Free Essay with the Tesla Company Analysis

Published: 2022-04-26
Free Essay with the Tesla Company Analysis
Type of paper:  Case study
Categories:  Tesla
Pages: 7
Wordcount: 1727 words
15 min read

The Tesla Inc Company is an American organization which mainly specializes in the manufacturing of electric vehicles, energy storage, and the solar panels. In 2003 the firm was established by a group of engineers who had a market strategy of ensuring increment in the market demand through the provision of quicker, better and gas oiled vehicles. Besides, by the end of the 2009 financial year, Tesla Company had raised an operating capital of the United States $187 million shillings and market production of 147 motor vehicles. Development of the going concern concept, the company had also been approved to be receiving the United States $ 465 million shillings loans from the enhanced machinery motor vehicle manufacturing loan program. The going concern concept is a financial term which is used to explain the ability of a firm or an organization to be able to operate in the near prospect.

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Porter's five models

The Porter's five models consist of the macro-environment factors. The models refer to the external forces which affect the relationship between the business unit and the customers. Therefore, the model explicates the five main factors which include the bargaining power of suppliers, the threat of the substitutes, the purchasing power of buyers, the danger associated with the emergence of new businesses and the industrial rivalry (Michaux, Stephanie, Cadiat, and Probert 25).

The level of market completion of Tesla Inc can be described to be relatively low compared to the other performing industries in the market. Accordingly, an income statement for the year-end 2014 of the company has reported the gross profit to be $ 881,671 while the gross profit earned for the year ended was determined as $2,222,487 translating to 39.67% increment (Tesla Company Financials 2018). In addition, the company also has been portrayed to be performing well in the market through a definite increase in the retrieved earnings before tax after interest expense. In 2014, revenues before income tax after interest expense was determined as $ 284,636 while the earnings before income tax after interest expense for the year ended 2017 was $ 2,209,032. These, therefore, represent a market increment of 12.88%, a clear indication that Tesla Inc is performing well in the market. The assets turnover ratio for the year ended in 2014 was 0.77%, while the assets turnover ratio for the year ended 2017 was at 0.46%, a decrease in the turnover ratio indicates that there is an increment in the total assets acquired by the company and a reduction in the total liabilities which are attributed.

Performance analysis

Year 2014 2015 2016 2017

Gross profit 881,671 923,503 1,599,257 2,222,487

EBIT 284,636 875,624 746,348 2,209,032

Total sales 284,636 875,624 746,348 2,209,032

Moreover, the company has been therefore portrayed to be promising and confident due to improved performance of the company over the past four years. Accordingly, the company is currently in a position in which its future performance and operability are promising, and the current operations are speculative to the organization's day for daily activities. From the data speculating the gross profit, earnings before interest and the asset turnover ratio as represented in the statement of financial position of the company, it is vividly clear that the company has a competitive edge over the other companies. Also, it is consistent in its growth, indicating that the adopted market strategies adopted since the retrieval results in loss for the year ended 2012, has enhanced going concern concept.

The current performance of the organization as portrayed from the company financial statement for the year ended at 2017 in comparison with the previous year's shows that Tesla is growing steadily. Realization of 39.67% increment attributed of the gross profit over the past four years indicates that there is no existence of the gap between the current and the desired performances of this corporation (Tesla Company Financials 2018). Minimizing cost of the product and maximum utilization of the available resource is amongst the several measures which Tesla organization has enhanced to ensure attainment of the set obligations. Several measures, however, need to be put into consideration to ensure the continued increase in the profits earned. The company needs to provide a reduced cost incurred mechanism in carrying out market research, general and administrative costs which negate the benefits made (Tesla Company Financials 33).

Nature of technology applied by the company

The Tesla Inc Company has put into consideration the adoption of current technological changes by implementing electric vehicles which are considered to be best in reducing global effects which are caused by the fuel produced by oil consuming vehicles. Such economic impact caused by the carbon monoxide gas which is produced by oil consuming vehicles are minimized through the implementation of electric cars which is amongst the primary financial strategies applied by this company. For instance, the company has been under development for the previous and invested much in research which aims at ensuring that it emerges better than the other motor vehicle manufacturing companies. Production of electric vehicles has not been a predominant fact, in the economy yet, hence leading to much expense on research and product modification to ensure maximization of profits through the production of this type of vehicles is enhanced.

Basic Demand conditions

According to the information provided in (Tesla Company Financials, 2018), it is vividly clear that increased level of demand for the products produced by this company has increased over the past years. The sales attributed by the company can be summarized as 284,636, 875,624, 746,348 and 2,209,032 for 20014,2015,2016,2017 respectively. Such statistics provides clear evidence that demand for the products which have been produced by the Tesla Inc has increased positively over the past years. Besides, increase in sales can be as a result of improvement in quality production, customer satisfaction, increased advertisement and reduction in cost incurred during the production process.

The Demand curve for the company:

Sales demand for the year 2016 decreased drastically from 875,624, 746,348 translating to a market loss attributed to the company. Such factors occur as a result of poor advertisement methods, poor quality production, increased levels of competition from competitors or increased cost of production amongst other factors.

The regulations which have greatly influenced the performance of this company incorporate the income tax, which has been levied for this company. Increased income tax is a negative factor affecting the total profits earned by the company. Income tax for the year 2014, 2015, 2016 and 2017 is 31,546, 26,698, 13,039 and 9,404 respectively. Income tax levied on the company, hence reduced linearly over the past years hence increasing the range of the profits earned.

Graphical representation of income tax for the company:

Application of Porter's five models

Information technology has been predominantly applied by most organizations so as to enhance quality production of products in the market. Consequently, most of the business operations in the recent past have transformed most of the operation to incorporate the use of information technology. It is considered to be one of the most significant aspects which most organizations have adopted to improve the quality of production. The company's gross profit for the past years has been linearly increasing over the past years. The gross profit for the year 20014, 2015, 2016 and 2017 are 881,671, 923,503, 1,599,257 and 2,222,487 respectively. The positive increase of the attributes to gross profit of the company is a clear indication that the company is performing well.

Gross profit curve:

The company faces minimal threat for the emergence of new competitors in the market. Production of electric vehicles has not been predominant in the current market situation, therefore, according to the porter's theory; the company's performance cannot be affected by the emergence of new competitive business units.

The company forms its essential strengths from the fact that it is the first company to produce a fully electric luxury car and it is popular in young age groups who mostly apply social media.

There are several strategies which I would propose to Tesla Inc to improve its profitability ratio. Adoption of innovative mechanisms and high-quality production of products are amongst the several methods that I would strongly recommend to the management of this company to maximize profits earned.

The critics of the porters five level models as applied by this company incorporates the fact that this model assumes a classic, perfect market which Tesla Inc is not experiencing. Accordingly, this model is best used in simple markets while Tesla Inc is in a complex market situation. In addition, this model is not applicable to this company since the model depends on a static market situation which is almost impossible concerning the current market situation experienced by this company.

Analysis 5

The resource-based view mechanism depends on the available recourses which a business unit utilizes to meet the obligations and other expenses associated with the firm. For instance, the ability of the company to meet short-term obligations is determined using liquidity ratios. The quick ratio compares Tesla's current assets and current liabilities showing a general status of the company. The firm through the management indicates how easy it would be to liquidate assets to pay off short-term obligations. In 2014, 2015, 2016 and 2017, Tesla's current ratios were 1.51, 0.99, 1.07 and 0.86 respectively (Tesla Company Financials 35). Current ratios are considered favorable if they exceed one. Therefore, in 2015 and 2017, Tesla's current ratio was not favorable and indicated that the company could be unable to take care of its short-term obligations since its short-term liabilities exceeded the current resources.Current Ratio=Current AssetsCurrent LiabilitiesYear 2014 2015 2016 2017

Current Assets 3,180,073 2,782,006 6,259,796 6,570,520


Liabilities 2,107,166 2,811,035 5,827,005 7,674,670

Current Ratio 1.5092 0.9897 1.07427 0.8561

The company has intangible assets of 361,502, 376,145, 12,816 and 0 as of 2017, 2016, 2015 and 2014 respectively. The more the number of intangible assets which are available for the firm is a clear indication that the firm is in a better position of meeting it's stipulated obligations. In addition, the tangible assets comprise of all the assets that have a physical form. Tesla Inc tangible assets have linearly increased of the past years hence indicating a strong base for the organization to meet its obligations. In 2017, 2016, 2015 and 2014, the tangible assets are 16,407,663, 11,184,491, 6,472,575 and 3,549,686 respectively represent a linear increment. The firm's depicts clear indication through the ability of the organization to operate in future

The analysis of Tesla Inc internal environment using the value chain analysis shows that this organization entails a high level of straight up amalgamation which has enabled the company to maintain high levels of profits earned at the end of each financial year. On the other hand, the analysis of the external environment for this company indicates that the organization has put in place several competitive methods which suggest that the operations of the company in the future are inevitable. The external analysis of Tesla Inc. entails political, economic, legal, and environmental factors, sociological factors and the technological factors. On the other hand, the internal factors include the pres...

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