Porters Five Force Assignment
- For a business organisation, it strategy to execute its plan in order to achieve its business objectives defines its success (or failure). Business organisation which are successful have one common factor among them, this common factor is their capability to successfully plan and execute their plan or in other word implement their business strategy to achieve their objectives.Focusof Porters Five Force Assignment Help is to understand various aspects related to business strategy and to apply these theoretical concepts with respect to a specific business organisation. In order to have better understand organisation selected for this task is Tesla Motors (Verbeke, 2013). As part of this report, focus will be on understanding the overall strategic planning process, the way it formulates its strategy, its approach towards evaluation and selection of a strategy and finally the way a selected strategy is implemented. Hence, by the end of this report, learner/reader should be able to analyse various elements of a business strategy and how it can be applied in an organisation like Tesla Motors.
Select a business organisation and research its business activities before writing a preliminary report based on following:
- Company Profile:Unlike other automobile manufacturers, Tesla Motors is relatively young company in the ever competitive automobile sector. However after its establishment in 2003, Tesla Motors has rapidly scaled the heights of the market and established itself has a unique manufacturer of the cars. Main reason behind unique positioning of the Tesla Motors is its focus on design and manufacturing of electric sports car-cars which run on electricity power rather than carbon fuel. However, Tesla Motors also plays critical role of other companies such as GM (General Motors) & Toyota Motors as it is one of the major suppliers of auto parts to these companies (Dinwoodie et al.2014).
- Mission and Vision statement: For any organisation its mission and vision statement provides a direction to the organization’s plan. Vision statement is a broad overview of what actually a company wants to achieve throughout its existence, on other hand mission is more like a well-defined short term and long term goals which company continuously wants to achieve.
- Vision statement of Tesla Motors is very objective and clear, it has targeted towards becoming one of the primary innovator and manufacturer in the field of electric car manufacturer in 21st Century. Company wants to create a sustainable transport system which is enabled by automobiles based on electric power. On other hand mission statementof Tesla Motors is focused on creating a healthy, green and sustainable environment through by reducing use of carbon fuels like petrol, coal and other source of hydrocarbons, by promoting electric power based automobiles in the market. Based on market analysis of Tesla Motors it can be said that as of now, it primary goal is to become primary leader in the market of electric car. In alignment to its goal and overall business strategy, its objective is to position itself as niche manufacturer in the automobile sector and to sustain its position by achieving stable growth and profitability. In order to achieve its business objective, Tesla Motors has focused on ensuring that it does a small scale production of 400 electric cars every week, and to further ensure that pricing strategy of such cars in long term is such that it becomes affordable for all the classes of society in United Kingdom. Important aspect of business strategy is to analyse the core competencies of an organisation. For Tesla Motors its core competency lies in its expertise in the electric car market. The level of technical expertise it has in this sector is unmatched, no other company is even near to create mass production model of electric cars. This is one major reason, due to which Tesla Motors has been able to uniquely position itself in the automobile market of UK and other countries. However, two main factors which give Tesla Motors an edge over other competitors are its superiority in development of the battery technology which powers its automobiles, and secondly its capability to innovate new features in saturated market of automobiles. It has been able to achieve this innovative edge through various ways like filing patents on relevant technologies, and then scaling up the product to a level of mass production (Schrader et al,2012).
Analyse the factors that have to be considered to formulate strategic plans. How does the Ansoff’s matrix help your chosen firm to manage the strategic decision to consider strategic plan.
While preparation of a strategic plan there are several factors which needs to be considered. In case of Tesla Motors, following are the factors which have been considered:
- Timeframe for strategy implementation: The time frame within which the strategy has to be formulated and implemented should be well-defined. Well-defined time line for strategy implementation will enable the business organisation to properly utilise its available resources in order to achieve its business objectives.
- Identification of stakeholders: Tesla Motors needs to ensure, that it clearly identifies the stakeholders who will be impacted by the implementation of the strategy.
- Identification of resource required tofulfilthe strategy: For Tesla Motors, in order to ensure that its business strategy is implemented properly, it will be important to identify the resources which will be required to achieve the strategy.
It is important to understand that for a business organisation to succeed, it is not necessary to deploy only one specific strategy to succeed and sustain in the market. These strategies can be development of market, differentiation of the product line, or the way organisation positions itself. In order to analyse, the kind of strategy might be required in any given specific situation, tool known as The Ansoff’s Matrix can be used. Below displayed diagram displays the Ansoff’s Matrix for Tesla Motors.
Figure 1: Ansoff’s Matrix for Tesla Motors
- Above displayed Ansoff’s matrix clearly identifies the suitable strategy w.r.t a specific market environment. On the basis of this matrix, it can be said that currently Tesla Motors has started its operations in UK and is rapidly spreading its presence in various cities of UK. For example, currently business strategy of Tesla Motors can be based on market penetration, as it is yet to gain major share of UK automobile market. However, in future Tesla Motors should focus more towards market development and diversification, especially since Tesla Motors offers on X and S class of automobiles currently. Hence, based on market environment Tesla Motors can accordingly plan its strategy and implement through analysis of Ansoff’s matrix.
- BCG Matrix is a framework which is used to evaluate the strategic position of the business organisation, its brand portfolio and overall business potential. BCG matrix can be used to identify the business of Tesla based on the industry attractiveness and competitive position.
- Hence, for Tesla Motors, four segments as per BCG matrix will be Stars (High market growth rate, high market share), Questions marks (low market share, high market growth rate), Dogs (Low market share, low market growth rate) and cash cows (low market growth rate, high market share). Hence based on analysis, below diagram represents the BCG Matrix for Tesla Motors:
- Figure 2: BCG Matrix Tesla Motors. Source
- Hence, based on the analysis, it can be said that Tesla Motors falls in the category of questions marks,where despite of earnings and profits growing, cash flows remains negative and overall strategy of Tesla Motors should be focused on investing in market development.
Evaluate the effectiveness of strategic planning techniques to be used when developing strategic business plan.
- In order to develop a strategic business plan, an organisation can use various strategy planning techniques. Some of the widely used techniques include SWOT (Strength, Weakness, Opportunity and Threat) analysis, Porter’s Five Force Model, BCG Matrix, Balance Scorecard and PESTEL Analysis. Some of these methods are described briefly below:
- SWOT Analysis: As the name suggests itself that SWOT analysis if focused on identification of strength, weakness, opportunity and threat for any particular business organisation. It can be said that SWOT analysis enables an organisation to analyse all the aspects mentioned above and accordingly prepare its business strategy. Strength and weaknesses are internal to the organisation whereas opportunity and threats are from the external environment which might not be directly associated with organisation (Alstete, 2013).
Porters Five Force Assignment
Hence SWOT analysis of Tesla Motors is as follows:
SWOT Analysis for Tesla Motors
- PESTEL Analysis: PESTLE analysis helps an organisation, by presenting a comprehensive analysis of the external factors which might have impact on organization’s business strategy. These factors are mainly categorized as Political, Economic, Social, Technological, Legal and Environmental in nature.
Political factors: Following are the political factors which will have impact on the business strategy of the Tesla Motors:
- Gradually United States has reduced its dependency on oil imports from middle east countries
- Government has been giving tax exemptions to the companies like Tesla which are focusing on use of green technologies.
- There has been increase in demand for the green transportation from public as well.
- Low interest rate and easily available funds from venture capitalist
- Increase in fuel prices have pushed consumers to look for other cheaper energy alternatives.
- Steady growth has increased the job creation has as well, impacting purchase power of the consumers.
- Tesla Motors has become a hugely popular organisation which people are following for its growth on social media.
- In 2013 Tesla Motor’s car was awarded as Motor Safety Trend Car of the Year.
- Over a period of time, increased consumer confidence has helped Tesla Motors to increase its potential market segment.
- Tesla’s supercharge network solar powered technology is one major aspect supporting Tesla’s innovation.
- Its partnership with organisations like Daimler, Toyota and Panasonic has helped the organisation to share critical automobile technology to support its business.
- Porter’s Five Force Model: Porter’s five force model helps a business organisation to understand the existing market scenario on the basis of five important factors. These factors are related to threat from a new entrant in the market, existing competition among the market players, bargaining power of the buyers, bargaining power of the suppliers and ultimately threat perception from any potential substitute product. Hence, based on the assessment of these factors future business strategy can be prepared (Alstete, 2013).
- Balance scorecard: Unlike other methods, this method is focused more towards the monitoring and implementation of the strategic plan. It also ensures that effectiveness of the implemented strategy is measured, so that accordingly various aspects of the strategic plan can be modified accordingly and future goals can be achieved.
- Stakeholder mapping for Tesla Motors is mentioned below. It is important to know that stake holder mapping has to be done on the scale of impact of change and support for change.
- Figure 3: Stakeholder mapping for Tesla Motors.
Conduct an organizational audit of the chosen business. How the evaluation of Porter’s five forces model in the perspective of your chosen organization is useful for business environment and strategic positioning.
As discussed in above section, one of the methods of strategic analysis is Porter’s Five Force model. Hence organisational audit based on the Porter’s five forces is mentioned below:
- Intensity of industry rivalry: Currently there is hardly any automobile company which has expertise in manufacturing of electric cars. Due to which, there is relatively negligible rivalry in this regard and has low to moderate impact on the performance of Tesla Motors.Even though overall competition in automobile sectors is extremely high, but due to its unique positioning Tesla Motors does have a competitive advantage in the segment in which it functions.
- Threat of new entrants: Due to entry barriers like initial investment and low acceptability of the products like electric cars, these barriers are relatively high, which further negates the threat of new entrants. Also, amount of technical expertise Tesla Motors has acquired over a period of time will be highly difficult to match-up with. Hence there is low threat of new entrants for Tesla Motors.
- Bargaining Power of buyers: Tesla Motors has launched products such as electric cars which are completely unique in the market. The overall designing and product presentation is unique and never seen by market. Hence, in such scenario there is no other company which can match the expertise of Tesla Motors in electric car segment. Hence it becomes obvious that customer hardly has any choice when it comes to buy high quality electric car, due to which bargaining power of the buyers is low as well (Johnson et al,2011).
- Bargaining power of suppliers: Considering the fact that Tesla Motors has acquired technical expertise in manufacturing electric cars, it becomes natural that company has supplier system which is unique as well and has taken long time duration to be developed. That is why; Tesla has high dependency on its suppliers to ensure smooth process of manufacturing of its cars. Because of this situation, supplier’s bargaining is high for Tesla Motors.
Explain the significance of stakeholders’ analysis while formulating new strategy of your chosen business.
- Stakeholders can be defined as an individual, group of individuals or any external entity which gets impacted by performance of the company with which the stakeholder is associated. For a business organisation there are various stakeholders. These stakeholders can be internal as well as external to the business. Stakeholders for any organisation can be classified as investors who invest their money in the organisation, employees of the company, customers, suppliers, government, and communities. Every stakeholder has different set of expectations from the organisation. These expectations and the way these expectations should be prioritize should be done through a process named stakeholder analysis. Two stakeholders cannot have same priorities for an organisation. For example, for Tesla Motors it will be more important to fulfil its carbon emission regulations first rather than focusing first on donating money to local community. Hence, it will not be wrong to say that stakeholder analysis helps in identifying the sensitivity of the stakeholders associated with the business, and based on the priority identified, company takes actions to fulfil those requirements/expectations of the most important stakeholder first. Ultimately, stakeholder analysis helps in formulation of the business strategy as it analysis of various interests helps the organisation to identify its future tasks; activities which it needs to do in order fulfil requirements of its stakeholder (Werbach, 2011). Based on stakeholder analysis of Tesla Motors, one aspect which clearly stands out is its investor’s expectation from the company to generate profit. Hence, Tesla Motors should focus on fulfilling requirement of its investors who have invested money and enabled the company to develop innovative product like electric car. Further the government policies also have influence on the business. Lastly the customers are also stakeholders in the business as the business needs to generate profits in order to sustain in the market. In nutshell, it can be said that following are the key stakeholders for Tesla along with their purpose:
- Investors: people who have invested money in Tesla Motors. Investor’s main intention is to get profit for their investments.
- Employees: People working for Tesla are also major stakeholders. For these stakeholders having a stable job with Tesla and a positive work environment is the main expectations.
- Customers: Customers who purchase product from Tesla are the most critical stakeholders in the business. If they are not satisfied with the product, then they will lose their faith in the company and will not buy products from Tesla.
- Government: Government as a regulatory authority is a major stakeholder in the organisation. Rules and regulations related to automobile sector impacts the organisation.
Present a new strategy for the chosen business based on organizational audit and stakeholders’ analysis
- Based on the organisational audit and stakeholder analysis of Tesla Motors there are certain key aspects which needs to be highlighted clearly. Firstly important aspect is that Tesla Motors currently does not have many products in its portfolio. For example in UK, Tesla Motors has only two products named MODEL S and MODEL X, whereas other competitors offer range of products in different categories, even though other manufacturers do not offer electric cars but still customer wants more products from a company. Hence in order to sustain itself and gain competitive advantage, Tesla Motors should first focus on diversification of its product line.
Further on, one major aspect which Tesla Motors needs to focus upon is its pricing strategy. Compared to other cars in market Tesla Motor’s products are nowhere cost effective, mainly due to high cost of innovation in electric car segment. Hence, it needs to optimize its pricing strategy so that its investors can achieve return on their investments. Hence in order to gain further market share and strengthen its position, Tesla Motors should focus on strategy of product differentiation, according to which it should be designing and launching new products frequently (for example yearly). Frequent launches of new products will maintain customer interests in the company, and will also provide new options to customers to select from. If the product differentiation strategy is implemented properly then Tesla Motors should definitely increase its sales and gain more market share and customers. In fact, for Tesla Motors, role of government is equally important since decision of government toward promotion of clean and renewable energy might result into certain subsidies or tax rebates for Tesla Motors. Hence Tesla Motors should work in close association with government in order make sure that through its products government is able to achieve the goal of promoting renewable energy.
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Based on the analysis of business strategy of Tesla Motors it can be said, that Tesla Motors is currently going through a transition phase, where it has to not only focus on strengthen position in UK market, but also has to ensure that it is able to enter high growth market like China.
Business strategy should always be prepared in a way that it considers external as well as internal environment to the company. Also, for Tesla Motors strategy which is recommended for sustaining future growth is related to retrenchment and market entry. It is important to understand that no two companies can follow same strategy as factors associated with one company might differ with another. One of the major take away from is that if the organisation is able to create a niche position in the market then it can insulate itself from aspects such as Porter’s Five Force Model etc.
- Abdulsater, A., Balasubramanian, A., Wang, B., Madani, F., Mansour, M., & Talla, R. (2014). Technology Road Map for Tesla Motors Sedan EV. InPlanning and Roadmapping Technological Innovations (pp. 215-238). Springer International Publishing.
Alstete, J. W. (2013). The dynamics of strategy: Mastering strategic landscapes of the firm. Strategic Management Review, 7(1), 110-111.
Dinwoodie, D. L., Quinn, L., & McGuire, J. B. (2014). Bridging the Strategy/Performance Gap How Leadership Strategy Drives Business Results
Europe, T. M. (2013). Tesla Motors Presents Supercharging at IAA and Announces Plans for European Network Expansion.