Undoubtedly, every company operates within an environment and an ecosystem that comprises of several different factors and considerations. The management would need to remain aware of the different aspects that are relevant to their firm’s success including the legal, political, and socio-economic factors. In any case, each firm will face different sets of circumstances even when they all operate in the same market. Therefore, an environmental analysis helps to determine the factors that a company should look out for and the best way to make the most out of the situation. In this case, a comparison of Toyota and Tesla will help illustrate some of the differences that exist.
PESTEL Analysis
As mentioned earlier on, the political the political, social, and economic factors will have an impact on a company’s ability to operate. Both Toyota and Tesla face nearly similar sets of factors even though there may be slight differences at some points. Politically, the firms have to be wary of increasing protectionist sentiment sweeping across different parts of the world and how that could impact their ability to operate in various markets (Tsipoulanidis, 2016). Economically, the two should be keen to take advantage of the growth in the global economy which means that consumers have more to spend. As for Tesla, the falling prices of electric batteries are good news which means that it would become cheaper to manufacture (Tsipoulanidis, 2016).
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In recent years, the demand for electric cars has become the most important social factor that car manufacturers have to consider. The difference with Tesla and Toyota is that the former has taken on the challenge and emerged as the premier maker of electric cars in the world (Tsipoulanidis, 2016). Part of that success is attributable to key technological advancements such as the increased use of embedded technologies in cars as well as the development of carbon- reducing technologies. Consequently, there has been a push to come up with more regulations and standards for car manufacturers to ensure that they make vehicles that are environmentally- friendly (Ton, 2014). It is understandable considering that pollution in the form of carbon emissions from cars remains the number one environmental concern when it comes to auto makers (Tsipoulanidis, 2016). Tesla has done well in this regard since it has focused on electric cars since its inception unlike its rivals such as Toyota that are still trying to catch up.
SWOT analysis
A SWOT analysis is important in understanding the situation in which the firm is in at any given time. The table below outlines the SWOT analysis for Tesla;
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Strengths Focus on Electric cars Battery manufacturing integration |
Weaknesses Sourcing of batteries from one supplier leaves the company exposed to disruptions. Lack of significant profitability for several years. |
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Opportunities The growing appreciation and enthusiasm for electric cars. Falling prices of components such as batteries. |
Threats Geo- political risks such as Brexit and growing protectionist rhetoric. Lack of a robust network of suppliers. |
Toyota’s SWOT analysis is given in the table below
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Strengths A unique production system A well- known and recognized brand across the world. |
Weaknesses Negative publicity as a result of mass vehicle recalls in past years Lack of a strong presence in China |
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Opportunities Chance to venture deeper into electric vehicles. Demand for more efficient cars. |
Threats Increasing competition globally. The threat of protectionist policies. |
Company Policies
Toyota and Tesla have inherent differences in company policy and ways of doing things. For starters, Toyota is a Japanese firm which believes in operating efficiently and following a just- in- time paradigm (Tsipoulanidis, 2016). On the other hand, Tesla believes in being futuristic and leading while others follow (Serra, 2013). One key difference between the two has to be with regard to promotion policies. Toyota follows the Japanese Keiretsu which places a huge emphasis on seniority as defined by one’s age. However, Tesla is a company for the future and which is always looking to put the smartest people in top positions regardless of their age (Tsipoulanidis, 2016).
Operations Strategy and Decision Making
Toyota and Tesla could be seen as having two entirely different operational models and outlooks for the future. For starters, Toyota is a mass market brand that has been producing cars for different market segments based on the fact that it produces a whole range of cars and trucks. The company strives for market share growth and to be able to push even more units (Tsipoulanidis, 2016). The principal management style and way of operation is the Toyota production system (TPS) which strives for efficiency and continuous improvement (Duffy, 2014). On the other hand, the story of Tesla is one of company daring to be different. Led by its enigmatic leader, Elon Musk, Tesla started operating in a niche area of electric cars which its rivals sought to venture into later (Erjavec & Restoule, 2012). The driving principles for the company are continuous innovation and an obsession with the future. Undoubtedly, Tesla remains one of the most interesting companies to watch going forward.
References
Duffy, J. E. (2014). Modern automotive technology Albany, NY: Delmar Publishers.
Erjavec, J., & Restoule, M. (2012). Automotive technology Toronto: Nelson Education.
Serra, J. (2013). Electric Vehicles Florence: Taylor and Francis.
Ton, Z. (2014). The good jobs strategy Boston: Houghton Mifflin Harcourt.
Tsipoulanidis, A. (2016). Global supply chain and operations management - a decision-oriented introduction New York: Springer.
