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 - – there is backlash against globalization, central banks are concerned over increasing inflation, increasing energy prices, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, talent flight as more people leaving formal jobs,
banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, 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 -
Cross disciplinary teams
– Horizontal connected teams at the Musk Tesla are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Effective Research and Development (R&D)
– Musk Tesla has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Elon Musk's Big Bets - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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 -
Increasing silos among functional specialists
– The organizational structure of Musk Tesla is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Musk Tesla needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Musk Tesla to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Elon Musk's Big Bets HBR case study mentions - Musk Tesla takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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 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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Musk Tesla is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Elon Musk's Big Bets can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Musk Tesla has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High cash cycle compare to competitors
Musk Tesla has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
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.
Low market penetration in new markets
– Outside its home market of Musk Tesla, firm in the HBR case study Elon Musk's Big Bets needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Musk Tesla can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
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.
Loyalty marketing
– Musk Tesla has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Musk Tesla to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Musk Tesla is facing challenges because of the dominance of functional experts in the organization. Elon Musk's Big Bets case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
Building a culture of innovation
– managers at Musk Tesla can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
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.
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 -
Environmental challenges
– Musk Tesla needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Musk Tesla can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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.
Increasing wage structure of Musk Tesla
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Musk Tesla.
Consumer confidence and its impact on Musk Tesla demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
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.
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.
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.
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Musk Tesla in the Strategy & Execution sector and impact the bottomline of the organization.
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 .
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Musk Tesla will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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.
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.