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Tesla and Porter's Five Forces

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Rebecca Hartley

on 11 September 2013

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Transcript of Tesla and Porter's Five Forces

Rivalry Among Existing Competitors
Bargaining Power of Suppliers
Threat of New Entrants/Barriers to Entry
Bargaining Power of Buyers
Threat of Substitute Products or Services
Strategic Groups
Jordan Grindeland
Rebecca Hartley
Katelyn Keith

Bargaining Power of Buyers = LOW (1)
- Tesla Motors does not sell products in bulk
- Do not have standard products. Tesla automobiles are very unique in the industry.
- Buyer power is extremely low due to the fact that there are few competitors.

Threat of Substitutes = LOW (3)
- There are few substitutes as well.
- Substitutes include:
*Public Transportation
*Hydrogen Vehicles
- The Tesla consumer is very environmentally cautious and the transportation methods listed above also have green consumers.
- These substitutes are of lower quality
- Tesla vehicles are differentiated when compared to transportation listed above. (Electric sports car vs. either a hybrid or a sports car. Not both.)

Attractiveness of the Industry
Barriers to Entry/Threat of New Entrants = High (8)
•There is slight product differentiation in the cars such as hybrid versus fuel.
•The switching cost is high. In order to switch to another industry almost nothing from the automobile industry can be transferred.
•There is expected retaliation from other competitors when a new car manufacturer emerges.
•There is a need for strong brand identity and to differentiate from other car makers. Since most cars are relatively similar. Customers will buy more for the brand than the car.

Power of Suppliers: Low (3)

Many firms rely on one or two automakers to buy a majority of their products. The supplier firms must contend with substitute products for sale to the industry.
If automaker decided to switch suppliers, it could be detrimental to the previous supplier’s business. Suppliers are susceptible to the demands and requirements of automobile manufacturer = very low power.

Supply-chain and product strategies are tightly aligned. Finding the right partners that are willing to manage costs in order to help Tesla become profitable quickly mitigated the bargaining power of suppliers.

Rivalry Intensity Among Competitors: High (7)

Rivalry in the US and the global automotive industry is intense. The automotive industry is no longer the playground of the Big 3 (GM, Ford, Chrysler) global companies now compete in US market, while US companies have globalized themselves. Great diversity of rivals in terms of cultures and philosophies have intensified rivalry. High fixed costs associated with manufacturing cars and trucks and the low switching costs for consumers when buying different makes and models further heighten the rivalry.

Main competition seems to be Tesla themselves. GM Volt, Nissan Leaf, Mazda hydrogen vehicles will be competition. Can focus on their leadership messaging – being the first viable electric car in the market.

Forces: 22/5 = 4.4

The Industry is moderately attractive
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