Recommendations For Tesla: Automotive Industry

Recommendations for Tesla Name Institution Recommendations for Tesla Introduction In the 20th century, The Big Three (GM, Ford, and Chrysler) ruled the American car market. Customers were not only loyal to these companies but also felt the need to support their own. The Big Three were also protected by the high entry barriers which were in place back then. However, in the 1980s, foreign entrants, mainly from Europe, intensified their push in the U.S. market and The Big Three was declared dead. The truth is, the automotive industry is or seems protected mainly because cars are quite complex to build and also it is highly expensive to enter the market. Since the 1980s, there were no new entrants for a long period and any that tried never made it to the world stage. However, with the technological leaps, the world has made since the 1980s made it possible for a company like Tesla to enter the automotive industry successfully. Tesla came with a new and unique style and its dedication coupled together with its innovative technology has helped it to make a name for itself. However, as with any company, there are issues and challenges which could be detrimental to survival or future success and Tesla has several. One key challenge is competition or competitive rivalry which is extremely high in the automotive industry. The second one is the availability as well as cost of raw materials which could strain the company’s mission “to accelerate the world’s transition to sustainable energy” and vision “to create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles.” The third and fourth issues are legal issues as well as the human resources factor. For any company, the issues mentioned above are quite significant and can heavily impact the affairs of a company even as big as Tesla. While acknowledging the impact the factors stated above on Tesla’s operations, this article seeks to go further and provide several recommendations which the company can employ to help secure its future and ensure survival in the often tumultuous automotive industry. Summary of Issues and Opinion Competition is one of the most common challenges companies face regardless of the industry one operates in. As long as an industry has more than one company, then there is competition and earning or gaining competitive advantage becomes a priority. In the automotive industry, there are several companies which are more than five times bigger than Tesla and their profits could well be even 20 or 30 times larger. With such giants in the industry, Tesla should be applauded for their resolve and resilience. The major companies in the motor industry are General Motors, Honda Motor Company, Volkswagen, BMW, Toyota Motor Corporation, and Nissan Motor Company. Each of these enjoys a huge piece of the car market and convincing their loyal clientele to shift is quite a task. While Tesla is by far the largest electric car company in the world, it is still performing dismally compared to these giants. Competition intensified the moment Tesla entered the industry, but maybe there is a way for Tesla to turn things around. Manufacturing cars is an expensive affair, and like other motor companies, Tesla has also invested billions of dollars. A significant part of this investment goes towards securing raw materials which at times could be quite costly or unavailable. For Tesla, the former seems to be the case. Tesla’s electric cars are largely dependent on lithium-ion batteries which are not only in short supply but also quite expensive. The company is spending a lot of money in acquiring batteries which are complementary to the vehicles they are manufacturing, and this, unfortunately, comes at an insane cost. Aside from the financial end, it has repeatedly been reported that the production of these batteries also come at an environmental cost. Opray (2017) notes that the extraction of Nickel which is a key element of lithium-ion batteries comes at the expense of the environment and the employees’ health. This is an important issue bearing in mind that the goal of switching to electric cars is to enhance the environment’s safety. Legal issues are also in the way of Tesla as it aims to grow and reach its clients all over the world. Currently, Tesla models are only sold in the US, Canada, UK, parts of Europe, Australia, Hong Kong, and China. However, it is essential to acknowledge the fact that Tesla’s supply often falls short of its demand a good example being what is happening right now. According to Stewart (2018), predictions over the production of Tesla’s Model 3indicated that the company would be producing 5,000 cars every week before the end of 2017. However, in another article, Stewart (2018) notes that Tesla only managed to “deliver just 1550 Model 3s” and this happened in the last three months of 2017. The above issue aside, the company has also been banned from selling its cars in several states in the US. Tesla employed a unique business model which seems to allow the company to sell its vehicles to their clients directly. However, there are some legal concerns with some states which do not allow direct-to-customer sales. Some of these states include Utah, Louisiana, Connecticut, Texas, Michigan, etc. There seems to be friction over this issues and according to Hu (2017), Tesla even “launched a lawsuit to overturn a sales ban put into effect in Michigan in 2014” whose aim was to prevent direct-to-customer sales. The final issue is the human resource factor which might seem trivial but is one of the chief concerns for any serious company. For a company like Tesla, one which wants and has already re-invented the art of manufacturing vehicles, knowledge can categorically be said to be the company’s biggest resource. The company’s approach is indeed one that shook the world and their resolve to keep going with the odds against them is quite commendable. People often refer to this era as the information age and knowledge is currently regarded as one of the most important assets. However, this knowledge, in the case of car manufacturers, is in people which makes the employees just as important. Companies have tried to imitate Tesla’s approach, and many have failed simply because they cannot bear the cost, and also they do not have workforce as equipped in manufacturing electric cars as Tesla’s workforce. However, a person can be swayed with a better deal or simply spill the beans on the projects or the designs of the company. This can dent Tesla’s market share or the dreams of ever being considered as one of the biggest car manufacturers. Recommendations on the Issues Competition/Competitive Rivalry The high competition in the automotive industry is as a result of three factors including the small number of companies, the low switching costs on the part of clients, and finally, the high aggressiveness of the few companies. These factors highly contribute to the competition in the industry. However, Tesla can employ several recommendations which can help it gain competitive advantage over its rivals. Some of the recommendations include: * Increase market presence by revamping the company’s marketing campaign. According to Kissinger (2017), Tesla employs the 4Ps (i.e. Product, Place, Promotion, and Price) in its marketing strategy. Kris (2017) notes that Tesla “has a $0 paid media budget” and according to McCarthy (2013), the company does not need to change anything. McCarthy notes that “Tesla Motors has no advertising, no ad agency, no CMO, no dealer network. And that’s no problem.” However, it is likely that this is a problem. In an industry where competition is stiff, Tesla needs to invest more in marketin...