Tesla Decision Environment Analysis
Tesla Decision Environment Analysis
Tesla Decision Environment Analysis
The Tesla Motors Company is at crossroads going forward. It has reached a point in which current decisions will affect its existence and its ability to survive in the market. The electric car market is not causing the same excitement it did a few years ago when the first all-electric car was launched into the market. Tesla Motors and its abilities are now well known. In an effort to supplement its business, Tesla has also diversified its operations and now has battery manufacture as part of its main operations beside designing and manufacturing of electric cars. Recently, Elon Musk, the CEO of Tesla Motors released the patents to the creation of the electric car. This action was applauded by many. The main reason behind his actions being presenting of the Tesla Motors ideas to the public and let other companies with the wherewithal help push their dream to places Tesla Motors cannot achieve shortly. Clearly, the battery manufacturing industry has more potential to create a difference faster and to low income earners than the manufacture of the electric vehicle. The market potential is immense, including companies that are continually being required to have back-up energy sources (Martin, 2014). Other untapped markets such as the African continent that do not experience winter present an opportunity to Tesla battery manufacturing business to make a difference on a global scale. The new battery from Tesla with the ability to power entire homes can be a life-changing piece of invention in such markets.
The Cynefin framework may be used in the analysis of the market and the challenges that Tesla Motors faces in its current and potential markets as well. The Cynefin framework has five domains; obvious, complex, complicated, chaotic as well as disorder domains (Snowden & Boone, 2007). Each of these domains presents different scenarios that a company may face at different stages of its evolution or at different times as the market factors change. The TeslaMotors’ market is defined by several factors that fit the various factors that present the challenges Tesla faces. The energy market in which the Tesla Corporation operates faces a future riddled with uncertainties. Researchers predict that the oil resource, which is non-renewable, may become extinct soon. The researchers feel that after the year 2020, the world resources will be significantly lower that machines that depend on the energy resource will be deeply affected. Batteries that are rechargeable by electric energy will be of much more value as more demand for electric cars will cause the higher demand. Specializing in such a market is a viable option. However, no one can predict with certainty when the oil resource can be completely exhausted or significantly reduce, especially with some countries discovering oil while some doing major oil explorations with huge potential for new reserves.
The technology used in the manufacture of the batteries may also be outdated or it cannot be sustained as durability has not been determined as yet. These uncertainties call for massive probing, sensing, as well as an adequate response. This scenario reflects a complex relationship depicted in the corporation’s environment. On the other hand, the demand for the batteries is growing and is bound to grow further. Some states already have legislation in place that make it compulsory for the firms to invest in rechargeable batteries meant to provide backup energy in case of blackouts. Such legislation as well as the green agenda will continue to push for higher demand for the batteries (Liu et al., 2014).
Elon Musk is facing serious strategic decision-making challenges. There are a number of factors that Elon Musk needs to consider before making the strategic decision of specializing in the manufacture of power batteries. Creating a difference in the world requires to satisfy a basic need. Cars may be a basic necessity in some parts of the world. For a majority of the developing world, cars are seen as luxuries. However, lighting is a basic necessity for all. Serving a basic need will help Tesla make a difference to the world in a unique way.
Secondly, international strategies are poised to bring fresh challenges to Tesla as it seeks to expand to new markets to expand its influence and creation of new markets for its commodities (Mangram, 2012). An international strategy may require differentiation for different markets. The cost factor may be an issue for the emerging markets. The technology that is presently being used is expensive, an issue that translates to the price of the batteries. Reducing the cost of the batteries will present the biggest challenge to Tesla. Otherwise, the product will be reserved for the exclusive few that are rich in the society.
Thirdly, the Tesla Corporation is poised to face serious challenges as it seeks to expand beyond its market. Tesla sells most of its products in America. The growth of the company means an increase in the costs of electric charging stations as well as the requirement to meet the demands of the different markets. New internal challenges are also bound to arise as efficiency decreases as a result of growth into new markets that are not well known.
I would recommend that Tesla invests in low-cost technologies to enable lowering of its high-cost power batteries as it seeks to enter new markets. The cost of the existing products is a major factor that has curtailed the sales of the Tesla corporation’s products (Mangram, 2012). Developing countries face economic challenges and introducing high-cost products into such markets presents a major challenge to the company and its expansion plans.
Demands of different markets need to be anticipated in advance. Before Tesla enters a new market, a survey and exhaustive study of the market prior to making a decision is necessary. Possible challenges need to be streamlined before the company can opt to enter the market. The political environment also needs to be assessed.A stable political environment, as well as sound economic policies, is necessary before a company can opt to invest in a new country. Tesla needs to be sure of the environmental conditions before entering or investing in such a market.
Investing in solar batteries and entering potential markets in developing economies such as Asian and African countries present huge economic potential and growth possibilities. Deciding to specialize in battery manufacture over electric cars is a major decision. Tesla’s decision to make public patents for the production of electric cars is likely to let in new players who may compete in the electric car market. The production of batteries is poised to grow faster and with far reaching effects compared to electric cars. Investing in technology that will help in lowering the cost of the batteries should be top of their agenda.
In conclusion, the Tesla corporation corporate-level strategy should be to grow over the next five years.Demand for its products has been phenomenal. For instance, demand for its batteries in 2015 far outweighed supply. The next batch of batteries is scheduled for 2016. Such demand calls for growth and strategic decisions geared towards enabling the growth of the company. The low-cost strategy is the way forward as the company seeks to expand into new markets. I believe that Tesla’s main mission is to provide energy solutions to the world and to make the energy factor affordable for the masses. Battery production as well as powering businesses is the best way forward for Tesla in achieving that goal. If the Tesla corporation decided to continue with the multi-faceted strategy of designing and manufacturing cars as well as battery production, it may face serious challenges that will not offer the company competitive advantage on any sector of the economy, especially if competitors arose in the respective markets and that specialize in the sectors of the energy industry (Mangram, 2012). Each of the markets holds vast growth potential, choosing to go both ways will present huge challenges to the corporation and may act as a catalyst to the company’s downfall. The battery business, based on the years sales that have already surpassed demand, shows great potential and promises huge potential markets as well.Manufacturing batteries for electric cars need not stop, however, as it perfectly aligns with the new strategic plan.
Liu, Y. E., Kang, Y., Wu, H., Chen, C., & Hon, E. (2014). Tesla Motors Inc. Case Synopsis.
Martin, C. (2014). Driving change in the battery industry. Nature nanotechnology, 9(5), 327-328.
Mangram, M. E. (2012). The globalization of Tesla Motors: a strategic marketing plan analysis. Journal of Strategic Marketing, 20(4), 289-312.
Snowden, D. J., & Boone, M. E. (2007). A leader’s framework for decision making. Harvard business review, 85(11), 68.