Critical Evaluation of Tesla's Competitive Environment and Capabilities

This report evaluates the competitive environment of Tesla and identifies its competitive environment. The internal environment of the company is also analyzed to determine the factors within the control of the company that has a direct impact on the company. The external environment of the company is analyzed using PESTEL analysis. The risks and future challenges that the company could face are also analyzed in the report.

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Contents
Introduction......................................................................................................................................3
Critical evaluation of Tesla`s competitive environment..................................................................3
Capabilities and core competencies.................................................................................................4
Analysis of external environment....................................................................................................6
Political factors............................................................................................................................6
Economic factors.........................................................................................................................6
Social factors...............................................................................................................................7
Technological products................................................................................................................7
Ecological factors........................................................................................................................7
Advantages and risks of Tesla`s business level strategy.............................................................7
Potential future challenges...........................................................................................................8
Recommendations........................................................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

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Introduction
Tesla Motors is a motor vehicle manufacturing company formed in the year 2003. The
company specializes in the designing and manufacturing of electric vehicles. Tesla is a silicon
valley based company that was founded in the year 2003. It designs, manufactures and sells zero-
emission electric cars and powertrain parts. The company patents and sells the powertrains to
other vehicle manufacturers. The aim of the company is to create a compelling car company for
the 21st century. The mission of the company is to build and sell electric vehicles, sell
powertrains to other car makers and to act as a role model to others in the industry in designing
electric vehicles (Botsman& Rogers, 2011). The report evaluates the competitive environment of
Tesla and identifies its competitive environment. The internal environment of the company is
also analyzed to determine the factors within the control of the company that has a direct impact
on the company. The external environment of the company is analyzed using PESTEL analysis.
The risks and future challenges that the company could face are also analyzed in the report.
Critical evaluation of Tesla`s competitive environment
Evaluation of Tesla`s competitive environment is important in order to identify the
competitors in the industry. The analysis also helps in understanding the competitive advantage
of the company and the factors that make it unique in the market. Some of Tesla key competitors
include; Toyota, Volkswagen, Ford and General Motors.The jaguar I-Pace is very close to the
Model X of Tesla. The Jaguar I-Pace has similar range and acceleration to the Model X. Jaguar
I-Pace is also cheaper by approximately $ 10,000 compared to Model X. Other serious
competitor brands include the Porche`s mission E- Cross Turismo concept. Porche is planning to
introduce a new model of hybrid 911. This model of electric car is threatening all the competitors

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in this market due to its unique design and power.There are other small players in the market
who are venturing into the market of design and manufacture of electric vehicles. The electric
vehicle industry has very many players. This means that the market is very competitive and
hence it is very important for companies in this industry to come up with strategies that will help
the company compete effectively in this market.
Tesla has a competitive advantage in the electric vehicle market. Tesla is the market
leader in the electric vehicle industry because it was the first company to venture into this
segment of car technology. The competitive advantage of the company of Tesla is in the
technology aspect. The company has the patent rights when it comes to the manufacture of
powertrains components. This means that for any company to design and manufacture electric
cars, it has to depend on Tesla technology (Doeden, 2015). The other car makers pay a
significant license fee to Tesla in order in order to use its technology.Tesla also posses the
competitive advantage of being the market leader in this niche market. It was the first company
to venture into the electric car market and therefore it has the advantage of a great wealth of
resources as well as experience exceeding fifteen years unlike many of its competitors.
Capabilities and core competencies
Tesla has several core competencies that help the company to gain competitive
advantage. Capabilities in strategic management can be defined as the unique factors that a
company has and which are important in helping the company gain competitive
advantage.Tesla`s core competencies are it`s manufacturing and innovation abilities.The
company has invented many different types of electric car parts which are crucial in
manufacturing the electric car with zero emission (Frynas, 2015). The fact that the company has

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the fast mover advantage gives it an edge over its competitors in this industry. The company is
the only manufacturer of powertrains which are used in the manufacture of electric vehicles. All
the companies interested in manufacturing electric vehicles, therefore, have to buy the
technology from Tesla. The other core competence of Tesla is licensing its drive propulsion
technology and packaged battery system. This helps Tesla Motors earn a substantial amount of
money from licensing the technology and hence offering the company an advantage compared to
other competitors in the market (Holland & Lam, 2014). The many patents possessed by the
company is a core competence for Tesla and it helps the company greatly in becoming the
market leader in the design and manufacturing of electric vehicles. Good engineering and
technology research has helped the company to always be ahead of its competitors since it
designs innovative technology which is new in the market and hence attracting consumers.Tesla
has strong relations with venture capitalists who have contributed large amounts of capital which
has been instrumental in the growth of the company. The company has received in excess of
$100 million in funding from various investors (Fleisher, &Bensoussan, 2015). The bright future
of the company has encouraged investors to continue trooping in for a share of the companies`
stocks. Tesla has weaknesses which can impact on the performance of the company in future.
one of these weaknesses is that the company is not a popular brand yet among the general public.
This means that the sales volumes of the company are limited and hence limiting the revenues
that the company generates from sales. In addition to this, Tesla does not enjoy economies of
scale. This is because the company is small in size compared to its peers. The companies`
production capacity is limited and hence it cannot capitalize on economies of scale to reduce
costs of production. Tesla experiences difficulties in keeping up with the supplies when the

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demand for car parts increases. This causes delays and inconvenience to customers and hence
destroying the brand of the company.
Analysis of external environment
The external environment of Tesla is analyzed using PESTEL analysis technique.
Political factors
The political factors that affect the operations of Tesla include the government incentives
for electric automobiles. The government has injected a substantial amount of resources both
directly and indirectly in order to support the electric car industry.The aim of the government is
to promote clean vehicles with little emissions in order to reduce the effect that vehicles have on
the environment. This is an opportunity that the company should utilize in order to grow and
improve sales. There are also expanding free trade agreements that the company should utilize to
achieve higher sales in other countries where it has an opportunity to export (Whitney, 2016).
Another political factor that has an influence on the Tesla is that the political environment is
stable and hence a perfect opportunity to do business.
Economic factors
The cost of manufacturing electric car batteries has gone down. This is perfect for Tesla
since the batteries will become more affordable and the sales will increase and hence increasing
the revenues of the company. The cost of renewable energy is going down because of various
government subsidies which have lowered the costs and hence making renewable energy
products more affordable(Cadle, Paul& Turner, 2010).The economy of the country is growing at
an impressive rate and hence the companies` sales should improve by taking advantage of the
increase in disposable income among the citizens.

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Social factors
Most of the people in developed nations are appreciating the need for low carbon
emissions. The population is, therefore, more sensitive to the environmental impact of whatever
they consume. Due to this social factor, electric cars have become increasingly popular and
therefore there exists a perfect opportunity for Tesla to take advantage (Marmol, Feys&Probert,
2015). The developing markets have also experienced a wave of improved income distribution
and hence offering more markets for the company to sell its products.
Technological products
The high rate of technological change in the industry offers both an opportunity and
threat to the company. The rate of technological advancement has increased automation of
electric vehicles and hence offering consumers increased efficiency.
Ecological factors
Tesla is one of the companies that designs and manufactures vehicles that do not pollute
the environment. The vision of the company is to manufacture a car with zero emission rate. The
rising standards of electronic waste disposal may bring about a concern on disposing parts of the
vehicles when they unusable (Tansel, 2016).
Advantages and risks of Tesla`s business level strategy
The business strategy of Tesla is to focus on design and manufacture of high quality and
high-performance Electric vehicles. The focus strategy has various advantages to the company.
By focusing on high-quality electric vehicles. The company will be able to establish itself as a
premium recognizable brand. The company will, therefore, be able to secure a niche market and
sell products at a premium price. The focus strategy will also help the company to specialize and

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improve expertise and hence offer customers high-quality products(Gandellini, Pezzi&Venanzi,
2012). The focus strategy also enables a company to focus on offering high-quality services after
they have bought the product.
The risk of focus strategy is that it can limit the growth strategy of a firm and hence
limiting its size. This will, therefore, mean a small market share and lower revenues. There is
also a huge risk that the niche may disappear and be taken by a competitor and hence the
company may cease to exist in future. Tesla also risks reducing its revenue base because the
strategy limits revenue streams and hence increased the risk for the business.
Potential future challenges
Tesla faces a challenge of increasing its production capacity. The current production
capacity of the company is very low hence the company takes only a limited number of orders
per year. This limits the ability of the company to take advantage of economies of scale which
could reduce costs for the company (Coste-Maniere, 2012). The company, therefore, faces a
challenge of growing and increasing in size in order to become more competitive.
Tesla faces a challenge of overcoming competition in future. Most car manufacturing companies
are entering electric vehicle manufacturing market. Some of the companies are such as Porche,
Jaguar, Toyota, and Hybrid are manufacturing electric vehicles that offer stiff competition to
Tesla (Batty, 2016). The company, therefore, faces the challenge of overcoming competition in
order to remain the market leader in the EV segment.
Recommendations
Tesla should increase its product portfolio. This will go a long way improving the market
in increasing Tesla`s revenue stream and hence improve the companies` profitability.

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Tesla should seek more funding in order to increase its production capacity. This will help the
company to serve a wider market and to improve its market share in the vehicle manufacturing
industry(Baines Fill & Page, 2010).
Tesla should take advantage of free trade agreements between the USA and other
countries to increase its market presence globally. The company should also take advantage of
the subsidies to increase production and increase its presence in the market.
Conclusion
The report analyzes and discusses the competitive environment of Tesla in order to
identify Tesla competitors and the level of competition in the market. Tesla`s main competitors
include Porche Jaguar, Toyota, and Volkswagen. The competitive advantage of the company is
its technology. The company has patented Electronic Vehicle technology which the company can
take advantage. The report also analyzes the external environment of the company to determine
the external factors that might affect the operations of the company. The focus strategy of the
company helps the company to concentrate on specific products and hence selling products at a
higher price than other competitors in the market. The risks and future challenges that the
company might face are also discussed in the report.

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References
Baines, P., Fill, C., & Page, K. (2010). Marketing. Oxford, Oxford University Press.
Batty, C. (2016).Media Writing. Palgrave Macmillan. Http://Www.Myilibrary.Com?Id=976973.
Botsman, R., & Rogers, R. (2011).What's Mine Is Yours: How Collaborative Consumption Is
Changing The Way We Live. London, Collins.
Cadle, J., Paul, D., & Turner, P. (2010).Business Analysis Techniques: 72 Essential Tools For
Success. London, British Computer Society.
Coste-Maniere, I. (2012). Global Luxury Trends - Innovative Strategies For Emerging Markets.
Doeden, M. (2015).SpacexAnd Tesla Motors Engineer Elon Musk.
Frynas, J. G. (2015). Global Strategic Management.Oxford University Press.
Fleisher, C. S., &Bensoussan, B. E. (2015).Business And Competitive Analysis: Effective
Application Of New And Classic Methods.
Gandellini, G., Pezzi, A., &Venanzi, D. (2012).Strategy For Action. The Logic And Context Of
Strategic Management I I. Milan, Springer.
Http://Public.Eblib.Com/Choice/Publicfullrecord.Aspx?P=973927.
Holland, R., & Lam, B. (2014).Managing Strategic Design.
Https://Nls.Ldls.Org.Uk/Welcome.Html?Ark:/81055/Vdc_100028567701.0x000001.

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Marmol, T. D., Feys, B., &Probert, C. (2015). Pestle Analysis. [Place Of Publication Not
Identified], 50minutes.Http://Public.Eblib.Com/Choice/Publicfullrecord.Aspx?P=4005664.
Tansel, A. K. (2016). Marketing Report On "Tesla Motors" Marketing Audit, Segmentation &
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Resolving.De/Urn:Nbn:De:101:1-2017021114338.
Van Gilluwe, F. (2014).Tesla Model S - Best Car Ever! Mountain View, CA : FAQware.
Whitney, G. (2016). The Tesla Motors Handbook.Emereo Publishing