TESLA MOTORS INC. Essay Example

Executive Summary

The overall structure of the paper is an introduction to the company that is Tesla Motors Inc. the introduction entails a brief history of the company including its founding and location. An introduction on the overall external environment analysis is then provided including the importance of the analysis to profit making business organizations. An external business analysis is then conducted with focus on future company projections. The analysis is done based on Economic Environment, Competitive Environment, Labour Environment, Resource Environment, Customer Environment, Legal and Regulatory Environment, Global Environment, and the Technological environment. A brief discussion on the company’s main threats and opportunities is then done after which a general conclusion on the paper is provided.

Table of Contents

1. INTRODUCTION AND COMPANY OVERVIEW

   1. Company Overview

Tesla Motors Inc. was founded in 2003 and the company was named after Nikola Tesla (Tesla Motors, n.d.). The company is American and deals with electric cars and their powertrain components in terms of design, manufacture and sale. Three engineers from Silicon Valley namely Ian Wright, Eberhard Martin, and Marc Tarpenning founded the company. Elon Musk came in as a financer after three engineers were not able to raise funds to realize their goal of building an electric vehicle. The company headquarters is in Palo Alto, California with several other subsidiaries around Europe, Asia, and the other North American States (Tesla Motors, n.d.).

1. 1. Summary of Introduction

Analysis of a business environment requires specific environmental tools. The environmental tools are used to establish how internal and external aspects affect the performance of an organization. Forces that affect the external environment of a business need to be considered for it to realize its goals and objectives (Mercer, 1998). Strategic external business analysis adds value to the overall success of the country. The external environment of Tesla Motors Inc. is discussed with focus on eight major external environment aspects. The external environmental aspects considered include the Economic Environment, Competitive Environment, Labour Environment, Resource Environment, Customer Environment, Legal and Regulatory Environment, Global Environment, and the Technological environment.

1. EXTERNAL ENVIRONMENT ANALYSIS

   1. Technological Environment

Tesla Motors is driving the electric vehicle industry manufacture globally. Design and manufacturer of electric vehicles is a huge technological filed and the technological capability that the company displays is proof. Technological advancements in the field of electric vehicles is at a high with Tesla aiming at producing ecofriendly vehicles or maintaining the green energy sustainability plan required for all organizations. The company takes advantage of the skilled and experienced employees to help in technological innovations as it is the main source that which the company maintains its competitive advantage in the vehicle manufacturing industry. Technological innovations entail battery technology and the different EV designs. (Tesla Motors, n.d.) The company looks to build more battery production and maintenance factories that would deal with all innovations of battery technology.

The technological environment in which Tesla operates is a tight field and it needs constant innovation to ensure that the company continues to operate in the industry. Innovation is not a problem for the company with substantial growth in the EV manufacturing industry. However, the main problem lies in the infrastructural development concerning battery technology and EVs as the advancements in technology is projected not to be able to hold the growth rate of EV manufacturing industry (Motavalli, 2013).

1. 1. Economic Environment

Tesla is not among the giant companies in the manufacture of vehicles but it is number one in manufacture of Electric vehicles. The economic environment in which Tesla operates is not favorable especially due to the low demand for Tesla products especially EVs. Tesla has not ventured or expanded globally at a sufficient rate because of the difference in economies of the different countries that the company seeks to expand its operations. Tesla motors ran losses since its establishment in 2003 until 2013 when the company registered its first profits (Tesla, 2013). The strength of competitors makes the economic environment in which the company is operating tough. However, the company is looking towards growth strategies that include product development and market penetration to improve its economic position in the future. Moreover, reduction in product prices has been established as another way for the company to grow its economic environment.

1. 1. Competitive Environment

Tesla operates in a tough competitive environment considering that most of its competitors in the vehicle manufacturing industries were established earlier. Breaking into the market share of such established brands is and would not be an easy task for Tesla Motors. The number of companies in the vehicle manufacturing industry is small but their aggressiveness in innovation makes the industry highly competitive. Some of the company’s in the general manufacture of vehicles include Ford, Honda, Hyundai, Nissan, General Motors, Toyota, Subaru, and Volkswagen (Tesla Motors, n.d.). A large percentage of the market share when it comes to design and manufacture of EVs is owned by Tesla with the number growing to 30% in the United States market. The chart below shows EV sales per company in the United States.

(Source: Fleetcarma)

The chart shows that Tesla Motors Inc. beat some of the globally established giants in the vehicle manufacturing industry in terms of electric vehicle model sales. These sales numbers are projected to continue increasing over the years due to the innovativeness of the company and its growth into new markets both in the United States and globally. The world is heading towards electric vehicles and Tesla’s competitors will have it hard to make the transition to EVs since the company will already be established as a giant in EV design and manufacture. The future competitive environment for Tesla looks bright.

1. 1. Labour Environment

Tesla Motors does not dominate the labor environment as it offers employment to about 33,000 people as at 2017. The rise in the company’s number of employees from 900 in 2010 to the current 33,000 shows the high rate with which the company is growing in the labor environment (Tesla Motors, n.d.). This growth in employees is not the end as more than one thousand positions are still open. For the next four years, the company plans to provide employment for about 4,500 individuals (Richard, 2016). The number is just an approximation since if its projected operations run smoothly, the company will hire a number higher than 4,500. The company has continued to push for more software engineers to support the autopilot platform and this creates an opportunity for more individuals to work at the company. With such projections, Tesla Motors Inc. is set to become a global force regarding the labor market environment.

1. 1. Resource Environment

The resource environment and resources in general are determined by the ability to relate with the company physically. This notion leads to sub division of resources as either intangible or tangible. The company’s tangible resources come in as finance, which can be in terms of the company’s assets or cash. The financial resource is Tesla’s main resource and the company obtains most of it from its own revenue that is generated in each financial year. Tesla is able to sell its products to the customers and thus make profits. Other tangible resources include the raw materials used in the design and manufacture of the EVs. The company acquires raw materials through different methods including outsourcing. These raw materials are acquired from suppliers with which the company shares them with its rivals in the vehicle manufacturing industry (Mark, 2013). The company has over 150 suppliers globally and this allows the company to gain access to over 2000 parts (Karamitsios, 2013). With projected continued growth of the company, the increase in suppliers is expected. Moreover, the financial resource is also expected to increase and this is an indication that Tesla will have a dominant resource environment in the future.

1. 1. Customer Environment

Tesla’s customer environment is changing. As at 2014, the average owner of Tesla’s EV S model earned more than 100,000 USD (Tesla, 2013). The proper definition of Tesla’s customer at the time was male between 18 to 65 years and earning an annual salary of over 100,000 USD as shown in Table 1, which presents results of a study, by Edmunds.com on the profile of Model S owners (Zucchi, 2015). However, this is changing and as of today Tesla’s car, owners are young and earn less. The customer base buying Tesla’s products has expanded and with Model 3, the company looks to widen the range of buyers further by venturing into the mass market. When the company introduced the sale of used EV models, the customer base increased. One major disadvantage concerning Tesla’s customer environment is the fact that EVs are considered luxury vehicles. With this notion in mind, potential customers are misadvised and this has limited the company’s ability to expand its customer base.

Some of the main factors that will drive Tesla’s customer demand in the future include the price of fuel and the need to establish a green environment (Zucchi, 2015). The cost of fuel is expected to rise due to shortage, this will increase demand for EVs, and thus Tesla would increase it sales and thus expand its customer numbers. The need to establish a green environment is founded by the desire for the carbon footprint to be lowered. EVs promote reduction of carbon emissions and thus demand for EVs is expected to rise thus growing Tesla’s customer environment.

Table 1: Tesla’s Model S Buyer Profile as at 2015

Buyer Profile
Income under 50,000 USD
Income 50,000-99,999 USD
Income over 100,000 USD
18-44 years old
45-64 years old
Over 65 years old.

1. 1. Legal and Regulatory Environment

The legal and regulatory environment has been one of Tesla’s strong external environment platforms. The company’s manufacture of EVs is one of the major breakthroughs in environmental protection policies, laws, and regulations. The world is focused on going green and this is one of the major requirements of organizations. Regulations on the accepted carbon emissions have been implemented and Tesla is edging towards achieving manufacture of EVs with zero carbon emissions. Another aspect that depicts the strong nature of the legal and regulatory environment for Tesla is the policies by the United States government to reduce tax rates on the production and distribution of EVs (Mangram, 2012). Tesla has been able to take advantage of these policies, as it is the leading EV manufacturing company. Moreover, the same policies also provide incentives for pricing of the EVs. With such legal and regulatory environment, Tesla is in a great position, as it desires to achieve growth and development in the future.

1. 1. Global Environment

The global environment has not been fair to Tesla due to the classification of its products as luxury. Proof of this is the losses the company ran for the first ten years after its establishment. The cost of the EVs has also limited the company’s growth into the global market. The company operates in few countries in Europe and Asia as the global market environment. The company’s strategy has been to establish its brand first in the United States before expanding to the global scene. Tesla’s ability to expand to other global markets will continue to be limited by the competitive nature of the industry and the characteristics of its products.

1. INTERPRETATION AND DISCUSSION

   1. Main Opportunities

One of the main opportunities that Tesla has is the increase in the price of oil due to the drying up of oil reserves. The rise in oil prices presents Tesla with an opportunity since electric vehicles will be the better alternative to vehicles powered by gasoline.

Continued support of electric vehicles from different governments globally also presents Tesla with an opportunity to expand to other global markets. The United States government has invested over 5 billion USD in EV and PHEV technologies in the past nine years. This is a good example of the continued support the governments offer to EV production.

1. 1. Main Threats

Some competing technologies have made major breakthroughs and this is a threat to EV production companies including Tesla. These technologies could offer better alternatives to the gasoline-powered vehicles.

There have been some concerns raised regarding the overall safety of electric vehicles and associated technologies including the use of Lithium ion batteries.

1. CONCLUSION

Overall, the external environment analysis can be essential in allowing profit making business organizations to make huge strategic decisions with the goal of growing in terms of profit making. The external environment analysis for Tesla shows that it is poor in some aspects including the competitive environment, economic environment, global environment, labor environment, and customer environment. However, the company shows strength in the legal and regulatory environment, technological environment, and resource environment. In general, the future projections will position the company in a better external environment.

REFERENCES

Karamitsios, A., 2013. Open Innovation in EVs: A Case Study of Tesla Motors. Sweden.

Mangram, M. E., 2012. “The globalization of tesla motors: a strategic marketing plan analysis,” Routledge, vol. 20, no. 4, pp.289-312.

Mark, K., 2013. ‘Suppliers to the 2013 Tesla Model S,’ Supplier Business. Accessed from: http://www.autonews.com/assets/PDF/CA843311210.PDF. [17 August 2017].

Mercer, D. S., 1998. Marketing strategy: The challenge of the external environment. London u.a.: Sage.

Motavalli, J., 2013. ‘As it increases production, tesla worried about battery supply’. The New York Times. Accessed from: http://wheels.blogs.nytimes.com/2013/09/06/as-it-increases- productiontesla-worries-about-battery supply/? [17 August 2017].

Richard, G. M., 2016. “Hiring spree: Tesla went from 899 employees in 2010 to 14,000 today,” Treehugger. Accessed from https://www.treehugger.com/green-jobs/hiring-spree-tesla- went-899-employees-2010-14000-today.html [17 August 2017].

Tesla Motors. (n.d.). About Tesla. Accessed from: http://www.teslamotors.com/en_CA/about. [17 August 2017].

Tesla, 2013. Tesla Motors Inc. 2012 Annual Report. Palo Alto: EDGAR.

Zucchi, K. 2015. “What Drives Consumer Demand for Tesla?” Investopedia. Accessed From http://www.investopedia.com/articles/personal-finance/021715/what-drives-consumer- demand-tesla.asp [17 August 2017].