Final Project - Tesla PDF

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Market analysis of tesla...

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Marketing Term Paper Tesla, Inc.

Written By: Marketing (MKT) 101-04 Fall 2018 Professor Li Huang

Table Of Contents: 1. Introduction…………….…………….………………...Page 2 2. Line of business, yearly sales, profit trends……………Page 2 3. Target Market…………………………………………..Page 3 4. Company product, brand mix, manner of distribution, promotion methods, pricing………………………………………..Page 4 5. International Performance……………………………...Page 4 6. Strengths………………………………………………..Page 5 7. Weaknesses……………………………………………..Page 6 8. Opportunities…………………………………………...Page 6 9. Threats………………………………………………….Page 7 10.

PESTEL analysis …………………………………..Page 7-9

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Conclusion………………………………………….Page 10

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Bibliography………………………………………..Page 11-

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Introduction: In the modern day, people everywhere rely on the use of cars as transportation in an increasingly wider world. The desire for a reliable, safe, and fuel efficient car is a main priority of many modern consumers (Barry, 2018). Though there are several companies in an increasingly competitive industry that aim to fulfill this demand, by far the most well-known among them is Tesla, Inc. (Randall, 2018). Tesla was founded in 2003 under the name Tesla Motors, Inc. by a group of scientists who sought to prove that electric cars could be better, cleaner, and more efficient than traditional gasoline cars, all without compromising style and luxury. Launched in 2008 out of their Freemont, California factory, Tesla first revealed their battery technology and then later designed their first-ever fully electric sedan: the Model S. Tesla continues to put out newer, safer, and more environmentally friendly models year after year (Lambert, 2018).

Line of Business and Yearly Sales and Profit Trends: Tesla Inc. is an electric automobile company that utilizes sustainable practices in order to facilitate and usher in a ‘green’ (more environmentally friendly) mindset into the automobile industry. The main function of their business is to sell their electric vehicles and their brand to consumers across the globe, with both expensive prestige-based models as well as more mainstream and affordable options. Tesla also offers environmentally-minded consumers “a unique set of energy solutions” through innovations such as Powerwall, Powerpack, and Solar Roof. All of these options aid in more sustainable energy use for households and businesses alike.

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As forward-minded and important as Tesla Inc. is in the automobile industry, it has been seen to struggle immensely with its finances (Sperling, 2018). Observing any of Tesla’s past three quarterly financial statements (from February 7, 2018, May 2, 2018 and August 1, 2018) reveals massive net losses on operations, ranging from $742,706,000 (in thousands) as of June 30 according to the recent August financial statement to an egregious $770,807,000 (in thousands) in its older February statement representing the losses of 2017. Though net losses are shrinking as Tesla scrambles to face the issue, they cannot be overlooked. However, in a recent update, Tesla has made a momentous success in turning a profit for the first time in a long time in a single quarter of $254.673 (in thousands) for the period ending September 30. If this trend continues Tesla may begin to see considerable growth and profits in the years to come.

Target Market(s): Tesla’s target market includes businesses interested in operating on a more environmentally-friendly level as well as everyday consumers seeking to reduce their ecological footprint. Due to Tesla’s high price point, a majority of both its individual and business consumers tend to have a large annual net income. According to a 2013 CNBC report, the company’s buyer report shows that 77.3% of its consumers make over $100,000 in income per year (LeBeau, 2013). This, of course, does not necessarily mean that Tesla purposely excludes lower income audiences: it merely reveals that the relatively high price of Tesla automobiles causes them to attract a higher percentage of wealthy customers.

Company Product, Brand Mix, Manner of Distribution, Promotion Methods, and Pricing:

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The product and brand mix that Tesla, Inc. offers includes a wide variety of goods. These goods include the Model S, the Model X, the Model 3, and the Roadster, with the latest product branching off slightly in the form of the Tesla Semi (a cargo truck aimed at shipping companies rather than the general public). The manner of distribution is the manner in which goods and services move from the manufacturer to the outlet where the consumer purchases them. All Tesla products and the vast majority of the components for each car are produced at its factory in Freemont, California. Tesla’s promotion methods include focusing on advertising and promoting their products through various social media platforms. Tesla’s website is another platform which compliments its social media sites by allowing for greater promotion of products. The pricing of these cars are all extremely high and therefore attract a certain consumer type. The Model S, Model X, and Model 3 base prices all depend on the dealer. However, the Roadster base price is $200,000, with the Tesla Semi 300-mile range version priced at $150,000 and the 500-mile version priced at $180,000. Tesla, Inc. has a marketing mix (4Ps - product, place, price, promotion) that is very distinctive in the automotive industry. The tight control on the marketing mix due to high standards set by the managerial sector enables Tesla to both maintain their position and maximize the company’s effectiveness in attracting its target market, allowing for optimal profits.

International Performance:

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Tesla’s global performance is on a steady incline. Being dedicated to providing better service to their customers overseas, they have plans to expand globally following international trade agreement laws (Thompson, 2017). To provide better service internationally, Tesla has plans to increase the number of stores, vehicle service centers, car charging stations, and other facilities in North America, Europe, and Asia. While they aim to continuously expand business ventures overseas, they are aware that they must improve upon the shipping and servicing vehicles to meet the demands of these new markets. With this in mind, Tesla wants to sustain demand while also keeping expenses and operating costs under control so that they do not run the risk of their resources falling short (10-K, 2017).

SWOT and Environmental (PESTLE) Analysis: Strengths Strengths of Tesla are that it is an innovator in the field of car productions and the company has a strong figurehead in the form of Elon Musk. Musk is always undertaking PR stunts that aid the company’s image: For example, Tesla’s most recent successful stunt involved sending a Roadster-model car into space (Koren, 2018). Tesla also has a massive market share (Sperling, 2018). Due to the current high price of Tesla’s products, owning a Tesla car can be considered a status symbol, which makes more consumers want to purchase the car as people regard having a high status as a positive factor. Tesla’s sleek and modern designs are also very appealing, and their offer of an eco-friendly automobile is highly attractive to the current generation of consumers (Barry, 2018).

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“The transition to electric vehicles is increasingly dependent on the success of Tesla—with Tesla likely to account for 60% of all EVs sold in the United States by the end of this year.” -Daniel Sperling, Forbes.com

Weaknesses Elon Musk, the Chief Executive Officer of Tesla, is currently under investigation by the U.S. Justice Department for several recent tweets he has made in regards to privatizing the company (Ingber, 2018). This has put Musk’s reputation at risk and therefore the company’s reputation at risk as well. The costs of producing a single Tesla car are also very high, as the many components that go into them have a significant price to obtain (Hajek, 2018). It is no doubt that one of the biggest weaknesses for Tesla is their lack of a high profit margin.

Opportunities A sizeable opportunity for Tesla is the global green movement that has been recently expanding as more people are turning to electric cars in order to minimize their negative impact on the environment (Barry, 2018). More and more consumers are realizing that sustainable living is the only way for us to survive on limited resources with a growing population, which is good news for a company that offers a more sustainable alternative to gasoline-fueled, pollutionproducing cars. Tesla also has an impressive social media presence with over three million followers on Twitter alone allowing for a greater social presence in the market. Tesla has also begun production of a lower priced model with has a starting price of $35,000, a significant reduction from the current model prices ranging from $50,000 - $140,000. This promise of a

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more affordable car appeals to a much wider consumer demographic in the form of the middle class, though more expensive models will still be available. Finally, Tesla has the ability and opportunity to expand their market share into different types of automotive vehicles in the form of trucks, trains and aeroplanes. As the most well-known electric vehicle brand around the globe, Tesla is definitely in the right position to seize the market and expand into other ventures (Sperling, 2018).

Threats Compared to other car manufacturers that have been around for over a century (such as Cadillac and Mercedes-Benz), Tesla is relatively young, only being formed in July of 2003. Without a long history and a generational following behind their brand name, Tesla is weaker to the threat of waning public interest in their product. Older and more well established companies might have the ability to threaten Tesla’s hold on the market by expanding their own productions into electric vehicles, which they could potentially sell at lower prices..

PESTEL (environmental) analysis: The PESTEL analysis involves all the major external and uncontrollable factors that influence an organization’s (Tesla’s) decision making, overall performance and strategies. As listed below the factors of PESTEL are the political, economic, social, technological, environmental, and legal elements. It is said that due to Tesla’s business effectiveness, this is a clear representation of how well the company addresses the external factors in the environment.

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P - Political - As a result of the government turning to greener technologies and less reliance on fossil fuels (EIA Analysis & Projections 2018), there are huge incentives for Tesla to produce electric cars in line with the government guidelines to use less fossil fuels. Another political factor that is beneficial to Tesla, Inc. as a company are the new potential global trade agreements. This allows for better flow of goods and services between countries. Finally, political stability of major markets would be favorable to Tesla.

E - Economic - The first economical factor that influences Tesla’s business performance are the decreasing battery costs. This is important to the company as a whole as it means the affordability of their products in the automotive industry is greater, attracting a larger consumer crowd. Decreasing renewable energy costs also helps to increase sales for Tesla. However, economic instability issues is a threat to the company as it is threatening their financial performance especially in continents such as Europe and Asia (according to the World Bank Global Economic Prospects 2018: Europe and Central Asia).

S - Social - This part of the environmental analysis considers how Tesla, Inc. aligns its business with social trends in its target market. This is key to attracting the optimal amount of consumers. A social opportunity is the increasing preference to renewable energy types. This is beneficial to Tesla as the main idea of their products are the efficiency of using electric automotives. Also, an increasing popularity of low-carbon lifestyles helps to improve market demand due to Tesla being a company with electric, low-carbon vehicles. Finally, an improving distribution of wealth in developing markets helps to increase the population of potential buyers as people have more

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money to buy these high-end, expensive products. Because of these socio-cultural factors, Tesla can grow its business internationally.

T - Technological - The success of Tesla’s business highly depends on the advancements of technology and the availability of those technologies. Therefore, the high rate of technological change can be both an opportunity and a threat to the company. For instance, a high rate of technological change can allow Tesla to stay up to date with the latest technologies allowing for advancements in their products. However, if this rate of change is so fast then some technologies can become quickly outdated, leaving the company with old technologies in its products. The next opportunity is the increasing automation in business, and finally, the increasing popularity and usage of online mobile systems allows for great opportunity for Tesla to integrate online mobile systems throughout their products.

E - Environmental - As a result of a widespread global issue of climate change due to global warming and other factors, this enables Tesla, Inc. to promote their products better as people are getting more and more concerned with the environment so are turning to greener technologies such as electric cars (Bomey, 2018). Expanding environmental programs and rising standards on waste disposal also allow for opportunity for Tesla to grow.

L - Legal elements - Just like any company, there are many legal constraints and laws that must be followed in order not to face legal action and punishment. The legal external factors that must be considered are expanding international patent protection (if Tesla is going to expand internationally overseas), energy consumption regulations (if they are going to promote their

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electric vehicles and energy solutions), and finally, dealership regulations in the United States. These regulations can be considered both an opportunity and a threat: If Tesla can be the first to create a product that follows them and appeals to the masses then it could potentially dominate the market, but if it cannot keep up, then it may be forced to compete with the products of older and more well-established companies.

Conclusion The company we decided to explore in great depth was Tesla, Inc. Overall, we discovered that Tesla is an ever expanding global company, and as with all companies, Tesla is faced with many weaknesses and many potential threats. However, what makes it a market leader in terms of EV (Electric Vehicle) technologies, are the strengths inherent in the company and the opportunities afforded to it in the future. As stated in the SWOT and environmental analysis, one of the main strengths of this company is that its innovations are in high demand in an increasingly eco-conscious world. Elon Musk, a Co-founder and CEO of Tesla, Inc. has been largely responsible for the growth and expansion of the company into the market it now dominates, largely due to his prominent social media presence and various publicity stunts. Furthermore, his innovations and knowledge has enabled Tesla to dominate this field of study, vastly outshining other companies that seek to compete with them. Tesla continues to expand by year on year producing newer, safer, and more environmentally friendly automobiles, and this in turn attracts more and more consumers. The problem we have chose to tackle in the company would be to try and help lower the overall high production costs. This is crucial to the company as this would enable Tesla, Inc. to reach a wider target market as more people could afford the

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product. It might also help to increase their total sales as more people would be interested in purchasing the product.

Bibliography and Works Cited

About Tesla | Tesla. (n.d.). Retrieved from https://www.tesla.com/about

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Barry, K. (2018, May 8). More American Drivers Want Electric Cars, AAA Survey Says. Retrieved October 27, 2018, from https://www.consumerreports.org/hybrids-evs/moreamerican-drivers-want-electric-cars-aaa-survey-says/ Bomey, N. (2018, May 09). Americans more likely to buy electric cars, AAA study finds. Retrieved from https://www.usatoday.com/story/money/cars/2018/05/08/electric-carsaaa/586987002/ Global Economic Prospects: Europe and Central Asia. (2018, June 5). Retrieved October 27, 2018, from http://www.worldbank.org/en/region/eca/brief/global-economic-prospectseurope-and-central-asia Hajek, S. (2018, June 01). Tesla Model 3 Can Throw Off Profits. Retrieved October 18, 2018, from https://www.wiwo.de/technologie/mobilitaet/electric-car-dissected-tesla-model-3can-become-profitable/22632688.html Ingber, S. (2018, September 19). Tesla Is Under Investigation By The Justice Department. Retrieved October 27, 2018, from https://www.npr.org/2018/09/18/649313979/tesla-isunder-investigation-by-the-justice-department Koren, M. (2018, February 15). The Symbolism of Elon Musk Sending a Car Into Space. Retrieved October 18, 2018, from https://www.theatlantic.com/science/archive/2018/02/the-symbolism-of-elon-musksending-a-car-into-space/552479/ Lambert, F., & Electrek. (2018, September 20). Tesla Model 3 gets perfect 5-star safety rating in every category from NHTSA [Videos]. Retrieved October 27, 2018, from https://electrek.co/2018/09/20/tesla-model-3-5-star-safety-rating-nhtsa/ LeBeau, P. (2013, August 20). The young and rich snapping up Tesla's Model S. Retrieved

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October 18, 2018, from https://www.cnbc.com/id/100970641 McCarthy, N. (2017, August 14). Tesla Dominates The U.S. Electric Vehicle Market [Infographic]. Retrieved October 18, 2018, from https://www.forbes.com/sites/niallmccarthy/2017/08/14/tesla-dominates-the-u-s-electricvehicle-market-infographic/#7608cc57be49 Panmore. (2018, June 25). Tesla, Inc.’s Marketing Mix (4Ps) Analysis. Retrieved October 18, 2018, from http://panmore.com/tesla-motors-inc-marketing-mix-4ps-analysis Panmore Institutes. (June 25, 2018). Tesla, Inc. PESTEL/PESTLE Analysis and Recommendations. Retrieved October 25, 2018, from, http://panmore.com/tesla-motorsinc-pestel-pestle-analysis-recommendations Randall, T. (2018, April 3). Tesla’s Model 3 Is Now America’s Best-Selling Electric Car. Retrieved October 18, 2018, from https://www.bloomberg.com/news/articles/2018-0403/tesla-s-model-3-is-the-best-selling-electric-car-in-the-u-s Schoenberg, T., & Robinson, M. (2018, September 18). Tesla Is Facing U.S. Criminal Probe Over Elon Musk Statements. Retrieved October 18, 2018, from https://www.bloomberg.com/news/articles/2018-09-18/tesla-is-said-to-face-u-s-criminalprobe-over-musk-statements? utm_content=business&utm_source=twitter&utm_medium=social&utm_campaign=socia lflow-organic&cmpid=socialflow-twitter-business Sperling, D. (2018, July 19). Tesla's Struggles Are A Threat To The Future Of Electric Cars. Retrieved October 27, 2018, from https://www.forbes.com/sites/danielsperling/2018/07/19/depending-precariously-on-tesla/ Tesla Inc. (2018, February 7). [Tesla Fourth Quarter & Full Year 2017 Update]. Unpublished raw

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data. Tesla Inc. (2018, May 2). [Tesla First Quarter 2018 Update]. Unpublished raw data. Tesla Inc. (2018, August 1). [Tesla Second Quarter 2018 Update]. Unpublished raw data. Tesla Inc. (2017, December 31). Annual Report on Form 10-K for the Year Ended December 31st, 2017. https://www.sec.gov/Archives/edgar/data/1318605/000156459018002956/tsla10k_20171231.htm#Signatures Thompson, C. (2017, November 15). Everything Tesla wants to accomplish by 2020. Retrieved October 27, 2018, from https://www.businessinsider.com/te...