In-Depth Analysis of Tesla Company's Target External Environment - Case Study Example

Name: Lecturer: Subject: Date: Question: An in-dерth аnаlysis оf thеir target оrgаnisаtiоn’s ехtеrnаl еnvirоnmеnt In the current world, analysis of the external environment is very essential for the company. This is because analysis of external environment facilitates identification of the most appropriate strategies that can be used to improve the competitiveness of the company. Analyzing these external factors enables you to increase your knowledge of the target market. Besides, it also enables you to compare the resources of the company with those available in the industrial sector to which it belongs (Benn et al. 2014). PESTLE is an external analysis tool, which sometime referred as PEST analysis; it is a concept in marketing principles. In addition, this concept is always used as a tool for the organizations to assess the environment they are operating in or planning to introduce a new product or service. A PESTLE analysis is often utilized as a universal ‘orientation’ tool (Huczynski & Buchanan, 2013) establishing relationship of an organization or product with external factors, these external issues will eventually influence what is happening internally. Political Factors – some of the issues covered in this section comprise of tax policy, employment laws, and employment constrictions. Other factors are trade restrictions and political stability. Economic Factors – some of the economic factors that are likely to affect companies include inflation, interest rates, currency exchange rates and economic growth. These factors are likely to alter the cost of capital and the power of the company. Social Factors – these factors are very essential since it affects the taste and the consumer needs. In addition, the social factors influence the market size for organization resources. Examples of social factors that are likely to influence organizational success include the population growth, age, attitudes towards healthiness and demographics. Technological Factors – these factors are essential to the business since they influence barriers to entry, innovation and make buy decision, and investment in innovation Legal Factors – these are the factors that control the operation of the business. They are the operating laws of the state that govern the running of businesses in the country. In many cases, legal factors are likely to influence the number of people to be employed in a company, importations and exports of goods, access to resources and quotas. Environment – these are measures that are in place to control effects of the company to the environment The above six elements is essential in analyzing the external situation of the company and can also be used to review the position of the company in the market. Furthermore, the above factors can be used when designing the marketing proposition Tesla Company is a public company that trades on NASDAQ stock exchange under the symbol TSLA. It is an American company that designs, manufactures and sells electric cars and electric vehicle powertrain components. Tesla Company produces its product that are of high quality with the latest technological version so as attract more customers. The company markets products through convincing the customers that their products technologically advance and can meet customers need effectively (Mukhopadhyay, 2015). The purpose of this assignment is to critically analyzes the external environment of the Tesla Company. In order to achieve competitive advantage in the company, it is essential to apply this tool so as to improve the performance of the company (Kumar, 2015). External Environment In order to effectively evaluate the external factors that are likely to influence the company in one way or another, it is essential to apply the PEST analysis tool. This strategy will facilitate the identification of the position of the business in the market, size of the company, direction of operation and, situation of future market, its growth and to classifying the market development and decline. Political Factors In business, there are various issues that are not controllable or cannot be control by the company. Such uncontrollable problems include geopolitical uncertainties, fight against terrorism, authority to work and the rising health issues that can interfere with the sale of the company’s products. Tesla has been able to control the operating cost utilizing the resources that are available. In case this country faces war or any other form of political instability, the company’s manufacturing process will be affected, and it will lead to spoil the Tesla likeness in the eye of consumers and its dealers Economic Factors The World’s economic situation is very crucial to the international company because it dictates the purchasing power. According to HO, (2014) unemployment has a decline in the past few years across the world. This had had a big impact on the Tesla because customers’ purchasing power was low. Another economic factor is inflation. Inflation interferes with the ability of people to buy products of Tesla Company because of high prices. However, the current economy is improving. This will enable the company to boost its sales in the market. Social Factors The company has continuously innovated new products as a way of satisfying customers’ needs that are ever changing (Khan & Sabharwal, 2014). The customers always need different, and they always change to fit the current lifestyle. This is a big problem to the company because it has to be always on fashion. The motive of customers buying cars can be segmented into the following: Entertainment. Consumers are complex nowadays especially the youths who wants to go to places. It is, therefore, essential for the company to have the efficient, reliable and graphical purchasing power. Travel/mobility. Customers in this segment expect vehicles that are lighter and with a longer life. Interconnectivity – customers are looking for the latest cars that are very faster and reliable traveling long distance in the shortest time. Status – this segment are looking for the latest cars with a great brand and a brand new design. Technological Factors This is one of the forces that have greatly influence structure of the Tesla Company and sustained the technical progress. Every year, the company works toward improving the integrated circuits and other electronic components in its vehicles. This is done so that these products can become efficient, better, and cheaper. It provides opportunities for improving cars as well as designing a new kind. According to Orfano, (2011) Tesla Company is affected by the technological innovation forces. This is because the company majors on designing and manufacturing premium electric vehicles. There is rapid innovation in the market. For example, the company is currently offering a Model S, the world’s first premium electric sedan. This has differentiated the company from its competitors. This has also improved the company’s competitiveness and encourage continuously innovation so as to maintain differentiation and its market position in the market. It is evidence that the company has been owning a large market share for a long time. For example, in 2012, the design personal cars as a main strategy of winning more customers. The unveiled two dual motor all-wheel drive configurations of Model S that further improve the vehicle’s handling and performance. During those days, the Tesla Company was dominating the market, the company was developing vehicles that were very efficient and satisfying. During those days and even now the company was delivering and is still delivering personal cars that deliver great personal experience compare to its competitors in the market. The company faces many competitors in the market, and this makes hard for the company to keep doing the same things every season. It is essential now for the company to ensure that the keeping changing technological system they are using as a way of meeting the diverse needs of the customers in the market. Besides, it is essential for the company to ensure that they maintain its position as a market leader through advertising its vehicles. Consumers pass complex buying decision especially when they are dealing with the produces that involve a lot of cash. Technological advances is considered as an externals threat because if the company fails to embrace technology it will lose its customers. Many people across the world value technology and would want to associate themselves with vehicles that are technologically advanced. Tesla Company faces tough competition from Ford Motor Company that releases a new version of vehicles every two years. This has created pressure to Tesla to launch Model X, a crossover vehicle as well. This is the only way Tesla Company will remain relevant in this very competitive market. Dealing with cars is not simple since innovation are taking place over night. It is also essential to improve the image of the company through delivering quality vehicles because customers who are satisfied will market the company’s products through referrals. It important to maintain the existing and at the same time attracting new customers in the market. Positioning and being a market leader require more than just delivering quality to the customers. Legal Factors There are various legal factors that are likely to affect the decision that are made in the company. For example, employment laws are likely to interfere with budget and allocation made in the company. Following these laws can sometime be expensive to the company. Some countries dictate that an employee should be confirmed by work as a casual for six months. Such decision that are dictate by the laws of the country is expensive because it can force a company to employee employees, and maybe they have not planned for. Other legal laws that can also affect the normal functioning of the company is the corporate social responsibility. This is rules and regulations that force the company to participate in certain projects. One of the common problems that are associated with the corporate responsibility is that there is a conflict between the purpose of business and the concept of social responsibility. In the normal situation, the company should focus on it purpose of making profit and making returns to its shareholders and not to be held accountable for all of its actions (past, present and future) that impact the environment and community Another problem of corporate social responsibility is that a company can abide by the laws of corporate responsibility because of fear of public backlash than because they believe it is good for long-term business performance. This affects the system in the company because of wrong perception, lack of commitments and wrong motive of doing things. Another legal factors that are influencing the Tesla Company is the consumer protections. These laws affect the profitability of the company. Some vehicles that are sold in different companies are not the same i.e. a vehicles sold by Ford Company is not the same as the vehicles sold in the Tesla Company in terms of quality, durability, speed and many more. This can make a company from these two companies to sell the same car at different prices. The problem comes when the legal authorities require that certain product (saloon car) be sold at a standard price without considering the quality of the product offered by different companies. The legal factors also differ from one country to another. This has made it difficult for the Tesla Company to have the same culture and system in the different countries. Tesla is a multinational company offering its services across the globe. Environmental factors Tesla Company has serious criticism from the environmental organization for not being a leader in removing toxic chemicals from their products. This is a serious impact on the business because its affect the image of the company in the market. Customers will lose trust in the products supplied by Tesla Company because of such accusations. The environmental authorities have also criticized the company for improperly recycling its old products. This accusation of dumbing products that have serious effects on the environment, human life, and even animals life have affected the company negatively. The image in business is the key to success. Companies that excel in business have got a good image. It is, therefore, essential for the Tesla Company to convince its customers that they responsible and they value community. The company should adopt this process so that they can be friendlier with the nature (Cummings & Worley, 2014). To maintain its position as a market leader in supplier of cars, Tesla Company should ensure that they proved their commitment to protecting the environment. They should ensure that they have removed the harmful toxin such Auto shredder residue from polluting the environment. They should also ensure that their products a free from lead and mercury. Tesla Company, being one of the manufacturers of the most efficient vehicles across the globe, should focus so much on environmental issues. They should produce a report on how they are dealing in protecting environmental pollution. They should also ensure that their products do not exceed 5.2 Energy Star as a way of complying with the government standards. Analysis of how environmental change will influence the strategy The trend of the environmental change in the past and present is essential for forecasting the future of the company. The rapid increasing of technological innovations, changing in customers’ needs, taste and fashion, high competition due to low entry barriers can easily lead to the more and saturated and fragmentation of market (Hill et al. 2014). This trend has made the environmental situation to be more turbulent and complex for Tesla Company. This is a call that the company should continuously adapt various marketing strategies and at the same time dropping strategies that are not working as a response to the dynamics of the environment. Strategies need to be designed, be reshaped basing on the analysis of external environmental factors affecting the company. When the environment changes, the company’s strategies should also change so that the company can maintained its position in the market. Marketers of the company should be very keen on design adverts and other promotional factors. Tesla responses to the environmental change The company for a very long time have been responding to the ever-changing environment as a way of surviving. Since Tesla was losing customers to trucks due to high competition and high expectation of the customers, the company adopt a new strategy and manufacturing footprint into other areas, such as in Tilburg and Lathrop, where it has a specialized production plant. This was a great move or regaining its competitiveness in the market. The Tesla business strategy model of introducing new models has generated a lot of cash for the company. The company was able to collect a lot of cash in saloon cars. When the company introduces Model S 70D; All-Wheel Drive Standard it attracted many customers in the market. There are also various products are currently offered by the company to its customers. This is a move to maintain the customers are looking for new cars with new features. The company needs to satisfy the needs of the customer so that they can maintained them. This is transforming the marketing channel so that many customers and potentials customers can access the products offered Tesla store has been an effect means of reaching a wider market with discriminating them. This is important because it will influence customer are slow in adapting changes or who are slow in making a decision on whether to purchase or not to purchase a product (Brown, 2014). In response to the social pressure on environmental issues, Tesla recycles million pound of their e-waste. The company is also looking forward on recycling more in the coming years. This is a strategy that will build the competitive advantage of the company in the market. The future strategic options for Tesla Company There are a various strategic option for the company so that they can obtain a more rapid and successful business and development. Cost Leadership Strategy – this is a comparative advantage of Tesla Company as compared with its competitors. If the company knows its cost of creation or production, then it is in a position to control that cost and take advantage of its competitors. Controlling the production cost is very essential to the company because it help in reducing wastage of resources. This strategy is very essential for the Tesla Company because it is a big company. The company spends a lot of resources in advertising, research and development, employment, and the manufacture of the products. It is, therefore, essential for the company to recognize the power of the cost and control them. There is a need to control this cost a way of maximizing the income. Market Penetration Strategy This is a strategy that is commonly used when expanding the market for the product. The company can use new product to expand the market targeted, or it can create a new product. This strategy can be launch in improving the product features, increasing production capacity, expanding sale channels, expanding the production scale, exploring new markets, reducing product cost and so on. Diversification Strategy The company has not done well in this strategy; it is possible for the company to adopt this strategy as a way of ensuring that the products meet the customers’ needs in the market. The company has been facing serious challenges in satisfying customers in the market. This is because the company deals with technological products that are frequently changing, they need to carry out research and design unique products from offered by the competitor (Mukhopadhyay, 2015). The company can now utilize these three option that are available as a way of improving its competitiveness in the market. Furthermore, the company can adopt these strategies and use them to differentiate itself from other competitors in the market. Conclusion In conclusion, the car industry has evolved over many years serving customers with quality cars and other electronics products. However, the company has been facing hard time because of the changing dynamics of the environment. The interaction of social, technological, economical, legal, political forces create a turbulent and complex environment. This forces made it hard for the company to survive, some other cases, the company could lose it market share. On the other hand, it increases its income. The company is now developing strategies that are essential for surviving as the environment change dynamically. References Benn, S., Dunphy, D., & Griffiths, A. (2014). Organizational change for corporate sustainability. Routledge. Brown, T. (2014). Change by design. HarperCollins e-books. By, R. T., Armenakis, A. A., & Burnes, B. (2015). Organizational Change: A Focus on Ethical Cultures and Mindfulness. Journal of Change Management, (ahead-of-print), 1-7. 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