BCG Matrix Competitive Analysis For Medtronic

Liberty University

BCG Matrix (Appendix )

The two strategic business units (SBUs) of Tesla evaluated via the BCG Matrix were the automotive operations and the energy generation storage organizational segments. The automotive services are the cash cow of Tesla because it is generating the most profit and revenue between the two SBUs, and consumes most the share earning within the company. The energy generation and storage segment of Tesla are the problem child because it makes up a small share of earnings and will require more resources and strategic initiatives to help grow this SBU. Therefore, the automotive operations are the more profitable business unit when compared to it lesser performing SBU energy generation and storage. Tesla’s can utilize some of the cash generated from the automotive operations and invest it in energy production and storage to help maximize growth.

Product Life Cycle

Tesla life cycle is between the initial and growth stage since the development of electric cars is becoming more mainstream. Tesla currently manufactures three models which are the X, S and 3 type that vary in size from compact to medium sized vehicles. In the future, as growth for the company continues larger cars like SUV and minivans will be developed. Also, as the demand for electric vehicles increases to help mitigate air pollution and waste, more automobile companies will pursue the technology advancements of producing electrically operated vehicles. Therefore, to help prevent adverse effects from the mature development of electric motor vehicle in the automobile industry, Tesla will have to employ techniques like mass production of a various model to fit the needs of all consumers and find a way to expand their customer base by offering a reasonably priced vehicle. The overall objective is to adapt to the market and keep profits high as possible.

Competitive Forces Analysis

The automotive industry is a very competitive market which requires multiple strategic initiatives to help entice consumers and maximize profits. The automobile industry in the United States is saturated with both dominant domestic and import companies such as Ford, Chevy, Toyota, Honda, BMW and Volkswagen to name a few. Tesla is the smaller company that specializes in making high-end electric motor vehicles by providing an alternative to standard gasoline fuel. With the rise of cars being environmentally healthy and minimizing pollution, Tesla will be a competitive force to be reckoned with in a competitive automobile industry consumed by gasoline operated vehicles.

Porter’s Five Forces

· The Threat of New Entrants: The threat of new entrants in the auto industry is always high. Automobile companies are always going to challenge each other for sustaining success by holding a majority of the market, high profits, and maintaining a huge consumers base by offering what people desire (McMullen, 2016). In the case of Tesla, the company offers a high quality, sporty, cutting edge, electric propelled a motor vehicle, and depending on the demand by consumers this niche automaker could become a force in a large automobile industry that has both Honda and Toyota to compete against for electrical car dominance.

· Bargaining Power of Buyers: Barging power for consumers is moderate for Tesla. Tesla does participate in a niche market, by offering an electric vehicle that is high priced aimed at targeting high-end users. Therefore, Tesla is providing a specific high-quality vehicle, to a particular demographic, which directly impacts bargaining power for buyers. Also, federal and local governments are providing incentives for cleaner technologies (DeShazo, Sheldon, & Larson, 2017), which directly impacts the demand for electric cars keeping the power of bargaining power low.

· Bargaining Power of Suppliers: Bargaining power of suppliers is high because Tesla is very dependent on suppliers delivering raw materials and components that could impact production timelines directly affecting cost. Tesla vehicles are made up of very savvy technology, which is driven by research and development of significant technological parts, which too can impact bargaining power of suppliers.

· The Threat of Substitutes: The threat of substitute that could affect Tesla’s low. Although other automobile companies such as Honda and Toyota offer electric hybrid vehicles, a majority of Tesla car are customized and made to order. Therefore, Tesla affords its consumers the opportunity to get the vehicle they went at the point of purchase vice having to search for the electric car they want.

· Competitive Rivalry: The automotive industry is a very competitive market which requires multiple strategic initiatives to help entice consumers and maximize profits. The automobile industry in the United States is saturated with both dominant domestic and import companies such as Ford, Chevy, Toyota, Honda, BMW and Volkswagen to name a few. Tesla is a smaller company that specializes in making high-end electric motor vehicles by providing an alternative power source rather than the standard gasoline fuel. With the rise of cars being environmentally healthy and minimizing pollution, Tesla is a competitive force to be reckoned with in a competitive automobile industry consumed by gasoline operated vehicles, and the completion being Honda and Toyota which offer hybrid vehicle ran off both electricity and gas.

Competitive Profile Analysis (Appendix )

The competitive profile matrix was based on evaluating 12-critical success factors of Tesla, the Ford Motor Company, and Toyota. The most critical factors for success for all three automobile companies are advertisement, customer service, brand value, economic profit, customer loyalty, and quality. Tesla is a young car company in the United States, but it lagged in competitive profiling with a total score of 23.65. Tesla’s highest rating was based on research and development since it is a high-end luxury electric motor vehicle with savvy technology and battery powered and operated. Then customer loyalty is high as well since most of the consumers come from a particular economic demographic that shows continued support for the Tesla brand. Tesla rating for price competitiveness is low since the vehicle is marketed with a high price tag not competing against the standard models of both Ford and Toyota. Also, their R&D is greater because it is battery-operated vehicles with slot technological interfaces, whereas Ford and Toyota’s sell more car globally since their production are more streamlined or economical to scale.

Competitors Ratios Analysis (Appendix )

When evaluating the competitors’ ratio analysis Ford has the highest debt to equity ratio of all competitors, but Ford and Toyota can meet short-term financial liabilities as indicated on their quick ratio, whereas Tesla is below one indicating they will have a harder time meeting the short-term financial obligations. When evaluating the return on equity (ROE) which is the competitor’s profit to shareholder equity, Tesla was not profitable for how much money shareholder invested with – a 9.1 ROE in 2016. Both Ford and Toyota earned modest profits per shareholder equity with both ratios being greater than 1 in 2016. The net gain for all competitors was very similar because all competitors were below the ratio, which an indication that a trend is happening within the automobile industry for all three competitors at

Alternative Strategies

There are multiple strategies that Tesla can utilize to help stimulate and sustain growth. A strategic concept can either hinge on previous initiatives or look for alternate innovative ways to increase growth. Below are the follow strategic alternatives that can be used.

1. Stability Strategy

2. Expansion Strategy

Stability Strategy

Stability strategy is employed for companies that are not looking to expand or introduce new items into a separate market. The is strategic alternative could be perfect for Tesla because sustainable and continued growth is important for a new company.

· This will allow for complete focus on introducing high-quality products into current market

· Narrow focus of resources in R&D to enhance current products.

· Will help increase the performance of goods over time incrementally.

· Enhances current vehicle production.

· Allows the company to capitalize on current productive processes.

Stability strategy will help Tesla focus on improving technology and quality of existing vehicles in the market not necessarily hindering growth by not expanding. Some disadvantages could be.

· Slower introductory of newer vehicles into the market

· Innovation for expansion is hindered, one avenue for growth

· Customers will be limited to just this one product produced by a company.

Expansion Strategy

The expansion strategy can be employed by Tesla to help determine other ways to break into other markets and raise their strategic competitive advantage. Tesla can utilize expansion to help increase growth and mitigate a rapid decline by not expanding and adapting to the market demand and growing market share and using resources. Some advantages of expansion:

· R& D can be enhanced within the organization

· Opportunity to improve innovative ideas and diversify products

· Economic of scale

Disadvantages of expansion strategy

· Require massive capital investment

· Different customer base

· Outsourcing

Regardless if you’re a pursuing stability or expansion plans, they are great alternatives depending on the objective of the company and current state of the market.

Reference

DeShazo, J. R., Sheldon, T. L., & Carson, R. T. (2017). Designing policy incentives for cleaner technologies: Lessons from California’s plug-in electric vehicle rebate program. Journal of Environmental Economics and Management84, 18-43.

McMullen, S. (2016). Giving Consumers What They Want?. In Animals and the Economy (pp. 45-61). Palgrave Macmillan UK.

Competitive Profile Matrix (Appendix )

  Tesla Ford Toyota
Critical Success Factors Weight Rating Score Rating Score Rating Score
Advertising 1.00 1 1.00 4 4.00 3 3.00
Market Penetration 0.75 2 1.50 4 3.00 4 3.00
Customer Service 1.00 3 3.00 3 3.00 4 4.00
Distribution Channels 0.50 2 1.00 4 2.00 4 2.00
R&D Spending 0.60 4 2.40 2 1.20 3 1.80
Brand Value 1.00 3 3.00 4 4.00 4 4.00
Financial Profit 1.00 1 1.00 3 3.00 4 4.00
Customer Loyalty 1.00 4 4.00 3 3.00 4 4.00
Global Expansion 0.60 2 1.20 3 1.80 3 1.80
Product Quality 1.00 3 3.00 2 2.00 4 4.00
Online Presence 0.75 3 2.25 1 0.75 1 0.75
Price Competitiveness 0.30 1 0.30 3 0.90 3 0.90
Totals 9.50   23.65   28.65   33.25

Competitors Ratios (Appendix )

FY 2016 Competitors Analysis
Ratios Ford Tesla Toyota
Debt to Equity Ratio 4.6 1.5 1.1
Quick Ratio 1.2 0.72 1.1
Return on Equity 2.5 -9.1 1.3
Net Profit Margin 0.8 0.9 0.4

BCG Matrix Appendix ( )

High+20

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Medium 0

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Low -20

   

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