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INTRODUCTION

Corporate strategy refers to the direction as well as scope of actions of company in alignment with the stipulated organisational goals and objectives (Davies, 2016). Every organisation has a unique corporate strategy which is applied by them to gain a strategic and competitive edge in marketplace. It is largely concerned with the management of resources, risks and returns done by an entity which provides an opportunity to the firm to become a leader in corporate world within the specific business industry. Designing and formulating an effective corporate strategy lays the foundation for success of a business enterprise in global market place and assists the entity in carrying out its operations in accordance with the targets stipulated by the management of a company.

The following report is based on Tesla Motors which is an American automotive and energy organisation that enjoys a leading stature within the global marketplace. This report consists of external business environment and industry analysis by way of PESTLE and Porter Five Force analysis. Further, it includes the resources and key competences of entity to determine the core competences. And lastly, it constitutes of SAFe criteria applied to a strategy executed by organisation in marketplace.

External analysis (business environment and industry) to identify Opportunities and Threats and assess industry attractiveness

Tesla Motors is a leading name within the vehicle manufacturing sector owing to the wide variety of cars that the entity offers to public as per their choice and relevance. This organisation is having its head office located at Palo Alto, in Silicon Valley. Company mainly is a car manufacturer unit established in the year 2003. Entity is one of the leading car manufacturer company having more than 79 stores around the world and have approximate number of 10,161 employees in its organisational structure. With the help of PESTEL evaluation, Tesla will effectively be able to analyse its opportunities and threats in the sector including, political, legal, environmental, technical and social (Mittal and Dhar, 2015). Along with this, present analysis also benefits company to assess their currently present competitors within automobile industry.  In addition with this, as Tesla is looking forward to build up environment friendly alternatives, environment factor of PESTEL analysis aid Tesla to find opportunities and threats in effective way in order to stimulate its growth process:

  • PESTEL Analysis

Political:Political factor consists, different types of trade regulations such as EU & NAFTA, entry mode regulation, stability of government, social policies and more. Tesla underway its business by trading cars in the region of North America and after then expanded their business services in Western Europe and Asia. This expansion brings numerous political factors that influence its culture. Some of the basic political factors that put their impact on functioning of Tesla include, environmental regulation that aim towards decreasing the emissions level for this, it has been encouraged to produce environmental friendly cars along with this, element of government subsidies and other various incentives make consumers to use greener vehicles. Government institution of US created a programme in which they provide energy loan programmes that will effectively encourage industries to use new vehicles technologies. For instance, in Europe, Norway government encourage industries in market by providing certain measures like, nationwide access bus lanes and offering free parking of electric vehicles (Du and et. al., 2013). All these political decisions adopted by countries effectively represents as an opportunities for Tesla in order to find new market and make further investments in those market as to gain more growth and maximise profitability of company. While on the other hand, various types of environmental regulations can result as a major threat for Tesla to operate their functions in smooth and effective way as these regulation affect day to day functioning of company.

Economic: These factors are mainly related to, current level of inflation, economic growth rate, credit accessibility, interest rates and more. As demand of sustainable car demand rose around the globe as price of fuel-engine vehicles is rapidly raising with the fast phase increment in fuel prices worldwide this factor will work as an effective opportunity for Tesla to offer their environmental friendly cars in global market and acquire large market share. Along with this, increase in GDP rate lead towards significant rise in buying power of customers that will automatically increase sale of electric cars in global market.

Social: Change in lifestyles and trends, education level, distribution of wealth is some of the factor which is covered in this aspect of PESTEL analyses. Social factor is related to buying behaviour and attitude of customers related to a product or a service. In today’s modern world, there is an increase in environmental awareness. Recently individuals prefer to buy eco-friendly products rather than purchasing the pollutants ones (Engert and Baumgartner, 2016). People like to spend their money on environment friendly products as to safe both environment and their money. Convinced individual’s acts as a great opportunity for Tesla to offer electric cars in market and generate effective growth of their products in a global level in order to satisfy demands of consumer on a great base.

Technological: These include new and innovative discoveries, different types of new technological platforms and more. Technological factor effectively benefits rapid progress of organisational effectiveness. With the adoption of highly advanced technological measure in its manufacturing process Tesla can find numerous sets of opportunities in order to improve its level of efficiencies and decrease overall cost of input in their car industry. Along with this, technological factor enables Tesla to gain opportunity, to offer wide range of car choices to customers worldwide. While on the other hand, in order to find different types of effective technological measure for company it is required for Tesla to input more cost in their R&D expenditure budget (Gnan, Montemerlo and Huse, 2015). This will act as a threat as it is quite hard to find out one of the best effective and suitable technological measure for company which can effectively stimulate its growth.

Environmental: There are different types of factors included in environmental section such as, attitude towards environment, waste disposal law, energy consumption law etc. As individuals in all over the world is getting so much aware about environmental concern so this factor can be seen as a threat for Tesla to face more competition in order to produce eco-friendly vehicles in both economical and affordable way. While, as Tesla is planning to bring eco-friendly car in the market this concern of environment results in increase in high end demand of company products at global market which effectively stimulate its growth.

 Legal: There are a variety of legal factors which are required to be considered by companies in order to perform their functions in a manner desirable by law. Some of these factors include product regulation, patent infringement, health and safety regulation, employment regulation etc. World is leading towards, go green movements in which brings large and leading manufacturers to build vehicles in an eco-friendly way. There are different types of legal regulations implemented by government such as, carbon tax, green policies and more (Lam and O'Higgins, 2012). All these regulations and laws acts as an opportunity for Tesla in order to boost their demand of electric cars in global market. While on the other hand numerous taxation policies on green business results as a threat for Tesla to operate their business in global market.

 

Tesco has been running successfully within the global market by making use of the opportunities that the external business environment presents and overcoming the threats that are placed by macro environmental factors of the entity. Further, the manager of this organisation has carried out Porter Five Force analysis in order to gain knowledge of industry attractiveness of the sector in which this entity operates and to identify who possess the largest influential power within this industry. In this regard, industry analysis of automobile sector relatively taking into consideration the position of Tesla is given below:

PORTER FIVE FORCES

  • Threat of New Entrants - High

The threat of new entrants within automobile sector is low. This is so owing to a number of reasons. One of the most dominant reasons of this is then requirement of huge capital which is necessary to gain an entry into automobile sector, specifically the electric vehicle segment. Also the expertise required to carry out the high tech operations associated with manufacturing and other related activities is not easy to be gained by every new entrant. This is beneficial for companies such as Tesco to ensure its sustainability in market for a long duration of time.

  • Threat of Substitutes - High

The threat of substitution is found to be quite high within the automotive sector. In this regard, Tesla Motors faces the threat of substitution from hybrid cars, electric cars, solar power cars and other diesel cars which are offered by rival firms within the same sector (Tesla Porter’s Five Forces Analysis, 2019). Further, the threat of substitutes also exists in case of people opting to make use of bus, train or bicycles as a mode of transportation instead of acquiring an electric vehicle.

  • Bargaining Power of Buyers - Moderate to High

The power possessed by buyers within this sector is ranging from moderate to high. This is due to the increasing awareness among customers which makes them crave for high quality and innovative products with prices lower than that of other companies dealing within automotive sector. If customers realise that they can get the same product at a lower price from another enterprise, they may switch to that entity (McCahery, Sautner and Starks, 2016). Thus, it is required by Tesco to adopt diversification so as to keep the loyal base of customers intacked.

  • Bargaining Power of Suppliers – High

The bargaining power of suppliers within the automotive sector is high owing to the specific technologies that the firms operating at large scale make use of to gain strategic edge in marketplace over rival firms. In this regard, Tesla is dependent upon suppliers for the necessary prerequisites to utilise lean management system across the organisational premises (Tesla Porter’s Five Forces Analysis, 2019).

  • Competitive rivalry - High

In the global marketplace, the competition in automotive industry is fierce and owing to this the competitive rivalry is high in this sector. Various firms operating as a part of this industry offer diverse categories of vehicles as per the preferences and convenience of customers. In relation to electric vehicles, the cars designed by Tesla have no close substitutes yet companies such as Nissan which produce affordable electric cars stand a chance to out power Tesla across the global market.

Porter's Five Force Analysis Model

Figure 1: Porter Five Force Analysis Model 

As per the analysis of the automobile sector, it has been evaluated that Tesla faces a number of threats owing to which they need to focus their attention specifically towards the high quality of cars and the differentiating element present within them to gain a strategic and competitive edge over rivals in marketplace. Further, it has been analysed that the threat of the existence of other dominating and well established brand names within the industry which provides close substitutes of the vehicles produced by Tesla is significant enough to take over the current share of company in global marketplace. This organisation has made use of hydrogen fuel to design and develop high tech cars which possess the capability to persuade customers to make a purchase. Additionally, it has been assessed that automobile sector is still not much accessible owing to the high capital investment which is required to be done by new entrants and the skills that are required to execute the high tech operations to successfully tap in the industry as a key player (Herrmann and Felfe, 2014).

Analysis of Resources and key competences of company to identify core competences

VRIOS framework assists an organisation in determining the areas which render the company a competitive advantage within the industry (Marsh, 2013). Identification of the most valuable skills, resources and competences is necessary for an enterprise. In this regard, VRIOS framework is used to analyse the resources and key competences of Tesla Motors.

 

VRIO ANALYSIS

V: Value creating potential

R: Rarity

I: Imitability

O: Organization Appropriateness

 

V

R

I

O

STRATEGIC IMPLEMENTATIONS

RESOURCES

Elon Musk

YES

YES

YES

YES

The award winning CEO of Tesla is its most important resource. The success of company is owing to his strategic vision and leadership in the right direction.

Funds & Grants Raise

YES

NO

NO

YES

Owing to its socially responsible vision and mission as well as its promising leadership have the access to funds and grants which assist the enterprise in product launch (Tesla’s mission is to accelerate the world’s transition to sustainable energy, 2019).

Design and engineering excellence

NO

NO

NO

YES

Tesla vehicles, especially the Model S is an architectural excellence which is a result of the extreme design and engineering efficiencies within the enterprise which act as a powerful resource for the success of this entity (Tesla's High End Disruption Gamble, 2019).

 

V

R

I

O

STRATEGIC IMPLEMENTATIONS

CORE COMPETENCES

Innovative and creative design thinking culture

YES

YES

YES

YES

Owing to the heavy investment of Tesla within R&D, the culture of this organisation is driven by innovative and high design creativity. The technological innovations brought in by this firm render it a competitive advantage within the industry (VRIO FRAMEWORK, 2019).

Diversification strategy

YES

YES

NO

YES

The long term diversification strategy of this enterprise has assisted the organisation in turning itself into an energy innovative company which develops sustainable goods for power industry. This renders a strategic as well as competitive advantage to the firm over rivals as this is a unique concept anew to Tesla Motors.

Marketing Strategy

YES

NO

NO

YES

Owing to the lack of a well designed and formulated marketing and advertising campaign, this organisation has not been much successful in creating awareness about electric vehicles manufactured by Tesla and its high tech features which regards it the value that it holds within global marketplace

Business Model

NO

NO

NO

YES

Tesla’s corporate as well as sales strategy is capable to provide assistance to company in achieving their expansion goals. The owned revenue and service centers of this organisation are too expensive and not at all conducive for the attainment of sales targets.

 

Figure 2: DISRUPTIVE INNOVATION DONE BY TESLA

SAFe criteria applied to be a strategy implemented by organisation

Over years, Tesla has been known for making use of innovation and creativity within products so as to design and develop such products which possess the capability to disrupt automotive industry as well as the overall global market place. In this regard, the strategy of company to enter the segment of electric vehicles taking into account the aspect that not many entities are present within this segment to compete with Tesla Motors was excellent in terms of the strategic choice and intelligent mindset. With the passage of time, the decision of this organisation to enter this segment of vehicle production has assisted the entity in gaining increasing name and stake within marketplace (McCahery, Sautner and Starks, 2016). By introducing new models of electrical cars at regular intervals, company strives to enhance the share in global market with a significant quantum every time that a new product is launched into the industry that aims at disrupting the sector in terms of its high tech features and excellent architectural design. The manager of this organisation has applied SAFe criteria to analyse the suitability, acceptability and feasibility of this generic strategy of company to adopt innovation and tap new product segments:-

Suitability: Taking into account the behavioural characteristics of their target consumers, Tesco analysed that customer prefer innovative products. This strategy of adopting innovation to tap new product segments is suitable to meet the needs and demands of people as with this, the organisation stays aligned with the latest tools and technologies prevailing in marketplace.

Acceptability: The generic strategy of company to adopt innovation so as to enter new markets segments such as electrical vehicles is easily acceptable by people as customers in today's era are more inclined towards uniqueness and innovation.

Feasibility: The generic strategy of Tesco to make use of innovative practices to enter new product segments is feasible as this renders organisation the opportunity to enable growth of business operations within global marketplace.

CONCLUSION

As per the above report, it can be concluded that corporate strategy is the key to success of an enterprise within marketplace. Also it has been analysed with the help of PESTLE analysis that external business environment offer a number of opportunities and threats that have to be taken into consideration by the enterprise in order to operate strategically in market. Further, Porter Five Force analysis reveals that there is huge threat of rivalry and substitution within automotive industry which causes risks for the existing companies in the sector. VRIOS analysis indicates that the resources and competences of a firm are the key to success of an organisation and should be worked upon on a daily basis to become the leader in market.

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REFERENCES

Davies, A., 2016. Best practice in corporate governance: Building reputation and sustainable success. Routledge.

Du, S. and et. al., 2013. The roles of leadership styles in corporate social responsibility. Journal of business ethics. 114(1). pp.155-169.

Engert, S. and Baumgartner, R. J., 2016. Corporate sustainability strategy–bridging the gap between formulation and implementation. Journal of cleaner production. 113. pp.822-834.

Gnan, L., Montemerlo, D. and Huse, M., 2015. Governance systems in family SMEs: The substitution effects between family councils and corporate governance mechanisms. Journal of Small Business Management. 53(2). pp.355-381.

Herrmann, D. and Felfe, J., 2014. Effects of leadership style, creativity technique and personal initiative on employee creativity. British Journal of Management. 25(2). pp.209-227.

Lam, C. S. and O'Higgins, E. R., 2012. Enhancing employee outcomes: The interrelated influences of managers' emotional intelligence and leadership style. Leadership and Organization Development Journal. 33(2). pp.149-174.

Marsh, C., 2013. Business executives’ perceptions of ethical leadership and its development. Journal of Business Ethics. 114(3). pp.565-582.

McCahery, J. A., Sautner, Z. and Starks, L. T., 2016. Behind the scenes: The corporate governance preferences of institutional investors. The Journal of Finance. 71(6). pp.2905-2932.

Mittal, S. and Dhar, R. L., 2015. Transformational leadership and employee creativity: mediating role of creative self-efficacy and moderating role of knowledge sharing. Management Decision. 53(5). pp.894-910.

Ocasio, W. and Radoynovska, N., 2016. Strategy and commitments to institutional logics: Organizational heterogeneity in business models and governance. Strategic Organization. 14(4). pp.287-309.

Ojokuku, R. M., Odetayo, T. A. and Sajuyigbe, A. S., 2012. Impact of leadership style on organizational performance: a case study of Nigerian banks. American Journal of Business and Management. 1(4). pp.202-207.

Tricker, B., 2015. Corporate governance: Principles, policies, and practices. Oxford University Press, USA.

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