- Situation Audit:
Overview: Tesla Motors, named after Nikola Tesla was founded in 2003. The founders first created an expensive sports car: The Roadster, the profits from which were used to produce less expensive car, the Model S and the profits from this model would be further used to produce an even cheaper car. The products of Tesla Motors have thus been the Roadster, which is no longer available in the market, Model S which is currently in market and the third cheaper model which is under development.
The SWOT analysis consists of critical issues underlying the Tesla Motors Company and is generally based on Model S.
Strenghts:
- Technology:
- Technological expertise in the part of drive train and electric transmissions.
- Effective assembly line resulting in vehicles being developed completely in house.
- Superior battery technology compared to competitors in the industry.
- Partnerships:
- A strong relation with the competitors and other entities in the industry provides its assistance in the R&D processes for technology development.
- Design focus, Performance and Efficiency concerns:
- Tesla gives equal emphasis to all three factors, design, performance and efficiency, at the same time being equally concerned about the environmental issues.
- The Electric Vehicle Company:
- Tesla produced the Roadster, which was the first highly capable, highway friendly electric car of its kind, setting Tesla as the Electric Vehicle Company.
Weaknesses:
- Lack of Brand Name:
- Tesla does not have as strong a brand name as compared to its competitors such as Toyota. While launching EV technology into the market, which could be one key catalyst.
- Consumer perception of EV purchase:
- The EV may require greater customer changes as the conventional methods of batteries are easier to use.
Opportunities:
- Abroad sales:
- Tesla has been extremely popular in abroad markets like the Canada, Europe and Asia, the markets denoting huge revenue potentials.
- Strong Brand Community:
- Tesla comprises of a strong and established brand community of owners who can leverage the sales of Tesla models.
- Government Support:
- The growing support of governments around the globe who advocate environmentally friendly vehicles through ways of exemptions and other supports.
Threats:
- Consumer preferences for hybrids and plug in hybrids:
- The tesla is known for electric cars, meaning competition with a technology that is more than a hundred years old. If the consumers still prefer using the old technology, Tesla is likely to fail.
- The pricing strategy has not yet been used by Tesla in the auto industry.
- PROBLEM STATEMENT:
It was stated by the Elon Musk, that the plan was to “[b]uild sports car, [u]se that money to build an affordable car, [u]se that money to build an even more affordable car.”
Tesla wants to establish itself as the car mass production Company. However, given the history of other EV technology electric cars in the past and the complexities related to mass production, it is still a matter of uncertainty whether this plan of Tesla will materialize into a successful project in the future.
Before Tesla only WWП was able to create history as the mass producing Car Company in the US auto market. The real question here is whether Tesla should give second thoughts on its idea of mass production, given the market threats and the history of other similar companies or it should continue and mass produce its new Model X.
- IDENTIFICATION OF ALTERNATIVES:
After analyzing the case, the alternatives that could be considered as options for Tesla are:
Alternative 1: Continue with the mass production of New model X without extra efforts.
Alternative 2: Produce certain quantity of the new model and test it in the market to see if the mass production will give successful results.
Alternative 3: Invest the profit from Model S not in the production of Model X but in further advancement and development of Model S itself.
Alternative 4: Mass produces model X but with intensive promotion and further building strategic alliances with different entities.
- CRITICAL ISSUES:
The critical issues based on which the analysis of the identified alternatives has been carried out are recognized as follows:
- Resources Use
- Market Demand
- Competitors in the auto industry
- Work in Progress
- Track record and History of the industry in mass production
- Risks associated with mass production
- ANALYSIS:
Alternative 1:
The analysis of Alternative 1 depends on the progress of work accomplished on the new Model X till now. The case mentions that the new model of Tesla would be out by 2015, meaning that a huge amount of investment has already been made.
The pros of this alternative are that it helps utilize the full potential of Tesla and also give it all the required prerequisites for market demand.
The cons are that if the consumer preference changes, the sales will not be as expected.
Alternative 2:
The pros of this alternative are that it gives an opportunity to understand the market preferences and trends and also to give time to research and develop the contents of Model S and Model X.
Alternative 3:
This alternative would mean diverting resources from Model X to Model S and completing giving up the idea of producing the Model S at mass scale. The alternative consists of high risks and involves many complications and would involve high costs as well.
Alternative 4:
This is by far the best alternative available. The step would involve producing the Model X in mass, but putting extra efforts. The extra efforts could be in the form of advertising and other promotional campaigns.
- RECOMMENDATION:
Analyzing the different alternatives, we can see that the best alternative for Tesla at the moment would be choosing alternative 4 i.e. producing Model X at mass and indulging in different tactics to publicize and make it suitable for the current market. The car market is expanding with many established as well as new brands coming into the market. Mass production will mean that there are risks as to whether the supply will meet the demand.
However, as the resources have already been poured into the production of Model X, the best option would be going with the production along with putting in extra efforts, in the form of advertisement, market research, using the core competency strength and other activities.
