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Background
Tesla, founded in 2003, is a leader in the electric vehicle (EV) market. It has revolutionized
the automotive industry by combining cutting-edge battery technology, software-driven
innovation, and brand prestige. However, as of 2024, the EV industry is becoming
increasingly competitive, with new players, government policies, and shifting consumer
preferences shaping the landscape. To assess Tesla’s competitive environment, we apply
Porter’s Five Forces model.
1. Threat of New Entrants – Moderate to High
Building an EV company requires significant capital (factories, R&D, battery supply chains).
However, falling battery costs and government incentives have lowered these barriers.
Start-ups like Rivian, Lucid Motors, and NIO (China) are entering aggressively. Tech giants
(Apple, Xiaomi) are also exploring EVs. Tesla cannot rely solely on first-mover advantage; it
must maintain innovation speed and scale.
2. Bargaining Power of Suppliers – Moderate
Tesla relies heavily on suppliers for lithium, nickel, cobalt, and other raw materials. Supply
constraints and price volatility increase the power of suppliers. To mitigate this, Tesla has
vertically integrated by developing in-house batteries (Gigafactories) and securing longterm contracts with mining companies. Vertical integration reduces supplier power, but
raw material scarcity keeps this force significant.
3. Bargaining Power of Buyers – High
Consumers have increasing options: legacy automakers (Ford, GM, VW) and new EV-only
players offer alternatives. Switching costs are low—buyers can easily compare price, design,
and performance. However, Tesla enjoys brand loyalty and a strong ecosystem (charging
network, software updates). Tesla must maintain differentiation (innovation, brand image)
to retain customer loyalty.
4. Threat of Substitutes – Moderate
Substitutes include traditional internal combustion engine (ICE) vehicles, hybrid cars,
public transport, and emerging mobility services (ride-sharing, autonomous taxis).
Government policies pushing for decarbonization are reducing ICE attractiveness. While
substitution threats are declining, Tesla must prepare for a future where consumers value
mobility services more than car ownership.
5. Industry Rivalry – Very High
Competition is fierce: Tesla faces pressure from both legacy automakers (VW, Toyota, Ford)
and aggressive new entrants (BYD, NIO, Rivian). Price wars (e.g., Tesla’s 2023–24 price
cuts) show intensifying rivalry. The growth of the EV industry attracts significant
investment, making rivalry a dominant force. Tesla must balance market share growth with
profitability, while protecting its innovation lead.
Strategic Implications for Tesla
• Differentiation Strategy: Tesla must continue innovating (autonomous driving, AI, energy
solutions) to stay ahead.
• Supply Chain Control: Expanding vertical integration will reduce supplier dependence.
• Global Positioning: Competing in China (world’s largest EV market) is critical, especially
against BYD.
• Future Mobility: Tesla should prepare for industry shifts from car ownership to mobility
as a service.
المملكة العربية السعودية
وزارة التعليم
الجامعة السعودية اإللكترونية
Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
College of Administrative and Financial Sciences
Assignment 2
Strategic Management (MGT 401)
Due Date: 01/11/2025 @ 23:59
Course Name: Strategic Management
Student’s Name:
Course Code: MGT 401
Student’s ID Number:
Semester: First
CRN:
Academic Year:2025-26-1st
For Instructor’s Use only
Instructor’s Name:
Students’ Grade:
/10
Level of Marks: High/Middle/Low
General Instructions – PLEASE READ THEM CAREFULLY
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The Assignment must be submitted on Blackboard (WORD format only) via the
allocated folder.
Assignments submitted through email will not be accepted.
Students are advised to make their work clear and well presented, marks may be reduced
for poor presentation. This includes filling your information on the cover page.
Students must mention the question number clearly in their answers.
Late submissions will NOT be accepted.
Avoid plagiarism, the work should be in your own words, copying from students or other
resources without proper referencing will result in ZERO marks. No exceptions.
All answers must be typed using Times New Roman (size 12, double-spaced) font. No
pictures containing text will be accepted and will be considered plagiarism).
Submissions without this cover page will NOT be accepted.
Learning Outcomes:
CLO1
CLO2
CLO3
CLO6
Recognize the basic concepts and terminology used in Strategic Management.
Describe the different issues related to environmental scanning, strategy formulation, and strategy
implementation in diversified organizations.
Explain the contribution of functional, business, and corporate strategies to the organization’s competitive
advantage.
Communicate issues, results, and recommendations coherently and effectively regarding appropriate strategies
for different situations.
Case Study: Tesla and the Global Electric Vehicle (EV) Industry
Questions
Please read the enclosed case study carefully and answer the questions that follow (2 marks/
question).
1. Briefly present the company’s ‘Tesla’ and discuss its position in its market.
2. Which of the Five Forces currently poses the most significant risk to Tesla? Justify your answer.
3. How effective is Tesla’s vertical integration strategy in reducing supplier power? Argue your
answer.
4. Should Tesla prioritize defending its premium brand or expand aggressively into lower-cost EV
segments? Why?
5. Which type of directional strategy would you recommend to Tesla to better defend its competitive
advantage? Justify your answer.
Notes.
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Be concise when answering the questions.
It is highly recommended to use the vocabulary/terminology studied in your course of MGT401.
You can use other sources (references) about this company to enhance your answers.
Student’s Answers
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