Tesla (TTSLA) SWOT Analysis / TOWS Matrix / MBA Resources
Auto & Truck Manufacturers
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Tesla (Italy)
Based on various researches at Oak Spring University , Tesla is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, wage bills are increasing, geopolitical disruptions, talent flight as more people leaving formal jobs,
banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Tesla can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tesla, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tesla operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Tesla can be done for the following purposes –
1. Strategic planning of Tesla
2. Improving business portfolio management of Tesla
3. Assessing feasibility of the new initiative in Italy
4. Making a Auto & Truck Manufacturers sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Tesla
Strengths of Tesla | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tesla are -
Organizational Resilience of Tesla
– The covid-19 pandemic has put organizational resilience at the centre of everthing Tesla does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Tesla has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Auto & Truck Manufacturers industry. Secondly the value chain collaborators of Tesla have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Tesla is one of the most innovative firm in Auto & Truck Manufacturers sector.
Operational resilience
– The operational resilience strategy of Tesla comprises – understanding the underlying the factors in the Auto & Truck Manufacturers industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Training and development
– Tesla has one of the best training and development program in Consumer Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Low bargaining power of suppliers
– Suppliers of Tesla in the Consumer Cyclical sector have low bargaining power. Tesla has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Tesla to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Auto & Truck Manufacturers industry
– Tesla has clearly differentiated products in the market place. This has enabled Tesla to fetch slight price premium compare to the competitors in the Auto & Truck Manufacturers industry. The sustainable margins have also helped Tesla to invest into research and development (R&D) and innovation.
Digital Transformation in Auto & Truck Manufacturers industry
- digital transformation varies from industry to industry. For Tesla digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Tesla has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Cross disciplinary teams
– Horizontal connected teams at the Tesla are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Successful track record of launching new products
– Tesla has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Tesla has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High brand equity
– Tesla has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Tesla to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Auto & Truck Manufacturers
– Tesla is one of the leading players in the Auto & Truck Manufacturers industry in Italy. Over the years it has not only transformed the business landscape in the Auto & Truck Manufacturers industry in Italy but also across the existing markets. The ability to lead change has enabled Tesla in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Tesla | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tesla are -
High bargaining power of channel partners in Auto & Truck Manufacturers industry
– because of the regulatory requirements in Italy, Tesla is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Auto & Truck Manufacturers industry.
High cash cycle compare to competitors
Tesla has a high cash cycle compare to other players in the Auto & Truck Manufacturers industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High operating costs
– Compare to the competitors, Tesla has high operating costs in the Auto & Truck Manufacturers industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Tesla lucrative customers.
Skills based hiring in Auto & Truck Manufacturers industry
– The stress on hiring functional specialists at Tesla has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Products dominated business model
– Even though Tesla has some of the most successful models in the Auto & Truck Manufacturers industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Tesla should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the Auto & Truck Manufacturers industry, Tesla needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow decision making process
– As mentioned earlier in the report, Tesla has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Auto & Truck Manufacturers industry over the last five years. Tesla even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Tesla is slow explore the new channels of communication. These new channels of communication can help Tesla to provide better information regarding Auto & Truck Manufacturers products and services. It can also build an online community to further reach out to potential customers.
Employees’ less understanding of Tesla strategy
– From the outside it seems that the employees of Tesla don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Increasing silos among functional specialists
– The organizational structure of Tesla is dominated by functional specialists. It is not different from other players in the Auto & Truck Manufacturers industry, but Tesla needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Tesla to focus more on services in the Auto & Truck Manufacturers industry rather than just following the product oriented approach.
Lack of clear differentiation of Tesla products
– To increase the profitability and margins on the products, Tesla needs to provide more differentiated products than what it is currently offering in the marketplace.
Tesla Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Tesla are -
Creating value in data economy
– The success of analytics program of Tesla has opened avenues for new revenue streams for the organization in Auto & Truck Manufacturers industry. This can help Tesla to build a more holistic ecosystem for Tesla products in the Auto & Truck Manufacturers industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Tesla is facing challenges because of the dominance of functional experts in the organization. Tesla can utilize new technology in the field of Auto & Truck Manufacturers industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Auto & Truck Manufacturers industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Tesla can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Tesla can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Auto & Truck Manufacturers industry, but it has also influenced the consumer preferences. Tesla can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for Tesla to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Tesla to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Tesla can use these opportunities to build new business models that can help the communities that Tesla operates in. Secondly it can use opportunities from government spending in Auto & Truck Manufacturers sector.
Manufacturing automation
– Tesla can use the latest technology developments to improve its manufacturing and designing process in Auto & Truck Manufacturers sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Building a culture of innovation
– managers at Tesla can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Auto & Truck Manufacturers industry.
Use of Bitcoin and other crypto currencies for transactions in Auto & Truck Manufacturers industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Tesla in the Auto & Truck Manufacturers industry. Now Tesla can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Tesla can improve the customer journey of consumers in the Auto & Truck Manufacturers industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Loyalty marketing
– Tesla has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Developing new processes and practices
– Tesla can develop new processes and procedures in Auto & Truck Manufacturers industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Threats Tesla External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Tesla are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Tesla may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Auto & Truck Manufacturers sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Tesla in Auto & Truck Manufacturers industry. The Auto & Truck Manufacturers industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Easy access to finance
– Easy access to finance in Auto & Truck Manufacturers industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Tesla can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Tesla high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Auto & Truck Manufacturers industry are lowering. It can presents Tesla with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Auto & Truck Manufacturers sector.
Shortening product life cycle
– it is one of the major threat that Tesla is facing in Auto & Truck Manufacturers sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Tesla
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Tesla.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Tesla can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Tesla prominent markets.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Tesla needs to understand the core reasons impacting the Auto & Truck Manufacturers industry. This will help it in building a better workplace.
Regulatory challenges
– Tesla needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Auto & Truck Manufacturers industry regulations.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Tesla business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Tesla can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Auto & Truck Manufacturers industry.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Tesla.
Weighted SWOT Analysis of Tesla Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Tesla needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Tesla is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Tesla is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Tesla to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Tesla needs to make to build a sustainable competitive advantage.
