Between late 2014 and late 2016, Tesla and CEO Elon Musk undertook several major, and risky, initiatives that would dramatically expand the scale and scope of Tesla's business. In late 2014, Tesla began construction on a $5 billion "gigafactory" that would manufacture lithium-ion batteries used in Tesla's electric vehicles on an unprecedented scale. In early 2015, Tesla announced a new product line of battery packs designed for large-scale energy storage for residential, commercial, and utility-scale installations. In 2016, the company acquired SolarCity, a leading solar energy firm, creating what Musk called "a vertically integrated energy company." These moves, representing billions of investment and extension into new industries, came at a time when Tesla was still losing money and struggling to scale up production of its electric vehicle lines to meet ambitious delivery targets. Meanwhile, Musk was also CEO of SpaceX, which was, while growing its business of launching satellites and cargo into space for commercial and governmental clients, preparing to take astronauts into space, pioneering the use of reusable rockets, and announcing plans to colonize Mars. Would Musk be able to realize his ambitious goals or was he taking too many risks with his investors' money?
Swot Analysis of "Elon Musk's Big Bets" written by David B. Yoffie, Eric Baldwin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Musk Tesla facing as an external strategic factors. Some of the topics covered in Elon Musk's Big Bets case study are - Strategic Management Strategies, Financial management, Growth strategy, Managing uncertainty, Manufacturing, Risk management, Strategy execution, Sustainability, Technology and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Elon Musk's Big Bets casestudy better are - – central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , technology disruption, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, geopolitical disruptions,
cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Elon Musk's Big Bets
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Elon Musk's Big Bets case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Musk Tesla, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Musk Tesla operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Elon Musk's Big Bets can be done for the following purposes –
1. Strategic planning using facts provided in Elon Musk's Big Bets case study
2. Improving business portfolio management of Musk Tesla
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Musk Tesla
Strengths Elon Musk's Big Bets | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Musk Tesla in Elon Musk's Big Bets Harvard Business Review case study are -
Ability to lead change in Strategy & Execution field
– Musk Tesla is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Musk Tesla in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Musk Tesla is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by David B. Yoffie, Eric Baldwin can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Sustainable margins compare to other players in Strategy & Execution industry
– Elon Musk's Big Bets firm has clearly differentiated products in the market place. This has enabled Musk Tesla to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Musk Tesla to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Musk Tesla in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Musk Tesla has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Training and development
– Musk Tesla has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Elon Musk's Big Bets Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Highly skilled collaborators
– Musk Tesla has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Elon Musk's Big Bets HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Musk Tesla is one of the most innovative firm in sector. Manager in Elon Musk's Big Bets Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Operational resilience
– The operational resilience strategy in the Elon Musk's Big Bets Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Successful track record of launching new products
– Musk Tesla has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Musk Tesla has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Organizational Resilience of Musk Tesla
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Musk Tesla does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Musk Tesla in the sector have low bargaining power. Elon Musk's Big Bets has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Musk Tesla to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Elon Musk's Big Bets | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Elon Musk's Big Bets are -
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Musk Tesla supply chain. Even after few cautionary changes mentioned in the HBR case study - Elon Musk's Big Bets, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Musk Tesla vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though Musk Tesla has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Elon Musk's Big Bets should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Elon Musk's Big Bets, is just above the industry average. Musk Tesla needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Lack of clear differentiation of Musk Tesla products
– To increase the profitability and margins on the products, Musk Tesla needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, David B. Yoffie, Eric Baldwin suggests that, Musk Tesla is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Elon Musk's Big Bets, in the dynamic environment Musk Tesla has struggled to respond to the nimble upstart competition. Musk Tesla has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Need for greater diversity
– Musk Tesla has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High operating costs
– Compare to the competitors, firm in the HBR case study Elon Musk's Big Bets has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Musk Tesla 's lucrative customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Elon Musk's Big Bets HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Musk Tesla has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Musk Tesla has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Musk Tesla even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Aligning sales with marketing
– It come across in the case study Elon Musk's Big Bets that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Elon Musk's Big Bets can leverage the sales team experience to cultivate customer relationships as Musk Tesla is planning to shift buying processes online.
Opportunities Elon Musk's Big Bets | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Elon Musk's Big Bets are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Musk Tesla can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Musk Tesla to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Musk Tesla to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Musk Tesla to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Musk Tesla can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Musk Tesla has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Elon Musk's Big Bets - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Musk Tesla to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Musk Tesla can use these opportunities to build new business models that can help the communities that Musk Tesla operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Buying journey improvements
– Musk Tesla can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Elon Musk's Big Bets suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Low interest rates
– Even though inflation is raising its head in most developed economies, Musk Tesla can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Developing new processes and practices
– Musk Tesla can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Manufacturing automation
– Musk Tesla can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Musk Tesla can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Elon Musk's Big Bets, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Musk Tesla to increase its market reach. Musk Tesla will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Musk Tesla in the consumer business. Now Musk Tesla can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Elon Musk's Big Bets External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Elon Musk's Big Bets are -
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Musk Tesla business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Musk Tesla with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– Musk Tesla has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Musk Tesla needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Stagnating economy with rate increase
– Musk Tesla can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Regulatory challenges
– Musk Tesla needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
High dependence on third party suppliers
– Musk Tesla high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Musk Tesla.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Elon Musk's Big Bets, Musk Tesla may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Musk Tesla needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Musk Tesla can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Musk Tesla can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Elon Musk's Big Bets .
Shortening product life cycle
– it is one of the major threat that Musk Tesla is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Elon Musk's Big Bets Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Elon Musk's Big Bets needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Elon Musk's Big Bets is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Elon Musk's Big Bets is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Elon Musk's Big Bets is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Musk Tesla needs to make to build a sustainable competitive advantage.