SWOT Analysis of Tesla Motors

 
 

Introducting

Tesla Motors, Inc. manufactures and designs electric powered trains and vehicles. The company operates in a premium class industry that offers electric motors. Tesla also specializes in the manufacture and design of luxury electric vehicles, and it is one of the fastest growing motor vehicle firms in the U.S. This means that the company has a number of competitive advantages, which have enabled it to acquire a market share. Tesla is headquartered in Palo Alto, California, U.S.A. Global automobile project sales are divergent and according to the forecasts market penetration rates for the electric vehicles will increase (Mandel, 2013). In 2012, Tesla’s sales grew by 74.95 percent while the number of employees increased by 57.62 percent (Tiu, 2013). A SWOT analysis of Tesla Motors, Inc. will show the firm’s strengths and weaknesses, in addition to its threats and opportunities.

SWOT Analysis

Strengths

Tesla’s CEO, Elon Musk, who is also the firm’s co-founder, was involved with technological and innovative companies such as SpaceX and PayPal (Tiu, 2013). This fact shows that the firm’s top management has an experience in the technological field. Tesla Motor, Inc. has a dedicated and professional design team that is involved with the design of award winning vehicles such as the Model S (Tiu, 2013). The company also has a good technology and engineering research capability. This is evident from the fact that Tesla has produced efficient electric cars, unlike its competitors (Mandel, 2013). The enterprise has the strength of being a first mover. This means that the firm was the first to produce a practical electric car (Elley, 2013). Tesla has been able to acquire product endorsement from celebrity customers such as Jay Leno, George Clooney and Arnold Schwarzenegger (Tiu, 2013).

Weaknesses

Tesla’s main weakness is lack of brand recognition. Some of its car models are relatively unknown to potential customers (Tiu, 2013). This can be attributed to an ineffective marketing department or strategy. Tesla’s CEO is also involved with the management of SpaceX. This means that the CEO is not committed to the operations of Tesla. In addition, the company is exposed to market uncertainties because it produces and sells only electric cars and motors. People are reluctant to shift to the electric car models because they are accustomed to gasoline vehicles (Elley, 2013). Tesla is dependent on consumer behavior changes and has to consider them in order to increase its sales.

Opportunities

Tesla Motors, Inc. has an opportunity in the industry because of the high prices of gasoline and oil. The company can provide its activities through partnerships with battery manufacturing firms and technological companies. This will enable Tesla to expand its operations and technologies for developing lithium-ion batteries. The partnerships will also provide opportunities for product improvement. Tesla Motors, Inc. has chances on global markets, particularly in Canada, Europe and Asian markets (Tiu, 2013). European and Canadian automobile markets are beginning to shift from gasoline powered cars to electric cars. Emerging markets in Asia, particularly in China, Singapore and India also provide market opportunities for Tesla (Tiu, 2013). These countries have growing and stable economies. Economic incentives and government regulations provide additional options for Tesla. The U.S government allocates financial resources into research that focuses on environmental protection. These resources are also intended for the acceleration of customer adaptation to electric vehicles (Elley, 2013). Tesla’s innovative channel model provides opportunities for growth. It provides differentiating and unique customer experience that is associated with the success of Apple, Inc.

Threats

The main threat to Tesla Motors, Inc. is competition. Wrightspeed X1 is a prototype of a high performance electric vehicle that targets Tesla’s market. In addition, established and financially resourceful companies have begun to develop hybrid and fully electric cars (Rechtin, 2014). Some of the automobile firms that have hybrid and fully electric cars are Toyota and General Motors. They also target Tesla’s market and customers who want an electric or hybrid car. Tesla also faces the threat of fall of oil prices. Stabilization of oil production and global politics will lead to this process (Tiu, 2013). Development of alternative sources of energy, geothermal and nuclear energy, will also lead to reduction of the price of oil. Technological advances, particularly in car design and manufacture, threaten the operations of Tesla. Energy related technologies, such as natural gas and hydrogen powered cars, will impend the market and sustainability of Tesla Motors, Inc. Continued economic instability also threatens Tesla’s market presence (Tiu, 2013). Economic instabilities create a situation where potential buyers change their priorities in order to cover the most important needs. In this case, they view buying of cars as a luxury that is unsustainable in an unstable economic environment. Tesla’s inability to create new partnerships or termination of strategic ones may threaten its ability to design and manufacture efficient and innovative cars (Tilley, 2014). Company’s research and development activities are dependent on revenues obtained through strategic partnerships. Therefore, the termination of these partnerships will impact on Tesla’s income.

Recommendations for Specific Steps

Tesla Motors, Inc. should expand its target market. Currently, the firm targets only buyers of electric cars. Current market trends show that customers prefer to buy hybrid cars. Expanding the target market means that Tesla will accept the issue of customer preference for hybrid cars (Anholt, 2006). The company will be able to offer both hybrid and electric cars to the market. This will help in strengthening Tesla’s brand and expand its market presence. Tesla will also be able to compete with such firms as General Motors and Toyota, which have entered the market by offering hybrid cars.

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Tesla should change its marketing strategy in order to create brand awareness. Company’s market strategy features internet advertising, word of mouth marketing and trade shows. The firm should target mass media advertising through television, newspaper and radio advertising (Anholt, 2006). Marketing on mass media will also help Tesla to increase its audience.

Tesla Motors, Inc. should raise financial resources internally rather than looking for partnerships. The latter expose the firm to business risks such as the loss of revenue in case the partnership is terminated. Tesla can seek for loans or sell its shares in order to raise financial resources (Anholt, 2006). In case, the firm wants to set up partnerships, it should focus on strategic ones. These are partnerships that multiply Tesla’s strategic advantages. These will be partnerships for technological advancements and product improvement.

In the case of management, Tesla Motors, Inc. should ensure that its executives and managers are fully devoted to the operations of the firm (Anholt, 2006). Additionally, the company should hire a professional and established recruitment agency for its recruitment drives. Tesla’s CEO is also involved with SpaceX. In this case, the CEO’s attention is divided between the two firms. This may create management inefficiencies. Tesla should hire only committed employees.

Conclusion

Tesla Motors, Inc. is an American company that designs and manufactures electric motors and cars. The firm is recognized as one of the fastest growing companies in the U.S. Tesla’s SWOT analysis reveals that though the firm has strengths that support its sustainability, it also faces threats. The firm’s main strength is its research and development, and ability to design and manufacture efficient cars. They have enabled the company to acquire a large market share within a short timeframe. These strengths can be undone by threats such as competition, technological advances and changes in customer preferences. Tesla’s competitors have been able to study the market and realized that customers prefer hybrid cars to electric ones. They have been able to enter the market and reduce Tesla’s market share by offering efficient hybrid cars. Technological advances, particularly in energy technologies have the potential to change the industry. Car industry is determined by the firm that can offer the most efficient and environmental friendly car. In order to overcome these challenges, Tesla should focus on expanding its target market by offering both hybrid and electric cars. Additionally, Tesla should enter into strategic partnerships with innovative and technology-based firms in order to facilitate product improvement.

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