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Responsible Management – Internal & External Analysis

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Responsible Management – Internal & External Analysis

Introduction

Responsible management in business refers to the technique of balancing the interests of the major stakeholders in the company in order to develop for the benefit of present and forthcoming generations. Responsible management is required for any company that plans, organises, leads, and controls its responsible performance. The current paper is focused on the contentious Tesla management challenges confronting the UK-based Automobile company and focuses on assessing the organization’s macro and meso analyses to provide recommendations for improved results.

Organizational Context

Background of Tesla

Nikola Tesla, a physicist and inventor, is the inspiration behind the 2003 founding of Tesla Inc. California-based Tesla has gained popularity among Americans as a high-end electric car with a distinctive look (Baffour-Awuah, 2020). The luxury concentrated configurations and conservation features of Tesla have driven it to the top of the multinational auto industry. Tesla’s usage of renewable energy revolutionised the automotive sector and had a substantial consequence on the world. The Roadster, the company’s initial automobile, was the foremost to utilise lithium battery cells.

SWOT Analysis

Strengths

  • Considering the recent trends in the automotive industry, it can be stated that Tesla is leading the industry of environment friendly electric vehicles which uses comprehensive renewable energy like solar Power.
  • Tesla has an excellent design which has given their electric vehicle a lot of thought in terms of engineering and design in order to provide their customers with great ease (Someka, 2022).

Weakness

  • Tesla is seeking to establish itself in a highly competitive automobile industry on the one hand, while expanding globally on the other (Someka, 2022).
  • Tesla is a well-comprehended premium brand in the field of sustainable energy. Pricing and consumer trust issues brought on by a premium product line may be one of the challenges that electric vehicles encounter.

Opportunities

  • Because of its safety and simplicity, Tesla’s autopilot system has risen in popularity. Increasing its credibility in the sights of customers (Someka, 2022). Tesla’s autopilot development is continually evolving.
  • As customers become more environmentally conscious, there is a greater desire for electric vehicles, as well as a desire to limit the use of gasoline-powered automobiles which influences the production of eco-friendly vehicles.
  • There might be a game changer focusing Tesla’s battery cell production because it will authorize the business to cut production expenses (Someka, 2022). It will also produce a considerable number of jobs, which will profit the economy.

Threats

  • Many studies are being undertaken for renewable energy-powered automobiles, and numerous significant firms, including BMW and Volkswagen, are becoming Tesla’s competitors.
  • Tesla is recently experiencing competition from established firms like Volkswagen and BMW since the firms are also  investing in the research of electric vehicles powered by renewable energy (Someka, 2022).
  • A sustainable energy auto company must guarantee long-term viability. This is a potential issue because of Tesla’s erratic manufacturing conditions and the inadequate EV support infrastructure in North America and some regions of Asia.

Porter’s Five Forces

Competitive Rivalry  (Strong force) – Industrial competitiveness is a potent force since the automobile business is so fiercely competitive. Several factors are at play in Tesla’s competition analysis, and there are various external factors and strong forces at play in competitive rivalry (Baffour-Awuah, 2020). The number of competitors in the market is a weak factor. Competitive rivals control the market. Low switching costs for consumers are a potent force.

The threat of new entrants (Moderate force) – Tesla Porter’s five forces model only makes a small mention of new competitors. Numerous considerations make it difficult for new competitors to enter this sector. Brand creation is expensive since it calls for cutting-edge technologies that are very innovative. The cost is a weak deterrent for new businesses. The automobile sector, another weak force, requires a lot of capital to function. Additional weak forces include large economies of scale (Baffour-Awuah, 2020). While new entrants do not benefit from economies of scale, existing market members do.

The bargaining power of suppliers (Weak force) – According to Tesla Porter’s five forces model, supplier bargaining power is a moderate force. To keep its supply lines operating properly, Tesla depends on vendors. Because of this, suppliers affect the company, and one of the forces at play is forward integration, a moderate factor (Liu, 2021). Tesla does not solely rely on one provider; rather, it sources from a number of them. It is hence a mild force. A moderate force correlates to a modest supply level.

The bargaining power of customers (Strong force) –  Consumer bargaining power is a moderate element in the market for electric automobiles. The client’s negotiating position is influenced by a variety of circumstances. Low switching costs are a crucial element since they provide buyers more negotiating power. They can change to any car they want at any time. A force having a modest number of alternatives is considered tiny. Electric car suppliers are few and few between on the market, but those that do are capable. Because a single consumer may possess one or many vehicles, there are fewer purchases made (Baffour-Awuah, 2020).

The threat of substitute products or services (Strong force) – Because Tesla Inc. ‘s market choices are moderate and constrained, the danger of substitute products is a moderate factor in Porter’s five forces model. Low switching costs are the most important component, which heightens the competition between businesses. A moderate force has a constrained range of potential outcomes. A moderate force likewise yields a moderate substitute performance.

PESTEL Analysis

Tesla’s PESTEL study has helped the company to better understand how the macro environment impacts the expansion of its business. It implies that Tesla has room to grow in the global auto industry. The corporation has expanded substantially in recent years despite fierce competition from other businesses. They have effectively assessed the outside factors and used them to their advantage. To accomplish future growth, they should comprehend growth potential and reduce market-based risks.

Political

  • Politics has contributed to Tesla’s success by ensuring its development into contemporary markets.
  • The government’s financial performance has increased as a result of the incentive to be environmentally conscious.

Economics

  • The company’s economic expansion and profitability are referred to as the economic aspect.
  • The world economy has seen benefits from the sale of electric vehicles.

Sociological

  • Understanding the sociocultural factors that outline and specify people can enable marketers to better grasp the demands of their target clients (Liu, 2021).
  • The usage of renewable energy sources and people’s environmental consciousness is rising trends.

Technological

  • The technology in Tesla vehicles is cutting-edge.
  • A business can quickly create a comparable function to compete.

Ecological

  • The firm backs expanding environmental initiatives to solve issues with resource management and climate change.
  • Tesla may forecast growth by analyzing environmental factors (Liu, 2021).

Legal

  • Tesla must follow rules and modify its practices to stay compliant as it expands its business into new markets (Liu, 2021).
  • In addition to the restrictions on direct sales imposed by various governments, Tesla’s constrained global sales operation may be problematic.

Organizational Responses

Evaluative critique of organizational actions

Tesla has significantly increased its R&D expenditures. Tesla’s innovations are used by other companies to complete their industrial tasks (Perkins & Murmann, 2018). For instance, Toyota uses a Toyota motor, whereas Mercedes-Benz uses the Tesla powertrain. Tesla’s current models already benefit the environment. No gas is released into the atmosphere by them. They don’t also contaminate the sound. It would produce environmentally friendly zero-emission autos. By making its patents available for environmental goals, Tesla has achieved the unthinkable. As a result, it was selected as the top business to use as a model for environmental concerns.

The company wanted to make its valuable patents available. If every huge company did what Tesla has done to support a clean environment, it would be amazing. The CEO calls on other competitors to contribute to lowering greenhouse gas emissions from gasoline-powered automobiles (Meyer, 2018). The business asserts that the technique will help reduce the price of electric automobiles, making them accessible to everyone. Although first unsatisfied, the stockholders later came to understand the validity of the arguments. He made the right decision, as evidenced by the $30 increase in the share price of Tesla. Tesla has two goals, both of which have an impact on the consumer and the environment (Perkins & Murmann, 2018). All socioeconomic groups should have access to electric automobiles and technologies, according to Elon. He declared that Tesla would permit third parties to make use of its patents to lower the price and increase the supply of electric vehicles and related equipment. According to its CSR policy, the community is the most important stakeholder group, followed by investors, consumers, government and employees. Tesla’s objective for 2019 was to offer consumers the safest vehicles and its employees the safest production environments possible (Meyer, 2018). In order to accomplish these goals, the company is investing money in research into autonomous systems, developing standards of conduct for its suppliers, and controlling the supply chain. These actions will make products safer and the technique of creating them harmless.

A further goal of Tesla is to speed up the switch to sustainable energy sources to reduce greenhouse gas emissions and carbon dioxide emissions. This objective can only be accomplished if EV-enabling technologies are made available to everyone on the planet. Musk realized as a result that the primary objective should be to lower the cost of technology. Profitability is not the main business objective, as evidenced by the fact that investors are not given top priority in the corporation’s CSR strategy (Perkins & Murmann, 2018). Tesla promotes ethical business practices by using ethical suppliers, taking good care of its workers and clients, and inspiring local communities to help with the switch to sustainable energy. Tesla supports education in addition to attracting and retaining a diverse workforce. The company offers a 12-week curriculum for students who desire to attain technical skills to begin their careers at Tesla (2019). Musk continues to lead today’s energy revolution despite criticism from certain financial experts. Due to its innovation and integrated services, which include worldwide charging stations, Tesla appreciates an edge over its rivals (Meyer, 2018). Vertical integration, commitment and supply chain innovations to ongoing development promote lower costs and increased profitability. A desirable feature for getting a competitive advantage is low cost. To survive in this hostile climate, a bold media marketing strategy is required.

Recommendations on key limitations and strengths

The management of the company needs to be more forthright about important business matters if it wants to rebuild the company’s reputation and regain its lost market reputation. According to Kampala and Kopia (2015), the business can inform the public and the media about its efforts to increase the security and safety of its customers and employees while they drive. The organization has already shown that the autopilot feature is unable to pick up every single vehicle on the road, thus when using autopilot, drivers must pay strict attention to the road. To address Tesla’s management issues, a firm can run either an open system or a closed system, following the management systems theory. In an open system, information flows between the organization and its external environment and incidents in the external environment may have an impact on the organization (Perkins & Murmann, 2018). As a result, when selling cars or letting customers test drive, the business may operate as an open system and be truthful with customers regarding the steps that customers must take to prevent accidents. Toyota, for instance, provides a pamphlet with instructions for using autopilot mode to its customers so they know what to do when driving.

Conclusion

Tesla uses a different approach than conventional automakers, who aim to maximize profits. The company’s objective is to assist the world switch to sustainable energy by creating such products more widely available. Tesla controls the supply chain and makes sure that all of the vendors follow the code of conduct. The company is the largest producer of electric vehicles in the world, and it plans to improve its position by increasing its investment in the expansion of green technologies.

References

Alghalith, N. (2018). Tesla: innovation with information technology. International Journal of Business Research and Information Technology, 5(1), 37-51.

Baffour-Awuah, D. (2020). Essence of Corporate Social Responsibility–Case Study of Tesla Inc. Available at SSRN 3672317.

Bhardwaj, S., Pandey, R., Sharma, S., Sejal, S., Iyer, G., Sharma, S., … & Kulkarni, S. (2020). Problems Faced by Automobile Industries: Case Study on Tesla. International journal of Tourism and hospitality in Asia Pasific (IJTHAP), 3(2), 78-88.

Dana, C. (2018). A Strategic Audit of Tesla, Inc.: Electrifying our Future or About to Run out of Energy?.

Liu, S. (2021, March). Competition and valuation: a case study of Tesla Motors. In IOP Conference Series: Earth and Environmental Science (Vol. 692, No. 2, p. 022103). IOP Publishing.

Meyer, P. (2018, September 8). Tesla Inc.’s Organizational Structure & its characteristics (analysis). Panmore Institute. Retrieved November 3, 2022, from https://panmore.com/tesla-motors-inc-organizational-structure-characteristics-analysis

Perkins, G., & Murmann, J. P. (2018). What does the success of Tesla mean for the future dynamics in the global automobile sector? Management and Organization Review, 14(3), 471-480.

Someka. (2022, March 21). Tesla SWOT analysis – strategic analysis of Tesla Motors. Someka. Retrieved November 3, 2022, from https://www.someka.net/blog/tesla-swot-analysis/

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