Tesla Inc.TSLA
Introduction
In this paper, we have chosen to analyze Tesla Inc., which is American clean energy and electric vehicle company, and its headquarter is in Palo Alto, California. The company was initially formed to develop electric sports cars. The electric car the company produced was Roadster. It later branched out in the production of solar energy products, and in 2016 it was able to buy SolarCity, a solar panel company.
Economic characteristic
The majority of the firms found in the automotive industry usually experience a different kind of external; from the Tesla company analysis, we can see that it can grow despite the number of challenges it is experiencing. Tesla must, therefore, ensure that it addresses these external factors according to the intensity of the forces, which has been seen to be impacting the overall business by conducting a five force factor analysis. They include strong force, which is a competition or competitive rivalry, a moderate force, which is customers bargaining power, a moderate force which is also suppliers bargaining power, another moderate force which is threats of having substitutes or even substitute products, and lastly, a weak force which is new entrants or entry threats.
In the first factor of Porter’s five model forces, we will look at Tesla’s strong force that involves competitive rivalry with Tesla or competition. Since Tesla usually operates in a highly competitive market, the aspect of five forces analysis tries to outline the kind of influence competition has on energy and automotive industry solution (Akakpo et al., 2019). The firms operating in the automotive industry are small in number (weak force), so in the framework of porters five forces analysis, this kind of external factor usually limits the kind of effect competition has on a firm like Tesla. Even though the firms are small in number, they are aggressively innovative and knows how to promote their products (strong force). However, customers’ low impediments to buying cars from a different manufacturer (considered a low cost of switching) usually strengthen the competition force.
The customers’ bargaining power in Tesla, which is considered a moderate force, has some level of influence; this is because they are normally the factor that directly determines sales revenue. The low switching cost, which is a strong force, usually reduces the number of barriers customers of Tesla have to buy a car from another manufacturer; the moderate substitute availability, which is a moderate force, limit the amount of bargaining power customers of Tesla have. However, the low purchase volume, which is a weak force where a customer keeps or buys a few cars, reduces the influence of customers on the company. The supplier’s bargaining power, which is a moderate force, is important to analyze since the firm depends highly on the customer’s reliability. There is a low level of forwarding integration by the suppliers, where they have a control that is limited in product sales and distribution.
The suppliers are moderately sized, making them have a limited influence in the automotive industry; the other external factor is moderate supply level (moderate force), thereby empowering the suppliers the power to affect the company in a limited capacity. In threats of substitutes or substitution analysis (moderate force), a substitute is enabled by low switching costs, e.g., public transportation can easily attract customers, hence imposing a strong force against Tesla. Suppliers’ influence is limited by substitute moderate availability, i.e., customers only have limited and moderate substitute options in the market. Substitute only have a moderate performance to be able to satisfy the practical need of the customer. The last external factor force is a new entry or entrant threat (weak force); it difficult to compete with a company like Tesla because of the brand development high cost; the automotive industry usually has a high cost of doing business hence imposing a lot of barriers for new companies (Stringham et al., 2015). The players already existing in the industry mostly benefit from economies of scale, which is difficult to achieve for new entrants.
Tesla Strategy
In analyzing Tesla’s strategic framework, we will examine its SWOT analysis where the internal strategic framework will involve strengths and weaknesses, and the external strategic framework will involve opportunities and threats.
Strength analysis
The company’s strong brand has supported it in expanding on a global market scale. It is also known for its high innovation rate in which it introduced the world’s first electric sports car. Its brand has been a strong symbol of renewable energy solutions and innovation; the company has a production process that is strongly controlled due to vertical integration (Vynakov et al., 2016).
Weakness analysis
The company has suffered a limited presence in the market, i.e., most of the revenue the company generates is from the U.S and has a small presence in China as well as other countries that are developing. It also has a limited supply chain, hence preventing it from expanding rapidly. The prices of their product are high compared to other cars, especially those with internal combusted engines. Due to that, it prevents it from growing its market share and customer base.
Opportunity analysis
Tesla has a chance of global expansion sales; this is because of the economic growth of countries with a small market presence; there is also an opportunity for a global expansion of the supply chain. Also, Tesla can improve its business performance through product diversification, where it established new businesses to reduce the risk of business exposure in the market.
Threat analysis
Aggressive competition in the automotive industry is one of the threats the company faces; there is also the fluctuation of price materials, i.e., lithium increasing cost a material the company uses to store energy products. Dealership regulation is another threat; the company likes selling its products directly to its customers. Still, it’s illegal in states such as Texas and Virginia to sell a product directly without a dealership.
References
Akakpo, A., Gyasi, E. A., Oduro, B., & Akpabot, S. (2019). Foresight, organization policies and management strategies in electric vehicle technology advances at Tesla. In Futures Thinking and Organizational Policy (pp. 57-69). Palgrave Macmillan, Cham.
Stringham, E. P., Miller, J. K., & Clark, J. R. (2015). Overcoming barriers to entry in an established industry: Tesla Motors. California Management Review, 57(4), 85-103.
Vynakov, O. F., Savolova, E. V., & Skrynnyk, A. I. (2016). Modern electric cars of Tesla Motors company. Автоматизація технологічних і бізнес-процесів, (8,№ 2), 9-18.