The analysis is an important procedure performed to understand a complex topic by dividing it into small divisions (The Economic Times, 2018). This report is being prepared in order to analyze a case study based on Tesla Motors which is based in California. External and Internal Environment analysis will be discussed to identify the factors that influence the performance of the company. Along with this, a strategy will be suggested and it’s action plan that can help the company in increasing its profit in the future.
Tesla Company was founded in 2013 with the specialization in the manufacturing of solar panel, lithium-ion battery energy storage energy storage, residential photovoltaic panels, and electric automotive (Tesla, 2018). Headquarter of the company is based in Palo Alto, California. The additional products which are included in the product list of the company are Power pack Batteries and Tesla Power wall, solar roof tiles and solar panels (Vynakov, Savolova & Skrynnyk, 2016).
External Environment
Technological Trends- Tech is in the root of the business plan of Tesla because it is counted in the list of the inventors of an electric vehicle. It has created an integrated, comprehensive, proprietary electric powertrain technology including Lithium-ion cells. Along with this, it involves high-energy density and unique chemistry, a compact set of software-controlled power electronics, an actively cooled battery pack, and a high RPM single-gear box (Kissinger, 2017).
Source [Tesla Motors Company Overview, summer 2011]
Demographic Trends- Automakers who acquire Tesla Electric vehicle powertrain components and individuals buying Tesla’s Electronic Vehicle are included in the list of the company’s customer list. In the automotive market, there are various options for the individual customers. Whereas a pure high-performance electric sports car like the Roadster has no comparable models. The innovative models like Model X or Model S possess a large number of potential competitors which comprise traditional gasoline-powered and hybrids vehicles (Hitt, Hoskisson & Ireland, 2013).
Characteristics of Owners by Type
Source [Melinda, 2017]
Economic Trends- Economic factors include economic growth in the industries of alternative energy. The cost of utilizing the cars increases because of the increase in the prices of fuel in the short period. Therefore, the demand for more competent cars has increased. The retrieval of inflation and GDP rate in many advanced countries has a major influence on the purchasing power of the consumer (The Sphere Press, 2017).
Political/ Legal Trends- Public issues in the changing global climate is possible to cause-related variations in the legal and political trends, like government mandates to considerably reduce the emissions of greenhouse gas. Many countries have previously passed a carbon tax, which will offer Electric Vehicles of Tesla a competitive advantage for the fossil-fuel–powered automobiles (Tesla Motors, 2018).
Social-Cultural Trends- Tesla’s focus and innovation are determined by high concern towards the environment. In precise, the impending threat of changes in the global climate has substantial implications for the increasing acceptance of company’s products. The company considers that customers who are environmentally aware and knowledgeable will start taking more interest in the products which are environment-friendly (Pratap, 2017).
A major part of making a different type of company has been the attention on constructing a corporate culture that highlights the vision and values adopted by the management team. The culture Tesla attempts to make begins from kind of workforce it seeks to appoint.
Global Trends- Global changes in the customer demographics are likely to raise the demand for the vehicles which are emission-neutral. Global growth of population, specifically in China and India, along with the economic development has raised the worldwide automobiles demand.
Global economic trends mostly includes changes in the free trade agreements and rates of currency exchange, while presently it is not of major concern to the Tesla Motors, but it may define how the company enlarges its sales and operation in Asia, Europe, and in other countries in the future.
Physical Environment Trends- Tesla Motors always fulfill its corporate social responsibility by creating different strategies depending on the business nature. For example, the electric automobiles of the company are seen as the answer to all the negative effects of the cars that make use of internal combustion engines (Greenspan, 2017).
Tesla Motor’s Five Forces Analysis
Competitive rivalry
Tesla Motors functions in an extremely competitive market. In this matter, the external factor’s forces are accountable for the competitive rivalry’s strong force which is as follows:
There are few firms which are functioning in the market of automotive. This factor decreases the effect of competition in Tesla. However, these types of firms are aggressive in the promotion and innovation of their products. This increases the effect of competition on Tesla (Kissinger, 2017).
Bargaining Power of Customers
The customers of the company are considered as the direct factor that defines the sales revenues of the company. The low switching cost decreases the barriers to the purchasing tendency of the Tesla customer from other providers. On the other hand, the accessibility of the substitutes is very limited which limits the bargaining power of the customers against Tesla.
Bargaining Power of Suppliers
The partial business of Tesla is depending on its supplier’s reliability. Low level of forward integration is possessed by the suppliers of Tesla. This factor reflects the supplier’s limited control in the sales and distribution of their products.
Threats of Substitutes
Tesla Motor comes across with the impacts of substitutes on the environment of the automotive industry. The low cost of switching allow substitutes, like public conveyance, to effortlessly attract customers. But, the moderate obtainability of substitutes limits such influence of suppliers.
Threats of New Entrants
A new entry of firms in the market affects the environment of automotive industry, which defines the Tesla’s performance. The business of Tesla Motors is very difficult to compete with, specifically due to the high cost of the development of the brand. For Instance, Tesla has already made its strong brand image in the market which is difficult for new entrants to match.
The market of the automobile industry is highly competitive, and many auto manufacturers have a major existence in abroad and the United States. Companies like Daimler and Hyundai have still to field an Electric vehicle but have declared their plans to work in near future. Various manufacturers are presenting hybrid vehicles; however, these companies have entered late in the market of EV segment. Whereas pure players in the segment of EV such as Tesla are comparatively rare due to the significant need for the capital requirement. The range of products offered by these conventional auto manufacturers reflects that the competition will increase in this market segment in coming future.
SWOT Analysis
Strength- Tesla is famous for its innovation, particularly for establishing the first fully electronic sports cars in the world. This strategic factor is considered as company’s strength which permits the company to cultivate profitable and competitive products (Kissingger, 2018).
Weaknesses- The market share of Tesla is very limited. For instance, most of the revenue that company earns is from United State and it has a limited presence in the market of China.
Opportunity- In association with the Tesla’s weaknesses, it should focus on the opportunity of expanding global sales. This business opportunity depends on the countries substantial economic growth where the company has limited or no presence in the market. For instance, the revenue of the company can be increased by the expansion of the automotive market in Asia.
Threat- The competition among the automotive companies is high. This strategic factor gives a threat to Tesla, considering present efforts of various companies in creating EV. The changes in the prices of material are also a threat to the company.
Tesla Motors possess all the qualities required for becoming successful in the market in the years to come. But, as acknowledged in the SWOT analysis, there are numerous concerns that the company must focus in order to enhance its profitability and maintain its competitiveness.
Tesla Motors should go for inventing new product such as Electronic Bicycles. It has been recommended because nowadays people are more focused towards their health and even prefer driving bicycles.
Performing Market Research- At this stage company will perform market research and will identify the requirement of the customers.
Identifying Alternatives- At this stage, various alternatives will be recognized by the company which can provide best results.
Feasibility study- All the alternatives will be checked and the most appropriate option will be shortlisted which can be profitable and can be manufactured at less cost.
Making Decision- At this stage, one best alternative will be selected by the company i.e. electronic bicycles.
Implementing New Project- Implementation and manufacturing of the Electronic Bicycle will be done.
Conclusion
Tesla Motors is a well-known company in the automotive vehicle’s market which reflects that the above-suggested strategy of manufacturing Electronic bicycle will definitely help the company in increasing its market share and profit. Along with this, it will help the company in expanding its market in the various parts of the world.
References
Greenspan, R. (2017). Tesla Motors, Inc. Corporate Social Responsibility, Stakeholders. Retrieved from: https://panmore.com/tesla-motors-inc-stakeholders-corporate-social-responsibility
Hitt, M.A., Hoskisson, R.E., & Ireland, R.D. (2013). Strategic Management: Competitiveness and Globalisation. U.S: Cengage Learning.
Kissinger, D. (2017). Tesla Motors, Inc. PESTEL/PESTLE Analysis & Recommendations. Retrieved from: https://panmore.com/tesla-motors-inc-pestel-pestle-analysis-recommendations
Kissinger, D. (2017). Tesla Motors, Inc.’s Five Forces Analysis & Recommendations (Porter’s Model). Retrieved from: https://panmore.com/tesla-motors-inc-five-forces-analysis-recommendations-porters-model
Kissingger, D. (2018). Tesla Inc. SWOT Analysis & Recommendations. Retrieved from: https://panmore.com/tesla-motors-inc-swot-analysis-recommendations
Melinda, V. (2017). Tesla S/X/3 costs & demographic study. Retrieved from: https://model3ownersclub.com/threads/tesla-s-x-3-costs-demographic-study.2429/
Pratap, A. (2017). Tesla PESTEL/PESTLE Analysis. Retrieved from: https://www.cheshnotes.com/2017/10/tesla-pestelpestle-analysis/
Tesla Motors. (2018). Pestel And Vrine Analysis. Retrieved from: https://teslaresearchproject.weebly.com/internal-external-analysis.html
Tesla. (2018). About Tesla. Retrieved from: https://www.tesla.com/about
The Economic Times. (2018). Definition of ‘Analysis’. Retrieved from: https://economictimes.indiatimes.com/definition/analysis
The Sphere Press. (2017). TESLA Motors – External Analysis Using PESTLE – The SpherePress. Retrieved from: https://thespherepress.com/tesla-motors-external-analysis-pestle/
Vynakov, O.F., Savolova, E.V., & Skrynnyk, A.I. (2016). Modern Electric Cars Of Tesla Motors Company. Automation of technological and business-processes, 8(2), 9-18.
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