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.
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Porter, the strategy guru, used concepts developed in Industrial Organization IO economics to derive five forces which determine the competitive intensity and therefore attractiveness of a market.
This model describes the attributes of an attractive industry and thus suggests that opportunities will be greater, and threats less, in these kinds of industries.
Attractiveness in this context refers to the overall industry profitability. Resource based views were argued to be more suitable than the 5 forces model as a tool for analysis in the wake of web enablement of businesses.
Research has established that the rate of unique visitors, the e-business-specific measure, showed significant correlations with market value, net income growth, and employee growth. This implies that cyberspace-specific indicators, such as page views, stickiness, click-through rate, and conversion rate, may not be unreliable as performance measures.
Web enablement increases the dynamic nature of industry structure. In the light of technology enablement of business to e-business, the five forces, as depicted by Porter are significantly affected. The bargaining power of both suppliers and customers increase as the information accessibility is increased and the information gap is narrowed.
This leads to lower bargaining power for the firm, and may transcend into lower profits. Again as e-business enablement increases customer reach, the bargaining power of the customers are negatively impacted by this change. Also, e-business models will enable easier entry into the industry, as now, companies may only look to perform very few activities in-house, and outsource the rest to other firms in the value chain.
This decreases the management complexity among new entrants, and thus the threat of new entrants may go up. While systematic risks may be addressed by taking objective steps and tactics, the rest is somewhat difficult to address, especially those which arise from socio political linkages or from regulatory fluctuations.
Tesla Inc. Five Forces Analysis (Porter’s Model) & Recommendations
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.
How the internet affects Porter’s 5 forces model
Apple Inc. Photo: Public Domain Apple Inc. Michael E. A Five Forces analysis of Apple Inc. Established in , Apple has succeeded to become a dominant competitor in the industry under the leadership of Steve Jobs.
Fathoming Porter's Five Forces Model in the Internet Era