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Module Code and Title: Corporate Strategy MGT406
Assignment title: Case Study Report
Submission deadline: August 13th, 2024
Date submitted: August 10th, 2024
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ID Number: u010009
Date: August 10th, 2024
Introduction
Tesla Inc. is a large American technological corporation specialized primarily in automobile
manufacture and energy industries. Having its headquarters at Austin, Texas, and running
several manufacturing facilities in North America, Europe and China, the company has
proven itself to be the absolute dominant within the market of electric vehicles for the latest
decade. In addition to its absolute leadership in the industry by number of products sold,
Tesla has reached the highest peak of stocks, becoming the most expensive automobile
producer by market capitalization size in 202, thus being listed in S&P 500 index.
Nevertheless, for the last couple of years, there have been observed several critical
challenges of strategic importance that the company had to cope with. The most significant
of those were downturns in production and supply chains, increasing competition among car
manufacturers, high indicators of capitalization of the company’s shares, changes in
regulations concerning autopilot systems in vehicles and others, which put the company in
front of a serious issues that required proper business solutions by management. The
following report will focus on analyzing the nature of the abovementioned corporate
challenges that emerged on the way of Tesla’s conquering the world’s car market
precedence and to what extent and how the company was able to withstand.
Analysis
Tesla’s primary source of income is sales of produced cars in various forms (leasing) and
manufacture of sustainable and clean energy products (solar panels, storage devices). As
per the official reports provided by the company, it has generated total revenue of 96.77
billion USD for 2023 by selling over 1.8 million vehicles to customers, thus reaching 19%
yearly growth from 81.5 billion USD revenue of 2022. These high financial indicators of the
company’s efficient performance can be reviewed through SWOT and PESTEL analyses.
SWOT analysis.
Strengths:
1. Best in-class electric cars. The company produces vehicles that are more preferred by
customers among alternative models of other car manufacturers. In addition, people often
regard Tesla as provider of the most advanced electro-vehicles, exceeding counterparts
in technical features.
2. Immense electric vehicle market share. The company covers more than 50% share of
global market of electric cars. This indicator is due to strong marketing activities, dynamic
sales and strong customer base of company.
3. One of the most highly-valued companies by capitalization. Tesla experienced dramatic
increase in prices of its shares in 2020, thus becoming on of the most expensive
companies. This implies that investors hope on substantial profitability potential of the
company.
4. Innovative company. In general, Tesla is treated as progressive and innovative company
that always designs and offers original new products to the market. In fact, mass public
consider company’s great success lies on its focusing in new industry of electric vehicles
at the beginning of its way in the beginning of 2000s.
Weaknesses:
1. Dependency of vehicles on charging systems. During the present period, when the global
population has only begun to purchase and drive electric vehicles, many places lack
proper infrastructure for charging and maintaining Tesla’s products, which serve as
obstacle for enhancing sales is certain regions.
2. Manufacturing delays. For the last years, many customers have faced problems in timely
supply of vehicles. This implies that Tesla is not well-arranged in terms of having
unexpected booms of sales and is unable to organize proper logistic chains for swift
delivery of vehicles for markets of demand.
3. Little profitability. Despite reaching immense figures on revenues, financial statements
suggest that Tesla do not have high indicators of profitability in comparison with
counterparts. This may be explained by the costly productions of vehicles and medium-
levelled prices in order to withstand challenges of competition.
4. Short experience in car market. Among other global car manufacturers, Tesla is quite
young and inexperienced company. Unlike other automobile corporations, with their
century experience of participation in business, during which they faced with various
market challenges and changes of customer behaviours, Tesla, with its twenty-year
experience, cannot rely on its immense historical background. Due to this fact, the
company remains at situation of taking risks in making corporate decisions and
sometimes, such decisions may lead to drawbacks.
Opportunities:
1. Global tendency for electric vehicles. With growing concerns on harm of usual cars (with
engine of inner combustion), customers are turning to electro-vehicles that are
demonstrating themselves as eco-friendly. This increasing tendency automatically
creates large perspective market of customers for Tesla, which should take responsive
actions by designing new and more technological vehicles and other products.
2. Expanding energy market. The abovementioned tendency also results in high demands
of people for good-quality energy infrastructure, the market of which is also actively
engaged by Tesla’s participation.
3. Capacity for innovative products. Tesla, due to high intellectual potential of its specialists
and overall company’s capacity to develop new technological products, can further
actively take the upcoming global opportunities from technological tendency, and thus,
become one of the dominant corporations of world.
Threats:
1. Global supply chains. Sustainability of logistic chains ensures the timely and proper
delivery of Tesla’s product to global markets. Breaks in supply chains threat the company
with suspensions and delays in product’s provision to customers, which can further result
in sales’ decline.
2. Extensive global competition. In response to global tendency for electric vehicles, many
car manufacturing corporations developed own models that made competency for Tesla,
as well as other big corporations emerged to global market, which repeated the business
model of Tesla, imitating the same highly-technological and eco-friendly business model.
These rivalry presents serious threat of losing market shares for the company.
3. Capital markets. Another risky aspect of Tesla’s activity as corporation is capitalization
side. Since the company has huge indicator of capitalization from stocks, instability of
capital markets (crises, stock exchange drops, shocks) present another major risk for the
corporation to consider.
PESTEL analysis.
Political: Tariff policies of countries are crucial in determining the scope of sales that
Tesla will be able to reach in certain country. In sought of political interests,
governments may change tariff rates that directly result on revenue levels of
company, thus implying the political aspects of influence of Tesla’s activities. Political
conflicts between states also create problems for sales of the company by becoming
barrier on logistical routes.
Economic: Since Tesla is focused in production of complex products, global supply
chains and economic behaviors make the company dependent on various goods
such as batteries and vehicle spare parts. Other economic factors, such as electricity
costs and level of competence in vehicles market are considered by the company as
major determinants of potential revenue.
Social: Throughout the globe, Tesla is perceived as innovative company that
continuously offers customers new models. The role of its CEO Ilon Must is also
crucial in company’s performance. Considering social factors, company tries to
demonstrate itself as environmentally-friendly and innovative company with purpose
of ensuring stability of sales.
Technological: Mass tendency for highly-technological products around the world
provide the company with an opportunity for becoming dominant global corporation,
covering spheres accompanying electro-vehicles. The company’s own reports
suggest that large amounts are spent on research and development in order to have
continuous technological development of products. It should be also mentioned that
the company works in cooperation with other technological corporations and aim to
have compliance of their products with those of its partners.
Environmental: Global concerns on greenhouse gas emissions contribute to mass
preference of electro-vehicles. In this regard, Tesla establishes as its strategic goal
to design environmentally-friendly vehicles that are not harmful for environment.
Legislative: Tesla’s global sales and manufacture facilities make the company quite
sensitive towards political decisions of many governments, primarily those of USA.
Currently, careful legislative attitude of the USA on development of autopilot vehicle
systems prevents Tesla from further developing and spreading its software system.
Recommendation and Justification
The following recommendations can be applied by Tesla in order to solve the present
strategic challenges it faces.
For the company, to solve its difficulties in arranging proper supply for customers without any
delays or inconsistencies, should develop on the logistical aspect. The company may
cooperate with big logistical companies that can ensure sustainable delivery of vehicles. It is
also suggested to pay better attention on planned production, which would enable to avoid
errors in accepting orders and thus prevent delays in supply of proper amounts of products.
Problems of supply may be caused by smaller capacities of the company in comparison with
higher demands it faces. Tesla may take actions for better applying economies of scale,
thereby focusing on mass production.
Economy of scale would enable Tesla to solve the problem of competition within the electric
vehicles industry. This approach will contribute to hold balance between relevant amounts of
products and their smaller costs that will be optimized due to mass production. Such
optimized costs will eventually result in more competitive prices of Tesla cars.
Potential risks from capitalization aspect may be resolved by different financial tools that
would guarantee the stability of shares’ prices. Such tools may be by minimizing the number
of existing shares, using retained earnings and converting debts (shares) into equities. In
addition, in order to ensure the stability of shares, Tesla should hold its reputation of
innovative company, secure the quality of products and deploy additional practices of
effective financial governance.
With regard to the challenge of government’s strictness on autopilot systems, Tesla may
gradually insert the system to their vehicles rather than installing the total system at once.
Higher automation of driving processes may push people’s desire forward and thus,
governments will be obliged to revise current restrictions in response to people’s demands
for vehicles equipped with autopilot systems.
Conclusion
To summarize, it can be clearly understood that Tesla Inc. in dominant global company that
own huge potential for becoming more dominant corporation. In order to reach its goals,
Tesla should fairly evaluate and solve the present challenges of capitalization, rivalry of
industry, suspended supplies and government restriction. Overall, all these strategic
obstacles may be resolved not by unexpected innovative solutions, but rather with “classical”
methods of business and finance management, where proper efforts and competent
methods can ensure successful overcoming.
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