A. Historical Timeline and Company Characteristics of Tesla
Tesla Case Outline
A. Historical Timeline and Company Characteristics of Tesla
· Founded by Martin Eberhard and Marc Tarpenning, later on joined Elon Musk.
· Roadster, Model S, Model X
B. Market Characteristics
· Car market has higher demand for technology than before.
· Interest in electric cars is growing as they save money, are better for the environment by having lower carbon footprint.
· There is a significant growth in demand for alternate fuel as oil prices grow.
· Industry has low “Threat of New Entrants” as; the initial cost is high because of the need for costly assembly plants, the market is intimidating as no successful entry has been made since WWII.
· Customer switching costs are low for the market.
· Differentiation is not very high as the competitors are usually able to imitate the trends.
A. SWOT Analysis of Tesla
i. Strengths and Opportunities
a. Innovation and Technology
· Tesla offers software-controlled cars, which means providing continuous innovation and change, control over mobile app also software control also allows customization and provides differentiation.
· Wireless updates feature decreases repair needs as it did when problems occurred with handles and windscreen wipers.
· Tesla has battery advantage over competitors as its battery has 7000 cells versus its competitors 192 cells.
· Silicon Valley roots brings attention to Tesla and press coverage which increases brand recognition.
· Tesla obtains new sales business model by using online sales and company owned stores without dealerships. Salespeople of Tesla are workers without commission and have no conflict by pushing EVs into market.
· Tesla has great car handling, rigidity due to reduced weight of the vehicle through innovations.
b. Custom Designs
· As differentiation in the market stops at a level, additional customization feature of Tesla engages and attracts consumers.
· By having custom designs, Tesla can fulfill customer needs better than its competitors.
c. Product Quality
· Consumers perceive Tesla as having high product quality.
· Governments started to promote EVs and give tax credit for purchases of EVs to promote environmental awareness and to lower oil dependence.
· Along consumers there is an ongoing trend in eco-friendly behaviors and products
e. Growth in EVs
· Mass production of EVs started, so the overall market share of EVs are in growth which will give Tesla more market access.
f. Crisis in Industry
· With the ongoing crisis, Tesla sees the opportunity and purchases production equipment from struggling manufacturers.
g. Receiving Press
· As Tesla is the production of first ever high-end EV, the brand receives a lot of press coverage.
· Elon Musk becoming the face of Tesla also pushes consumers to perceive the brand’s characteristics as innovative, new, challenging the limits, new generation etc.
ii. Weaknesses and Threats
a. Lack of Experience in Manufacturing
· Tesla has assembly line effectiveness and efficiency problems which slows the delivery process down, causing in delays as not prepared for high volume, the capacity is not used efficiently due to lack of experience and bottleneck constraints. These result in unmet demand and competitors won’t stay idle and try to poach customers away. The brand will lower its reliability this way too.
b. Legislation and Conflicts
· With its new sales model, Tesla experiences conflict with dealership lobby as Tesla sells its cars with its company owned stores with its own salespeople that won’t have conflicts selling EVs instead of selling through independent dealerships.
· States passed laws requiring selling through independent dealerships which pushed Tesla to sell online from many states. A product such as a car that has high money value plus that won’t be changed frequently means that the buyer will rather buy it at a store than ordering online which is a constraint for Tesla.
· Also, petrol lobbies are not pleased with lowering the dependence on oil by pushing EVs.
c. Consumer Doubts
· Driving range is a big consumer doubt, Model X provides up to 325 miles range while the new upcoming Tesla Roadster that can’t be ordered yet but only reserved, is announced to have 620 miles range. Being an owner of Tesla requires to reside in close to a charger station or to have built-in Tesla’ Supercharger. Longevity, resale value and safety are also big consumer doubts today.
d. Unusual Features
· As it is an advantage to have customizable features and off the shelf components, this is also a cost disadvantage, and while the company is struggling with net profit, cost cutting is very important.
e. Limited Capital
· As Tesla is still considered as a small company, and has costly investments due to its innovative roots, not enough profit is being made to grow.
B. Competitor Analysis
· Same class as Ford and Golf
· Battery is not as powerful as Tesla’
· First mover status in EV market
ii. General Motors
· Hybrid, not an EV
· Not big of a competition as Nissan
III. Formulating Strategy of Tesla
A. Defining the Strategy of Tesla
· Focused Differentiation Strategy: requires unique features for a narrow market.
· Niche Market: focusing to fulfill the demands of early adopters to EVs with high income.
· Strong marketing and being known as the innovator.
· Providing overall cost cutting through alternate fuel for the consumer.
· Strategic Alliances with Panasonic, Mercedes Benz.
B. Recommendations: Formulating New Strategies & Solutions
· Increasing supercharger distribution in order to come over the range doubts of the consumers, alliance with Shell and/or BP in order to have their access to distribution channel plus to have them shift and obtain market share in EVs industry too, this will also expand EVs market share in vehicles.
· Proposing governmental agreement as “Go Green” campaign, incentives to come over dealership laws.
· Focus on manufacturing in order to use the plants, facilities and production lines efficiently.
· Correcting effectiveness of assembly to stop delays, produce more: “Economies of Scale”
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