Tesla- 5 forces Final - Grade: A PDF

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LIBR 001 Spring 2021 Michael Porter’s 5 Forces Model- TESLA When looking at whether or not Tesla Motors is a company that you would like to do business with, it is important to measure the advantages and disadvantages of the company. A powerful tool used to measure the competitiveness of Tesla within the industry is Michael Porter’s Five Forces Model. This tool is useful because when you understand your environment, you can adjust your business model accordingly. Knowing what works and what does not work, can keep your company ahead of the competition without having to waste valuable resources for the company. Competitive rivalry is something that needs to be heavily researched when looking at Tesla, or any company for that matter. Knowing the number of competitors and how strong they are can show you how you need to differentiate yourself. Is it a new product line? Or better customer service? Whatever your competitors are doing, you need to be ten steps ahead. Tesla has already positioned itself to be one of the top automotive companies, as it is known for being a luxury electric, sports car targeted towards consumers looking to spend a little more on these types of vehicles. Though there are competitors that offer similar product lines, there is not one that comes close to the level of excellence that Tesla holds, making Tesla a strong competitor in the market. Supplier power, the next force, is determined by how easy it is for suppliers to increase their prices. If there are more suppliers available to a company, it is easier to find a cheaper alternative; however, the more you need help from suppliers, the stronger their position is in raising their prices. “As Tesla, Inc. purchases materials from more than 200 suppliers, no one supplier has enough power to influence the company, not even its major suppliers like Panasonic”(Musonera, Etienne, and Carol Cagle). Overall, suppliers have a moderate force to influence the industry. The third force in Michael Porter’s Five Forces, is buyer power. How many buyers are

there in the industry? Are they strong enough to dictate prices? Buyers can easily switch to a vehicle that offers similar features to Tesla, however, Tesla offers a wide selection of charging stations nationwide, that other dealers do not offer. Not unique to Tesla, but since a car is a luxury purchase at any price point, cars are not being bought at a high volume, which further weakens buyer power. Though there are substitutes for Tesla’s products, they aren’t as accessible for buyers, which makes buyer power moderate as well. To further continue the discussion on substitutes, the next force is the threat of substitution. The threat of substitution for the products offered by Tesla are low as there are not many environmentally friendly substitutes, other than perhaps a bike or walking. There are public transportation options available like a bus and train, but they do not offer the same accessibility as a personally owned vehicle, keeping the threat of substitution low. The final force in Michael Porter’s model is the threat of new entry. The threat of new entry determines how easy it is to have new people enter the market and measures an individual’s footing within the industry. Big name brands within the industry could potentially enter the market, but given how established Tesla is, they would have to bring something remarkable to the table. Tesla already offers premium services, nationwide charging stations, and an overall aesthetically pleasing product line. The threat of potential new entrants is overall low-moderate. Using the Five Forces Model, it is easy to measure Tesla’s success as an innovative automobile manufacturer. Prioritizing knowing what is happening in the industry outside of the company itself will keep Tesla competitive as one of the top luxury electric, sports car manufacturers in the world.

Works Cited Musonera, E., & Cagle, C. (2019). Electric Car Brand Positioning in the Automotive Industry: Recommendations for Sustainable and Innovative Marketing Strategies. Journal of Strategic Innovation & Sustainability, 14(1), 120–133. https://doi.org/10.33423/jsis.v14i1.991...