|Type of paper:||Case study|
The Porter's Five Forces Analysis
Porter's Five Forces Analysis presents the onset of a company's strategic analysis utilized in the assessment of a company's prospects when it comes to its industrial suitability. According to (Akpoyomare et al. 53) the analysis also unearths a reliable and innovative means of improving a company's profitability and the wellness of the industry at large. As a company, Tesla produces electric cars with its highest sales in the last 5 to 10 years ranging from 2500 to 3000 roadster coupes. According to the 2016 Consumer Reports, Tesla's Model S made over $2 Billion in car sales courtesy of its appeal to a larger market (Kachaner et al. 45).
Tesla has a dominant technology that exhibits rapid technological advancement which capitalizes on the rapid globalization of automotive products. The technology has featured computerization of vehicles that has barred several instances of accidents that occur on the roads. The electric cars have allowed automotive driving which improves the safety and the convenience of using cars. Additionally, the B2B platforms and other marketplaces have eased the mode of accessing opportunities to the ever competitive automotive industry hence leading to a reduction in costs and increasing efficiencies (Stringham et al. 85).
Tesla also faces certain levels of regulations which mostly point to the green movements. It is through these movements that introduction of critical programs such as the energy loans programs sprung up (Akpoyomare et al. 53). They have in turn piled pressure on the need to produce eco-friendly vehicles as a call for increased taxes to formulate other modes of doing green business. The costs of compliance have been huge bearing in mind the ''carbon tax'' and other policies have been enforced to protect the environment despite affecting the manufacture of related car appliances.
Threats from New Entrants
Ideally, Tesla faces a real challenge from new entrants in the market. As it entered the electric automotive sector in early 2000, Tesla faced challenges being a new entrant in the market with a workload of deep financial problems (Kachaner et al. 47). In this regard, the company required huge capital investments, building brands and another daunting task of distributing channels. However, if other manufacturers with immense economic power entered the market, the market remained relatively low. The inefficiency in the market would be explained by the incapability of the government to support the development of electric vehicles.
The Bargaining Powers of the Clientele Base
The overall bargaining power of the buyers presents one of the modest means of making sales. According to the company's 2014 financial report, Tesla relied on the closely-knit relationship between Toyota and Daimler. In this case, the partnership exuded a lot of importance to the company since making supplies to these companies proved to have higher shares of their profit and Tesla could not afford the pain of losing these prospects (Kachaner et al. 47). Consequently, it also assured the company of a considerably higher opportunity of selling their cars to clients even as the most government incentives accord prospective clients affordable tax deductions. It is from such programs that the company face a stimulation of demand for electric cars hence making the power to bargain even lower.
The Threat of Substitution
Substitutes present a significant amount of threat to the law as far as the automotive industry becomes a concern. The reason behind this undoing comes from the fact that there exist few choices when it comes to the substitution of cars. One of these many substitutes includes biking and walking that in most cases would bring inconveniences when encountering long distances (Nandakumar et al. 927). Additionally, having mass transportation by means such as buses, trains and even subways are suitable for both localized and travels over long distances. However, most cases present individuals to prefer having personal means of traveling due to their convenience in the end.
Presenting the Power of Bargaining from Suppliers
The power of bargaining from suppliers remains high because Tesla as the company is dependent on suppliers and therefore any problems that come with delivery and product disruption can distort a company's image (Akpoyomare, et al. 53). Even as the company thrives on building close relationships with suppliers such as Panasonic the company has insisted on formulating new developments that would later see the replacement of suppliers of its chassis with their own.
The Magnitude of Rivalry in the Automotive Industry
The automotive industry is facing a competitive era where most manufacturers have resorted to positioning themselves to acquire new buyers in the industry. For instance, Ford and Chevrolet have had a share of their experience in the ever expanding industry where the markets are attractive, and other companies such as BMW, Audi or even Volkswagen have made entry into this market with their lucrative plug-in models (Akpoyomare, et al. 55). Even as every company tries to create its niche, development of other alternatives when it comes to manufacturing of environmentally conscience cars would require innovativeness and sheer creativity.
One vital strategy to improve the company's firm's competitive position would fundamentally require a shift from the company's focus differentiation as a strategy to differentiation. The venture would provide a competitive edge over other competitors and rivals who value these customers as the similar prices. Therefore the shift will foster an increase in the market and possible profitability of the company in the end.
Value Chain Analysis
Performing a value chain analysis helps in determining a company's position regarding its strength and weaknesses. In such a scheme, the functions and activities in the market comprise primary activities and support activities which enhance production and support of primary activities respectively.
The primary activities at Tesla involve inbound logistics which mostly depict all manner of manufacturing of products done in-house (Akpoyomare et al. 55). On the other hand, Tesla has products and components which are produced and their respective deliveries made from other suppliers according to their schedules. The strategy limits the company wastage of time from the transit module and also when it comes to production and efficiency of the processes involved.
Since all cars are manufactured in North California, the Fremont factory is endowed with all the requirements when it comes to operations (Kachaner et al. 47). All the processes involving manufacturing are highly innovative and automated to the extent that the process alone can manufacture up to 80 cars on a daily basis with the help of the multi-function robots. Additionally, the process is also much sophisticated through numerous programs to ensure the facility also produces different car models.
Its distribution channels comprise Tesla's stores that spread over 20 countries. In all these stores, they serve to educate the clients on the benefits that exist when they use electric cars (Sharma et al. 18). They also have a competent customer service that ensures that any purchases made through online reservations must involve proper delivery addresses.
Sales and Marketing
Tesla never incurs any costs when it comes to traditional marketing. However, the company has developed a network of their stores that foster interaction between the company and the clientele and also encouraging brand awareness. In addition, the company also uses short web-based films customized to bring car buying experience to life through the marketing ad campaigns.
Tesla has numerous service centers in Europe, North America, and Asia. The construction of these stations and expansions, enhance the value that exists when it comes to their products.
Tesla has developed a cordial relationship with its strategic suppliers who include Panasonic, Sony to acquire significant benefits for each of the parties sharing information (Kachaner et al. 48). Other agreements fostering these relationships point to the replacement of suppliers with other alternative sources in an event where a given failure provides necessary components.
The company has adopted a horizontal structure for its organization while having the CEO as the decision making personality in the organization and also in charge of a delegation of duties to the rest of the staff members (Sharma et al. 25). Courtesy of its flat organizational structure, Tesla will be able to enhance their communications processes which also act as a build-up of an enhanced decision-making process and a cut down of delays and lag time which are synonymous with poorly built infrastructures.
Research and Development
It is a critical component of the company as it spells the levels of competitiveness whose heights no other automotive company in the industry can match. The company orients its focus on channeling its free money to Research and Development as a means of reducing costs, sustaining their brand and reputation (Stringham et al., 89). Additionally, they also work to enhance their innovativeness through adding elegance and improved designs to their products. A look at all the company's ideas shows their levels of commitment to patenting plans as a means of decreasing adverse threats of exploitation.
Human Resource and Management
Its fast growth in the local and global industry has necessitated the use of hiring firms for recruitment and employment of competent individuals to its workforce. In fostering a hospitable environment to its workers, Tesla has continued to provide its employees with a huge amount of shares that seek to motivate and even help the company to soar highly in the market (Sharma et al. 15). In the process, the workers have had to adopt proper strategies thus increasing the company's overall share prices.
Key Success Factors
The key success factors as far as the competition and clientele requirements become a concern seeks to identify and create a competitive advantage in the industry. From this standpoint, Tesla has several success factors such as the outsourcing of secondary elements which seek to aid in the keeping of low costs while enhancing technology (Stringham et al. 89). Another sector points to the strength of the Research and Development which has since created an efficient means of manufacturing and marketing of products. These factors have since overwhelmed competitors in this market as the clientele base increases. It is also noteworthy that Tesla has acquired a host of investors from different high-ranking companies. In turn, such ventures have necessitated the identification of opportunities worth exploiting for purposes of creating a competitive advantage over other players in the same field. An avenue identified for this gesture has the existence of a lean management system where employees work together in relatively tiny offices as a means of simplifying the processes of making decisions.
Porter's decision model in the light of sustaining competition among players in this industry comes with unforeseen challenges. For instance, this model remains favorable in cases where the company seeks to expand its frontiers. When the market faces a negative growth, there exist vast chances of a company such as Tesla with a single factory to be squeezed out of the competition. Due to the competitive nature and a sudden 'taste' for huge players in the market, the static nature of this model involves a lot of struggle t...
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