Strategic Audit For Strategic Marketing Plan Analysis – Tesla Motors

Analysis of General Environment

Discuss about the Strategic Audit for Strategic Marketing Plan Analysis.

Tesla Motors was founded in the year 2003 and the inventors wanted to prove that electric cars could be better than gasoline-powered cars (Tesla Motors, 2016). The CEO of the company Elon Musk in the year 2014 launched two dual motor with all-wheel drive configuration that helped in enhancing the performance and handling of the vehicle. Tesla at present is the powerful brand name that is not just recognized as automaker but also as a technology and design company that emphasizes on energy innovation. In order to understand the current situation of Tesla external analysis is conducted that reveals the threats and opportunities for the company. Moreover, with the help of internal analysis strengths and weaknesses of the company will be determined.

Demographic Environment

Tesla is a luxury brand that provides quality vehicles and thus, targets people with higher incomes belonging to upper middle class (Tesla Motor Company, 2009).

Economic Environment

However, with the recession period the demand for luxury cars declined which also affected Tesla. Due to recession, the price of gasoline increased along with this, the depletion of natural resources gave rise to electric power which was tempting for the customers.

Political Environment

The legal environment is positive towards electric cars across the world therefore, government motivates people to purchase and use zero emission vehicles (Mangram, 2012).

Social Environment

Moreover, people are concerned about global warming therefore; they are focused to purchase products that do not cause harm to the environment.

Technological Environment

In order to manufacture electric cars with zero emission and high performance, advanced technology is required. As it is investigated that supercharging stations will be built in near future for development of electric cars it is evident that technological environment is positive for Tesla (Froome, 2015)

The four forces that helps in analysing the environment of an industry are determined below which also determines the profitability of the company.

S. No	Forces	Description
1	Bargaining power of Supplier:	Supplier power is moderate at present but it is decreasing as there are several suppliers in this market therefore, switching cost is low. Moreover, the company has its own R&D due to which it has to rely on suppliers for few materials. Tesla uses approximately 2000 parts for the cars which are outsourced from more than 300 suppliers across the world (Supplier Business, 2016). However, the bargaining power will decrease in future as the company is planning to produce in house battery packs to deal with disruptions in supply chain.
2	Bargaining power of Buyers:	The bargaining power of the buyers is low because very few companied deal in electric cars. In addition to this, the probability of consumers in terms of gaining any profit from the seller is low. Moreover, despite the price for Model S is $69,000 which is accessible only by wealthy people, there is no shortage in the demand of the vehicle. As the demand of Model S is high among people buyers do not have bargaining power. However, Tesla estimates that this demand id temporary therefore, with the launch of Tesla Model 3 in $35,000 the company has offered a brand within the reach of average person (Froome, 2016). It is likely that Tesla has a market reputation in terms of performance and safety and offering a product that is affordable by average person will boost the sales.
3	Threat of Substitutes:	Though there are several competitors of Tesla in electric car market such as Nissan and Ford but they lack in performance. Therefore, threat of substitute is low. In addition to this, substitute for electric cars are available in the market such as flex fuels, natural gas, hybrids and diesel cars which either requires some amount of fossil fuel or their performance is low.
4	Threat of New Entrant:	Threat of new entrant is also considered low because entering into an electric vehicle market requires huge amount of capital investment because latest technology is required to manufacture electric car with zero emission (Aulicino, Waratuke, Williams and Elliott, n.d).

The competitive rivalry in automotive industry is high as many brands such as Ford, Honda, Toyota and Daimler-Benz compete with each other. However, there is no direct competition for Tesla as it deals in niche market and provides electric cars to the consumers (Aulicino, Waratuke, Williams and Elliott, n.d). Moreover, industry rivalry is expected to rise in future as other automotive companies are also investing in manufacturing electric vehicles.

Opportunities	Threats
People concern regarding environment pollution is increasing Can expand globally Diversify business Expand supply chain Minimise production cost Gigafactory (Tesla Motors1, 2016)	Strong competition Limited demand due to higher cost Accidents due to electric engines can frighten customers Threat of dealership regulation Faults in Model S (Pandey, 2016)

Tangible and Intangible Resources

Serial Number	Tangible Resources	Intangible Resources
1. 2. 3. 4. 5.	Capital Own manufacturing plants Selling through Dealership Advanced equipments and technology Battery supply chain (Shahan, 2015)	Brand Value (Hirsh et al., 2016) Innovative culture (Shahan, 2015) Intellectual Property Right Research and Development Department Management team of experts

The core capabilities of Tesla include power train technology and battery packs which can be considered as the most important strategic element of the company (Tesla Motors Inc., 2012). This capability of the company is highly rare and replicating this is expensive and also requires high technical expertise.

Analysis of Industry Environment

The core competencies of the company include its vehicle engineering and power train engineering (Tesla Motors Inc., 2012). Along with this, battery pack’s cost is low therefore; company is able to sell Model S at affordable price. In addition to this, the company also has more than 200 patent applications across the world which will help the company in providing zero emission vehicles with high performance (United States Patent and Trademark Office, 2014).

With the help of value chain analysis tool the internal environment of the company can be measured which helps in evaluating the strengths and weaknesses of the company in terms of its resources and capabilities.

Primary Activities	Supporting Activities
Activities	Description	Activities	Description
Inbound Logistics:	The most significant element for Tesla is that it produces automotives internally. Moreover, the company has adopted vertical integration in its process which means it has its own manufacturing as well as supply chain unit. In addition to this, the company has also announced to built “Gigafactory” for developing batteries for electric vehicles which will help the company to take over battery business (Tesla Motors1, 2016).	Infrastructure:	The structure of Tesla is horizontal which is an advantage as its helps in faster decision making and enables better communication along with minimizing work delays.
Outbound Logistics:	Tesla uses model of direct sales where the company sells its car directly through showroom and there is no middlemen. This, direct selling model has helps the company in cutting the prices of the vehicle and helps in boosting the sales.	Human Resource:	The market of the company is growing therefore, the company required talented workforce for which company uses high street performance. Furthermore it is found that the company motivates its employees and also provides them company shares which help in increasing the share price of the company.
Operations:	The manufacturing process of Tesla vehicles is highly automated and multi-functional robots are used to manufacture several cars in a single day.	Procurement:	The companies also focus on making good relations with its suppliers that helps the company in long-run.
Marketing and Sales:	Tesla is a luxury car brand that has reputation in the market hence, it does not require investing high amount on marketing (Hirsh et al. 2016).	Technology Development:	Tesla uses advance technology for making electric vehicles through which the company provides its customers with innovative cars which are better in performance (Musk, 2016).
Services:	It is found that Tesla has its own service centres across Europe, Asia and North America which is valuable for the company. Moreover, company has also expanding the charging station networks.

Strengths	Weaknesses
Model S is popular in electric cars for its performance Strong brand name (Hirsh et al., 2016) Own Research and Development process helping in Innovation Strong sales growth	High cost of production Higher product prices than competitors Less charging stations (Froome, 2015) Familiarity of electric cars is low among people

Conclusion

From the overall discussion it has been analyzed that there are providing high performance electric cars is the strength of the company and offering electric vehicles at lower cost in future is an opportunity for Tesla. In the similar manner, the threat is growing competition in the electric vehicle market and weakness includes less amount of promotion of the products.

References

Aulicino, S., Waratuke, J., Williams, S. and Elliott, C. n.d. Tesla Motors case study.

Dobbs, M. 2014. Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review 24(1), pp. 32-45.

Froome, C. 2015. The infrastructure Australia needs to make electric cars viable. The Sydney Morning Herald.

Froome, C. 2016. Tesla’s gamble on its ‘affordable’ electric car. The Conversation Media Pvt Ltd.

Hirsh, E. et al. 2016. Changing Channels In The Automotive Industry: The Future of Automotive Marketing and Distribution. PwC.

Musk, E. 2016. Tesla Model 3: Price, specs and everything we know. The Week.

Pandey, A. 2016. Tesla (TSLA) Model S Crash: Company Faults Car’s Automatic Braking System. International Business Times.

Shahan, Z. 2015. Tesla’s Competitive Advantages — 5 Big Ones. EV Obsession.

Supplier Business. 2016. Suppliers to the 2016 Tesla Model X. [Online]. Available at: https://www.autonews.com/assets/PDF/CA10076284.PDF [Accessed on: 13 September 2016].

Tesla Motors Inc. 2012. Annual report on form 10-k for the year ended december 31, 2012. United states securities and exchange commission.

Tesla Motors. 2016. About Tesla. [Online]. Available at: https://www.tesla.com/about [Accessed on: 13 September 2016].

Tesla Motors. 2016. Tesla Gigafactory. [Online]. Available at: https://www.tesla.com/gigafactory [Accessed on: 13 September 2016].

United States Patent and Trademark Office, 2014. Collectible Cards. Office of the Chief Communications Officer.

Mangram, M.E. 2012. The globalization of tesla motors: a strategic marketing plan analysis. Routledge.

Tesla Motors. 2009. Company marketing sedan to upper middle class green-friendly ‘Baby Boomer’ generation. [Online]. Available at: https://www.examiner.com/article/tesla-motor-company-marketing-sedanto-upper-middle-class-green-friendly-baby-boomer-generation [Accessed on: 16 September 2016].