Executive Summary
The report assesses Tesla’s current condition, including its mission, vision, objectives, and strategy; it offers SWOT and Porter’s Five Forces analyses to examine the internal and external environments and addresses competitive advantage to provide recommendations for strategy enhancement. Essentially, sustainability is key to Tesla’s corporate beliefs and mission. The company’s goal statement is to help the world make the transition to sustainable energy. The firm aims to build highly efficient and safe mass-market battery electric vehicles (EVs). Tesla’s approach is centered on a single goal: to bring breakthrough technology to market. The organization has also attempted to flatten its hierarchical structures to strengthen communication.
Regarding SWOT analysis, Tesla’s strengths include brand awareness, improved performance, advanced battery technology, and an ecologically friendly business concept. Automobiles are overpriced, charging takes time, and there are fewer charging points and superchargers, considering weaknesses. More EV research, rising conventional fuel prices, additional government subsidies and tax savings, and growing global warming awareness lead to more opportunities. Threats include fierce rivalry, emerging new EV companies, and diverse renewable energy sources and hybrid technologies. According to Porter’s 5 Forces analysis, Tesla should pay attention to the increasing number of rivals, particularly new entrants.
The firm’s competitive advantage is based on its revolutionary technology, yet, Tesla’s dominance looks to be threatened by expanding competition. Current competitors have actively focused on manufacturing new types of EVs at reasonable prices. The recommendations include developing new Tesla models based on market trends and consumer preferences over the next two years and modifying its vehicles to fit current visual trends. Furthermore, Tesla should aim for a recycling technology that would make the battery wholly recyclable and environmentally safe. The firm may produce portable charging equipment the following year to boost client loyalty and establish a lasting competitive edge. Global sales, market share, and market penetration will determine success.
Current State of the Organization
Notably, sustainability is at the heart of Tesla’s values and purpose as a corporation. Climate change is reaching alarming proportions throughout the world, owing primarily to emissions from the usage of fossil fuels for electricity production and transportation (Impact report, 2020). The world cannot cut CO2 emissions until energy consumption is addressed. Thus, Tesla’s mission statement is to facilitate the global transition to sustainable energy (About us, n.d.). In order to achieve this purpose, the firm creates products that replace some of the world’s worst pollutants.
The company significantly contributes to a world powered by solar energy and electric automobiles. Perkins & Murmann (2018) argue that since its inception in 2003, Tesla’s vision has been to produce mass-market battery electric vehicles (EVs). The compelling customer value proposition includes long-range and recharging flexibility, energy efficiency, low cost of ownership, and high performance without sacrificing design or functionality (Perkins & Murmann, 2018). One of the objectives is to ensure that Tesla’s automobiles are the safest on the market (About us, n.d.). Following safety, the objective is to make every Tesla the most enjoyable vehicle a person could own. The company introduces technological features from gaming to movies that make driving more fun. Furthermore, through over-the-air software upgrades, Tesla constantly delivers new features at the touch of a button.
The organization has devised an intriguing multi-pronged strategy for substantially altering an industry. Furr and Dyer (2020) claim that one must first distinguish between its two fundamental pillars to comprehend Tesla’s approach: headline-grabbing initiatives such as the unveiling of the Cybertruck and the Roadster 2.0, and the massive bets it is placing on its primary cars, the models S, X, 3, and Y (Furr & Dyer, 2020). These approaches have distinct goals: obtaining the resources to commercialize the concept versus actually monetizing the idea. Nevertheless, they work together to pursue a common goal: to bring innovative technology to market. The Tesla strategy is also centered on regular and meaningful interaction with staff, a strong safety culture, and clear career routes for all employees (Impact report, 2020). Moreover, the organization strongly emphasizes extremely competitive wage packages and concepts of diversity, equity, and inclusion incorporated into all phases of recruiting, promotion, and retention. In order to improve communication, Tesla has also attempted to flatten its hierarchical structures.
Internal & External Analysis
SWOT
Examining the strengths, weaknesses, opportunities, and threats is critical to enhancing the current strategy. Tesla’s strengths include brand recognition, increased performance, advanced battery technology, and an environmentally beneficial business concept (Kancherla & Daim, 2018). Tesla’s primary advantages are its cutting-edge scientific research team and exceptional technologies in the EV sector. Kancherla and Daim (2018) acknowledge that the company’s breakthrough battery and fast-evolving innovations address a power battery gap and build a solid foundation for Tesla’s product differentiation. Regarding the weaknesses, vehicles are expensive, charging takes longer, and there are fewer charging facilities and supercharging stations. Kancherla and Daim (2018) explain that one of the electric car business’s issues is not being able to travel as far as an IC vehicle while still having the same fuel convenience. According to current technology, portable charging equipment can be employed to charge an electric automobile at any time in a 240-volt socket outlet (Kancherla & Daim, 2018). Consequently, Tesla could produce or partner with companies like TurboCord to make it easier for automobiles to charge.
More research in EV technology, rising conventional fuel prices, more government incentives and tax cuts, and growing awareness about global warming all contribute to more excellent opportunities. For instance, The US Environmental Agency intends to drastically cut carbon emissions by 2025, which includes supporting the use of alternative clean energy vehicles (Kancherla & Daim, 2018). It also entails providing incentives for the development of modern transportation technology. Additionally, consumers in emerging markets are becoming more conscious of their carbon footprint.
The threats are aggressive competition, the advent of new startups in the EV business, and various renewable energy sources and hybrid energy technologies. The corporation is under significant pressure from competitors and new entrants. Kancherla and Daim (2018) emphasize that Tesla’s most prominent market threat is not electric automobiles but conventional vehicles. Thus, Tesla EV vehicles should have higher power and get more market share by producing family-friendly automobiles to overcome competition and become the industry pioneer.
Porter’s 5 Forces
Porter’s 5 Forces, incorporating competitive rivalry, the bargaining power of suppliers, the threat of new substitutes, the threat of new entrants, and the customer’s bargaining power, should be addressed. Tesla has a years-long great start in the EV battle, selling four electric car models before other manufacturers released their first, but competition is increasing by the day (Tucker, 2022). The Hyundai Ioniq 5, for illustration, was just named World Car of the Year for 2022. It offers an innovative approach, with distinctive aesthetics evocative of an 8-bit video game automobile and pixelated headlights (Tucker, 2022). Additionally, the car charges quicker because it employs an 800-volt layout compared to Tesla’s 400-volt arrangement, and it is considerably less costly/
Many firms are presently offering EVs benefit from existing market complementary assets, such as brand and delivery. According to the MIT SMR Strategy Forum (2022), they may provide higher-quality automobiles than Tesla, particularly in the luxury market. For instance, current data reveal that companies like BYD, BMW, and Mercedes-Benz outsold Tesla in Singapore during the year’s first half. Companies like Volkswagen and Ford have aggressively concentrated on producing new variations of EVs at reasonable price ranges (MIT SMR Strategy Forum, 2022). Their goal was to win over customers who may not have previously considered purchasing an electric vehicle.
There is also a significant threat of new entrants because the EV market continuously evolves. Although the coronavirus epidemic has hampered auto development and manufacturing, automakers’ intentions to launch electric vehicles remain unaffected. According to Consumer Reports (2022), dozens of all-electric vehicles are expected to hit the market by the end of 2024. Examples of new entrants are Cadillac Lyriq, Chevrolet Blazer EV, DeLorean Alpha 5, Fisker Ocean, Indi One, and Kia Niro, among others (Consumer Reports, 2022). From the standpoint of the overall car electrification process, if lithium battery advancement is slow, hydrogen fuel cell technology may be a substitute (Yang, 2022). Due to a narrow supply chain network, suppliers have strong bargaining power (Hadi, 2021). Buyers’ negotiating power is low since Tesla markets its products at the top end of the market with high prices.
Competitive Advantage
Tesla occupies a unique market position in that it offers not just automobiles but also technologies. Tesla is expected to maintain its competitive advantage in the field of innovation (MIT SRM Strategy Forum, 2022). Kancherla and Daim (2018) argue that the company dominates the EV market and manufactures electric vehicles that outperform other electric vehicles in luxury, high capacity, and range. Nevertheless, once a technological revolution is produced, there may be increased competition in the market (Kancharla & Daim, 2018). Being a forerunner in the electric vehicle sector is critical for Tesla’s future success. Tesla’s supremacy appears to be in danger from growing competition (Tucker, 2020). Tesla’s advantage in the field is rising despite having more competitors compared to the past years. Tesla vehicles accounted for seventy percent of EV sales during the first quarter of 2021 and seventy-five in the same time of 2022 (Tucker, 2022). Nonetheless, there is a high threat of new market entrants; thus, strategy improvements are needed.
Evaluation and Recommendations
The first aspect is to investigate whether the flattering organizational leadership is suitable for the company. Power disputes may destroy culture if positions are not clearly defined. The company’s CEO must be visible and skilled in detecting and directing employees through such a situation (Flat vs. hierarchical, n.d.). Current competition and new entrants pose a significant danger, according to SWOT and Porter’s 5 Forces analyses. Tesla should develop new models in the next two years based on market trends and consumer preferences so that the target audience perceives them as valuable enough to purchase. Tesla’s models fade into the background when contrasted with new energy vehicles on the market, such as the Hyundai Ioniq 5. The corporation may alter its vehicles to meet current visual trends. Customers’ messages should continue to emphasize the environmental benefits of EV use while also pushing new technology and unique designs. As a result, it is critical to analyze consumers’ demands and preferences in each target market regarding the design of Tesla’s vehicles.
Even though Tesla promotes itself as an environmentally friendly firm, it still uses lithium batteries, which are poisonous, combustible, and explosive. Tesla should consider lithium-free batteries for the future safety of its vehicles. Lithium is considered one of the most toxic and combustible components, causing environmental contamination; if lithium is not replaced with a different cathode, Tesla should strive for a recycling technique that may make the battery one hundred percent recyclable and ecologically safe (Kancherla & Daim, 2018). Moreover, there is also the issue of fewer charging stations and superchargers. For instance, in order to increase client loyalty and gain a sustainable competitive advantage, the corporation may develop portable charging equipment in the coming year.
Evaluation of Recommendations
In order to track the success of the current flat leadership structure, employees should provide monthly feedback, and depending on the results; adjustments should be introduced. When the company’s global sales and market share significantly grow, it will know it has met its marketing objectives. Market penetration is critical; it is defined as the firm’s portion of the market’s customers and might indicate if the company succeeds. Furthermore, Tesla may track monthly sales growth; it is also critical to use marketing indicators like the total number of conversions or website visitors who are interested in Tesla’s automobiles. Receiving feedback from current and potential customers may highlight areas for improvement and demonstrate whether the new EV models achieved success.
References
About us. (n.d.). Tesla. Web.
Consumer Reports. (2022). Hot, new electric cars that are coming soon. CR Consumer Reports. Web.
Flat vs. hierarchical. (n.d.). Indeed. Web.
Furr, N., & Dyer, J. (2020). Lessons from Tesla’s approach to innovation. Harvard Business Review. Web.
Hadi, L. (2021). Tesla: Porter’s five forces industry and competition analysis. Hivelr. Web.
Impact report. (2020). Tesla. Web.
Kancherla, Y. D., & Daim, T. U. (2018). Technology roadmap: A roadmap for Tesla. In: T. U. Daim, L. Chan, & J. Estep (Eds.), Infrastructure and technology management. Innovation, technology, and knowledge management (pp. 347-366). Springer, Cham.
MIT SRM Strategy Forum. (2022). Is Tesla’s era of dominance coming to an end? What experts say. MITSloan Management Review. Web.
Perkins, G., & Murmann, J. P. (2018). What does the success of tesla mean for the future dynamics in the global automobile sector? Management and Organization Review, 14(3), 471-480.
Tucker, S. (2022). Tesla still dominant, but electric car competition heats up. Kelley Blue Book. Web.
Yang, X. (2022). Research on Tesla’s market – Based on Porter’s Five Forces and Ratio Analysis Model. 2nd International Conference on Enterprise Management and Economic Development (ICEMED 2022) (pp. 773-777). Atlantis Press.