Tesla Inc. SWOT Analysis & Recommendations

Tesla Inc. (Tesla Motors Inc.) SWOT analysis, strengths, weaknesses, opportunities, threats, internal, external factors, automobile case
A Tesla Roadster at the Tokyo Auto Salon, 2011. This SWOT analysis of Tesla Inc. (formerly Tesla Motors, Inc.) emphasizes the importance of global expansion to ensure business growth in the global automotive and renewable energy industries. (Photo: Public Domain)

Tesla, Inc. (formerly Tesla Motors, Inc.) succeeds as an innovative automotive and energy solutions business. This SWOT analysis shows that the company has the strengths needed to maintain profitability in the long term. This positive outlook holds despite challenges in expanding the business. The results of the SWOT analysis also suggest strategic reform to ensure Tesla’s competitiveness and long-term success in the global automotive and renewable energy markets. Such reform should increase strategic effectiveness in addressing the strong force of competition shown in the Porter’s Five Forces analysis of Tesla Inc. Still, the company’s brand and innovative nature support international business growth despite competitive pressure involving automakers like General Motors Company, Toyota Motor Corporation, Ford Motor Company, Nissan Motor Company, Honda Motor Company, Bavarian Motor Works (BMW), and Volkswagen, among others. As a popular manufacturer of electric vehicles, the company gains from global expansion. For example, expansion in foreign markets increases the company’s revenues and stability. However, limited global operations remain a weakness that, along with other issues identified in this SWOT analysis, Tesla must address to maintain international competitiveness and corresponding business growth.

Tesla, Inc. must implement reforms that include the internal strategic factors (strengths and weaknesses) and external strategic factors (opportunities and threats) enumerated in this SWOT analysis. These factors define the environment in which the business operates and develops. Including these strategic factors in reforms can boost business performance and resilience in the global market for electric automobiles and related transportation and energy solutions. The corporation’s management can expect better performance upon addressing the identified SWOT factors.

Tesla’s Strengths (Internal Strategic Factors)

This aspect of the SWOT Analysis of Tesla Inc. deals with the business strengths that contribute to organizational growth and improvement. Business strengths are internal factors that empower the company to compete against other firms, and to ensure profitability, especially in the long term. For example, the company’s strong brand can support strategic expansion in the global market. In this company analysis case of Tesla, the following strengths shape the capabilities of the business as a competitive player in the automotive industry:

  1. Highly innovative processes
  2. Strong brand
  3. Strong control on production processes

Tesla, Inc. is known for its high rate of innovation, especially in introducing the world’s first fully electric sports car. This internal strategic factor is a strength that empowers the company to develop competitive and profitable products. Also considered in this SWOT analysis, the Tesla brand is a strong symbol of innovation and renewable energy solutions, in line with CEO Elon Musk’s business goals. Such a strong brand optimizes the company’s ability to attract and retain new customers. The internal factor of strong control on production processes is based on vertical integration, as well as the centralization and hierarchy in Tesla’s organizational structure. For example, the company manufactures automobiles and many of their components. This factor is a strength that minimizes issues linked to the involvement of third parties. Overall, this aspect of the SWOT analysis of Tesla points to innovation and brand image as major strengths of the company.

Tesla’s Weaknesses (Internal Strategic Factors)

The internal factors that limit organizational performance are identified in this aspect of the SWOT Analysis. These internal factors are weaknesses that can reduce Tesla’s competitiveness and business growth. In the context of this business analysis, weaknesses are issues that the company must overcome through strategies, reforms, and initiatives. Despite its strong brand as a manufacturer of electric vehicles, Tesla, Inc.’s performance and potential future growth suffer from the following major weaknesses:

  1. Limited market presence
  2. Limited supply chain
  3. High prices

Tesla suffers from limited market presence. For example, the company generates most of its revenues in the United States and has a small presence in China and the developing world. This internal strategic factor is a weakness that limits business growth based on the rapid economic development of overseas markets. This SWOT analysis also determines that the company’s limited supply chain is a related weakness that prevents the company from rapidly expanding in such markets. Moreover, Tesla’s products are relatively more expensive than competing cars, especially those that have internal combustion engines. Such high prices prevent the company from rapidly growing its customer base and market share. The weaknesses identified in this SWOT analysis reflect Tesla’s need to reform its strategies related to global expansion and growth.

Opportunities for Tesla, Inc. (External Strategic Factors)

This aspect of the SWOT Analysis focuses on the external factors that present potential growth and development for the organization. These external factors are opportunities that Tesla can use to improve its business performance, management effectiveness, and strategic growth, among other aspects. For example, the company can expand in the global automobile market to support further business growth. Tesla, Inc. has major opportunities to improve its financial standing and competitiveness in the global automotive and energy markets, as follows:

  1. Global sales expansion
  2. Global supply chain expansion
  3. Business diversification

In relation to its weaknesses, Tesla must consider the opportunity for global sales expansion. This opportunity is based on the significant economic growth of countries where the company has insignificant market presence. For example, the company can increase its revenues through expansion in Asian automotive and renewable energy markets. In this SWOT analysis, another opportunity is to expand Tesla’s supply chain to support the global expansion of production and sales operations. This external factor puts emphasis on the relatively small extent of the company’s operations, compared to larger firms like General Motors. Also, the company can improve its performance through diversification. This external strategic factor involves establishing or acquiring new businesses to reduce business exposure to risks in the automotive market. This aspect of Tesla’s SWOT analysis points to the benefits of international expansion.

Threats Facing Tesla, Inc. (External Strategic Factors)

The external factors that limit or reduce Tesla’s organizational performance are covered in this aspect of the SWOT Analysis. These external factors are threats that prevent the company from maximizing the benefits of its strengths and opportunities. For example, competitive forces limit the company’s potential revenues from the global market for electric vehicles, batteries, and solar panels. Even though its business has shown considerable profitability, Tesla needs to address the following threats to maintain resilience despite the changing conditions of the automotive industry:

  1. Aggressive competition
  2. Fluctuations in material prices
  3. Dealership regulations

Automotive companies aggressively compete against each other. This external strategic factor threatens Tesla, considering current efforts of other firms in producing electric vehicles. The fluctuations in material prices are another threat determined in this SWOT analysis. This external factor especially highlights the fluctuating and generally increasing cost of lithium, a material used in the company’s energy storage products. The company also faces the threat of dealership regulations. At present, Tesla directly sells its products to customers without dealership involvement that increases selling prices. However, some states like Virginia and Texas prohibits direct sales of the company’s products, requiring that such sales must go through dealerships. Based on this aspect of the SWOT analysis, Tesla must maintain competitive advantage to remain profitable despite aggressive competition from large automotive firms.

SWOT Analysis of Tesla Inc. – Recommendations

Tesla, Inc. has the strengths to remain successful in the business in the years to come. However, as identified in this SWOT analysis, there are various issues that the company must address to maintain its competitiveness and improve its profitability. Tesla must improve its multinational presence. For example, new facilities and sales operations in high-potential developing countries can enhance business growth, satisfying Tesla’s corporate mission and vision statements. Also, the company must continue its significant investments in research and development (R&D) to produce technologically advanced products that are competitive. This SWOT analysis shows that Tesla has the potential to grow in the global automotive market despite aggressive competition.

In considering the results of this SWOT analysis, with the goal of improving business competitiveness, growth, and development, it is recommended that Tesla Inc.:

  1. Expand operations in foreign markets to exploit the global growth of the renewable energy industry.
  2. Continue or increase investments for product innovation.
  3. Diversify the supply chain to reduce supply-side risks.