Case Study Description of Tesla Motors (A): Financing Growth
The case analyzes the equity market value of Tesla Motors, the electronic car company founded and led by Elon Musk. Wall Street analysts are wildly divided on the future growth prospects for this company, and analysts' one year share price targets range from $160 to $500. The case explores in detail the valuation case made by two analysts covering Tesla, one a bull on the stock and one who is bearish. Students are asked to consider the arguments and the analytical approaches employed by each. Is Tesla a good investment or not?
Swot Analysis of "Tesla Motors (A): Financing Growth" 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 Analysts facing as an external strategic factors. Some of the topics covered in Tesla Motors (A): Financing Growth case study are - Strategic Management Strategies, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Tesla Motors (A): Financing Growth casestudy better are - – technology disruption, wage bills are increasing, increasing energy prices, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , increasing commodity prices,
cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Tesla Motors (A): Financing Growth
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Tesla Motors (A): Financing Growth case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tesla Analysts, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tesla Analysts 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 (A): Financing Growth can be done for the following purposes –
1. Strategic planning using facts provided in Tesla Motors (A): Financing Growth case study
2. Improving business portfolio management of Tesla Analysts
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 Analysts
Strengths Tesla Motors (A): Financing Growth | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tesla Analysts in Tesla Motors (A): Financing Growth Harvard Business Review case study are -
Innovation driven organization
– Tesla Analysts is one of the most innovative firm in sector. Manager in Tesla Motors (A): Financing Growth 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 Tesla Analysts
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Tesla Analysts does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– Tesla Analysts 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 Stuart C. Gilson, Sarah L. Abbott 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.
Learning organization
- Tesla Analysts 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 Tesla Analysts is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Tesla Motors (A): Financing Growth Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Tesla Analysts is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Tesla Analysts 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 Motors (A): Financing Growth HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Tesla Analysts 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Tesla Motors (A): Financing Growth firm has clearly differentiated products in the market place. This has enabled Tesla Analysts to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Tesla Analysts to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the Tesla Motors (A): Financing Growth 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.
Low bargaining power of suppliers
– Suppliers of Tesla Analysts in the sector have low bargaining power. Tesla Motors (A): Financing Growth has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Tesla Analysts to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Tesla Analysts digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Tesla Analysts 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.
Effective Research and Development (R&D)
– Tesla Analysts 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 (A): Financing Growth - 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 Tesla Motors (A): Financing Growth | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tesla Motors (A): Financing Growth are -
Capital Spending Reduction
– Even during the low interest decade, Tesla Analysts 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.
High cash cycle compare to competitors
Tesla Analysts 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.
Need for greater diversity
– Tesla Analysts 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.
Interest costs
– Compare to the competition, Tesla Analysts 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.
Products dominated business model
– Even though Tesla Analysts 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 Motors (A): Financing Growth should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners
– Because of the regulatory requirements, Stuart C. Gilson, Sarah L. Abbott suggests that, Tesla Analysts is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
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 Tesla Analysts supply chain. Even after few cautionary changes mentioned in the HBR case study - Tesla Motors (A): Financing Growth, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Tesla Analysts vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Tesla Analysts 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. Tesla Analysts 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.
No frontier risks strategy
– After analyzing the HBR case study Tesla Motors (A): Financing Growth, 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Tesla Analysts is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Tesla Motors (A): Financing Growth 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 Tesla Analysts, firm in the HBR case study Tesla Motors (A): Financing Growth needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Tesla Motors (A): Financing Growth | 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 (A): Financing Growth are -
Leveraging digital technologies
– Tesla Analysts 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Tesla Analysts can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Tesla Analysts 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 (A): Financing Growth - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tesla Analysts to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Tesla Analysts has opened avenues for new revenue streams for the organization in the industry. This can help Tesla Analysts to build a more holistic ecosystem as suggested in the Tesla Motors (A): Financing Growth case study. Tesla Analysts can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Tesla Analysts 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.
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. Tesla Analysts 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. Tesla Analysts 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.
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. Tesla Analysts can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Analysts 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Tesla Analysts 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Tesla Analysts 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 Motors (A): Financing Growth, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Tesla Analysts can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Tesla Motors (A): Financing Growth 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.
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 Analysts can use these opportunities to build new business models that can help the communities that Tesla Analysts operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Better consumer reach
– The expansion of the 5G network will help Tesla Analysts to increase its market reach. Tesla Analysts 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.
Threats Tesla Motors (A): Financing Growth 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 (A): Financing Growth are -
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 Analysts.
Technology acceleration in Forth Industrial Revolution
– Tesla Analysts has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Tesla Analysts 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.
Increasing wage structure of Tesla Analysts
– 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 Tesla Analysts.
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 Analysts 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.
Stagnating economy with rate increase
– Tesla Analysts 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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Tesla Analysts with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Tesla Analysts 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Tesla Analysts 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 (A): Financing Growth .
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 Analysts can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Tesla Analysts 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.
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 (A): Financing Growth, Tesla Analysts 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 .
Weighted SWOT Analysis of Tesla Motors (A): Financing Growth 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 (A): Financing Growth 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 (A): Financing Growth 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 (A): Financing Growth 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 (A): Financing Growth 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 Analysts needs to make to build a sustainable competitive advantage.