capstone case analysis

Running head: GROUP CASE ANALYSIS 1 1

GROUP CASE ANALYSIS 1 5

Alternative Strategies

Market Development.

Advantages

As of 2017, China is the largest automobile market in the world with annual sales of over 24 million. Also, the Chinese government is very ambitious in the promotion of electric vehicles. This affords Tesla the opportunity to enter the Chinese market using its brand and innovation to gain leverage in a new market before other firms. Tesla has the needed capital and human resources for such an endeavor (David & David, 2017). Tesla has already begun laying the groundwork for expansion into China by “having Tesla personnel install charging points at customer homes or businesses well before delivery” (David & David, 2017, p. 517).

Disadvantages

The major disadvantages of this strategy are the cost of expanding into the Chinese market and the product not being well-received by the consumers, resulting in a financial loss for the company.

Product Development.

Advantages

Tesla already has made a name for themselves in the electric vehicle realm and is becoming a well-known brand with consumers. With the promising outlook of the electric vehicle market, Tesla should conduct research and develop improvements and modification to its current and future line to keep interest high for the consumer. David & David (2017) note that one of the guidelines for this strategy is “An organization competes in an industry that is characterized by rapid technological improvements.” Tesla’s investment into the Gigafactory that will enable the company to mass produce the batteries that power the vehicle at a rate higher than all of the world’s combined output (David & David, 2017). The Gigafactory will also allow the production of lithium-ion batteries to be reduced through economies of scale and innovative engineering (Tesla, n.d.).

Disadvantages

Much like the disadvantages of the market development strategy, there is a cost that comes with the research and development to stay at the forefront of the competition. The improvements made could not be attractive to the consumer therefor resulting in a loss.

Market Penetration

Advantages

A guideline for implementing the market penetration strategy is “the usage rate for present customers could be increased significantly” (David & David, 2017, p. 138). Some manufacturers are still producing lead-acid batteries for their hybrid cars which have a distinct disadvantage over lithium-ion. This is a negative aspect to consumer who are looking to buy an electric vehicle. The Gigafactory will increase production density and accelerate output for the batteries, which will increase production capacity exponentially and provide the support for production of about 500,000 vehicles (Tesla, January 4, 2017).

Disadvantages

One of the disadvantages of market penetration is the potential for missed opportunities in other areas. The resources used in this strategy could be used elsewhere. If the company has many product lines and they focus their efforts on improving just one there could be negative impacts regarding the rest of products. There results of the market penetration strategy could be minimal and have a negative effect.

Related Diversification

Advantages

Related diversification is defined as “Adding new but related products or services” (David & David, 2017, p. 134). This strategy is effective because it allows an company to capitalize on its current products and brand recognition. A guideline for implementing this strategy is “adding new, but, related products would significantly enhance the sales of current products” (David & David, 2017, p. 140). By building its own Gigafactory for its production of it lithium-ion battery cells, Tesla is also producing renewable energy for other applications such as the home. Not only that but other companies can use the facility to produce batteries for their own products (Tesla, 2017).

Disadvantages

As with the other strategies listed above, the resources used in related diversification could have no return and impact the company negatively. The investment made in not only money, but also human capital could prove to be a costly mistake that could prove to be fatal for a company if the products that are introduced are not well-received by potential new consumers, or if present customers don’t like the direction the company is going, they could take their business to the competition.

Recommendations

Specific Strategies

The specific strategies that Tesla should implement are Market Penetration and Related Diversification.

Tesla has topped U.S. sales of electric and plug-in hybrid vehicle they should capitalize on this opportunity and improve their current products and add new innovations that the company is known for to not only attract new consumers but also keep existing customers as well (David & David, 2017). With Tesla’s investment in building the Gigafactory production facility and as of 2014, the company has installed a total of 380 charging stations worldwide has already shown that this is an effective strategy in maintaining the edge in the electric vehicle market (David & David, 2017).

The Gigafactory is also a sign that “Tesla is not just an automaker but a technology and design company with a focus on energy innovation” (David & David, 2017, p. 517).

Long-Term Objectives

By implementing the recommended strategies Tesla could see growth in the Chinese market since it is the largest automobile market in the world with the Asia Pacific region being home to the highest emitters of CO₂ (Rapier, 2017).

The Chinese government is very ambitious in the promotion of electric vehicles. With the outlook on the revenue growth of lithium-ion battery production in the U.S. to approach 20% in 2020 this is also an opportunity for Tesla to expand its product line as well.

Both of these endeavors will be helped by the Gigafactory Tesla has opened up in Nevada. Reducing production costs and increasing output will help Tesla to finally see a profit.

References

Cheong, T., Song, S., & Hu, C. (2016). Strategic alliance with competitors in the electric vehicle market: Tesla Motor's case. Mathematical Problems in Engineering, 1-10. Retrieved from https://search-proquest-com.ezproxy.liberty.edu/docview/1776060210/fulltextPDF/2AA69C05D0CE448DPQ/1?accountid=12085

David, F., & David, F. (2017). Strategic management: A competitive advantage approach (16th ed.). Boston, MA: Pearson.

Rapier, R. (2018, July 01). China Emits More Carbon Dioxide Than The U.S. and EU Combined. Retrieved from https://www.forbes.com/sites/rrapier/2018/07/01/china-emits-more-carbon-dioxide-than-the-u-s-and-eu-combined/#b192e98628c2

Tesla. About Tesla. Retrieved from https://www.tesla.com/about

Tesla Gigafactory 1 Investor Event. (2017, January 4). Retrieved August 13, 2018, from http://ir.tesla.com/static-files/7aafe167-39ec-4b30-84ad-6cf32723d47e

Zhang, Q., Ou, X., & Zhang, X. (2017). Electric vehicle market penetration and impacts on energy consumption and CO2 emission in the future: Beijing Case. Energies, 10(2), 1-15. Retrieved from https://search-proquest-com.ezproxy.liberty.edu/docview/1878408319?pq-origsite=summon&accountid=12085