Running head: TESLA MOTORS: INNOVATION AND COMPETITIVE ANALYSIS

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Project Deliverable 2: Innovation and Competitive Analysis

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Strayer University
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Management Capstone 599

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Dr. Evangeline Jefferson

February 3, 2019
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 TESLA MOTORS: INNOVATION AND COMPETITIVE ANALYSIS
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Tesla Motors: Innovation and Competitive Analysis

Introduction

Tesla Motors is one of the leading automotive Companies across the entire globe. The

Company maintains its high [profitability levels through the incorporation of significant

operational strategies. Regardless of Tesla's commendable performance in the industry, there are

numerous external forces threatening its continued growth and development. As one of the

leading players in the electric automotive market, the Company should effectively address these

factors to ensure long-term resilience and competence. It faces massive competition for other

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automakers such as Honda Motor Company, Ford Motor Company, Volkswagen, General Motors

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Company, Nissan Motor Company, Toyota Motor Corporation, and BMW (Karamitsios, 2013).

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In this case, Tesla Inc. should account for the characteristics and nature of such competitors
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within the international and the domestic markets for the electric automobiles. The current

success enjoyed by Tesla Motors as a renowned innovative manufacturer is due to the ability to
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put in place significant strategies for tackling the external factors influencing this industry.
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Innovation and Competitive Analysis of Tesla Inc

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There are various external factors that influence the operations and performance of
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multinational automotive Companies such as Tesla Motors. These include the availability of raw

materials and the adoption of emerging technological advancements. Tesla's resilience in this
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industry depicts great strategic effectiveness against its rivals. Despite massive competitive
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challenges, Tesla manages to thrive well in the industry market (Karamitsios, 2013).
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Nevertheless, the Company should be in a good position o address the external factors based on

the intensity of significant forces influencing the business operations. For instance; there is a

strong force with regards to the competitive rivalry, moderate force in the bargaining power of

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 TESLA MOTORS: INNOVATION AND COMPETITIVE ANALYSIS
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customers and suppliers, the moderate force with regards to the threat of substitutes, and a weak

force in terms of the threat of new entrants.

Competitive Rivalry

Automotive industry depicts great levels of competition across the entire globe.

Companies usually take advantage of every emerging opportunity such as the technological

advancement to outweigh the competitors. Competition is primarily blamed on the small number

of Companies, high aggressiveness amongst the existing automotive companies, as well as the

low switching costs (Grant, 2016). The small number f firms operating in this industry tends to

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limit the impact of competition on Tesla, Inc. Nevertheless, these Companies are extremely

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aggressive with regards to innovation and product promotion. For instance, large automotive

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firms have aggressive marketing campaigns.
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Bargaining Power of Customers

The bargaining power of customers in the automotive industry is influenced by low

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switching costs, availability of moderate substitutes, and low purchase volumes. The low
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switching costs minimize barriers for the prevailing Tesla customers to buy cars from other
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companies. The availability of substitutes is, however, moderate in most cases. This moderation
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limits the bargaining power of the customers against Tesla Motors. For instance; most customers

residing in suburban regions have limited access to public transport, hence making it appropriate
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to drive their personal cars (Stringham, Miller, & Clark, 2015). Moreover, the customers’
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influence in this Company is associated with low purchase volumes.

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Bargaining Power of Suppliers

The virility of Tesla Inc.’s business frameworks is largely dependent on the suppliers’

reliability. Suppliers are responsible for shaping the industry environment through the influence

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 TESLA MOTORS: INNOVATION AND COMPETITIVE ANALYSIS
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of the constant supply and availability of necessary materials (Stringham, Miller, & Clark, 2015).

The external factors influencing the supply comprise the aspects of moderate forward

integration, moderate size of suppliers, as well as the moderate level of supply.

Threat of Substitutes

The threat of substitutes is primarily influenced by factors such as the low switching

costs, moderate availability of substitutes, and moderate performance. Low switching costs

enhance competition since it enables other substitutes including public transportation sector to

attract customers (Grant, 2016). Nonetheless, this kind of influence on supplies is limited by the

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moderate availability of substitutes. On the other hand, many substitutes have moderate

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performance levels with regards to the aspect of customer satisfaction.

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Threats of New Entrants
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It is somewhat difficult for other Companies to compete with Tesla's business due to the

high cost of enhancing brand development and popularity. For instance, the new entrants find it
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challenging to match the Corporation's strong brand. Such external element emerges as one of
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the entry barriers. Moreover, entry barriers into this venture are also inflicted by high costs of
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production. According to Moritz et al. (2015), established industry players such as Tesla benefit
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from increased economies of scale that can only be achieved by the new entrants after exceeding

the production threshold.

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Conclusion and Recommendations

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From the analysis, it is clear that competition is one of the most significant forces that
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influence the operations of Tesla Motors. Therefore, it is necessary for the company to prioritize

this force in its strategic formulation. The top management should try any possible strategy for

continued strengthening of Tesla's competitiveness. It should be noted that a stronger competitive

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 TESLA MOTORS: INNOVATION AND COMPETITIVE ANALYSIS
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advantage can be achieved through increased market presence and innovation. For instance, with

regards to innovation, it is necessary for the company to boost its investment in R&D (research

and development). Moreover, aggressive marketing campaigns are necessary for enhancing the

Company’s competitive advantage. The managerial initiatives should address these prevailing

forces based on their intensities.

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 TESLA MOTORS: INNOVATION AND COMPETITIVE ANALYSIS
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References

Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. New York, NY:

John Wiley & Sons.

Karamitsios, A. (2013). Open innovation in EVs: A case study of Tesla Motors. Retrieved from

https://pdfs.semanticscholar.org/af23/f5dd51db88e2751efd4f835b7588bd838843.pdf

Moritz, M., Redlich, T., Krenz, P., Buxbaum-Conradi, S., &Wulfsberg, J. P. (2015, August). Tesla

Motors, Inc.-Pioneer towards a new strategic approach in the automobile industry along

the open source movement. In Management of Engineering and Technology (PICMET),

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2015 Portland International Conference on (pp. 85-92). IEEE.

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Stringham, E. P., Miller, J. K., & Clark, J. R. (2015). Overcoming barriers to entry in an

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established industry: Tesla Motors. California Management Review, 57(4), 85-103.
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