In the recent past, Tesla has been noted as a great competitor in the automotive industry. This is attributed to its three huge competitive advantages. Generally, the advantage lies in its ability to bring about innovative disruption in the industry. This include; a strong battery supply chain that is sustainable in itself, a supercharger network celebrated by the customers and a software system several leagues ahead of its competitors (Zach, 2015).
However, despite Tesla’s internal competencies and a reputation of building exquisite products, it still encounters lack of major resources and capabilities that its competitors own. Building a car takes years or research and development hence the traditional car companies have the necessary infrastructure and will only need to acquire the appropriate technology (Steen, 2015).
According to the business insider, it is stated that it costed Tesla almost everything to develop the car of the future while it cost General Motors totally nothing to develop the car of their future (Debord, 2015). What does that tell us, Tesla may be having great challenges when it comes to resources and key capabilities? These include;
The focus of Tesla Company is on a niche in the automotive industry, which is building and selling electric cars. To a company like General Motors, the electric cars line of business is considered a side business, hence it only needs to study the patterns of Tesla’s cars then build on of its kind that will take Tesla out of business (Debord, 2015).
In addition, the economy is also working against Tesla as the gas and oil prices are dropping at a steady but positive way. This would render Tesla’s ...
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...de and the electric vehicles on the consumption side.
Thus, this merger will enable both companies stay relevant to the future with regard to energy production and mode of consumption. In addition, Tesla has established distribution networks that SolarCity would benefit from when distributing the new solar panels to the market hence a one- stop shop for customers to acquire solar installation for their vehicles as well as homes.
Generally, the merger is a cost reduction strategy as both companies aim to benefit from the infrastructure that would complement their future projects. For example, it is estimated that the merger will reduce a significantly the cost of acquiring new customers by solar city which is estimated to be adding $0.55/w cost on new installation (Lambert, 2016). As a result, great profit margins are anticipated hence maximizing shareholders wealth.
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