Maximizing Comp. Competitiveness: Exploiting the Asian Auto Market - Essay Sample

Introduction

The external strategic factors of a company focus on the opportunities and threats that a company experiences. The opportunities refer to the things that the company can do to increase its competitiveness while threats refer to those aspects that reduce the competitiveness of the company by pulling it down. One of the opportunities is sales expansion in the untapped market. The Asian market provides a great opportunity that the company can exploit since Asia still unsaturated with automobiles, and the demand is high. Through increasing its financial stability and stronger market presence, Tesla Inc. could increase its competitiveness to a great extent.

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The other opportunity that exists is for Tesla Inc. to increase its manufacturing rate by producing its own battery cells. The company has plans to use in-house technology to help it increase its manufacturing rate while at the same time reducing the production cost (Patel, Sachgau, & Rauwald 2020). If the company embraces this opportunity, then it could lower its financial spending. The third opportunity that the company needs to embrace is the introduction of the pick-up truck. Data from the National Automobile Dealer Association shows that Pick-up truck covers 17.6 percent of the US automotive market. This is a low percentage, a revelation that Tesla Inc. could embrace this opportunity and start manufacturing pick-up trucks.

Tesla, Inc. faces several threats that reduce its competitiveness. If not addressed, these factors could affect the performance of the company to a great extent. One of the threats is that the company faces significant product liability claims. This is a major financial blow to the company, and it could affect its financial stability if not well addressed. Besides, the company has faced claims and lawsuits as a result of the failure of technology in their autopilot vehicles, leading to accidents. Another major threat to the company's progress is extensive competition. Tesla Inc. faces competition from other car manufacturers such as General Motors ("Tesla," n.d.). Many of the competitors offer their brands at a lower price than that of Tesla Inc., and this has affected its sales negatively. The third threat that Tesla Inc. faces is product defects. Tesla Inc. uses high technology in its production, but this has exposed major flaws in several cases. Most of the defected products exhibit weaknesses in design and manufacturing, as well as other features that may harm the image of the company negatively. These threats pose challenges to the progress of the company, and there is an urgent need to find strategies to mitigate their effects. If this is not done, Tesla Inc. may continue experiencing financial constraints to a great extent, and this may give its competitors an upper hand.

The five forces of industry analysis include the threat of new entrants, bargaining power of suppliers, bargaining power of buyers, the threat of substitute products, and rivalry among existing competitors (Porter 2008). Tesla, Inc. maintains its profitability by using strategic measures that address the various competitive challenges that are raised in the Five Forces model. Based on information obtained from the company's website, the five forces appear as follows for the company. The threat of new entrants (weak force), the threat of substitutes (moderate force), bargaining power of suppliers (moderate force), bargaining power of buyers (moderate force), and competitive rivalry (strong force). Porter's Five Force model shows that competition is a major factor that determines the success of a business (Porter, 2008). As such, every company needs to prioritize this force if it is to survive in the business. Thus, Tesla Inc. needs to continue with its innovation as well as increase its market presence. The company can increase its market presence by establishing proper campaign support.

The bargaining power of customers is moderate because of the low volume of purchases and moderate substitute availability. The availability of substitutes is moderate, and this makes the customer buying from Tesla Inc. to have lower bargaining power. The low volume of purchases arises from the fact that a customer will only buy one or a few cars.

The bargaining power of suppliers for Tesla is moderate. The suppliers that Tesla Inc. relies on have a low level of forward integration. As such, the suppliers do not have huge control in the sale of their products. While some suppliers transact directly with the customers, others are third parties (Carlson 2015). The threat of substitutes for Tesla remains a moderate force. Low switching costs that Tesla Inc. experiences pose a threat to the company. A majority of customers will prefer public transport to private cars as it is cheaper.

Internal Analysis

In order to maintain competitiveness in the automobile industry, Tesla Inc. needs to maintain its strengths and work on its weaknesses. It needs to develop strategies that can address the weaknesses satisfactorily. Business strengths refer to the internal factors which make it possible for a business to compete favorably against other firms as well as ensure profitability both in the short term and the long term (Roy 2011). For instance, when a business has a strong brand, it is capable of supporting strategic expansion in the global market. Focusing on Tesla Inc., the following strengths can be identified. One of the company's strength is a highly innovative process. The company is synonymous with innovation. The company has focused greatly on innovation as a key aspect of its growth. For instance, the company is famous for introducing a fully electric sports car.

This internal strategic factor has empowered the company to develop profitable and competitive products. Additionally, Tesla, Inc. has used innovation to develop renewable energy solutions (Walder 2013). This ensures that the company does not spend a lot of money on energy sources as it is able to renew its energy. The other strength is that Tesla Inc. is a strong brand with a good reputation. Customers prefer being associated with a brand that has a good reputation. The good reputation of the company makes it possible to attract and retain new customers.

The other strength is that the company has a strong control of production processes. This factor is based on vertical integration coupled with the centralization as well as a hierarchy in the company's organizational structure. For instance, other than the production of automobiles, the company is also able to manufacture most of its components. This is advantageous in that the company reduces its involvement with third parties.

The weaknesses are internal factors that reduce a company's competitiveness as well as business growth. Since Tesla Inc. experiences weaknesses, it must seek to overcome them through initiatives, strategies, and reforms. One of the company's weaknesses is the limited market presence. The company has a very small presence in some of the developing nations, which would be great markets for its products (Tesla & Childress 2000). Tesla Inc. has a very small presence in China despite the fact that it generates most of its revenues in the US ("Tesla," n.d.). This weakness makes it difficult for business growth based on the superb economic development of overseas markets. The other weakness that Tesla Inc. experiences are a limited supply chain. This makes it difficult for the company to expand in several potential markets. Tesla, Inc. also faces the challenge of pricing. Its cars are usually more expensive than that of other countries. When a car manufactured by Tesla Inc. is placed alongside another car produced by another company, Tesla Inc. is usually more expensive. Such high prices make it difficult for the company to grow its market share and customer base. These weaknesses show the need for Tesla Inc. to relook into its strategies so that it is able to expand and grow globally.

Value Chain

Tesla inbound logistics mostly comprises of the receipt as well as storage of raw materials, which are used in the building of electric vehicles and solar panels. Tesla Inc. also uses some scarce raw materials such as copper, cobalt, and aluminum (Dobbs 2014). At the moment, highly sophisticated inbound logistics practices do not account for the major sources of value creation for the company. The company mainly works on a build-to-order basis. This translates to the fact that the supply of parts could a big headache for the company. As a result of this, it is essential that the company develops a long-term strategic relationship with the suppliers to ease the cost of acquiring raw materials.

Tesla operations can be grouped into two segments, which are automotive and energy generation and storage. The automotive segment comprises sales of electric vehicles, their development, and manufacturing. On the other hand, the energy generation and storage segment comprise of aspects such as designing, manufacturing, installation, and lease of solar energy systems. A high level of integration of robots in the operation of the company is considered a major source of value creation for the company (Grundy 2006). For example, in the manufacture of one Model S, close to eight robots may be used at a time. Each of these robots performs about eight different tasks such as welding, bending metals, moving materials, and riveting, among others.

Tesla inbound logistics entail several functions such as energy storage systems, warehousing, and distribution of electric vehicles produced by the company. The company stores its electric vehicles in its own galleries and stores in countries such as the US and others where it has stores (Stolze 2015). At other times, the company makes direct deliveries of the vehicles to customers who make such a request. This increases its competitiveness as many of the customers may opt for the vehicle being delivered to them. The company has recorded a large number of customers due to the ability of the customer to order for a car online (Karagiannopoulos, Georgopoulos, & Nikolopoulos 2005).

The company prefers to sell directly to end users instead of dealing with dealers and resellers. This is a major source of value creation in Tesla's outbound logistics. The first reason for this is that with the high demand and high number of orders that Tesla Inc. gets, direct sales fasten the delivery time of the vehicle to the customer (Perez 2019). Secondly, direct sales make saves the company a lot of expenditure.

Regarding marketing and sales, Tesla Inc. does not spend a lot of money on advertisements and endorsements. Mostly, it relies on word of mouth. The company's ability to attract major media coverage at the global scale acts as an essential source of value by its ability to increase the level of brand awareness on a global scale.

Regarding service, Tesla Inc. has experienced high-profile customer service complaints from various quarters in the recent past. On several occasions, the company has been sued by customers for the refusal to return the customer's phone call and email about servicing his car. Besides, it has been sued by customers for keeping their cars for too long during repair (Oachs 2018). Such lawsuits have affected the company negatively by damaging its reputation.

VRIO/VRIN Analysis

The VRIO analysis is used in business to assess whether the competencies of a firm can offer a competitive advantage. Based on the table below, the innovative nature of its CEO Elon Musk is one of the greatest competencies that the company utilizes. Besides, it relies greatly on the unique design of its modern electric vehicles, and each of the competencies achieves a significant competitive advantage that cannot be replicated easily. Some o...