In this discussion, we will explore the external and internal environments at Tesla, Inc. Tesla’s five forces of competition, external threats, strengths, and weaknesses will be examined. Moreover, the mechanisms of how these factors have contributed to the company’s success and challenges will be desribed. The aim of this discussion is to gain a better understanding of the complex and dynamic factors that shape the future of Tesla. We will also look at the company’s strategy, capabilities, resources, and recent performance in the market.
General Environment
The external components that may impact a firm’s processes and performance are referred to as the general environment of a company. The technological and political-legal sectors of the general environment would rank at the top of the Tesla corporation’s influencer list. The organization has spent a lot of time and effort in the previous ten years bringing elegance and high-end quality to the market. Below are some of the segments of Tesla’s general environment.
Technological Industry
In terms of the components of the overall environment, the company has an even development in all areas. Substantial economic growth through increased vehicle sales and production costs is accompanied by successfully recouped innovation activities. Consequently, the economic and technological components complement each other, ensuring the company’s development. From a socio-cultural perspective, Tesla has also been successful in significantly influencing and largely shaping the concept of ecological consumption. The products of this manufacturer are associated not only with high-tech, but also with style and status (Hitt, 2020). The only problematic aspect is the legal regulation, since in many countries the service of such cars is not sufficiently regulated and accompanied by many administrative complexities (Hitt, 2020). Nevertheless, it can be argued that there is a quality environment around the Tesla.
Legal and Political Segment
The political-legal component of the overall environment refers to how government rules and regulations affect business operations. This would incorporate Tesla’s EV and renewable energy production plans and regulations. Government rules and regulations can significantly impact Tesla’s business because they can change how well the company can sell its goods and services and how much competition there is in the market. Additionally, government regulations regarding taxation, subsidies, and the use of green energy are significant to Tesla’s economic model. On this basis, it should be noted that problems are observed in the international regulation of environmental issues (Gerus, Jones, Parish, Phillips, & Williams, 2022). In the course of the latter, the necessary compromise has not been reached, therefore, the same models in different countries will operate under different environmental norms.
Five Forces of Competition
The framework developed by Michael Porter and titled The Five Forces of Competition is used to investigate the industry’s competitive dynamics. The following are the five forces: Threat from new competitors, Risk of having to replace products or services, Bargaining Power of Suppliers and Buyers, and Competition between Already Existing Rivals, and the risk of macroeconomic changes influencug the streams of investments (Bruijl & Gerard, 2018). During the past five years, Tesla has combated two of these five forces with considerable success.
The Threat of New Competitors
By significantly raising the obstacles to entry in the electric vehicle (EV) market, Tesla has countered the danger of new competitors. To produce cutting-edge technology, the company has made significant investments. It has also built a solid brand and reputation, since, according to the research, the corporation has mostly positive associations among consumers from all over the world (Lin, Lu, & Xu, 2022). It is challenging for new businesses to compete on pricing because Tesla has been able to develop its operations and build automobiles at a cheaper cost than most new entrants. The gatp in pricing is revealed in 20-40 percents in comparison with the closest competitors in the industry (Lin, Lu, & Xu, 2022). In this respect, the company has gained superiority which gides it more space for further innovations and, hence, is a significant force.
The threat of replacement goods or services
By constantly developing and upgrading its goods and services, Tesla has countered the danger of replacement goods and services. In terms of technology and design, the company has been able to keep in front of the curve, making it challenging for other businesses to provide matching items. Additionally, Tesla places much emphasis on sustainability, which provides them with a unique selling proposition and sets it apart from other automakers. Due to the substantial progress, it has achieved in tackling these two competitive pressures, Tesla has forged a solid position for itself in the EV industry which lets it spend more money for innovations and marketing programs.
Greatest External Threat
The growing rivalry for electric vehicles (EVs) may be one of Tesla’s biggest external concerns. Traditional automakers are investing significantly in EV development and manufacturing, and new players are joining the market. The creation of fully autonomous vehicles may represent a future breakthrough for Tesla, since none of its competitors has mentioned such a direction for the nearest future development (Lin, Lu, & Xu, 2022). This might significantly improve Tesla’s cars’ efficiency and safety by doing away with the requirement for a human driver.
Highest Opportunity
The rising demand for ecologically friendly and sustainable transportation may represent one of Tesla’s most significant prospects. Customers may be more inclined to think about buying an EV as more people become aware of conventional gasoline-powered vehicles’ adverse effects on the environment. Tesla may need to keep promoting its ethical business practices and investing in creating renewable energy to take advantage of this potential. The company’s expansion into other sustainable energy goods, such as Solar Panels and Energy storage systems, may provide additional concrete evidence. The business can reach new markets and generate more money with a broader range of goods and services.
Strengths and Weaknesses
Strong brand and reputation: As a market leader in electric vehicles, Tesla has built a solid brand and image as a business at the forefront of environmentally friendly mobility. Innovative technology: Tesla is renowned for its cutting-edge engineering, which includes its electric drivetrain, which is regarded as one of the most sophisticated in the business. Additionally, Tesla’s emphasis on AI research and autonomous driving technologies enhances its vehicles’ safety and driving experience. Vertical integration: Tesla emphasizes this strategy, which has complete control over all production and delivery phases (Lin, Lu, & Xu, 2022). As a result, the business can cut expenses and boost productivity.
Within costly production, Tesla may find it challenging to compete on pricing with conventional manufacturers due to the higher production costs associated with producing electric automobiles than conventional gasoline-powered vehicles. Restricted manufacturing capacity: Due to Tesla’s current limited production capacity, it may require more work to satisfy its automobile demand. This idea is supported by the research results showing that the capacity indicators has become 9 percents lower than in 2021 (Lin, Lu, & Xu, 2022). Dependence on government incentives: Tesla’s sales and revenue heavily rely on the subsidies and incentives governments provide worldwide for purchasing electric automobiles.
Strategy
Tesla should keep putting its innovation and R&D efforts into its electric powertrain, autonomous driving technologies, and AI research to build on its strengths. In addition to enhancing the driving experience and safety of the company’s vehicles, this will aid in maintaining its competitive edge in the electric vehicle industry. Tesla should continue supporting the development of renewable energy sources, as suggested by Pathak et al. (2022), to capitalize on the demand for environmentally friendly and sustainable transportation.
One drawback of Tesla vehicles is their relatively high cost compared to traditional gasoline-powered cars. To mitigate such drawbacks, Tesla ought to maintain its efforts to reduce the cost of its autos and its energy storage systems (Lin, Lu, & Xu, 2022). Acquiring raw materials at a lower cost and increasing manufacturing automation and efficiency are potential means of accomplishing this goal.
Resources, Capabilities, and Core Competencies
Tesla’s resources include its financial resources, its physical resources, and its people resources. The business enterprise is in a healthy financial situation, with plenty of cash and access to several financing markets. In addition, Tesla owns a substantial quantity of tangible assets, including research and development facilities, production apparatus, and factories where it manufactures its products (Lin, Lu, & Xu, 2022). Besides, Tesla’s engineers, designers, and production employees are highly qualified and experienced in their respective fields.
Tesla has several essential qualities that have aided in its success, including Electric powertrain innovation: it has created one of the most cutting-edge electric powertrain innovations in the market, which has helped to differentiate it from its rivals (Lin, Lu, & Xu, 2022). Technology for autonomous driving: Tesla has made significant investments in this field, which have improved both the safety and driving experience of its vehicles.
Sources
Gerus, S., Jones, G. A., Parish, E., Phillips, P., & Williams, M. F. (2022). Tesla, Inc. A Study of Public Accounting and Related Economic Concepts, p. 72.
Ellul, J. (2018). The technological system. Wipf and Stock Publishers.
Bruijl, D., & Gerard, H. T. (2018). The relevance of Porter’s five forces in today’s innovative and changing business environment. Available at SSRN 3192207.
Hitt, M. (2020). Strategic Management: Concepts and Cases: Competitiveness and Globalization. 13th ed. Cengage Learning.
Pathak, P., Yadav, V., Pillai, S., Das, S., & Kansal, G. (2022). We are unveiling the Success Behind Tesla’s Digital Marketing Strategy. In Emerging Technologies in Data Mining and Information Security: Proceedings of IEMIS 2022, Volume 1 (pp. 251-260). Singapore: Springer Nature Singapore.
Lin, P., Lu, Y., & Xu, Z. (2022, March). Tesla’s Dilemma and Future Development Trends. In 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022) (pp. 2174–2180). Atlantis Press.