Tesla Motors Case Study

Tesla Motors Case Study

With the increased focus on renewable energy driving all, sector the country’s economy. The transport sector has also received numerous recommendations to reduce carbon emissions. It is against the backdrop of these ideal that Tesla Motors Company was created. This case study will examine Tesla motor companies strategies as well as assess their internal and external environment in order to create viable recommendations for a sector, which is highly competitive. This case study report will begin with background information about the company then assess the organisation strategic positions and this will be undertaken with the use of Porter’s five forces and SWOT analysis. The outcomes from this model will aid in the recommendation, which will be vital for the organisations.

Tesla Motors Background

According to Tesla (2014) the organisation was formed in 2003 as a revolutionary car business using the latest technology as its competitive advantage. The car was able to conceptualise and create an independently electric vehicle known as the roadster. The concept of the car designs was Silicon Valley inspired. According to Ehrler et al. (n.d, p. 381) the organisation “designs, manufactures and sells zero emission electric cars and power train parts, such as lithium-ion battery packs”. The organisation has sought for strategic partnerships with companies such as Daimler, Panasonic, Toyota and US department of energy (Ehrler et al., n.d, p. 383).

Tesla Motors PESTEL Analysis

PESTEL analysis is a viable tool used to examine an organisation environment and is crucial in the identification of key areas of improvement as well as potential problems likely to emerge (Yuksel, 2012). The external environment is a factor, un-controlled by the organisation and all the eternities function as influences to the organisation operations as seen in figure 1 below. The models take into consideration the political, economy, the social, technology, legal and environment.

Tesla Motors PESTLE
Tesla Motors PESTLE

Figure 1 PESTEL Model

(Sourced from: Business and Management: 4th November – 11th November 2013, – PESTLE Analysis, 2015).

Political

According to Tesla (2014), Tesla motors sell their cars in numerous countries across the United States, Europe and Asia and hence, the company is exposed to different political situations occurring in all those countries. According to the Environmental- protection.org.uk (2014), some countries political environment are affected by climate change issues and hence, law enacted to cut carbon emission by a particular percentage and this affects car manufacturers. The US government is offering incentives to car manufactures that endeavour to product cars more efficient and better in utilising green car technology.

Economic

There is an alternative avenue for growth for cars offering cars, which utilise alternative energy. The increase costs of petroleum have made business more difficult and hence, businesses and individuals are in need of an alternative solution to the rising fuel costs. Most developed countries are now recovering from the financial crisis; the purchasing power is now higher, great new for manufacturers who have products that at needed.

Social

Today the word green technology is associated with companies that are considered to be producing products that are good for the environment. Carbon emission from vehicle exhausts are a big contributor to greenhouse gases affecting the earth environments (Wunch et al., 2009).

Technological

The car sector has seen tremendous changes due to technological innovation affecting several aspects of the car efficiency. Vehicles have been going through metamorphosis with car manufactures looking for way of reducing the fuel intake in order to improve efficiency.

Environmental

Eco friendly car is the word spoken to car manufacturer if they rare to remain competitive by customers across the world. With fuel leakages reported in some places, resulting in a loss of marine and bird life, there have been a growing number of environmentalists forcing their government to regulate the sector and allow only fuel-efficient cars on their roads. What happens to the ozone layer is another factor pushing some individual and institutions to consider vehicles, which do less damage to the environment.

Legal

The US has a market presents challenges for Tesla as a car manufactures especially due to the franchise laws in the country (Fisher, 2014). The energy loan program also in the country increases the chances of car manufacturer to produce more green cars in the sector.

All the factors seen above have the effect of directing the way a car manufacturer does business in US. It is vital to determine how external environments affect the organisation in order to work from there, building competence in a way, which is likely to result in a more beneficial manner. Of major significance in the assessment of Tesla’s external environment are the franchise laws, which would stop the company from distributing their cars in some states in the country. However, the much of the external influence faced by the car manufactures geared to more in support of the company and trends show the vehicle sector is set to follow Tesla direction in the future.

Tesla Motors Competences (SWOT Analysis)

In order to determine Tesla’s competences in the vehicle industry, a SWOT analysis is carried out to examine the organisations strengths, weaknesses, opportunities and threats (Hill, & Westbrook, 1997. It is vital to assess the organisation internal capabilities for a more effective recommendation outcome. A SWOT analysis model is presented in figure 2 below.

Tesla Motors SWOT
Tesla Motors SWOT

Figure 2: SWOT analysis

(Sourced from: Doing a SWOT Analysis to Focus Your Marketing Strategy, 2015)

Strengths

Tesla motors have been able to create executive cars, which are totally fuel free and are energy efficient since they are based on electric power, which are saved on batteries. Tesla cars have been able to go for more than 300 miles without having to recharge their batteries and the closest competitor can only reach 100 miles, which is a significant benefit to the company. In 2013 their car, the “Tesla S” was awarded the price as the trendiest car of the year.

Tesla has been able to reduce its input costs significantly through outsourcing of other parts needed for the manufacture of their vehicles and this has allowed the organisation to reduce its costs. Its collaboration with Panasonic is likely to have an even more powerful battery, which is likely to push their cars even further. In addition, its collaboration with Daimler and Toyota has greater advantages and the company is set to provide vital parts for needed for electronic cars for the two companies.

The organisation has invested a large amount of research and development and this is key to pay off in the future when new technology which is likely to further revolutionise the car sector will be a necessity and this goes in hand with their objectives which is to be in the forefront of the electric vehicle sector.

The organisation has been able to utilise just in time JIT manufacturing systems and only those cars, which are ordered, manufactured and this reduces storage costs and enables them to have a smaller facility. This form of lean management process allows staff to become specialised in a vast number of skills hence, fewer staff are able to accomplish the task of the organisation.

Weaknesses

The major problem that Tesla Motors has is a lack of adequate capital base on which to sustain its operational successfully. Despite having sales for its vehicles, the organisation is not making profits and is due to a low demand and high cost of sales, which are eating up the sales revenues.

The organisation is running on debt financing which is expensive and puts the company at greater risks of being taken over if they are not able to pay up its debts on time. The large research and development costs do not seem to bear profits at this time.

The Tesla car brand is not international recognised as compared to other brands such as the Toyota Prius. The organisation has focused on the higher end of the market, attracting only those with considerable resources to purchase the cars.

Opportunities

The opportunities for Tesla are enormous today especially with fuel prices rising, making life difficult for those who have cars that consume a lot of fuel. The car manufactures need to communicate the benefits of their vehicle to the entire car market since the benefits accruing with owning their cars far outweighs having a regular gasoline car. There is a ready market for small fuel-efficient vehicles also which the company has not tapped (Pollet, Staffell & Shang, 2012). Already the car manufacturer is in a sector, which few have tried to venture fully. Those car manufactures who have tried to venture either have hybrid cars of inefficient electric cars as compared to Tesla motors.

Threats

Other car manufacturers have greater financial resourced or sources, which could easily allow them to venture into the niche market, Tesla is viewed as a smaller inexperienced car manufactures are compared to the long term experienced car manufactures in vehicle sector. If other car manufacturer with greater capability for economies of scale to start making electric vehicles, this could affect Tesla revenue sine the organising is not able to manufacture as cheaply as those who are established worldwide.

Tesla Motors Competences (Porters 5 Forces Analysis)

Porters five forces as seen in figure 3 below is useful in assessing a business sector to find how attractive the sector is and who has influence in the sector.

Tesla Motors Porters
Tesla Motors Porters

Figure 3: Porters 5 forces Analysis Model

(Sourced from: Porter, 1981)

The Threat from New Entrants

The sector which Tesla Motors company is in has challenges for those who want to enter that market segment. The capital expenditure needed for this electric vehicle sector is very high and keeps new business away from this sector. The only business which may find it easy to enter this market are those existing car manufacturer that have large resources readily available as well as have the capacity to venture fully into this sector.

The Bargaining Power of Buyers

Tesla is a vital company in the electric vehicle sector and today they have a very solid relationship with their customers. Since the company has invested a lot of money and skill in research development, they have been able to manufacture quality products, which are useful for companies such as Daimler, and Toyota hence Tesla Motors power is very high. Tesla has a manufacturer, produces cars which are unique and scarce hence, with increased demand likely to set in the market, they will have considerable power thought, this is only vital if they are able to generate awareness of their brand.

Threat of Substitution

The threats of substitution are the Tesla Motors market segment can be seen from hybrid cars, diesel cars as well as other electric cars and solar power cars. There are also substitutes arising from people choosing to ride buses, trains as well as use bicycles instead of purchasing an electric vehicle.

The Bargaining Power of Suppliers

Since Tesla Motors is highly dependent on its suppliers and this is due to adopting lean management system where parts sought when an order is availed. This means that the suppliers have a higher bargaining power. If the suppliers do not bring the raw materials in time, Tesla is likely to suffer as a result.

The Intensity of Rivalry in the Industry

The global car sector is fiercely competitive with car manufactures competing on a global platform with different categories of their products to cater for different clientele. In the electric vehicle, sectors server car manufactures have created cars, which have not been able to meet the standard of Tesla though; companies such as Nissan have created compact affordable electric cars, which are selling in different countries.

Porter’s five forces show a growing threats to the Tesla car company if they do not work quickly and cater for other segment. This threat can only be from already established car manufacturer. The sector is still inaccessible due to the high capital-intensive investment an organisation will have to undertake and the skill needed to ensure an organisation is competitive.

Conclusions

This case study features Tesla Motors a company that was set up to create in 2003 as a revolutionary car business using the latest technology as its competitive advantage. The car was able to conceptualise and create an independently electric vehicle known as the roadster. The company’s revolutionary cars are set on a global stage, as a car with moves without the conventional fuel. The external environment scanning undertaken through PESTEL analysis of the organisation revealed that the organisation had greater opportunities to enhance their business with support from the American government. The international analysis undertaken using the SWOT analysis revealed that organisation has inherent weaknesses, which saw the company perform in a sector, which is very lucrative due to a lack of adequate finances. Threats in the electric vehicle sector were seen to arise from existing car manufacture, with greater competences as well as finances to build electric vehicles even cheaper than Tesla. Porters 5 forces analysis that was undertaken on Tesla Motors revealed that the sector was very hard to enter by new players in the sector. This was due to the high capital intensity the sector demanded as well as the skills necessary for a business to actually undertake the business successfully. The case study also showed that Tesla Motors strategy was more focused on the upper clientele of the car market with quality, better performance as well as expensive vehicles, which used electricity as compared to petrol.

Recommendations

Tesla was advised by its customer to manufacture a car that was of a lower price but the company has still manufacture a car that is half the cost of its pioneer car thought still relatively high for many to purchase.

Since Tesla is in a sector, which has the highest potential in the vehicle sector, the organisation should find ways of building a cheaper option, which can be bought by a number of people worldwide. Since the companies cars are of the best quality, in order to capitalise on this aspect, selling on mass production could be more beneficial to producing on demand. It is better to derive fewer profit margins and sell more cars, which then equates to a greater profit as compared to selling premium, which affects demand. With threats evident as existing car, companies have started embarking into electronic car sector, this is poised to destroy Tesla cars in the market if those car manufactures are able to manufacture and sell at a cheaper price. This is an aspect Tesla should not forget and having beautiful expensive cars does not equate to profits but rather having a car, which has demand.

The company’s strategy on focusing on premium cars and attracting the rich to purchase their cars is failing with little or no demand. The rich have the capacity to purchase any other car despite the consumption and hence, a change to their focus can create changes to the financial reporting. Coming out early and capturing a greater market share will hinder even existing car manufacturer from venturing into Tesla niche market. The organisation should come out with different models from compact small cars to their SUV since this is a car concept which any individual is unlikely to pass out.

Tesla should embark on selling key part to other car manufacturers to ensure they have a steady stream of revenue apart from selling their cars. This ensures that the car manufacture remains relevant even with increased competition, which is set to grow in the coming years. Being in the forefront or provision of vital innovative electrical parts for car manufactures can even bring in a greater percentage of revenues. Samsung Company has been able to remain competitive as a result of producing vital parts for iPhone which is a major rival.

Tesla should continue with its research and development and produce batteries, which are able to take the car further as well as reduce the time it takes to charge the car batteries, which many view as a challenge when using electric vehicles.

Most importantly, Tesla needs to create awareness of its products to the international market not just in American and Europe. There are many government and organisation, which could benefit from having a car that utilises less harmful substances as compared to petrol of diesel. A greater percentage of the revenue should be spend in advertisement and education on harmful carbon emitted in petrol and diesel consuming cars.

References

Business and Management: 4th November – 11th November 2013, – PESTLE Analysis (2015) Business and Management: 4th November – 11th November 2013, – PESTLE Analysis.

Doing a SWOT Analysis to Focus Your Marketing Strategy (2015) Doing a SWOT Analysis to Focus Your Marketing Strategy.

Ehrler, C., Gillis, J., Huesemann, M., Sandoval, M., & Turckes, L., (n.d) Tesla Motors: charging into the future? Case 29 1(1) pp. 381-395

Environmental-protection.org.uk, (2014) Car Pollution | Environmental Protection UK.

Fisher, D. (2014) Tesla’s Elon Musk Learns An Old Lesson Fighting Protectionist Dealer Laws.

Hill, T., & Westbrook, R. (1997) SWOT analysis: it’s time for a product recall. Long range planning, 30(1), 46-52.

Pollet, B. G., Staffell, I., & Shang, J. L. (2012) Current status of hybrid, battery and fuel cell electric vehicles: from electrochemistry to market prospects. Electro-chimica Acta, 84, 235-249.

Porter, M. E. (1981) The contributions of industrial organization to strategic management. Academy of management review, 6(4), 609-620.

Tesla Motors, (2014) About Tesla | Tesla Motors.

Wunch, D., Wennberg, P. O., Toon, G. C., Keppel Aleks, G., & Yavin, Y. G. (2009) Emissions of greenhouse gases from a North American megacity. Geophysical Research Letters, 36(15).

Yuksel, I. (2012) Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management, 7(24), p52.

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Smartphone Market Apple

Apple’s Position in the United States Smartphone Market

The smartphone market in the United States is comprised of all firms that manufacture and sell smartphone’s specifically to U.S. consumers. According to Cromar (2010. p 4.), a smartphone is a mobile phone which is run on an advanced operating system. The operating system makes a smartphone to have advanced computing capabilities such as installing of new applications and can connect to the internet.

There are five major players in the U.S. smartphone market. They include:

  1. Apple Inc. (a U.S. corporation)
  2. Research in Motion Limited (a Canadian corporation)
  3. HTC Corporation (a Taiwanese corporation)
  4. Motorola Inc. (a U.S. corporation)
  5. Samsung Electronics (a subsidiary of a Korean corporation)

This article will mainly focus on Apple’s presence in the smartphone market.

Apple’s Market Share

According to new statistics released by comScore – an analytics firm – on February 2013, Apple and Samsung have continued their two-horse race for the U.S. smartphone subscription over the last quarter of 2012 (Campblell, 2013). For three months ending in December 2012, Apple’s iPhone had maintained its dominance in the U.S. smartphone market which raised its share of the market by 2% up from 36.3% in the previous quarter. However, Samsung, the biggest competitor to Apple had experienced the most positive change over the same period by controlling 21% of the market. These two smartphone giants were trailed by HTC and Motorola, which unfortunately were experiencing declining results with market shares of 10.2% and 9.1% respectively (Campbell, 2013). The following table shows a percentage share of smartphone subscribers for the period between September 2012 and December 2012

Smartphone Market 01
Smartphone Market Apple

Source: comScore (2013)

This was a representation of 125.9 million people in the United States who were owning smartphones during the last quarter of 2012 (Jones 2013). As Apple was dominating in smartphone subscription, Google’s Android Platform operating system was leading with a 53.4 % of the market share in the fourth quarter of 2012 (Paul, 2013). This made Apple’s iPhone 5 and Samsung Galaxy SIII the bestseller in Q4 leaving HTC, LG and RIM struggling to get a share of the lucrative market.  The following table according to Jones (2013) shows a tabulation of Apple’s position in the period between December 2011 and December 2012

Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 +/-
Android 47% 51% 52% 53% 53% 6%
Apple 30% 31% 32% 34% 36% 6%
RIMM 16% 12% 11% 8% 6% -10%
Microsoft 5% 4% 4% 4% 3% -2%
Symbian 1% 1% 1% 1% 1% -0%
Other 1% 1% 1% 1% 0% -1%
Total 100% 100% 100% 100% 100%

Source: comScore (2013)

Threat Analysis

Apple’s dominance in the smartphone market for many years can be attributed to the advantage that the company takes from vital synergies that are available in its electronic ecosystem of electronics, computers and software (Comar 2012 p 31). Before the company released the iPhone, Apple already had an existing broad base of users for its iPods, computers and software like iTunes. The iPhone is a smartphone that can be easily integrated with other Apple products such as the Apple TV. It is the success of Apple’s other products that were carried over and integrated into the iPhone making it an unmatched smartphone with highly differentiated and integrated user experience.

As of 2010, most of Apple’s competitors were facing significant challenges in market share control due to Apple’s availability of a highly integrated electronic ecosystem.  However, Samsung has in the past two years revolutionized its smartphone presence in the United States making it Apple’s main competitor.  This has led to patent counter suits between Apple and Samsung being experienced in especially the last one year. Samsung has fully utilized its wide range of consumer products such as the manufacture of computer chips, PCs, TVs and printer to influence its smartphone innovation in recent years, a technique that Apple largely relied on in the earlier days.

Apple’s Weaknesses

The biggest challenge that Apple as a smartphone manufacture is facing today is the growing competition in smartphone operating system application platform. Apple smartphones use iOS which is a mobile operating system created exclusively by Apple. Over the last couple of years, Apple has been experiencing a significant long term risk in gradual loss of smartphone market share specifically to the Android platform. This trend has reduced Apple, a one-time smartphone giant, to a mere niche player in the U.S. smartphone market. The following image show’s Apple’s iOS market share as compared to other mobile operating systems for the period between January 2009 and June 2012 (Blodget 2012)

Smartphone Market Dissertation
Smartphone Market Dissertation

The Android platform that is giving Apple’s iOS a run for its money is a software stack of mobile devices which includes an operating system that is designed mainly for touch screen devices such as smartphones. Android, which is owned by Google, has played a key role in challenging the success of Apple’s smartphone by handing companies like Samsung an easy to use mobile operating system.

The reason why Apple’s smartphone market share is under siege is essentially because the smartphone market is a ‘platform’ market. Apple’s weakness here is that in a platform market, third company markets like Google build products and services on top of other companies’ platforms (Blodget 2012). In this case, Google continues to build the Android application for use by companies such as Samsung on their smartphones. Currently, Android and Apple are continuing to dominate the smartphone market with Apple’s share declining in a rapid manner in the last two years.

Another area of Apple’s weakness is its spending on research. According to Chen (2013), smartphone manufacturer, Samsung, outspent Apple by 2012 on research and development with Samsung spending 5.7% of its revenues on research as compared to Apple which has spent only 2.2% of its revenues. Research is essential, especially in a mobile based platform, since a company will always be abreast with not only emerging trends, but also reading the current trends of consumers.

Samsung’s Competition on Apple

Even though Samsung came in second in the U.S. smartphone market share, Samsung was the only company that recorded significant growth especially in the last quarter of 2012.  Paul (2013) points out that with increase in competition in innovativeness in smartphone design, Samsung’s growth rate was slightly more than Apple’s which consequently heightens the prediction of its market share results in the first quarter of 2013.  Samsung has not only been experiencing growth as a mobile phone manufacturer in the United States alone. Globally, for the first time in 13 years, Samsung toppled Nokia in the global mobile phone business on an annual basis at the end of 2012. Samsung accounted a growth of 29% in mobile phone business in 2012 which was up from 24% in 2011 (Wayne 2012).

Chen (2013) also concurs that for many years Apple has not face a challenger like Samsung, who can make very popular and profitable smartphones and tablets.   Whereas Apple is staking its success on creating new markets and then dominating them, Samsung is investing heavily on studying existing markets and coming up with new innovations inside them. Samsung’s strategy has seen the Samsung Galaxy SIII smartphone to be the first smartphone to engage on a neck-to-neck competition with Apple’s iPhone in sales (Chen 2013).

Samsung’s success over competitors like Apple and Nokia is being mainly forged by the company’s competitive edge in the smartphone sector. According to information and analytics provider HIS, on a global perspective, Apple and Samsung ended 2011 in an absolute two-horse race over smartphone market share, with only 1% separating the two (Wayne 2012) .

Business Analysis tools and techniques

There are many business analysis techniques and tools that can be used to analyze different business problems. This paper shall focus on four of the majorly used tools. They include:

  1. SWOT Analysis
  2. The PESTLE Technique
  3. The 5 Whys Technique
  4. CATWOE Analysis

SWOT Analysis

SWOT analysis is one of the most commonly used tools for analyzing and auditing the overall strategic position of a business and its environment.  SWOT is an acronym that stands for Strengths, Weaknesses, Opportunities and Threats.  For purposes of understanding the business environment of a company through SWOT analysis, strengths and weaknesses mainly focus on the internal factors while opportunities and threats focuses on the external factors.

Whereas a business cannot change the external factors affecting it, it can change the internal factors affecting its business environment. SWOT analysis do help companies for instance to understand the external environment of a business and how they can strategize on sustainability and performance.  SWOT also helps a company to identify a strategy that creates a concrete business model that best matches a company’s capabilities and resources to the environmental requirements. It is basically a foundation in which a business evaluates its internal potential and probable limitations in comparison to opportunities and threats posed by its external environment. Arguably, a consistent SWOT analysis of the environment that a business is operating enables a company to adequately predict changes in trend and also helps in factoring them in the decision making processes of the company.

Strengths

The strengths of a business are the unique qualities that enable a company, for instance, to accomplish its mission and vision. They form the basis on which the continued successes of a business are established and sustained.  The strengths of a business are what the business is well specialized in or the expertise it has, the traits and the exceptional qualities that its employees poses and the distinctive features as compared to others in the industry that gives the business its consistency.  They are simply the attributes within a company, which can either be tangible or intangible that give the business a competitive edge over others. Some of these beneficial aspects of a business may include: customer goodwill to the brand loyalty, human competencies, financial resources, products and services, etc.

Weaknesses

Weaknesses are the attributes and qualities that prevent a business from accomplishing its mission and consequently achieving its desired full potential. In SWOT analysis, these are factors that prevent a business from achieving successful results since they simply deteriorate a business’ growth. They are internal factors in a business that make the business not to meet the required standards that the business opts to be meeting. They may range from insufficient research and development capabilities as in the case of Apple Inc. when compared to Samsung Electronics, to narrow product range and depreciating machinery. Analyzing weakness assists the management in a business to know the areas in the business that need to be improved. Weaknesses precisely impact on the profitability of a business and if not well controlled, they may make a company to go out of the business.

Opportunities

Opportunities are essentially the possibilities that a business has in increasing their profit margins or improving on performance.  They are presented by the environment within which a business is operating. Opportunities arise when a business takes an advantage of the conditions posed in its operating environment to plan and execute strategies that could drive it to more profit making. Businesses have to be very keen in identifying opportunities and grasping them immediately they rise. It could be something as simple as releasing a new product line to targeting a new customer niche. Conducting a SWOT analysis on opportunities involves examining external factors to a business such as technological advancements and the state of the overall economy.

Threats

Threats to a business rise when external factors in a business environment compromise the profitability and reliability of the business. They create a vulnerability that is faced by a business when compounded to its weaknesses. They are peculiar external factors which cannot be controlled. For instance, the economic downturn of 2008 was factor that most businesses could not control. Political and social trends can also be possible threats to a business. A good example is the current social and political push for products that are more environment friendly as compared to those that are not.  An essential part in analyzing the threats of a company has to involve a look at the strengths of its competitors.

SWOT analysis is advantageous in that it presents valuable information since a business can evaluate the four elements either independently or as in combination (Nordmeyer, 2010). It also involves the integration of qualitative and quantitative data which is an essential part in formulating a business strategy. SWOT analysis is preferred by many since one is not required either have technical skills or training to conduct the analysis. This in turn makes SWOT analysis one of the most affordable business analysis tools that also requires a fairly short time to conduct.

The PESTLE Technique

The PESTLE technique is a business analysis technique that is mainly concerned with the external aspects of a business such as the environment. PESTLE is an acronym that stands for Political, Economic, Social, Technological and Legal Environment (Financez 2012).  This method is mostly used in analyzing a business environment and making market evaluations at the initial stages of the business. According to Marx (2010), the PESTLE technique primarily consists of four main phases.  These phases are:

  1. Formulating the external factors list
  2. Identifying the implications of these external factors
  3. Determining the relative importance of the impacts of the external factors
  4. Formulating alternative scenarios

Political – When generating a political-factor list, one is expected to concentrate on the key political factors that will affect a business. The taxation policy, for instance, especially during elections is one of the main political factors that a business needs to internalize and factor in its strategy analysis. How foreign policy will affect exports and imports especially to a business in such a field can also be a cognizant factor.

Economic – In this analysis, one is considered to factor the overall economic situation, the strength of consumer spending in business’ main product and service segment, both current and future government expenditure and how it may affect the economy among many other factors.

Social – When considering the sociological aspects in business analysis, it is important to concentrate on the cultural aspects that are likely to impact on the business (Marx 2010). Cultural and social trends have great influences on a consumer of any product or service. Therefore, it is important to consider factors on demography, lifestyle patterns, fashion, and work attitudes as well as religious and ethnic differences when analyzing a business environment.

Technological – This is one area that has greatly changed the lives of many people today. For a business to easily sustain itself in today’s world, it has to adequately factor technological advancements available to improve its overall performance. Having a big eye on technology is a major factor that creates a competitive edge of a business over its rivals (Financez, 2012).

Legal – Legal and political factors are closely related but for good business analysis, they are distinguishable. Current and pending legislation ultimately do have implications on a business which makes them a compulsory business analysis consideration as this technique provides. Legislation may affect employment, taxation, health and safety requirement, as much as many other aspects of a business.

Environmental – These are factors in business analysis that may have a connection with the environment. Aspects on pollution capabilities and recycling possibilities in the product and services of a company are important factors in business analysis.

The 5 Whys Technique

The 5 Whys technique is a problem-solving technique that assists one in getting to the root cause of a problem quickly (Manktelo & Carlson 2011). This method simply helps in determining the cause-effect relationship in a problem or failure event (Sondalini 2008). This technique was made popular by Toyota especially in the 1970s when they were developing their manufacturing methodology. The 5 Why’s technique simply involves looking at a business problem and asking ‘why’ and ‘what caused the problem’. In using this strategy to solve a problem, one simply starts with the end results and works backward in asking ‘why’ in a repeated manner until the root cause of a problem is apparent.

Five is a rule of the thumb and that is why this technique is called the 5 Whys technique. It is not a must for one to ask 5 ‘whys’ since one may ask more or less before finding the root cause of the problem. When one, for instance, in business is facing a certain problem, you start with a statement of the situation and ask why it is occurring. Then turn the answer to this questions into a second ‘Why’ question. The answer to the second ‘Why’ questions becomes the third ‘Why’ questions and so forth. Repeatedly asking why peels away ‘layers’ in an issue which then leads one to the root cause of a problem. When one refuses to be satisfied with an answer, this increases the odds of coming up with the underlying root cause of the problem (Sondalini 2008).  Some of the benefits attributed to this technique are:

  1. Simple – it does not require the use of advanced mathematical tools.
  2. Effective – it quickly helps to separate symptoms from causes
  3. Flexible – It can be used alone or in combination with other techniques

CATWOE Analysis

CATWOE analysis is a business analysis technique where an analyst prepares a report, that is analytical, to solve a particular problem. CATWOE is an acronym that stands for Clients, Actors, and Transformation, Worldview, Owner and Environmental constraints.  In business, it is a technique that is very useful in checking the features existing in a defined problem. The CATWOE technique is mostly preferred when identifying a business problem that requires prompting critical thinking on why it is really necessary to be solved.

Clients – The clients of a business have to be analyzed on so as to understand who are on the receiving end of the business’s products and services.

Actors – This comprises the employees who form part of implementing the business strategy or changes to achieve a desired mission.

Transformation – It comprises of an analysis of probable changes that have been introduced in a business. It also factors on the analysis of the processes involved in transforming inputs into outputs.

Worldview – In other words, this is the world view. This describes an analysis on the bigger picture that a certain situation or a problem in business fits.

Owner – Having a look on the stakeholders and identifying needs of the owners or shareholders of a business is crucial.

Environmental constraints – It includes an analysis on the external environmental factors in which a business is operating.

References

Blodget H. (2012). This Trend is very worrisome for Apple. Business Insider

Campbell M. (Wednesday, 6th February 2013). Apple and Samsung pull further ahead in U.S. smartphone market, iOS gains on Android.  Apple Insider

Chen B. (February 10th, 2013).  Samsung Emerges as a Potent Rival to Apple’s Cool. New York Times

Comar S. (November 29th, 2010).  Smartphone in the U.S. Market Analysis

ComScore (February 6th 2013). ComScore Reports December 2012 U.S. Smartphone Subscriber Market Share

Financez (2012). What is Business Analysis: 2 – PESTLE Technique

Jones C. (February 2013). Apple’s and Android’s U.S. Smartphone Market Share Continues to Increase.

Manktelow J. & Carlson A. (2011). 5 Whys – Quickly getting to the root of a problem. Mind Tools

Marx C. (July 20th, 2010). The PESTLE Strategic Marketing Analysis Technique: Compiling the list of External Factors. Yahoo! Voices

Nordmeyer B. (2010). Advantages and Disadvantages of SWOT Analysis. Houston Chronicle.

Paul C (2013). Apple top US smartphone market with Samsung second. TechBeat.

Sondalini M. (2008). Understanding how to use the 5 Whys for Root Cause Analysis. Lifetime Readability Solutions

Wayne (December 18th, 2012). Samsung displaces Nokia as Top Cellphone Brand in 2012 and takes decisive Smartphone lead over Apple.  HIS Supplier

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