Strategic Management

MBA-550

Name: Dripta Chakma

ID: 2010688
 1. Which PESTEL factors are the most salient for the electric vehicle segment of the car
industry? Do you see a future for electric vehicles in the United States? Why or why not?
After reading this Tesla case study, I think the PESTEL factors for the electric vehicle request are
political, environmental and technical factors.
Politics has a significant influence on the growth of diligence. In 1980, government banned non-
American auto producers, while the government on the other hand, merged political and legal forces to
make desirable advancements in consumer conduct. Like the U.S. government provides a tax incentive
when purchasing a new electric vehicle. For automobile companies in the electric vehicle market, these
kinds of political rules have a competitive advantage.
Nowadays world climate change and climate security is a critical issue. So, Environmental factors are
important for auto industry. Therefore, the need for new markets for engines is strong. Electric vehicles
offer a solution to these big challenges by reducing the amount of atmospheric pollution that will help
minimize the quantity of greenhouse gases and help the environment. New innovations, such as the
lithium-ion accumulator, would mean that electric cars are about to succeed. Further and further attention
due to their lower environmental footmark. Another good argument for the automotive assiduity is that
energy and environmental regulations are important and if they are rigid and uncurled towards
effectiveness and environmental knowledge, it can impact the manufacturing programs that
manufacturers have to fulfill.
And technical factors of this auto industry are the batteries. It became worrisome due to its weight,
limited power, range and expenditure. But Technology, still is Growing with many new ways of
minimizing carbons and ways to reduce the speed of battery loss in the auto itself. New inventions,
similar as the lithium-ion accumulator, would mean that electric buses are about to succeed.
And for electric vehicles, I can see a future in the USA. Because the electric vehicles industry is moving
fast. And people are more concerned about environmental issues. So, they are moving towards the eco-
friendly technologies. And technology has rapidly advanced and will continue to create new technologies
that will revolutionize the automotive industry.
2. Looking at Porter’s five forces of competition, how would you assess the profit potential of
the U.S car industry?
The automotive industry became very competitive with many players playing in the market. And
Industry environmental factors plays more vital role so automobile makers cannot consider simply
safety and reliableness to remain competitive, particularly given the maturity of this trade.
Porter’s theorized that understanding both the competitive forces and the overall industry structure
are crucial for effective, strategic decision-making, and developing a compelling competitive strategy
for the future.
In Porter's model, the five forces that shape industry competition are,
1. The threats of entry: It is the risk a new competitor creates for current companies within an industry.
This occurs when a new company enters in the market and start selling a similar product or service as an
existing company.
2.The bargaining power of suppliers: refers the pressure that suppliers can put on companies by raising
their prices, lowering their quality, reducing the availability of their products in the market.
3.The bargaining power of customers: demanding a lower price or higher product quality by buyers. This
force examines the power of the consumer, and their effect on pricing and quality. Consumers have power
when they are fewer in number but there are plentiful sellers and it's easy for consumers to switch.
4. The threat of subsidies: the availability of similar products in the market. This force studies how easy it
is for consumers to switch from a business's product or service to that of a competitor. It examines the
number of competitors, how their prices and quality compare to the business being examined, and how
much of a profit those competitors are earning, which would determine if they can lower their costs even
more. The threat of substitutes is informed by switching costs, both immediate and long-term, as well as
consumers' inclination to change.
5.Competitive Rivalry: Competitive rivalry is a measure of the extent of competition among existing
firms. Intense rivalry can limit profits and lead to competitive moves, including price cutting, increased
advertising expenditures, or spending on service/product improvements and innovation.
In this case if we analyze , the car sales dropped rapidly when the recession struck in 2007-2008,
reflecting the downturn in consumer spending. It affected both the industry and the government. after
arriving new technologies in the market, we can see changes in market demand. So, both Govt. and
Companies were satisfied. And the US market became a extreme competitive market due to foreign
companies. But i think the car industry in US.
I think, although that the automobile trade normally would stay profitable with all the technology,
developments and government laws. And i believe the automotive trade would keep a similar is that the
U.S. transport system is expensive and their square measure numerous alternatives, like Uber. Innovations
like electrical vehicles, autonomous pilots, will facilitate keep the automotive trade flowing.

3. Using the five forces model, what implications can we derive for how Tesla Motors should
compete in? The U.S. car industry? What would be your top three recommendations for
Leon Musk? Support your Arguments.
Tesla should focus on the political regulation under which the markets work. They should also focus on
technology development such as technology research, producing own battery and making them available
and cheaper in the market. Tesla should also concentrate on its suppliers to ensure that their product
distribution is carried out smoothly and without delay in the most effective way which will create positive
reputation to their clients.
 4. Draw a strategic group map for the U.S. automotive industry. What are your conclusions?

HIGH Rolls Mercedes BMW

Royals
TESLA INFINITI LAXUS
Medium VOLVO
TOYOTA FORD GM
LOW CHRYSLER HONDA
SPECIAL LIMITED FULL MASS
MASS PRODUCTION
PRODUCTION

Conclusion: since Tesla is known for their price, quality, standards and the product line diversification is
low. I placed them to the far left which is under the special manufacture label. Compared to their
competitors they are needing to find a way to make more models that are more affordable as well as
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.
5. Why do you think that Tesla’s market capitalization (Share price × Number of outstanding
shares) is roughly 50 percent that of GM, while GM’s revenues are more than 50 times larger than
that of Tesla Motors?
Tesla’s market capitalization is almost one-half that of GM, although Tesla revenues were a little over $3
billion in 2014, while GMs were $155 billion. The market capitalization of Tesla is currently above that
of General Motors, creating it the biggest auto maker operative within the U.S. by that live. The auto
maker has landed another trade landmark with Tesla's latest stock rally: its market cap currently exceeds
the combined worth of their rival General Motors. For example, Ford and General Motors delivered over
a pair of million vehicles in 2019. Tesla contains a fascinating result that might be troublesome for rivals
to recreate on customers and shareholders alike, and whereas bears might have legitimate reasons against
the stock, those can in all probability not matter. TESLA appears, in several respects, to play by its own
rules. The current technology and corporations of Tesla might leave it well-positioned to penetrate
different markets that might improve its worth more.