Profile Matrix Tesla Analysis

Tesla Analysis

Tesla leads in the electric car market and enjoys the benefits of being the first movers in the industry. Tesla was incorporated in 2003, and its mission is “to accelerate the advent of sustainable transport by bringing compelling mass-market electric cars to market as soon as possible” (Tesla, 2022). The firm adopted a global strategy by establishing subsidiaries in strategic locations across the globe, such as the Netherlands and China. The company is now facing competition as gas-fueled car manufacturers have begun the manufacture of electric cars. Herein, Tesla’s external factor evaluation (EFE) and internal factor evaluation (IFE) are discussed.

Competitive Profile Matrix (CPM).

CPM provides a comparative analysis between a firm and its competitors. The matrix examines the strengths and the weaknesses in the core factors of the company in its business segment. The matrix offers insights into how Tesla should respond to opportunities and threats in the business environment.

Table 1: Competitive Profile matrix for Tesla Motors Inc.

Tesla

General Motors

Ford Motors

Critical

Success Factors

Weight

Rating

Weighted

Rating

Weighted

Rating

Weighted

Price Competitiveness

0.1

1

0.1

3

0.3

2

0.2

Product Quality

0.14

2

0.28

3

0.42

3

0.42

Advertising

0.08

4

0.32

2

0.16

2

0.32

Customer Loyalty

0.11

4

0.44

2

0.22

2

0.44

Financial Position

0.12

2

0.24

2

0.24

1

0.12

Management

0.09

3

0.27

2

0.18

2

0.18

Product Diversity

0.06

3

0.18

2

0.24

2

0.24

Market Share

0.12

3

0.36

1

0.12

1

0.12

Expansion

0.09

3

0.27

2

0.18

2

0.18

Production Ability

0.09

3

0.27

3

0.27

3

0.27

Total

1

28

2.73

23

2.33

22

2.49

Tesla’s initial pricing strategy targeted high-income earners with an annual income of $100,000. Notably, these are the top 1% earners across the globe, which limited the access to electric cars to this class and left the gas-fueled car manufacturers to dominate. The advertising of Tesla is mainly through its online presence and initial online-based distribution channel. This unconventional approach to distribution also gives its competitors, such as Ford Motors, a competitive advantage over Tesla since it has well-established distribution channels across the globe that are more familiar to customers of different ages. Conversely, the Tesla distribution strategy applies to internet-savvy individuals and high-income earners due to the positioning of the cars as luxury products.

However, Tesla’s management in the electric cars segment has been effective with the significant allocation of resources to research and development for innovation. General and Ford Motors have a long history in the automotive industry that has enabled them to build a resilient production ability even in the new product segment without some of the production challenges in production quality that Tesla has encountered (Furrier, 2020). However, Tesla’s customer loyalty is significantly higher in the electric car segment than that of Ford and General Motors due to the first movers’ advantage and solo focus on electric car production.

External Factor Evaluation (EFE)

Table 2: External Factor Evaluation Matric for Tesla Motors Inc.

External factor

Weight

Rating

Weighted Score

Opportunities

Market confidence

0.10

3

0.3

Expand the target market

0.20

3

0.6

Entry into international distribution

0.20

4

0.8

Manufacture of car parts

0.15

3

0.3

Threats

Regulation of auto drive in foreign markets

0.10

1

0.1

Hybrid vehicles

0.15

2

0.3

competition

0.10

2

0.3

Total

1

18

2.7

Opportunities

Tesla has opportunities to expand its cars catalog with the growing market confidence in its vehicles. Leveraging market confidence to introduce budget-friendly cars for the middle class will increase the firm’s market share in the automotive industry. The expansion of the distribution internationally, which is underway, will help customers easily access vehicles with shorter delivery times and repairs. Tesla has established an elaborate network of charging centers in regions across the US, Europe, and Urban China (Furrier, 2020). Expanding the target market will increase the revenue generated from sales and improve the brand’s penetration in the automotive industry at large rather than the domination of the electric cars segment only. Tesla’s research and development department is highly innovative and could leverage its capabilities to distribute parts to other automotive manufacturers, such as bitrates and power trains.

Threats

Competition in the electric cars segment of the automotive industry for luxury cars is picking up with great competition from General and Ford Motors. Tesla still holds the leading share in this market segment due to higher technological innovation and high brand awareness in its target market (Furrier, 2020). However, introducing Hybrid cars into the market poses a challenge due to the efficacy of electric power trains and internal combustion engines, eliminating the challenge of electric cars charging range. The tariffs imposed on imported cars in markets such as China raises the cost incurred by the customer.

Internal Factor Evaluation

Internal Factor

Weight

Rating

Weighted

Strengths

High Revenue

0.15

3

0.45

R&D Innovation

0.20

4

0.80

Increased production capacity

0.05

2

0.10

Customer Loyalty

0.15

3

0.45

Threats

Higher Demand

0.10

2

0.20

Complications liability

0.10

2

0.20

Elon Musk’s brand image attachment

0.10

3

0.30

Production and delivery challenges

0.15

3

0.45

Total

1

22

2.95

Strengths

Tesla’s internal factor evaluation rating is 2.95, which is good, but the company’s threats could disrupt the business’s success in the last three years. Tesla’s research and development department is highly innovative in terms of technology as well as the business model of the company. Notably, Tesla has been growing financial resilience in company with increasing sales with the sale of 900,000 vehicles by the end of 2021 (WSJ Markets, 2022). This revenue growth has also led to an increase in the market valuation of Tesla stocks that have generated capital for expansion of the distribution and manufacturing points internationally.

Weaknesses

Tesla’s ability to meet demand and deliver products on time is limited due to its low production capacity. Challenges, such as the limited supply of lithium, have created room for Tesla’s competitors as alternative suppliers of electric vehicles (Tao, 2019). The brand is synonymous with CEO Elon Musk’s image, which puts it at a disadvantage if its reputation is disparaged. The limited production capacity and challenges in the raw materials supply chain result in delayed customer deliveries. These challenges create more room for its competitors to grow their market share.