The article analyzed the latest initiative launched by Tesla Motors upgrading autopilot in approximately 70,000 of its vehicles on the road. It involves utilizing cellular networks to update software that will be useful for upgrading the autopilot driver support system. The program intends to enable the company to reach its customers through mass media on issues related to vehicle fixes as well as establishing means of having major enhancements downloaded. This outstanding technological feat began the very week Boudette wrote this article around one month ago. The motive behind this feat is the need to avoid faults that led to the disastrous crashes, which occurred along the Florida highway back in May and other accidents that might occur in the future if appropriate measures are not taken. That said, the author questions the effectiveness of the launched initiative and calls drivers for being attentive while driving.
From the summary above, it is clear that this initiative targets individuals, who own cars from the company Tesla Motors. It means that the article is written within the frame of invisibility, as current and potential Tesla owners are mentioned, while the interest of others is not. At the same time, it is a peculiar referral to social class and privilege because this company is known as a luxury manufacturer. So, representatives of the middle and lower classes can hardly afford to buy one. This referral is pointed to by drawing lines between Tesla and Apples iPhone, which is commonly associated with a sign of prestige and a positive social image. Moreover, there is a hint at the concept of power. As mentioned by one of the research directors of Gartner Group, Tesla senior executives have enough power to control their autos while they are on the road. At the same time, they have enough power to direct the lives of Tesla owners, as updating software and upgrading the autopilot system might contribute to decreasing the risks of fatal crashes. More than that, they can choose to put people driving their cars at risk of accidents by offering an experimental version of autopilot. Finally, the concept of power is seen in the ability to inspire changes in automobile manufacturing by advocating for the implementation of only perfectly operating software in autos offered by other companies. However, this ability is ignored. From this perspective, the frame of power is closely related to invisibility because only the lives of Tesla owners are valued.
Also, it is imperative to point to the significance of media functions. In this case, it is seen as a tool for controlling people. For instance, visual and audio advancements are used for reminding drivers to stay focused and make sure to keep their hands on the steering wheel. At the same time, the informational function of media is highlighted, as the latest software offers pictures of a car, its location on the road, and map information. On the other hand, the article suggests that the influence of media on human life is crucial. The rationale for coming up with this statement is the very instance of a mentioned accident. If a driver stayed focused and ignored the option of autopilot, the outcome of the story might have been different.
In conclusion, it is imperative to state that both authors use different frames to make the message more persuasive. That said, preference is given to visual messages (demonstrating options of autopilot software), some real-life issues (e.g., a fatal crash and changes in legislation), and referrals to external research (quotes of people, who are believed to be experts due to their ranks). These frames contribute to the strength of provided arguments and explain the potential causes of the changes in the companys policy.
Bloomberg
Edward Niedermeyer
This article analyzes Hype Machine, i.e. the very essence of Teslas autopilot. The key argument made in the article is that there ought to be a clear distinction between the true capabilities of the system and the expectations of a car driver/owner. The chief point that critics and regulators have capitalized on is their relentless opposition to the autopilot system. That is, the assumption that it is capable of handling the complexities of the urban highways is unfounded and Tesla is not at the stage of automobile development it states it is. This article refers to the recent software update and unpredictable outcomes it is associated with, i.e. the death of a Tesla driver.
Just like in the case of the first article, the concept of power is one of the major lines of this article. It is seen not only in power to affect peoples lives but also in breaking promises, which might lead to fatal cases. This statement can be supported by the fact that the initially introduced hardware, which might make a car autonomous, is now called a driver-assist system. Moreover, the concept of power is closely related to privilege. It is seen not only in a prestigious brand but also as an opportunity to offer a fascinating experience related to testing the new autopilot system to everyone already owning a Tesla vehicle. This one is closely connected to the psychological nature of a human being, as each person using a novelty, which is not yet available to masses, feels privileged.
At the same time, the issue of functions of media is as well mentioned. It can be referred to as the image of Big Brother introduced by Orwell because the latest software makes it possible to collect data while a car is on the road. Furthermore, the influence of mass media is as well emphasized. In this case, it is essential to recollect the promotion of the beta version of autopilot, as it was demonstrated as a tool for making a car autonomous. On the other hand, it is hinted that it shapes peoples perception of the novelties, as company founder claims that negative articles do not necessarily contain true information, but they could still demotivate Tesla owners to use autopilot and decrease demand for Tesla automobiles. Finally, the idea of difference is as well traced. It is seen in the difference between the product description and what the company offers in practice. More than that, it can be located in the difference between customers expectations and reality, as the software, they are proposed to use is not what they were promised.
Just like the author of the first article, Mr. Niedermeyer deploys different frames to influence the perception of his message. The only difference in the chosen frames is the fact that the latter article includes a photo of a fatal crash and detailed descriptions of the offered software. Together with the best techniques, they make the article persuasive and provide reasons for believing the mentioned information.
This Financial Research Report presents a possible investment opportunity for a client interested in the US stock market. The company chosen for the client is Tesla Motors, Inc. Established in the year 2003 and went public in the year 2010, Tesla designs develops, manufactures, and sells its high-end electric cars and solar energy storage products in the US, Europe, China, and other global markets. Its flagship cars are mainly sedan and sports utility cars.
A rationale for choosing the company for which to invest
Tesla Motors, Inc. is the pioneer electric car manufacturer, which is viewed as a great firm given consumers enthusiasm for its sports utility, sedan cars, and solar energy storage products. The companys Model S is highly evaluated while Model 3 got nearly 290,000 pre-orders.
Economic significant
Tesla is a company that has brought about major changes in the automobile industry. The established sales channels with no distributors and innovative technologies, including solar energy storage have deeper implications for both the energy and transport sectors. That is, Tesla is a company with innovative products and technologies with huge potential to disrupt significant fractions of the economy and enhance the US economic growth for many decades.
The firm is poised for growth, as will be seen in the stock analysis later in this report. The disruptive nature of this company makes it vital for the economy in specific areas related to employment and inflation and, therefore, of interest to any investors. Tesla has automated most of its manufacturing processes to save costs on human labor.
Also, it has significantly embraced new technologies to reduce the overall headcount in the factory a move that has suppressed growth in wages. Of course, this approach has assisted the company to mitigate issues associated with skyrocketing labor costs and other uncompetitive labor practices. Consequently, it can save significantly on employee compensation and benefits.
Additionally, Tesla has embarked on disrupting the traditional model of a car dealership by focusing on online car sales, few showrooms, and almost no advertisement expenses.
Tesla is an exemplar of technological realization and its disruption in economies. Although the company has relatively a small production number relative to gasoline-fuelled cars, the companys production capacity is expected to rise each year as demand increases. That is to say, the electric car market is growing steadily and rapidly than earlier anticipated.
Keen analysts and investors have noted that the number of electric cars on the road in the US will reach five percent by the year 2025. This project will ultimately shift oil consumption in the US and lead to a decline in oil demands. The reduction in demands will be attributed to a significant number of electric vehicles on the road, which would perhaps lead to low oil prices. Thus, Tesla will influence the economy in a significant manner.
Financial significant
Current financial reports indicate that Tesla is a loss-making firm, and it is not likely to be profitable until the end of the decade. Nevertheless, the company has continued to realize increased revenues because of year-over-year growing demands and sales.
For investors, Tesla does not pay a dividend. Instead, the company focuses on enhanced investment in research and development (R&D) to revamp its autopilot technologies, longer battery lives, and introduce new advanced models at affordable prices.
The continued investment shows that Tesla executives have better growth opportunities to invest earnings and shareholders funds. To this end, the financial significance of the company to the economy or investors is negligible, but it continues to shape the investment in R&D.
Relative to competitors, Tesla appreciates that its rivals have greater financial, marketing, manufacturing, and technical resources, which they can use to facilitate the production, sales, and promotions of new cars. Moreover, the company lacks massive financial resources generated from revenues because of less extensive customer bases and industry relations, limited operating history, and inordinate name recognition.
Tesla stock is, therefore, suitable for the patient, long-term investors. According to experts, Tesla stock offers an important opportunity for investors who are keen and can absorb some risks because it is one of the best long-term stocks currently available (Anderson, 2015).
As the share price continues to decline, long-term investors have a better buying opportunity. It also noted that the company has gained about 500% in share price since its IPO in 2010. That is, its IPO at $17 per share in June 2010 had achieved a maximum of $280 per share in 2014, but the current share price is around $220.96 (August 2016).
Other factors of consideration for the selected stock
For investors, Tesla should be more than an electric car manufacturer. One major reason that makes Tesla stock superior as a long-term investment opportunity is the companys focus on the home battery segment of the market. The company has started the production of lithium-ion batteries found in its cars for capturing and storing solar power for domestic usages. This represents a critical shift for the company, which positions it above competitors.
Tesla now is strategically positioned in the middle of two emerging industries, electric, self-driving cars, and clean energy, which will move the company forward.
Further, the quality of leadership is also interesting. Elon Musk is now considered the most innovative, futurist CEO on earth. He can identify values that others have failed to recognize. Cars, lithium-ion batteries, solar, and innovative business models have all shaped entrepreneurship. The home battery, for instance, is meant for everyday use to allow owners to store energy and use during high-cost tariffs. The use of direct sales ensures that Tesla can maintain the required inventory around while simultaneously eliminating dealers with diverse business agendas (DAllegro, 2015). Ultimately, the company cannot go wrong with such approaches.
Tesla is regarded as a disruptive technology firm. It boasts of superior technologies and qualified engineers, which give it a lead on other companies in the auto industry. Moreover, Tesla has maintained a growth rate of more than 50% every year in a relatively stable market. It is expected that Tesla will continue to deliver superior products relative to its Model S and competitors.
Given that Tesla still has low sales volume, it then has further opportunities for expansion. Further, the decline in prices of gasoline should not be a factor of concern for investors because the shift toward electric cars is not driven by gasoline prices. Instead, it is a general shift, which promotes environmental conservation. It is expected that by the year 2025, there would be more Tesla cars on the road than imagined (DAllegro, 2015).
Teslas stock price will continue to improve as revenues rise. Hence, it is a good bet for investors.
The primary reasons why the selected stock is a suitable investment for the client
Tesla is a growth-oriented company, and so is the investor.
Tesla has demonstrated its potential since its launch in 2003. Today, the companys gross margins have improved, and they could range between 25% and 30% by the end of 2016. Tesla is currently manufacturing about 2,000 Model S and Model X cars in one week. Further, the company focuses on a steady increment to attain a target of 2,400 by the end of the fourth quarter.
Tesla has also invested heavily in its Model 3, which is touted as an affordable model expected to provide sufficient volumes to drive operation profits. The CEO has stated that the volume of cars would triple or even quadruple once the company starts to ship Model 3. Further, mini-SUVs and buses based on the technology of Model X will soon reach the production stage too.
These developments form a company characterized by loss-making sound enticing for a long-term, patient investor. An investor must, however, recognize that these are ambitious targets, which Tesla may fail to attain as stipulated.
Nevertheless, the bottom line is that Teslas financial indicators will soon shift to profitability and, thus, it will become a vital investment opportunity.
A description of the clients profile
The investor recommended for Tesla is a growth-oriented one. The investor will seek to optimize the long-term potential for price growth based on its principal. Teslas share price is characterized by price fluctuations, which the investor must tolerate while ignoring all the noise and squeak. The investor notably possesses a long-term investment period (Vanguard Group, Inc, 2016).
The investor is a billionaire whose primary goal is optimization. Current income generation is not the major objective of the investment decision. Thus, it would be imperative for the long-term growth-oriented investor to hold off on Teslas stock until the company starts generating profits perhaps after this decade (Mourdoukoutas, 2016).
The investor uses a patient method to invest, is a fan of the company, and believes in a long, thriving future of the company and the bold vision of the CEO. The investor understands that the loss-making trend will soon end, and Tesla will start paying dividends.
The investor is not a long-term value-oriented or immediate income-focused investor. Long-term value-oriented investors should consider other stocks in the auto industry such as General Motors stock or Fords stock. These investors would not find Teslas stock as attractive relative to other companies. Hence, they should not buy, but instead, sell Teslas stock to other investors. Tesla currently has negative operating margins and operating cash. According to these investors, the current state of Tesla reflects multiple weaknesses, which they consider as critical sources of investment challenges with greater consequences than any strengths that drive decisions of long-term growth-oriented investors. In this case, such investors find it more difficult to consider Teslas stock because they believe that other stocks are better options. Thus, net income and sustained growth in earnings per share are vital for such investors.
Analysis of Financial Ratios
Liquidity
Current Ratio
Total Current Assets/Total Current Liabilities
This ratio is vital for providing an overview of Teslas ability to repay its short-term debts with its short-term assets. Tesla Motor Inc. Current Ratio for the last three fiscal years is presented in the following table.
2013
2014
2015
1.88
1.51
0.99
Source: gurufocus.com
It shows that the company is hardly efficient in its operations and, therefore, issues related to liquidity may arise. Generally, the acceptable ratio ranges between 1 and 3. Nevertheless, the industry average is imperative for comparison. While this ratio reflects the current financial challenges at Tesla, it does not necessarily mean that the company will go bankrupt soon.
Quick Ratio
Total Current Assets-Inventory / Total Current Liabilities
This ratio shows whether Tesla will be able to meet its short-term debts based on its liquid assets, and inventories are not included.
2013
2014
2015
1.37
1.06
0.54
Source: gurufocus.com
For the past three fiscal years, Tesla has recorded declining quick ratios, which show that the firm is highly leveraged and fighting to grow and sustain sales. Hence, the declining trend is not healthy, and Tesla may not cover its financial obligations.
Earnings Per Share
Diluted earnings per share = Net Income-Preferred Dividends / Total Shares Outstanding
This ratio reflects the value of earnings per outstanding share of Teslas stock. The dividend preferred has been subtracted to eliminate common manipulation through non-recurring items, depreciation, or amortization rate. This presents a better performance of the company.
2013
2014
2015
-0.62
-2.36
-6.93
Source: gurufocus.com
Earnings per share is a critical indicator of the current Tesla share price, and it is important for investors interested in the overall profitability of Tesla. In this case, Tesla is not profitable because of negative values.
Price Earnings Ratio
Tesla is currently losing money and, therefore, the price-earnings ratio is meaningless. That is, Tesla lacks positive earnings and posting losses, making the ratio impractical for decision-making.
2013
2014
2015
N/A
N/A
N/A
Source: gurufocus.com
Gross Margin
Gross Profit / Revenue or Sales
2013
2014
2015
22.66
27.57
22.82
Source: Morningstar.com
This ratio is consistent to show that Tesla is doing relatively well, but is fighting to gain the market share and establish a competitive edge over other auto manufacturers.
The risk level of the stock from the investors point of view
Tesla stock is considered as high risk by industry experts (StreetInsider, 2016). The rating is based on the cash flow challenges and negative ratios, making such ratios meaningless to investors (The Street Ratings, 2016).
Further, when the P/E ratio is negative, the value is useless to investors because it cannot be used to determine discount valuation or premium. It only shows that Tesla has negative earnings per share.
Analyses have also established that Tesla is over-priced or trading at a premium relative to other competitors or S&P 500 averages (The Street Ratings, 2016). For instance, Teslas price-to-sales ratio is 7.16 relative to peers 1.13. The price-to-book ratio (12.79) also reflects a high premium against competitors or peers (3.74).
Tesla, however, has high sales growth (23.35) relative to its peers (18.99). This ratio suggests that Tesla is rapidly gaining market share.
Given the high-risk rating, investors should also expect high rewards from Tesla. In this case, it is observed that investors have a choice. That is, they can invest in cash-rich regular automakers at low valuations or invest in Tesla because it presents the best chance to alter the industry fundamentals notwithstanding its current spending patterns and a lack of any near-term valuation indicators. Hence, Tesla stock is all about assessment and interpretation of risk and rewards. Thus, Tesla is not for every potential investor (Abramov, Radygin, & Chernova, 2015).
Key strategies to use to minimize these perceived risks
The investor must understand the financial risks and metrics of Tesla. Financial tools, such as ratio analysis, can greatly assist investors in decision-making. For instance, year-over-year ratios can be used to predict future performances albeit to a lesser extent because of other market fundamentals (Kubota & Takehara, 2010; Fathi, Zarei, & Esfahani, 2012).
The investor should also consider other investment options. For instance, a long-term investor may wish to consider corporate bonds because of relatively low risks compared to stock investment. Fixed income instruments can assist the investor to mitigate potential losses that Tesla may yield. Further, there is a need for constant changes or improvements to the investors portfolios. Such adjustments should be used to mitigate risks in stocks. That is, the investor will have a fixed risk-return ratio for a given portfolio to account for the long-term growth-oriented investment in Tesla stock. In this case, other long-term value-oriented stocks offered by GM and Ford could be an alternative in the auto industry. Hence, low-risk financial investment is a strategy to mitigate the negative impacts of Tesla.
The investor should also keenly follow the activities of Tesla, and possible reactions of other investors, including market information (Kumar, Dixit, & Francis, 2015; Mollik & Bepari, 2015). The announcement to acquire SolarCity, for instance, has led to a decline in Teslas stock price because both companies are loss-making entities. Thus, the acquisition announcement should inform future decisions to buy, hold, or sell (Smit & Moraitis, 2010).
Recommendations of this stock as an investment opportunity
It is recommended that the long-term growth-oriented investor should buy Tesla stock. It is believed that Tesla stock has huge potential to appreciate and generate massive returns once the ambitious targets are attained. The recommendation is based on the following observations.
Growth
Tesla is most likely to grow more than its current position because it is still considered as a startup driving two emerging industries with massive impacts.
Total Return
Based on the historic price movement of the stock, Tesla has gained more percentage than it has lost. Many analysts claim that Tesla stock is overpriced.
Price Volatility
The historical price movement has generally been good. In this case, most investors have often reacted to noise rather than major events. Thus, price volatility noted will improve once the company attains some of its targets.
Financial Position
The gross margin has continued to increase year-over-year as Tesla acquires more market share. Nevertheless, the net income declined to affect overall performance. Also, the weak liquidity noted in quick and current ratios are temporary, which will improve. Overall, the liquidity continues to improve, reflecting an improving cash flow.
Therefore, in the long-term, a growth-oriented investor should be patient and accommodate current activities at the company until the end of the decade rather than investing in firms with low returns and share buyback tendencies.
The investor must be able to understand the companys dynamics and its abilities to disrupt the auto industry and the clean energy division. Tesla has unique abilities to realize its goals.
The bottom line is Tesla stock is recommended for a long-term, growth-oriented investor who can afford to lose some investment portfolio, and this risk has been observed in the latest price decline in the stock. While some investors are selling, Tesla remains a superior buying investment opportunity.
Fathi, S., Zarei, F., & Esfahani, S. S. (2012). Studying the Role of Financial Risk Management on Return on Equity. International Journal of Business and Management, 7(9), 215-221. doi: 10.5539/ijbm.v7n9p215.
Kumar, M. V., Dixit, J., & Francis, B. (2015). The Impact of Prior Stock Market Reactions on Risk Taking in Acquisitions. Strategic Management Journal, 36(13), 21112121. doi: 10.1002/smj.2349.
Mollik, A. T., & Bepari, M. K. (2015). Risk-Return Trade-off in Emerging Markets: Evidence from Dhaka Stock Exchange Bangladesh. Australasian Accounting, Business and Finance Journal, 9(1), 71-88.
The customers are usually provided with the ability to return the product in case it does not satisfy their needs or was defective. The rights of the buyers are protected and regulated by law. However, the customers are not the only group that can return the product. It is worth highlighting that the company can itself recall the product, in case the life or the health of the customers is dependent on the product, and some issues were discovered after the product was manufactured and delivered to the buyers.
There is hardly an enterprise in the world that did not face the problem of returned or recalled products. Tesla Motors Incorporation is not an exception. The primary purpose of the paper is to discover the reasons the customers return the cars made by Tesla Motors and what is the purpose of recalling the product.
Tesla Motors is famous for combining innovations with the current market needs. It is worth noting that they are successful in it and have become popular nowadays. Although the majority of people drive fuel cars, Tesla Motors aims to foster the transition of the world population to sustainable energy and provide people with affordable and innovative electric cars. Globalization strategies and flexible marketing ideas help the company in the way of their goal accomplishment.
Despite the fact, that the cars developed and manufactured by Tesla Motors have already been successfully integrated into the society, and people value the product, it is of paramount importance to make an accent that their product, namely electric cars, was returned by the customers and recalled by the company itself. What are the reasons for such actions? First and foremost, one should consider the aspect of innovative technologies.
Tesla Motors cannot be compared to the giants of the automobile industry. The company was established only in 2003, and the first car was presented to the public only three years later. Tesla Motors uses new technologies and change the vision of people towards an understanding of what the car is. The machine made by Tesla does not require car service. This and other advantages of Teslas electric vehicle contributed to the fact that the product made by the company becomes popular every year. However, innovations are always risky. The reason the company recalled the product is security.
Providing a customer with a secure product is a fundamental concern of any company. In 2013, the Model S vehicles were recalled by Tesla Motors because of the fire hazard (Lienert, 2014). The company discovered potential issues with the battery, and thus, recalled the product. In 2015, the company discovered the issue of a faulty seatbelt in the Model S car. The company recalled 90,000 cars (Thielman, 2015). In 2016, the company recalled 2,700 vehicles of the Model X because of the insecurity of the third-row seats (Hull, 2016).
After multiple testing, the managers concluded that the seats can create a potential problem. As for the product return, there is hardly a person that was not satisfied with the vehicle. Thus, the customers prefer to have Tesla electric vehicle in the garage, not back in the store.
In conclusion, it should be stressed that even though Tesla Motors is a client-orientated and innovative enterprise, the products of this company can be recalled in case of the potential risk. However, it characterizes a corporation as responsible and caring for the customers.
Tesla is a California-based electric vehicle manufacturer that began in 2003. The organizations founders Marc Eberhard and Marc Tarpenning wanted to provide a stylish yet effective electric vehicle for the masses. Before their conception, electric vehicles lacked aesthetic appeal as they were too focused on practical aspects. Tesla sources its products from different partners around the world such as Sotira in France, and Hethel in the UK.
This method has caused huge savings in production because the organization builds vehicles on demand; it does not have to spend huge sums on inventory management. Additionally, the company sells itself as an environmentally friendly alternative to conventional, fuel-powered vehicles. Its efficiency ratings are quite impressive even in comparison to hybrid cars.
These developments have not come without their fair share of challenges. First, the company lost its founder Eberhard in 2007 and two crucial engineers in 2012 after they resigned. Furthermore, it recorded a net income of $ -396.2 million in 2012, which was worse than the performance in the previous year of -254.4 million. This was due to economic conditions and a series of other internal changes like the loss of the two engineers.
However, a fundamental problem is that electric cars are a new form of technology that must compete with century-old organizations. Gas-powered cars have been in business since the early 1900s; therefore, it will take some times before the public warms up to Tesla. This means that the organization must seek new ways of becoming profitable, and international expansion in South Korea is one such alternative.
Environmental variables
Political and economic background of South Korea
South Korea was laden with a series of autocratic leaders during the late twentieth century. Surprisingly, this was the point when the countrys economy grew tremendously. At the time, the prevailing leaders chose to appoint technocrats who spearheaded the countrys economic growth.
The government was heavily involved in these results owing to its centralized fiscal policies, the regulation of foreign exchange, and incentives that were available to small businesses. Prior to the 1990s, South Korea had a number of five-year interventions that saw 9% annual GDP growth rates within this period of time. However, in 1987, South Korea replaced the autocratic regimes with democratic ones.
This change did not come with the promising results that many anticipated as seen in the 1997 Asian crisis. Instead, the countrys political leaders used public positions to reward persons who had been loyal to them. The technocrats that had caused those changes were no longer present. In 2013, the country has become a respected democracy in which its political stability contrasts dramatically to the autocratic regime of its Northern neighbor (Heritage 12).
In the 2000s to date, South Korea remerged as a global world leader. President Dae Jung spearheaded high growth rates in 2000 using emergency loans from the IMF. The country did well in 2004 and 2006 where it reported 4.6% and 5% growth in GDP, respectively. In the 2008-2009 global economic crisis, the country managed to maintain a positive growth pattern while other developed nations reported declines.
Furthermore, now the economy is the eleventh largest in the world. This countrys economic growth patterns have been resilient against external conditions owing to strong fiscal reserves. Furthermore, the South Korean government owes little in debt. This implies that when emergencies occur, the country can easily use its reserves to deal with the problem.
The Asian nations economic freedom ratings are impressive. It now stands at position 8 in the continent and 34 in the world. This country has free trade agreements with the EU and US. It is open to foreign investment and most of its private sector players are free to operate. Innovation and a well-educated work force are some of the reasons behind this conducive environment.
In fact, now South Korea is a world leader in internet usage. This nation exports a series of items that include textiles, shoes, electronics, telecommunication devices as well as automobiles. Industry and service sectors are the largest contributors to the economy. Its trading partners are Chinas Hong Kong, Japan, Taiwan and the US. Additionally, the country has been known for its innovations in alternative sources of energy.
For instance, it engaged in the production of certain forms of nuclear energy by building plants around the country. These facilities account for approximately 40% of the nations energy needs. In the future, it is likely that the country will get more than half of its electricity from nuclear resources.
Regulations Tariffs, quotas and import tax
As stated earlier in the economic background section, South Korea is highly conducive to foreign investment. The Free Trade Agreement between Korea and the US has enabled importers to benefit from a 7.9% basic tariff for these goods. Nonetheless, it is expected that in the next four years, the country will eliminate 95% of tariffs on imports from the US.
Therefore, companies like Tesla will have an advantage over other automakers because their products come from the United States. In addition to this, one must consider the flat 10% VAT on imports. Since electric cars are luxury items, then Tesla will need to pay 10 to 20% excise tax to import them into the country.
If a foreign investor brings in raw materials for manufacture in South Korea, then he or she is not expected to pay import tax. Nonetheless, the Ministry of Finance will have to approve the project or investment before it be labeled as duty-free. When importing products into the country, one will also have to pay insurance and freight at 15%, import tariffs at 5%, Vat at 10%.
These additional costs will be added onto the product cost to create a final import price. In order to trade in South Korea, an investor or importer must comply with certain requirements. First, the individuals will need to hold a commercial invoice. This will need to include information about the quantity of goods being transported, their unit value, description and any other shipping information.
A certificate of origin must also accompany the commodities. In order to access preferential treatment, the certificate must indicate that the goods come from the United States. Details about the harmonized systems as well as certification date will allow the US exporter to enjoy tariff deductions. All goods entering South Korea need to have a bill of lading in which the concerned company places shipping information.
Consignee name, destination, shippers name, insurance and freight charges as well as the price list need to be included. During the clearance process, South Korean customs employees will work to clear goods in as little time as possible. The declaration system is now electronically managed.
Therefore, an importer can get import clearance electronically even without physically appearing in the customs house. Unless a commodity falls within the prohibited or special goods list, an investor can easily do business in this country without being boggled down by intensive and bureaucratic customs clearance.
Competition
Comparison with Korean Companies
Currently, few organizations sell electric cars in South Korea. Most of the prime international automakers plan on introducing them in the next five years. For instance, General Motors will build its own version of an electric vehicle in 2014. Even the BMW and the Volkswagen will enter the Korean electric vehicle market in 2014 where they will also build their own version.
Some of the local manufacturers like KIA plan on introducing a model known as Ray for the electric vehicle market in the near future. Renault will introduce the model SM3 ZE sedan in Busan, which is a region in South Korea. However, all these plans are dependent on whether the Korean government will subsidize the vehicles. Failure to do so will cause automakers to overprice their electric automobiles and thus become uncompetitive.
Aside from companies that plan on introducing electric vehicles, some companies like Nissan are selling the Leaf brand in Koreas market. GM plans on making some electric vehicles in Korea in 2014 but already imports US-made electric vehicles into the country; its key brand is Volt. Currently, the two companies are struggling to sell their electric vehicles. Their cars have low range and mileage.
Since Tesla already worked on this aspect, it is likely that the organization will record better performance in the country than some of these older brands. Competition for Tesla will not just come from electric vehicle sellers. The organization must contend with other automakers that know and understand the Korean market. Hyundai and Kia are companies to watch out for in the market.
Hyundai initially struggled with creating visually-appealing vehicles but it has already improved on this component through its Tucson and Elantra models. Additionally, Kia has built sedans that are better looking than vehicle from global leaders Toyota and Honda. Perhaps one of the most impressive characteristics of Kia and Hyundai is their reverence for quality. These organizations cars deliver when it comes to performance.
Hyundai has also earned a reputation for its fast responses to defects. Kia and Hyundai, as Korean auto manufacturers, have also worked on their marketing appeal. Kia is now revered for creative advertisements while Hyundai is respected for innovative sales deals. It has a policy that guarantees buyers a resale of the car if the buyer loses his or her job.
It should be noted that when Tesla enters the South Korean market, it will have to fight against an organization that is owned by the wealthiest Korean in the country. Hyundai Motor Group manages both Kia and Hyundai, and these two companies have enjoyed a lot of government support.
Even its owner, When Chung, was pardoned by the government when he faced criminal charges. The courts claimed that he was needed in order to run Hyundai. Tesla will need to take advantage of the deficiencies in management of this organization in order to succeed in South Korea.
Demand on electric cars
Demand for electric cars in South Korea is moderate. This mirrors trends on other parts of the world where electric vehicles have not done so well. Oil prices in South Korea have been relatively stable, so this has curbed enthusiasm for electric vehicles. Nonetheless, this low interest will be counteracted by the Environment Ministrys plan to provide $25.3 million in investments for purchasing approximately one thousand electric vehicles (Choi 5).
South Korea is already prepared for the adoption of electric cars by instating charging stations. Estimates indicate that the country now has about 600 of these. While some countries in different parts of the world have more than double this number, it is still sufficient enough for an investor to provide the vehicles within the country.
Electric vehicle sales will also be promising because hybrid vehicle sales have tripled in 2012. This indicates that automobile consumers are now aware of their environmental impact and are willing to mitigate this though alternative sources of fuel.
Competitive Advantage
The first and most promising aspect of Teslas vehicles is that they are fully electric. This implies that consumers will get exactly what the company markets. This commitment to electric vehicles alone also implies that the organization has perfected its craft. The firms founder Martin Eberhard once stated that most electric vehicles from mainstream automakers have failed because they required consumers to alter their nature.
The cars were less aesthetically-appealing, had less range and low speed, yet their prices were higher than their gasoline counterparts. However, Tesla set out to change all this by offering consumers a vehicle that would be in tandem with their nature. Electric vehicles from Tesla are not like those from other automakers because their technologies have been sharpened and worked on exclusively.
Tesla does not have to divide its time between gasoline-powered cars and electric vehicles; this is not a sideshow for the organization. Teslas competitive advantage also lies in its ability to offer comfort through size. The company initially produced the Roadster but it is now out of production. Therefore, the new Model S is the car to beat in electric vehicle sales.
Tesla will introduce a newer model X in the near future. The Model S can accommodate 5 adults. It has a head room of 35.3 inches, a leg room of 35.4 inches and hip room of 54.7 inches. Even the trunk cargo area is impressive as it has a volume of 5.3 cubic feet (Tesla 6). This vehicle is thus quite comfortable.
The company also offers high miles per charge for the vehicle. Once the vehicle is charged, it operates on 92% charge efficiency. This is arguably one of the most impressive efficiency ratings in the electric vehicle industry. Some models like the Toyota Prius can only promise 82% efficiency while the Honda CNG has 86% efficiency. It is easy to access a universal connector and charger.
The mileage for the automobile is also above the rest of its competitors. The mileage for the Model S is 265. A person can charge their vehicle through a supercharger station. Vehicles of this nature can get approximately 120 miles from a 60 Kwh battery. Tesla offers a luxurious and elegant alternative in electric motoring. The Model S has an interior design that is unrivaled.
It has sleek accents, black leather seats, interior door handles, seven-speaker systems and memory storage that enables its users to store up to 500 songs. The car also comes with wireless technology and WIFI-capability. One may also enjoy cruise control when driving the car. It has climate control capabilities so as to manage the temperature and air distribution in the machine.
The automobile can sensor when the drivers seat has been occupied so one has the option of controlling this device as they please. Environmental friendliness is perhaps one of the unique selling points of the car. It is a given fact that relying on electric power to charge vehicles is much cheaper in the long run than gas usage. Furthermore, even charging costs are cheaper than gasoline refueling or other modes of energy.
Aside from price sensibilities, the amount of green house gasses emitted by such a vehicle is negligible in comparison to the carbon-rich conventional fuels. Critics sometimes claim that electric vehicles still emit carbon-based gases owing to the factories that create those batteries. However, this argument is lopsided because it does not compare these carbon emissions to the ones that come from conventional vehicles.
Gas-powered cars keep discharging polluting gases into the environment, yet the fuel also comes from carbon-emitting plants. At least in the case of electric vehicles, polluting gases are confined to battery manufacturers. Furthermore, studies indicate that the Lithium-ion batteries used by the company are some of the safest in the market. In fact, they can be disposed off at the municipal waste site without any problems.
Positioning strategy
The organization should position itself as a high-end electric vehicle seller. It needs to create an image in the minds of consumers that it is the best in the business. However, because demand for electric vehicles is moderate, Tesla will need to generate enthusiasm for its product. One way of achieving this would be to build only a few hundred vehicles for the South Korean market.
They can target car enthusiasts and key stakeholders to talk about the qualities of the car. This needs to be seen as a fine tuned vehicle that will satisfy customer expectations. Once the product brand is known as the go-to car for quality and efficiency, then the organization can work on increasing its availability.
The aspect of quality may also be sold through the partnerships that the company has with other conventional automakers like Daimler and Toyota. These organizations have been sourcing for electric vehicle parts from Tesla. Such collaboration is indicative of the market leadership and quality that customers get from Tesla.
One should note that all the positioning must tie in with the green aspects of the companys offerings. This organization is an electric vehicle manufacturer; therefore, it will position itself as the environmentally- friendly car of choice.
Both selling points need to be merged together such that individuals do not assume that the car is only appropriate for environmentally-conscious consumers or quality-conscious consumers. The Tesla models available in South Korea should be such that they appeal to these two categories of consumers in equal measure.
Time and mode of entry
As stated earlier, in the regulations section, the government intends on introducing subsidies for Korean-made electric vehicles. Therefore, Tesla would benefit from manufacturing the vehicles in the country rather than exporting them to Korea. Since the company already sources parts of its batteries in the target market, it would make sense to take production there.
However, the company might not have thorough knowledge of the South Korean market. It would thus make sense to enter the market through a joint-venture partnership with a local automaker. Tesla would bring the expertise it possesses on electric vehicles and the local partner would demystify the Korean market (Koch 70). This would make the building cycle quite low.
Furthermore, it would minimize costs as raw materials to be used for automobile manufacture are not taxed in the same way as imported cars. The company is trying to return to profitability. It can achieve this by expanding into a country that has promising outcomes. Therefore, this move should occur as soon as possible.
It is preferable that the company does it at the beginning of 2014. If it waits until later, competitors like GM, Chrysler and Toyota may dominate the South Korean market with their electric-powered vehicles.
Marketing mix Analysis
The fixed price of the Model S should be $ 40,000. Since the product will be manufactured in South Korea, then there will be no additionally sales taxes or tariffs. The idea is to get the public to appreciate the exclusivity of the product. However, after a reasonable amount of time, the organization will introduce the model X, which will be cheaper. This Model will go for $ 30,000. Individuals will already appreciate the quality of the brand so they will not mind purchasing another make.
In terms of place, the automobiles will be available in different distributorships across the country. This will cement the companys name in consumers minds. Tesla will create a battery network in South Korea designed to lock out other dealers. It will make these stations exclusive to their models so that other companies do not take advantage of their investment.
In terms of the product, the Model S will possess all the features that were mentioned in earlier portions of the paper. Great emphasis will be given to the efficiency, performance, elegance as well as the greenness of the product. Promotions will include a sales deal in which a generous refund package will be available to consumers (Garling & Thogersen 60).
Additionally, the company will allow for leasing of the car such that consumers who cannot own the car can still have access to it. The organization will use Korean celebrities to endorse the product and act as brand ambassadors. Additionally, the firm will have a marketing campaign in which it will utilize creative advertisements to sell the elegance and exclusivity of Teslas vehicles. Test drives through computer simulation will also give buyers a feel of the automobile.
Managing and controlling marketing efforts
Care will be taken not to over market the product as it is an exclusive commodity. This means that the frequency and the quality of advertisements will be in tandem with this brand image. The message will be simple elegance; no flamboyant promises will be made in this marketing strategy.
Conclusion
Tesla has been highly successful in the past but is currently experiencing losses. It needs a new strategy to turn around its results, and entry into South Korea is one alternative. The Asian country has a business-friendly environment especially for US-based investors like Tesla. It would be advisable to enter the country through a joint venture in order to reduce cycle times and take advantage of the partners local knowledge.
Tesla ought to position itself as a high-quality green vehicle. This will work by generating a buzz concerning the automobile and building brand recognition. It should then introduce an inexpensive model for the masses after some years.
Works Cited
Choi, Kyong-Ae. Seoul catches heat over electric cars. Wall Street Journal 2012: 5. Print.
Garling, Anita & John Thogersen. Marketing of electric vehicles. Business Strategy and the Environment 10(2001): 53-65. Print.
Heritage. South Korea: 2013 Index of Economic Freedom. 2013. Web.
Koch, Adam. Selecting overseas markets and entry modes: two decision processes or one? Marketing Intelligence and Planning 19.1(2002): 65-75. Print.
Innovation is the art of making things amazingly different to advance modernity. Tesla Company became one of the leaders in innovation in the car industry. Its announcements of new models, new battery technology, and patent release enabled it to make a lot of progress in the market.
Elon Musk, the chairman, and CEO of Tesla had a plan to revolutionize the automobile industry. The introduction of the electric vehicles helped to provide cars that were eco-friendly and efficient for the market. However, there were a few problems. The infrastructure in the industry was not viable for the new developments. Its technology was not compatible with the national adaptation to the new system. Most customers still preferred oil-fueled vehicles because oil prices had dropped over the period. The electric cars were very expensive (Grant 237). Therefore, Tesla allowed the use of its patent to increase the level of uptake of the electric vehicles in the market.
Tesla had made advancements in the electric cars. Its battery innovation was and still is the basis for its uniqueness. It also developed a wholly new electric car from scratch. The system of charging with the newly developed supercharger made Tesla a company to beat. Within 30 minutes its system can charge a car to travel for over 100 miles (Grant 237). The other national chargers are slow and a charge of 30 minutes can only take the vehicle for not more than 10 miles. The architecture of Teslas car battery packs, high voltage cables that connect to the battery, and the advanced computer system that manages the charging system are its unique points. It is not easy to patent such technology. Such unique features led the company to protect its patents through registration. They were its competitive advantage.
Teslas unique range of cars gives the company an edge in the market. The company partnered with Panasonic Company to provide the cars with the much-needed support of quality batteries (Johnson 502). It has the S-Model and the X-Model which took the market by storm due to their structure and speed. The battery only adds to this beauty with the supercharger system and ability to store energy for long distance performances.
The lithium-ion batteries were already in use even before Tesla Company came into being. Other companies like Nissan partnered with NEC to produce lithium-ion batteries from scratch. Tesla bought off-the-shelf lithium-ion cells which were smaller but capable (Grant 237). They also did not overheat like other batteries. Later, Tesla and Panasonic partnered in 2014 to build the world largest manufacturing plant for lithium-ion batteries. It has projections to ensure that the electric cars become affordable to acquire and to maintain.
The anticipation was that the move would free up its patent to other companies. It would then speed up the market for the electric vehicles. When there are many supplies in the market, the price tends to drop. The decrease in prices leads to the increase in demand. It leads to more purchase. However, the company states that the use of its patent should be in good faith. It will maintain its supercharging technology but share its battery technology. Customers who charge in its stations should pay a fee to enable the company to raise additional revenue. If Tesla did not share its technology and got a competitor who did, its recharging stations would lose value.
Tesla and other companies can revolutionize the industry. Their sharing of technology will help to save the environment from pollution. It will also speed up technological advancement.
Works Cited
Grant, Robert M. Contemporary Strategy Analysis. 9th ed. Hoboken, New Jersey: John Wiley & Sons, 2011. Print.
Johnson, Drew D. International Directory of Company Histories. 1st ed. Detroit, Mich.: St. James Press, 2011. Print.
A sustainable competitive advantage can be achieved in several ways to ensure the company is able to deliver its services better than other organizations. The two main strategies include service differentiation and information exchange. Tesla has already proved itself as a successful disruptor of the electric vehicle industry (Lang et al., 2021). Still, it continues offering the best innovative technologies for customers, and it is important to check the existing variety of customers needs.
Thus, the introduction of unique goods and services has to be a number one strategy for Tesla. Such steps as the analysis of the field, communication with people (potential customers), and the evaluation of recent technological achievements will help Tesla recognize new trends and its readiness to change something. Service differentiation is not about introducing a new exclusive idea but the ability to cooperate at different levels and use available information.
Another strategy is related to information exchange and knowledge promotion. Despite the desire to be all-rounded, only a few people understand the core vision of Tesla. Within a short period, the company has demonstrated success in multiple data-driven decision-making processes to enhance product management and information exchange (Lang et al., 2021). Now, it is high time to share its knowledge with other people. Therefore, Tesla should enhance free meetings and charity events to attract the attention of new people and demonstrate its intention to cooperate. When a person sees a service, asks questions, and has a free trial, the guarantees of a future purchase increase.
Tesla must establish a connection with society and prove that its futuristic technologies are closer than people could imagine. Service differentiation and a solid, informative background for customers are the two strategic decisions for Tesla at the moment. These steps are relatively inexpensive because much depends on how its employees work with current facts and implement them for competitive advantage.
Tesla is renowned for its innovation and leadership in the electric car industry. As its market grows, Tesla faces new quality challenges, significantly as it expands its production and sales in China. To ensure long-term success in China, Tesla needs to develop a robust quality control and customer service system that can effectively address problems with car quality.
Tesla has faced quality issues with their vehicles in China, particularly with the brakes, which has caused customers to be increasingly wary of their safety. After multiple complaints were reported in February 2021, Chinese regulators called upon Tesla to investigate and resolve the matter quickly (Sun & Goh, 2021). This anxiety was amplified when a Tesla car crushed and killed two people in April 2021 (Pietsch, 2021). The drivers family claimed that the brakes had malfunctioned, and the crash investigation revealed that the vehicle had been traveling at an elevated speed and the brakes were not used. In light of these events, Chinese customers are now questioning the trustworthiness of Teslas cars.
Tesla has had to confront some issues with the quality of its batteries in the Chinese market. Customers have reported that the batteries in their cars have spontaneously ignited, resulting in considerable destruction of their vehicles. In April 2019, a Tesla Model S burst into flames in a Shanghai car park, and the occurrence quickly circulated on Chinese social media (Shaban, 2019). This accident lowered Teslas reputation in China.
To take care of quality problems, Tesla ought to give precedence to safety and quality in its vehicles and put money into research and development to advance the proficiency and dependability of its breaking and battery systems. Additionally, Tesla should implement more meticulous testing procedures to identify and tackle quality issues before they become widespread. For instance, Tesla could employ more sophisticated simulation tools to evaluate the robustness and safety of its brakes and batteries before they go into manufacture. Moreover, Tesla should construct a more stringent quality control process to ensure that all vehicles adhere to the maximum safety and quality standards.
Tesla has been the subject of disapproval due to their inadequate customer service in the Chinese market (Jacobs & Chase, 2014). Per the 2021 China Customer Service Index (CSI) research conducted by J.D. Power, Tesla scored the least among all luxury brands regarding customer contentment (2021 China Customer Service Index, 2021). Teslas rating was 573 out of 1,000, much lower than the industry standard of 651.
To ameliorate customer service, investing in training customer service representatives and providing more available pathways for customers to voice concerns about quality and give feedback could be beneficial. For instance, Tesla could create a specific hotline or email address for Chinese clients to discuss quality issues or comment on their customer service experience. Additionally, Tesla should carry out routine customer surveys to recognize customer requirements and inclinations and utilize the data to upgrade its products and services. Furthermore, Tesla could contemplate instituting a system that grants commendable customer service, incentivizing customer service reps to provide the finest service.
The subsequent problem with Tesla is related to the high costs of Tesla cars in the Chinese Market. Tesla currently imports all of its vehicles to China, which makes its cars more expensive for Chinese customers due to import tariffs and shipping costs (Bloomberg, 2021). This puts Tesla at a disadvantage compared to other electric vehicle manufacturers, such as NIO and BYD, which have local manufacturing operations in China. Tesla should consider expanding its manufacturing operations in China to reduce costs and increase its competitiveness in the Chinese market.
Ultimately, Tesla has encountered several concerns about quality in the Chinese market, which has hampered customer contentment. Those problems incorporate issues with brakes and batteries, inadequate customer service, and the absence of local production. To address these worries, Tesla should stress safety and quality in its vehicles, invest in providing training to and supporting its customer service staff, and set up a local manufacturing base in China. Through these measures, Tesla can fortify its position in the Chinese market and raise customer satisfaction, thus helping it to reach its long-term ambitions.
Tesla is among the leading players within the scope of the automotive industry. Through the years, it has been demonstrating a great extent of competitiveness, innovativeness, and success. This is reflected in its profit margins and stable market performance, which is essential under the conditions of severe rivalry. The below discussion will explore Teslas strategic foundation, as well as external and internal factors affecting the company, to define the basics of its competitiveness.
Globalization
The Tesla Motors corporation decided to enter the foreign market for a variety of reasons. First, it is important to note that the companys website states that its purpose is to produce and market a product that would enable more sustainable use of the environment. Environmental issues are quite important when it comes to the transportation business; according to certain data, this industry is responsible for about 70% of the worlds oil consumption as well as for around 57% of greenhouse gas emissions that are harmful to the environment (Liu, 2021). Furthermore, it is crucial that several nations pay attention to ecological issues on a global scale. Governments are prompted by environmental consciousness to offer certain unique benefits to businesses that support the development of environmentally friendly technology.
It should be noted that although Tesla Motors has only just started growing globally, the company has already had a lot of successes there, sometimes even overtaking the competition as the top brand. Because environmental concerns are a developing global concern, using cutting-edge, environmentally friendly technologies was the primary element in its success (Liu, 2021). If the company continues to place a strong focus on the ongoing use of cutting-edge technology, it could be able to predict the companys future success.
Technology
Technologies now in use will determine how far Teslas automobile and energy solutions businesses progress. For instance, the companys batteries performance and cost-effectiveness are determined by materials engineering technology. The rapid advancement of technology is both a potential and a risk. The fast pace gives Tesla a chance to advance the technology in its products. The same external element, though, poses a threat to the business since it might cause the technology utilized in its goods to quickly become obsolete. Nevertheless, the trend of growing commercial automation offers the opportunity (Tesla Inc., 2021). For instance, Tesla may expand by further automating its operational procedures. Additionally, the corporation should incorporate these technologies more deeply into its vehicles as a result of the rising adoption of online mobile systems. The distant or macroenvironments technical state highlights the potential for development based on technological advancement.
Industrial Organization Model
Although competition from huge companies like automakers including General Motors, Honda, Toyota, Volkswagen, Nissan, and BMW, Teslas sales profits for electric cars, batteries, and solar modules are rising. This state shows that the external issues in the distant or macro environment of the firm are effectively addressed (Hitt, 2020). Hence, the company is able to expand its operations toward an attractive industry with related characteristics truck production, for example.
Tesla possesses the necessary resources to acquire a number of companies that are involved in truck production. The corporation can develop such acquisition firms toward electric vehicles. Tesla already has experience in this field Cybertruck is a project with promising projections (Williams, 2021). The company should use this expertise and experience in this framework which can be considered an asset and utilize them within the acquired organizations. This strategy can be implemented in Europe an area in which demand for expensive and exclusive cybertrucks will be significant. Such an approach is likely to result in superior returns and increased global presence.
Resource-Based Model
Internal business assets, including the companys brand, provide the automobile company with the capacity to compete with other organizations for long-term prosperity in the world market. According to Elon Musks corporate objectives, the Tesla brand is a representation of innovation and sustainability. The corporation may launch new solar goods and automobile models that draw interest from target clients all around the world thanks to its strong brand (Tesla Inc., 2021). The tremendous rate of invention at Tesla is well recognized. It makes sense to regard this internal strategic component as a major competitive advantage that enables the business to create viable and lucrative goods for the market for electric cars (Hitt, 2020). This strength partially depends on Teslas company culture, which governs the support of human resources for creative improvements.
Given the mentioned factors, it seems that entering the market of nanotechnologies is an attractive industry for Tesla. An essential element here is to be able to introduce and implement innovations, which Tesla does significantly. It may establish some joint ventures with the leading players in the industry so that experience and expertise could be linked to considerable assets.
Vision
Tesla, Incs vision statement is to create the most compelling car company of the 21st century by driving the worlds transition to electric vehicles (Tesla Inc., 2021). The philosophy behind Teslas mission statement is also expressed in more detail in its vision statement. It concentrates on the corporate objective. The following essential elements make up the vision statement. First, it is to develop the 21st centurys most engaging automaker. Second, it is to drive the switch to electric automobiles throughout the world. These two elements are dependent on one anothers accomplishments. Tesla needs to develop into the most alluring automaker in order to steer and aid the worlds shift to electric automobiles, which are a healthier and greener choice.
When every other prominent automaker concentrated on gasoline-powered vehicles, Tesla was the first to focus substantially on electric vehicles. They made significant innovation investments in order to compete with gasoline-powered automobiles of similar size. Teslas electric vehicles were scrutinized and received unfavourable press in the beginning because of the models minor flaws. People had doubts about how practical and efficient electric cars were. However, Tesla has persevered and innovated over the past ten years, and as a result, newer Tesla car models have exceeded expectations. This proves that Tesla is making progress toward realizing its goal of being the most compelling automobile manufacturer of the twenty-first century.
Mission
Teslas mission statement is to accelerate the worlds transition to sustainable energy (Tesla Inc., 2021). The worlds unavoidable transition to sustainable energy is discussed in Teslas stated mission, along with the corporations commitment to actively accelerating the change. The utilization of energy is becoming more widely recognized. More than ever, the wider populace is aware of the risks posed by environmental degradation and climate change. They are aggressively looking for electric automobiles as a healthier form of mobility. Teslas innovations have completely changed the electric vehicle market; its electric vehicles provide a variety of benefits like uniqueness, speed, cutting-edge battery technology, cleanliness, and more.
The ability to position electric automobiles as a hip, modern, superior alternative to gasoline-powered vehicles is Teslas greatest accomplishment. This sparked curiosity and increased awareness in individuals. The strategic choices were made with the intention of making electric automobiles appear hip and environmentally friendly. The business was able to present itself as a captivating brand with a clear vision thanks to favourable media coverage and creative marketing techniques.
Stakeholders
Communities needs are directly met by Teslas car division. Communities are key stakeholders who shape brand perception through considerable advocacy efforts and reactions to the company. The preservation or protection of the natural ecosystem is one of the concerns of this stakeholder group. The corporations solar panels, electric cars, and chargers answer such desire in this business research scenario (Tesla Inc., 2021). Then, customers have an impact on Teslas profits and care about good products at fair prices. Given this considerable impact, the corporation places a strong premium on these stakeholders in its CSR initiatives. The company looks for innovative methods to save expenses in order to fulfil these interests.
Employees are an essential component of success for Teslas automotive and energy solutions businesses, according to the companys plan for corporate social responsibility. Employees have an impact on corporate success and productivity as stakeholders. High pay and numerous job options are among their CSR priorities. The formative days of Tesla were financed by a number of investors. The capitalization of the firm is significantly impacted by these stakeholders. Shareholders and investors have a stake in the success and expansion of the company (Tesla Inc., 2021). Through long-term plans that seek to alter the transportation and energy markets, Teslas CSR strategy meets these objectives. Finally, governmental action has an impact on Tesla governments are key players who provide companies with mandates, restrictions, and possibilities. The concerns of this stakeholder group encompass both commercial participation in economic growth and legal compliance.
Sources
Lara Williams. 2021. What Will Tesla Do Next? Investment Monitor. Web.
Michael A. Hitt. 2020. Strategic Management: Concepts and Cases: Competitiveness and Globalization. 13th ed. Cengage Learning.
Shiyong Liu. 2021. Competition and Valuation: A Case Study of Tesla Motors. IOP Conference Series: Earth and Environmental Science, 692.
Tesla Inc. is a revolutionary company that focuses on clean energy and electric vehicle production. Stemming from humble beginnings, with the leadership of its CEO Elon Musk, Tesla has projected itself as one of the most valuable companies of all time. Tesla holds a 66.3% market share in electric vehicles, and sells both luxury and mid-entry level cars. Although 2021 saw the EV market only have a 2.4% share among automobiles, it is growing from a niche community to a massive industry (Edelstein, 2021). This paper will examine the electric vehicle industry and Tesla as a company.
Challenges and Opportunities
The electric vehicle industry and markets are rapidly growing, with more than 10 million electric cars on the roads in 2020 and each year seeing renewed records for vehicles produced, bought, and registered. The positive aspect is that more markets outside the United States, such as Europe and China (and broader Asia) are adopting the electric vehicle with appropriate policies and infrastructure (IEA, 2021).
Competition in the Industry
Tesla operates in a highly competitive market of automobiles, as well as a more niche market of electric vehicles, making competition a strong force. Given the low switching costs for consumers, the competition is fierce. Even among a much smaller subniche of electric vehicles, the few firms that have produced or are in the process of producing EVs, there is high aggressiveness in terms of marketing. Tesla is currently leading the EV industry, and as that market share grows, other traditional automakers are attempting to dethrone the company aggressively (Riley, 2019).
Potential of New Entrants
The potential for new entrants is strong, as most major automotive vehicle producers have announced the development of all-electric vehicles, but very few have come to market so far. Once those cars begin to be massively produced and sold, the market may shift significantly. Furthermore, as the technology becomes more available, smaller players in the car industry may choose to produce electric vehicles, potentially at a lower quality and cost to undercut the major competitors.
Power of Suppliers
Suppliers have a tremendously strong hold on the vehicle industry in general, but for electric vehicles that is even more dependent. Car production, especially as technologically complex as electric vehicles, needs a wide variety of parts and materials shipped from all over the world to produce the larger components, that are, in turn, shipped for final production. Furthermore, a major component of electric vehicles is the battery which requires a mixture of rare or expensive metals to produce, the majority of which are difficult to source at an industrial level, giving these suppliers significant bargaining power (Rapoza, 2021).
Power of Customers
The bargaining power of consumers in the electric vehicle industry is moderate. The primary factor is that the switching costs are low, so a consumer can easily switch between automakers based on preference without much compromise as virtually all offer similar features. However, vehicle purchases for most people are a major commitment, and people commonly dedicate themselves to the brand and idea, particularly with socially active brands Tesla.
Threat of Substitutes
The threat of substitutes remains weak for the industry because there are no other viable technologies for vehicle propulsion outside of electric utilized by Tesla and others. There have been some prototypes with hydrogen engines or algae driven fuel as green replacements for petroleum, but none of the technologies have reached maturity or mass production.
Strengths
As a company Tesla has many strengths, with its brand name being widely recognized and synonymous with EVs and innovation. It has a significant lead over competition in various technologies for EVs as well as technologies such as autonomous driving. The company has been able to overcome multiple production issues and establish profitable manufacturing facilities in various countries, including producing its own batteries which is critical for EVs. The brand and the companys results allow to attract new funding and investment making it the most valuable automotive company. It is by far the best in-class of EVs, getting greater mileage on charge and faster charging than other producers.
Weaknesses
Tesla does have a range of weaknesses, including the brands dependence on Elon Musk as the leader. Tesla lacks high volume production and periodically experiences manufacturing complications and delays with shipping. The company also faces some financial uncertainty, as despite being highly valued, it has only recently achieved profitability and remains deeply in debt. The firms dependence on batteries and semiconductors, as with most EVs, make the dependence on rare earth metals highly concerning. Furthermore, there is a limit as too how much the lithium battery can be developed, giving the opportunity for other EV makers to equalize any advantages Tesla may have eventually.
Conclusion
Tesla is operating in a challenging industry, where it is being contested by other automakers while also facing a range of other issues such as supple bottlenecks and customer demand. However, the company has benefits of being ahead in the industry, having resolved many of the technical and logistical challenges of production in years prior. Its brand name is also synonymous with electric vehicles. While Tesla does have an overreliance on its CEO Musk as well as facing some regulatory issues, it is a company known for its adaptability in the industry and market, pushing for more options for consumers.
Tesla Inc. can avail the opportunity for strengthening its financial performance through various incentives offered by the government. The political environment of any country influences its business environment directly and indirectly. It can directly affect the economic environment of the country and in this way the degree of economic action and business as well. The political environment influences the administrative environment as well (Ali & Ahmad, 2014).
On the off chance that the political environment of a country is steady, it likewise prompts economic dependability and offers to ascend to higher economic action and flourishing. Particularly in nations where an enormous piece of the production network of a global business is found, political disturbance or bedlam can prompt interruption in the inventory network and afterward business misfortune. Geopolitical issues and psychological oppression can likewise disturb businesses and challenges in political connections between countries can likewise make business between the two troublesome.
Economic
Electric cars are gaining popularity day by day which is mostly connected with the global economy. Worldwide economic development is relied upon to stay at 3% in the year 2019 and 2020. In 2018 the electric vehicle market was $39.8 billion which is relied upon to reach $1.5 trillion by 2025 (Personal Electric Vehicle&, 2019). This economic factor is an incredible open door for Tesla to underwrite. Economic powers have a significant job in the business world and can influence the fortune of businesses in different manners. Tesla has seen its business rising quickly in the previous year. This has happened because of a few reasons.
Notwithstanding, expanded economic movement since the downturn is a significant factor that has influenced this development. Since the downturn has passed, the economic movement has aroused all-inclusive (Pratap, 2018 ). Teslas Model X is a fully estimated electric SUV with bird of prey wing entryways. The sales of its SUVs have additionally expanded with higher economic action the world over.
Social
Social conditions and trends affect a firms remote through employees, customers, and investors. Social factors are similarly as significant as different factors and in some cases, they can impact the interest and supply of specific products. These factors sway how certain products are seen in specific social orders and the degree of acknowledgment they can pick up in explicit cultures. The interest for supportable products has aroused universally and maintainability is certainly not a passing trend. Presently more individuals need products that are useful for the environment. The environment is ideal for feasible brands (Pratap, 2018 ).
The interest in maintainable products has developed in the 21st century as more individuals are currently considering environmental security. Moreover, some geographical peculiarities should be considered by Tesla as there are differences in regions and their readiness for products of this sort. For instance, China can be taken as a promising area, while some other Asian states demand additional analysis (Kumar, 2018).
Technological
The advancement of Teslas automotive and energy solutions business depends on available technologies. For instance, materials building innovation decides the productivity and cost-viability of the organizations batteries. It influences a few things in the business world. From production to activities and marketing, in each office innovation assumes a significant job in business. Technological changes happen each day and each brand is in a race to embrace the freshest innovation first. Teslas business additionally relies upon innovation and technological development implies sales development in the 21st century. Reasonable innovation is stunningly better since its fame has become exceptionally quick in the cutting edge period (Pratap, 2018 ). This factor becomes a serious facilitator of the companys development and rise.
Environmental Factors
The gradual degradation of the environment preconditions the appearance of new demands on cars and their effects on climate change. Today, fossil fuels have become less popular and face some criticism because of their contribution to the increase in the level of air pollution and other environmental factors (Kumar, 2018). Under these conditions, the popularity of electric cars increases as they can replace traditional ones and meet demands for sustainability. As far as Tesla emphasizes its environmentally friendly character, this aspect can contribute to the companys growth.
Legal factors
Law is a very important force affecting businesses all over the globe. Legal factors have grown in importance in the 21st century. From work guidelines to environmental and other sorts of business guidelines, the law can directly affect businesses. The numerous States incidentally hindered the Tesla Sales directly from maker to purchaser. As per these states, the producer is required the connect with an outside vendor. This legal prerequisite can influence the Tesla vehicle conveyance. Besides, having a business implies more cost and less gainfulness. There are other legal issues like patent rights and vitality utilization guidelines. Tesla needs to consent to laws and guidelines to easily maintain the business exercises (Pratap, 2018 ).
Industrial analysis
Tesla is forcing the auto industry to rapidly change. Large established automakers now are making fully electric and hybrid-electric cars. Automakers are starting to explore and include artificial intelligence (AI) in their cars. Not exclusively did Tesla Chief Executive and Chief Product Architect Elon Musk exhibit that shows could be resisted, he did it in an industry with 100-year-old customs, standards, and procedures. The vehicle industry has enhanced previously, however, Tesla, which was established in 2003, has pushed the envelope past what most automakers thought conceivable.
As for the electric vehicles industry, in 2017, the market size was valued at about $118.856 million and is expected to reach about $567,299 million by 2025 (Kumar, 2018). The given numbers evidence the fact that the given sector becomes more popular and attracts new actors. Important factors impacting the sphere include environmental degradation, economic advantages, and technological advancements (Kumar, 2018).
The unsustainable character of fossil fuel and its high price facilitate the fast growth of the industry and its profitability. Modern consumers have an increased level of awareness regarding electric cars and demonstrate intentions to use them. This factor attracts new companies and increases the attraction of the industry. The potential areas of the expansion include Asia, Latin America, the Middle East, and China as one of the major manufacturers of electric vehicles. In 2017, the state produced about 200.000 cars, which constitutes about 5% of global production (Kumar, 2018). In such a way, the electric car industry is on the rise today and offers multiple opportunities for investors.
Competitor analysis
Tesla has had a competitive advantage over auto industry rivals in design innovation since day one. The organization decided to switch up the inventory network and obtain from the electronic manufacturing services model of production that is standard practice in the shopper hardware industry. In this regard, Tesla is nearer to being an innovation organization than a conventional car producer. The EMS model is extending in the automotive industry and any semblance of Foxconn, and Jabil are working with brands including Chrysler, General Motors (GM), Daimler, Jaguar, Ford, and Volkswagen.
Teslas main competitors in the given sphere are Nio, BYD company, and Volkswagen. The given corporations also recognize the increased demand for electric vehicles and offer their products to customers (Birk, 2015). Nio manufactures high-class electric cars for the international markets and has its target audience that provides the company with stable revenue (Kumar, 2018). BYD is one of the worlds fast-growing auto companies that also want to occupy the niche and benefit from the creation and sales of electric cars (Kumar, 2018). Finally, Volkswagen is a giant in the auto industry that initiates a new line of vehicles that can be interesting to clients. These brands should be considered by Tesla as the main competitors. Moreover, there is a high risk of new entry as evolving companies will try to attract customers by offering electric cars to meet their demand.
Internal analysis
Business Model
Tesla didnt develop the electric vehicle or even the extravagance electric vehicle. What Tesla invented was a fruitful business model for carrying convincing electric cars to the market (Serrat, 2017). Some portion of the methodology was building a system of charging stations to settle perhaps the best snag confronting the selection of electric vehicles refueling on long outings. Tesla is determined to changing existing business model inside the heavy automotive industry by selling directly to buyers (Boudette, 2019).
At the same time, the current business model employs the charismatic leader of the company Elon Musk who promotes its products and increases its popularity (Birk, 2015). Moreover, the model emphasizes the fact that the brand is an auto-maker, tech company, and hardware supplier which forms its canvas and contributes to the creation of a recognizable image (Birk, 2015).
Corporate Culture
Teslas organizational culture creates the human resource competence necessary for innovative products in the global automotive business. An associations organizational or corporate culture speaks to the traditions and qualities that characterize laborers practices and choices (Ioannou, 2009). Teslas organizational culture enables its workforce to scan for perfect arrangements that make the business hang out in the automotive industry and the vitality age and capacity industry. Through the organizational culture, Tesla has encouraged the board to streamline workers to adopt inventive and imaginative practices. These practices are fundamental to keeping up the technological innovation that structures some portion of the organizations establishment. The basic elements of the corporate culture are the following:
Move fast.
Do the impossible.
Constantly innovate.
Reason from first principles .
Think like owners.
We are all in (Birk, 2015).
The existence of given postulates contributes to the creation of a specific organizational culture and unites workers around a particular idea that is central to the company. It also helps to generate a competitive advantage and create a recognizable image.
References
Ali, H. A., & Ahmad, S. Z. (2014). Etihad Airlines: growth through successful strategic partnerships. Emerald Emerging Markets Case Studies.
Birk, D. (2015). Tesla Motors, Inc. Market analysis and definition. Web.
Boudette, N. E. (2019). nytimes. Web.
Ioannou, P. (2009). MAR402 STRATEGIC MARKETING. Academic Journals.