Tesla Inc. Photo: Public Domain Tesla Inc. Michael Porter developed the Five Forces Analysis model as a strategic management tool to understand the impact of external factors on firms and the competitive landscape of their industry environment. This Five Forces analysis of Tesla looks into the external factors significant in the automotive industry and the energy solutions industry, and how such factors affect the company.
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Tesla Inc. Photo: Public Domain Tesla Inc. Michael Porter developed the Five Forces Analysis model as a strategic management tool to understand the impact of external factors on firms and the competitive landscape of their industry environment. This Five Forces analysis of Tesla looks into the external factors significant in the automotive industry and the energy solutions industry, and how such factors affect the company. The company must account for the nature and characteristics of such competition in the domestic and international markets for electric automobiles, batteries, and solar panels, as considered in this external analysis.
Pressures from substitutes, suppliers and buyers are also considered in this business analysis. Firms in the international automotive industry environment experience a variety of external factors, including raw material availability and technology-based firm competitiveness. This company analysis shows that the business manages to grow in spite of competitive challenges.
However, Tesla must ensure that it addresses external factors according to the intensity of the forces impacting the business, as shown in this Five Forces analysis: Competitive rivalry or competition Strong Force Bargaining power of buyers or customers Moderate Force Bargaining power of suppliers Moderate Force Threat of substitutes or substitution Moderate Force Threat of new entrants or new entry Weak Force Recommendations.
Thus, the company must prioritize this force in its strategic formulation. Managerial initiatives must address these forces according to their intensities. Competitive Rivalry or Competition with Tesla, Inc. Strong Force Tesla, Inc. This aspect of the Five Forces Analysis outlines the influence of competition on the automotive and energy solutions industry environment.
In this case of Tesla, the external factors and their intensities responsible for the strong force of competitive rivalry are as follows: Small number of firms weak force High aggressiveness of firms strong force Low switching costs strong force There are only a small number of firms operating in the automotive market.
However, these firms are generally aggressive in innovating and promoting their products. For example, large automotive companies have aggressive marketing campaigns. Also, the low impediments for customers to buy cars from other manufacturers low switching costs further strengthen the force of competition.
This aspect of the Five Forces analysis of Tesla Inc. The following external factors and their intensities maintain the moderate force of the bargaining power of customers on the company: Low switching costs strong force Moderate substitute availability moderate force Low volume of purchases weak force Low switching costs reduce barriers for Tesla customers to purchase cars from other providers.
For example, many customers in suburban areas have limited access to public transportation, making it more practical to drive their own car.
In addition, the low volume of purchases each customer buys and keeps only one or a few cars reduces the influence of customers on Tesla. Thus, the intensities of the external factors in this aspect of the Five Forces analysis reflect the bargaining power of customers as a moderate force and a secondary management priority.
This prioritization is reflected in Tesla Inc. This aspect of the Five Forces Analysis shows how suppliers shape the industry environment by influencing the availability of materials that firms need. For example, some suppliers use third parties to sell their materials to Tesla, while others directly transact with the company.
In addition, most of these suppliers are moderately sized, thereby having limited influence on the automotive industry environment. Another external factor is the moderate level of supply, which empowers suppliers to affect Tesla, but only to a limited degree. In this external analysis case, the low switching costs enable substitutes, such as public transportation, to easily attract customers. However, the moderate availability of substitutes limits such influence of suppliers.
For example, customers have only a moderate and limited number of substitute options in the market. For instance, public transportation is not as versatile as a private car.
In this aspect of the Five Forces analysis of Tesla, Inc. Threat of New Entrants or New Entry Weak Force New entrants are new firms, which impact the industry environment and determine the performance of companies like Tesla Inc. In addition, automobile manufacturing has high costs, which impose a barrier to new firms.
Also, established players like Tesla benefit from increasing economies of scale, which new entrants can only achieve upon exceeding a production threshold.
Based on the external factors in this aspect of the Five Forces Analysis, the threat of new entry is only a minor strategic management concern in Tesla Inc. References Dobbs, M. Grundy, T. Karagiannopoulos, G. Porter, M.
The five competitive forces that shape strategy. Roy, D. GRIN Verlag.
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Apple Inc. Photo: Public Domain Apple Inc. Michael E. A Five Forces analysis of Apple Inc.
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It is especially useful when starting a new business or when entering a new industry sector. According to this framework, competitiveness does not only come from competitors. Rather, the state of competition in an industry depends on five basic forces: threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products or services, and existing industry rivalry. The collective strenght of these forces determines the profit potential of an industry and thus its attractiveness. If the five forces are intense e. If the forces are mild however e.