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7261 Words Nov 19th, 2013 30 Pages
Tesla Motors Strategic Analysis Report
Industry, Company Analysis and Recommendations on Accelerating Transition to a Solar-Electric Economy

By Candela Díaz, Michelle Ikoma, Benton Moss, John Son, David Valenstein

Introduction The United States automobile industry is one characterized by incumbent behemoth corporations whose distribution channels span the world. Companies like Toyota, General Motors, and Volkswagen form entire segments of their respective countries’ economies and have dominated the auto industry for generations. Yet Tesla Motors, a company started in 2003, represents a disruptive threat characteristic of the information age in which industries are constantly challenged to innovate by smaller, more nimble firms.
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Within the automobile industry, consumers are concerned with efficiency, reliability of vehicles, availability of services, and price. Consumer bargaining power revolves around these aspects. Consumers have little influence in pricing but shop based on other qualitative aspects. Specific issues potential Tesla Motors consumers must deal with include supercharging infrastructure, range of each model, reliability of the technology, and federal tax incentives. Consumers’ bargaining power between the segments of fully electric and ICE is high because the concerns about the issues previously mentioned are high. Essentially, to neutralize potentially high consumer bargaining power, Tesla Motors must reassure and convince consumers that there is superior value in buying a fully electric car versus an ICE or hybrid model.

Supplier bargaining power within the traditional automobile industry can be divided into three distinct segments: part suppliers, car dealerships, and labor. Within in the traditional automobile industry, parts suppliers have relatively low bargaining power with auto manufacturers. The automobile industry exerts significant buying power for three primary reasons. First, the highly consolidated makeup of the automobile industry – where the “Big 3” U.S automakers comprise around 70% of the industry in 2013- enables automakers to dictate the buying terms over the many auto suppliers.

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