Tesla Motors’ Strategic Response to Industry Change Essay
Industry’s Maturity or Decline
Big companies with greater resources dominate the automobile sector. Since few firms can compete in the automobile industry, the items they make are often aimed at a narrow market subset. Tesla Motors made a reputation for itself by revolutionizing the vehicle industry with ground-breaking innovations in design and technology. Its most significant successes, especially concerning electronic cars, are linked to what the market will require in the future and what the government will ultimately do. Tesla has shown via the consistent release of new models that its firm and brand name are built on a solid foundation, allowing them to sustain and build upon its existing long-term success.
It has been examined that Tesla has created a product that stands out from the crowd in the competitive automobile market (Falschmidt, 1). Most of Tesla’s top rivals in this market have a solid infrastructure and are now commercializing or planning to introduce superior electric cars in the near future. Therefore, it is clear that this automobile sector technology is mature enough to be employed in the mainstream market, which will undoubtedly enhance sales. Success for Tesla also includes the company’s decision to share details of its cutting-edge automobile technology with its consumers and, on occasion, its rivals. This feature can speed up innovation and improvement in the automobile sector while minimizing associated expenses. Toyota has recently adopted a similar strategy to create a substantial market for hydrogen electric cars; this is novel in the automobile business but commonplace in other industries (such as e-companies).
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Porter’s National Diamond
The Tesla motors firm has seen pros and cons due to its vertical integration and outsourcing. Porter’s national diamond model, which consists of four factors, is used to illustrate the advantages of both approaches. The elements define the many facets of rivalry inside a company. Factor conditions, related and supporting industries’ demand conditions, firm strategy, structure, and rivalry are all parts of this puzzle (Konsolas, 2).
Producing eco-friendly automobiles is one area in which Tesla Motors Company excels relative to competitors. This act is a prerequisite since the automotive industry is working to develop new, less harmful vehicles. Therefore, Tesla employs people with the necessary expertise to create electric-powered automobile batteries.
Additionally, the company’s capital stock in the automotive sector is quite valuable. Because of their access to sufficient funding, Tesla has been able to investigate and develop battery integration in their manufactured automobiles. Tesla Motors’ efficient power electronics and drivetrain system result from vertical integration. The success may be attributed to Tesla’s well-thought-out strategy and competent management. The fact that Tesla Motors outsources some of its supplies from sister and ancillary businesses is a significant plus. When Tesla Motors started making automobiles, it relied on technologies AC Propulsion Company and Lotus Company developed to complete the assembly process. The corporation was able to stabilize at a lower cost thanks to outsourcing.
Among the drawbacks of vertical integration is the high start-up costs. In the beginning, Tesla Motors lacked the resources to make most of the components necessary to build automobiles. That is because a competitor benefits whenever a provider prioritizes its highest-paying customers. The costs associated with outsourcing may be substantial, particularly for an established business. When the demand for a particular motor component changes, making the necessary adjustments often involves contacting a geographically distant supplier, which is time-consuming and inefficient.
Boston Consulting Group’s Growth-Share Matrix
The Boston Consulting Group examined a matrix that allows investigative access to the whole company’s product line to establish the automobile industry’s essential and non-essential components. These magnitudes may be organized in four distinct ways, each corresponding to a distinct kind of company portfolio. Both the pace of expansion and the percentage of the market a company currently occupies are considered. The first factor describes the rate at which the industry is expanding, while the second describes the extent to which a certain service or automobile product dominates the market compared to its rivals.
Tesla Motors’ product lineup has consisted of just the Model S. Since 2013, the total amount of electric automobiles in use around the globe has increased by a factor of two each year. For this reason, we may assume a rapid expansion of the global vehicle market. When looking at the top-selling vehicles produced by Tesla Motors, the Model S ranks in the top three and holds nearly more than 16 percent of the market. Only the Chevrolet Volt (17%) and the Nissan (27%), both electric vehicles, sell at a higher rate. Given that the Model S is the only product Tesla offers, the BCG-Matrix analysis shows it is among the best in its class (Pantano, 3).
Approach for the CEO to Adopt to Implement the Strategies
The ability to make sound decisions is crucial to the firm’s continued success, both now and in the future. Therefore, modifications to operations should be implemented to improve both the outputs and the efficiency of the processes. It is necessary to make proactive and decisive judgments to enhance the many operational processes associated with the matter. Tesla’s governing authorities must include their staff members in the company’s decision-making processes more regularly and comprehensively. The custom of Tesla CEOs making unilateral choices will have ended when this happens. After identifying necessary adjustments, the CEO should consider implementing those modifications to the planning framework. The decision-making process would benefit from the input of analytics, business professionals, and cutting-edge technologies (Markusen, 4).
As in lean manufacturing, the planning framework has to be robust enough to ensure quality is maintained, providing the tools to implement the most effective planning tactics for teamwork and forward movement. Due to its critical importance, Tesla’s planning structure should be open and robust to ensure its success and growth. The goals and aspirations of Tesla must be reflected in the planning framework, which should be oriented more toward promoting technological progress and introducing innovation. In addition, the planning structure and SWOT evaluation should be updated to account for changes in the industry and critical analysis of Tesla (Fainshmidt, 1).
Tesla’s success may be gauged by looking at several different metrics, such as the business’s financial health (which can be determined by its productivity), the firm’s level of consumer acceptance and loyalty (which can be determined by analyzing customer satisfaction survey forms), the happiness of Tesla’s workers, and the firm’s engagement and participation in the automobile sector (Markusen, 4).
Sources
- Stav Fainshmitd. 2016. National Competitiveness and Porter’s Diamond Model: The Role of MNE Penetration and Governance Quality. p. 81-104. https://onlinelibrary.wiley.com/doi/10.1002/gsj.1116.
- Ioannis Konsolas. 2017. The competitive advantage of Greece: An application of Porter’s diamond.
- Eleonora Pantano. 2014. Innovation drivers in the retail industry. p. 344-350. International Journal of Information Management.
- James Markusen. 2014. Outsourcing versus vertical integration: Ethier–Markusen meets the property-rights approach. p. 75-90. https://doi.org/10.1111/ijet.12028.