Competitive Analysis of Tesla

The key challenge facing Tesla is stiff competition from other brands and low gasoline prices, which may defeat their strategy of being the best manufacturer of electric vehicles.

Analysis

The pioneer company in manufacturing electric motor vehicles, which gained the top recognition in the global market.

The company’s major objective is to become the world’s best producer of environmentally-friendly vehicles.

Currently, they have the highest competitive advantage over other brands.

Has managed to boost production annually by about 20%.

Operates as two segments; automotive and energy generation and storage.

Over the past years, the company has attained a huge volume of sales minus traditional advertising and using low advertising costs.

The company has a major challenge, which may hinder its strategic objective. The challenge is a mounting competition from other vehicle brands producing electric vehicles.

Alternatives

Producing more varieties of vehicles for various purposes, for example, introducing luxury cars if they have not produced any models.

Analyzing the competitors’ strategies and using them against the competitors.

Recommendation

Introducing autonomous cars to beat the competition of electric cars.

Revamping the current features in the car models to increase their efficiency and make them more affordable.

Improving marketing strategies.

Implementation

Tesla is a global brand with the required resources, technological expertise, and time that they can use to put their idea of producing autonomous cars into practice. They should also improve their marketing strategies to target a wider audience and produce new models that are affordable, but with the same unique expert features. They should analyze the competitor companies’ marketing strategies and revamp them to gain a competitive advantage and convince more consumers to shift from gasoline vehicles to electric vehicles.

Problem Statement

The introduction of electrically-powered vehicles came as a breather and a viable solution to the environmental pollution caused by vehicles that operate using gasoline. Since its establishment, Tesla Company has been at the forefront of producing unrivaled high-end quality electric vehicles, and through the help of their dealers, the brand has been popularized around the world. The company operation is divided into two major parts; the segment handling manufacture of vehicles powered by electricity and the other segment handling production and storage of energy. Their objective of attaining global usage of environment-conserving energy has been fundamental towards the production of their three vehicle models. The company drives demand through continuously incorporating better features, such as the expansion of retail, software updates, and introducing new variants and models. All these are attained through the unmatched engineering and technological expertise. However, the company’s goal of becoming the world’s best manufacture in the automotive industry (Bowler, 2017) may not be achieved as fast as the company intends to due to the challenges faced. This article seeks to analyze the company’s strategies, strengths, weaknesses, challenges, and solutions to these challenges based on the competitors’ analysis too.

Analysis of Financial and Market Condition

Tesla Company currently holds a $359.6 closing price, which was realized at the close of 2017, and they have 1156 holders of common stock (Bowler, 2017). Their strategy to achieve recognition as the best manufacturers of non-gasoline powered vehicles is on its way to attainment because they had increased production volume by 20 percent per year. Besides, the company has managed to install the world’s largest battery that delivers electricity during prime hours to help in maintaining a reliable source of operating power for the electrical infrastructure. In 2017, the company managed to deliver a higher number of the three vehicle models and deploy a large quantity of energy storage products.

SWOT Analysis

Strengths: Sustainable innovation that has been embraced by Tesla is a vital strength of the company. All its products are linked to sustainability, since their primary aim is to help the world in its evolution towards an energy efficient world. The company has two models of excellent performance and high functionality vehicles that are entirely electric (Model X and Model S). Besides the vehicles, the company also makes energy storage systems, which are fitted with outstanding functionalities (Chen & Perez, 2017).

Global brand recognition due to the vast range of vehicles and other similar sustainability products is another significant strength of the outstanding service that has attracted attention internationally. The profound publicity that Tesla has gained is a crucial factor that helps in generating major sales, as well as being key leverage for the big company. The brand recognition alongside their effective marketing strategy has also played a key role in increasing vehicle sales internationally through its owned stores.

Tesla has incredible technological expertise, which has been applied to the engineering of their vehicles and systems. Most importantly is their engineering expertise in producing lightweight material for electric vehicles manufacture. Closely related to the technological expertise is the rapidly growing supercharger network, which has steered the adoption of its products.

Weaknesses: The costly price of vehicles that ranks them among the premium category vehicles is a significant weakness because they are unaffordable to the middle-class individuals, thus hampering the growth of Tesla’s sales.

Stiff competition is another primary weakness, which greatly paralyzes the company’s competitive strength because other companies such as Nissan and Ford are also making similar electric vehicles and their prices are lower compared to those of Tesla’s vehicles.

High costs of production and operation is another shortcoming, which considerably hampers the smooth operation of the company. Besides, there is limited presence, which is vital in growing the sales of the brand, since the sales network solely relies on the supercharger network.

Opportunities: Increasing demand for sustainable products, which keeps growing is a favor for Tesla and functions to its advantage as more people are shifting to environment-friendly transport options. Autonomous vehicles technology is a crucial opportunity, since most vehicle brands are striving to unleash their autonomous cars as soon as possible, Tesla included. Moreover, Tesla aspires to unleash a ride-sharing service to provide an alternative way of cheap transportation (Voigt, 2017).

The company is working towards minimizing its production and operation costs to produce affordable vehicle types that can favor middle-class consumers. The rising middle class has brought chief opportunities of growth for the global brands, hence the company is working towards satisfying the needs of middle-class consumers. Additionally, Tesla can focus on widening its sales and maintenance network in Asia to grow the brand faster because the vast middle-class consumer segment in Asia could bring more revenue for the company (Linxweiler, 2017).

Threats: The chief threat facing Tesla is competition from other environmental friendly brands, for example, Ford, as well as other luxury brands such as Audi. Tesla has a premium image, which it has maintained for several years and altering the image to introduce more affordable cars will take a long time.

The other threat stems out from the fact that the company has operations in many countries, which consequently puts it through various legal and political conventions in those markets, which typically, can be expensive affairs that eventually lead to increase in both production and operation costs.

Analysis of Challenges

The short-term strategy of the company was to double their sales in the coming years. The long-term aim was to become the largest and superior company producing electrically operated vehicles, thus maximizing the share of environmentally-friendly vehicles on the road and ending the regime of gasoline-powered vehicles entirely. However, this strategy could be defeated by key factors. The first is the tremendous fall of gasoline price in early 2016 that was predicted to remain that way for almost two years or more due to a predicted global oil glut (Gilson & Abbott, 2017). The fall in prices of gasoline reduced the number of consumers buying the galvanic vehicles and increased the purchase of gasoline-powered vehicles. Moreover, electrically-powered vehicles were more costly and were confined to travelling a specific number of miles after a charge.

The second challenge is formidable competition from the rapid growth of other electric-vehicle manufacturers such as Lexus, Audi, and Porsche. The company’s strategy is likely to be defeated because these companies also develop high-end, superior quality electric vehicles with engine configurations that would give a stiff head-on competition to the two vehicle models of Tesla. The rival companies introduced vehicles that would compete against the Model 3 and were still cruising towards improving its features to make it more desirable than Tesla’s Model 3.

Alternatives

Apart from the company’s top three models of vehicles, the other alternatives worth considering are analyzing the competitors’ marketing strategies and features then using them against the competitors. Tesla can introduce new functionality such as luxury cars, which they have never had.

Recommendation and Implementation

The major challenge facing the company emanates from the high competition from other companies that also manufacture environmentally-friendly cars and the dramatically reduced price of gasoline. Therefore, these challenges are likely to defeat the company’s strategic objective of being the world’s most renowned producer of electric vehicles. Nonetheless, being a big company that is well-established, Tesla should apply one important strategy that will enable them to beat the competition and maintain their competitive advantage. The key suggestion is to add more unique features to their existent models through innovations to stay above the competitors, then broaden its links around the world and use more innovative technologies to make certain that their vehicles are still superior to the other brands. This can be achieved by incorporating features such as unique seat arrangements that maximize space and offer comfort, especially for big cars. The other way of integrating the key strategy of improving vehicle features is to invent new superior quality models with excellent features, but the prices should be less costly compared to the existent vehicle models, so that they target the middle-class individuals. Additionally, Tesla should also work in executing its underway plan of introducing autonomous cars, which have unique features to beat the stiff competition, since they will sell their brand more and also maintain the superior quality of their brand by the new features. Incorporating new features also entails boosting the battery capacity or adding superior quality technology in the vehicle batteries to improve their ability to sustain more power for longer periods and consequently, increase the mileage that the vehicle can attain using a single charge. In conclusion, the recommended strategy is achievable because Tesla is a well-established company that has the skilled engineering and technology expertise required for implementation.

References

Bowler, P. J. (2017). Tesla: Inventor of the Electrical Age. https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&as_ylo=2014&q=bowler+p.j+Tesla%3A+inventor+of+the+electrical+age+2017&btnG=

Chen, Y., & Perez, Y. (2017). Business model design: lessons learned from Tesla Motors. https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&as_ylo=2014&q=chen+y+perez+y+2017+business+model+design+lessons+learned+from+tesla&btnG=

Gilson, S. C., & Abbott, S. (2017). Tesla Motors (a): Financing Growth. https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&as_ylo=2014&q=gilson+s.c+abbott+s+2017+tesla+motors+financing+growth&btnG=

Linxweiler, J. A. (2017). Sensitive Analysis of Tesla Motors, Inc. https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&as_ylo=2014&q=linxweiller+j+a+2017+sensitive+analysis+of+tesla+motors+inc&btnG=

Voigt, K. I., Buliga, O., & Michl, K. (2017). Driving Against the Tide: The Case of Tesla Motors. In Business Model Pioneers (pp. 187-198). Springer, Cham. https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&as_ylo=2014&q=voigt+k.i+buliga+o+michl+2017+driving+against+the+tide&btnG=