Tesla Motors is one of the most promising companies in automotive industry regardless of its business struggles in the past. In fact, despite the costly prices of its unique cars, the company has gained strong based of consumers and followers of the brand. With this impressive performance in the market, a study concerning its business strategy through SWOT analysis and Value Chain analysis is worth setting. It is interesting to note the fact that the company has reportedly reconfigured its system and has taken full charge and ownership of its value chain concerning strategy. This is with a determined recognizable pattern of unsettling strategic initiatives on its operation. This is considered a part of the strategic business plan of Elon Musk, Tesla Motors’ founder and CEO.
SWOT Analysis
Tesla Motors has a rich history prior to its successful run in the automotive market. Perhaps the strongest suit of the company is its current position being the pioneer in fully electric sports car through its first model, The Roadster. This was said to be developed immediately after the revamp of the company’s management. Although there were other manufacturers that developed and released their own versions of electric cars, Tesla Motors was the first to materialize the concept among its competitors. Another strength of the company is that it was able to position itself as the leading technological expert in the category of electric transmission and drive train within the market. In fact, whenever electric cars are being deliberated in forums and technological discussions as the expert in the respective field, hence the strong brand image. The company can sustain itself by not depending on other suppliers as it can produce its own materials, parts, and sub-assemblies in developing and assembling its own car models. The company’s efficiency in developing in-house materials and products can be proven with its own sideline – as a supplier of materials to other vehicle manufacturers particularly with Toyota. Tesla Motors, as demonstrated in Model S, has designed a futuristic platform that can be adapted as a universal model for the future cars. By having the design patented and copyrighted, the company can gain further profit through partnership and collaboration with other manufacturers that would seek to adapt the flexible design of the vehicle.
On the other hand, the company’s mode of self-production in terms of materials and vehicle parts would mean high cost in productions since the economic scale model, which is bargaining system for materials with its manufacturers, cannot be applied. In effect, the company could not afford to lower its prices in order to compete with other rivals that sell economic cars in affordable prices. Meanwhile, the growing awareness of governments in global scale regarding the importance of environment-friendly cars is giving the company an opportunity to expand its market. It was predicted that smart cars and electric cars are the viable options for vehicles once the global awareness has set in among major countries. Tesla Motors can easily adapt the concept of smart car or produce their own version on its accordance. This is attainable for the company since it already has prior arrangements with Mercedes Benz’s smart car by supplying some of the parts of the model (Praem 2014). They can learn the technology by association and produce their own passenger vehicle. Another opportunity that the company can gather is to study further the production of its materials and vehicle parts regarding quality and alternatives. An efficient study can lead the company to resort to more affordable raw materials that can yield with same quality. By doing so, the company can reduce it price and bring their products in a wider market.
The threats for Tesla Motors can be attributed to the current design of its business model – being self-sufficient and self-reliant through overall in-house manufacturing. The high cost of the production restricts the company to design their pricing trend for the average earner consumers, hence the company could not widen its target market. The default with the production cost leaves the company with the difficulty in adjusting their prices for their vehicles. Another determined threat is the unpopularity of the technology being used as compared to the traditional and well-known technology of the competitors, which is the combustion engine. Although electric car is being regarded as the viable alternative of combustion engines vehicles in order to alleviate air pollution, majority of the vehicle users are unwilling to invest in to the technology that they are not familiar with.
Value Chain Analysis
As discussed earlier, Tesla Motors has taken charge its value chain management under the Tesla brand by integrating most of its features such as designing process, production and sales that were being handled separately in a traditional business model. Pertaining with its inbound logistics, the Gigafactory system is currently at work-in-progress since the battery factory is still being developed by the company (Praem 2014). Once accomplished, the battery factory of the company will not only complete the Gigafactory system but it will also provide additional source of revenue for the company. The production scores the tenable quality of the vehicle particularly with the Model S, the technical expertise of the manpower and the exclusive integration of production system that was made possible by having its own plant designed for electric vehicles. The outbound logistics was systematically designed with integrated distribution model by creating its own stores under the Tesla brand. The company’s aim in having its own stores is to educate the customers regarding the company’s goal for the industry and electric cars technology as part of its impressive brand perception. The major percentage of marketing and sales features are associated to the name of Elon Musk, being the face of the company and credible educator of futuristic technology. Musk has a strong base of followers both of admirers and purchasing customers. Supercharger station being distributed in several parts of the globe helped to erase the stigma about electric cars being unreliable in roads due to battery failure. The strong base of the followers and consumers has provided the word-of-mouth marketing with their first hand testimonies of their Model S experiences.
Conclusion
The remarkable performance of Tesla Motors in the market is due to its unique business model particularly its self-sustaining feature by creating a Gigafactory system. This is regarded as admirable particularly with the followers of the brand since it could generate additional sources of income for the company, yet this is also detected as a detrimental factor for its pricing strategy. The company has plenty of opportunities to expand its operation and widen its target demography concerning technological developments.
Work Cited
Praem, Nicoline Eeg. “Valuation of Tesla Motors Inc.” Copenhagen Business School. August
2014. PDF. 8 July 2016.
