Business analysis is a critical component of management education. All MBA candidates go through a series of business analysis seminars. These workshops help them understand the benefits and drawbacks of the best businesses available. All of this is done to prepare applicants to confront issues in corporations that require immediate attention. A tool that frequently comes up in the business environment to examine various projects, firms, and strategies is the SWOT Analysis. So, today in this Tesla SWOT analysis tutorial, you are going to use the SWOT technique to analyze Tesla INC.
What Is SWOT Analysis?
SWOT analysis is a technique that businesses utilize to conduct an objective analysis. It is an essential component of any strategic planning. The term SWOT stands for strengths, weaknesses, opportunities, and threats. Swot analysis examines internal and external factors, as well as present and possible future opportunities. It is aimed to facilitate a realistic, fact-based, data-driven examination of an organization's, initiative's, or industry's strengths and weaknesses.
The SWOT technique can help you embark on a specific project or plan by visualizing the positives and negatives. For formulating a thorough SWOT analysis, companies have to research what things they are good at and not so good at. This is achieved using a SWOT Matrix or table. It typically consists of four quadrants, one for each area. But, the exact shape may vary depending on the design. The image given below is a sample of the SWOT Matrix:
The image above highlights strengths and weaknesses as internal factors and opportunities and threats as external factors. The factors whose control lies in the hands of an organization are considered internal factors. And the factors which are beyond companies’ control are regarded as external factors.
Moving forward in this Tesla SWOT analysis tutorial, you will discover a few details about Tesla INC.
Introduction to Tesla INC.
Tesla was founded in California (USA) in 2003 and is named after Nikola Tesla, a well-known inventor, and scientist. In recent years, Tesla has had tremendous success as a dynamic automobile and energy solutions firm. Tesla dominates the vehicle business with its electric cars and is the subject of continual discussion in the market. Tesla also aspires to be one of the two US automakers that have not declared bankruptcy, the other being Ford.
The Tesla SWOT analysis will display all pertinent facts connected to each facet of Tesla's business plan. So, let’s dive into that!
Strengths: Tesla SWOT Analysis
1. Strong Brand Value
Tesla is a brand that everyone in the world is familiar with. This means Tesla has strong brand recognition. It is the world's most well-known manufacturer of electric vehicles. Elon Musk, Tesla's iconic CEO and major shareholder is one of the world's most renowned, influential, and appealing businessmen. In addition to that, Tesla was the leading luxury carmaker in the financial year 2019, delivering 367,500 automobiles. Tesla's extraordinarily high sales growth has been credited with the company's unrivaled rise in luxury and innovation. In June 2020, Toyota was surpassed by Tesla as the most valued automotive manufacturer.
2. Leading Electronic Car Vendor
Tesla was the first to introduce a fully electric automobile. Many customers like Tesla's pioneering spirit. The capacity of Tesla's vehicles to operate in autopilot mode and the degree of luxury they deliver are two of the key reasons people admire Tesla. Eye-catching aesthetics, along with energy efficiency and a good customer experience, explain Tesla's premium price and distinct competitive approach.
Tesla focuses on enhancing the user experience and product quality since it aspires to provide a comfortable ride throughout the lifecycle of a vehicle, leaving customers with a sense of happiness and satisfaction. And this customer satisfaction is the most significant contributor towards Tesla's popularity and growth in organic sales. Also, because Tesla Inc. is a trailblazer in the electric vehicle industry, its brand equity is at an all-time high.
3. Tesla’s Noble USP
The term "USP" stands for "Unique Selling Proposition." It's a distinct advantage that sets your organization apart from the competition in your field. Tesla’s USP is one of the most deliberate and thoughtful ones. It speaks volumes about preserving the global environment by removing gasoline or petroleum-powered cars from the equation.
Tesla sells a story, a story of an organization that is in business with the illustrative purpose of preserving the global environment. This is probably Tesla’s most valuable strength.
All these factors will do wonders in an idealistic future world. But, right now, in a Fossil fuel-dominated world, there are a few downsides to consider for this business. Hence, next in this Tesla SWOT analysis tutorial, you will see the Weaknesses.
Weaknesses: Tesla SWOT Analysis
1. Open Source Patents
Tesla is a trailblazer in its area. However, Elon Musk's decision to make all of their patents open source is naive and unrealistic. This could be disastrous for the firm in the long run since it will be unable to defend its inventions from the competition.
2. Complex Manufacturing Procedure
The greater the amount of innovation, the larger the mechanical problems and risk components in the manufacturing processes. Tesla has had challenges with launch delays, manufacturing issues, and slow production ramps when it comes to releasing new automobiles and other commodities. Tesla has competed with the world's leading vehicle manufacturers in a brief period, although its production force is far smaller than its competitors. The company only has one facility in California, and it can only produce a certain number of cars each quarter.
Due to that, at the time of model X launch, Tesla faced severe challenges in manufacturing, leading to distribution delays. The company also ran into a considerably challenging situation at Gigafactory 1 while developing the Model X's battery module manufacturing process. These are the few examples showing the requirement for more manufacturing plants.
3. Premium Price Range
One of the significant challenges that Tesla will continue to face is the price of electric vehicles and customer trust. As mentioned previously, the greater the level of innovation and mechanical complexity, the larger the manufacturing risk and product cost. Tesla aims to provide premium products to a limited market while maintaining a premium automobile corporate reputation. Because of this, the expansion of the market is quite difficult.
Recently, Tesla launched the Model 3 with a little less price tag, 43,990 US Dollars. And it has attracted more crowds than all other premium Tesla productions because of its low cost. So in upcoming years, Tesla will have to work on producing cars with little low cost to increase the customer reach. Otherwise, Tesla will definitely burn cash in upcoming years.
Next, you will discover the external factors of Tesla’s SWOT analysis. First, you will look at the future opportunities that Tesla might be able to seize.
Opportunities: Tesla SWOT Analysis
1. Future Demands Sustainability
Electric cars are the future of the transportation industry. That is something on which the majority of people agree. The only remaining uncertainty is when this change will occur. Many people believe that this will occur within the next 10 years. And those associated with gasoline-powered vehicles predict it will take another 40 years for this transformation to occur.
One thing is for sure, the faster the transition towards electric cars, the better it is for Tesla. Tesla's demand will increase dramatically during this transition from fossil fuels to sustainable energy.
2. Global Expansion
The United States and China, the world's two largest automobile markets, account for the vast majority of Tesla sales. According to the turnover report of 2018, the US accounts for 70% of Tesla sales, whereas China for 10%. This stat suggests that Tesla is not much operational at the global stage.
Asia is home to the world's fastest-growing economies. Concentrating more on Asian markets, notably India and China, has the potential to increase giga sales significantly and solidify Tesla's position as the global leader.
Elon Musk has already established Tesla's presence in India by building its first store. However, the scale of the activities is not significant. Hence, this is definitely a vital opportunity for Tesla in the coming time.
3. Economies of Scale and Scope
Economies of scale suggest that the company should increase its manufacturing capacity. At the same time, the economies of scope represent a reduction in the product pricing to expand the market base.
Tesla is expensive because of its remarkable commitment to innovation, which necessitates a huge amount of funds. But by finding the neutral ground for production complexity and implementing the two principles mentioned above, Tesla can approach massive growth in no time.
In the next section of this Tesla SWOT analysis tutorial, you will look at potential threats that Tesla may face in the future.
Threats: Tesla SWOT Analysis
Tesla confronts a small number of hazards despite the volatile market it serves. Now, discover them one by one:
1. Competition is Growing
Tesla is currently up against stiff competition from alternative fuel vehicles and self-driving technology. Many luxury automakers, such as Mercedes-Benz, BMW, Audi, and Lexus, and mass-market manufacturers like Toyota, Ford, Volvo, and General Motors, are bracing for fierce competition. Despite Tesla's image as an electric car trailblazer, its competitors, who have been in the market for hundreds of years, have swiftly caught up with the technology. Additionally, their lower prices may entice Tesla customers in the future.
Although Tesla appears to be the only manufacturer of high-end vehicles, other companies may start producing cars for the same clientele, putting Tesla in a very competitive environment. Many businesses are preparing to offer environment-friendly self-driving technology at a lower price. It can turn into a major threat for a firm like Tesla, which relies on its unique value to sell new cars that are incredibly expensive and beyond reach for most people.
2. Product Liability Claims
The automotive industry, in particular, is accustomed to dealing with large-scale product liability lawsuits. Since its inception, Tesla has released several self-driving cars, and not all of them have proven to be safe in the case of an accident.
Several lawsuits have been filed against the corporation owing to technical defects. If these liability claims are followed, Tesla may face far more severe financial implications. Thus, something more reassuring should be done to double-check all technical elements of new Tesla vehicles as they arrive.
3. Material Shortage
The last threat that Tesla may face is a scarcity of necessary materials. Aluminum, Steel, Lithium, Nickel, Copper, Cobalt, and Lithium-ion cells are all used by the company, which are acquired from all around the globe. The recent events in Afghanistan have also impacted adversely in the supply of Lithium. Hence, this concern will be the most devastating one for Tesla in the near future.
During the company's annual shareholder meetings, Elon Musk, the CEO, revealed that manufacturing had slowed because of a battery shortage (Lithium). As a result, Tesla INC must act quickly to address this threat.
In the domains of sustainability and innovation, Tesla is a well-known leader. According to SWOT analysis, Tesla has the strengths to continue to be successful. The corporation will almost certainly face some troubles. International expansion, particularly in Asia and other regions of the world, is critical. Tesla has to reconsider its strategy and concentrate on growing its worldwide presence.
Tesla is a subversive automaker with a mission to alter the way people drive in the future. They are not just focusing on building exquisite, environmentally friendly automobiles for the rich but also on developing autonomous driving technology. Each of Tesla's market strengths, weaknesses, opportunities, and threats were highlighted in this SWOT analysis. Tesla needs to take bold action to grow its market share and maintain its financial health.
According to this analysis few immediate actions Tesla should take are:
- Tesla must continue its research on alternative energy sources as Lithium is a volatile substance and has limited resources.
- Work on gaining consumer trust and long-term organization confidence.
- Establish a market base in Asia.
- Implement the principles of economies of scale and scope.
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In this Tesla SWOT Analysis tutorial, you learned what SWOT analysis is and how it works. After that, you looked into a few basic details of Tesla INC. Using Tesla’s business model, you discovered how Strengths, Weaknesses, Opportunities, Threats (SWOT) analysis is done. In the end, you also went through the deductions of our Tesla SWOT analysis.
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If you have any questions or need clarification on any section of this tutorial, please leave them in the comments section at the bottom of this page; we will respond to them soon.