Overview of SWOT analysis
Conducting a SWOT analysis demands proficiency in numerous areas key to writing an assignment in business school. In real business scenarios, a SWOT analysis is instrumental in making strategy decisions important to business growth and long-term survival.
On the other hand, in academics, just like a Nike’s business strategy or business case study, the SWOT analysis is used to help learners develop business analysis skills as well as assess their aptness in business strategic analysis.
Accordingly, a SWOT analysis is considered a strategic planning technique that is used to determine the strategic decisions and actions of a business enterprise.
It is an acronym for:
Strengths (S), Weaknesses (W), Opportunities (O), and Threats (T).
Per se, the respective SWOT analysis decisions are arrived at after an examination of the entailed strengths, weaknesses, opportunities, and threats.
It is important to note that a SWOT analysis is usually conducted using a 2×2 matrix. To fill the matrix, you should specific questions in respective areas. These questions include:
Strengths
1. What areas do the enterprise excel in?
2. What unique resources can the enterprise rely on?
3. What attributes do other firms view as the enterprise’s strengths?
Weaknesses
1. What areas can the enterprise improve on?
2. In what areas are the enterprise’s resources more diminished?
3. What areas do other firms think are the enterprise’s weaknesses?
Opportunities
1. What opportunities are at the enterprise’s disposal?
2. What are the trends that the enterprise can exploit to its advantage?
3. What can be done to make the enterprise’s strengths solid opportunities?
Threats
1. What elements could harm the enterprise?
2. What are the enterprise’s competitors doing?
3. What risks do the enterprise’s weaknesses expose it to?
SWOT Analysis for Tesla
Logically, in your college studies some of the assignments you are likely to come across include a Tesla SWOT and PESTLE analysis. Such assignments requires skills on how to write an essay as well as in-depth knowledge in the field of business.
In the case of a Tesla SWOT analysis essay, you will need to understand the company’s background.
Tesla Inc.’s Background
The SWOT analysis for Tesla cannot be done without considering the company’s background.
Per se, Tesla Inc. is a public company that focuses on the manufacturing of electric vehicles and clean energy technology. It was founded in 2003 by a group of engineers, including Elon Musk, it current CEO and largest shareholder.
The company is based in Palo Alto, California and is considered one of the largest car companies globally, with a valuation of about $ 173.7 billion in 2020.
With the understanding of this background, although quite brief, you can go ahead and conduct Tesla situation analysis.
Strengths
Strengths are at the core of SWOT analysis for Tesla. They have an intricate role in the development of Tesla strategy, and include:
1. Brand equity: Tesla enjoys a very strong brand name. Over the years, brand image has become one the key elements of Tesla strategy.
The company is renowned for cars with classy designs that are environmentally friendly. This brand name can be leveraged on when developing its future strategies.
2. Technology and innovation: Tesla is miles ahead when it comes to technology and innovation. Accordingly, a SWOT analysis for Tesla has to consider how the company has managed to be a pioneer in areas such as battery packs, powertrains, and motors for electric cars.
Note that other companies like Toyota and Mercedes-Benz have even directly borrowed some of these technologies from Tesla.
3. Monopoly: Arguably, the company enjoys a partial if not an absolute monopoly in the electric vehicles industry. Your Tesla SWOT analysis essay therefore has to reflect on the implications of the company’s dominant effect in this niche.
Accordingly, its sole focus on these vehicles has given it a huge competitive advantage in this market segment over other companies.
4. Political support: The SWOT analysis for Tesla has also to consider the political goodwill the company has enjoyed from local and regional governments. First, the company has historically secured energy management projects for US Department of Energy.
Second, the global government policy shift towards clean energy in Europe, Americas, and Asia favors the company’s operations.
5. Effective leadership: Tesla situation analysis should also examine the role of leadership in the development of the company’s strategies. Particularly, the leadership offered by Elon Musk, Tesla Inc.’s CEO has been critical to its performance.
The CEO has proven to be resilient, driven, and a team-player, all attributes that ooze down the company. This is also evident among the rest of the management team.
6. Good distribution channels: In the SWOT analysis for Tesla, it is important to note the role of its distribution channels in its strategies. The company has successfully established efficient distributions channels that it has complete control over.
In this, it is possible to easily establish customer relationships, control supply, and efficiently respond to customer needs.
Weaknesses
Weaknesses would also be fundamental in a Tesla SWOT analysis essay. You have to consider all the areas that make the company vulnerable in order to device strategies to mitigate against them. Such weaknesses encompass:
1. High operational costs: Operational costs are at the center of SWOT analysis for Tesla. The company is facing increasing costs in its daily operations and expansion drives.
These costs are associated with demand for superior raw materials, investment in R&D, and establishment of the super-charger network.
All these make the cost of revenue quite high.
2. Poor liquidity: Poor liquidity is one of Tesla’s biggest weakness. Note that the company ranks poorly in liquidity compared to competitors like Ford, General Motors, and Fiat Chrysler.
These companies have current assets of about $20b, $25b, and $40b, respectively.
Tesla on the other hand has about $3b in current assets. This is likely to negatively affect its daily debt obligations.
3. Low capacity: Tesla situation analysis should also look at its production capabilities. Note that the company has only one operational plant at the moment. The Fremont, California plant has a limited car production capacity.
Per se, Tesla is not in a position to produce enough vehicles to match market demand. It has been noted that only about 500,000 vehicles can be produced in a year.
4. Narrow portfolio: This is another of Tesla’s biggest weakness. The company’s narrow niche that focuses on electric cars restricts its profits and growth.
Accordingly, a SWOT analysis for Tesla has to evaluate its product line that encompasses quite a few vehicle brands and energy products.
This puts it at a disadvantage when competing with companies like Toyota, Audi, Mercedes-Benz, and BMW, who have all recently expanded their operations into the electric cars market.
5. Costly products: The high prices for electric vehicles is also part of Tesla’s biggest weakness. The company’s vehicles are considered premium products that are beyond the reach of ordinary consumers when compared to alternatives.
Tesla vehicles cost about $75K, with the second cheapest care being at about $35K. Majority of the customers opt for the cheaper gasoline vehicles.
6. Poor customer awareness: The SWOT analysis for Tesla has to assess the place of customers in the company’s strategy. At the moment, very few customers understand and appreciate Tesla vehicles.
The electric cars are seen as a relatively new concept and part of futuristic products.
Customers are also in a dilemma on whether to invest in the equipment required for such vehicles.
Opportunities
For students, opportunities are a key element in a Tesla SWOT analysis essay. You must be able to clearly identify the opportunities the company can derive from its environment. In view of that, opportunities in SWOT analysis for Tesla include:
1. Demand for sustainable products: The world has become increasingly conscious of the need to adopt sustainable approaches towards consumption. With this in mind, Tesla strategy can leverage on the demand for alternatives to cars using gasoline.
The demand for clean energy cars is likely to continue growing in the near future.
2. Emerging demands on vehicle technology: A SWOT analysis for Tesla could not be complete without examining the place of new technology in the vehicles as a market force.
Particularly, the emergence of autonomous vehicles is an area that Tesla can explore for strategic positioning and growth opportunities.
This is because autonomous cars is certainly a major area in future vehicle industry.
3. Diversification: A Tesla strategy focusing on diversification presents the company with a myriad of opportunities. Such diversification may take the form of new products or services. For instance, the company could opt to venture into the taxi industry.
Tesla could do this by building an online taxi operation platform like Uber and leverage on its cars.
4. Market expansion: Venturing into new markets in another opportunity for the company.
A SWOT analysis for Tesla should appreciate the fact that the company has not effectively expanded into markets like Asia and Europe.
This is evident where about 70% of its sales come from customers in the US.
Threats
Threats are also integral to the SWOT analysis for Tesla. The company should find a means of turning these threats to opportunities. They include:
1. Competition: Tesla is facing serious competition from rival companies. First, the gasoline car industry is still much dominant. Also, other companies, including conventional manufacturers like Toyota and Mercedes-Benz are seriously investing in the electric car industry.
2. Regulatory restrictions: Government regulations feature prominently as a threat in SWOT analysis for Tesla. Note that governments of either US or other countries have become seriously involved in regulating the standards of vehicle in areas like safety.
3. Economic challenges: As well, Tesla has to contest with a sluggish global economy. This is considering the slowdown of economy in countries like China that are huge potential markets.
