case analysis

Strategic Issues: Tesla Motors

Student’s Name

Institution Affiliation

Date

Question 1

There are a number of strategic issues that are influencing Tesla Company according to the case. One such issue is the company’s ability to manufacture different brands of cars that are modern, of high quality and affordable. The most modern car qualities that enabled them to make massive profits in 2013 and 2014 were Tesla Roadster and Model S. The main evident strategic issues with these car models were their designs, the manufacturing process and the sales and marketing issue. For instance, the Tesla Roadster had a design that was so fascinating and hence it stood as one of the strategic issues that enabled them to take over the market. with only a cost of 0.5 billion only, the car design integrated unique features that were being developed in the Silicon Valley using a technology that can enable the car users customize their cars according to their specific wants. Another, design feature that stood as their strategic issue are the seventeen touchscreens that were integrated in it to scrap the normal button controls and hence adding to the simplification the car’s dashboard and other important parts. The additional design functions such as the air conditioning, lighting and entertainment were also some of the design strategic issues that enabled the company to compete with other global car manufacturers in the market.

As already stated, manufacturing criteria was also another strategic issue that the company invested on in order to maintain their competitive advantage in the market. The Model S of the Tesla Motors was brought in-house. Although, observers thought was a wrong decision by the company, the same worked out for them in that it saw the company expand and even acquired the massive NUMMI plant in Fremont California. To help lower their production costs, the company also took part in purchasing some of the manufacturing materials from struggling counterparts in the industry. This was done on discount and hence served as strategic edge over other competitors in the market and this therefore enabled them make massive profits.

The other strategic issue that the company enjoys is the fact that they also sell electric power trains to other manufacturers as well as design services to the electric power trains. For instance, it has developed power trains for Toyota Rav 4 EV. This deal helped them generate almost $100 million in 2012 to 2014.

Question 2

There are a number of alternative courses of action that can be taken by the company to address their strategic issues that I have identified above. For instance, their strategic issues of going completely in-house in the development of the Tesla S would have been much better if it could have been outsourced to countries like China and Japan where the labor is considerably lower when compared to America. Moreover, they could also consider placing the design and development role to renowned dealers in the U.S. rather than them taking the role themselves as this could reduce them the work and capital that they will need to invest.

The other strategic issue that we identified above was the fact that the company sells electric power trains to other car manufacturers in addition to their manufacturing. This strategic issue can be replaced by having the company stop the action completely and concentrate on doing their car manufacturing work. This is because by dealing with both manufacturing of cars and at the same time selling electric power trains will make them loose the focus that they in order to survive in the market. I believe that the two courses of actions are really the alternatives that the company would consider. The firm can undertake both actions simultaneously to help them cut on the capital that they will invest in these actions.

Question 3

An alternative for the inhouse development is moving its services to China. This alternative has its advantages and disadvantages. A major advantage is that China has a higher availability of labor force. Also, the cost of labor is cheaper in China as the compared to the US. This will result in reduced production cost which in leads to increased profits. Also, moving its production to China exposes the company to a larger market. This will give it an opportunity to market itself to other parts of the world. Despite the advantages of this alternative, moving to China will lead added management costs as the company will need to hire managers to oversee its new production sites. The other alternative is that the company should stop supplying electric parts and concentrate on manufacturing cars. An advantage of this alternative is that the productivity will increase as the company will invest more time on producing crash. A larger number of cars will be manufactured to meet customer needs. Another advantage of this alternative is that the specialization will lead to improved quality. Quality is an important factor in motor industry as the competition is stiff. Improved quality will lead to increased customer satisfaction which in turn result in increased revenues. A demerit for specialization is the loss of revenues collected from selling electric parts to other motor companies.

Based on the analysis of the two alternatives, the best action to take is moving its production operations to China. This is good because the company will cut on production cost which is the main factor to consider during pricing. Low production cost will lead to low selling price. Low cost quality vehicles can be a huge step towards establishing a competitive advantage for the company. To implement his strategy, the alternative, the company need to do a research in China to identify the best place to set up the production centers. The research will also help in identifying the legal requirement that must be met before moving the company to China (Ferdinand, 2016).

Question 4

My analysis makes some implicit assumptions. One of the assumptions is that Tesla has been facing stiff competition from similar companies such as Nissan, BMW and Porsche. Tesla electric cars face direct competition from Nissan Leaf. The data used in the case is factually correct. The author derived the data from trusted sources. Some information was sourced from Bloomberg case writer analysis. For instance, Balance Sheet for Tesla Motors in 2013 was derived from Bloomberg case analysis. Another trusted source used was BMW Group. The information collected from BMW Group was Income Statement and Invested Capital by BMW Group.

Various conclusions derived from the case can be justified by the factual data. A major conclusion from this case is that Tesla Motors has been successful since its establishment. The company has laid out effective strategies to compete successfully in electric-car market. Some of the strategies is effective design. The cars are designed suing modern technology tools to meet customer needs. Also, the quality of the cars is high to effectively compete with similar companies in the market. Another justifiable conclusion is that Tesla has the ability to because the global leader in production of electric cars. This is so because the data shows that Tesla an effective business and marketing strategy to win more customers (Stringham et al., 2015).

References

Steen, E. V. D. (2015). Tesla Motors. Retrieved from https://hbsp.harvard.edu/student/

Stringham, E. P., Miller, J. K., & Clark, J. R. (2015). Overcoming barriers to entry in an established industry: Tesla Motors. California Management Review, 57(4), 85-103.

Ferdinand, P. (2016). Westward ho—the China dream and ‘one belt, one road’: Chinese foreign policy under Xi Jinping. International Affairs, 92(4), 941-957.