COMPETITIVE STRATEGY
Executive Summary
Every business operation has a target of achieving a competitive advantage. This can be achieved by offering the customers with better value compared to the other providers. For instance, offering quality products and reducing the selling costs. With this, the Business will also be in a position to grow and develop. Therefore, Tesla, an automated vehicle industry, identifies the issues that could hinder it from attaining the competitive strategy and solves the problems by prioritizing on the strengths. We find that competition is healthy for Business. It works towards maintaining a strong brand for recognition despite the competition. The Company’s executive board and the high skilled workers work together to enhance Success. To attain a competitive advantage, the Company applies the theoretical concepts and utilizes each for the benefit of the Company. It involves a strategy model to grow profitability, enhance the growth and development of the Company, and achieve a competitive advantage. It uses the Porter Model to describe how the Business can grow alongside the competitive challenge. Tesla. Inc integrates all the factors to enhance its Success.
Table of Contents
Identification of Strategic issues. 4
Application of strategy model 8
Tesla’s customer’s bargaining power. 9
Tesla’s supplier’s bargaining power 9
Threats from the new entrants. 10
Introduction
Tesla operates as an innovative automotive and as an energy-based solution form of Business. With the fact that Tesla is a global manufacturer of vehicles, it gains expansion in different fields. An increase in the foreign market leads to a high growth rate in the revenues hence stability for the Company. On the other hand, the Company has enough strength to boost its profitability throughout its term despite its challenges in growing the business. The outcome of the analysis used to deal with strengths, weaknesses, opportunities, and threats suggests strategic reforms that will enhance Tesla’s maintenance and Success in the famous automotive market amidst the competition from other companies (Foley & Jeffrey, 2016). Therefore, Tesla, Inc. practices these strategic reforms that consist of the internal and external strategic factors. The internal factors include the strengths and weaknesses, whereas the exterior is the opportunities and threats.
However, there are issues that the Company must identify and analyze for it to be in a position to maintain its competitiveness, boosts its profitability, and enhance growth and development. Appling strategies that would benefit the Company should be considered. Tesla applies Porter’s model. It incorporates both the generic competitive scenario and the Intensive growth intensive to enhance effectiveness in the Company’s operations, contributing to a competitive advantage.
Brief Summary of the Case
Tesla. Inc is among the largest automotive vehicle industries, and therefore it faces the competitive challenge from other firms who practice the same Business. Thus, for the Tesla company to maintain, grow, and develop, it has to maintain stability, profitability, and competitiveness.
Identification of the Strategic issues
In searching for a competitive advantage, Tesla identified several issues that they were facing, affecting its growth. One of the critical risk factors that they identified was the inability to balance their production with the demand. They also faced much competition on their scope (Khan, Mohd & Salma, 2019). They faced competitive pressure from other automakers, for instance, the Bavarian Motor Works, the Mercedes Benz, the Volkswagen, Ford Motor Company, Toyota Motor Corporation, and Honda Motor Company. Another issue was an X-Factor from China, and finally, issues related to the leadership and legal concerns.
Elon Musk, Tesla’s company CEO, described how the Company is facing challenges in achieving the production rate that was on demand. The Company looked forward to producing 5,000 models every week, and this comprised measures on how to collect the vehicles in a makeshift tent. Towards the end of the financial year, Tesla reported the production of 5,300 cars. Yet, the Company had expectations on producing a total number of 7,000 vehicles by the end of the year (Liu, Jian & Zhan, 2017, p. 968). On competition, Tesla is not the only innovative automated vehicle market, and there the competition was stiff. The round rose when the companies like Porsche and Mercedes came into the market and produced the models that were of the higher-end. The China X factor was another issue that Tesla identified. When a trade truce was announced, the investors saw Tesla as a potential beneficiary of the increased trade relations that took place between China and the U.S.A. The reason being that China would serve as Tesla’s primary consumers and as the base for the manufacturer. Reducing the tariffs in China and the EV market opportunity that was untapped represented a unique market opportunity for Elon Musk. The legal issues, together with the leadership, became a significant concern. Two months after Elon Musk settled with the SEC on Twitter, they faced fraud charges against the executive, which had become volatile. Therefore, Tesla had to get a new board after Musk said that he no longer respects the SEC.
Tesla used the SWOT analysis to deal with this issue, where they maximized more on the strengths and opportunities, which resulted in the company growth and improvement. The powers encourage Tesla to compete against other automakers and, in most cases, boost long-term profitability. Having a strong brand that maximizes the ability to attract and sustain customers, control the production processes, and availability of innovative methods shape the capabilities of Tesla as a competitive player in the vehicle industry (Thomas & Elicia, 2019, p. 660). Tesla also uses an external factor to increase its business performance, enhance effectiveness in management, and achieve strategic growth. Tesla has expanded on the business diversification, global supply chain, and international sales to improve its financial stability and succeed alongside the competitiveness in the famous automotive market. Tesla, Inc.’s strengths can enable it to remain successful over the years in the same Business. However, there are issues that the Company describes to sustain its competitive advantage and profitability. Therefore, Tesla works on improving its presence in multinational, laying investments in various fields, such as the research and development of technologically enhanced products. It should also expand its operation in the foreign market and increase its levels of investments for the innovation of products.
Theoretical concepts.
The theoretical concepts and self-organization dynamics play a significant role in cognitive sciences, social and behavioural, especially in the continued interaction growth. The usage of the nonlinear dynamics over a long time had been restricted and mostly symbolic. The main reason is that it is challenging to learn the tools; therefore, the sophistication of a degree of mathematics automatically becomes a requirement. Dynamic perspective is another reason which in most cases is caught in oppositions in most of the conventional theoretical concepts instead of it acting as an understanding aid (Perkins, Greg & Johann, 2018, p. 478). It also focuses on the psychological processes that include memory, attention, perception and intention. The dynamic languages link the individual approaches to the group processes. And as for Tesla, Inc, each dynamic should be filled with enough content together with the variables and parameters.
Theoretical concepts in Tesla are the ones that determine the culture of the Company. Therefore, Tesla’s executive and management team makes the right decisions regarding the ideas and once done, they communicate them to the employees to avoid any chances of confusion. On the other side, the theoretical concepts in most cases depend on employee’s workplace range on how they do their work, how they dress and act together with any other idea that could affect the actual workplace environment (Nygaard & Birgitte, 2019). Tesla’s relevant theoretical concepts are the behaviour of the employees in the Company, the workstyle, the overall appearance of the employees in the Company including the dressing, the atmosphere at the Company is also key and communication which is a fundamental concept. All these aims are gaining a competitive advantage and profitability.
To enhance and boost the production of the Model 3, the executive works closely together with the employees. Therefore, on behaviour as a theoretical concept, It is governed by the law. The working style concept in Tesla functions under a situation where, the individual tasks in most cases is assigned to the people, and left the responsibility to carry out the task alone for the largest part of it. Dressing and the overall employee’s performance is a concept that the Tesla’s. Inc executive closely discussed and works on it. The employee’s appearance would reflect the reflect most of the companies’ culture. However, in a financial and legal related form of the institution have a very formal dress code, unlike other companies. Workplace appearance is a significant concept consider in the Company. Some companies are always separated in cubicles, but Tesla is different from this. Tesla functions in one large space to create a community feel and enhance the workers to work together and motivate one another (James et al., 2019, p. 9). Also, the executive needs to incorporate recreational areas and a day for the employees where they can take a break from work and relax and have fun without considering it as a form of distraction. Communication is one key thing that every Company should enforce. In Tesla, the executive works to ensure they maintain a favourable communication area for the employees. Therefore, they come up with ways on how the employees will communicate at work. Face to face as a traditional form of communication was the preferred form of communication. However, the growth of technology came up with other ways in which people can use to communicate. For instance, the use emails, instant messaging, phone calls and online forums.
Application of the strategy model
Tesla uses the Porters model to be in a position to maintain the Company’s competitive advantage, profitability and to attract many adopters into the famous automotive market. The other related intensive strategies assist and improve the organizational growth that relies on the growing sales revenue from the market that Tesla, Inc is operating from. The matching of the generic competitive strategy and the intensive growth strategies contributes to effectiveness in the Company’s operations. Tesla. Inc, the generic competitive system enhances competitive advantage in regards to the product development that makes the Company different from other firms in the same industry. For instance, the products produced at Tesla’s Company are competitive because they can easily integrate with the technology and the friendly environment. Use of the Generic competitive strategy which is large in differentiation greatly benefits the Company as it acts as a platform to attract all the potential customers (Chen, Yurong & Yannick, 2018, p. 57). In the use of the differentiation strategy, the Company boosted its product uniqueness. It maintained a focus on the early adaptors for the vehicles that are electrical in the higher-end market. As much as the Company is global, the costs of production are also reducing hence enabling the Company to target a larger number of customers in the automotive market.
Most automotive industries face external a factor including the availability of the raw materials and the competitiveness on technological firms. Tesla’s Porter’s model describes how the Business can grow despite the competitive challenge. The forces addressed by the external factors include the competitive rivalry, the customers and the buyer’s ability to bargain, the supplier’s power of bargaining, substitute threats and threats the new entrants.
Competitive Rivalry
Tesla company operates in a market that competition is very high. This aspect shows how competition influences the automotive industry, whereby there are only a smaller number of similar firms that practice the automotive market. Therefore, in Porter’s Five Forces, the external factor reduces the competition effect on Tesla, Inc. Nevertheless, firms are very aggressive when it comes to innovation and product promotion. In return, this strengthens the competitors to take effect on the Company (Banks et al., 2016, p. 280). Also switching the costs of the cars to be low strengthens the Company’s force of competition. Therefore, these forces are a better consideration for strategic management in the automotive industry.
Tesla’s customer’s bargaining power.
In Tesla, the customers are a vital factor that enables the Company to determine its sales revenue. However, some factors help moderate the force of the customer’s power to bargain on the products in the Company. Therefore, with the Company becoming global, it reduces the costs of the products hence sustaining and attracting customers and also setting a barrier to the customers from buying the products from other providers ( Durcheva, Mariana & Anna, 2019). This also limits the customers from bargaining. Also offering purchase that is of low volume reduces the customer’s influence on the Company.
Tesla’s supplier’s bargaining power
Suppliers shape the industries, especially in the influences on ensuring there are available raw materials for the Company. Therefore, the company operations depend most importantly, on the supplier’s reliability. The suppliers have controlled distribution and product sales. This because their forward integration is low levelled (Lehman, Dale & Maxim, 2017). Also, the largest number of supplier’s size is moderate hence reducing the influences on the industries environment. Moderated level of supply also enhances supplier effect on Tesla though this happens only to a limited degree.
Threats of substitutes
The threats of substitution on Tesla are described to have reduced costs, for instance, in reducing the transportation fee for the customers by offering public transport hence attracting more customers. Availability of the substitutes is regarded to be moderate therefore easier satisfaction of the needs of the customers. Also, the performance of the reserves is moderated.
Threats from the new entrants
New entrants in a company are known for impacting the environment under which the industry operates and determining the performance of the Company. The Company’s global aspect and strong brand become a challenge for the new entrants to match with the standards. Also, the cost of automobile manufacturing is relatively high, thus making it a barrier for most new firms. However, Tesla gains an advantage from the economy scales that is drastically increasing hence creating a platform for the new entrants benefit though on exceeding the entry production.
Conclusion
Tesla. Inc, as a global automotive industry, can experience competitive advantage by maximizing on the Strengths after identifying the challenges it faces. Some of the difficulties Tesla faced was the inability to produce products that would meet the demands. After placing a problem, coming up with a solution would be of impact to the Company. Also ensuring the Executive board governing the Company works effectively to improve on the growth and development of the Company. The Company strong brand enables it to attract many customers and sustain them. Therefore, this sets it at a position to function normally despite the competition from other firms. Also having better ways of managing risks acts as a factor for the growth of the Company. Porters model insist on prioritizing on the competitive rivalry since it’s the most significant force in the environment of the multinational Business. Therefore, Tesla’s Success also based on the strategies that handle the external factors in the industry.
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