Industry analysis

Competitive analysis
Firstly, it is quite crucial to make the competitive analysis when we focus on one
industry. Tesla has many competitors among traditional car makers, such as Ford,
BMW, Nissan and so on, but it focus on product the high-performance electric
vehicles. Although there are now more competitors to enter the markets, Tesla is
always on the top of high-level automotive market.

Actually, Ford, BMW, and Nissan have all proved themselves in automotive industry
but now have to adapt to the new electric market. The competitors have advantages
over Tesla in many different ways including branding, larger resources, and the ability
to generate income outside of the automotive market, and at this time, the
competitions core competency is gas engine vehicle production which has allowed
them to become the dominant companies they are today. Although Tesla is focused
only on electric vehicles, competitors can continue to sell their usual products while
trying to research and develop a new electric vehicle.

However, Tesla suspect that the competition will continue to grow as companies turn
their weaknesses into opportunities. All of the current competition lacks the ability to
produce an electric vehicle that can surpass the Tesla. It not means that the
competition did not have the ability to create a better electric vehicle, just saying that
they have not done yet.

Currently, the movement away from gas powered vehicles has slowly started to take
an effect which is what has allowed Tesla to increase sales. Consumers will slowly
shift toward electric vehicles which is great for Tesla who has already created many
different products for consumers to choose from. Electric vehicles pose as a threat to
Ford, BMW and others but are a huge strength for companies such as Tesla. There is a
minimal number of electric vehicles currently on the market which pushes consumers
toward Tesla. Tesla has established a name for itself early on in electric vehicle
market which will continue to grow from this point.

“Porter’s Five Forces” analysis

Then, the “Porter’s Five Forces” framework for industry analysis is an effective tool
for examining the health and competitive intensity and of an industry.

In terms of the Rivalry Among Existing Firms, the number of players in an industry
and their respective shares in the market represents the level of competition in an
industry. Not many firms are operating in the automotive market, and even fewer
operate at Tesla’s level. there also exist low impediments for the customers to seek out
cars from other car manufacturers, something which further strengthens the force of
competition.

On Bargaining Power of Buyers. Usually, if the customers enjoy market power, they
are in a better position to negotiate for lower prices with the venders, but for the tesla,
which is in the situation that there are more customers but less competitors .Tesla is
on the top of electric vehicle industry. It limits the bargaining power of the customers.
So, it seems that tesla haven’t been affected by this power.

Furthermore, on Bargaining Power of Suppliers, when an industry overwhelmingly

relies on a limited number of suppliers, these suppliers enjoy a significant amount of
bargaining power. Such power can affect small businesses operating in the industry
because their supplies directly influence the quality of the final product and its
pricing. Tesla’s suppliers have a rather low level of forward integration. This means
that they have limited control in the sale and distribution of their items. Some
suppliers often use third parties to sell their products to Tesla. So, this factor poses a
moderate force on the company.

On Threat of Substitute Products, actually, substitutes exist in two forms: products

that have the same functionality but have lesser pricing and products with the same
pricing but differ in quality. In fact, Tesla experienced the impact of the substitutes.
These substitutes are largely influenced by low switching costs. So, this force makes a
moderate threat to Tesla.

Finally, on Threat of New Entrants, Tesla operates at such a high level that it would be
difficult for a new entrant to try and compete with it. It is very hard for a new
company to match the strength of Tesla. Furthermore, the cost of doing business in the
automotive industry is very high, only established companies like Tesla stand to get
benefits. So, this force poses a weak threat to Tesla.

Production Capacity Levels and Pricing

When discuss about the industry analysis, production capacity levels and pricing are
also very important.

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 a strong production processes, which stems from vertical integration and the
centralization of power in the Tesla’s organizational structure, especially there are no
third parties involved.

In term of the pricing. It’s quite costly. Cars are expensive for the common customer,
especially for the people living in developing countries. It means that Tesla’s market
heavily relies on wealthy customers.

In conclusion, Tesla has made a lasting impact on the automotive industry.