1. A brief historical summary
Tesla, Inc is an American Multinational Company founded in 2003 and headquartered in Palo Alto, California . The company specializes in three major areas that include the electric vehicle manufacturing, lithium-ion battery energy storage as well as the solar panel manufacturing. Currently, Tesla sells a variety of products that include the Tesla Model X, Model S, Model 3, Powerback and Powerwall batteries, solar roof tiles and solar panels among other related products (Tesla.com, 2018). The company was co-founded by Marc Tarpenning and Martin Eberhard and named after a renowned electric engineer and physicists known as Nikola Tesla. The primary purpose of the company is to be a leading independent and technology auto manufacturer that offers electric vehicles at affordable prices to the average customers. As the competition in the auto industry is increasing, Tesla has been engaged in coming up with unique products and marketing activities to ensure that it achieves a competitive edge in the market. Ideally, the company is increasingly facing competition in the electric vehicle market segments as new firms enter the market.
2. A list of Competitors
Competition in the automobile industry is intense given the fact that there are many players competing for the share in the market. Although Tesla primarily manufactures electric vehicles, it still faces competition from the companies that manufacture vehicles that are powered by fossil fuels. In addition, other automobile manufacturing companies are making significant to manufacture the cars that are powered by the electric batteries. The notable competitors of Tesla Corporation include General Motors, Federal Signal, Ford Motor Company, Honda Motor Company, Tata Motors, and Toyota Motor Corporation.
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3. The Company's Position within the Industry
Tesla is one of the new and rapidly growing automobile manufacturing companies in the global business environment. The company is specializing in the manufacturing of the electric vehicles as opposed to the majority of the companies in the industry. The position of Tesla in the industry can be analysed by the analysis of its competitiveness in the industry. In order to determine the position of Tesla in the industry, it is important to assess the important factors that affect the company in the market. Porter’s five forces can be used to determine the position of Tesla in the automobile industry. Porter's analysis assesses the position of a company in the industry based on five main factors that include the buyer's power, the supplier power, the competitive rivalry, threat of substitute products and the threat of new entrants (Hill, 2017).
The bargaining power of buyers in the industry is relatively low. Currently, there are many buyers of electric vehicles in both the United Staes and across other countries in the global market. Besides, only a few companies are manufacturing the electric cars and this reduces the purchasing power of the buyers. As a result, the buyers cannot have a significant influence on the marketing division of the company such as pricing strategy.
The bargaining power of the suppliers in the industry is relatively low. The company has a wide base of suppliers and thus can easily shift from one vendor to another. Also, there are many suppliers in the car manufacturing industry which eventually reduce their power in the market. Tesla faces low bargaining power of suppliers it is able to negotiate better terms and conditions of trade such as low prices and high-quality inputs.
The competitive rivalry in the car manufacturing industry is high. Many companies are currently producing the electric vehicles on the market. However, Tesla's marketing strategies enable it to reduce the level of competition in the industry. The company specializes in the manufacturing of electric vehicles as opposed to other companies that manufacture both electric and fossil powered cars.
The threat of new entrants in the industry is high due to the high rate of return. Many new and existing companies are interested in entering the electric market segments and this can lead to a reduction of market share for Tesla Corporation. The high image and reputation of Tesla in the market can help it reduce the threat of new entrants. The company has created a large base of loyal customers and thus it is difficult for the new entrants to acquire its customers.
The threat of substitute products in the industry can be argued to be low. Ideally, the major substitute products consist of cars that are powered by other sources of energy apart from batteries. This can include the cars that use fossil fuels. Furthermore, train, bicycles and motorbikes also offer alternative products to the electric cars. Although there are various substitutes products, the issue of climate changes and global warming has shift promotes the demand for electric cars as the company's aims at reducing the level of their carbon emission to the atmosphere. Consumers are also becoming aware of the impact of carbon emissions thus favours products that are environmentally friendly (Morschett et al., 2015). This favours and promotes the business activities of Tesla in the market.
4. Recent Developments within the Company/Industry
The electric motor industry is increasing as the demand for vehicles powered by battery increases. Since the emergence of the electrically powered vehicle, many developments have taken place as companies develop effective marketing strategies to outperform their competitors (Baker, 2014). In essence, the major recent development in the industry is evident by the plans of many companies to start producing the vehicles that are primarily powered by electricity. All companies are nowadays aimed to offer electric vehicles and avoid those powered by the fossil fuels. Besides, the sales and demand of the electric vehicles have increased significantly over the recent years. Ideally, it is expected that the demand for electric vehicles will continue to increase over the foreseeable future and this will create high sales volumes and profitability.
Tesla has responded to the recent changes in the industry by developing new models of electric vehicles to meet the dema nd of the customers. Currently, it has been able to achieve its objective of producing several models of electric vehicles to meet the demand of the targeted mass market ( Campbell, 2018). Furthermore, the company has opened several charging stations in the US with the largest supercharger station located in North America between Los Angeles and San Francisco. There are also the developments of more utility programs aimed at supporting the electric vehicles adoption in the United States. These initiatives will help promote the activities of Tesla in the electric vehicle industry.
5. The Key Risk Factors
There are several risks that Tesla faces in the industry. The major risks that the company is facing are associated with the long-term threat from some of the incumbent auto manufacturers in the industry. The incumbent companies in the industry are coming up with new and innovative electric vehicles that can outperform the Tesla electric vehicles (Wesseling et al., 2015). In addition, the Tesla electric vehicles face competition from other auto manufacturers the offers energy efficient petrol vehicles. Although the purpose of electric cars is to reduce carbon emission to zero, there is evidence that the current models are still emitting large volumes of carbon into the atmosphere. As many companies engage in research and development programs, there are chances that new efficient petroleum vehicles that are affordable will be developed and offers direct and intense competition with Tesla.
Tesla is also facing significant risks in its financial performance. Acccording to the recent New York Times business news, it is challending for the company to be profitable in the next third quarter (Boudette, 2018). The company operational expense is currently high owing to its eloborate investment and expansions strategies. The high operating cost is the major factor that reduces the profitability of the company in the business environment. In its efforst to reduce its financial risks and losses, the company is renogotiating agreements with suppliers to achieve the price reduction and improve its profit margin (Boudette, 2018).
The other risk factor is the changes in the technological development. There are rapid changes in technology as many companies come up with new and innovative products to outperform the products of the rival firms. As companies continue to develop a new version of electric cars, there is the likelihood that the products of Tesla will become redundant in the market.
6. The Strategic Direction of the Company
In order for the company to remain competitive in the market, it should develop certain strategies to enjoy sustainable growth in the market. As a result, the company should design some effective strategic objectives to enable it to survive in the marketing environment. The main strategic objectives of the company are to invest in research and development programs to improve the competitive edge of its vehicles ( Tesla Investor Relation, 2018) . Evidently, the technology in electronic vehicle manufacturing is changing and thus firms need to come up with new and innovative products to satisfy the ever-changing needs of the customers (Ehsani et al., 2018). Also, the company should consider expanding to other markets around the globe. Currently, Tesla operates in the United States and plans to penetrate in other foreign market. The market expansion plan can be achieved through various strategic alliances where the company collaborates with other firms in different counties.
7. Other Items of Significance to Tesla
Although Tesla has remained competitive in the market, the company needs to maintain its market position and meets the demands of the customers. One of the strategies that can help improve the performance of the company is a change in the organizational culture. Majority of the employees of the company currently lack adequate motivation and this reduces their overall performance. Employees are the major assets of an organization that can ensure that it maintains a competitive edge in the market. With a motivated workforce, the company can enhance its performance and become competitive in the global business environment.
References
Baker, M. J. (2014). Marketing strategy and management . Macmillan International Higher Education.
Boudette, N. (2018). Tesla, Pushing for Profit, Faces New Questions Over Finances. Retrieved from https://www.nytimes.com/2018/07/23/business/tesla-suppliers-profits.html?rref=collection%2Ftimestopic%2FTesla%20Motors%20Inc .
Campbell, P. (2018). Tesla hits bumps in pursuit of mass market | Financial Times. Retrieved from https://www.ft.com/content/b305aa0a-c011-11e7-9836-b25f8adaa111
Ehsani, M., Gao, Y., Longo, S., & Ebrahimi, K. (2018). Modern electric, hybrid electric, and fuel cell vehicles . CRC Press
Hill, T. (2017). Manufacturing strategy: the strategic management of the manufacturing function . Macmillan International Higher Education.
Morschett, D., Schramm-Klein, H., & Zentes, J. (2015). Strategic international management (pp. 978-3658078836). Springer.
Tesla Investor Relations (2018). Investors Overview | Tesla, Inc. Retrieved from http://ir.teslamotors.com/?_ga=2.193960941.1990190486.1532774498-1324990496.1532612715
Tesla.com (2018). Tesla Corporation Home Page, available at https://www.tesla.com/ . Retrieved on July 26, 2018
Wesseling, J. H., Niesten, E. M. M. I., Faber, J., & Hekkert, M. P. (2015). Business strategies of incumbents in the market for electric vehicles: Opportunities and incentives for sustainable innovation. Business Strategy and the Environment , 24 (6), 518-531.
