Case Study on Tesla

Executive Summary

Every organization before starting or establishing a business needs to consider the operating environment with priority. To launch a product or brand firm should find out a suitable environment where it will run its operations smoothly. Organizations to be long-lasting and to survive in the international marketplace must evaluate the business environment wholly and in detail to figure out the coming opportunities, threats, and risks in order to deal with them when facing. This report will demonstrate the concept of the entire business environment of Tesla, an automotive company producing motor and electric cars and vehicles. Along with this report will conduct about the external environment like political, economic, and social, environment to analyze the obstacles and amenities extracted from them. 

Introduction

Today’s world has carried businesses to the modernization and advanced level with technology. Businesses need a compatible environment to carry out their operation according to the plan. The business environment is composed of internal and external factors such as premises, employees, customers, rivals, product suppliers, management body, HRM, technology, government laws, economy, social, marketplace, etc. Business needs surrounding compatible environment in order to sustain themselves in the market where they can operate with progress. If the environmental factors seem compatible businesses can expand their operation to an international extent. The international business environment consists of the factors where the large business operates its business and plays a role in supporting the economic and political development of the country. The international market comprises geographic, political, demographic, legal, taste, tradition, culture, and people which are the major considered factors of the environment. This report will demonstrate the largest automotive company Tesla and its surrounding business environment and analyze the sustainable strategies in the market place conquer the environmental multipliers.

 

Overview of Tesla

Tesla is an American automotive and Energy Company producing electric cars and vehicles situated in Austin, Texas, and was established in 2003. They named the company after the electric engineer Nikola Tesla. Tesla majorly manufactures electric vehicles like cars, trucks, house grind scale power agglomeration, solar roofs, and solar panels. Their market assets into income are $650 billion. They have sold electric and plug-in electric cars in 2020 which possess 24% of the electric and 17% of the plug-in market. It’s majorly an American Installer of the photovoltaic processes which are generated by the subsidiary of Tesla Company (Baucells and Maiden, 2020). Tesla supplies the largest battery power agglomerations of 3.98 gigawatts per hour in the world that was established in 2021.  Tesla has established almost 656 distribution stores and service centers worldwide.  They have almost 110,000 employees and operate the business in North America, Europe, West Asia, East Asia, and Oceania. Tesla majorly values the Model S, Model X, Model 3, Model Y, Megapack, Powerpack, and Powerwall named products along with the solar roofs and solar panels. Their customers get the vehicles, insurance, charging services also software services, and premium connection extent. Tesla’s major subsidiaries are Tesla Grohmann Automation, Tesla Energy, and Deep Scale (Jenčová, 2019). Tesla’s CEO Elon Musk stated that their prior intention is to aid lenient the move into sustainable power along with transit the power attained through automotive vehicles and solar power. Tesla launched its first product which was a car for sports named Roadster. They’ve gained $53.8 billion in revenue, $62.2 billion in assets, and $30.1 billion of impartiality in 2021.

 

Industry Analysis Using Five Forces Model

Organizations entering into international market face various external environments and factors of technological and competitive advantages. Below is the discussion of Tesla’s company evaluation of company challenges and growth strategies.

·       Competitive Rivals: Tesla though operating in the major competitive markets faces lower effects in this case as there are a lower number of electric vehicle companies in the market (Krishnamurthy, 2010). Tesla’s amenities are their marketing campaigns, customer low switching cost, and customers tend to be loyal to them and don’t intend to purchase from other companies that enhance the competitive advantages.

·       Customers Bargaining Power: The mitigated and attainable substitutes confine the customer’s switching options and lower the bargaining power as people are in need of personal cars in suburban areas. Tesla confines the buyer’s influence on them through the confined quantity of buying which is considered as average and accessory management precedence.

·       Suppliers Bargaining Power: Tesla has the lower influence on the supplier's bargaining power as most suppliers get to deliver their products through middleman and few of them distribute products through direct contact which shows that distributors have lower control over the products supplies and selling context as a result of moderated shaped suppliers.

·       Substitutes Threat: Tesla needs to have minor concerns about substitutes in the market because the substitutes have limited amenities and advantages that will not satisfy customers adequately such as public transport and local vehicles. Their confined representations are not as suitable and comfortable as private vehicles which majorly limits the influence of substitutes on Tesla (Jacob, 2021).

·       New Entrants: Businesses like Tesla are quite complicated to maintain and carry the operations without adequate capital and brand proposition. It is costly to maintain sustainability and product development which is hinder for new entrants to compete with Tesla within a limited time. So this is an insignificant concern for Tesla. 

International Trade Market Position

In 2021 Tesla has become the biggest automation company worldwide. Tesla also ranked in the top fifteen company players among all the industries worldwide. Its growth rate increased to 156% and positioned as a rapidly extended brand in 2021. They have a record of positioning as the leading company in electric automation. Tesla recovered their most revenues through propelled traveler cars named sedans and crossover transportation. They have intended to introduce the propelled light-duty vehicle in 2022. Tesla has the role of delivering 627,351 units of vehicles globally within September 2021 which was 17% higher compared to the 2020 whole year (Carlier, 2022). Tesla made the record selling their Model 3 plug-in propelled cars which positioned as the first vehicle to surpass the one million-selling record in the world. They have earned major revenues in 2020 through vehicle selling. Their major products Model 3 and Model Y supplies were considered 95% of Tesla’s electric vehicles delivery as a whole.  They introduced the Model S and Model X considering the customers of high-end zone rates. They are now considering the major customer base by selling Model 3 and Model Y products. They have contemplated introducing Roadster second-generation and Cybertruck recently.  And America, Europe, and China are considered the largest market. Tesla was on the top rank as the most trendy automation industry in 2010. Their investment of $1.3 and $1.6 billion in the Research and Development section has resulted in new inventions from 2017 to 2020 (Fernandez, 2021). They have the peak record of making revenues of $31.4 billion and also made a market determination standard of $443 billion in 2020. Tesla has ranked as the most brand capitalized company with $642 billion in 2021. They have positioned themselves as the erect brand worldwide with a 263% share price.

Political and Economical Factors

Political: Tesla’s most demanding products Model S and Model 3 are made of a raw material named cobalt extensively that is supplied from the Democratic Republic of Congo. Through Amnesty International report exposed that material delivery has enhanced child labor, political conflict, chaos, instability, and rapid corruption in Congo which is a threat to Tesla’s supply chain management. The governmental body offers a spur to Tesla for reducing CO2 outflow from electric automation (Qu and Gu, 2022). For those who purchase an electric automation $7500 tax credits are offered to them. In 2018 when Tesla first launched Propelled vehicles got $7000 credit for delivering 400,000 carriages throughout the USA. Tesla has been recognized for international trade agreements as a manufacturer of substitute fuel automation and amenities in global trade. Tesla has faced hinder due to the trade conflict between US and China and they had to petition the Trump administration in order to eradicate the tariffs charged on the import supplies from China.

Economic: Tesla has major concerns regarding foreign currency rates as they have operations in multinational regions. Tesla is increasing international trade along with the US market capture. Tesla gained $31.54 billion in revenues which is 21% of their sales level in 2020 also their $334 billion valued contracts were increased through foreign currency exchange rate. As Tesla is known as a substitute fuel automation manufacturer they received tax spur and subsidiary amenities of sales remission and tax credits, own genuine assets tax, personnel rescinds the tax, transit discount tax, credit in tariffs collection till 2034 (Shiddiq, 2020). As Bloomerang stated Tesla’s battery expenses emissions are considered a noticeable fact based on the reduction of lithium-ion price by 2023 from $137 per kWh to $100 per kilowatt-hour. This scenario tends to extend Tesla’s affirmative application to general people.

Social and Environmental Factors

Social: Social factors regarding modern trends and circumstances place an influence on any organization’s micro and macro surroundings. Tesla also deems the external environmental factors from which several amenities are attained through effective strategies applications.  The public has been cautious regarding social welfare and it extended the recognition of a less carbonated society among people. The company is getting into the global market through facilities and customers are preferring energy generation. Through these factors, Tesla’s electric Vehicle demand is extending along with its services (Wang, 2021). People responded the most regarding the solar roof and solar panels services that Tesla provides and demanded to set the services in their houses in decorative ways which result from the ecological amenities and social environmental balance are kept according to the environmental regulations. Tesla can enhance its financial roles and performances through product distribution and sales in the global and preceding markets. Through these strategies, Tesla can expand the customer segment.

 

Environmental: Tesla encounters the macro-environmental effects on the ecological conditions in the global markets. Environmental situations demonstrate the attainability of materials required for the operations. This investigation of Tesla demonstrates how the ecological factors and automation industry environment generate facilities to exalt the EV products concerning the alteration of climate, increasing the ambiance programs, and enhancing several concerns regarding waste disposal. Tesla’s Electric automation reduces the CO2 extraction through substitute firing and energies along with solar roofs and panels that reduce the electricity cost for the people as these services produce solar electricity from the sunlight in the normal houses are considered benefitted and suitable for ecological balance in the environment (Bruijl, 2017). They also support monitoring the avenues used in production. These environmental amenities aid the organization to grasp the people’s attention and also promoting the brand in the target market.

 

Recommendations

Tesla must focus on the major production of electric vehicles as a result of successive industry enhancements and sales increment of electric automation. In the US there are several regions where there are no charging stations or people are a little cautious of electric vehicles for transportation. Tesla must fix a portion for investing in the establishment of charging stations and advertising the products among people. They should extend the superchargers station which is considered a major selling region. People should be more concerned about using solar roofs and panels that can reduce electricity costs. Tesla can offer new inventions to the people that will aid the company increase and grasping customer attention which will carry the organization to sustainable competitive advantages. Tesla must generate new creativity in the employees and associates and grow the product line that will be further apposite to the limited earned people. Based on the present brand image and market position Tesla can grasp the competitive space in the market and introduce the innovated products along with maintaining environmental cleanliness by delivering electrical vehicles. Tesla’s strengths are they initiate immediate action for surpassing the competitors as they notice the rivalry entering the market with multipliers.

Conclusion

Tesla despite being the biggest automation company needs to be concerned about the several environmental factors and limitations while operating a business. Considering the identical offerings of electrical automated vehicles Tesla captured the position of vast competitive advantages in comparison to several competitor companies. Tesla’s major valuable products are environmentally friendly and support ecological conditions which mostly make people want to buy their products and remain loyal to them. The solar roof and solar panels attract the customers most as the services provide natural lights to the houses generated from the sunlight. This fact reduces the national spending on electricity and develops the economic conditions of a country. But they are not spared from obstacles and barriers of the political and economical environment for which they must make moves and develop strategic actions and planning. This report has demonstrated Tesla’s environmental factors affecting the business functions and recommendations for surpassing them.

References

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