Tesla Case Study Answer - Performance and Competitive Analysis PDF

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Tesla Case Study: Tesla's strategy and its performance to date in comparison with its competitors over the period of time....

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1.

How would you rate Tesla’s performance to date? Tesla’s journey till 2018 (the time-frame given in the case study) has been full of ups and downs, but has definitely caused terms like sustainable solutions and disruptive technology to be in the limelight. With a differentiation strategy and that of market development, it introduced the concept of an alternative way of traditional vehicles by providing in electric vehicles which produced lesser carbon emissions and were environment friendly.

2008 2009

Launched "Roadster" which caught enough attention and helped in brand's awareness and recognition. 2400 cars were sold, worth approx $100,000 each. Success led other players (BMW and FORD Motors) in market to give attention that segment.

Strategic Partnership (Vertical Integration): Mercedez Benz bought 10% equity stake and Tesla provided powertrain components. Same partnership with Toyota Motors as well.

Elon Musk during this period realized that Tesla needs to be self-sufficient in provision of components and parts needed for the electric vehicles so that the supplier dependency can be minimized. With introduction of additional cars by Tesla like Model 3 sedan, Tesla began to realize production capacity problems, which caused production delays and time was being taken to meet the growing demand of customers. Tesla’s need for scaling up manufacturing capabilities to match the overwhelming response was the point of focus for Tesla to work upon to compete in the market space. Contrary to the production issue, there was an increase in sales (of 33%) in Model S and X sales. Elon Musk put it on excessive automation to reason the delay in production process, thus caused Tesla’s human workforce to trip their shifts and help in production of cars. It turned out to be successful, Tesla produced 80,000 vehicles in third quarter of 2018, which was a 50% increase in its previous quarter’s production. Once the manufacturing problem was addressed, the delivery logistics issues came forward. The absence of proper transportation caused the, then fixed manufacturing outputs to be delayed in being transferred to end customers. The delivery speed and

quality control were the issues then. Car hauling trucks were acquired to ease the transportation issue and help with the delivery time. Tesla’s initial strategy (Broad Differentiation) to attract a niche market segment did help in causing a buzz amongst the target market and wider market too, because of its features and performance. The demand as anticipated grew in masses too but at a lower price, so the idea of successive cars being launched at lower prices actually seem to work in that way. 2. Compare Tesla’s strategy toward electric vehicles to that of Mercedes-Benz and Ford Motor Company. Why might different approaches make sense?

The core elements of Tesla’s strategy have been: (i) (ii) (iii) (iv) (v)

exclusive integrated electric powertrain, vertical integration from development through to production and retail sales significant incorporation of IT capabilities into the automotive sector uncompromising focus on battery electric vehicles build-out of supercharger network and free charging for customers.

However, the above strategy cannot fully explain Tesla’s success. Timing and vision played a significant role. Tesla was one of only a handful of pure EV car makers globally in the mid-2000s and probably the first to develop a robust EV powertrain and battery pack. The company was a first mover in betting that lithium-ion battery costs would continue to decrease for many years to come. Tesla’s hard charging nature, led by CEO Elon Musk and its unique branding approach enabled it to distinguish itself from other car-makers and attract loyal customers, despite many missed deadlines in the early days of the Roadster and Model S development. Tesla in comparison with both Ford and Mercedes Benz had a sole production of electric vehicles, while the former two had built a strong base in traditional and hybrid formats. Their focus was to introduce the electric vehicle option as an alternative to the current ones, so that if customers wanted an electric vehicle option or an environment friendly one, they can opt for that. Tesla entered the market through expensive high-end cars targeted to the more financially privileged class of people. Once it is more established and widely known as a successful idea, it would venture into a more competitive market of lower-level priced models. So the first model was launched to get the company’s mission out in the marketplace. Tesla’s Business Model All Tesla needed was to make a name for their brand to get its concept widely accepted. After that, it reinforced its business model. Tesla’s business model is based on a threepronged approach to selling, servicing, and charging its electric vehicles.

Direct Sales Tesla doesn’t adopt the approach of franchise dealerships, unlike most manufacturers. They prefer selling their product directly to the customers through self-owned showrooms across many of the major urban centres in the world. They believe that this method of selling can speed up product development. But more significant is the customer’s buying experience. Tesla has showrooms, Service Plus centres (a combination of retail and service center), and service facilities. Tesla has also made use of Internet sales—consumers can customize and purchase a Tesla online. Servicing As mentioned above Tesla has combined direct sales with service centres. They believe opening service centres have a positive effect on customer demand. Thus the “Service Plus” retail centres. Customers can service their cars or charge them at the service centres or the Service Plus locations. They also have mobile technicians who can come to your home, called Tesla Rangers. With the Model S, they can wirelessly upload data so technicians can view and fix certain problems online without even physically touching the car. Charger’s network Tesla has a wide network of where its customers can charge their vehicles. Supercharger Stations: a place where customers can charge their vehicles in about 30 minutes for free. It is their belief that this will increase the rate of the customers’ product adoption.

In order to provide customer’s supreme experience and immediate knowledge, Tesla’s strategy is different from that of its competitors, with technology being one of its strengths, it has maximum usage to tackle the customer needs. The other competitor’s strategies also differ due to their overall strategies and other strategic business units too....