Attached.Surname1Student’s NameProfessor’s NameCourseDateTesla Motors, Inc.Situational AnalysisVRIO FrameworkResource and(V) ValuableCapabilityCommoditized Yes(R)(I)(O)RareDifficult toOrganizational CompetitiveImitateexploitationadvantageYesYesSustainableYesBattery PacksType ofcompetitiveadvantageSuperchargingYesYesYesYessystemsSustainablecompetitiveadvantageMega factoryYesYesYesNoUnusedcompetitiveadvantageSurnameDirect salesYesYesNoTemporarycompetitiveadvantageInnovativeYesYesNoYescultureTemporarycompetitiveadvantageElon MuskYesYesYesYesSustainablecompetitiveadvantageRegulatoryYesNocompetitivesupportparityVRIO analysis is used to assess the nature of competitive advantage produced byvaluable resources and competencies owned by Tesla. The framework focuses on both thetangibles and intangibles since they all contribute to the firm’s performance.SWOT AnalysisStrengths•WeaknessesEntrepreneurial endowment (Elon•Lack of physical dealershipsMusk)•High operating costs•Electric car market leadership•Production delays-low output capacity•Innovative technologiesOpportunitiesThreats2Surname•The growing demand for electric cars•Diversification to include more••3Traditional auto companies venturingin the electrical car industrymodels•Dealership regulationVenture in international markets•DebtTesla has notable strengths that can be used to enhance its competitiveness. Theentrepreneurial skills of Elon Musk, the company’s CEO, can be useful in making strategicdecisions to help Tesla overcome competitors. The company is also the market leader in theelectric car segment, providing it with valuable advantages over new entrants. Markedly, theorganization has established a stable market share and reputation. Tesla’s innovativetechnologies, such as the supercharging systems, can be utilized to deliver more novels toenhance consumer experience and challenge opposition.The company’s inherent weaknesses include the lack of physical dealer shops, selling itsproducts online. Customers lack such benefits as a test drive, which is useful in making a buyingdecision. The firm has a high operating budget, mainly through research and development,leading to growing net losses over the years. The firm’s inability to meet production deadlinesand output levels is a major concern to customers, especially those who pay to reserve vehicles.Tesla has the opportunity to capitalize on the growing demand for electric cars due tointernational efforts to combat climate change. The company can also diversify its portfolio toinclude more vehicle classes to meet consumers’ tastes. Tesla can seek to exploit the internationalmarket rather than focusing on the U.S. consumer base onlySurnameExternal threats facing Tesla Include the venturing of such traditional fuel-based vehiclemanufacturers like Nissan, Toyota, and BMW in the EV segment. Their already establishedcapacity can be a significant source of competition for Tesla. Regulations requiring the use ofdealerships can hurt Tesla’s direct selling technique, which has enabled it to minimize expenses.Additionally, high operational costs pose a debt threat to the company, a factor that can lead tofailure.Financial RatiosRatio20112012Gross margin5.06%6.27%Operating margin-10.46%-18.85%Return on assets-3.56%-3.56%Tesla’s gross margin for 2011 and 2012 indicate notable inefficiencies in production.Such figures can be attributed to the high cost of production that limits the revenue realized.Notably, the firm’s performance improved by 1.22% to indicate increased control overproduction costs. However, Tesla’s operating margins for the two years are negative, indicatingits inability to meet non-operating charges, hence a high risk of running into debt. The sametrend is manifested in the company’s ROA, confirming the failure of investments to deliverexpected revenues. An example is the purchase of the Gigafactory, which has not been utilizedexhaustively to cover its cost and produce income.4Surname5Central ProblemTo achieve and sustain long-term competitive advantage, Tesla must address the strategicchallenges facing it. The current cost of operation is undermining the company’s profitability andability to meet customer expectations. Notably, the firm’s main cost element is research anddevelopment, an aspect that …
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