Tesla Inc. (formerly known as Tesla Motors) are currently reorganizing their management structure making it flatter in order to ease communication between workers and the management. Although the firm have never delivered their profit in its 15-year history in the market, Tesla Inc has grown and advanced quickly over the past years. “Best brand car in terms of technology and innovation by U.S. car owners, and the Model S car being the best-selling all-electric car in the U.S. with 27k units of production is Tesla Inc” (Best-selling).
Recently, CEO Mr. Elon Musk goal is to produce 5,000 Model 3 sedans a week by end of June to gain profit in the coming quarter of the year. According to Wall Street Journal News, “CEO Elon Musk stated, ‘what drives us is our mission to accelerate the world’s transition to sustainable, clean energy, but we will never achieve that mission unless we eventually demonstrate that we can be sustainably profitable’ to his employees” (Higgings). “The supporters who believe in the company future vision where electric-powered cars are driven by computers has won out so far, pushing Tesla’s market value to over $50 billion to rival General Motors Co., which sells far more vehicles and is profitable” (Higgings).
Brief Firm History
What industries and industry segments are your firm involved in?
Tesla, Inc. (formerly known as Tesla Motors) is a company that participates in the design, production, development, and sales of all-electric vehicles, energy generation and storage systems. They provide electric vehicle service centers, charging station, and self-driving capable cars. There are two segments that the firm operates. The segment “Automotive” is the part of firm that includes design, production, development, and sales of all-electric vehicles. The second segment “Energy Generation and Storage” is where the design, production, install, sales, and lease of stationary energy storage products and solar energy.
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Founders of Tesla Inc are Jeffrey B. Straubel, Elon Reeve Musk, Martin Eberhard, and Marc Tarpenning. It was established on July 1, 2003 in the headquarter Palo Alto, CA, while, the factory is located in Fremont, California. The geographic location are U.S.A., Mexico, Canada, European countries, United Kingdom, Australia, China, Japan, New Zealand, Taiwan, South Korea, Jordan, and United Arab Emirates. The location selling more Tesla cars are, “U.S. being responsible for about the half of Tesla sales, following China, Norway, and other European countries, such as Netherlands, Germany, Switzerland, Denmark and France” (Jones).
What will be the focus of the paper?
The focus of this paper is to highlight the demand and supply related with Tesla Inc in today’s market. It analyzes the market structure, mission and goals, external and internal environment, and brand management.
What market structure represents this industry and why?
Tesla Inc represents an oligopoly type of market competing into two different markets, the luxury car industry and the electronic vehicle industry. It is a multinational company with these different markets that makes it a unique auto company worldwide. The entry barrier is created by their advanced technology and energy saving goal. There are fewer large companies in the market, therefore decision making is when firms engage to make decisions. Tesla Inc products are heterogeneous because of the difficulty to substitute with other products. “Tesla maintains the top spot in electronic vehicles and plugin market share and maintains strong share in the auto segment that it competes in” (Dalal).
Provide a statement of the current position or situation of your firm within the industry
The “price competition” for Tesla Model 3 is strategically controlled based the price values in the market. The important key to compete is because of their advanced technology and additional services. It was allocatively efficient in 2014 when it produced 31,258 cars at a marginal cost of $75,890. Also, we understand that Tesla Inc is neither productively efficient nor X-efficient. However, they need to produce economic profit because, “Tesla Inc has taken a lot of heat on Wall Street for its inability to hit its Model 3 production targets. Unfortunately for Tesla bulls, the company still has a lot to prove even if it gets Model 3 production back on track in the first half of 2018” (Duggan).
Which are the firms that this firms competing against?
Firms that compete Tesla Inc are electric vehicle producing companies such as Toyota, BMW, Chevrolet, Jaguar, Ford, Nissan, Volkswagen and NIO. Also, companies producing battery storage system such as Siemens and AES. “A week after Tesla announced it had won a tender for the installation of the world’s biggest battery storage system, in Australia, Siemens and AES launched a joint venture that focuses exclusively on battery storage systems that turn into stiff competition for Tesla” (Slav).
Mission and Goals
What is the current mission? Did you have to deduce it, or was it stated?
As stated, “Tesla’s mission is to accelerate the world’s transition to sustainable energy” (About Tesla). Their mission was changed from being “to accelerate the world’s transition to sustainable transport” to “to accelerate the world’s transition to sustainable energy.” According to Panmore Institute, “this new statement indicates a slight but significant shift in the company’s business, to address market opportunities for renewable energy. In a way, the new corporate mission recognizes the relevance of the firm’s batteries and related energy storage products in markets in addition to the electric vehicle market” (Rowland).
Is there quantifiable goal?
- In 2008, “Roadster” showed Tesla’s leading-edge battery technology and electric power train.
- In 2008, “Model S” was designed to be the world’s first ever premium all-electric sedan for the car of the 21st century.
- In 2015, “Model X” was designed to be the safest, fastest and efficient sport car in history that holds 5-star safety ratings from the National Highway Traffic Safety Administration.
- In 2016, “Tesla Semi” was designed to be the safest and comfortable truck.
What is the current strategy?
As stated, “our goal when we created Tesla a decade ago was the same as it is today: to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible” (About Tesla).
Brand Management
The objective of the brand management is to maximize market share and make the demand curve steeper. Are they achieving this objective?
Tesla Motors, Inc. uses marketing strategy that makes it noticeable in the industry. “Tesla maintains significant control in all components of its marketing mix or 4Ps (Product, Place, Promotion & Price)” (Kissinger). Their method to maintain their efficiency is expanding their production to meet customer demand which results in good profit for them. The best all-electric automotive producer in the worldwide, “Tesla continues to use its marketing mix to support market penetration and potential expansion in overseas locations” (Kissinger).
How well is the corporation performing in terms of market position and marketing mix?
According to Panmore Institute, “the place and promotion components especially make Tesla’s marketing mix unusual in the automotive industry” (Kissinger).
How well does your firm’s product offering (product mix) compare to a better performing firm? Is the firm’s pricing appropriate?
Tesla Inc vehicles are high in price but not extravagant compared to their uniqueness and excellent car services. They are using the pricing strategy for premium cars because of their technology advanced and sustainable vehicles. Customers are interested in an electric vehicle than its substitute gas cars. And, since they are prioritizing the electric cars, they choose to pay the given expensive prices. Hence, “innovation and product design are significant factors in successfully using this pricing strategy” (Kissinger).
How does the firm compete: Research and Development, creation of new products, improvement of the previous versions?
Tesla Inc is a “price setter” because of its brand name, technology advancement applied to their service, product, and their agreements.
Evaluate the promotional efforts of the firm. What is the payoff for the money spent on advertising?
The most important promotional effort they have been using is viral advertising through social networks, public relations, personal selling, promotions, and direct marketing. Viral marketing seems the most used and effective in promoting Tesla Inc product and services.
Conclusion
Tesla Inc needs to improve their strategic goal to ensure the effectiveness and continuing success to remain universally. The improvement can rise their value in focusing on the strong race. Their products compared to the market are expensive than the other competing electric cars. The given expensive car prices can fall the company growth in long term in both consumer demand and their sharing in the market. Recently, there is an aggressive race between companies producing electric vehicles. This external environment can threaten Tesla. Also, “some states like Virginia and Texas prohibits direct sales of the company’s products, requiring that such sales must go through dealerships. Based on this aspect of the SWOT analysis, Tesla must maintain competitive advantage to remain profitable despite aggressive competition from large automotive firms” (Kissinger).
General Motors, main challenger in the automotive industry now, has two different industry segments that is the car industry and their financial services. As stated, “limited diversification exposes the company to greater market-based risks that shows that General Motors’ potential global growth is hindered by its weaknesses” (Young). Therefore, General Motors needs to develop strategies that helps the company stay in the future. The important factors General Motors should consider are, “the following recommendations are appropriate: continue reforming the organizational culture to address the issue of bureaucracy, grow the dealership network to expand GM’s market presence in developing countries, & increase GM’s rate of innovation to improve competitiveness and protect the business from potential disruption in the automotive” (Young).
Recommendation
Tesla Inc should continuously improve their goal to be measurable in order to remain being competitive in producing advanced all-electric vehicles that is safe for the human and the earth. Regardless of the market competition, with the goal of continuously improving business competitiveness and growth they can remain in the market for long run.
