Tesla Case Study

Tesla Case

PESTEL framework evaluates the environment variables to identify general opportunities and risks of particular strategies. An analysis of the factors can lead to the significant transformation of industries, especially over the long run. PESTEL highlights Political, Economic, Social, Technological, Environmental and Legal group factors.

Political/Legal

One of the major political factors affecting the industry is environmental protection laws to cause more production of more environmental cars to meet strict emission levels. In the U.S they want to decrease their dependence on petroleum products. The second important factor is that federal and state governmental agencies are currently supporting loan programs through the Department of Energy and the California Zero Emission Vehicle (ZEV) program. This increases the popularity and chance of more wanting to enter the industry.

Economic

One of the first thing is that the economic growth in the alternative energy industries and increase in the cost of using the cars through high priced fuel means that the demand for more-efficient cars is growing. Also members of Republican Party have focused their demands for budget cuts in the “discretionary spending” arena, which is where alternative energy funding falls. Next, the recovering economy has allowed for more spending to occur, which means that more people now want higher priced luxury cars. The only downside is that electric vehicles cost significantly more than traditional vehicles with similar style and performance.

Social

One social factor is that buyers are losing faith in gasoline fuel and associated cost in production. They want to help do their part for trying to help the environment. This also overlaps with how people judge each other in a society. People are judged based on the type of the car they own and the idea of having electric vehicles improves the social status of an individual. A threat to the electric vehicle industry though is that there is an absence of infrastructure for recharging to support the growing numbers, especially with the fact that they set a goal to wanted 1 million electric cars on the road by 2015.

Technological

Industry-related technology is always advancing in the electric vehicle industry. The technologies developed can be used to improve the electric cars. They are related to intellectual properties, battery cell design and knowledge & skills of the workforce. Some are available for general use, however most companies own patents of technologies that they developed in-house. This will provide the companies with a competitive advantage. For example Tesla creating their own lithium-ion battery, which plans to mass produce, not only do they have a patent on it but they are also willing to open source so that companies can buy their technology.

If resources and capabilities exhibit VRIO, they become the building blocks for gaining and sustaining competitive advantage. VRIO stands for Valuable, Rare, Costly to Imitate, and Organized to capture the value of the resource/capability.

Value: I believe that Tesla products show great value, and if they can grow and become a market leader then Tesla's products are going to solve a major problem for the world, i.e., reducing reliance on fossil fuels. As we may see in the short term future, the company's clean energy products can become mainstreams with improved technology and affordability and resolve energy demand challenges for the entire world.

Rarity: Tesla was one of the first cars to light up the electric car industry, not only with their roadster but also when they began to reduce the prices but still maintain a high quality. The company's patented technology and researching and developing to innovative and improved alternative energy products such as cars and batteries are indeed rare, especially due to their technological advantage.

Imitability: It is difficult to imitate Tesla's unique technology, manufacturing strength, research and development capabilities and positioning in the industry. Tesla has been able to invest a huge amount of money and effort to reach the current stage and level to where it is at now, which is difficult to replicate by other players. Hence why Tesla is offering other car manufactures such as BMW to buy their patent use of technology.

Organization: Tesla's strong leadership through Elon Musk, with his ability to lead and be hands on to benefit anything he commits to, as well as an organizational culture and practices indeed make the company capable to obtain sustain competitive advantage. This is done through exploiting opportunities in the alternative energy segment, taking some risks that seem to pay off.

Over all we have answered yes to every segment of the VRIO and have been able to depict the reasons as to why Tesla upholds each one. Due to Tesla showing it does have value, rarity, costly to imitate, and is organized to capture value, this means that the company has a sustainable distinctive competence.

Next to analyze the internal and external conditions Tesla is facing a SWOT analysis will be conducted. SWOT meaning, Strengths, Weaknesses, Opportunities, and Threats.

Strengths

There are several strengths within Tesla Motors that have helped them to gain a competitive advantage in the automotive industry. First, outsourcing of secondary components helps to keep low cost and focus primarily on technological advancement. Due to this it has allowed them to move to investing into a strong research and development, creating high productivity battery systems and taking its competitors by surprise and leaving them behind. This made Model S the winner of 2013 Motors Trend‘s Car of the Year award. Tesla has acquired numerous investors from well-established companies such as Google, and built the successful strategic partnerships with Daimler, Toyota Motors and Panasonic that brings mutual benefits to both parties, sharing their expertise in production processes and technologies, and provide the trust for Tesla‘s customer, future investors, and may also enhance the company brand recognition. Finally, Only 20 percent of Tesla Motors factory is used to produce Model S, so as new models from Tesla Motors arrives, the company doesn't need to build a new factory.

Weaknesses

Tesla biggest