Tesla Strategic Analysis Report (Term Paper Sample)

STRATEGIC REPORT: TESLA, INC. IN THE AUTOMOTIVE INDUSTRY By (Name) The Name of the Class (Course) Professor (Tutor) The Name of the School (University) The City and State where it is located Submission Date Table of Contents TOC \o "1-3" \h \z \u STRATEGIC REPORT: TESLA, INC. IN THE AUTOMOTIVE INDUSTRY PAGEREF _Toc171265298 \h 1STRATEGIC REPORT: TESLA, INC. IN THE AUTOMOTIVE INDUSTRY PAGEREF _Toc171265299 \h 2Introduction to Strategic Management at Tesla, Inc PAGEREF _Toc171265300 \h 2Company Overview PAGEREF _Toc171265301 \h 2Objectives, Strategy, and Business Model PAGEREF _Toc171265302 \h 2Drivers of Business Value PAGEREF _Toc171265303 \h 2Financial Performance Indicators PAGEREF _Toc171265304 \h 3The Business Environment PAGEREF _Toc171265305 \h 3Main Trends and Factors PAGEREF _Toc171265306 \h 3PESTLE Analysis PAGEREF _Toc171265307 \h 4Porter’s Five Forces Analysis PAGEREF _Toc171265308 \h 7VRIO Analysis PAGEREF _Toc171265309 \h 10Geopolitical Risks and Economic Uncertainty PAGEREF _Toc171265310 \h 11Innovation and Technological Change PAGEREF _Toc171265311 \h 13Climate Change and Sustainability PAGEREF _Toc171265312 \h 14Conclusion PAGEREF _Toc171265313 \h 16Reference List PAGEREF _Toc171265314 \h 17 STRATEGIC REPORT: TESLA, INC. IN THE AUTOMOTIVE INDUSTRY Introduction to Strategic Management at Tesla, Inc Company Overview Tesla, Inc. was established in July 2003 by four people: Elon Musk, JB Straubel, Martin Eberhard, Marc Tarpenning, and Ian Wright. It is an American automotive and energy company that designs, manufactures, and sells electric cars, power storage products, solar products, and other related services (‌GlobalData Plc 2021). Tesla Company's mission statement is to embrace the world and transition to using sustainable energy as fast as possible. Objectives, Strategy, and Business Model In its current and future development, Tesla company's primary goal is to accelerate the world's transition to sustainable energy systems. The company's operational model is based on constant innovation in electric cars, battery systems, and renewable energy products (‌GlobalData Plc 2021). An important strategy Tesla follows is that of vertical integration; the company manages the manufacturing of electric vehicles, directly sells them, and even owns or controls the charging stations. Drivers of Business Value Some sources of Tesla's business value are innovation, which involves technological advancement, brand image, market penetration, and business efficiency, which comprises market coverage and interior operations. Its investments in R&D, Gigafactory, Autopilot, and Full Self-Driving software segments put the company in the best strategic location for the EV market (‌GlobalData Plc 2021). Financial Performance Indicators According to the financial records presented for the Tesla Company, the firm has registered impressive growth for the financial year that ends on February 25, 2023. Other operational income, including group sales (exclusive of VAT & Fuel), was £57.3% under the assumption of constant exchange rates (‌GlobalData Plc 2021). During this period, the company made an adjusted operating profit of £2.63 billion, a one percent drop from the previous figure (Tesla 2024). It reduced by 4% compared with last year. Retail free cash flow was healthy at £2 (Hannam 2024). Tesla sustained its dominance in the UK grocery market and had a market share of 27%. The market shares showed the following dynamics: 7% for Tesla, and online sales remained at £6. 4 billion, now comprising 13% of the total internet users ‌(GlobalData Plc 2021). A notable percentage enhanced the statutory operating profit of the company to £2. Earnings per share remained at 20.44 pence, and the company declared a full-year dividend of 10 (Tesla 2024). These numbers suggest that Tesla is well-positioned in a risky economy. While facing increasing inflation and changes in customer habits, it can continue its cash flow generation at a considerable rate. The Business Environment Main Trends and Factors Tesla is located in a complex environment affected by various factors such as technology, policies, and consumers' preferences regarding sustainable products. Potential risks relate to geopolitical risks, economic fluctuations, and supply risks. PESTLE Analysis Political Factors Political risks in the loose are essential to Tesla's industry and affect its business model profoundly. Such strategies include increased adoption of electric vehicles (EVs), which various governments globally have put in place to reduce emissions. For example, the US Inflation Reduction Act, with its measures that came into force in August 2022, includes tax incentives for buyers of electric cars ranging from $3,300 to $7,500, depending on the vehicle, which have a direct positive impact on Tesla's revenue (Tesla 2024). However, these benefits are usually associated with local content regulations that affect Tesla's global production of vehicles. Tesla has also established its Shanghai gigafactory due to a favourable policy environment in China for foreign EV makers. However, new conflict-associated risks have emerged, challenging Tesla's activities in the United States and China. For instance, in 2022, Tesla came under pressure in China over data safety issues, which could signal the fine line the company needs to tread in geopolitics (‌GlobalData Plc 2021). Economic Factors The overall economic environment plays a crucial role in determining the performance of Tesla Motor Company. Buying larger cars may also reduce during difficult financial times since consumers tend to be more cautious with spending. The onset of the COVID-19 pandemic led to decreased consumer spending at the beginning but also meant higher savings for some buyers, contributing to Tesla's record sales in 2020 and 2021 (Whittington et al. 2020). Fluctuations in raw material prices significantly influence Tesla's operating margins and financial performance. For example, the costs of lithium, which is used in the batteries of EVs, rose above 400% in 2021, which affected Tesla's margins (Tidd and Bessant 2020). Fluctuations in exchange rates also present another challenge since Tesla deals in the international market. Its operations could be impacted since a higher dollar value means Tesla's vehicles are more expensive in other markets. Nevertheless, the market capitalisation of Tesla has continued to remain high based on the general investor belief in the future outlook of the company. Social Factors Rising Global concern about the environment has favourably impacted the uptake of EVs and, therefore, is in line with Tesla's business strategy. Today's buying public, especially the millennials and Gen Z, are highly conscious about the environment and are Tesla's kind of consumers. This shift of demand has also exerted pressure on those conventional automobile industries that they must set their EVs, which in turn increases the rivalry in Tesla's competing market. The brand images convey the perceptions of innovation and sustainability that have created firm customers. However, the firm is also exposed to criticism and legal cases regarding working environment issues and organisational policies, such as racial discrimination at the Fremont factory (Thompson et al., 2013). The company's stance on autonomous driving technology has also elicited discussions on the safety and ethical issues of formulating the consumers' rules and guidelines. Technological Factors Technological advancement is by far a solid competitive advantage for Tesla. Technological progress in battery technologies is critical for Tesla Cars. The company launched 4680 battery cells in 2020 that offer more range and cost less than earlier Tesla models (Tett 2023). Among its rivals, Tesla stands out for its emphasis on autonomous driving capabilities, which are enabled by Autopilot and Full Self-Driving (FSD) features (Tesla 2024). However, it also goes hand in hand with the risks of software failures and accidents for the company. The over-the-air real-time software updates provided by Tesla mean that the vehicle is constantly improving and has a distinctive added value. The solar roof tiles and energy storage systems the company has invested in are beyond the technological sphere of automotive manufacturing. Legal Factors Tesla faces numerous challenges in its international operations due to legal nuances in many countries. Adherence to emissions policies or laws is also beneficial since Tesla's electric cars meet and often surpass requirements that test the limits of traditional automobile companies. However, the company has been constantly under pressure to promote self-driving features. The US National Highway Traffic Safety Administration investigated Tesla's Autopilot system in August 2021 after a series of crashes (‌GlobalData Plc 2021). Another significant legal field entails Tesla's protection of intellectual property rights. Legal conflicts involving patents have previously been witnessed, with the company hurling patent infringement cases and defending itself, indicating the cutthroat industry of EV technology. Environmental Factors Tesla's approach to its business as a whole is fundamentally oriented toward combating climate change and advocating for sustainability. The company's EVs considerably lower direct CO2 emissions than ICEVs (World Economic Forum 2023). Nevertheless, it is essential to note that Tesla is still experiencing environmental issues, especially in the supply chain department. Some materials required for the batteries, like cobalt and lithium, have been linked to the detriment of the environment as well as violation of the rights of miners. Tesla is aware of these challenges and has been trying to mitigate them by exploring ways of recycling batteries and using fewer contentious metals. The company's energy products, like solar panels and Po...