Tesla Motors Inc. is American energy storage and the automotive company that designs, manufactures and sells electric vehicle powertrain components and battery products. Tesla Motors is also a public company that trades on the NASDAQ stock exchange under the symbol TSLA (Carlson & Robertson, 2014).
Tesla Motors company manufactures home and office battery charging equipment and has also installed a network of high-powered Superchargers across North America, Asia, and Europe. The company also operates a destination charging program where shops and restaurants among other venues are offered fast chargers for their customers.
The market structure in which Tesla Motors competes is oligopoly market structure. The reason why Tesla company is said to belong to the oligopoly market structure is that it competes with other automobile companies in today's current markets. The oligopoly type of market structure have the following characteristics:
There are few, large firms that are operating in the market. In this case, Tesla company competes with other large motor companies in the market. There are three main competitors of Tesla Company, which include Nissan, Toyota, and Chevrolet. The Nissan Company has a network of 500 fast chargers that compete with tesla's supercharger network that has approximately 200 stations (Carlson & Robertson, 2014). There was no charge to charge program which was offered to consumers who purchased the Nissan Leaf. The leaf gets an average of 126 miles per gallon while tesla's model S gets an average of 95 mpg and is cheaper compared to model S that belongs to Tesla company.
Toyota as a competitor to Tesla once worked with Tesla but later went a different direction with their projects. Toyota was the first to produce a commercial fuel-cell vehicle which was much faster to refuel than most electric vehicles. The other competitor, Chevrolet had a volt which was an electric gas powered hybrid but not a dedicated electric vehicle (Van & Automotive Career Development Center, 2013). Chevy Volt was able to compete with tesla's Model S having the capability to drive up to 380 miles on a full charge and full tank of gas. It was competitive because it was more affordable than the Model S belonging to Tesla. Other few firms that operated with Tesla company included BMW i8 and S550.
There are no barriers to entry or exit into the market, however, in the long run, there are barriers which restrain other firms from entering the market. In this case, tesla's operation in the oligopoly market enjoyed the barriers that kept other large from entering into the market to create competition.
Another reason that shows that the market under which Tesla motor company operates is an oligopoly is the interdependence of firms in the industry. Because the companies in the market are few, decision making will, therefore, mean that firms should be engaged to make decisions. The reason for interdependence is because the actions of one particular firm will affect the performance of the other firms competing in the same market. Therefore, the firms must come to the consensus on the decisions and strategies for use in the similar market.
Tesla competes in an oligopoly type of market as indicated by the identical products that are offered by the other few, large firms in the market. All of the firms that compete with Tesla motor company deal with automobiles as the identical products in the market. An oligopoly market usually has the characteristic of firms producing identical products which compete in the same market.
An oligopoly market differentiates itself from other alternative forms of market structures in the light that they exhibit few large firms. The firms produce and sell identical automobile products. Other alternative firms may sell differentiated products and may be many in the market. Some markets do not have barriers to entry or exit thus there is freedom for entry and exit in the market.
Level of competition the organization will face if under the following market structures:
Oligopoly market.
If the organization is under the oligopoly form of market structure, oligopolistic competition and give rise to various results. In some instances, the firm may apply restrictive trade practices such as collusions to raise prices and restrict production like in the manner of the monopolists. Oligopoly markets often collude to form cartels with the aim of stabilizing markets and reduce the risks associated with the markets.
In other instances, the level of competition in the oligopoly form of markets can be very fierce between the producers and sellers of goods with relatively low prices and high production levels. The results of the competition can lead to efficient results that approach the perfect competition markets.
Oligopolistic competition can be much greater in cases where there are other firms in the market. For instance, Tesla motors will encounter very stiff competition because there are other automobile firms like Toyota and Mercedes in the industry. In cases where there are no other firms in the industry, competition will be relatively lower (Carlson & Robertson, 2014).
Perfect competition market
The type of market structure of perfect competition has characteristics such as free entry and exit of the market, the large number of buyers and sellers, differentiated products and perfect knowledge of the market. If Tesla Motor Company is operating in the perfect competition market, it would have experienced a very tight and stiff competition because there are many firms in the market offering a similar product to the consumers.
Such kind of a market poses a greater level of competition to the firms because many sellers are competing for the same consumers in the market. Tesla would have had a very tight schedule marketing its products to the consumers who have a variety of products to choose.
Monopoly market.
Monopoly market refers to a market where there is only one seller and many buyers. In this form of market structure, the monopolist has all the powers in the market, and all the decisions in the market are dependent on the monopolist. If Tesla company had operated in the monopoly market, it would have been the only producer in the market thus having no competition from other firms. The firm would have decided on which designs of vehicles to produce as well as the prices of the electric vehicles. Competition is eliminated purely through the operation in the monopoly form of markets.
Monopolistic competition market.
Monopolistic competition is an industry in which firms offer products and services that are homogenous, but they are not close substitutes. There are low barriers to entry and exit from the market, and the decision of any one of the firms do not affect other competitors directly. If Tesla Motor Company had operated in the monopolistic competition market, it would experience a very low degree of market power as all the firms in the market are price makers.
There is a very high elasticity of demand in the long run, which means that it is sensitive to changes. There are positive economic profits in the short run but in the long run, it approaches to zero. The company would face a high level of competition under the monopolistic competition market structure thus advertising of products to consumers become increased.
Competitive strategies to be used by the organization to maximize profits over the long run and their effectiveness.
Strategic positioning.
Tesla is strategically positioned in the electric vehicle market as top manufacturer and dealer. The company gains a competitive advantage over firms in the industry because it has a direct contact with the consumers and service centers (United States, 2009). It also has an advantage from the technological advancement of their products in which other firms have not yet discovered.
The direct contact with the customers enables the organization to understand the specifications and preferences of customers. Understanding the needs of customers will allow the company to tailor make electric vehicles suit the needs and preferences of customers thus gaining a competitive advantage and increased profits in the long run.
Low-cost producer strategy
Low-cost producer is based on producing a product or a service for the lowest likely cost. Such kind of a strategy provides a cost advantage compared to the competitors. The cost advantage that results from a business utilizing a low-cost producer strategy provides them with two options (Van & Automotive Career Development Center, 2013). The first option is where the organization undercuts the competitors thus increasing their market share. The other option is continuing to sell the products at a price similar to competitors which make the organization to receive a higher profit margin. The strategy is successful where the consumers can easily change the supply of products or services.
Differentiation strategy
Differentiation strategy is used when the needs of consumers are very assorted that a standardized product does not satisfy their needs. The organization can use the strategy based on learning the features that are important to the consumers and then incorporating the features to their products. Using the differentiated strategy gains a competitive advantage over the existing competitors within the industry. The price elasticity of Tesla Motors is very elastic meaning that the demand for the product is sensitive to price changes thus using the differentiation will enable the stability of demand for products (United States, 2009).
Niche strategy
The organization can employ the niche strategy that supplies a narrow segment with the products that have been tailor-made to meet the needs and preferences of the customers. The advantage of this strategy is serving a smaller segment of the market and satisfying the consumers adequately. This will generate good profits to the organization through the gaining of customer loyalty.
The strategy is considered effective because the products of Tesla motors are luxury goods to many people thus making use of the niche strategy will enable adequate satisfaction of the targeted niche (Van & Automotive Career Development Center, 2013). Government regulation should be followed to avoid the activities that can lead to misconduct of the organization.
Recommendations
The ethical implications of the strategies employed by the organization are increasing the profit margins as well as increasing customer loyalty. The strategies allow the organization to understand its market share and devise methods of expanding the share of the market. The strategies as well give the organization the competitive advantage over their competitors like in the case of strategic positioning.
The strategies align well with the organization's current values which aim at improving the sales volume as well as advancing in technology. The organization has the objective of outdoing the competitors regarding technology, and the strategy helps in fulfilling the goal.
The strategies as well are in line with my values such as the expansion of the market share and increasing the profitability of the firm. A profitable company is significant in the market which attracts more customers to buy the products. Tesla automobiles should employ the above strategies which are essential in boosting profitability and commanding of s larger share of the automobiles industry.
References
Carlson, W. B., & Robertson, A. (2014). Tesla: Inventor of the electrical age.
United States. (2009). Sec. Chu Announces the First Auto Loans for Advanced Technologies.
Oak Ridge, Tenn: distributed by the Office of Scientific and Technical Information, U.S.
Dept. of Energy.
Van, B. C., & Automotive Career Development Center. (2013). Understanding hybrid and
electric vehicle service and technology.
