Industry Analysis of Tesla: Porter's Five Forces Model

The report includes industry analysis of Tesla using Porter's Five Forces Model, international trade position, political and economic factors, social and environmental factors, and recommendations for Tesla's growth and expansion.

The Business Environment
Assignment 1

EXECUTIVE SUMMARY
Industry analysis is very important for any global organisation to analyse the threats and
opportunities that are coming its way to understand the current position in the market and project
the future standing in the market. For such an analysis, Porter’s Five Forces Model can be used
which discusses the five external forces affecting any organisation like new entrants, rivals,
customers, suppliers and availability of substitutions. Thus, the following report also explains
this model with respect to Tesla. Then market position of Tesla is also explained in the
international trade considers it to have very strong market share and presence. Then, from the
global perspective for growth and expansion of Tesla, its political and economic factors are also
explained which appear to be in favour of the company. Social and environmental factors are
also discussed for trade development along with recommendations to the company.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
MAIN BODY..................................................................................................................................4
Industry Analysis.........................................................................................................................4
International Trade Position........................................................................................................5
Political and Economic Factors...................................................................................................6
Social and Environmental Factors...............................................................................................7
Recommendations........................................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................1

INTRODUCTION
Industry analysis is the analysis of current and potential circumstances in the industry for
understanding of the position of the company as compared to its competitors in the industry and
assists in identifying the opportunities and threats coming its way. The below report thus will
include the industry analysis of Tesla using various models and determination of trade position in
international markets. Then it will explain the political and economic factors for growth and
expansion along with social and environmental factors for trade development. Finally, action will
be recommended based the above analysis of the industry.
MAIN BODY
Industry Analysis
The international organisation selected here is Tesla and its analysis in the industry i.e.,
automotive industry and energy solutions industry as per the Porter’s Five Forces Model which
studies the external factors affecting the company is as follows:
COMPETITIVE RIVALRY – STRONG FORCE
This factor includes competitiveness in the environment of automotive and energy solutions
industry. In the case of Tesla, there are various factors for the strong force of external factors like
few number of firms, highly aggressive firms, low costs of switching, etc. all of which contribute
to this factor being a strong force.
BARGAINING POWER OF CUSTOMERS – MODERATE FORCE
The customers of the Tesla are the most essential regulatory factor affecting its sales and
revenues (Tesla Inc. Five Forces Analysis (Porter’s Model) & Recommendations, 2022). Low
costs of switching, moderately available substitutes and purchases in low volumes makes this
factor a moderate force of the external forces on the company. This low cost of switching allows
the customers to purchase cars from other companies which poses a threat to Tesla.
BARGAINING POWER OF SUPPLIERS – MODERATE FORCE
It includes availability of raw materials from the suppliers. Therefore, it can be said that the
bargaining power of suppliers has moderate impact on the operations of Tesla. The factors which
render such moderate impact includes moderate forward integration, moderate supplier size and
moderate level of supply of raw materials.
THREAT OF SUBSTITUTION – MODERATE FORCE
The threat of substitution in the automotive and energy solutions industry impacts the Tesla

moderately. This moderate impact is due to factors like low costs of switching, moderately
available substitutes and moderate substitute performance (Perkins and Murmann, 2018). This
low cost of switching enables and enhances the competition in the industry which is a strong
force against the environment in the industry in which Tesla operates.
THREAT OF NEW ENTRANTS – WEAK FORCE
It is to be noted that the threat of new entrants in the industry of Tesla has a weak force which
can be proved by the factors like high costs of developing the brand, high costs of conducting the
business and high scale of economies. It is very well known that the business of Tesla is very
tough to compete especially with the popularity and intellect of Elon Musk.
International Trade Position
It is not a new fact that Tesla is dominating the market of electric vehicles for years now
in the United States. It has accounted for a whopping 75% market share in the market of electric
vehicles in the first quarter of 2022. It was also ranked first in the list of most valuable
automotive brand globally in 2021 and was a part of top 15 most valuable brands globally in all
the industries. It registered the growth rate of 157% in 2021 and was the fastest growing brand
globally (Chen, Chowdhury and Donada, 2019). In the first 3 quarters of 2021, it accounted for
627,350 units of deliveries of the vehicles which is 16% more than the overall sales in 2020. The
Model 3 of Tesla is the first electric vehicle to reach the milestone of one million sales globally
in June 2021 which resulted in this model becoming the bestselling plug-in electric vehicle in the
world.
Tesla has crossed the mark of 54 billion USD in terms of revenue globally with a record
of 255k deliveries of the vehicles quarterly thereby resulting in the earning of operating margin
of 19.2% quarterly (Teece, 2018). The Model 3 and Model Y are the most selling models of
Tesla which accounted for almost 96% of the total vehicle deliveries in the 3rd quarter of 2021
whereas, the company aimed make the Model S and Model X to be the most selling among the
high – end customers. Although the markets of United States are the most crucial target market,
the company is now aiming to access the markets of China as well as European countries also.
The top 10 electric vehicles sold in the markets of United States in the first quarter of
2022 includes 4 models of Tesla namely – Tesla Model Y, Tesla Model 3, Tesla Model X and
Tesla Model S at the ranking of 1st, 2nd, 4th and 7th (Thomas and Maine, 2019). It has already

delivered 310,048 vehicles in the first quarter of 2022 which is a record for the first quarter
deliveries. This deliverance of exceptional performances in the market is the result of its efficient
strategic measures to handle the competitive challenges.
Political and Economic Factors
Political Factors
Factors which affect the company and the industry due to intervention of the government
are included here. Herein, the growth and expansion of the business is affected by various
policies, level of corruption, applicable restrictions and other aspects in the long term. The
political and economic factors are directly affected by the ecological factor of Tesla as the
vehicles are more dependent on electricity and lesser on the fuels which makes the company
environment – friendly (Kancherla and Daim, 2018). Also, the customers of such electric
vehicles get particular tax credit for utilization of such electric vehicles. Considering the drive of
this company i.e., environmental friendliness, the government has offered various incentives to it
and its customers which resulted in strengthening of the financial performance. Thus, it can be
said that the applicable political factors have favoured the growth and development of Tesla and
also ensured its expansion globally.
Economic Factors
Factors which affect the profitability of the company and its economic growth in the
market and industry comes under the purview of economic factors. It includes aspects like
current rate of interest, current rate of inflation, rates of exchange influencing the income of
consumers, rates of economic growth, rates of unemployment in the industry, etc. It can be
agreed that the car is included in the luxury category and as times has changed, the selling of
electric vehicle has enhanced the global economy and given it a significant boost (Matthews and
et.al., 2020). Year 2016 and 2017 accounted for the years in which the automobile industry went
through a rapid growth and this rapid growth resulted into generation of an idea of production of
vehicles that can be cost – effective in the future. It shall be noted that the growth and expansion
of the company in a market depends upon the economy of the local market in which it aims to
expand and grow. Production of cost – effective vehicles will naturally attract the consumers and
company will be benefitted in the long run by competing with the other existing companies in the
market and by meeting the demand that is increasing of the electric vehicles owing to its

environment friendly nature and cost efficiency of running them. Economic instability is a threat
to the growth and expansion of Tesla.
Social and Environmental Factors
Social Factors
Factors which involves behaviour of tastes and preferences of the customers along with
the norms of society comes under this category. Demand of the consumers in the target market
comes here for setting of the short – term and long – term goals. Electric cars of Tesla are one of
its kind and have elevated the idea and implementation of luxurious electric cars for the people to
enjoy (Tesla PESTEL Analysis, 2022). Therefore, by studying the socio – cultural impacts of a
place the company focussed on the maximization of the profits and revenues through study of
investors, employees and customers. Tesla played very intellectually and turned the response of
the market in its favour by being environment friendly and positive towards the resources of
renewable energy as the people preferred. The company has to be careful while investing in the
developing markets as they can assist in generation of profits and revenue. Also, Tesla is a tough
competitor for the other rivals in the automotive and energy solutions industry.
Environmental Factors
This is the area where Tesla has real strength over its competitors and rivals in the market
and industry. For the past few years, the environmental factors have become the topmost priority
of any company operating. Also, the regulations of government regarding the carbon footprint,
scarce raw materials, pollution in the environment and even more has forced the company to be
environmentally concerned. It is very clear that the environmental factors are in favour of Tesla
as it is environment friendly (Jiang and Lu, 2018). Also, the issues of utilization of the resources
in a controlled manner and changes in climate are dealt by the company by expansion of
programmes related to supporting environment. Tesla is known to be abiding of such norms and
as a result, it has been able to establish a very strong brand image in the market and industry as it
is known to barely impact the emissions of carbon. Such abiding of norms includes utilization of
products that are sensitive to the environment like solar panels, electric vehicles and batteries.
Thus, Tesla can expect growth and expansion by multiple folds each time if it analyses these
environmental factors effectively and efficiently.

Recommendations
It can be agreed that the competition is the major force that drives and impacts the
operations of any business according to the Porter’s Five Forces analysis of Tesla. Thus,
prioritization of the rivalries in the market and industry shall be done by the company while
strategy formulation. Resultantly, it is also recommended to strengthen its competitiveness
through higher and better innovation and effectively enhanced presence in the market and the
industry. Tesla shall boost its investment in the department of research and development to
enhance level of innovation and creativity for outpacing the rate of innovation in the energy
storage of the competitors (Kim, 2020). For enhancement and increase in the presence in market,
Tesla follows and implements aggressive campaigns to support marketing which duly complies
with the company’s vision statements and mission statements so as not to divert from its line of
direction towards the achievement of such missions and vision. Other forces in the Porter’s Five
Forces analysis are also of significant importance and intensity but when compared to the forces
described above, it is of much lesser significance. Therefore, the management shall address these
forces as per their level of intensity in the company through implementation of these managerial
initiatives.
CONCLUSION
Concluding the above report, it can be said that analysis of industry is crucial to know the
current and potential market position of the company in the industry. Therefore, to know such
position in the industry the above report includes industry analysis of Tesla along with analysis
of market position in the international trade. Also, political and economic factors are explained
for growth and expanding the trade along with social and environmental factors for developing
the trade. Finally, recommendations are given keeping in mind the above analysis of the industry
along with the related risks and opportunities for Tesla.

REFERENCES
Books and Journals
Chen, Y., Chowdhury, S. D. and Donada, C., 2019. Mirroring hypothesis and integrality:
Evidence from Tesla Motors. Journal of Engineering and Technology Management. 54.
pp.41-55.
Jiang, H. and Lu, F., 2018. To be friends, not competitors: A story different from Tesla driving
the Chinese automobile industry. Management and Organization Review. 14(3). pp.491-
499.
Kancherla, Y. D. and Daim, T. U., 2018. Technology Roadmap: A Roadmap for Tesla.
In Infrastructure and Technology Management (pp. 347-366). Springer, Cham.
Kim, H., 2020. Analysis of How Tesla Creates Core Innovation Capability. International
Journal of Business and Management. 15(6). pp.42-61.
Matthews, T. and et.al., 2020. Tesla Energy. In Innovation Management in the Intelligent
World (pp. 233-249). Springer, Cham.
Perkins, G. and Murmann, J. P., 2018. What does the success of Tesla mean for the future
dynamics in the global automobile sector? Management and Organization Review. 14(3).
pp.471-480.
Teece, D. J., 2018. Tesla and the reshaping of the auto industry. Management and Organization
Review. 14(3). pp.501-512.
Thomas, V. J. and Maine, E., 2019. Market entry strategies for electric vehicle start-ups in the
automotive industry–Lessons from Tesla Motors. Journal of Cleaner Production. 235.
pp.653-663.
Online
Tesla Inc. Five Forces Analysis (Porter’s Model) & Recommendations. 2022. [Online].
Available through: <https://panmore.com/tesla-motors-inc-five-forces-analysis-
recommendations-porters-model>
Tesla PESTEL Analysis. 2022. [Online]. Available through:
<https://www.edrawmax.com/article/tesla-pestel-analysis.html>
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