QUESTION 2

STRATEGIC PLAN FOR TESLAS CATEGORY MANAGEMENT PROCESS TO

IMPROVE KEY AREAS OF SPEND.

2. STRATEGIC PLAN INCLUDES

PORTERS 5 FORCES AND HOW IT IS APPLIED ON TESLAS CATEGORY
MANAGEMENT

Competitive Rivalry or Competition with Tesla, Inc. (Strong Force)

Tesla, Inc. operates in a highly competitive market. This aspect of the Five Forces Analysis
outlines the influence of competition on the automotive and energy solutions industry
environment. In this case of Tesla, the external factors and their intensities responsible for the
strong force of competitive rivalry are as follows:

 Small number of firms (weak force)

 High aggressiveness of firms (strong force)
 Low switching costs (strong force)

There are only a small number of firms operating in the automotive market. In Porter’s Five
Forces analysis framework, this external factor limits the effect of competition on companies like
Tesla, Inc. However, these firms are generally aggressive in innovating and promoting their
products. For example, large automotive companies have aggressive marketing campaigns.
Tesla’s marketing mix or 4Ps partly meets such aggressiveness, which strengthens the effects of
competitors against the business. Also, the low impediments for customers to buy cars from
other manufacturers (low switching costs) further strengthen the force of competition. This
aspect of the Five Forces analysis of Tesla Inc. points to competitive rivalry as a high-priority
strategic management consideration in the automotive and energy solutions industry
environment.
Bargaining Power of Tesla’s Customers/Buyers (Moderate Force)

The influence of customers on firms and the automotive, battery, and solar panel industry
environment is accounted for in this aspect of the Five Forces Analysis. Tesla’s customers are a
direct factor that determines the company’s sales revenues. The following external factors and
their intensities maintain the moderate force of the bargaining power of customers on the
company:

 Low switching costs (strong force)

 Moderate substitute availability (moderate force)
 Low volume of purchases (weak force)

Low switching costs reduce barriers for Tesla customers to purchase cars from other providers.
In the context of this Porter’s Five Forces analysis, this external factor imposes a strong force
against the company and other players in the automotive industry environment. However, the
availability of substitutes is only moderate in many cases, thereby limiting customers’ bargaining
power against Tesla Inc. For example, many customers in suburban areas have limited access to
public transportation, making it more practical to drive their own car. In addition, the low
volume of purchases (each customer buys and keeps only one or a few cars) reduces the
influence of customers on Tesla. Thus, the intensities of the external factors in this aspect of the
Five Forces analysis reflect the bargaining power of customers as a moderate force and a
secondary management priority. This prioritization is reflected in Tesla Inc.’s generic strategy
and intensive strategies.

Bargaining Power of Tesla’s Suppliers (Moderate Force)

Tesla Inc.’s business depends on the reliability of suppliers. This aspect of the Five Forces
Analysis shows how suppliers shape the industry environment by influencing the availability of
materials that firms need. The intensities of the external factors that create the moderate force of
the bargaining power of Tesla’s suppliers are as follows:

 Moderate forward integration (moderate force)

 Moderate size of suppliers (moderate force)
  Moderate supply level (moderate force)

Tesla Inc.’s suppliers have a low level of forward integration. This external factor refers to
suppliers’ limited control in the distribution and sale of their products. For example, some
suppliers use third parties to sell their materials to Tesla, while others directly transact with the
company. In the framework of Porter’s Five Forces analysis, this external factor imposes a
moderate force on the corporation. In addition, most of these suppliers are moderately sized,
thereby having limited influence on the automotive industry environment. Another external
factor is the moderate level of supply, which empowers suppliers to affect Tesla, but only to a
limited degree. This aspect of this Porter’s Five Forces analysis of Tesla Inc. indicates the
bargaining power of suppliers as a secondary strategic management priority.

Threat of Substitutes or Substitution (Moderate Force)

Tesla, Inc. experiences the impact of substitutes on the automotive and energy solutions industry
environment. In this aspect of the Five Forces Analysis, the intensities of the external factors that
lead to the moderate force of the threat of substitution against the company are considered, as
follows:

 Low switching costs (strong force)

 Moderate substitute availability (moderate force)
 Moderate performance of substitutes (moderate force)

As pointed out in the other aspects of this Porter’s Five Forces analysis of Tesla Inc., low
switching costs enable competition. In this external analysis case, the low switching costs enable
substitutes, such as public transportation, to easily attract customers. This external factor imposes
a strong force against Tesla’s industry environment. However, the moderate availability of
substitutes limits such influence of suppliers. For example, customers have only a moderate and
limited number of substitute options in the market. In relation, many substitutes have only a
moderate level of performance in satisfying customers’ practical needs. For instance, public
transportation is not as versatile as a private car. This condition further limits substitutes’ force
against Tesla. In this aspect of the Five Forces analysis of Tesla, Inc., the external factors point
to the threat of substitution as a secondary management consideration in the company’s
strategies.
Threat of New Entrants or New Entry (Weak Force)

New entrants are new firms, which impact the industry environment and determine the
performance of companies like Tesla Inc. This aspect of the Five Forces analysis identifies the
intensities of the external factors that create the weak force of the threat of new entry, as follows:

 High cost of brand development (weak force)

 High cost of doing business (weak force)
 High economies of scale (weak force)

Tesla’s business is difficult to compete with, especially because of the high cost of brand
development, along with the popularity of Elon Musk. For example, it is difficult for new
entrants to match the company’s strong brand, which is one of the strengths enumerated in the
SWOT analysis of Tesla Inc. This external factor is an entry barrier in the context of Porter’s
Five Forces analysis. In addition, automobile manufacturing has high costs, which impose a
barrier to new firms. Also, established players like Tesla benefit from increasing economies of
scale, which new entrants can only achieve upon exceeding a production threshold. Based on the
external factors in this aspect of the Five Forces Analysis, the threat of new entry is only a minor
strategic management concern in Tesla Inc.’s industry environment.

Porter’s five forces

Source: semrush.com
80/20 RULE ANALYSIS ON TESLA

TESLA SWOT ANALYSIS

Strengths (Internal Strategic Factors)

This aspect of the SWOT analysis of Tesla Inc. deals with the business strengths that contribute
to organizational growth and improvement. Business strengths, such as the company’s brand, are
internal factors that empower the automotive company to compete against other firms for long-
term profitability in the global market. In this SWOT analysis case, the following strengths shape
the capabilities of Tesla’s business as a competitive player in the automotive and energy
solutions industry:

 High rate of innovation in business processes

 Strong brand
 Strong control on business processes based on vertical integration

Tesla, Inc. is known for its high rate of innovation. The SWOT analysis model views this
internal strategic factor a strength that empowers the company to develop competitive and
profitable products for the electric car market. This strength relies partly on Tesla’s
organizational or corporate culture, which determines human resource support for innovative
enhancements. The brand is also strength in this SWOT analysis of the automotive corporation.
The Tesla brand is a symbol of innovation and sustainability in line with Elon Musk’s business
goals. The strong brand enables the company to introduce new car models and new solar energy
products that attract the attention of target customers around the world.
On the other hand, strong control on business processes is an internal factor that functions as one
of Tesla’s strengths, based on the SWOT analysis framework. Corporate executives have strong
influence and control on various aspects of the multinational business, including the sales and
distribution of electric vehicles. This strategic factor is based on the hierarchy aspect of Tesla’s
organizational structure that facilitates centralized control of the corporation. Also, the company
manufactures many of the components used in its automobiles, and sells its cars through
company-owned locations. In the SWOT analysis model, this vertical integration helps reduce
risks linked to third-party unpredictability.

Weaknesses (Internal Strategic Factors)

The internal factors that limit organizational performance are identified in this aspect of the
SWOT analysis of Tesla Inc. These factors are weaknesses that can reduce competitiveness and
slow the growth of the automotive firm. In this business analysis context, weaknesses are issues
that the company must overcome through strategies, reforms, and initiatives that employ its
strengths and make use of the opportunities in the transportation sector. Tesla’s strategic
management must overcome the following weaknesses relevant to this SWOT analysis:

 Strategies that intentionally limit market presence

 Limited access to supply for innovative products
 Relatively high prices

Tesla Inc. suffers from limited market presence. For example, the company generates most of its
revenues in the United States and has relatively limited operations in other electric car markets.
In the SWOT analysis model, this strategic factor is a weakness linked to Tesla’s marketing mix
or 4Ps, and other strategies that emphasize exclusivity in distribution. This internal strategic
factor is a weakness that limits business growth despite the economic development and
opportunities in non-U.S. markets for cars and solar energy solutions.

In relation, this SWOT analysis determines that Tesla’s limited access to innovative supplies is a
weakness that prevents the company from rapidly expanding internationally. The technologically
advanced nature of the company’s products imposes challenges to suppliers’ ability to provide
the automotive inputs for the company’s manufacturing processes. Strategic adjustments to
Tesla’s operations management can minimize the impact of this weakness.
In terms of pricing, the company’s electric vehicles are relatively more expensive than
competing cars, especially those that have internal combustion engines. In the SWOT analysis
framework, high prices prevent Tesla from rapidly growing its customer base and market share.
This weakness relates to the objective of maintaining a premium brand image despite strategies
that aim for the widespread use of Tesla cars.

Opportunities for Tesla, Inc. (External Strategic Factors)

This aspect of the SWOT analysis focuses on the external factors that present potential growth
and development for the automotive business organization. These external strategic factors are
opportunities that Tesla can use to improve its business performance, management effectiveness,
and strategic growth. For example, the company can increase its revenues by expanding in the
global electric car market and solar energy market. The following opportunities are notable in
this SWOT analysis of Tesla Inc.:

 Global sales expansion for electric cars and solar energy solutions
 Global supply chain expansion
 Increased business diversification beyond electric vehicles

Tesla has the opportunity for global sales expansion. This opportunity is based on the economic
growth of countries where the company’s electric vehicles have limited market presence, which
is one of the weaknesses examined in this SWOT analysis. For example, the company can
increase its revenues through additional operations in Asia, such as through company-owned
distribution or new dealership agreements.

Tesla also has the opportunity to expand its supply chain to support the global expansion of
production and sales operations. In the SWOT analysis context, this external strategic factor
emphasizes the relatively small extent of the company’s operations in comparison to large
competitors like General Motors and Toyota. Tesla’s corporate social responsibility strategy and
stakeholder management efforts that capitalize on the sustainability trend can help facilitate sales
expansion and supply chain expansion.
Growth through diversification is another opportunity relevant to this SWOT analysis of Tesla
Inc. This external factor involves establishing or acquiring new businesses with operations
outside the company’s current business of electric automobiles, batteries, and solar energy
products. Growth through diversification addresses some of the trends noted in the
PESTEL/PESTLE analysis of Tesla Inc. The ecological and sociocultural trends in the industry
environment matches the diversification opportunity identified in this SWOT analysis.

Threats (External Strategic Factors)

The external factors that limit or reduce Tesla’s organizational performance are covered in this
aspect of the SWOT analysis. These factors are threats that prevent the automaker from
maximizing the benefits of its strengths and opportunities. To maintain resilience despite
changing industry conditions, Tesla needs to address the following threats relevant to this SWOT
analysis:

 Aggressive competition
 Fluctuations in material prices
 Dealership regulations

Automotive companies aggressively compete against each other. This external strategic factor
threatens Tesla’s market share in the electric vehicle industry. The fluctuations in material prices
are another threat determined in this SWOT analysis. This external factor especially highlights
the fluctuating and generally increasing cost of lithium, a material used in the company’s energy
storage products. Such fluctuations are a challenge to Tesla in keeping its costs and prices stable.

The company also faces the threat of dealership regulations. Tesla directly sells its products to
customers without dealership involvement. However, some areas, such as Texas, require car
sales to go through dealerships. This SWOT analysis puts emphasis on the risk and
corresponding threat of new dealership regulations against Tesla’s strategy of using company-
owned stores to sell cars.
QUESTION 4

How important will supplier relationship management be to ongoing improvement for the
category management process at Tesla.

Assessing and Mitigating Supplier Risk

For the Tesla Company, identifying and reducing supplier risk is a key benefit of effective
supplier management (Liao, Chuang & To, 2011). The likelihood of negative supplier risks also
rises as supply networks and the resulting supplier relationships become more complicated. Tesla
will benefit from supplier management's assistance in identifying and evaluating the impact of
supplier risks and developing effective risk mitigation strategies.
Leveraging Supplier Relationship Management

Although it may not seem so, the connections Tesla makes with its suppliers can be quite
advantageous for the company. As Tesla works together with its suppliers and includes them in
the decision-making process on how to meet the necessary standards, they develop long-lasting,
trust-based relationships that may be used in the future (Menguc & Auh, 2010). Suppliers are
more inclined to comprehend Tesla's business needs and evaluate initiatives on the company's
terms when they are working together.

Tracking Compliance to Relevant Parameters

To ensure they are meeting the needs of the Tesla Company, each supplier must adhere to a set
of predetermined specifications. The Tesla Company can assess the suppliers' adherence to the
established guidelines and pinpoint areas for improvement to generate the most value by using a
supplier management system (Liao, Chuang & To, 2011).

Improving the Organization’s Supply Transparency

The Tesla Company will be able to streamline important information and data regarding the
lifespan of the suppliers once they have a supplier management system in place. It enables
enterprises to see more clearly how many and what kinds of suppliers they have engaged, as well
as how they are performing. It also assists in finding areas for development and developing plans
to boost their performance even further (Liao, Chuang & To, 2011).

Managing a Growing Supplier Base Effectively

Organizations' supplier bases are growing as a result of a variety of causes, including

increasingly globalized business processes that give access to worldwide suppliers, growing
supply chain complexity, expanding organizational scale, etc. Managing the whole lifecycle of
suppliers gets challenging as the number of suppliers working with Tesla Business rises. The
organization will be able to handle its many suppliers with ease if it has a well-organized
supplier management approach in place (Menguc & Auh, 2010).

Achieving Cost Savings and Quality Control

Strong supplier management procedures will allow Tesla to spot supply chain cost-saving
opportunities and carefully monitor the caliber of supplier production. This has an immediate
effect on and affects the business's bottom line (Liao, Chuang & To, 2011).

Evaluating Supplier Performance

Since their suppliers account for the majority of their business' performance, Tesla Company
needs to be aware of how they are doing. The organization will be able to assess supplier
compliance with the help of supplier performance management, which will also provide
comprehensive information about their performance. It entails the development of several KPIs
to gauge supplier performance, and the organization can evaluate the value the suppliers have
contributed using these metrics (Liao, Chuang & To, 2011).

Building Development Programs to Support Suppliers

Supplier management may assist Tesla Company in designing development programs to support
suppliers, especially those that cater to long-term/critical requirements and help them improve
their performance, once they have reviewed their suppliers and identified areas for improvement
(Menguc & Auh, 2010).