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 - – digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices,
cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, 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 -
High brand equity
– Tesla Analysts has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Tesla Analysts to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Tesla Analysts has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Tesla Motors (A): Financing Growth 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.
Superior customer experience
– The customer experience strategy of Tesla Analysts in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Tesla Analysts 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.
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.
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.
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.
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.
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.
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 -
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.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Tesla Analysts 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.
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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Tesla Motors (A): Financing Growth, it seems that the employees of Tesla Analysts 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.
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.
Skills based hiring
– The stress on hiring functional specialists at Tesla Analysts 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Tesla Motors (A): Financing Growth, in the dynamic environment Tesla Analysts has struggled to respond to the nimble upstart competition. Tesla Analysts has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 -
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.
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.
Loyalty marketing
– Tesla Analysts 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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Tesla Analysts 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.
Learning at scale
– Online learning technologies has now opened space for Tesla Analysts 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.
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 Analysts in the consumer business. Now Tesla Analysts can target international markets with far fewer capital restrictions requirements than the existing system.
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 Analysts can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Tesla Analysts 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 Analysts to hire the very best people irrespective of their geographical location.
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.
Developing new processes and practices
– Tesla Analysts 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.
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 -
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.
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 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.
Shortening product life cycle
– it is one of the major threat that Tesla Analysts is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Consumer confidence and its impact on Tesla Analysts 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.
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.
Environmental challenges
– Tesla Analysts 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. Tesla Analysts can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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.
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 Analysts in the Finance & Accounting sector and impact the bottomline of the organization.
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.
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 .
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. Tesla Analysts needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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.