Case Study 2
STRATEGIC MANAGEMENT
MBA550
Name:Mansura Nur Mow
Id#2021611
Qs1
Ans:Many PESTEL factors play a key role for the electric vehicle segment for the electric car
industry.Essentials of Strategic management and The Tesla motor consider technology and environment
to stand out from the PESTEL factors for the electric vehicle market.
Technology is a big factor because this is a new forefront for the vehicle industry and when you have
limited suppliers that make electric car batteries it raises the price for the overall vehicle and limits profit
potential for the company.With electric cars being new technology the only way to keep them charged is
to have a charging stations which are limited but as time passes i do see more of these popping up
around Oklahoma city and Edmond.one of the main reason for the technology is to help reduce CO2
emissions and help our planet/
Environment factors are important for the electric car segment because of what i started above,it will
happen protect our planet from the harmful impact humans make on a daily basis.The more popular
electric vehicles become the more options there will be and the prices will start to become more
affordable for the everyday citizen of the world and wont just be luxury vehicles,which i know is a goal
for the founder and CEO,Elon Musk.
Qs2
Ans:Analysis of the Five Forces of Michael Porters
Buyers bargaining powers
Establishment of strong relationship between buyers and the American Automotive Industry is very
critical. Consumers are the key people that make the business to run. Basically, in this relationship
between the industry and the ultimate consumers, the entire power axis should be tipped specifically to
the favor of consumers. Consumers wield more power in this kind of relationship due to the relatively
standardized automotive commodity nature, as well as the frequent switching of costs related to
selecting a product from the industry’s competing brands. Nevertheless, the industry will remain
marginally powerful because of the large consumer base in relation to the producer ratio (Porter, 1985).
Suppliers bargaining powers
In the relationship between suppliers and the industry, more power is bestowed substantially to the
industry favor. Generally, the automotive industry involves powerful buyers who hold high abilities in
dictating individual terms towards their suppliers. Automotive buyers will be considered powerful
because of the absence of grand proliferation of companies’ essentially manufacturing automotives. The
main largest automotive companies within US hold approximately 90%of value shipments plus the value
added in US. Secondly, the industrial powers will result from the automotive parts which are basically
standardized commodities and they are mainly used in automobiles. Similarly, power to the auto
industry buyers will emanate from backward integration occurrences (Schwab et al, 2004).
Competitive rivalry in the industry
Despite the observation of high concentration ratios within the US market which signify decreased
competition level in the auto industry, rivalry in the global automotive industry and the US niche is
extreme. The US automotive industry is currently not the playground of the largest three automotive a
companies inclusive of General Motors, Ford or the Daimler Chrysler. Apparently, global auto motive
companies are being observed competing in the US Market while at the same time US companies are
getting globalized (Porter, 1985). For example, in 1980s Japanese car manufacturers Toyota and Honda
entered a relatively disciplined US market. These companies have been very devoted in increasing their
market share. Presently, great diversity of the rival firms on the basis of associated philosophies and
cultures has increased the rivalry intensity in the Automobile industry. Market growth has been slowed
down within the established US markets and this requires companies to fiercely fight to secure
considerable gains or possibly avert likely market share losses.
New entrants’ threats
Barriers to entry to the automotive industry have been substantial. New company requires very high
capital and this makes establishment of the manufacturing capacity in order to attain minimum efficient
scale very prohibitive. In addition, automotive manufacturing facility is relatively specialized and any
failure cannever be easily revived. However, though new companies entry barriers are substantial, major
established companies are still venturing into new markets by application of strategic partnerships
(Schwab et al, 2004). Additionally, entry is also being achieved through merging with other companies or
buying out other companies. In fact, presently entry barriers to new markets have been quite low. For
example, in 1980s, companies in the US practically welcomed Japanese makers to the US Markets after
realizing the existing firms had failed to provide quality vehicles within lower price markets. Moreover,
large automotive companies are apparently globalized and they have entered the foreign markets with
diversified degrees of successes.
Threats from substitutes
Substitute threats to American Auto Industry have been fairly mild. Many other types of transportation
are readily available but none of them provide convenience, utility value or independence availed by
automobiles (Schwab et al, 2004). Switching costs linked to employing a different transportation mode
such as train can be high on the basis of personal time consumed. However, monetarily, the use of train
as a mode fro transportation will be quite less expensive as compared to fuel costs consumed on same
trips, car insurance, parking and maintenance. In global urban with high population densities, substitutes
may include mass transit, bicycles, walking which are cheaper compared to the automobiles. For this
reason, alternative transportation modes will always be preferred. Similarly, social or cultural attitudes
may keep individuals from owning automobiles within some parts of the world. Other limitations or
constraints to owning automobiles may involve an individual’s class, religion, geography or race factors.
Qs3
Ans:For Tesla to be competitive long trem they need to effectively address the external factors that are
working against them.I have seen a couple Tesla models in Oklahoma,but i see a ford or Chevy vehicle
everyday.Brand awareness is going to be a big factor that Tesla will have to address because not they are
a newer conpany and when people think about buying a new car they are rarely the first brand on a
persons mind.A main focus on their should be on technological advancement and use their profits to
fund further research and development.They have come out with more models of Teslas ,but if the
technology is attainable to make the parts more affordablr they could make different modelsat more
affordable prices and i gurantee there would be a lot of more Teslas on road.
Qs4
Ans:
High$ Rolls Royce BMW MERCEDES
TESLA INFINITI LEXUS
Medium$ VOLVO
TOYOTA FORD GM
Low$ CHRYSLER HONDA
Special Limited Full Mass
mass production production
Since Tesla is known for their high price quality standards and the product line diversification is low i
placed them to the far left which is under the special manufactured label.Compare to their competitors
they are needing to find a way to make more models that are more affordable as well as an ability to
manufacture more on a larger scale because once they reach a price index that car buyers feel
comfortable with they will run out of stock before they can have more built.
