Tesla Case free essay sample

Sociocultural factors:  · The trend today between people and in the U. S. environment is buying such types of cars. Technology factors:  · Technology is highly used and thus ready to assist in the availability of these cars. Ecological factors:  · The cars that are produced by tesla are environmentally friendly. Legal factors:  · The regulations in the U. S. help the growth of such a business. 2. For the Tesla Company, in order to analyze the industry’s environment, one has to cover each aspect of the Porter’s 5 forces. First force is the competitive rivalry which is considered very high in this industry. All companies are searching for the new market in the car industry which is the electric line. The industry is limited to specific players which make it saturated as every player has huge resources, reputation, image†¦ Thus it is an oligopoly as there are 3 big US companies, along with the German, Japanese, Korean, and Chinese car companies. We will write a custom essay sample on Tesla Case or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Second force is the threat from new entrants which is low. The barriers to entry are high due to the high capital requirement to manufacturing cars. Also such an industry need brand equity and image along with needing a wide distribution channel. Also one needs the technological know-how which is gained through time and investing highly in human capital. Nevertheless it is highly difficult to exit such an industry after investing in it. Third force is the bargaining power of suppliers which is considerably moderate. Tesla is an important company for some of the suppliers as it is considered a significant customer to them and they have a long term contracts to defend itself so there bargaining power is low. But at the same time for other suppliers, Tesla has specific needs and not everyone can supply them so their bargaining power is high. Thus as a whole it is moderate. Forth aspect is the bargaining power of buyers which is also moderate. In this industry there are two types of buyers dealers and individuals. Dealers have long term contracts with the company and they usually order in large quantities which make their bargaining power high. However for the individuals their bargaining power is low as their order is minimal. Thus as a whole it is moderate. Finally the fifth factor is threat of substitutes which is also moderate. It depends on the market if it is used to using other ways of transportation like walking or public transportation. But for using normal fuel cars there is a strong infrastructure which isn’t present yet for electric cars making it easier to substitute to fuel cars. However the market is searching for fuel efficient cars or other kinds of energy cars especially with the increase in fuel prices causing higher demand to electric cars. Thus as a conclusion as Tesla can’t lower the cost of production so can’t lower the prices making them unable to compete on prices, Tesla should differentiate themselves in terms of quality and design to target higher end customers. 3. Using VRIO analysis: Valuable: Tesla motors is an American company that designs and sells electric based cars. In December 2006, Tesla motors was announced as the best invention of the year in the transportation category, however, the electric car technology is still not proven and it lacks high-performance batteries as well as some major safety issues then after some challenges the company has faced, it has improved electric power-train performance and lowered the production cost in 2009. Rarity: Tesla Motors is known to have a differentiated product over other firms in the sense that it sells electric based cars. It is the only successfully running electric sports cars in the U. S. At the beginning sales were not enough to sustain the business but tesla motors proved it self after introducing the new model, Tesla Roadster 2. There is only few car manufacturing companies trying to enter this industry which makes Tesla Motors have a competitive advantage. Imitability: This new invention needs a huge amount of capital to invest in. Tesla motors took a huge risk by investing in a new and differentiated product because this business might fail at one point or another. Organization: Tesla motors has got very good resources and technology however, it was bleeding money. As well as it lacks the good culture and trustworthiness of an organization for example when Martin Eberhard, one of the founders of Tesla Motors had led the investors to believe that the cost of the roadster was $65,000 whereas it turned out to be $92,000 sticker price. Through VRIO analysis, Tesla Motors is found to be a valuable and rare company. Of course it is very hard to imitate considering the amount of capital that should be invested, as well as the huge risks taken. However, we found out that Tesla motors has few emerging competitors into this industry. We can conclude that if Tesla Motors puts extra efforts onto making its organization a better one and invest its time researching in order to overtake other car manufacturers whom are trying to invest in this new technology, then Tesla can maintain its current competitive advantage in the long run.