Pestel and Five Forces Analysis of Tesla Inc

PESTEL and Five Forces Analysis of Tesla Inc. Introduction Organizational evolution, including change management systems in planning, necessitates new methods of thinking and doing business, as well as organizations' ongoing adaptation to environmental changes both within and outside the activity (Kennedy, 2020). Strategic challenges and opportunities are emerging faster and in greater quantities than at any other point in history. There's a good explanation behind this. Businesses operate in a globally integrated global economy and economy that is constantly evolving and intensely competitive. The strategic planning process, in its most basic form, is the mechanism by which companies make plans to attain broad, long-term objectives. The capacity to identify and comprehend one's reality, perceive occurrences in the world, interpret these events, and make judgments leading to suitable actions is the foundation of effective company development management (Khan & Khalique, 2014). The external environment of an organization, often known as the general environment, is an all-encompassing notion that includes all external elements and influences that govern the business operations and to which an organization must adapt or respond in order to sustain its workflows (Khan & Khalique, 2014). The Macro forces and environment of the organizations are Economic forces, Government and political forces, Natural and human induced problems, Sociocultural forces, and Technological force (Khan & Khalique, 2014). In this case study Tesla Inc. as a company is taken for PESTEL and Five forces analysis. Tesla Inc. is a profit-making company chosen here, is an American electric vehicle (EV) and clean energy company founded in the year 2003 (About Tesla, n.d.). Transition to sustainable energy is Tesla's mission in the world. The company's sustainability policy implies that it complies with worldwide expectations for businesses methods and practices that are in line with requests for green energy (Chen & Perez, 2018). PESTEL Analysis of Tesla 1 Tesla's whole corporate strategy is predicated on its ambition to steer the globe away from the usual sources of energy and toward more sustainable and clean energy sources (Cuofano, 2021). Companies operating locally and worldwide continue to face possibilities and pressures as a result of this dimension. The PESTLE (Political, Economic, Social, Technological, Legal, and Environmental) analysis is a strategic technique that is used here to examine Tesla's external environment. It enables a firm to have a sense of the elements that could influence a new business or sector. Various types of firms may prioritize different elements, and a PESTLE analysis can aid in identifying risk factors for strength, weakness, opportunities, and threats (SWOT) analysis (Mas, 2016). External forces that are mainly uncontrollable are referred to as opportunities and threats. The company's potential for expansion is highlighted in the opportunity section. PESTLE Analysis of Tesla is briefly explained as follow (Kissinger, 2019): - Political: This point highlights the effects of government on businesses and their immediate or macro-environment. Government agencies are one of the most powerful social forces influencing companies and sectors. Trade restrictions, for example, might limit the success of a sector and a company's revenue. Similarly, for Tesla it can be taken as opportunities, if there are governmental incentives for electric vehicles, new global trade agreements, and the politics is stable in majority of the major markets. - Economic: Tesla’s economic considerations have a direct effect on a company's longterm market prospects. The economy can influence how a firm price its products or how the supply and demand model work. Market growth, trade volumes, currencies, and other factors that affect the automobile industry are among these circumstances. Some opportunities for economy can be reduction in cost of battery, cost reduction of renewable energies as well as threats like economic instability. - Social: Employees, customers, and investors all have an impact on a company's distant or macro-environment due to social conditions and trends. For example, preference of 2 renewable energies, low carbon lifestyle in the target market, Improvements in the distribution of wealth in developing markets, etc. can create the opportunity to the company. - Technology: An industry's technological aspects may have a direct or indirect impact. While technology will have a greater impact on certain industries than others, it will have an impact on the market, consumer choices, and purchasing power. Some opportunities can be development of automation, online mobile systems, technological awareness etc. - Environment: The availability of resources utilized in the company's manufacturing operations is determined by environmental trends. The following ecological external elements have an impact on Tesla's market in this case: Standards raised on waste disposal, climate change, enhancing environmental programs can be opportunity for Tesla. - Legal: Managerial choices and business development are influenced by laws and legal systems. For example, the marketing strategies including marketing mix, human resources management, business partnership, etc. are directly influenced by the local rules and regulation of the target market. Not only the opportunities but also threats are expected to prevail with globalization. With the proper leadership vision of Tesla’s CEO, the company is in the path of profitability. The company must consider different opportunities and threats discussed in PESTEL analysis. In the following Porter’s Five force model is interpreted in relation to Tesla. Five Force Model Analysis Tesla The Porter Five Forces model was established by Michael Porter as a strategic management tool to assess the influence of external variables on enterprises and the degree of competition of their industrial environment (Hall, 2020). Companies may use it to identify their industry's rivalry, as well as the industry's flaws and strengths. This methodology may be used to look for viability 3 and desirability in any sector of the economy. Following are the five forces that Tesla needs to consider (Hall, 2020):  The potential for new enterprise entrants: At presents all the regional government and environmental activist are talking about sustainable, renewable, green energies. There might be chance of entering new competitors with new innovations that fulfills the triple bottom line as people, planet, and profit.  Current industry competition: After the change in rules and regulations and government in major automotive markets are welcoming the electric vehicles that and other green energies which has given rise to fierce competition. Like Volkswagen is leading in sales of its electric vehicles in European market, other competitors are investing more and more in their research and development. Therefore, Tesla must consider the current industry competition.  The introduction of new products or services to the market: Tesla, Inc. is affected by alternatives in the automobile and energy solutions industries.  Supplier dominance: Tesla Inc.'s business is dependent on the trustworthiness of its suppliers. As the present market indicates the scarcity of materials to manufactures batteries of electric cars. Tesla must not underestimate the power of supplier as lots of established automotive manufacturer are focusing on the similar projects to retain their customers.  Consumer strength: If the consumers does not have many options with appropriate costs, then, there might be chance to substitute Tesla cars with other available brands from competitors. This indicates consumers have chances to bargain for costs, affecting sales and profitability. Therefore, Tesla must consider this factor as well. Vulnerability Assessments and Recommendations Vulnerability assessments can give an organization with the information, understanding, and risk backgrounds it needs to comprehend and respond to dangers in its surroundings 4 (Rosencrance, 2021). Threats are defined by their aim, ability, and chance to cause harm to properties, in this case the company or some aspect(s) of the company. As a result, defending against risks is dependent on knowledge, resource availability, and engagement. Tesla's business is challenging to compete with, especially given the high cost of brand creation and Elon Musk's fame. Owing to the Tesla’s Brand value it is still difficult to compete for new entrants as well as the investment in automotive manufacturing is a high, which can be tough for new entrants. Tesla benefits from rising economies of scale, which new entrants can only gain if they reach a certain level of manufacturing. Entry of new entrants can be only a minor strategic management for Tesla. There are the few threats that Tesla must deal with to stay afloat in the face of market turbulence. The extensive competitions, products deficits, lack of regulations for autonomous driving, CEO Elon musk as he is sole representative and so on (Gupta, 2020). As a CEO I would try to the following diagnostic tool to determine company’s vulnerability. Make a list of all the significant initiatives that are currently ongoing the organization on separate index cards. After that, would make three boxes and label them (Govindarajan & Trimble, 2011). "Box 1: Manage the Present," "Box 2: Forget the Past Selectively," and "Box 3: Create the Future." As a CEO analyzing threats, I would manage the present by controlling the digital vulnerability as there is the history of Tesla Hack, where a hacker got control over entire fleet (Lambert, 2020). If the company is planning to establish autonomous fleet, it needs to take control over data breach before its too late. Next suggestion would be to extend the representative as now Elon Musk as a CEO is a sole representative of Tesla. In long run it can be detrimental to the company’s image. Conclusion In modern day of globalization all the organization must think strategically to serve both external and internal stakeholders. Every organization must be aware of external opportunities and threats for smooth operation of the business. Similarly, each organization need to make maximum use of strategic groups to create, execute, and monitor business strategies 5 (Athuraliya, 2021). Having identified each strength, weakness, opportunity, and threat that Tesla encounters in the market, Tesla must take aggressive measures to increase the customer base and liquidity position. Regardless of the negative aspects, the corporation is unquestionably a symbol of growth and innovation. 6