Industry Analysis

1. Competitive analysis
Firstly, it is quite crucial to make a competitive analysis when we focus on one industry.
Tesla has many competitors among traditional carmakers, such as Ford, BMW, Nissan, and
so on, but it focuses on producing high-performance electric vehicles. Although there are
now more competitors to enter the markets, Tesla is always at the top of the high-level
automotive market.
Although the competitors (Ford, BMW, and Nissan) have benefits over Tesla in various
fields, such as branding, resources, and generating income outside of the automotive market,
which means they have all proved themselves in the automotive industry, they have to adapt
to the new automotive market. At that time, the core competency of the competitors is the
production of gas engine vehicles, which has allowed the competitors to become the
dominant companies. When Tesla focuses on the electric vehicles, the competitors continue
to sell their usual products, though they are trying to research and develop in electric vehicle
industry at the same time.
However, Tesla realized that the competition would continue to grow, turned the weaknesses
of competitors into its' opportunity, and continue to focus on produce electric vehicles.
Gradually, most of the competitors cannot produce even one can surpass the Tesla. In fact, It
means the competitors just haven't done it yet, but not they do not have the abilities to do so.
Currently, the number of electric vehicles on the market is very small, the phenomenon
pushes consumers to Tesla. In other words, consumers would gradually shift to choose the
electric vehicles, which means a great motivation for Tesla to create the new products. For
the competitors, Ford, BMW, and others, it poses a threat, but for Tesla, it is a massive
strength. Therefore, Tesla has become famous in the electric vehicle market.
2. “Porter’s Five Forces” analysis
Then, the “Porter’s Five Forces” framework for industry analysis is an effective tool for
examining an industry’s health and competitive intensity.
In terms of the Rivalry Among Existing Firms, the number of players and respective shares
represents the level of competition in industry. There are not many companies operating in
the automotive market, and even fewer companies operate at the Tesla level. There are also
very few barriers for customers to find cars from other automakers, which further intensifies
competition.
On Bargaining Power of Buyers. Usually, suppose the customers enjoy market power. In
that case, they are in a better position to negotiate for lower prices with the vendors, but for
Tesla, which is in the situation that there are more customers but fewer competitors. Tesla is
at the top of the electric vehicle industry. It limits the bargaining power of the customers. So,
it seems that Tesla has not been affected by this power.
Furthermore, on the Bargaining Power of Suppliers. This power can usually affect the
operating of small companies, because their supplies can directly affect the prices and
qualities of the products. In fact, the suppliers of Tesla have a relatively low level in
forwarding integration. It means that they have control over the sale and distribution of
items, especially some suppliers always sell the products to Tesla by the third parties. Thus,
this factor poses a moderate force on Tesla.
On Threat of Substitute Products, substitutes exist in two forms: products with the same
functionality but have lesser pricing and products with the exact pricing but differ in quality.
In fact, Tesla experienced the impact of substitutes. Low switching costs largely influence
these substitutes. So, this force makes a moderate threat to Tesla.
Finally, on the Threat of New Entrants, Tesla's operating level is so high that it is difficult
for new entrants to compete with it. It is challenging for a new company to compete with
Tesla's strength. In addition, the cost of doing business in the automotive industry is high.
Only established companies like Tesla can benefit. So, this force poses a weak threat to
Tesla.
3. Production Capacity Levels and Pricing
When discussing the industry analysis, production capacity levels and pricing are also
significant. For the production capacity levels, Tesla was the first car manufacturer to launch
the world’s first full-electric vehicle. So, the capacity levels of Tesla are very high. Tesla has
an intense production process, which stems from vertical integration and the centralization
of power in the Tesla’s organizational structure, especially there are no third parties
involved.
In terms of pricing, it is quite costly. Cars are expensive for typical customers, especially for
individuals in developing countries. It means that Tesla often focus on wealthy customers. In
conclusion, Tesla has made a great impact in the automotive industry.