This SWOT analysis of Tesla, Inc. (formerly Tesla Motors, Inc.) shows that the automotive and energy solutions business has the strengths needed to maintain profitability in the long term. In evaluating Tesla, an analysis of SWOT factors (strengths, weaknesses, opportunities, threats) provides insights into how the business can approach challenges in the industry. Such insights inform and guide corporate governance and management to ensure the growth of the automotive business. The results of this SWOT analysis suggest strategic reform for long-term success in the global market, by increasing effectiveness in addressing the strong force of competition shown in the Five Forces analysis of Tesla, Inc. The innovative company withstands competitive pressure. 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 and expansion.
The internal strategic factors (strengths and weaknesses) and external strategic factors (opportunities and threats) enumerated in this SWOT analysis relate to Tesla’s generic strategy for competitive advantage and strategies for intensive growth. These factors define the environment in which the electric vehicle business operates. Tesla’s management can expect better performance and resilience in the global market for electric automobiles and energy solutions upon addressing the SWOT factors identified in this analysis.
Tesla’s Strengths (Internal Factors)
This aspect of the SWOT analysis of Tesla deals with the business strengths that contribute to organizational growth and improvement. Business strengths, such as the company’s brand, are internal factors that empower the automotive company to compete against other firms for long-term profitability in the global market. In this SWOT analysis case, the following strengths shape the capabilities of Tesla’s business as a competitive player in the automotive and energy solutions industry:
- High rate of innovation in business processes
- Strong brand
- Strong control on business processes based on vertical integration
Tesla is known for its high rate of innovation. The SWOT analysis model views this internal strategic factor as a strength that empowers the company to develop competitive and profitable products for the electric car market. This strength relies partly on Tesla’s organizational culture (corporate culture), which determines human resource support for innovative enhancements. The brand is also a strength in this SWOT analysis of the automotive corporation. The Tesla brand is a symbol of innovation and sustainability, in line with Elon Musk’s business goals. The strong brand enables the company to introduce new car models and new solar energy products that attract the attention of target customers around the world.
On the other hand, strong control over business processes is an internal factor that functions as one of Tesla’s strengths, based on the SWOT analysis framework. Corporate executives have strong influence and control on various aspects of the multinational business, including the sales and distribution of electric vehicles. This strategic factor is based on the hierarchy aspect of Tesla’s organizational structure (company structure) that facilitates centralized control of the corporation. Also, the company manufactures many of the components used in its automobiles and sells its cars through company-owned locations. In the SWOT analysis model, this vertical integration helps reduce risks linked to third-party unpredictability.
Tesla’s Weaknesses (Internal Factors)
The internal factors that limit organizational performance are identified in this aspect of the SWOT analysis of Tesla, Inc. These factors are weaknesses that can reduce competitiveness and slow the growth of the automotive firm. In this business analysis context, weaknesses are issues that the company must overcome through strategies, reforms, and initiatives that employ its strengths and make use of the opportunities in the transportation sector. Tesla’s strategic management must overcome the following weaknesses relevant to this SWOT analysis:
- Strategies that intentionally limit market presence
- Limited access to supply for innovative products
- Relatively high selling prices
Tesla suffers from limited market presence. The company generates about half of its revenues in the United States and has relatively limited operations in other electric car markets. In the SWOT analysis model, this strategic factor is a weakness linked to Tesla’s marketing mix or 4Ps, and other strategies that emphasize exclusivity in distribution. This internal strategic factor is a weakness that limits business growth despite the economic development and opportunities in non-U.S. markets for cars and solar energy solutions.
In relation, this SWOT analysis determines that Tesla’s limited access to innovative supplies is a weakness that prevents the company from rapidly expanding internationally. The technologically advanced nature of the company’s products imposes challenges to suppliers’ ability to provide the automotive inputs for the company’s manufacturing processes. Strategic adjustments to Tesla’s operations management can minimize the impact of this weakness.
In terms of pricing, the company’s electric vehicles are relatively more expensive than competing cars, especially those that have internal combustion engines. In the SWOT analysis framework, high prices prevent Tesla from rapidly growing its customer base and market share. This weakness relates to the objective of maintaining a premium brand image despite strategies that aim for the widespread use of Tesla cars.
Opportunities for Tesla (External Factors)
This aspect of the SWOT analysis focuses on the external factors that present potential growth and development for the automotive business organization. These external strategic factors are opportunities that Tesla can use to improve its business performance, management effectiveness, and strategic growth. For example, the company can increase its revenues by expanding in the global electric car market and solar energy market. The following opportunities are notable in this SWOT analysis of Tesla:
- Global sales expansion for electric cars and solar energy solutions
- Global supply chain expansion
- Increased business diversification beyond electric vehicles
Tesla has the opportunity for global sales expansion. This opportunity is based on the economic growth of countries where the company’s electric vehicles have limited market presence, which is one of the weaknesses examined in this SWOT analysis. For example, the company can increase its revenues through additional operations in Asia, such as through company-owned distribution or new dealership agreements.
Tesla also has the opportunity to expand its supply chain to support the global expansion of its production and sales operations. In the SWOT analysis context, this external strategic factor emphasizes the relatively small extent of the company’s operations in comparison to large multinational competitors. In addition to business growth strategies, Tesla’s corporate social responsibility strategy and stakeholder management efforts that capitalize on the sustainability trend can promote the company and its supply chain expansion.
Growth through diversification is another opportunity relevant to this SWOT analysis of Tesla, Inc. This external factor involves establishing or acquiring new businesses with operations outside the company’s current business of electric vehicles and energy products. Growth through diversification addresses some of the trends noted in the PESTEL/PESTLE analysis of Tesla, Inc. The ecological and sociocultural trends in the industry environment match the diversification opportunity identified in this SWOT analysis.
Threats (External Factors)
The external factors that limit or reduce Tesla’s organizational performance are covered in this aspect of the SWOT analysis. These factors are threats that prevent the automaker from maximizing the benefits of its strengths and opportunities. To maintain resilience despite changing industry conditions, Tesla needs to address the following threats relevant to this SWOT analysis:
- Aggressive competition among automakers
- Fluctuations in material prices
- Dealership regulations
Automotive companies aggressively compete. Tesla is subject to the aggressiveness of competitors, including General Motors, Toyota, Ford, Nissan, Honda, BMW, and Volkswagen. This external strategic factor threatens Tesla’s market share in the electric vehicle industry. 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. Such fluctuations are a challenge to Tesla in keeping its costs and prices stable.
The company also faces the threat of dealership regulations. Tesla sells its products directly to customers without dealership involvement. However, some areas, such as Texas, require car sales to go through dealerships. While Tesla works around such a regulatory issue, this SWOT analysis puts emphasis on the risk and corresponding threat of new dealership regulations against the company’s strategy of using company-owned stores and direct sales to car buyers.
Business Improvements Based on This SWOT Analysis of Tesla, Inc.
Tesla 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 vehicle and energy company must address to maintain its competitiveness and improve its profitability. For example, the automaker needs to improve its multinational presence. New or additional sales operations in high-growth countries can enhance business growth to satisfy Tesla’s corporate mission statement and corporate vision statement. Also, the company must continue its investments in research and development to produce technologically advanced and competitive automotive and energy products. This SWOT analysis shows that Tesla has the potential to grow in the global automotive market despite aggressive competition.
With the goal of improving business competitiveness, growth, and development, this SWOT analysis shows a number of ways that Tesla can use to enhance its performance. The company can:
- Expand or add to existing operations in foreign markets to exploit the growth of global demand for electric vehicles and renewable energy solutions.
- Continue or increase its investments for product innovation to ensure competitiveness despite aggressive competition with other automakers.
- Diversify its supply chain to reduce supply-side risks.
References
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- Tesla, Inc. – Form 10-K.
- Tesla, Inc. – Product Impact.
- U.S. Department of Commerce – International Trade Administration – Automotive Industry.
- U.S. Department of Commerce – International Trade Administration – Energy Industry.