Discuss about the Critical Evaluation Of Tesla`S Competitive Environment.
Tesla Motors is a motor vehicle manufacturing company formed in the year 2003. The company specializes in the designing and manufacturing of electric vehicles. Tesla is a silicon valley based company that was founded in the year 2003. It designs, manufactures and sells zero-emission electric cars and powertrain parts. The company patents and sells the powertrains to other vehicle manufacturers. The aim of the company is to create a compelling car company for the 21st century. The mission of the company is to build and sell electric vehicles, sell powertrains to other car makers and to act as a role model to others in the industry in designing electric vehicles (Botsman& Rogers, 2011). The report evaluates the competitive environment of Tesla and identifies its competitive environment. The internal environment of the company is also analyzed to determine the factors within the control of the company that has a direct impact on the company. The external environment of the company is analyzed using PESTEL analysis. The risks and future challenges that the company could face are also analyzed in the report.
Evaluation of Tesla`s competitive environment is important in order to identify the competitors in the industry. The analysis also helps in understanding the competitive advantage of the company and the factors that make it unique in the market. Some of Tesla key competitors include; Toyota, Volkswagen, Ford and General Motors.The jaguar I-Pace is very close to the Model X of Tesla. The Jaguar I-Pace has similar range and acceleration to the Model X. Jaguar I-Pace is also cheaper by approximately $ 10,000 compared to Model X. Other serious competitor brands include the Porche`s mission E- Cross Turismo concept. Porche is planning to introduce a new model of hybrid 911. This model of electric car is threatening all the competitors in this market due to its unique design and power.There are other small players in the market who are venturing into the market of design and manufacture of electric vehicles. The electric vehicle industry has very many players. This means that the market is very competitive and hence it is very important for companies in this industry to come up with strategies that will help the company compete effectively in this market.
Tesla has a competitive advantage in the electric vehicle market. Tesla is the market leader in the electric vehicle industry because it was the first company to venture into this segment of car technology. The competitive advantage of the company of Tesla is in the technology aspect. The company has the patent rights when it comes to the manufacture of powertrains components. This means that for any company to design and manufacture electric cars, it has to depend on Tesla technology (Doeden, 2015). The other car makers pay a significant license fee to Tesla in order in order to use its technology.Tesla also posses the competitive advantage of being the market leader in this niche market. It was the first company to venture into the electric car market and therefore it has the advantage of a great wealth of resources as well as experience exceeding fifteen years unlike many of its competitors.
Tesla has several core competencies that help the company to gain competitive advantage. Capabilities in strategic management can be defined as the unique factors that a company has and which are important in helping the company gain competitive advantage.Tesla`s core competencies are it`s manufacturing and innovation abilities.The company has invented many different types of electric car parts which are crucial in manufacturing the electric car with zero emission (Frynas, 2015). The fact that the company has the fast mover advantage gives it an edge over its competitors in this industry. The company is the only manufacturer of powertrains which are used in the manufacture of electric vehicles. All the companies interested in manufacturing electric vehicles, therefore, have to buy the technology from Tesla. The other core competence of Tesla is licensing its drive propulsion technology and packaged battery system. This helps Tesla Motors earn a substantial amount of money from licensing the technology and hence offering the company an advantage compared to other competitors in the market (Holland & Lam, 2014). The many patents possessed by the company is a core competence for Tesla and it helps the company greatly in becoming the market leader in the design and manufacturing of electric vehicles. Good engineering and technology research has helped the company to always be ahead of its competitors since it designs innovative technology which is new in the market and hence attracting consumers.Tesla has strong relations with venture capitalists who have contributed large amounts of capital which has been instrumental in the growth of the company. The company has received in excess of $100 million in funding from various investors (Fleisher, &Bensoussan, 2015). The bright future of the company has encouraged investors to continue trooping in for a share of the companies` stocks. Tesla has weaknesses which can impact on the performance of the company in future. one of these weaknesses is that the company is not a popular brand yet among the general public. This means that the sales volumes of the company are limited and hence limiting the revenues that the company generates from sales. In addition to this, Tesla does not enjoy economies of scale. This is because the company is small in size compared to its peers. The companies` production capacity is limited and hence it cannot capitalize on economies of scale to reduce costs of production. Tesla experiences difficulties in keeping up with the supplies when the demand for car parts increases. This causes delays and inconvenience to customers and hence destroying the brand of the company.
The external environment of Tesla is analyzed using PESTEL analysis technique.
The political factors that affect the operations of Tesla include the government incentives for electric automobiles. The government has injected a substantial amount of resources both directly and indirectly in order to support the electric car industry.The aim of the government is to promote clean vehicles with little emissions in order to reduce the effect that vehicles have on the environment. This is an opportunity that the company should utilize in order to grow and improve sales. There are also expanding free trade agreements that the company should utilize to achieve higher sales in other countries where it has an opportunity to export (Whitney, 2016). Another political factor that has an influence on the Tesla is that the political environment is stable and hence a perfect opportunity to do business.
The cost of manufacturing electric car batteries has gone down. This is perfect for Tesla since the batteries will become more affordable and the sales will increase and hence increasing the revenues of the company. The cost of renewable energy is going down because of various government subsidies which have lowered the costs and hence making renewable energy products more affordable(Cadle, Paul& Turner, 2010).The economy of the country is growing at an impressive rate and hence the companies` sales should improve by taking advantage of the increase in disposable income among the citizens.
Most of the people in developed nations are appreciating the need for low carbon emissions. The population is, therefore, more sensitive to the environmental impact of whatever they consume. Due to this social factor, electric cars have become increasingly popular and therefore there exists a perfect opportunity for Tesla to take advantage (Marmol, Feys&Probert, 2015). The developing markets have also experienced a wave of improved income distribution and hence offering more markets for the company to sell its products.
The high rate of technological change in the industry offers both an opportunity and threat to the company. The rate of technological advancement has increased automation of electric vehicles and hence offering consumers increased efficiency.
Tesla is one of the companies that designs and manufactures vehicles that do not pollute the environment. The vision of the company is to manufacture a car with zero emission rate. The rising standards of electronic waste disposal may bring about a concern on disposing parts of the vehicles when they unusable (Tansel, 2016).
The business strategy of Tesla is to focus on design and manufacture of high quality and high-performance Electric vehicles. The focus strategy has various advantages to the company. By focusing on high-quality electric vehicles. The company will be able to establish itself as a premium recognizable brand. The company will, therefore, be able to secure a niche market and sell products at a premium price. The focus strategy will also help the company to specialize and improve expertise and hence offer customers high-quality products(Gandellini, Pezzi&Venanzi, 2012). The focus strategy also enables a company to focus on offering high-quality services after they have bought the product.
The risk of focus strategy is that it can limit the growth strategy of a firm and hence limiting its size. This will, therefore, mean a small market share and lower revenues. There is also a huge risk that the niche may disappear and be taken by a competitor and hence the company may cease to exist in future. Tesla also risks reducing its revenue base because the strategy limits revenue streams and hence increased the risk for the business.
Tesla faces a challenge of increasing its production capacity. The current production capacity of the company is very low hence the company takes only a limited number of orders per year. This limits the ability of the company to take advantage of economies of scale which could reduce costs for the company (Coste-Maniere, 2012). The company, therefore, faces a challenge of growing and increasing in size in order to become more competitive.
Tesla faces a challenge of overcoming competition in future. Most car manufacturing companies are entering electric vehicle manufacturing market. Some of the companies are such as Porche, Jaguar, Toyota, and Hybrid are manufacturing electric vehicles that offer stiff competition to Tesla (Batty, 2016). The company, therefore, faces the challenge of overcoming competition in order to remain the market leader in the EV segment.
Tesla should increase its product portfolio. This will go a long way improving the market in increasing Tesla`s revenue stream and hence improve the companies` profitability.
Tesla should seek more funding in order to increase its production capacity. This will help the company to serve a wider market and to improve its market share in the vehicle manufacturing industry(Baines Fill & Page, 2010).
Tesla should take advantage of free trade agreements between the USA and other countries to increase its market presence globally. The company should also take advantage of the subsidies to increase production and increase its presence in the market.
Conclusion
The report analyzes and discusses the competitive environment of Tesla in order to identify Tesla competitors and the level of competition in the market. Tesla`s main competitors include Porche Jaguar, Toyota, and Volkswagen. The competitive advantage of the company is its technology. The company has patented Electronic Vehicle technology which the company can take advantage. The report also analyzes the external environment of the company to determine the external factors that might affect the operations of the company. The focus strategy of the company helps the company to concentrate on specific products and hence selling products at a higher price than other competitors in the market. The risks and future challenges that the company might face are also discussed in the report.
References
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Fleisher, C. S., &Bensoussan, B. E. (2015).Business And Competitive Analysis: Effective Application Of New And Classic Methods.
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Tansel, A. K. (2016). Marketing Report On “Tesla Motors” Marketing Audit, Segmentation & Targeting Analysis And Analysis Of Product/Brand Strategy And Positioning. Http://Nbn-Resolving.De/Urn:Nbn:De:101:1-2017021114338.
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