BPP Global Strategy and Sustainability Assignment Sample
Introduction
Tesla is one of the largest electric vehicles manufacturing companies, with its headquarters in California, USA (Tesla.com, 2021). The demand for electric vehicles is on the rise due to environmental concerns and the policies adopted by various governments to reduce the climate change phenomenon. In the business report, the global strategy and sustainability of Tesla Inc. would be discussed and analyzed. Various models and analysis such as Porter five-point and marketing entry strategy have been carried out in order to understand the Tesla business strategy and recommend the most suitable strategy for its business development in the international market.
Task 1-The external and internal environment
Identification and analysis of external and internal environment for Tesla
External- PESTLE analysis
| Factors | Analysis | Impact |
| Political | ● US political stability
● Incentives by the government of a various country for the manufacturing of electric car |
The political factor will analyze the government impact on the business of Tesla Inc., considering the macro environment. Governments are one of the most powerful entities and the strongest force that influences the overall business of the company. Various policies and laws in the US limit the growth of the company (Akakpo et al. 2019). The most important political factor for Tesla is related to incentives provided by the government for electric automobiles. It’s an opportunity for Tesla to strengthen its business performance. |
| Economic | ● GDP of the US
● Decreasing cost of battery
● Economic stability in major countries such as the US, Australia, China etc. |
The impact of economic conditions on the business of Tesla has been analyzed under the economics factor. The condition such as market growth, currencies, trade level and other variables with the potential to influence the business of Tesla has emphasized. The issue in the economic stability has posed a threat to the business of Tesla. |
| Social | ● Increasing popularity in the context of low carbon.
● Increasing renewable energy preference ● Wealth distribution in most of the developing country |
Tesla has immense growth opportunities in the major markets of the US, China, Australia etc., due to the increasing popularity in the context of low carbon (Tesla.com, 2021). Wealth distribution enhances potential buyers capacity; therefore, it has a positive impact on the business of Tesla Inc. |
| Technological | ● Technological change
● Automation integration in business ● Increasing online system popularity |
Technological change has both opportunity and threat for Tesla in its business expansion and growth. Technological up-gradation helps Tesla to bring updated products; at the same time, the chances of technological obsolescence used in earlier versions of cars increases. |
| Legal | ● Expanding protection in respect of international patent
● Energy regulation in terms of consumption
● Sales regulation in respect of dealership |
The company has an opportunity to promote its electric car in the market of US, UK and Southeast Asian nations. Tesla will benefit from the patent protection and regulation act of the US and other major economies. The US government is keen on developing energy regulation for the promotion of energy consumption in the most effective way. |
| Environment | ● Climate change
● Environmental programs ● Waste disposal standards on the rise. |
The company has a great opportunity to promote its electric vehicle on the present concerns of climate change. Some of the developing countries such as China, Australia and many other countries have concerns about climate change. Therefore they promote the electric vehicle concept in their market to reduce the impact of effluent gas on the environment. |
Figure 1: PESTLE analysis
(Source: Self-created)
Internal- SWOT analysis
| Strength
● Huge financial resources ● Brand loyalty ● Employee competency ● Quality product and services |
Weakness
● Poor decision making ● Insufficient research ● Lack of USP
|
| Opportunity
● Government policy in favour of electric vehicles. ● Preference of customer towards low carbon |
Threat
● Employee unrest ● Changing technology ● Increasing competition. |
Figure 2: SWOT analysis
(Source: Self-created)
Three most critical factor
The three most critical factors emerging from the analysis could be attributed to environmental concerns of the various governments, changing technology and the consumer preference for low carbon products.
Environmental concern in the countries US, UK, China, Australia and many other countries have shown concerns about the climate change phenomenon due to the greenhouse gases and other flue gases associated with vehicular emission. The government is focusing more on reducing obnoxious gases through product enhancement. At a global level, there are many protocols based on climate change, such as the Kyoto protocol and the climate change agenda that has been signed by various countries to curb the climate impact and reduce the climate change phenomenon to some extent (Jing, 2020). Therefore, the electric vehicle of Tesla would be beneficial in the effort. Technological up-gradation has provided an opportunity to Tesla to bring the most advanced and updated version of electric car to meet the current demand of the market. However, it has also been seen that technology has a negative impact on certain electric cars of Tesla due to obsolete technology used in those cars. Consumers are more tilted towards the low carbon product. Therefore, the opportunity for the Tesla is immensely high in the global market.
Tesla’s current source of competitive advantage and its evaluation
Tesla battery chain: Tesla has currently four battery products based on electric vehicle concepts. Tesla models such as S, 3, X AND Y all these car variants require powerful and high capacity batteries. Tesla at present has various kWh batteries. The Tesla supply chain for its battery has advantages for the Tesla Inc. Tesla battery expansion beyond all-electric vehicles is the greatest advantage for the company in the intensely competitive market.
Porters Five force analysis
Competitive rivalry:
Tesla operates its business in a highly competitive market. Tesla operates in the electric car segment, where competition is not so intense.
Bargaining power of consumer:
Tesla has low switching cost, which reduces barriers for the customer of Tesla to purchase cars from various other manufacturers (Tesla.com, 2021). However, the availability of electric cars with other automotive manufacturers is very low; as a result, the bargaining power of consumers is of a moderate level.
Bargaining power of suppliers:
Tesla suppliers have low forward integration; as a result, suppliers have very limited control over the sale and distribution of the Tesla electric car.
The threat of substitution:
Low cost of switching poses a threat to Tesla and enables intense competition in the automotive segment. The low cost could easily attract consumers to prefer public transport. But the low availability of the electric car limits the threat of substitution for Tesla motors (Pow, 2019).
The threat of new entrants:
Tesla has a very robust business strategy; therefore, it is very difficult for any organization to compete with Tesla in the electric car segment.
Tesla’s Supercharger Networks:
Tesla’s superfast charging facilities and various stations distributed across creates effective and efficient charging opportunities for the consumer. This is one of the important advantages for the company as compared to the other competitors. The supercharge station of Tesla is unmatched by any other competitor around the world.
Tesla software update:
Tesla electric vehicle has embedded software and gets updated on a regular basis to eliminate any issues due to technological up-gradation. The features such as improved traffic light, backup camera, Walkaway door lock etc. gets updated as per the technological upgradation. This provides a competitive advantage to the company in the market.
Tesla’s branding:
Tesla, over a period of time, has successfully developed its reputation in the global market. The Tesla Roadster has helped in transforming the electric car image in the minds of consumers. Tesla has facilitated in becoming fast and powerful electric vehicles from earlier slow and small electric vehicles. Therefore, Tesla is unmatchable by another company for its electric car version of the big, powerful and fast car segment.
Tesla AI:
Tesla analyses numerous pictures and experience of the Tesla car owner and enhances the autonomous capability of the Tesla car (Tesla.com, 2021). This creates a competitive advantage for the company across the market.
Task 2-Strategy in the Global Environment
Foreign market entry strategy
Tesla faces intense competition from Toyota and general motors. In order to enter the international market, Tesla focused more on bringing cost-effective and powerful electric vehicles to the market to gain a competitive advantage. In its initial phase, Tesla struggled with its low financial resources. Delay also happened in the production of the electric car, but the situation changed after adopting the effective strategy of disinvestment of some of the assets which were underperforming. This provides an opportunity for the company to expand its business in the international market (Ferreira, 2019).
The organization generally enters into the foreign market by analyzing 4ps, that is, product, price, place and promotion. Tesla’s biggest motive for the expansion of the business into the international market is the demand for the low carbon product by the consumer across the world market. Tesla understood the demand of the present market and accordingly decided to expand its business into the international market to capture the greater market share in the electric car segment.
Tesla’s motives for business expansion and its foreign market entry strategy
Tesla’s biggest motive for the expansion of the business into the international market is the demand for the low carbon product by the consumer across the world market (Tesla.com, 2021). Tesla understood the demand of the present market and accordingly decided to expand its business into the international market to capture the greater market share in the electric car segment.
Product
Tesla has a wide range of products in the market to meet the demand for electric cars. Tesla started its journey with the electric vehicle Roadster, and now it has continuously upgraded its electric vehicle segment with more capacity, speed and large size to compete with some of the giant companies like Toyota, general motors’ etc., across the world market.
Price
Tesla models range from $69200 to $141200 as compared to the other company such as BMW with its i8 model is approximately priced at $144395. Keeping the price of the vehicle very high negatively affects the company like Tesla (Liu et al. 2017). Therefore, Tesla’s affordable price strategy paved the way for international business expansion.
Place
Tesla distribution strategy with its distribution channel spread across many countries is one of the effective strategies that helped Tesla to enter the international market. Tesla is developing a Giga factory in the USA in order to manufacture the LI-ion battery to overcome its problem of supply chain shortage of batteries for various car segments.
Promotion
Tesla has zero marketing budget; in other words, it has no commercial advertisement. The reason behind the zero-budget advertising is that Tesla orders outnumber the manufacturing capacity of the company. Its supercharging stations and its customers are an effective marketer for its electric vehicle across the world.
Recommendation for different strategies Tesla can use to compete globally.
The most suitable strategy for Tesla to compete globally is the global strategy. Global strategy refers to the use of the same software and technology in the product across the globe. Tesla could rely on the global strategy for creating its brand value around the globe by providing the same features in its electric vehicle. Some minor modification as per the country rules and regulation is considerable in the global strategy for competing globally (Lugtu, 2019).
Task 3-Corporate strategy
Evaluation and critical analysis of various corporate strategy
Horizontal integration:
Horizontal integration refers to the acquisition of a business operating at a similar level in respect to the value chain pertaining to the same industry. For a company like Tesla, horizontal integration is not beneficial because of its unique and developed manufacturing technology and business strategy (Tesla.com, 2021). However, horizontal integration has certain opportunities associated with it, such as only in case the company has a successful business strategy and model. Companies with financial constraints could opt for this strategy. In case of a low, competitive level, a company could adopt a horizontal strategy.
Vertical integration:
Vertical integration refers to thestrategy where a company controls suppliers, retail locations or distributors in order to control its supply chain. Vertical integration has certain benefits in terms of providing an opportunity for companies to control their business operations. Vertical integration is opted by the company with strong financial resources and a well-developed strategy for its business development (Musonera and Cagle, 2019).
Outsourcing:
Outsourcing refers to a business practice in which an organization usually hires third parties in order to carry out its business activity such as operation handling, finance management, customer services etc. Companies with less financial and technological resources usually prefer this type of practice for their business operation.
Strategic alliance:
Strategic alliance is a kind of arrangement involving two companies to benefit mutually from the business operation. The company is involved in the same project on mutual terms, but they retain their identity and work in close cooperation and coordination for profit.
How Tesla can increase its profitability
Tesla could increase its profitability by adopting various strategies for its business. Tesla vertical integration strategy would be an effective and most beneficial strategy for its business. Tesla, by focusing on the higher variants, could be able to create a more consumer base in the global market. The decreasing cost of batteries could be one of the potential areas through which it could certainly enhance its business expansion and increase its electric vehicle sales in the global market. Tesla, by rescaling its capital expenditure, could be ankle to enhance its profitability (Musk, 2020). A vertical integration strategy would allow Tesla motor to control its various business operations and suppliers in order to facilitate cost-effective production of th4e electric vehicle. Therefore Tesla could be able to reduce its car price range and make it accessible for middle-order consumers across the global market.
Task 4-Strategic purpose- Ethics and CSR
Tesla’s CSR strategy
Triple bottom line
Tesla is one of the largest electric car manufacturers that relied totally on the Triple Bottom Line approach in its CSR strategy.
Tesla is concerned about the blue planet, that is, people, profit and planet, and therefore founded a company involved in the manufacturing of electric vehicles (Aybaly et al. 2017).
Planet
Electric vehicles of Tesla save the planet by reducing the flue gases and obnoxious emission from the vehicle. At the same time, electric cars are environmentally friendly products. Tesla electric car has extreme performance ability with its high speed driven by a battery.
People
The next aspect of TBL is people. Tesla recruits one of the best talented and skilled professionals for its product manufacturing and designing. Employees of Tesla are highly skilled and self-motivated. They have the ability to challenge unforeseen circumstances and innovate the product with unique features around the world (Teece, 2018).
Profit
Tesla’s next TBL is profit. Tesla provides importance to profit while utilizing the upgraded technology and skilled employees. Tesla has its own research, and development wing and innovation-related activities are carried out within the vicinity of the Tesla organization.
Employee safety and health at Tesla
Tesla promotes the health and safety of its employees at its manufacturing unit. Tesla allows its employees to attend various training programmes. Tesla has a strategy of health benefit at zero cost. Tesla takes responsibility for the well being of its employees by providing regular checkup and counselling campaigns within its designated health care centres (Gafarov, 2019). Health and safety of the employee at the workplace boost confidence and productivity. Tesla, on a regular basis, provides opportunities for a holiday tour along with the family for its employees to eliminate the negative impact on their mental well being.
- Water consumption
- 3R (Reduce, Reuse and Recycle)
- Carbon emission
- Charity by Tesla
Ethical issues faced by Tesla
The ethical issue involved in regards to its electric vehicle claiming no utilization of fossil fuels in its electric vehicle mobility. The argument put forward by some of the scholars is that recharging batteries requires electricity and that for electricity generation, coal and other fossil fuels are used.
The other ethical issues related to the customer feedback and their consideration while developing the car. It has been seen that Tesla, in its annual reliability survey, has neglected the feedback from the consumer and did not cover it in its report (Capuder et al. 2020).
Tesla’s recent move to close many stores located at various places without providing valid reasons has created a chaotic situation amongst the employees. The ethical concerns involved here is the absence of proper information and reason. Tesla laid off 8% of its existing employees but did not disclose the proper data.
Injuries at the workplace:
A frequent injury in the recent year has created ethical concern around the Tesla. The employee extended hours of working in the manufacturing unit of the company, posing a threat to their life.
Recommendation to eliminate the ethical issues
Comprehensive hazard control
Periodic inspection of the job and scheduling employee jobs properly would eliminate employee injuries at the workplace. Periodic surveillance to ensure the medical fitness of its employees will reduce work-related stress (Kauerhof, 2017).
Culture Improvement
Managers should be trained to handle the employee and understand their concern. They must be skilled enough to understand and address the situation and provide a better work culture to their employees.
Transparency
Tesla must ensure transparency in its business conduct as well as in terms of employee management. Tesla must understand the employee’s concern and work in the field to protect its employee by protecting their job security in a difficult time. Company moral responsibility lies in understanding its employee and consumer needs and must stand with its employee in hard times (Bruijl, 2017).
Conclusion
The study has been carried out on the global strategy and sustainability of the Tesla motors. PESTLE analysis helped in understanding the various factors impacting the business of Tesla Inc. Further SWOT analysis has been conducted, which revealed the opportunity and threat associated with the company in the expansion of its business. Through the 4ps marketing mix, various strategies of the company have been analyzed, and the most suitable recommendation has been provided. Tesla, by implementing the recommendation, would be able to enhance its business operation.
References
Akakpo, A., Gyasi, E.A., Oduro, B. and Akpabot, S., 2019. Foresight, organization policies and management strategies in electric vehicle technology advances at Tesla. In Futures Thinking and Organizational Policy (pp. 57-69). Palgrave Macmillan, Cham.
Aybaly, R., Guerquin-Kern, L., Manière, I.C., Madacova, D. and van Holt, J., 2017. Sustainability practices in the luxury industry: How can one be sustainable in an over-consumptive environment?: Sustainability in the automotive world: The case of Tesla. Procedia computer science, 122, pp.541-547.
Bruijl, G.H.T., 2017. Tesla Motors, Inc.: Driving Digital Transformation and the Digital Ecosystem. Inc.: Driving Digital Transformation and the Digital Ecosystem (October 14, 2017).
Capuder, T., Sprčić, D.M., Zoričić, D. and Pandžić, H., 2020. Review of challenges and assessment of electric vehicles integration policy goals: Integrated risk analysis approach. International Journal of Electrical Power & Energy Systems, 119, p.105894.
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Ferreira, M.B.D.C., 2019. Tesla and the electric vehicle market in 2018 (Doctoral dissertation).
Gafarov, R., 2019. Evaluation of the financial position and the performance of Tesla, Inc (Doctoral dissertation, Masarykova univerzita, Ekonomicko-správní fakulta)Guno, C.S., Collera, A.A. and Agaton, C.B., 2021. Barriers and Drivers of Transition to Sustainable Public Transport in the Philippines. World Electric Vehicle Journal, 12(1), p.46.
Jing, X.U., 2020. Analysis of the Operation Strategy of Tesla Inc. in China. Frontiers in Economics and Management Research, 1(1), pp.21-25.
Kauerhof, A., 2017. Strategies for Autonomous, Connected and Smart Mobility in the Automotive Industry. A Comparative Analysis of BMW Group and Tesla Motors Inc. GRIN Publishing.
Liu, J.H. and Meng, Z., 2017. Innovation model analysis of new energy vehicles: taking Toyota, Tesla and BYD as an example. Procedia engineering, 174, pp.965-972.
Lugtu Jr, R.C., 2019. Tesla: Testing a Business Model at its (R) Evolutionary Best (Doctoral dissertation, DE LA SALLE UNIVERSITY-MANILA).
Musk, E., 2020. Tesla, Inc.
Musonera, E. and Cagle, C., 2019. Electric Car Brand Positioning in the Automotive Industry: Recommendations for Sustainable and Innovative Marketing Strategies. Journal of Strategic Innovation & Sustainability, 14(1).
Pow, C.P., 2019. Of Tesla and Eco-city: Urban Sustainability as Territorial Local Trap?. In Remaking Sustainable Urbanism (pp. 19-35). Palgrave Macmillan, Singapore.
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Teece, D.J., 2018. Tesla and the reshaping of the auto industry. Management and Organization Review, 14(3), pp.501-512.
Tell, J., 2021. The 4Ps Marketing Mix, and what it means for charities ~ Just Tell Stories. [online] Just Tell Stories. Available at: <https://justtellstories.com/the-4ps-marketing-mix-and-what-it-means-for-charities/> [Accessed 26 June 2021].
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