Introduction
Enhancing performance requires effective identification of key issues that a business faces. That is because it helps in selection of suitable strategies as well as allocation of resources. With that, the following is a summary of the Tesla case study identifying the issues facing the company from the Market line case study and proposing suitable solutions as well as their implementation.
Analysis
Issues discussions and options
Issues
Business operations are normally subject to various factors that influence not only their performance but also the financial performance. In that view, Tesla motors operates in a competitive environment with dynamic factors that have been determining its performance over the years. The following is a summary of some of the issues identified from the case study company faces.
Issue 1: Poor financial performance in terms of operating loss and a net loss in 2014. The company operating loss in FY2014 was 186.7 million dollar, compared to FY2013’s operating loss which was 61.3 million dollar. The company net loss in FY2014 was 294 million dollar, compared toFY2013’s net loss which was 74 million dollar. With that, the company needs to improve its profitability that would provide funds for further development projects (Market line, 2015).
Issue 2: Intense competition that threatens the company’s market share and business growth. The international automotive market, especially for the alternative fueled vehicles, is very competitive. Many established as well as new automobile producers have announced plans or have already entered the alternative fueling vehicles markets. For example, BMW introduced a completely electric BMW i3 back in 2013 while it had plans to bring up an X5 eDrive, which is an electric hybrid plug-in SUV (sport utility vehicle). Furthermore, the Volkswagen did introduce a fully electric VW Passat GTE and e-Golf plug-in back in 2014 (Market line, 2015).
Issue 3: Increasing regulation that poses a threat to its development of new models. The Tesla is subjected to the regulations that demand it to change design of its own vehicles, which might impact the customers taste on the vehicles negatively. For example, the electric vehicle does make very little noise than the internal combustion ones. Because of concerns regarding the quiet vehicles as well as the vision impaired pedestrians, US congress had to pass the Pedestrians Safety Enhancement Act of 2010, back in 2011 (Market line, 2015).
Issue 4: Sustainability problem with delayed roll out of the planned models. That has been marked by the company delaying in rollout of several planned models affecting its ability to beat competitors in terms of innovation. Such delays have been experienced in the roll out of the Tesla Model X.
Issue 5: The seasonality of the market demand that threatens the viability of its innovations
The new cars demand in the industry of automobile generally reduces during the whole winter season, while there are higher sales during the summer and the spring months. For example, the Tesla Roadster sales fluctuated on basis of seasons having increased sales in summer and spring months during the 2nd and the 3rd quarter when compared to its 1st and 4th fiscal quarters. These company also anticipates that the sales of its Model S as well as the future models might have the same seasonality, although its history of limited operation makes it hard for Tesla company to judge the precise extent or nature of the business seasonality While also any abnormal condition of severe weather within some markets might impact the company`s vehicles demand. The operational end results can also suffer if it does not attain an amount of revenue that is consistent with the expectation of seasonal demand due to high number of its expenses on basis of the anticipated annual revenue levels (Market line, 2015).
Issue 6: Use of vehicle components that pose safety threat such as the lithium-ion batteries. Vehicles produced by Tesla uses of battery cells that are lithium ion. In the past few years, there has been observation of the cell battery catching fire or producing much smoke and getting in flames. The incidences resulted to company being involved in multiple lawsuits. Example include, the lawsuit that was filed accusing Tesla in 2013 of making statement regarding safety of S Model that was misleading, including fire and puncture risks in undercarriage of the cars and battery packs made of lithium ion. Moreover, it was claimed in these lawsuits that the defects that were found in their cars resulted to catching fire by battery pack in situations that were specific (Market line, 2015).
Issue 7: Dependence on sizeable single source suppliers that pose a risk for its supply chain. Dependent of Tesla on the suppliers, the large majority which are the only suppliers increases its risk in the supply chain in that they may fail to meet the demand when needed the most. The S Model contain over 3,000 parts purchased which are sourced globally by the company from more than 350 direct suppliers, many of whom currently are single supplier sources for these parts (Market line, 2015).
Alternative solutions
In view of the issues identified from the case study, the company could employ various strategies to address them and enhance its operations as well as performance. The following is a summary of the alternative solutions that the company can chose from depending on their suitability given its resources and the industry trends.
Issue 1: Poor profitability
Alternative solution 1: Increase revenues
Alternative solution 2: Enhance cost management
Issue 2: Intensive competition
Alternative Solution 1: Differentiation
Alternative Solution 2: Diversification
Issue 3: Increasing regulation
Alternative solution 1: Adhere to regulations
Alternative solution 2: Cut on concerned operations
Issue 4: Delayed models roll out
Alternative solution 1: Enhance capacity
Alternative solution 2: Better market forecasting
Issue 5: Seasonal market demand
Alternative solution 1: Diversification
Alternative solution 2: Seek emerging markets
Issue 6: Operations safety concern
Alternative solution 1: Use more innovative means
Alternative solution 2: Cut on operations
Issue 7: Supply chain risk
Alternative solution 1: Develop sustainable relationships with key suppliers
Alternative solution 2: Seek more suppliers
Recommendations and implementation
In view of the issues identified from the case study and the alternative solutions, Tesla motors needs to select the most suitable solutions to the problems. With that, the following is a summary of the recommended solutions as well as implementation guidelines that could be applied to address its issues.
Recommendations
Issue 1 solution: Increase revenues
Rationale:
The heavy demand in the market for electric cars could help boost sales hence increase revenues. That could help the company enhance its profitability considering that it already has a niche market for its electric cars.
Issue 2 solutions: Differentiation
Rationale
The Company has been currently adapting platform architecture for the Model S that developed its Model X for crossover. The vehicle model is well positioned for filling the niche between SUV and a minivan while having better performance features including the all-wheel drive and dual motor system. That enhances its ability to differentiate its brand from the competitors offering added value, hence would be a better strategy than diversification that would mean venturing in to markets where it has not developed a niche (Ferrel & Hartline, 2011).
Issue 3 solutions: Adhere to regulations
Rationale:
That will help the company avoid conflicts with the authorities and better meet the growing market demand. The option is better than cutting down on operations as that would mean lost business and revenues in face of increasing market demand.
Issue 4 solutions: Enhance capacity
Rationale
Construction of the new Gig factory can help the company expand its production scale hence increasing the output to meet the increasing market demand. That would be also be blended with better planning to ensure that the company effectively plans the model’s roll out.
Issue 5 solutions: Seek emerging markets
Rationale:
Issue 6 solutions: Use more innovative means
Rationale:
The company can apply the advanced technology to enhance its operations to avoid the use of the unsafe components as well as processes. The solution is better than cutting on the operations given that the second option would fail to optimize on the growing demand.
Issue 7 solutions: Develop key partnerships with key suppliers
Rationale:
Implementation
Given the choices of the solutions to address each issue, the company needs a suitable implementation plan that considers the responsible departments or parties, resources needed and the timeframe. In that respect, the following table presents a summary of the implementation
Implementation summary
In view of the above schedule regarding the proposed measures, those responsible and the timeframe, it is clear that each of the strategies will be allocated to a suitable department that has the needed expertise. Further, the schedule shows that the planned implementation would begin in June the year 2016 to December the year 2017. However, several of the operations would require continuous effort given that they would have to become part of the business strategy such as adhering to regulations, seeking emerging markets, developing key partnerships and differentiation. Finally, the operations would require the business to employ adequate resources for each strategy as a means of enhancing success. That would involve allocation of adequate funding and personnel.
References
Ferrel, D. & Hartline, M. (2011). Marketing Strategy. 5th Ed. Boulevard: South-Western, Cengage Learning.
Goyat, S. (2011). The basis of market segmentation: a critical review of literature”. European Journal of Business and Management 3.9 45-55. ISSN 2222-2839.
Market line. (2015). Tesla Motor Inc. Company profile Report CODE: AB841AB2-D41B-4EBF-93A5-2784973F5236
