MSc Management Global Strategy and Sustainability Assignment Sample
Introduction
Tesla is an automotive company based in San Carlos, California, USA. It was founded by Elon Musk in 2003. Tesla is engaged in designing and manufacturing solar panels, electric vehicles, solar roof tiles and battery energy storage from home to grid-scale (Vladzievska and Mulina, 2020).http://MSc Management Global Strategy and Sustainability Assignment Sample
In this report, we will discuss the external environment which is a PESTLE analysis of Tesla and the internal environment. The strategy that Tesla has framed to sustain itself in the global market. The corporate strategy of Tesla will also be discussed in this business report. Further, we will also discuss the CSR activities of Tesla.
External Environment of Tesla
PESTEL ANALYSIS
Political
The Tesla company can make the best use of the opportunities in order to strengthen its financial status and performance by utilizing a number of incentives that are provided by the government of the USA.
The business environment is affected by the political environment of the country both directly and indirectly. The political environment can directly affect the economic environment of the country and the business environment.
The Tesla company manages the factors of the external environment issues like the current economy, industry dynamics, market, socio-cultural forces and government regulations (Johnson and Reed, 2019).http://MSc Management Global Strategy and Sustainability Assignment Sample Tesla is prone to political instabilities in the market as it operates in the automotive industry.
Economic
Many car manufacturing companies are now working on manufacturing electric cars that are sustainable for the environment. Electric cars have gained huge popularity in the market after the green initiatives taken by companies globally to save the environment and reduce global warming.
In the years 2019 and 2020, the global economic development relies upon the stay at 3 per cent (Liu, 2021).http://MSc Management Global Strategy and Sustainability Assignment Sample The vehicle market was $39.8 billion in the year 2018 which has aimed to reach $1.5 trillion by the year 2025. This economic factor has turned out to be positive for Tesla and has opened doors to manufacture a maximum number of electric vehicles by the year 2025.
Social
Organizations are highly affected by the social conditions of customers, employees and investors of the organization. Social factors are the same as the other factors. In many cases, the social factors can affect the supply and interest in the specific products.
These social factors influence how some products are seen in certain social orders. Currently, there are many people or customers who demand products that are sustainable for the environment (Dai, Wang and Zhong). Tesla should consider geographical peculiarities like differences in regions and their readiness to accept electric vehicles.
Technological
The technological advancement implemented by Tesla to manufacture electric vehicles. Tesla’s business of energy solutions is highly dependent on the available technologies. For example, the productivity and the cost feasibility of the batteries of the organization are decided by the innovation in materials building.
The business of Tesla is dependent upon technological development and innovation involves the development of sales in the 21st century. New technological innovations happen each day. Tesla opens the door for new technological innovations (Alghalith, 2018). http://MSc Management Global Strategy and Sustainability Assignment SampleTechnological factors are important for automotive companies to sustain themselves in the market.
Environmental
Environmental factors are related to the preconditions of the environment and the growing demands for sustainable products from the consumers and their effects on climatic changes. Fossil fuels are replaced with electric cars as fossil fuels increase the level of air pollution and affect the environment.
Fossil fuels have become less popular after the innovation of electric cars that are sustainable for the environment. The popularity of electric cars is increasing day by day as people are demanding products that are sustainable for the environment (Jose et al., 2022).http://MSc Management Global Strategy and Sustainability Assignment Sample This aspect contributes to the growth of Tesla as it has the scope to manufacture more electric cars.
Legal
Legal factors affect businesses across the world. The legal factors have grown their significance in the 21st century. The law of the country has a direct effect on the businesses through its guidelines related to the work, environmental guidelines and other guidelines related to the business.
Many states and countries casually hamper the sales of Tesla directly from the manufacturer to the customer. In these states and countries, Tesla is required to connect with a vendor (Farkas-Csamango, 2020). http://MSc Management Global Strategy and Sustainability Assignment SampleThese legal conditions can affect the conveyance of the vehicles of Tesla. There are many other legal issues like vitality utilization guidelines and patent rights.
Internal Environment of Tesla
SWOT Analysis
| Strength | ● A well established strong brand
● Established operations capabilities ● Model S of Tesla exhibits how technology facilitates the process of developing cars with safety features and high-performance ● Has highly capable designs. Human resource and sales and marketing of the cars ● Creativity and innovation ● Has received customer recognition ● Best manufacturers of electric vehicles |
| Weaknesses | ● Depends highly on external suppliers
● Depends on new technologies for its operations ● Undeveloped international market ● The technology of electric vehicles has many uncertainties that are related to the negative preconceptions ● Tesla has reported negative operating margins ● Tesla only specialises in the electronic vehicle market |
| Opportunities | ● Demand of the customers to buy environmentally sustainable products
● Developed brand with exceptional features ● Model S and Model X will have an unstoppable growth once the electronic vehicle market bursts ● Tesla has the ability to eliminate the negative beliefs and presumption about the electric cars ● Mixed models of vehicles with other environmental friendly vehicles |
| Threats | ● Internal Combustion car manufacturers sell cars with same luxury, speed, attributes and comfort
● Internal Combustion car manufacturers have a protected brand and are well established ● Competitors are Volkswagen, Audi, Lexus, Nissan, BMW and Fiat ● A new company coming up with a new product in the market |
Strengths
Tesla has an established strong brand that is developed through utilities like reliability, luxury and high performance. It also has well-established capabilities in operations. Model S manufactured by Tesla illustrates how technology clears the way for the development of another automobile model with innovations, new safety features and high-performance levels.
Tesla has highly capable and attractive car designs with many new features. It also has a highly capable sales and marketing team and human resource team (Kancherla and Daim, 2018). http://MSc Management Global Strategy and Sustainability Assignment SampleTesla invests highly in creativity and innovation with an aim to succeed in future. Customers recognize Tesla as the best car manufacturer of electric vehicles.
Weaknesses
Tesla is highly dependent on external suppliers. As it is an automotive company, adopting new technologies is inevitable. Hence, Tesla is dependent on technology for its operations. Tesla was founded in the year 2003 but it still has an undeveloped international market.
Tesla operates only in the USA, Europe and Asia. The electric vehicle of Tesla has many uncertainties that are related to the negative presumptions about the performance and safety of the electric vehicles in comparison to the petrol, diesel and CNG cars. According to the reports of Tesla motors, it has negative operating margins (Kancherla and Daim, 2018). http://MSc Management Global Strategy and Sustainability Assignment SampleTesla motors have a limited market share as it only manufactures electric vehicles that have only a 1 per cent market base.
Opportunities
Many people nowadays are becoming cautious about the environment and demand for environmentally sustainable products. It is an opportunity for Tesla as electric cars are not harmful to nature. Using petrol, diesel and CNG cars results in an increase in air pollution.
Tesla is a developed brand with exceptional features. Model S and Model X of Tesla will have an unstoppable growth when there will be a rise in the market for electric cars. The features of the electric vehicles of Tesla have the ability to eliminate the negative beliefs and presumptions about electric cars (Kancherla and Daim, 2018).http://MSc Management Global Strategy and Sustainability Assignment Sample The variety of the cars of Tesla is combined with environmentally friendly cars that have compromised performance. Tesla also has a high financial ability.
Threats
The car manufacturers of Internal Combustion sell cars with the same comfort, speed, attributes and luxury. These car manufacturers have well established and protected brands.
The competitors of Tesla cars who are developing electric vehicles are Nissan, Audi, Lexus, Volkswagen, Fiat and BMW (Kancherla and Daim, 2018). http://MSc Management Global Strategy and Sustainability Assignment SampleThe biggest threat for Tesla is that it is a new company and has introduced a new product in the market.
Strategy in the Global Environment
The product strategy executed by Tesla is the same as many automobile companies. Tesla entered the market in 2003 with a high price point. They manufactured a low number of cars (Akakpo et al., 2019). http://MSc Management Global Strategy and Sustainability Assignment SampleTheir electric cars focused more on wealthy early adopters.
In the case of Tesla, it was a fully electric sports car: Tesla Roadster. Tesla invested highly in research and development and manufactured many models of Tesla electric cars that are affordable for everyone (Han, 2021). http://MSc Management Global Strategy and Sustainability Assignment SampleThrough this, Tesla is increasingly benefiting from the economies of scale. The end goal of Tesla is to offer electric vehicles at affordable prices to the masses.
The focus of Tesla is on Vertical integration. Tesla is 80 per cent vertically integrated as the automobile manufacturing companies outsource 80 per cent of their elements to the suppliers (Sathish and Weenk).
This vertical integration of Tesla is combined with the fact that the entire production of the electric cars of Tesla happens in the same factory of Tesla motors. It means that Tesla can reduce manufacturing costs and practice innovation much more effectively, efficiently and quickly (Chen, Chowdhury and Donada, 2019).http://MSc Management Global Strategy and Sustainability Assignment Sample
Tesla expanded into the international market in the year 2009 after one year after launching its first car. Their first car showroom was opened in London and Munich in the year 2009. Today, Tesla has showrooms in around 32 countries and service centres in around 35 countries.
The strategy implemented by Tesla to operate in the global market is direct selling (Ding and He, 2022).http://MSc Management Global Strategy and Sustainability Assignment Sample All the showrooms and service centres located globally are directly owned by Tesla. It is also known as the traditional franchise dealership model that is generally used by many automobile manufacturing companies.
Tesla follows a direct selling strategy with an aim to have better service coverage. It helps them in informing their customers about the cars in the best way (Jing, 2020).http://MSc Management Global Strategy and Sustainability Assignment Sample Direct selling removes the franchise dealers and helps in reducing the cost of the car. Franchise dealers also have a conflict between selling electric cars and gasoline-powered cars.
Another strategy implemented by Tesla at the international level is the Transnational strategy. Transnational strategy means that Tesla is present in many countries and gets many benefits from the global structure of Tesla (Orantos Palomo, 2021). http://MSc Management Global Strategy and Sustainability Assignment Sample
It adopts the product and sales methods that are according to the local requirements of every country. In the initial days, Tesla cars were only manufactured in Fremont, California, USA (Onaltayev et al., 2019).http://MSc Management Global Strategy and Sustainability Assignment Sample After expanding globally, at the year-end of 2012 Tesla opened its distribution centre in the Netherlands in Tilburg.
Corporate Strategy
The first product of Tesla is an electric sports car that has high performance and extraordinary safety features that is called Tesla Roadster. The long term plan of Tesla is to develop a wide range of models of family electric cars at an affordable price (Helmold, 2020).http://MSc Management Global Strategy and Sustainability Assignment Sample
The overarching purpose of Tesla toward a sustainable economy is to help the economy to shift from a hydrocarbon economy to a solar electric economy which is the best sustainable solution that should be adopted by all the automobile manufacturing companies in order to reduce the impact on the environment. It is critical to make that happen by developing electric cars without any compromises.
The sports car of Tesla: Tesla Roadster is designed and manufactured to beat the sports car in a head to head showdowns such as Ferrari and Porsche are gasoline cars (Lin, Lu and Xu, 2022). http://MSc Management Global Strategy and Sustainability Assignment SampleThe strategy of Tesla Motors is to enter the market at the high end, wherein customers are ready to pay a premium price for the electric cars and then drive down the market quickly to lower prices and higher unit volume with each new model.
The mission of Tesla Motors is to fast-track the world’s transition to sustainable energy. The steps involved in achieving this are by building the best sports cars with exceptional safety features, attractive designs and high performance (Lugtu Jr, 2019). http://MSc Management Global Strategy and Sustainability Assignment Sample
Utilize money to invent electric cars at affordable prices and also provide zero gas emission electric power generation alternatives. Below is the historical journey of Tesla motors after developing its first sports car: the Tesla Roadster.
Tesla Motors has achieved a huge success in the market of electric vehicles as it has superior technology, a supercharger network and vertical integration. The electric cars of Tesla have a unique design and exceptional technology that has a camera for optional autopilot, ultrasonic sensors available at the front and back parking assistance, radar sensors for optional autopilot, and a liquid-cooled rear AC induction motor and a lithium-ion battery pack (Ingram, 2018). http://MSc Management Global Strategy and Sustainability Assignment SampleThis lithium-ion battery pack is the most heaviest part of the car. It is 26 per cent of the total weight of the car.
Tesla Motors came up with a network of superchargers. Superchargers are electric battery charging stations that have the capability to charge the batteries 50 per cent faster in just 20 minutes.
These electric battery charging stations cannot be used by any other electric vehicles as these electric battery charging stations use proprietary connectors that can charge the batteries of cars of Tesla (Baucells and Maiden). The network of superchargers provides Tesla Motors with a competitive advantage though it requires a significant capital investment. No other electric vehicle car manufacturers have battery charging stations.
The focus of Tesla is on Vertical integration. Tesla is 80 per cent vertically integrated as the automobile manufacturing companies outsource 80 per cent of their elements to the suppliers (Sathish and Weenk).
This vertical integration of Tesla is combined with the fact that the entire production of the electric cars of Tesla happens in the same factory of Tesla motors. It means that Tesla can reduce manufacturing costs and practice innovation much more effectively, efficiently and quickly.
Ethics and CSR activities of Tesla
Materiality analysis
Tesla conducted its first-ever materiality analysis wherein it surveyed its stakeholders that include the Board of Directors, employees, operational leadership, customers, suppliers and local and state policymakers in order to understand which Environmental, Social and Governance (ESG) their stakeholders find the most relevant according to their business.
Environmental impact
In the year 2020, the electric vehicles of Tesla and solar panels manufactured by Tesla enabled their customers to reduce the emissions of CO²e by 5.0 million metric tons.
Reduction in carbon footprint
The electric vehicles of Tesla are known for their highest energy efficiency. In the initial days when they manufactured their Model S, they had successfully achieved energy efficiency of 3.1 EPA miles/ kWh. Today, Tesla’s most efficient Model 3 Standard Range Plus (SR+) has successfully achieved an energy efficiency of 5.1 EPA miles/ kWh which is higher than any electric vehicle manufactured to date (Gui, 2019).
The Model Y AWD- All-Wheel Drive of Tesla has successfully achieved energy efficiency of 4.2 EPA miles/ kWh. The Model Y AWD- All-Wheel Drive of Tesla stands out when compared to the competitors of the same line. The below graph shows the average lifecycle emissions in the USA.
The below graph represents the energy efficiency of SUVs and mid-sized sedans of other car brands and the Model Y AWD- All-Wheel Drive of Tesla.
In order to reduce its carbon footprints, Tesla Motors is investing highly in building new factories that will have new designs and will be more efficient. Tesla is investing in building the factories that will reduce the use of energy from each element that requires less movement around the factory.
They make use of robots in the production process of electric vehicles which helps in reducing the consumption of energy. Before the end of the year 2019, all the vehicles of Tesla were manufactured in one location to reduce the manufacturing cost and exported to the rest of the world (Matthews et al., 2020).http://MSc Management Global Strategy and Sustainability Assignment Sample
Tesla is starting to expand their electric vehicle manufacturing at a global level as the operating cash flows of Tesla have improved sustainability. Moreover, Tesla is also covering its roof space with solar panels with a capacity of 3,200 KW. They are aiming to increase the capacity by 24,000 KW by the end of next year in order to make their automobile manufacturing factories carbon neutral.
Recycling Batteries
The batteries of Tesla cars are easily recyclable. The batteries used by Tesla are lithium-ion batteries that are recyclable. The batteries of Tesla cars have longer battery life. All the batteries are recycled in one place at the Gigafactory of Tesla in Nevada (Coffin and Horowitz, 2018). http://MSc Management Global Strategy and Sustainability Assignment SampleI
n the year 2020, the number of metals used in lithium-ion batteries that were sent for recycling by Tesla to its Gigafactory in Nevada was 1300 tons of Nickel, 400 tons of copper and 80 tons of Cobalt.
Conclusion
From the above business report, we can conclude that Tesla is a well-established brand, yet its brand is still undeveloped. It is a new brand that offers entirely new products. Tesla manages its political environment. Electric cars have gained huge popularity in the market after the green initiatives taken by companies globally to save the environment and reduce global warming.
It is an opportunity for Tesla as people are demanding environmentally friendly products and these electric cars are environmentally friendly. These cars have lithium-ion batteries that can be recycled and are non-hazardous to the environment. We also came across the strengths, weaknesses, opportunities and threats of Tesla motors.
Moreover, we also discussed the strategy implemented by Tesla to expand globally are direct selling and transnational strategy. The mission of Tesla Motors is to fast-track the world’s transition to sustainable energy. The steps involved in achieving this are by building the best sports cars with exceptional safety features, attractive designs and high performance. Tesla Motors has achieved a huge success in the market of electric vehicles as it has superior technology, a supercharger network and vertical integration. The electric cars of Tesla have a unique design and exceptional technology.
References
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