Tesla is an auto company incorporated in July 2003. It was formed by Elon Musk and Marc Tarpenning. The company's aim is to utilize its powertrain and proprietary battery technologies to manufacture electric cars that would reduce the dependence on fuel. It produced and sold its first car in 2007. The period between 2008 and 2012 was a challenging period for the company with losses totaling to $943.5 million. In 2013, the company turned around and saw its global revenues increase to $2.0 billion. The stock market price rose from $34 in January 2013 to $250 by March 2014. The company has so far produced and started selling Roadster and Model S car, which has received favorable ratings from customers. It has been rated as the best due to its blistering acceleration, versatile cabin, sharp handling, among other features. The company is in the process of manufacturing a Model X car which it plans to release in 2017. Tesla’s aim is to completely revolutionize the global automotive industry.
Tesla’s mission statement
Mission statement is used to present company’s goals, show firm’s market scope, outline various products sold by the company and firm’s position in the market. Tesla’s mission statement states “to accelerate the world’s transition to sustainable energy" ("About Tesla | Tesla").
This statement addresses the company’s opportunities for the market of renewable energy. It has the following notable components:
Acceleration. This component of Tesla's mission statement indicates the company's aim of propelling the automotive industry forward by use of advanced technology in achieving nourished business and products which use renewable energy.
World’s transition. This part of statement points out the firm’s objective of dominating the global electric automobile market and related products successfully. This unit also relates to the Tesla's vision statement which addresses its coverage on the global market.
Sustainable energy. This component has been used to address Tesla is much focused on fulfilling the renewable energy demand by producing more profitable products of renewable energy and batteries which will solve energy issues in the near future.
Tesla’s mission statement does not fully show the organization set development. Thus I recommend they provide details of the strategic approach they are undertaking in order to achieve the set vision.
Tesla’s general strategy
Tesla’s aim to revolutionize the automotive industry is supported by different strategies it undertakes in different areas of operation. The company’s product line strategy is to broaden the customer base by providing various models, including cheaper models. The company has introduced several models of its Model S car and continues the process of introducing other models. Model X and Gen III cars are in the pipeline.
Broadening the customer base and producing cheaper models requires the company to control its production cost. One major factor contributing to the high prices of electric cars is the high cost of lithium-ion battery packs which cost as high as $25,000. The company is trying to reduce this cost by scaling up its production to enjoy economies of scale in battery production. It has also invested heavily in research and development to promote innovation which leads to advances in technology that reduce the production cost. Research and development are also key in developing new products and producing high-quality electric cars. It has invested over $900 million in research and development to aid the production of top-quality electric cars.
The company has also developed the capacities of its personnel. It does vehicle design and engineering in-house hence it has absolute control over product design and engineering, among other production processes. Besides, it distributes its electric vehicles directly to customers which give it the ability to create and control a compelling customer buying experience.
The above strategies are suitable for the challenging automotive industry. There is stiff competition from other companies that manufacture electric cars. Thus, innovation is key to producing top-quality cars that cannot be matched. Besides, cost reduction is important in broadening the customer base by enabling the company to produce cheaper models.
SWOT ANALYSIS
SWOT analysis shows company's strength in maintaining long-term profitability. For Tesla to maintain its competitiveness in the market, it should address the internal and external strategic factors. Internal strategic factors are the strengths and weaknesses while external strategic factors are opportunities and threats.
Strengths
Tesla’s strengths include:
Highly innovative processes. Tesla has been globally recognized for its innovation in introducing first electric car. This factor has empowered the organization to develop profitable and competitive products.
Strong brand. Its brand has been a solution to renewable energy and a symbol of innovation. Tesla’s brand has enhanced the organization competence in attracting new customers and retaining them. The Model S and X have been rated as the best cars in the world and the upcoming models (Gen III) are expected to take the electric car market to another level.
Control over the production of vehicles. Tesla has its plant in the United States thus there is a minimal link with third parties (dealers). This has enabled them to have full control of their production. Engineering and design is also in-house.
Experienced management: Tesla is led by an inexperienced CEO. Musk has a vast experience in technology, which he obtained during his time at SpaceX, PayPal, SolarCity, among other companies. His experience is critical to the design and engineering at Tesla. He also provides a bigger vision for the company.
Skilled employees: Tesla’s engineers are highly skilled thus enabling it to design cars in-house. The skilled personnel has been a key to its innovations.
Weaknesses
These are internal factors that limit organization performance. They include:
The high cost of production: Tesla's operating costs are high due to the use of lithium-ion batteries as well as research and development. This has been a challenge in producing low-cost vehicles.
Limited global presence: Tesla’s market is concentrated in the US with few sales in Europe and China. Global presence is important in broadening the market base and diversifying revenue sources.
Opportunities
Global expansion: Tesla has an opportunity to expand its products worldwide. Electric cars are still a green idea in some countries hence there is an opportunity for growth.
Cost reduction: Tesla has opportunities for reducing its production cost especially the cost of lithium-ion batteries through innovation, among other measures.
Threats
The company faces stiff competition from other brands by well-established auto companies such as BMW, Audi, Daimler, Chevrolet, among other brands. Most automotive companies had invested in research and development are in the process of producing fully electric cars.
Recommended strategy
Tesla already enjoys a pool of skilled workforce. The company needs to implement Porter's generic strategies of cost leadership and differentiation. The success in the highly competitive market will depend on the company's ability to produce at a lower cost without compromising the quality of production. The cost differentiation strategy will help the company to produce electric cars at lower costs thus gaining a competitive edge over other companies in the industry. Investing in innovation, improving the skills of personnel, enhancing the efficiency of the distribution channels, among other measures can reduce Tesla’s operating costs.
It should also implement a differentiation strategy by developing unique electric cars. As other automotive companies develop electric cars, Tesla’s cars should be differentiated. In the next few years, there will be several electric cars in the market and consumers will prefer cars that have unique and outstanding features hence product differentiation will be vital to Tesla. Once these two strategies have been implemented, the company can focus on diversification and increase its international expansion.
Ethics and social responsibility
The auto industry faces ethical issues such as environmental pollution. In 2016, Volkswagen was involved in the pollution scan by installing a defeat device in diesel engines (Mathiesen and Neslen). The device detects when testing is done and changes performance to improve results.
At Tesla motors, sustainability relates to business practices and model, sustainability is an idea that socially responsible organizations will always outperform their competitors by focusing their attention on the world's environmental and social problems. They take them as favorable circumstances of building up profit and also as a chance of offering assistance to the world. To start with, health and environmental concerns have been one of the most violated norms in the society today. This has been triggered by the exhaust fumes to the environment emitted by cars thus causing urban pollution. Discovery of electric motors has been an alternative in the auto industry in dominating fossil fuel but due to the financial crisis and other factors the venture has had a lot of difficulties. Electric cars companies have faced direct opposition from auto producers, consumer distrust and their entrance into the market has been a threat to oil companies thus making it difficult to pursue the market. This factor has brought reluctance in the production of an electric car to be taken up seriously.
Tesla has invested in sustainable operations and uphold high ethical standards. It has a well-documented code of ethics that addresses ethical issues in its operations ("Code of Business Conduct and Ethics | Tesla Motors").
Works cited
"About Tesla | Tesla". Tesla.com. N.p., 2017. Web. 9 Jan. 2017.
"Code Of Business Conduct And Ethics | Tesla Motors". Ir.tesla.com. N.p., 2017. Web. 10 Jan.
2017.
Mathiesen, Karl and Arthur Neslen. "VW Scandal Caused Nearly 1M Tonnes Of Extra Pollution,
Analysis Shows". the Guardian. N.p., 2017. Web. 10 Jan. 2017.
