VRIO Analysis of Tesla Motors

Author- | Posted- | Updated: October 14, 2020 |

The resources and capabilities of a company are its drivers of competitive advantage. Nearly all that a business owns can be classified as a resource or capability. By understanding the resources and capabilities of different enterprises, one can understand why overall performance differs from one business to another. To achieve a competitive advantage, the resource or capability that a  company owns needs to be valuable, rare, inimitable, and organized. 

The VRIO framework comes to the help of managers when analyzing the company’s resources and capabilities. VRIO is an acronym that stands for Valuable, Rare, Inimitable, and Organized. These four bricks of VRIO represent the four properties of the resources and capabilities that lead to sustainable competitive advantage. When the resource or capability satisfies all the four requirements, the competitive advantage it generates will be sustainable, whereas, when it meets fewer standards, the competitive advantage will be temporary. 

Moreover, a sustainable competitive advantage comes from core competencies that arise from resources and capabilities.

Tesla Motors VRIO Analysis

Core competenciesValuableRareInimitableOrganizedAdvantage
Brand ImageYesYesYesYesCompetitive advantage
InnovationYesYesYesYesCompetitive advantage
Customer experienceYesYesYesYesCompetitive advantage
Product RangeYesNoYesYesTemporary advantage
Market PositionYesYesYesYesCompetitive advantage
HRMYesNoNOYesCompetitive advantage

Brand Image:

Tesla’s brand image is one of its core sources of competitive advantage. It is also one of the main differentiators for the brand that sets it apart from the world’s crowd of automobile brands. While several auto brands are there in the industry, including those making EVs and hybrids, Tesla has acquired a very distinct image. Tesla’s sustainable business model and its focus on innovation have helped it acquire the image of a transformation leader in the world of mobility. Brand image affects several things in the automobile industry, including its popularity and overall sales and revenue. It is why companies in the automobile sector focus on managing a strong image.

While an automobile company’s products play a leading role in terms of brand image and its vehicles’ performance affects how the customers perceive the brand, the company’s marketing strategy also affects the brand image and sales overall. Tesla has proved itself outstanding in all these areas, and apart from product quality and innovation, the company’s marketing strategy does not employ heavy promotions. It has achieved strong brand recognition and word of mouth and publicity through consistent focus on innovation and customer experience. Overall, its strong brand image has helped it generate a sustainable competitive advantage for the brand. 

Technological innovation:

Technological innovation is also an important source of competitive advantage for businesses in the automobile sector. To maintain their market position and market share, they must focus on research and development for automobile businesses. The competition level in the automobile industry has grown, and every business needs to innovate to maintain its market share. Tesla is renowned for its focus on innovation and for bringing high-quality products equipped with the latest technologies. Apart from self-driving technology onboard and the large touchscreen that allows the car owner to manage his driving experience with higher convenience, the company also provides a Tesla app that allows drivers to control their cars from the outside.

Apart from the advanced batteries that Tesla uses, the types of technologies used inside these cars increase Tesla’s car models’ attractiveness. The battery range of Tesla cars is higher than any other car in the entire market’s EV category. Overall, innovation has helped the company bring advanced products that none of its competitors has created. Its technological features also make Tesla a superior car brand in terms of passenger safety. This has helped the company achieve a major advantage, which seems impossible for Tesla competitors to match in the near term.

Customer experience:

The overall riding experience that Tesla offers is vastly different and a lot superior to the rival cars. Due to this factor, Tesla cars have achieved much higher popularity than the other EV models. Tesla’s premium EV models are superior in terms of design as well as performance and looks. While they are also safer than the rival car models, they are equally attractive from the outside. Another plus point for Tesla cars is their zero carbon footprint. Now, people are looking for cars that are fuel-efficient as well as environment friendly. The growing presence of Tesla in the US and China is a key factor that indicates that people are now gravitating towards environment-friendly car models.

Apart from that, Tesla cars do not cost a fortune in terms of maintenance, either. The maintenance-related expenses on tesla cars are also much lower than regular cars with internal combustion engines. This is a major plus point since the buyer has to spend money upfront once he purchases the car, and after that, he cannot enjoy his ride in peace. Overall, there are several benefits of owning a Tesla, and that’s why the company has gained more than 60% share in the US EV market. Overall, by creating a superior riding experience, the company has been able to gain a significant advantage over competing brands. Tesla cars provide a matchless driving experience, which continues to drive their popularity higher.

Product range:

Tesla has brought an attractive product range to the market. While its product range is much limited as compared to the other brands like BMW or VW, but still its product range efficiently caters to the higher end market that it targets to serve. Its cheapest car model is Model 3, and following the release of Model 3, the company has gained a significant market share, and its popularity apart from sales has also soared worldwide. The company will need to add to its manufacturing capacity in order to cater to popular demand. Apart from the Model 3, the company has also brought Model S, Model X, and Model Y to the market, which are higher priced as compared to the Model 3.

The company has also brought a nice range of power generation and storage products for customers that want to use renewable energy. Model S, X and Y are the higher priced car models of Tesla. While the company has mainly targeted the higher end market, it has also been able to increase its penetration in the middle class and upper middle class of consumers with the Model 3. Tesla products stand out easily from the crowd of competitors due to their efficiency and design. Overall, they are an important but temporary source of competitive advantage for the brand since competitors are also building cars that are comparable in terms of style and can match Tesla’s performance in some aspects.

Market Position:

Tesla has been able to build a superior market position in the automobile industry and in the EV market. Its market position and its clear edge over its competitors are a source of sustainable advantage for the brand. Its nearest competitors are having a much smaller market share compared to Tesla. The company’s market position continues to strengthen because of its higher focus on innovation and superior performance of Tesla cars. Overall, it has gained very strong brand recognition in the market and the result is higher sales and overall popularity globally. There are various factors that will continue to strengthen its market position in the coming years. Apart from the rising demand for EVs worldwide, the healthier image of Tesla is also an important supporting factor. Challenging the market position of Tesla will not be easy for any competing brand. Apart from the technological know-how, gaining the same efficiency as Tesla cars in terms of battery performance and driver safety will take the rival brands years. Overall, the market position of Tesla is an important source of sustainable competitive advantage for the brand. 

HRM:

The human resources of any technology company is a critical driver of competitive advantage for the brand. More than an automobile brand, Tesla is a technology company. Its focus on technological innovation makes it different from any competing automobile brand. However, the company is also innovative in terms of HR management, which has helped it grow its edge in the EV industry. Apart from attracting qualified and talented people, the company also focuses on engaging employees well. It has established an organizational culture that drives innovation and creativity. Sustaining the competitive advantage that the company has achieved also requires a consistent focus on managing its human capital strategically. The company pays its employees well and has also introduced training and career development programs that help its employees find faster career growth.  Overall, HR management is a critical source of competitive advantage for the brand but not a source of sustainable competitive advantage since the rival brands also invest heavily in managing their human resources strategically.

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.