Tesla Motors’ External and Internal Environments

Subject: Company Analysis
Pages: 6
Words: 1543
Reading time:
6 min
Study level: Bachelor

Tesla Motors is a next-generation automotive company manufacturing cars powered by alternative energy sources, such as solar-powered, hybrid, and battery-powered vehicles. A pioneer in clean energy, Tesla Motors is backed by a solid research and development team and is considered the benchmark for green technology. Tesla creates its products at its Fremont, California plant to ensure a fully sustainable ecosystem. Tesla also makes other goods that help owners produce and store clean energy.

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General Environment

The company was founded in 2003 by engineers who wanted to break the conventional wisdom that driving electric vehicles requires compromise. It was also credited with several firsts and has prompted competitors to try out new designs in alternative energy vehicle technologies (Linxweiler, 2017). Tesla Motors produces cars in almost every category, such as sedans, hatchbacks, and convertibles. Tesla has always been associated with cutting-edge technology, and many companies have adopted solutions introduced by Tesla.

Monopoly

Tesla Motors targeted a very niche segment: electric and alternative energy vehicles. The strategy was to increase its share in the existing field and operate in a monopoly market. This intention helped the business achieve faster growth than most competitors (Linxweiler, 2017). In addition, the company acquired sufficient support from the government. Tesla has received USD 465 billion for energy management projects under the US Department of Energy (Linxweiler, 2017, p. 7). It was launched at the right time with Obama’s cleantech initiative, which received many benefits from the state.

Excellent Leadership and Team Spirit

The company’s CEO, Elon Musk, is passionate about engineering while being a smart salesperson. This combination makes him equally experienced in both manufacturing and the commercial side of the business. Behind the CEO, there is an enthusiastic team following the sustainable development course set by Musk (Somssich, 2017). Musk’s leadership style, which motivates and inspires his very self-directed team, is a factor in Tesla’s success.

Five Forces of Competition

Tesla is the first to commercially release an electric car meeting federal standards with a high-performance vehicle’s design. The five forces consist of rivalry between competitors, suppliers’ bargaining power, buyers’ bargaining power, the threat of substitutes, and the threat of new entrants (Somssich, 2017). For Tesla, maintaining competitiveness in the marketplace is a challenge as many companies start to embrace the idea of building hybrid cars.

Product Identity

This competitive advantage benefited Tesla Inc. as soon as they entered the market. Their initially high performance was conditional upon pioneering in supplying the industry with superior vehicles with lower maintenance and no tailpipe emissions than those powered by an internal combustion engine (Somssich, 2017). It became clear that the manufacturer’s philosophy has not changed since that time in the recent past. Currently, Tesla aims to reform vehicles and transportation in general while relying on government incentives (Somssich, 2017). Since the efforts have been uniform throughout its history and supported by innovations, it can be claimed that Tesla’s cars are still easily distinguishable.

Interaction with Other Corporations

Tesla is heavily dependent on Lotus for engineering components for its vehicles and Panasonic supplying batteries. Without these two companies, Tesla’s regular operations might be significantly disrupted. However, the recent experience has shown that the manufacturer can gradually shift from this mode to relying solely on its resources (Somssich, 2017). Since the mentioned components are critical, this move might be essential for further growth while maintaining Tesla’s integrity.

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Future Improvements

To remain competitive, Tesla needs to consider possible ways of development in its industry. The suggested improvements include elaborating new technologies faster than competitors and investing equally in producing essential components for the company’s vehicles. The former solution is feasible from the field’s rapid growth complemented by the need to ensure brand loyalty after the projected sales increase from 2.5% to 25% (Somssich, 2017, p. 9). In turn, the latter decision is critical for guaranteeing the lack of problems in terms of the regularity of operations.

Greatest External Threat

Threats are environmental factors that can negatively impact business growth. Their primary source is the developing technologies of other corporations engaged in automotive production. Tesla faces serious competition from various companies such as Ford, General Motors, Fiat Chrysler Automobiles, and even Google. The inflated ambitions of Tesla and its owner are a plus, but they are not always possible to translate into reality (Somssich, 2017). In 2019, Elon promised to launch the Tesla Network service by 2020 – 1 million robot taxis with autopilot (Somssich, 2017). These products are not created yet, so the company should declare the exact dates of the issue and other conditions for credibility. This strategy should incorporate critical concepts, such as the supply chain that should be readjusted and brand loyalty to ensure sufficient demand. The suggested course is justified by the two forces identified above and the need to eliminate the accompanying risks to be successful in the long run.

Greatest Opportunity

Currently, Tesla is the largest manufacturer of electric cars and eco-transport. This position gives it strong credibility as a tool to conquer markets. The company may not wait until 2030 and increase its sales earlier by entering new territories. The main consumers of electric cars are China, the USA, and European countries. But there is the rest of the world with big states like India, and entering such markets is an opportunity for development (Somssich, 2017). For example, in 2022, a new Tesla plant is opening in Germany, where they plan to produce a compact, inexpensive urban electric hatchback, likely called the Model 2.

Strengths and Weaknesses

The principal strength of Tesla is the flexibility of all operations, which allows it to timely readjust efforts for greater popularity and, consequently, profitability. This standpoint is confirmed by the fact that the company successfully shifted completely from services rendered by physical stores to online activity, thereby ensuring the convenience of purchases for customers (Somssich, 2017). This innovative business model is an excellent example supporting the claim and making the business customer-oriented in any possible aspect. Hence, creating additional value for customers is a process regularly reassessed and realigned concerning demand and changing market conditions. Moreover, by offering free software updates for all sold cars, Tesla provides the owners with an opportunity to keep their vehicles relevant.

Another reason why Tesla’s activity can be viewed as flexible is the capability of the business to occupy a leading position in drastically different markets. This intention, which is successfully addressed by the company when operating in the United States and China, serves as evidence of its expertise in surviving in the rapidly changing conditions. In addition, Tesla remains competitive regardless of the high degree of unpredictability of the marketplaces and continues to gradually increase the price of its products (Somssich, 2017). This initiative is effective since it is also performed with respect to the flexibility of decisions.

As for the weaknesses attributed to Tesla, the most significant factor is customers’ lack of awareness concerning the possibility of entirely replacing ordinary cars with electric vehicles without adversely affecting their experience. The preference for internal combustion engines remains significant in terms of buyers’ loyalty, as seen from the fact that in 2019, 42% of Americans surveyed still thought electric cars ran on gas (Mas, 2018, p. 11). The populations should be informed about the alternatives’ actual value to change this situation. However, one company’s efforts are insufficient for making a drastic change in this situation. In addition, uneven demand on Tesla’s vehicles when models 3 and Y are more popular than S and X cars complicates their image by confusing potential customers not used to innovations (Mas, 2018). Varying prices of these products do not resolve the challenge, which, alongside the population’s lack of knowledge, presents the principal obstacle to profitability.

Strategy

The strategy for further development of Tesla can be formulated as relying on the flexibility of operations for affecting potential customers’ attitudes. In practice, this initiative can be conducted by designing a campaign allowing people to receive first-hand experience and compare it with their previous knowledge of the products. This project will require physical facilities, and the experiment might be expensive; however, the benefits will outweigh the drawbacks in the long run. By adopting this innovative approach, Tesla will improve its brand image and increase sales.

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Resources, Capabilities, and Core Competencies

The analysis shows that Tesla’s resources include their partnerships with suppliers, online presence, and funds for continuous innovation. Their relevance to success is conditional upon the fact that the combination of these components is sufficient for readjusting to the changing market environment. Thus, cooperation facilitates the manufacturing process, the website provides adequate information about operations, and the financial aspect instills trust in the public. In turn, key capabilities are an orientation on customers and high quality of products and services. The former is essential for receiving feedback and readjusting efforts, whereas the latter guarantees brand loyalty. As for core competencies, they include the unique design of the cars and Musk’s original ideas. The former distinguishes Tesla from its competitors, and the latter means that the offer has no analogs.

Sources

Linxweiler, J. A. (2017). Sensitive analysis of Tesla Motors, Inc. GRIN Verlag.

Mas, S. M. (2018). Tesla Motors. SWOT analysis and corporate strategy. GRIN Verlag.

Somssich, E. (2017). Definition and market analysis if the Tesla Motors Model S. GRIN Verlag.