Case Study Description of Tesla: The SolarCity Acquisition
In mid-2016, the chief executive officer of Tesla, a U.S. manufacturer of electric cars, was interested in acquiring SolarCity, a U.S. solar power manufacturer and distributor. Both Tesla and SolarCity operated in young, high-growth industries; however, despite their high growth rates, both companies were also losing money every year. Both companies had similar products and could be a strong strategic fit. The chief executive officer needed to convince Tesla's shareholders that SolarCity would be a good acquisition target and then determine a fair price to offer.
Swot Analysis of "Tesla: The SolarCity Acquisition" written by Zhichuan Frank Li, Tomiwa Ademidun includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Solarcity Tesla facing as an external strategic factors. Some of the topics covered in Tesla: The SolarCity Acquisition case study are - Strategic Management Strategies, Financial analysis, Manufacturing, Mergers & acquisitions and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Tesla: The SolarCity Acquisition casestudy better are - – increasing energy prices, technology disruption, challanges to central banks by blockchain based private currencies, wage bills are increasing, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions,
supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Tesla: The SolarCity Acquisition
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Tesla: The SolarCity Acquisition case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Solarcity Tesla, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Solarcity 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 Tesla: The SolarCity Acquisition can be done for the following purposes –
1. Strategic planning using facts provided in Tesla: The SolarCity Acquisition case study
2. Improving business portfolio management of Solarcity Tesla
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Solarcity Tesla
Strengths Tesla: The SolarCity Acquisition | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Solarcity Tesla in Tesla: The SolarCity Acquisition Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Solarcity Tesla in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Solarcity Tesla is present in almost all the verticals within the industry. This has provided firm in Tesla: The SolarCity Acquisition case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Cross disciplinary teams
– Horizontal connected teams at the Solarcity 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.
Learning organization
- Solarcity Tesla is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Solarcity Tesla is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Tesla: The SolarCity Acquisition Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Training and development
– Solarcity Tesla has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Tesla: The SolarCity Acquisition 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.
High brand equity
– Solarcity Tesla has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Solarcity Tesla to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Solarcity 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 Zhichuan Frank Li, Tomiwa Ademidun 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.
Ability to recruit top talent
– Solarcity Tesla is one of the leading recruiters in the industry. Managers in the Tesla: The SolarCity Acquisition are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Solarcity Tesla in the sector have low bargaining power. Tesla: The SolarCity Acquisition has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Solarcity Tesla to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Finance & Accounting industry
– Tesla: The SolarCity Acquisition firm has clearly differentiated products in the market place. This has enabled Solarcity Tesla to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Solarcity Tesla to invest into research and development (R&D) and innovation.
Strong track record of project management
– Solarcity Tesla is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Solarcity Tesla is one of the most innovative firm in sector. Manager in Tesla: The SolarCity Acquisition Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Tesla: The SolarCity Acquisition | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tesla: The SolarCity Acquisition are -
No frontier risks strategy
– After analyzing the HBR case study Tesla: The SolarCity Acquisition, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Tesla: The SolarCity Acquisition 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 Solarcity Tesla has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Solarcity Tesla, firm in the HBR case study Tesla: The SolarCity Acquisition needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Solarcity 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. Solarcity 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 Tesla: The SolarCity Acquisition 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 Tesla: The SolarCity Acquisition can leverage the sales team experience to cultivate customer relationships as Solarcity Tesla is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, Solarcity Tesla needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Skills based hiring
– The stress on hiring functional specialists at Solarcity Tesla has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Interest costs
– Compare to the competition, Solarcity 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Tesla: The SolarCity Acquisition, is just above the industry average. Solarcity 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 Solarcity Tesla products
– To increase the profitability and margins on the products, Solarcity Tesla needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Solarcity 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 - Tesla: The SolarCity Acquisition should strive to include more intangible value offerings along with its core products and services.
Opportunities Tesla: The SolarCity Acquisition | 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 Tesla: The SolarCity Acquisition are -
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 Solarcity Tesla in the consumer business. Now Solarcity Tesla can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Solarcity Tesla can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Developing new processes and practices
– Solarcity Tesla can develop new processes and procedures in Finance & Accounting 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Solarcity 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, Tesla: The SolarCity Acquisition, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Solarcity 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Solarcity 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Solarcity Tesla can use these opportunities to build new business models that can help the communities that Solarcity Tesla operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Solarcity 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 Solarcity Tesla to hire the very best people irrespective of their geographical location.
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. Solarcity Tesla can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Solarcity 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 Finance & Accounting segment.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Solarcity Tesla can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Solarcity Tesla can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Solarcity Tesla is facing challenges because of the dominance of functional experts in the organization. Tesla: The SolarCity Acquisition 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.
Loyalty marketing
– Solarcity 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.
Threats Tesla: The SolarCity Acquisition External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Tesla: The SolarCity Acquisition are -
Environmental challenges
– Solarcity 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. Solarcity Tesla can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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 Solarcity Tesla in the Finance & Accounting sector and impact the bottomline of the organization.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing wage structure of Solarcity 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 Solarcity Tesla.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Solarcity Tesla in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Regulatory challenges
– Solarcity 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 Finance & Accounting industry regulations.
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. Solarcity 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.
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 Solarcity Tesla.
Technology acceleration in Forth Industrial Revolution
– Solarcity Tesla has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Solarcity Tesla needs to keep up with the evolution of technology in the Finance & Accounting 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.
Consumer confidence and its impact on Solarcity 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.
Stagnating economy with rate increase
– Solarcity 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.
High dependence on third party suppliers
– Solarcity 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.
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 Solarcity Tesla business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Tesla: The SolarCity Acquisition 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 Tesla: The SolarCity Acquisition 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 Tesla: The SolarCity Acquisition 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 Tesla: The SolarCity Acquisition 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 Tesla: The SolarCity Acquisition 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 Solarcity Tesla needs to make to build a sustainable competitive advantage.