External Analysis
The first opportunity was holding a design contest for its first product. In this manner, the company managed to secure the manufacturing and engineering expertise of Lotus cars who brought experience to Tesla Motors. The use of Lotus’ software and tools also ensured that a company that has specialized in the area built the chassis. There were financial challenges that faced the company due to the misleading by the CEO, who lied to the investors about the manufacturing cost of the car. Furthermore, there was a discovery that the technology used was outdated, resulting in safety issues in the design used to manufacture the Roadster. A revision of the design and managerial hierarchy enabled a re-introduction of the product, and secured monetary deposits to invest in production. The introduction of electric powertrain engines enabled the new model to be introduced, which reduced production costs. Additionally, the acquisition of the factory from Fremont enabled Tesla to access modern infrastructure to aid in the manufacturing of the new model. Tesla also had the challenge of promoting its new electronic products. The challenge was that the technology was not yet popular, and many cities and countries did not have the infrastructure to support electric vehicles.
Tesla’s best business decision was arguably the specialization in electric cars. It has noted that there was the need for fuel-efficient vehicles since the 70’s. The complaint of the United States depending on foreign oil notwithstanding, congress appended Title V that described the optimization of automotive efficiency, motor vehicle information as well as cost savings. Law that the Corporate Average Fuel Economy standards of personal vehicles as well as light trucks to set an objective of increasing the number of fuel-efficient vehicles by two fold established it. The nineties saw the California Air Resource Board pass the law of zero emission vehicles. It detailed the need of at least 2 percent of the cars that are being manufactured in California to have no missions within that decade. In addition to that, there was call for development and research of electric care prototypes. The gradual rise in crude oil prices acted as a catalyst for alternate energy sources. The United States saw the emergence of infrastructures to support electric cars. To date the government has consciously offered economic incentives as a means to attract the end consumer to buy an electronic car. Tesla was progressively making headway in the manufacturing of electronic vehicles. It noted that it was a relatively new product in the car industry, and there was a shortage of infrastructure to support the genre. As a means of countering this deficiency, Tesla arranged to build their custom charging stations around the country. To ensure it got ahead of its competition in the agenda, the company started building its network of charging station in secret. The challenge came in when these charging stations were only customized for the Model S. The investment of millions of dollars for stations that could only serve one of its products came into question. In addition to that, it was noted that these stations served their consumers much slower than the conventional gas pump. The response was a public demonstration of how the battery pack in the Model S was replaced by a robotic system, which theoretically, was going to improve the duration taken in charging the vehicles and increase the efficiency of their products.
Another external challenge faced by Tesla was its price. It was noted that the American public was not willing to pay extra to drive an electric vehicle. To keep up with the price of fuel vehicles, it was essential for Tesla to scale its production and sell more units at the same time. Sal produced 2,650 Model S vehicles in 2012, which was not equal to the amount projected by the CEO. It produced buying option based on battery capacity, performance, and additional upgrades depending on the consumer’s preferences. Critics doubted that it could reduce its price ranges to competitive level while maintaining the performance projected in the products. The only option was to diversify its product, inclusive of introducing options for the regular buyers such as the family sedan and the new Model X SUV, both which came with reduced prices. Increasing buying options ensured that sales projections were met, and the company’s market share was maintained.
Internal Analysis
A key strength of Tesla Motors was its access to Elon Musk, a creative and informed engineer and entrepreneur guru. If the CEO failed to deliver during the initial stages of production, he came in and took charge of engineering. It enabled the redevelopment of the car regarding essential systems, inclusive of the body, electronics, and motor. Tesla Motors had invested in its research and development the model of the car as its market share grew. The redesigned Roadster was presented in 2008 at a price, of 109,000 dollars. Moreover, it had sold the same in 18 different countries. Due to its broad market, it enabled to attract further external investment. Once a new model was introduced, the Roadster 2, the prior model was discontinued. The tenets emanate from the fact that the new model had come with a new engine and cost effective production. It had improved performance, which enabled the further development of a new model the Roadster Sport, which was a fast car. Later on, the firm introduced the family sedan. At that juncture, it had already secured a market share with the quantity of customer reservations sharply increasing. Another strength was the acquisition of a new factory from Toyota, enabling production to be more efficient and widespread. Moreover, a key objective was to reduce the cost incurred in producing its units. The market was open to the idea of new technology in vehicles such as the all-electric version but was skeptical in increasing the amount spent to acquire these vehicles. In addition to purchasing a new factory, manufacturing was to be done overseas, which acted as a means of expanding into new markets. Another method of reducing production costs was the introduction of common parts of vehicles that could be found from other car manufacturers, instead of depending on their production of custom tools and parts.
The key strength there was the manner in which it expanded internationally. Initially, the sales were managed through the phone or internet through the company’s headquarters or corporate events. It secured company owned stores that formed a global network that provided a sales location in other parts of the world. It ensured that the customer experience was also revised, by making sure that sales representatives were sourced from within the company. Tentatively, the sales and service operations remained in-house ensuring that the customers dealt with the enterprise directly. In addition to that, it introduced a leasing alternative for consumers, thus securing its market share further.
A manufacturing challenge was also experienced in the attempt to maintain the high-quality standards that were imposed on the company by the expectations of the market. With production rates on the increase and the introduction of new products, there was a need to implement new processes and facilities to meet the standards articulated by the Model S. It posed a challenged to the company’s brand, with active consumers experiencing problems with software technologies that controlled the door handles. More pressure originated by the expectations of its stock price in 2013. Its production was below the standards set by its competitors such as Mazda, forcing the company to solve its manufacturing problems if it was going to maintain its stock price.
It should be noted that the diversification of the models produced complicated the performance of the company in terms of manufacturing. The original production was done at the NUMMI plant that focused on the Model S, producing five of them in each month at to the ginning. This number has since risen to 500. The target of the leadership is to multiple that number by a million. However, discontinuing of producing the Roadster plus the introduction of a cheaper model of the Model S has put a stain on the production. The introduction of yet another option, the Model X does not ease the complexities that will be incurred in manufacturing.
Identification of Strategic Actions and Implementation Steps
The first step was the replacement of the management, during the early days of the company. It is because the outgoing CEO was deemed to have misled the investors on production costs. Tesla also ensured that it eliminated the chances of faulty cars on the production line. The first case was the original model of the Roadster, whose design was completely replaced with a new car. The new model enabled the company to rise again; however, it was discontinued after another model came into manufacturing. The Model S replaced its predecessor due to its new engine and low investment cost. The success of the latest model ensured that the company focused on its production with its location to a new factory. The constant innovation brought to the table by Musk ensured that the product was efficient and had much more range in comparison to previous models. Another strategic move was to make sure that the Model S was affordable. When it launched its first IPO, the company was under scrutiny due to its financial uncertainty. The communication of its turn of profit in 2013 ensured that its stock price remained solid and even improved. In this manner, Elon Musk ensured that the company had enough money to run its affairs. It also managed to secure new investors through key partnerships in the motor industry. For example, the deal with German automotive engineering powerhouse, Daimler, who purchased 10 percent equity stake in Tesla. It enabled the development of Daimler’s smart car into an all-electronic vehicle. Toyota also bought stock, ensuring that the management of the new united motor manufacturing factory was delegated to its supervision, easing the effort needed by Tesla to maintain infrastructure. It also brought Panasonic Inc. into the fold, to improve its battery technology and well as contributing to Tesla’s electronic technology.
The company’s public image took a dent when two articles printed two different experiences of consumers who tried to drive the Model S. In the initial stages, the car in question was meant to drive for 400 miles without a recharge. It covered the distance but took 17 hours at speeds of 25 mph. In the second incident, the car’s battery lost power at a faster rate than anticipated. The response was the release of the data logs of the cars to the public that claimed the second car had contradicting results to what was recorded on the computer. The rippling effect was a loss of market, revenue, and stock value. It was proposed that Musk was being stretched too thin, as in addition to Tesla; he held significant roles in other companies as well. Elon had also grown a reputation of starting businesses and selling them off and was at one point questioned as to why he was determined to ensure Tesla succeeded. The push was albeit the shortcomings in production, and market expansion. Due to the specialization into electronic technology, it was deemed appropriate for the company to look for car manufacturers to whom they will provide the same technology to. As such, the directive taken into gaining Daimler as a partner and producing electronic versions of their cars attracted Toyota as well. If prospective manufacturers did not want, a complete electronic car from the ground up, Tesla could simply produce critical components need by electric vehicles. In this manner, the electric car would receive much more exposure and access markets that have been solidified by other vehicle manufacturers. The partnering with much more established car makers would ensure Tesla’s access to substantial technological and financial resources that will enable them to reduce the cost of production and launch products much faster with proper access to the end consumer.
Works Cited
Rothaermel, Frank and Erin Zimmer. Tesla Motors; Will sparks fly in the automobile industry? Washington: McGraw-Hill, 2012.
Stimec, Armaud. "Revenue management, relations with enterprises and negotiation." Negotiations 4 (2010).
