Tesla analysis by THE VALUE CHAIN analysis Management Research Paper

TESLA ANALYSIS BY THE VALUE CHAIN
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Tesla Analysis by Value Chain
Tesla Inc. remains an innovative entity whose success in a highly competitive industry keeps attracting debates and analyses. Tesla is a fairly young company that has experienced unprecedented success through its development. Part of the success has been pegged on Tesla’s unique ability to create a new product in an existing market. However, it should be noted that much is happening in Tesla’s value chain that could warrant its global presence. Primary among the factors contributing to Tesla’s prominence is its successful diversification into the Chinese market recently. China presents one of the largest markets for electric vehicles currently, something that Tesla is strategizing to utilize effectively. An advanced understanding of Tesla’s operations in China is anchored on the company’s value chain activities. This paper explores the analysis of Tesla in the Chinese market through value chain analysis. The analysis is valuable in exploring Tesla’s strengths and weaknesses through the elements of its value chain, including both the primary and supportive activities to mark the company’s strategic intent in China.
Value Chain Analysis
The value chain model has been an efficient tool for organizations that intend to have a better understanding of their operations. Developed by Michael Porter in 1985, the value chain model features nine technologically and economically interdependent activities. Each activity in the chain bears significant importance to the success of an organization individually. The nine elements are subdivided into primary activities and support activities. Besides giving an organization an operational footprint, the value chain tool also creates an advanced understanding of operational costs, thereby enhancing efficiency. The tool has, however, been criticized for its limited consideration of the broader organizational goals. With more emphasis on micro-activities, little emphasis is put on long-term organizational goals.
Tesla’s successful entry into China is primarily attributable to its unique internalization strategy. At the entry point, Tesla collaborated with the Chinese government to execute independent operations. As opposed to other competitors such as Toyota and BMW, Tesla was allowed to operate in China without restrictions on innovation and value chain inputs. The company has since employed the opportunity to develop one of the most stable electric vehicle markets in the world. A better understanding is anchored on the company’s value chain as follows:
Primary Activities
The primary activities are those that bear direct relationships with the creation of products or services in Porter’s value chain analysis. Each primary activity defines the scope of the product in terms of the value it creates at the end of the chain. Tesla’s primary activities are as follows:
Inbound Logistics
Inbound logistics refers to the inward flow of goods or materials into a business. The strategy that an organization employs in transferring its materials from suppliers to company facilities marks the inbound logistics. Some of the activities that characterize inbound logistics include transport, storage, and delivery. For long, Tesla had most of its logistics operations in the US. The only notable diversification was marked with developments in Taiwan. That change was not adequate in addressing the needs of a wider market such as China. Hence, the company developed a gigafactory in Shanghai. The Shanghai factory is partly used for storage and production. Besides, the Taiwan warehouse has been strategic in offering both storage and administrative services for the entire Asian market.
Operations
Tesla’s operations are fast changing to reflect its diversification into the international market. The company is headquartered in Palo Alto, California, United States. The California offices remain important, especially in the administration of Tesla’s services. However, the company has expanded its chain network elements, including supply, sales, manufacturing, and operations in other parts of the globe. In China, Gigafactory 3 has been the core of Tesla’s operations. Tesla’s Shanghai factory was completed in 2019. The factory that was built in a record ten months is also believed to have consumed much less than the entity had budgeted before. The factory was constructed with an authorized capital of 100 million yuan (Tesla Annual Report, 2019). It is owned wholly by Tesla Motors Hong Kong. However, the funding was largely completed by loans from Chinese banks.
Gigafactory 3 has been a primary element of Tesla’s operations in China. As soon as the factory was completed in December 2019, it began the assembly of Tesla’s Model 3 vehicles (Tesla Annual Report, 2019). The expectation was that it would begin assembling model Y vehicles later in 2020. Since its initiation, gigafactory 3 has depended on supplies from the US and Taiwan factories. However, the company plans to instill the made in China content later in 2020. With more materials and supplies based in China, Tesla intends to cement its position as a trusted entity by the Chines government and people.
The production line of gigafactory 3 keeps setting newer targets. In early 2020, the factory was partially closed down following the coronavirus outbreak. Operations resumed on February 10. Key operational components, including supplies and sales, also resumed. Currently, gigafactory 3 produces 2,000 cars every week. The target by the end of 2020 should be 5,000 cars. If achieved and sustained, the Hong Kong factory will be responsible for 250,000 cars in annual capacity. The intention to instill more Chinese touch in the products should enhance the production line further deep into the future.
Outbound Logistics
Gigafactory 3 in Hong Kong is poised to become a leading outbound logistics hub for Tesla in China. The facility was developed to be the company’s mark of manufacturing network in the region. Outbound activities such as vehicle assembly and end of line testing are currently conducted in gigafactory 3. Gigafactory 3 remains a key distribution component for completed cars in the Chinese market, bearing the understanding that the factory cannot assemble cars relative to the market demand. As such, an increase in Tesla demands is accompanied by imports from the US factories before distribution to customers is completed at gigafactory 3.
Marketing and Sales
Marketing is a big component of operations in the automobile industry. That is because the competition is stiff, with larger companies committed to maintaining their market share. Tesla understands the nature of competition in their operational environment (Leonhardt & David, 2018). As such, the entity has culturally explored both traditional and digital channels to promote their products. Digitally, Tesla depends on its website and social media to interact with customers. The company consistently publishes changes in its services and products on its website and social media handles. Besides, Elon Musk, the executive officer, has consistently used his influence on social media to promote Tesla products.
Tesla also uses its privately-owned stores to market the products. Even though Tesla is a fairly young company compared to its competitors, it has explored its resources to position the products efficiently. Tesla uses its company-owned stores that are distributed throughout its major markets to sell and market the products. Opening stores in Hong Kong is an ideal marketing leap because the com...