SWOT analysis is one of the most popular strategic tools for assessing the internal and external conditions of an organization. As a management student it is imperative that you know how to implement the SWOT framework into any organization of your choice in order to be able to propose a new business plan. In order for you to fully understand what is SWOT analysis, we have presented a comprehensive SWOT analysis example on the chosen company Tesla. This Tesla SWOT analysis example should help you to grasp the in-depth details on how to do a SWOT analysis in your paper for college.
The SWOT framework has been broken down in four key components such as Strengths, Weakness, Opportunity and Threats.
Strength: The key strength of Tesla relies on its brand image. At present Tesla is the leading brand in consumer electric vehicle. It is the most sought-after electric car company in the world, with highest sales volume recorded in the United States. The strong positive brand image of Tesla helps in attracting new customers thereby driving its sales volume. Moreover, the brand image also helps in drawing the attention of the shareholders and investors, which is quite crucial for the company to improve its financial status.
Secondly, the revenue generation of Tesla is also a key strength of the company. The company has been able to increase its revenue over the past decade at a significant pace, which highlights the constantly improving performance of Tesla. The increasing cash flow can help the organization to develop new products and technologies, thereby offering more compelling value for the customers. Moreover, the strong financials of the company also enables the firm to take care of the interest of its stakeholders, thereby securing its survival in the industry.
Thirdly, value proposition of the company can be considered as its strength. A present, Tesla offers a range of electric vehicles equipped with advanced technologies that includes top of the line autopilot and safety features. Tesla also offers its products at different price points to attract a wide range of consumer groups. This as a result helps the company to expand its business and generate more revenue.
Finally, Tesla has adopted vertical integration strategy to gain more control over its supply chain and its operating costs. The establishment of the Giga Factory has enabled Tesla to manufacture its own components such as battery and drive trains. As a result the company has become more reactive to market changes and also capable to reducing the cost of manufacturing. It should also be noted that the company also becomes much less dependent on its suppliers. The vertical integration of Tesla presents a perfect case study of how it can act as strength for a company.
Weakness: Firstly, the primary weakness of Tesla is its limited product line up. Even though the company offer electric vehicles for almost every price bracket, but it still lacks an extensive line up of products like other well-established brands. This is mostly due to the fact that Tesla is a relatively new market player and does not have enough resources or market reach to offer a much wider product line up.
Secondly, the product design which is the key selling point of Tesla can also be a point of its weakness. Being solely driven on battery power, the consumers have to dependent on the charging stations. One cannot make long distance trips to just about anywhere if there are charging stations in the way. Even though the company is gradually increasing the number of stations in its target markets, but they are still not enough to offer the versatility of a traditional fuel car.
Thirdly, due to its limited production capacity, it has failed to deliver its electric cars to customers right on time. As mentioned earlier, the company is relatively a new player in the automotive sector, and does not have the required operational infrastructure to meet the high demand of its cars. This as a result has led to long delays in product delivery, and has led to customer dissatisfaction.
Finally, it should be noted that due to the high complexity of its technologies, Tesla is still only able to cater to the upper middle and upper social segment with high disposable income. There are not products that are targeted at the mass consumers. This as a result, restricts the market penetration of the company.
Opportunity: First of all, the market demand for electric cars has increased significantly all across the world. Consumers are looking forward to own vehicles that use renewable energy. The increasing demands present an opportunity for Tesla to leverage this trend to foster future business expansion and to cater to a much larger customer base. The high demand for electric vehicles across various international markets also presents the opportunity for geographic expansion, allowing the company to expand its target markets.
Secondly, in order to encourage purchase of environment friendly electric vehicles, several national governments are offering incentives to the customers. Moreover, the government bodies are also supporting the business venture of electric car manufacturers in order to boost the expansion of the electric car sector.
Thirdly, the expansion into the Chinese market can prove to be a potential opportunity for Tesla to increase its revenue generation. It has been found that the demand for electric vehicles in China has increased significantly over the recent years. From the year 2016 to 2019, the electric car sales have increased significantly from 233 thousand to 1.5 million units. It is also predicted that post covid-19 pandemic the demand for electric vehicle in China is likely to surge.
Finally, it should be highlighted that Tesla can benefit from diversification of its product portfolio. The recent entry of the company into the pickup truck sector with its announcement of the Cyber Truck can be a potential opportunity to leverage the first mover advantage in the market.
Threat: The first significant threat faced by Tesla in the industry is the steep competition in the automotive industry. The global automotive sector is characterized by the presence of various well-established brands like Volkswagen, Honda, BMW, etc. Moreover, owing to the expansion of the electric car sector, a lot of these traditional car manufacturers are trying to enter this sector, thereby posing a steep competition for Tesla. Moreover, new companies like Lucid Motors and Nikola Corporation are also trying to penetrate the attractive electric vehicle market. Thus, Tesla faces threat of competition from both the existing companies as well as from the new entrants.
Secondly, the fluctuations in material pricing can have a prominent effect on the business operations of the company. Even though the company has adopted vertical integration to some extent, it still is reliant on some its suppliers, who has high bargaining power over the company. As a result, it can threaten the overall operations of Tesla by disrupting its supply chain.
Thirdly, it should be noted that the international business of Tesla is largely dependent on the bilateral ties between the home and host nations. Any political turmoil can have a significant impact on the business of the company.
Finally, Tesla can face a prominent threat from the oil industry lobby. The increasing demand for electric vehicles, also threatens the oil industry as more and more customers are willing to switch to environment friendly options. As a result, the oil industry lobby can bring potential hurdles that can slow the market expansion of the electric car companies like Tesla.
You can use this SWOT analysis example as a reference for your own company or any other venture of your choice. If you want to learn more on how to do SWOT analysis, check out more examples on SWOT Analysis of Apple Inc and SWOT Analysis of Starbucks.
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