the increase in the sales of cost effective vehicles. * Social Consumer demand and consumer behavior towards specific products are important elements of marketing which are influenced by societal norms. Social factors shape and mold the target population. In reference to Tesla, the company popularizes the notion of luxurious electric cars and environmental friendly attitude which coincides with the growing environmental consciousness and the transition towards sustainable lifestyles. Nonetheless, social attitudes towards EVs and preferences for traditional vehicles can still pose challenges. * Technological Existing technological factors such as rapid innovation have significant potential influence in a particular industry. Incentives in automation and rapid growth significantly affect the overall growth of companies especially those operating in a technology intense environment (Zhu, 2022). Analyzing the technological factors in Tesla’s case illustrates instances of rapid advancements in battery technology, autonomous driving, and energy storage. Collectively, this facilitated the Tesla’s ability to stay at the forefront of innovation. * Ecological Over the recent years more focus has been laid on environmental impact that businesses incur in their operations. With this in mind, ecological factors encompasses environmental concerns on aspects such as regulation of pollution, carbon footprint (Shu, 2022). Tesla’s core mission aligns with increasing environmental concerns given that the company supports environmental programs to mitigate climate changes. This assertion is reflected in the company’s environment-sensitive products such as solar panels, EVs and batteries geared towards a sustainable future. * Legal Political factors revolve around the rules and regulations imposed within a country which have bearing on the operations of a company. Compliance with automotive and energy sector regulations, intellectual property protection, and product liability are essential legal considerations for Tesla's operations. 2 Internal environment analyses As part of the environment analysis, it is important to similarly perform an internal analysis of Tesla Inc. Central to the internal analysis is the consideration of the competitive advantage which are the specific attributes that make a company excel compared to its rivals (Yahdiyani et al.,2023) To facilitate this analysis, the report considers the following tools the first being VRIN framework which assesses the potential capabilities of competitive advantage based on the value, rarity, inimitability and non-substitutability of a company’s products (Talaja, 2012). An overall evaluation of Tesla’s product portfolio that includes electric powertrain technology, Supercharger network, brand, and software capabilities using VRIN framework demonstrates the company’s competitive advantage. Ideally in terms of strategic capabilities, the company succeeds in creating value from its products that do not only address the specific needs of the consumers but doubles up to facilitate a unique product that is difficult to imitate by competitors (Han, 2021). The second tool for the internal analysis is the Resource Based view which is an approach which suggests that companies must develop unique competencies to outperform rivals through a different way of operation (Lockett et al., 2009). Analysis using this tool illustrates that Tesla’s key resources include a strong brand, technological innovation, manufacturing expertise and a vertically integrated business model. Collectively, these resources provide a competitive advantage for the company by enabling efficient control over key components. 3 Strategic methods and directions – 350 words With the external and internal business environment analyzed, the report shifts towards the evaluation of the strategic methods and strategic directions employed by Tesla. The strategic competitive advantage of the company may be analyzed through the consideration of Porter’s generic strategies. Porter argued that a lasting competitive advantage can be established by companies through three generic strategies cost leadership, differentiation and focus. (Tanwar, 2013). Depending on the nature of the business, companies may adopt individual generic strategies or a combination to create a hybrid strategy. A close analysis of Tesla reveals that it relies on a hybrid strategy that combines two generic strategies for its competitive advantage. The first is differentiation which involves uniqueness along some dimension that is sufficiently valued by customers to allow a price premium. In Tesla’s case, the company differentiates itself through technological innovation, design aesthetics, and sustainability. Ideally, Tesla’s differentiation is driven by the product and service attributes which facilitate some aspect of uniqueness. It can be noted that the distinctive features of electric vehicles and energy products position Tesla as a premium and environmentally conscious brand (Saxena and Vibhandik, 2021). Additionally, Tesla incorporates the focus strategy where companies target a specific segment and tailors their products and services to the specific segment. While Tesla started with high-end models, the company has expanded its focus to more affordable models, broadening its market reach by primarily focusing on electric vehicles and renewable energy sources. With reference to strategic directions, the application of Ansoff matrix would be helpful towards determining the corporate strategy framework across the four basic directions for Tesla’s growth. First, under market penetration it is noted that Tesla penetrates its present existing market by increasing the sales of its current products (Jussani et al 2015). More specifically, the company engages in in expanding its supercharger network and enhancing software features for its existing electric products in the EV market. Secondly within market development, Tesla adopts a strategy to develop its market by entering new geographic markets. By expanding its global footprint, Tesla is able to tap into emerging markets while simultaneously increasing the global demand for EVs (Clarissia, 2021). Thirdly under product development, Tesla has been successful through its ability to introduce new models and upgrading existing ones thus pushing technological boundaries. Lastly with diversification, Tesla has primarily focused on electric vehicles while diversifying its portfolio to include energy products for energy storage solutions. 4 Evaluation of strategic practices – 800 words In this section, the report transcends towards the evaluation of...