Tesla Motors (B): Merging with SolarCity SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study Description of Tesla Motors (B): Merging with SolarCity
In 2016, electric car manufacturer Tesla announced that it was making an offer to acquire solar panel manufacturer SolarCity in an all-stock offer worth $2.6 billion in Tesla stock. Tesla's co-founder and CEO, Elon Musk, believed that the merger would generate significant cost and revenue synergies, based on his vision of the future of transportation, energy storage, and a "green" economy. However, most Wall Street analysts were highly skeptical of the deal, voicing concerns that the merger would burden Tesla with excessive debt, and that Musk was using the deal to advance his personal interests (at the expense of public shareholders) and bail out Tesla. Concerns were raised over possible conflicts of interest, given that Musk owned over 20% of the stock, and sat on the board of directors, of both companies. The viability of the merger was also questioned given that neither Tesla nor SolarCity had ever been profitable.
Swot Analysis of "Tesla Motors (B): Merging with SolarCity" written by Stuart C. Gilson, Sarah L. Abbott includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Tesla Musk facing as an external strategic factors. Some of the topics covered in Tesla Motors (B): Merging with SolarCity case study are - Strategic Management Strategies, Financial management, Mergers & acquisitions and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Tesla Motors (B): Merging with SolarCity casestudy better are - – technology disruption, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, wage bills are increasing, increasing household debt because of falling income levels,
increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Tesla Motors (B): Merging with SolarCity
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Tesla Motors (B): Merging with SolarCity case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tesla Musk, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tesla Musk 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 Motors (B): Merging with SolarCity can be done for the following purposes –
1. Strategic planning using facts provided in Tesla Motors (B): Merging with SolarCity case study
2. Improving business portfolio management of Tesla Musk
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 Tesla Musk
Strengths Tesla Motors (B): Merging with SolarCity | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tesla Musk in Tesla Motors (B): Merging with SolarCity Harvard Business Review case study are -
Ability to recruit top talent
– Tesla Musk is one of the leading recruiters in the industry. Managers in the Tesla Motors (B): Merging with SolarCity are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Finance & Accounting field
– Tesla Musk 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 Tesla Musk in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Tesla Musk has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Tesla Motors (B): Merging with SolarCity 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.
Effective Research and Development (R&D)
– Tesla Musk 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 Motors (B): Merging with SolarCity - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Tesla Musk has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Tesla Musk 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.
Cross disciplinary teams
– Horizontal connected teams at the Tesla Musk 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.
Diverse revenue streams
– Tesla Musk is present in almost all the verticals within the industry. This has provided firm in Tesla Motors (B): Merging with SolarCity 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.
Superior customer experience
– The customer experience strategy of Tesla Musk in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Tesla Musk is one of the most innovative firm in sector. Manager in Tesla Motors (B): Merging with SolarCity Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Tesla Musk digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Tesla Musk has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Strong track record of project management
– Tesla Musk is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Finance & Accounting industry
– Tesla Motors (B): Merging with SolarCity firm has clearly differentiated products in the market place. This has enabled Tesla Musk to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Tesla Musk to invest into research and development (R&D) and innovation.
Weaknesses Tesla Motors (B): Merging with SolarCity | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tesla Motors (B): Merging with SolarCity are -
Lack of clear differentiation of Tesla Musk products
– To increase the profitability and margins on the products, Tesla Musk needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of Tesla Musk, firm in the HBR case study Tesla Motors (B): Merging with SolarCity needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Tesla Musk 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Tesla Motors (B): Merging with SolarCity, in the dynamic environment Tesla Musk has struggled to respond to the nimble upstart competition. Tesla Musk has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Skills based hiring
– The stress on hiring functional specialists at Tesla Musk 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.
Capital Spending Reduction
– Even during the low interest decade, Tesla Musk 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Tesla Musk is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Tesla Motors (B): Merging with SolarCity can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Aligning sales with marketing
– It come across in the case study Tesla Motors (B): Merging with SolarCity 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 Motors (B): Merging with SolarCity can leverage the sales team experience to cultivate customer relationships as Tesla Musk is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Tesla Motors (B): Merging with SolarCity HBR case study mentions - Tesla Musk 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.
Increasing silos among functional specialists
– The organizational structure of Tesla Musk is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Tesla Musk needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Tesla Musk to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study Tesla Motors (B): Merging with SolarCity 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 Tesla Musk 's lucrative customers.
Opportunities Tesla Motors (B): Merging with SolarCity | 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 Motors (B): Merging with SolarCity are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Tesla Musk is facing challenges because of the dominance of functional experts in the organization. Tesla Motors (B): Merging with SolarCity 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.
Buying journey improvements
– Tesla Musk can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Tesla Motors (B): Merging with SolarCity 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
– Tesla Musk 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Tesla Musk can use these opportunities to build new business models that can help the communities that Tesla Musk operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Using analytics as competitive advantage
– Tesla Musk 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 Tesla Motors (B): Merging with SolarCity - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tesla Musk to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Tesla Musk 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Tesla Musk 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.
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 Tesla Musk in the consumer business. Now Tesla Musk can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Tesla Musk can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Tesla Musk in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Learning at scale
– Online learning technologies has now opened space for Tesla Musk 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.
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. Tesla Musk can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Tesla Musk 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 Tesla Musk to hire the very best people irrespective of their geographical location.
Threats Tesla Motors (B): Merging with SolarCity External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Tesla Motors (B): Merging with SolarCity are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Tesla Musk with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Tesla Musk 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 Motors (B): Merging with SolarCity, Tesla Musk 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 .
Shortening product life cycle
– it is one of the major threat that Tesla Musk is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Tesla Musk 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 Motors (B): Merging with SolarCity .
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.
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 Tesla Musk.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Tesla Musk 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.
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 Tesla Musk in the Finance & Accounting sector and impact the bottomline of the organization.
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. Tesla Musk 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
– Tesla Musk 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.
Regulatory challenges
– Tesla Musk 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.
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. Tesla Musk can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Tesla Motors (B): Merging with SolarCity 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 Motors (B): Merging with SolarCity 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 Motors (B): Merging with SolarCity 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 Motors (B): Merging with SolarCity 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 Motors (B): Merging with SolarCity 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 Tesla Musk needs to make to build a sustainable competitive advantage.
