Tesla Competitor analysis
Tesla Competitor Analysis
Tesla Competitor Analysis
Using the understanding you have gained on Tesla and its external environment and stakeholder environment, please consider the following questions:
For any of the competitors identified, discuss how Tesla connects with them in the larger system. How dependent is Tesla on the success? How significantly is Tesla impacted by their strategic decisions?
Tesla is a car manufacturer founded in 2003 and it specializes in the production of electric cars. Since its inception, the company has grown and enjoyed tremendous success with the demand for electric cars on the rise. The success is mainly due to the sensitivity to environmental issues and a shift in demand of Eco-friendly products. Internally, Tesla has no glaring issues as the its CEO is focused on the growth of the company and establishing strategic partnerships with companies such as Toyota. In general, the automobile industry is very competitive, but Tesla’s niche is unique and has so far faced little competition as it didn’t face fierce rivalry as it established itself. That may soon change as the giant automobile companies join the industry. Its main competitors include Ford with its Ford Focus BEV, Nissan with its Nissan Leaf model and Chevrolet Volt model. Recently, other entrants in the market offering slightly differentiated products that include Audi, Volkswagen and BMW that produce hybrid cars.
The management of the company’s strategic decisions have been instrumental in the growth of the company. Partnering with companies such as Toyota and Daimler for which it produces power train components. The partnership has contributed to a major stake in the profits of the Tesla corporation. The company has also grown and sells its products across North America, Europe, and Asia. It also keeps improving its products and designing new models as its market changes and becomes more competitive. The company started with the roadster model and has since started production of a new model, Model S. Its evolution and timely reaction to market demands have been instrumental to its success. Its future, however, is pegged on its ability to remain competitive as new automobile companies enter the lucrative market (Propfe, Kreyenberg, Wind&Schmid, 2013).
For each of the competitors you identified, apply the model of competitive reality and discuss each of the 4 main points. Against these competitors, is Tesla operating in a blue ocean or a red ocean? Support your answer.
Ford Motor Company
The company competes with Tesla in the electric car industry with its Ford Focus BEV model. The model was first introduced to the market in 2012 and its main market is the United States. Since its launch, the company has sold over 3000 units in the United States. The model has not ventured much into other markets such as the European market. The product is similar to the Tesla products as it uses an electric powertrain and the car is all-electric. Tesla still maintains a competitive advantage over the brand due to its global appeal and established markets across America, Europe and Asia (Khan&Kockelman, 2012).
The Chevrolet company produces the Chevrolet Volt model. This model is a hybrid car and shares similarity to the Tesla models. The company does not compete directly with Tesla in the all-electric market due to its hybrid nature. The company competes with Tesla both domestically in the United States as well internationally in Europe and Asia. However, the brand has different versions of its car in the other markets.The company has earned a reputation for its energy efficiency (Khan&Kockelman, 2012).
Nissan competes with Tesla with its Nissan Leaf model. The model is an all-electric car and competes directly with Tesla products. The company competes well both in the United States and in the European market with over 11000 units sold in Europe as of 2014.The Japanese market is its local market and holds a competitive advantage over the Tesla products in the market as well as in the Asian region.The company also produces different models for the European market and continually improves its products to keep them relevant in the market (Khan&Kockelman, 2012).
Against these three competitors, the Tesla company is operating in a red ocean. The market space is already determined and the boundaries determined and competition for the available market characterizes the relationship between Tesla and its competitors. However, with growing sensitivity to climate change, demand for the electric cars is on the increase and the market boundaries are expected to shift and open up new markets. In this aspect, the company can be said to be operating in a blue ocean.
As an auto manufacturer, an OEM battery maker, and as a technology company Tesla is facing competition from many companies on many fronts. Are they facing too much competition? Does it make sense for Tesla to scale back on one or more of these areas? Explain your answer detailing the support for any recommendations you make.
It is true that Tesla is facing stiff competition,especially in the production of OEM batteries and in its technology. However, the competition helps drive Tesla to greater heights and keep it focused on making its batteries cheaper(Barmore, 2013).The battery cost determines the cost of the car and ultimately the cost of the car. Therefore, competition in this respect will help the company to improve its production of more efficient batteries at a lower cost. The cost will be expected to trickle down to the cost of the car and translate to more sales of its products in the long run.It does not make economic or business sensefor the company to scale down. It holds an economic advantage for electric cars and scaling down will give its competitors an advantage for growth. Instead, the company should aim to further strengthen its grip on the market via investing in better technology that should be able to reduce the cost of production.
How can Tesla use the questions in the Four Actions Framework to create more Blue Ocean space for themselves?
The Four Actions Framework details a four-pronged strategy that firms can use to improve their efficiency and improve their market positions.The four parts of the framework include elimination, reducing, creating and raising. The framework provides a logical perspective of approaching the market with a view to improve it.A firm is expected to identify the factors long overdue in the market and eliminate them. A firm should identify factors that need to be raised above their present status and improved above the industry standards. A firm should create new factors not offered in the market presently, and lastly, factors that are above the industry threshold and need not be there should be reduced (Yang & Yang, 2011). These four strategies epitomize the four-action framework.
Applying the framework, Tesla can create a blue ocean for itself. The pricing of the cars is still high and needs to be reduced. The firm can create demand for the cars in new areas by constructing new power stations in new areas. The energy efficiency of the cars should be raised above the present standards and expensive technologies that contribute to higher costs of batteries and cars should be eliminated and newer technologies developed and embraced. Tesla has an enviable position in the electric car market. It is the undisputed leader in the United states and North American market. It has also established strong markets in the European and Asian markets.Using its competitive advantage and ability to reduce prices by improving its productions and reducing costs of production, the company can continue to lead in the market and create a blue ocean for itself.
Barmore, C. (2013). Tesla Unplugged: Automobile Franchise Laws and the Threat to the Electric Vehicle Market. Va. JL & Tech., 18, 185-185.
Khan, M., &Kockelman, K. M. (2012).Predicting the market potential of plug-in electric vehicles using multiday GPS data. Energy Policy, 46, 225-233.
Propfe, B., Kreyenberg, D., Wind, J., &Schmid, S. (2013). Market penetration analysis of electric vehicles in the German passenger car market towards 2030. International Journal of Hydrogen Energy, 38(13), 5201-5208.
Yang, C. C., & Yang, K. J. (2011). An integrated model of value creation based on the refined Kano’s model and the blue ocean strategy. Total Quality Management & Business Excellence, 22(9), 925-940.