Tesla Motors Inc was established in 2003 with the aim of designing new generation electric cars to replace traditional gasoline powered vehicles (Mark, 2013). The Company was founded by Elon Musk and borrows its name from Nikola Tesla, a physicist and electrical engineer. Tesla’s products have swiftly become famous because of minimal environmental effects owing to limited emissions during the production process, high torque development, and the availability of energy used to power it. Tesla received international recognition in 2012 after the launch of the first premium electric sedan known as model S (Karamitsios, 2013). This paper discusses Tesla’s internal environment functioning, including the strengths and weaknesses of the company. It also analyzes its external environmental tendencies, including threats and opportunities, as well as its strategic efforts.
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Currently, there are more than 50,000 vehicles successfully operating on various roads in the world manufactured by Tesla. This makes it a winning competitor in the modern society, where sustainability is a key consideration factor in the course of development. Appendix 3 demonstrates the performance of Tesla against other leading competitors.
Tesla’s mission statement is to build the most compelling car company in the 21st century by moving the world towards the realization of the benefits and the profitability of the use of electric vehicles (Tesla, 2013).
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To enhance the safety of customers using Tesla’s products through the advantage of environmental sustainability and accelerate the world transition towards the utilization of electric cars by availing a full range of affordable electric means of transport (Tesla, 2013).
- Always doing our Best
- Respect for the Environment
- Respect and encouragement for people
- No forecast has ever been perfect but we keep trying
Since the moment of the company’s inception its objective is to create a brand vehicle that is highly efficient and environmental friendly.
External Environment: Opportunities and Threats
The external environment offers a number of opportunities for Tesla Inc. These chances involve a range of subsidy programs, significant environmental friendliness, increasing demand, as well as the opportunities for cost reduction.
The rising interest of governments in electric vehicles in many parts of the world is providing considerable cost advantages to various buyers in the multitude of countries. The governments, such as that of the United States, are offering a variety of subsidy programs for those citizens who are purchasing electric powered vehicles. Elsewhere, the governments have encouraged the purchase of these cars by exempting import duties and offering other forms of support. Ultimately, this has helped lower the price on purchasing Tesla products and hence stimulated the sales. Appendix 2 illustrates the subsequent upsurge of the sales rates for model S.
Environmental Friendliness and the Growing Interest
Electric powered vehicles with markedly decreased negative environmental effects are definitely a technology for the future. Its ecological friendliness, high efficiency and durability in exploitation are the factors that are helping to encourage the demand in various parts of the globe.
To numerous buyers, the electric powered vehicles are regarded as VIP vehicles. The pleasure and the convenience that come with the usage of these classic vehicles have helped to arouse some form of demand among the people in the middle and high class. Consequently, the demand on electric powered transport is raising daily, thus offering the opportunities for Tesla’s growth (Hardester, 2010)
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Improving Quality Control Technologies
The advancement in the technologies for the manufacture of these vehicles, including mass production, quality control processes and other aspects positively impacting the production course offer an opportunity for the cost reduction. The reduced cost of the cars powered with electricity will definitely be a crucial factor in stimulating the demand and hence will boost the expansion of the industry.
Since its establishment in 2003, the company has faced numerous threats, some of which are discussed in this section. These threats inhibit the ability of the company to achieve its objectives within the stipulated period of time.
High Cost of Purchase
Although the organization did manage to reach the decline in the expenses on the production of their cars, due to the technology used in the manufacture of these vehicles, there are extremely expensive as compared to traditional gasoline powered vehicles. For example, the recently launched model S is sold at approximately $100,000. This is about seven times higher than the average price of a gasoline powered car. This high cost makes the car unaffordable to middle class citizens in various companies and communities worldwide. Consequently, it has become difficult for the firm to obtain adequate sales envisioned in their strategic plan. Low sales also inhibit the projected growth and market popularity of the company.
Tesla Inc is currently in competition against the technology that has been in use for more than one hundred years. This has made it extremely complicated for them to compete successfully with motor vehicle giants such as Toyota, Volkswagen, which have also invested in newer technologies and cheaper vehicles thereby threatening the development of the company and the expansion of Tesla’s market (Tesla, 2013).
Nowadays, motor vehicle dominant enterprises such as Volkswagen have launched the design and development of electric vehicles, thus posing a noticeable challenge to Tesla Inc. These giants possess a well established marketing strategy for their products, thus enabling them to sell their products much easier. Additionally, the electric cars launched by these companies are much cheaper owing to their advancements in mass production. This too has continued to inhibit Tesla’s economic growth. The other competitors, who have launched electric cars thus limiting the market for Tesla Inc., include Toyota Prius, Chevrolet Volt and Toyota Rav 4 (Tesla, 2013). Appendix one reveals Tesla’s main competitors in the US market.
Electric driven cars are not the only new technologies available in the market today. The alternative technologies being explored today include Hybrid vehicles, solar powered transport, water driven cars, biogas powered vehicles and many others. All these technologies pose a significant threat to the development of Tesla in coming years (Ashtiani, et al, 2011).
The firm targets the people with purchasing capabilities in the middle and high class economic segments. The tendency was greatly affected by the great recession but has grown strategically soon after.
Advanced technology offers a chance for increased efficiency, environmental friendliness and reduced cost. Overall, in time this is expected to continue decreasing the cost of vehicles and reasonably increasing the demand on them.
The positive reception from different governments in terms of subsidies and the duty exception for electric cars has helped actify the demand for the firm.
The threat of New Entrants
There is a low threat of new entrants to the industry owing to the high cost of manufacturing electric vehicles and the technology involved.
Bargaining Power of Suppliers
The firm has a high power represented in the form of suppliers. In 2013 about 33 supplying companies were willing to invest in the newly launched model S.
Bargaining power of Buyers
The low bargaining power of buyers due to the high cost of vehicles remains quite a serious challenge.
Internal Environment: Strengths and Weaknesses
The internal structure of Tesla Inc involves a number of strengths. These aspects are discussed in greater detail in this section.
Tesla boasts of being one of the few industries that have a direct access to modern technologies. This advanced technology has enabled them to manufacture a highly efficient and friendly from the ecological point of view transport means. Overall, the availability of advanced technology to manufacture modern vehicles provides the firm with a competitive advantage over its closest competitors.
Traditionally, Tesla has been a core supplier of other top manufacturers such as Toyota. This has allowed it to have market advantages over other competitors in that it still makes sales to friendly companies.
Conventionally, Tesla outsources their technologies and products from other firms. This has enabled it to remain a brace with the never stopping modern technology enhancement and gives it the possibility to adopt the newest technologies that will help in cost reduction (Karamitsios, 2013).
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Strategic Partners and Investors
Tesla has developed a range of strategic investors and partners over time. The investors who are willing to invest in new advancements provide the capital for the research and development of new products, while the partners are influential in marketing the products. Tesla’s partners include Toyota and Google who are regarded as strategically important for its growth as a market power.
The internal weaknesses pose a great challenge to the growth of the organization. These challenges ought to be understood and dealt with strategically. Some of the major disadvantages are hereby discussed.
Large Debt Amount
Tesla has a huge debt which continues to threaten its existence. Its financial records also indicate that it has a negative cash flow of about $ 455. These two factors create an immense menace to its functioning and the existence as a whole.
Poor Delivery Strategy
Tesla is one of the organizations with a very poor marketing and delivery strategy. Its cars are predominantly delivered one year after the order is made. This has resulted into a loss of a huge number of customers who may prefer to purchase their vehicles as soon as possible.
Negative Impacts of Existing Products
The high cost of previous products such as Model X has had a negative impact on the brand and the firm in general as well. This has led to potential customers shunning products from the firm.
Tesla has been in operation for only a few years. It was, as aforementioned, launched in 2003. This makes the firm lack adequate systems and strategies to produce and market its products in the vast market all over the world.
Brand Loyalty: To maintain brand loyalty, the firm will be forced to invest in research, develop high end products and increase its market share. In total, building a strong brand will be important for the future sustainability of the firm.
Global Expansion: A global presence in different markets will assist the firm in overcoming the supply chain problems and deliver its products within the limited time frame.
Technology Advancement: The company is also advised to invest in modern technology to reduce the cost of their vehicles in order to induce the demand for its produce.