Tesla Analysis
Tesla leads in the electric car market and enjoys the benefits of being the first movers in the industry. Tesla was incorporated in 2003, and its mission is to accelerate the advent of sustainable transport by bringing compelling mass-market electric cars to market as soon as possible (Tesla, 2022). The firm adopted a global strategy by establishing subsidiaries in strategic locations across the globe, such as the Netherlands and China. The company is now facing competition as gas-fueled car manufacturers have begun the manufacture of electric cars. Herein, Teslas external factor evaluation (EFE) and internal factor evaluation (IFE) are discussed.
Competitive Profile Matrix (CPM).
CPM provides a comparative analysis between a firm and its competitors. The matrix examines the strengths and the weaknesses in the core factors of the company in its business segment. The matrix offers insights into how Tesla should respond to opportunities and threats in the business environment.
Table 1: Competitive Profile matrix for Tesla Motors Inc.
Tesla
Ford Motors
Critical
Success Factors
Weight
Rating
Weighted
Rating
Weighted
Rating
Weighted
Price Competitiveness
0.1
1
0.1
3
0.3
2
0.2
Product Quality
0.14
2
0.28
3
0.42
3
0.42
Advertising
0.08
4
0.32
2
0.16
2
0.32
0.11
4
0.44
2
0.22
2
0.44
Financial Position
0.12
2
0.24
2
0.24
1
0.12
Management
0.09
3
0.27
2
0.18
2
0.18
Product Diversity
0.06
3
0.18
2
0.24
2
0.24
0.12
3
0.36
1
0.12
1
0.12
Expansion
0.09
3
0.27
2
0.18
2
0.18
Production Ability
0.09
3
0.27
3
0.27
3
0.27
Total
1
28
2.73
23
2.33
22
2.49
Teslas initial pricing strategy targeted high-income earners with an annual income of $100,000. Notably, these are the top 1% earners across the globe, which limited the access to electric cars to this class and left the gas-fueled car manufacturers to dominate. The advertising of Tesla is mainly through its online presence and initial online-based distribution channel. This unconventional approach to distribution also gives its competitors, such as Ford Motors, a competitive advantage over Tesla since it has well-established distribution channels across the globe that are more familiar to customers of different ages. Conversely, the Tesla distribution strategy applies to internet-savvy individuals and high-income earners due to the positioning of the cars as luxury products.
However, Teslas management in the electric cars segment has been effective with the significant allocation of resources to research and development for innovation. General and Ford Motors have a long history in the automotive industry that has enabled them to build a resilient production ability even in the new product segment without some of the production challenges in production quality that Tesla has encountered (Furrier, 2020). However, Teslas customer loyalty is significantly higher in the electric car segment than that of Ford and General Motors due to the first movers advantage and solo focus on electric car production.
External Factor Evaluation (EFE)
Table 2: External Factor Evaluation Matric for Tesla Motors Inc.
External factor
Weight
Rating
Weighted Score
Opportunities
Market confidence
0.10
3
0.3
Expand the target market
0.20
3
0.6
Entry into international distribution
0.20
4
0.8
Manufacture of car parts
0.15
3
0.3
Threats
Regulation of auto drive in foreign markets
0.10
1
0.1
Hybrid vehicles
0.15
2
0.3
competition
0.10
2
0.3
Total
1
18
2.7
Opportunities
Tesla has opportunities to expand its cars catalog with the growing market confidence in its vehicles. Leveraging market confidence to introduce budget-friendly cars for the middle class will increase...
…image, which puts it at a disadvantage if its reputation is disparaged. The limited production capacity and challenges in the raw materials supply chain result in delayed customer deliveries. These challenges create more room for its competitors to grow their market share.Financial Ratios Compared to industry Ratios 2021
Financial Ratio
Tesla Ratios
Industry Ratios
Debt Ratio
0.54
0.57
Debt-to-Equity Ratio
0.78
0.93
Profit Margins
3.2%
5.2%
Quick Ratio
048
0.82
Interest Coverage Ratio
3.08
3.04
Based on the companys financial ratios evaluation compared to the manufacturers in this segment, Tesla is better than most of its competitors. According to the financial reports submitted on 31 December 2021, the companys revenue was $53,823 million and $62,131 in assets (Furrie, 2020). The companys liquidity has grown, giving the firm flexibility in strategy and remaining competitive in the market.
Conclusion
Teslas main challenge is solving challenges with its production capacity and establishing an elaborate marketing and distribution strategy. The resolution of the production capacity challenge will make the threat that the company faces from hybrid cars and other competitors in the electric car manufacturing segment negligible. With healthy cash flow and a growing trust in the companys abilities, Tesla can direct even more resources to develop a resilient supply chain to streamline production and lower its price strategy to meet demand among the middle class. This approach will reinforce the dominant force of the Tesla brand in the electric car market and the automotive…
References
WSJ Markets. (2022). Tesla Inc. WSJ Markets. Retrieved 20 July 2022, from https://www.wsj.com/market-data/quotes/TSLA/financials.
Furrier, A. (2020). Tesla: Business Model: Strategic Analysis. Medium. Retrieved 20 July 2022, from https://medium.com/@alecfurrier/tesla-business-model-strategic-analysis-c7d00bdc0339.
Tao, R. (2019). Tesla Supply Chain - Custom-build World Class Supply Chain. [online] Tradegecko.com. Retrieved 20 July 2022, from https://www.tradegecko.com/blog/supply-chain-management/tesla-custom-built-supply-chain.
Tesla. (2022). Tesla’s mission is to accelerate the world’s transition to sustainable energy. Retrieved 20 July 2022, from https://www.tesla.com/about.
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