Introduction
Tesla Inc. is the leading automaker of fully electric cars in the world. The company took a bold step to lead the world toward using sustainable energy. Its operations are considerably influenced by various aspects, ranging from the general environment to internal and external factors. The paper evaluates the most significant environmental segments, forces of competition, strengths and weaknesses, resources, capabilities, and core competencies.
General Environment
Industries and firms operating within them are influenced by various factors. The elements are categorized into seven segments, including demographic, sociocultural, global, technological, economic, political, and sustainable physical (Hitt, Ireland, & Hoskisson, 2020). These general environment segments are not directly controllable by an individual firm. The technological and sustainable physical environments are the general environment segments that significantly influence Tesla Inc.
Technological Segment
The rapid technological development has significantly influenced firms to adopt changes in their operations. The automobile industry is one of the sectors affected by technological changes. For example, the uses of sustainable energy to power vehicles and autonomous mode in vehicles are some of the technological changes in the car industry (Xu, Niu, Li, & Sun., 2020). Tesla Inc. embraced new technologies and enhanced them through innovation to pioneer the mass manufacturing of electric vehicles. The firm also used battery pack technology and chip software to enhance the safety of its products. Social media technology has further influenced the way Tesla markets its products. The CEO, Elon Musk, uses Twitter to market Tesla Inc.’s products to consumers.
Sustainable Physical Environment Segment
Factors such as efforts towards the use of renewable energy and minimization of environmental footprint played an instrumental role in the goals and objectives of Tesla Inc. The company focuses on leading the automobile industry toward using sustainable energy. Most firms in the industry manufacture gasoline-powered vehicles, contributing to increased emissions of greenhouse gases. As a result, these emissions have led to adverse climatic changes, forcing governments and international bodies to support the use of renewable energy (Habiba, Xinbang, & Anwar, 2022). While other automakers feared taking the initiative to offer eco-friendly products, Tesla Inc. began manufacturing fully electric vehicles to align with the demand for renewable energy and minimize its environmental footprint.
Five Forces of Competition
The automobile industry environment significantly influences the competitive actions and responses that Tesla Inc. takes. The company operates in an industry comprising electric vehicles and traditional automobile manufacturers. Tesla Inc. experiences various forces of competition like any other firm, which it must examine and take appropriate actions to operate profitably and gain and enhance its competitive edge against its rivals. The two most significant forces of competition that Tesla Inc. must consider are threats of new entrants and rivalry among competing firms in the industry.
Threats of New Entrants
The threat of new entrants in the market that Tesla Inc. operates in is high since the barrier of entry is significantly low. The company faces stiff competition from electric vehicle start-ups, traditional automobile manufacturers switching to electric cars and fossil-fuel-powered vehicles. Companies from China manufacturing electric vehicles dominate new entrants worldwide. These start-ups in the electric vehicle market include BYD, Nio, Li Auto, and XPeng (Xu, Niu, Li, & Sun., 2020). The firms have a considerable competitive advantage since they get support from the government, have access to the largest consumer market (the Chinese market), and have a well-established supply chain. The traditional automobile manufacturers transitioning to electric vehicles are General Motors (GM), Ford Motors, BMW, Volvo, Volkswagen, and Mercedes-Benz (Xu, Niu, Li, & Sun., 2020). Tesla addresses the threat of new entrants by using innovative technology to differentiate products and offerings and adopting economies of scale in production. For instance, Tesla Inc. is the first firm in the automobile industry to engage in mass production of electric vehicles, a strategy that lowers cost and makes the products available to everyone who needs them.
Rivalry among Competing Firms
The rivalry among competitors in Tesla Inc.’s industry is intense, ranging from traditional automobile manufacturers and large automotive brands switching to electric vehicles to numerous new entrants worldwide. The competitors’ pricing and differentiation strategies restrict Tesla Inc.’s domination in the electric vehicle market and profitability growth. For example, Chinese start-ups such as Nio adopt pricing differentiation and personalization to dominate their domestic market and inhibit the growth of Tesla Inc.’s sales (Xu, Niu, Li, & Sun., 2020). Tesla Inc. uses innovation, integration of services, and differentiation in products, prices, places, and promotions to establish and maintain a competitive advantage in the industry. For example, the firm offers customizable cars in various models, supercharging compatibility, and regular software updates, a strategy that differentiates the company from competitors.
Future Improvements
Tesla Inc. should provide more differentiated products using innovative technologies and uniquely integrate its services in a way that none of its competitors can match to minimize the threat of new entrants. Additionally, the firm needs to adopt vertical integration to lower the risks associated with the supply chain (Xu, Niu, Li, & Sun., 2020). Further, the company should improve its deliveries and reliability by enhancing manufacturing excellence to alleviate rivalry among competitors in the industry.
Greatest External Threat
The most significant external threat that Tesla Inc. faces is the growing competition from existing automakers and new entrants in the electric vehicle market. Additionally, there is stiff competition from self-driving technology and alternative fuel vehicles. For instance, luxury vehicle automobile manufacturers such as BMW, Mercedes-Benz, Lexus, and Audi and other mass-market producers like General Motors, Ford, and Toyota are waging fierce competition against Tesla Inc. For example, General Motors offers a mass market for Chevrolet Blazer electric vehicles (Bell, 2022). Large companies in the automobile industry have started producing high-end cars, as Tesla Inc. has. Equally, most are embracing eco-friendly self-driving technology at a lower price. These factors put Tesla Inc. in a very competitive environment, and its customers may switch to competitors in the future. Tesla Inc. should consider pricing differentiation to offer products to extended market segments, including the middle-class population. This approach will help the company increase its customer base and competitiveness.
Greatest Opportunity
The greatest opportunity for Tesla Inc. is the sustainability of future demands. The rate at which people embrace environmentally friendly products makes electric vehicles the transportation industry’s future. Tesla Inc. pioneered mass manufacturing of electric vehicles, a move that most governments support, and encouraged new market entrants (Lambert, 2022). Even companies that manufacture gasoline-powered vehicles have started transitioning to electric cars. Tesla Inc. can take advantage of this opportunity to maintain its competitiveness in the market by adopting pricing differentiation and using innovative technology to manufacture more affordable vehicles. The approach will allow the company to attract more customers worldwide and limit the possibility of existing clients whiting to competitors and new entrants.
Strengths and Weaknesses
Tesla Inc. has its strengths and weaknesses like any other firm in the automobile industry. The company’s greatest strength is that it is the leading global vendor of electric vehicles. As noted earlier, Tesla Inc. was the first firm to manufacture a fully electric vehicle and an advocate for using sustainable energy in the automobile industry, attracting everyone who supports eco-friendly products. Its cars are luxurious and can operate in autonomous mode, two factors that make Tesla Inc. admirable to most people. As a leader in the electric vehicle market, Tesla Inc. focuses on enhancing the quality of its products and user experience to ensure customer satisfaction, contributing to its popularity (Lambert, 2022). However, the company’s biggest weakness is its products’ premium pricing. The high level of innovative technology and mechanical complexity used in manufacturing electric cars makes Tesla Inc. target a limited market for its premium automobile. The firm is determined to maintain its reputation of offering high-end products, making it difficult to expand its market. This factor can give competitors to produce cheaper electric cars, reducing the firm’s market share and changing the perception of its premium products.
Strategy or Tactic
Tesla Inc. can maximize the advantage of being the leading vendor of electric vehicles by expanding its production and enhancing the quality and safety of its cars. Undeniably, when someone hears about the electric car, the company that comes to mind is Tesla Inc. The demand for the company’s products has been increasing steadily since its inception. The automaker enjoys large backlogs for all its models (Lambert, 2022). Thus, the firm should expand its production capacity at the Fremont factory and other parts of the world to facilitate the timely delivery of its products. Equally, Tesla Inc. should continue using innovative technologies to improve the quality and safety of cars, especially those with autonomous mode. Consequently, the customer experience and satisfaction will remain high, maintaining and attracting new consumers.
The strategy that Tesla Inc. can use to fix the issue related to premium pricing is by manufacturing products for consumers with different levels of financial capability. Tesla Inc. is one of many automakers of electric vehicles because new entrants and giant players in the industry are transitioning to products that use sustainable energy. These competitors are offering cheaper electric vehicles with features similar to those produced by Tesla Inc. Therefore, the firm needs to change its premium pricing strategy and produce cars that meet the needs of different consumers. This tactic will facilitate the expansion and maintenance of market share for electric vehicles.
Resources, Capabilities, and Core Competencies
Resources, capabilities, and core competencies are vital elements that define a company’s competitive advantage in the market. According to Hitt, Ireland, and Hoskisson (2020), resources create a firm’s capabilities, and the latter is the source of core competencies. The most significant resources for Tesla Inc. are a skilled workforce, innovation, and reputation. For example, the company innovates new ideas to enhance the production and quality of its products. Equally, the brand name, products’ quality perception (premium products), and positive reputation with the customers are essential resources for the firm.
Conclusion
Motivating and empowering employees, constantly developing product design and quality, implementing innovative technology, and developing products with sophisticated features are critical capabilities of Tesla Inc. The bold leadership of the company’s CEO, Elon Musk, and large bonuses are given to workers who meet or exceed set goals to empower and motivate them (Elnour, 2021). Product design and quality facilitate the manufacturing of cars that meet the needs of the targeted customers, while innovative technology helps research and develop high-end electric vehicles. The company’s core competencies are innovative manufacturing processes, battery pack technology, and the safety design of its vehicles. These competencies give the company a competitive advantage over its rivals in the industry. For instance, innovation allows Tesla Inc. to manufacture vehicles with sophisticated features and regularly updated software.
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