Discuss About The Matrix Analysis In Business Diversification.
PESTEL Analysis of Tesla facilitates in determining the impacts of industry’s macro-environment within the automobile industry. These external factors impact other aspects of the business that includes community based or consumer organizations. With effective brand image and enhancing profitability, Tesla can improve its long term success through considering the results of this evaluation in strategy development.
Political- Politucal stability of the major markets makes the macro-environment favorable for market penetration strategies of Tesla. Tesla has the opportunity to improve its financial performance by means of attaining government incentives. Such external factor is directly associated with insignificant carbon emissions from the company’s offerings. Free trade agreements present several opportunities to the company in expanding its global business operations.
Economical- Economic conditions in the macro-environment are observed to impact the business of Tesla. Business performance of the company attains advantages from low battery expenses. For instance, such external factor transforms into the affordability of Tesla’s automobile products. In consideration to same, decreasing renewable energy expenses makes the products of the company more attractive.This also considers that economic stability concerns threaten the company’s financial performance in Asia and Europe.
Social- The socio-cultural trends that impacts Tesla’s macro-environment are increasing popularity of low carbon lifestyles, enhancing [reference for renewable energy and enhancing wealth distribution within advancing markets.The company has growth opportunities relied on increasing popularity of low carbon lifestyles along with enhancing renewable energy preferences. These are the external factors that are deemed to enhance market demand for Tesla’s electric vehicles along with associated products.
Technological- Increasing rate of technological changes presents high opportunities for Tesla to improve technologies related with its products. In addition such external factors also presents risks for the company in consideration to the potential fast obsolesce in technology employed within products.The company also has growth opportunities through high automata ion of its business processes. In addition, growing popularity of online mobile systems facilitates Tesla to integrate such systems within its automobiles.
Environmental- Tesla has attained better opportunities in promoting all its electric automobiles relied to certain issues such as climate change, growing environmental programs and increasing standards for disposal of waste disposal. For instance, Tesla’s electric automobiles are deemed to be suitable in dealing with the external factors elated with the business sustainability along with environment friendly offerings.
Legal- Tesla has increased opportunities to expand safely its business internationally in consideration to expanding global patent protection. Moreover, the organization has the chance of promoting its electric vehicles. This is relied on consumption of energy regulations that the consumer company needs to follow. Moreover, the company has also attained the opportunity to grow its business by means of direct sales that is allowed in several states in US.
Tesla sustains its profitability by means of strategic measures that facilitates in attaining competitive advantages though addressing challenges revealed within Porters Five Forces analysis of global automotive industry.
Competitive Rivalry (Strong Force)-Tesla operates within a high competitive market. This aspect of indicates the impact of competition on energy and automotive solutions industry environment. There are just a few numbers of companies operating within automobile industry that impacts the competitive environment of the company. To maintain a competitive position within the industry, Tesla intends to follow aggressive innovation and product promotion. For instance, large automotive organizations tend to follow aggressive marketing campaigns.
Bargaining Power of Buyers (Moderate Force) – Low switching costs decreases barriers for the consumers of Tesla for purchasing cars from other manufacturers. In consideration to the five forces analysis, the external factor is deemed to exert a high force against the organization and its business rivals in automobile industry. For instance, the substitute’s availability is moderate with several cases that decrease bargaining power of its Tesla’s consumers. Moreover, the decreased volume of purchases decreases the impact of consumers on Tesla. For this reason, consumers bargaining power acts as moderate force and a secondary management priority.
Bargaining Power of Suppliers (Moderate Force) – Tesla’s suppliers are deemed to have low forward integration level. Such external factor indicates limited control of suppliers in sale and distribution of their products. For instance, certain suppliers employ third party for selling their materials to Tesla. On the other hand, most of thee suppliers are sized moderately that has decreased impact on the automobile business surrounding. One more external factor is considered as moderate supply level that empowers the suppliers to impact Tesla to a certain extent.
Threat of Substitutes (Moderate Force) – Tesla faces the threat of substitutes within automotive industry. Low switching cost increases competition for the company and this facilitates substitutes including public transportation for simply attracting consumers. Such external factor has a strong force in the company’s external business environment. Conversely, the moderate substitute’s availability decreases such suppliers influence. For instance, consumers in the automobile industry have limited and moderate number of substitute options within the industry. For instance, public transportation is not that versatile in comparison to a private car that decreases substitute force against the company.
Threat of New Entrants (Weak Force) – Business of Tesla is complex to compete with particularly due to high brand development cost along with increasing Elom Mask popularity. For instance, it is not easy for the new entrants to compete with the company’s strong brand that contributes to one of Tesla’s business strengths. In addition, the automobile manufacturing maintains high cost that presents a barrier for the new entrants.
Critical success factors impacts the competitors within the automobile industry directly. Considering the same, Tesla must make attempts to implement activities associated with critical success factors at highest level for outperforming the competition.
Access to capital- Electric vehicles needs to make high investments in research and development due to internal workings of the vehicles. The company attains enough capital for developing technologically efficient software and battery capability that is crucial for company’s success.
Government support- Government policies are observed to support the electric vehicles manufacturing that facilitates the industry to continuous grows continuously.
Battery technology- For successfully competing within the there is a need to innovate within lithium-ion battery technology. The company is developing products based on the fact that electric vehicle manufacturing costs are battery-related that is estimated to drop drastically.
Changes in infrastructure- Quality and convenience of the available charging stations are available to the electric vehicles of Tesla that serves as major key success factors as it is vital for continuous vehicle functioning.
Consumer education- Educating consumers on financial, environmental and economical advantages along with switching costs to a fully electric vehicle that can result in consumer’s ability to make more informed decision sat the time of purchasing vehicles.
Disruptive technology- This technology of effectively powering a better performing car with lithium-ion batteries that drives Tesla for innovating forefront of the electric vehicle industry.
Superchargers- Tesla supercharges are placed in the highways and city centers. Moreover the company has also attained partnership with particular destinations to offer Tesla Wall Connector at the location.
Experience of consumers- Tesla has a strong business advantage as it sells its cars in its showroom. The company also provides its consumers with representatives that are willing to educate consumers regarding pros and cons of consumer’s likely car purchases.
Strong and sustainable brand image- Tesla has a remarkable brand reputation within the electric vehicle as well as automobile industry. The company’s business is committed to employ sustainable energy with exceptional and attractive car design.
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Opportunities · Increased partnerships to maintain enough resources · Increased prices of gas · A shared standard along with engineering criteria for autonomous driving |
Threats · There are several competitors within the automobile market that offers identical products like Tesla · Strategic along with sector risk is faced by the company · Financial risks associated with the raw materials · Sales and marketing related risks can also be faced by the company · Tesla is also deemed to face great threat from the likely backlash taking place from Samsung batteries |
Opportunities- Certain opportunity that must be pursued by Tesla includes making more strategic partnerships for increasing their resources. The company must also consider establishing a shared standard along with engineering criteria for autonomous driving. Tesla must focus on developing a safe and effective manner for the industry to introduce autonomous driving. In addition, rapidly rising gas prices can offer the company with an opportunity to generate a highly sustainable fleet of vehicles.
Threats- Along with significant opportunities there are increased number of threats that are faced by Tesla. Tesla must be aware of the fact that there are several major competitors such as BMW that offers identical products as the company. Moreover, there are certain economic and political risks that are faced by Tesla while entering a new market. The company also faces a financial risk threat associated with its raw materials like carbon fiber that is cost and requires being used in limited amounts.
Bowman’s strategy Clock: Focused Differentiation
Tesla has launched its differentiation strategy with increased focus on a small demographic segment of environmentally conscious wealthy consumers. Through focusing n this narrow consumer group, Tesla avoids competing with its major competitors like BMW. The reason for setting focus differentiation strategy is that it facilitates in maintaining a forward vision and addresses issues like production capacity limitation along with improperly developed charging network. Following such strategy, the company develops technologically advanced vehicles for consumers those can afford other vehicles for their every transportation.
Ansoff Matrix Analysis of Tesla
Ansoff matrix analysis of Tesla indicated that the company has effective product development strategy that is focused on carrying out regular market acceptability test for all its new products within European and US markets. Moreover, it has developed new and modified product based on consumer needs such as Power wall and Model 3. Marketing plan of model 3 is focused on product positioning among the middle class. The luxury brand Tesla capitalizes on inspirational value of the Model S. The automobile organization has an effective power wall sales plan within home along with commercial spaces. Moreover, based on analysis of this matrix it can also be said that Tesla has effective business development along with existing products marketing within USA along with European markets. The company entered new market segment through introduction of its new car models such as EV tools, Model S and cars with power train technology. It also implemented aggressive marketing strategy focused on distinct pricing strategies, innovative promotional campaigns along with widening distribution channels. Market development strategy of Tesla has also facilitated the company in introducing its existing cars such as model S in new markets like in India and China for attaining competitive position.
The increasing competition between Tesla and the domestic competitors indicates uncertainties for the future position of Tesla. This must consider developing new strategies to be implemented for dealing with such uncertainties.
Option 1: Focused effort on research and development of its batteries to decreasing cost and increasing profit:
Profits and market success of Tesla is anticipated to rely on the efficiency and cost of its batteries. The company must consider developing an undivided research and development focus in the direction of enhancing battery effectiveness along with decreasing battery production expenses. Moreover, for attaining competitive advantage, the automobile company must focus on considering this strategic option. In addition, Quick setup and Giga Factory along with running with its full capacity is considered vital to be considered by Tesla for better cost reduction. For this reason it can be anticipated that the strategic option of integrated business plan which generates business worth $5, 00,000 car sales per annum supported with battery manufacturing with Giga factory will be effective enough.
Option 2: Capitalizing on the power wall:
Tesla’s power wall home battery development can serve as an effective product for offering superior electricity backup. This product can prove to be an effective use in home of developing nations in which continuous electricity supply and serve as a major concern ad also in several commercial sectors. Tesla must focus on delivering an effective business plan for successful sales and marketing of its products. The automobile company must also expand its facilities such as “Tesla service plus”, “Tesla Ranger” and “Supercharger stations” to offer free charging along with home service options to the consumers. The connectivity features can also focus on offering superior online service options.
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Strategy Option |
Suitability, Feasibility and Acceptability |
Accept/ Reject |
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Option 1 |
· Suitability- Tesla cars will be powered totally by the electrical charge stored within batteries that will be considered as Battery Electric Vehicles. Moreover, this strategy will be suitable because of the company’s existence for the lithium ion batteries have the highest charge capability of any practical battery formulation. · Acceptability- This strategy is acceptable as the company’s engineers are highly skilled to configure the internals of the battery pack. This can facilitate increasing the cell capability by 6% that can facilitate the Tesla batteries to store more than 90kwh of energy. · Feasibility- This is feasible as battery formulation is efficient in terms of money that is high enough for making Tesla battery efficient vehicles practical. |
Accept |
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Option 2 |
· Suitability- The strategy is deemed to be suitable for the reason that Tesla can attain a better advantage in terms of technology along with price to stay ahead of its business rivals. · Acceptability- Despite of having several helpful implications, this strategy is too observed to be acceptable because of several reasons. Increasing energy prices along with decreased feed in-tariffs are also factors that drive interest within increased self-consumption. As this strategy is intended to be time consuming with increased costs associated with it, acceptability of this strategy is questionable. · Feasibility- Feasibility of this strategy of Tesla is doubted for the reason that the company will not be able to attain enough cost advantage. The company will also require heavy marketing along with public relations that is indicated to be paying off. |
Reject |
Focused effort on research and development of its batteries to decreasing cost and increasing profit:
Profits and market success of Tesla is anticipated to rely on the efficiency and cost of its batteries. The company must consider developing an undivided research and development focus in the direction of enhancing battery effectiveness along with decreasing battery production expenses. Moreover, for attaining competitive advantage, the automobile company must focus on considering this strategic option. In addition, Quick setup and Giga Factory along with running with its full capacity is considered vital to be considered by Tesla for better cost reduction. For this reason it can be anticipated that the strategic option of integrated business plan which generates business worth $5, 00,000 car sales per annum supported with battery manufacturing with Giga factory will be effective enough.
Business Risk
Supplier related risks of Tesla is deemed to be one of the business risks that includes suppliers failure to offers goods in appropriate time and increasing risks of price fluctuation and dependency of raw materials. To deal with the legal risks faced by the business, Tesla focuses on finding legal risk sources such as contract regulations, structural changes and litigation. Warranty and goodwill claims risks can be dealt by the company through enhancing consumer relationships to enhance loyalty, offering a platform for customers for offering their opinion.
Operational Risk
Tesla faces high production risk in the areas the product launch such as batteries and cars, expenditures, manufacturing plant failure along with risks of bottlenecks and production stalls. There are certain risks that take place from goodwill and warranty claims that are related with the guarantees on goods along with all other contingent liabilities. The company also deals with certain technological and personal risks. In order to address such risks, Tesla focuses on developing taskforce to address technological risks related with Tesla Motors. To address all the personnel risks the company focuses on developing personal training workshops for the employees. Tesla can also address such risks though offering incentives by means of awards, bonuses along with the likes.
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