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 – central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, increasing commodity prices, there is backlash against globalization, increasing government debt because of Covid-19 spendings,
supply chains are disrupted by pandemic , increasing energy prices, 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 -
Learning organization
- Tesla is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Tesla is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Tesla emphasize – knowledge, initiative, and innovation.
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.
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.
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.
Effective Research and Development (R&D)
– Tesla has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Tesla staying ahead in the Auto & Truck Manufacturers industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
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.
Strong track record of project management in the Auto & Truck Manufacturers industry
– Tesla is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Tesla is one of the most innovative firm in Auto & Truck Manufacturers sector.
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.
Analytics focus
– Tesla is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Auto & Truck Manufacturers industry. The technology infrastructure of Italy is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses of Tesla | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tesla are -
Aligning sales with marketing
– From the outside it seems that Tesla needs to have more collaboration between its sales team and marketing team. Sales professionals in the Auto & Truck Manufacturers industry have deep experience in developing customer relationships. Marketing department at Tesla can leverage the sales team experience to cultivate customer relationships as Tesla is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative at Tesla, in the dynamic environment of Auto & Truck Manufacturers industry it has struggled to respond to the nimble upstart competition. Tesla has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Slow to strategic competitive environment developments
– As Tesla is one of the leading players in the Auto & Truck Manufacturers industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Auto & Truck Manufacturers industry in last five years.
Need for greater diversity
– Tesla has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
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 dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Tesla supply chain. Even after few cautionary changes, Tesla is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Tesla vulnerable to further global disruptions in South East Asia.
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.
High dependence on Tesla ‘s star products
– The top 2 products and services of Tesla still accounts for major business revenue. This dependence on star products in Auto & Truck Manufacturers industry has resulted into insufficient focus on developing new products, even though Tesla has relatively successful track record of launching new products.
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.
No frontier risks strategy
– From the 10K / annual statement of Tesla, it seems that company is thinking out the frontier risks that can impact Auto & Truck Manufacturers industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Tesla Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Tesla are -
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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Tesla in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Auto & Truck Manufacturers industry, and it will provide faster access to the consumers.
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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Tesla can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Tesla can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Better consumer reach
– The expansion of the 5G network will help Tesla to increase its market reach. Tesla will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Tesla can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Tesla can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Tesla to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Tesla has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Auto & Truck Manufacturers sector. This continuous investment in analytics has enabled Tesla to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tesla to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Tesla External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Tesla are -
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.
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.
Consumer confidence and its impact on Tesla demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Auto & Truck Manufacturers industry and other sectors.
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.
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.
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.
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.
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.
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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Tesla in the Auto & Truck Manufacturers sector and impact the bottomline of the organization.
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.