Tesla: Testing a Business Model at Its (R)evolutionary Best SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Tesla: Testing a Business Model at Its (R)evolutionary Best
Tesla Motors, Inc. (Tesla), the electric car company, unveiled its Model 3 in late July 2017 as its stock price continued to appreciate. The Model 3 was priced to sell to the mass market and to potentially compete with the mass-market leaders such as Toyota. The stock market had also responded favourably to Tesla's decision in 2016 to acquire SolarCity, a manufacturer of solar cells, and its decision to build the Gigafactory, the world's largest lithium battery plant. Could Tesla justify its sky-high stock price multiple by simply selling electric cars, or should Tesla become a battery company that could fundamentally change the energy storage industry-or for that matter, some other type of company? Sayan Chatterjee is affiliated with Case Western Reserve University.
Swot Analysis of "Tesla: Testing a Business Model at Its (R)evolutionary Best" written by Sayan Chatterjee, Dennis Terez includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Tesla Battery facing as an external strategic factors. Some of the topics covered in Tesla: Testing a Business Model at Its (R)evolutionary Best case study are - Strategic Management Strategies, Manufacturing, Sustainability and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Tesla: Testing a Business Model at Its (R)evolutionary Best casestudy better are - – increasing commodity prices, geopolitical disruptions, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, increasing energy prices, increasing transportation and logistics costs, technology disruption,
central banks are concerned over increasing inflation, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Tesla: Testing a Business Model at Its (R)evolutionary Best
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Tesla: Testing a Business Model at Its (R)evolutionary Best case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tesla Battery, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tesla Battery 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: Testing a Business Model at Its (R)evolutionary Best can be done for the following purposes –
1. Strategic planning using facts provided in Tesla: Testing a Business Model at Its (R)evolutionary Best case study
2. Improving business portfolio management of Tesla Battery
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Tesla Battery
Strengths Tesla: Testing a Business Model at Its (R)evolutionary Best | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tesla Battery in Tesla: Testing a Business Model at Its (R)evolutionary Best Harvard Business Review case study are -
Ability to recruit top talent
– Tesla Battery is one of the leading recruiters in the industry. Managers in the Tesla: Testing a Business Model at Its (R)evolutionary Best are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Innovation driven organization
– Tesla Battery is one of the most innovative firm in sector. Manager in Tesla: Testing a Business Model at Its (R)evolutionary Best 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 Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Tesla Battery digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Tesla Battery 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.
Training and development
– Tesla Battery has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Tesla: Testing a Business Model at Its (R)evolutionary Best 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.
Low bargaining power of suppliers
– Suppliers of Tesla Battery in the sector have low bargaining power. Tesla: Testing a Business Model at Its (R)evolutionary Best has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Tesla Battery to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Innovation & Entrepreneurship field
– Tesla Battery 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 Battery in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Tesla Battery is present in almost all the verticals within the industry. This has provided firm in Tesla: Testing a Business Model at Its (R)evolutionary Best 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.
Successful track record of launching new products
– Tesla Battery has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Tesla Battery 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.
High brand equity
– Tesla Battery has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Tesla Battery to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Tesla: Testing a Business Model at Its (R)evolutionary Best firm has clearly differentiated products in the market place. This has enabled Tesla Battery to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Tesla Battery to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Tesla Battery 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.
Operational resilience
– The operational resilience strategy in the Tesla: Testing a Business Model at Its (R)evolutionary Best 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.
Weaknesses Tesla: Testing a Business Model at Its (R)evolutionary Best | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tesla: Testing a Business Model at Its (R)evolutionary Best are -
Capital Spending Reduction
– Even during the low interest decade, Tesla Battery 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 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 Battery supply chain. Even after few cautionary changes mentioned in the HBR case study - Tesla: Testing a Business Model at Its (R)evolutionary Best, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Tesla Battery vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, Sayan Chatterjee, Dennis Terez suggests that, Tesla Battery 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.
Slow decision making process
– As mentioned earlier in the report, Tesla Battery 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 Battery even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Aligning sales with marketing
– It come across in the case study Tesla: Testing a Business Model at Its (R)evolutionary Best 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: Testing a Business Model at Its (R)evolutionary Best can leverage the sales team experience to cultivate customer relationships as Tesla Battery is planning to shift buying processes online.
No frontier risks strategy
– After analyzing the HBR case study Tesla: Testing a Business Model at Its (R)evolutionary Best, it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship 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.
Lack of clear differentiation of Tesla Battery products
– To increase the profitability and margins on the products, Tesla Battery needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Tesla: Testing a Business Model at Its (R)evolutionary Best HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Tesla Battery has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Tesla: Testing a Business Model at Its (R)evolutionary Best, is just above the industry average. Tesla Battery 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.
Interest costs
– Compare to the competition, Tesla Battery 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.
Need for greater diversity
– Tesla Battery 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.
Opportunities Tesla: Testing a Business Model at Its (R)evolutionary Best | 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: Testing a Business Model at Its (R)evolutionary Best are -
Manufacturing automation
– Tesla Battery can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship 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.
Using analytics as competitive advantage
– Tesla Battery 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: Testing a Business Model at Its (R)evolutionary Best - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tesla Battery to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Tesla Battery in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Better consumer reach
– The expansion of the 5G network will help Tesla Battery to increase its market reach. Tesla Battery 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.
Buying journey improvements
– Tesla Battery can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Tesla: Testing a Business Model at Its (R)evolutionary Best 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.
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 Battery 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 Battery 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Tesla Battery 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 Battery 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.
Learning at scale
– Online learning technologies has now opened space for Tesla Battery 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.
Loyalty marketing
– Tesla Battery 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.
Creating value in data economy
– The success of analytics program of Tesla Battery has opened avenues for new revenue streams for the organization in the industry. This can help Tesla Battery to build a more holistic ecosystem as suggested in the Tesla: Testing a Business Model at Its (R)evolutionary Best case study. Tesla Battery 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 Battery can develop new processes and procedures in Innovation & Entrepreneurship 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Tesla Battery is facing challenges because of the dominance of functional experts in the organization. Tesla: Testing a Business Model at Its (R)evolutionary Best 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.
Threats Tesla: Testing a Business Model at Its (R)evolutionary Best External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Tesla: Testing a Business Model at Its (R)evolutionary Best are -
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 Battery in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Environmental challenges
– Tesla Battery 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 Battery can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
High dependence on third party suppliers
– Tesla Battery high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Tesla Battery business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Tesla Battery 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: Testing a Business Model at Its (R)evolutionary Best, Tesla Battery may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
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.
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 Battery 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.
Technology acceleration in Forth Industrial Revolution
– Tesla Battery has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Tesla Battery needs to keep up with the evolution of technology in the Innovation & Entrepreneurship 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.
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 Battery with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Battery.
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 Battery needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Tesla: Testing a Business Model at Its (R)evolutionary Best 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: Testing a Business Model at Its (R)evolutionary Best 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: Testing a Business Model at Its (R)evolutionary Best 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: Testing a Business Model at Its (R)evolutionary Best 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: Testing a Business Model at Its (R)evolutionary Best 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 Battery needs to make to build a sustainable competitive advantage.
