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Tesla Case Analysis

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Question 1

Tesla SWOT analysis

Strengths Weaknesses
  • The company’s model S is the best electric car in terms of performance as compared to its competitors.
  • Tesla’s Model S records the highest safety mark in a test conducted on the available electric cars.
  • In comparison to the other companies, Tesla has the fastest superchargers, and the charging stations are distributed all over in the US, thus a viable choice for clients.
  • Tesla corporation has been able to create market awareness of its electric cars without even making any adverts and achieved continuously sales growth.
  • Tesla’s showroom display is very capitative as it resembles Apple, thus winning many customers.
  • Extremely high retailing cost for model S car.
  • Ineffective batteries in relation to the production costs and mileage aspects.
  • Lack of a wide range of varieties to satisfy all the customers’ taste as model S is the only available make.
  • Lack of adequate resources to support mass production and meet the market demand. The competitors have colossal capital and produce in large volumes.
  • The shipping costs incurred by the firm in delivering cars to other parts of the world.
Opportunities Threats
  • The prices of gasoline keep escalating, and the commodity has become scarce.
  • The mounting demand for electric cars.
  • Panasonic is enthusiastic about signing a pact with Tesla to be their key supplier of batteries, which has a chance of diminishing production costs.
  • The vivid technological advancement in the solar power field.
  • China promotes consumers to acquire electric cars to reduce toxic emissions to the air.
  • Electric cars are competing with gasoline-powered vehicles, which have proved to be reliable for many years.
  • Some countries have restricted the sale of Tesla cars via showrooms.
  • Nissan, which is a well-established company, is ahead of Tesla in the development of electric cars.
  • The public is yet to conventionalize the concept of electric cars. There is a notion that electric vehicles take much time to charge, and the charge is depleted after a few mileages.

The firm can thrive in the industry and endure success in the venture in the future. Concerning the SWOT evaluation, there are notable aspects that require to be addressed for the company to guarantee the business to move in the desired direction and advance its profits and competitive capacity. Inducing new plants in the high-latent developing nations can augment the firm’s growth and sustain the vision and mission objective as a step to enhancing its global base (Chen & Perez, 2018).

Tesla Case Analysis

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The company needs to capitalize on viable openings in the market setup. From the evaluation, we realize that gasoline turns out to be more expensive and scarce day by day. The issue has enhanced the demand for electric cars. Tesla corporation needs to capitalize fully on this chance and upsurge their production rates to match the looming market demand. If the company fails to institute the decisions on time, it might be unable to deliver the cars on time and hence result in poor customer service. Because of this, it is of incredible importance and urgency for Tesla to invest in a new factory as North America is still Tesla’s biggest market, the plant should stay there. Unit sales of the Model S in 2013 were 22,477 compared to 2,650 just a year earlier. The current factory in Fremont, California, will not support this type of growth in the long run. Tesla needs to increase production if they are ever to reach their goal of selling a higher volume of vehicles at a lower price. Since demand will only continue to grow, there is no better time to act than the present (Narins, 2017).

The company needs to dismantle the notion of ascertained electric cars. Tesla is losing many potential customers as lacking full acquaintance on electric vehicles who instead believe in the dubious misconceptions on a performance basis. The company should consider intensifying the amount of charging stations worldwide. The step will clear customers to worry about travelling for long distances as they will be guaranteed a charging station.

Also, in terms of the batteries, Tesla must urge Panasonic to sign a deal to become the primary battery provider. If Elon Musk does decide to build another factory to up the production of vehicles, he will also need to up the production of batteries. Signing a contract with Panasonic and in the future with the “Gigafactory” will undoubtedly help their cause (Narins, 2017). Early projections show that the Gigafactory could cut production costs of the battery by 30% (Gigafactory), which is enormous, considering the battery is the most expensive part.

For a new factory, China is another perfect place. I assume this because it was announced by the Chinese government that it would subsidise buyers of electric cars to counteract poor air quality. This means there will already be a strong demand in China for Tesla. The factory in China also ensures that Tesla will be able to avoid costs and tariffs for shipping. Although this shouldn’t be too high on Musk’s priority list yet, he should consider the potential growth of the company.

To conclude, to increase the output of automobiles and batteries while also investing in charging stations, Elon Musk can act quickly to reassure customers that electric cars are just as practical as traditional ones. If he can do this, the number of Tesla vehicles being sold will increase efficiently and the price of these vehicles will be reduced. There is no reason to stop them from winning a substantial market share in the highly competitive automotive industry in view of the nature of the product Tesla provides (Chen & Perez, 2018).

Paying attention to the SWOT analysis, the firm needs to focus on cultivating its business growth, competitiveness levels, and development to prevent being outfaced by the competitors in the market. The business needs to respond to the aspects hindering its operations from guaranteeing its future existence in the markets. Designing superior quality products and gaining tangible market share are some of the options that will assure the venture high profits and competitiveness.

Question 2

Concerning Tesla’s coalition with Mercedes, it leads to vulnerability for a probable pitfall on the firm’s market share grasp. The entry of Mercedes to the pact solidifies Tesla’s latent policy.

Question 3

Tesla incorporation employs the related diversification considering that they venture into a new sector that is interrelated and possesses essential resemblances with the corporate’s existing ventures. Tesla experiences the corporate advantage as electric car venture is lucrative and promises excellent profits to the firm.

Question 4

Paying attention to vertical integration, the company employs the forward integration technique, which has the upper hand to get the previous clients to acquire their products. The forward integration is advantageous as it augments the quality of supplies, reduces the costs incurred from abolished market transaction charges, enhances the harmonization in the supply chain, grants a bigger market share harmonization in the supply chain, and grants a more significant market share. On the other hand, the forward integration is disadvantageous in that it intensifies the upsurge in higher investments and bureaucracy ensuing to diminished flexibility (Wang, Wan, & Yiu, 2019). Additionally, it results in a higher possibility for legal consequence as an outcome of size. Ultimately, the proprietorship of distribution and supply channels may lead to the low quality of products.

Question 5

The part of the company’s value chain outsources makes strategic sense because when the firm insources the elements, they are most likely to reduce the costs and comprehend the right insource-outsource interchanges that require be made to achieve their sparing upshots.

Question 6

The company’s marketing strategy is usually based on the focus differentiated strategy. In the case, it is evident that the firm concentrates on lowering their vehicle costs to entice the clients bearing in mind the costs incurred in manufacturing their batteries. But in the long run, the competitive approach used visualizes the differentiated strategy. The differentiated strategy entangles intending on a narrow buyer portion and outdoing the competitors by providing niche members modified traits that meet their preferences and necessities better than competitors’ products (Thomas & Elicia, 2019). From the strategy description, we can ascertain that the Tesla corporation employs the differentiated focus technique.

Question 7

The crucial aspects of Tesla culture are the nonexistence of bureaucracy, determined innovations to retort the market forecasts, and observing the first principles during the accomplishment of duties. Elon Musk could face challenges due to the rapid changes in technology. In today’s business ventures, it’s ethical to strive and remain at par with technology trends to survive in the fluctuating markets. Elon might be required to train his personnel further to guarantee innovativeness, which may escalate the production costs.

 References;

  • Chen, Y., & Perez, Y. (2018). Business model design: lessons learned from Tesla Motors. In Towards a Sustainable Economy (pp. 53-69). Springer, Cham.
  • Narins, T. P. (2017). The battery business: Lithium availability and the growth of the global electric car industry. The Extractive Industries and Society, 4(2), 321-328.
  • Thomas, V. J., & Maine, E. (2019). Market entry strategies for electric vehicle start-ups in the automotive industry–Lessons from Tesla Motors. Journal of Cleaner Production, 235, 653-663.
  • Wang, X. A., Wan, W. P., & Yiu, D. W. (2019). Product diversification strategy, business group affiliation, and IPO underpricing: A study of C hinese firms. Strategic Entrepreneurship Journal, 13(2), 179-198.

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