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 - – digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy,
cloud computing is disrupting traditional business models, wage bills are increasing, 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 -
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.
Highly skilled collaborators
– Solarcity 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 Tesla: The SolarCity Acquisition HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
Organizational Resilience of Solarcity Tesla
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Solarcity Tesla does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Ability to lead change in Finance & Accounting field
– Solarcity 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 Solarcity Tesla in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
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.
Effective Research and Development (R&D)
– Solarcity 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 Tesla: The SolarCity Acquisition - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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 -
Need for greater diversity
– Solarcity 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Solarcity Tesla is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Tesla: The SolarCity Acquisition can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Tesla: The SolarCity Acquisition, it seems that the employees of Solarcity Tesla don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Capital Spending Reduction
– Even during the low interest decade, Solarcity Tesla has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Tesla: The SolarCity Acquisition 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 Solarcity Tesla 's lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Tesla: The SolarCity Acquisition, in the dynamic environment Solarcity Tesla has struggled to respond to the nimble upstart competition. Solarcity Tesla has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
High cash cycle compare to competitors
Solarcity 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.
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.
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 -
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.
Creating value in data economy
– The success of analytics program of Solarcity Tesla has opened avenues for new revenue streams for the organization in the industry. This can help Solarcity Tesla to build a more holistic ecosystem as suggested in the Tesla: The SolarCity Acquisition case study. Solarcity Tesla can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
Manufacturing automation
– Solarcity Tesla can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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.
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Solarcity Tesla can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Better consumer reach
– The expansion of the 5G network will help Solarcity Tesla to increase its market reach. Solarcity 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 Solarcity Tesla in the consumer business. Now Solarcity Tesla can target international markets with far fewer capital restrictions requirements than the existing system.
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 Solarcity 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.
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.
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 -
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Solarcity Tesla with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Tesla: The SolarCity Acquisition, Solarcity 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 Finance & Accounting .
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.
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. Solarcity Tesla needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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 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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Solarcity Tesla can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Solarcity 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 Tesla: The SolarCity Acquisition .
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.
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.
