Over the last decade, various technological advancements across different sectors have been developed, implemented, and gained universal success and acceptability. One of these technological breakthroughs has been experienced by Tesla Motors Company in the automobile industry, specializing in electric propulsion vehicles. Since 2003, when it started its operations in California, United States, this company has incredibly increased in terms of products diversification, product quality and consumer base. Still operating from its California headquarters, the company boasts of over 6000 employees and over 50 showrooms both in the United States and in several other countries. However, to maintain and improve the profitability and general business excellence of, the company should evaluate and implement any suitable strategies that embrace new challenges and opportunities. New investments should establish. In this document, one such investment strategy is proposed: Intercontinental Manufacturing Operations. The tremendous growth index by Tesla Motors allows this company to expand its operations by establishing additional manufacturing facilities outside the United States. The rationale behind this investment proposal, with all the implications and recommendations, are illustrated in this document.
Tesla Motors is an American based automotive company. Starting its operations in 2003, it specializes in the manufacture of electric vehicles, as well as the production and distribution of electric automobile components to a few other companies, such as those used in the RAV4 EV by Toyota. With its headquarters in Palo Alto in California, Tesla Motors does all its production in the United States. Just like any other Silicon Valley start-up companies, Tesla Motors started its operations with a corporate strategy inclined towards the production of relatively expensive vehicles targeted at wealthy audience. In addition, laying its emphasis on electric automobile propulsion technology only, Tesla Motors still yearns to increase its consumer base through increased sale of its EVs in its showrooms as well as online, and making more EV components to many other interested automobile companies (Reuters, 2014).
Tesla Motors Company at the Present
After a decade of operations, it is notable that Tesla Motors has experienced tremendous growth and in addition, made it through most of its corporate objectives and goals (Planes, 2014). The current operational state, relevant in assessing the business performance and excellence, can be ascertained through the analysis of various factors.
Since the year 2003, Tesla Motors has specifically concentrated in the production of two categories of products. The first is the complete electric vehicles branded and sold by the company through its showrooms and online. The other is components used in the assembly of electric cars (Tesla Motors, Inc., 2013). It has since sold such components to other automobile manufacturers including Daimler, Toyota and Freightliner. The major product however is the electric cars which have undergone various improvement over the years with the most famous being the Tesla Roadster, the Tesla Model S and Tesla Model X. Laying complete emphasis and focus on electric vehicle automobile, this company makes quality electric vehicles as well as electric power components thus leading to its growth over the years.
As aforementioned, the major product behind Tesla Motors growth over the years leading to its current business excellence level is its electric cars. The audiences, to whom these cars are targeted, include specifically the relatively wealthy individuals. In accordance to the company’s corporate strategy, Tesla Motors has over its first decade in operation marketed its products following the electronics market entry strategy. This has seen it manufacture expensive cars and selling them exclusively to the affluent. The famous Roadster was launched at a price higher than one hundred thousand dollars, with the other models selling at prices similarly high (Ramsey, 2013).
After ten about ten years of operations, Tesla Motors enjoys quite a significant market share in the electric automobile industrial sector. This market is however largely in the United States. As of the beginning of this year, 2014, the business model by from this company indicated operation stores for showcasing its products in 22 states in the United States. This marks a positive growth in the domestic consumption of Tesla Motors products from starting with California a few years ago to the over twenty additional mainstream states. In addition, due to reputational achievement across the globe, Tesla has a number of showrooms or galleries in selected countries outside the United States where the population suits as the targeted audience of the company’s products (Ramsey, 2013). Specifically, Tesla Motors has showrooms in Canada, Germany, England, Netherlands, Japan, Hong Kong, Singapore, China and Australia. However, the showrooms across all this countries sell products in line with the company’s corporate strategy, targeting the affluent (Tesla Motors, Inc., 2013).
Just like any other company operating in a relatively lucrative industrial sector, competition comes in handy for Tesla Motors. As aforementioned, Tesla Motors makes and sells EV components to other companies such as Daimler, Toyota and Freightliner. Apart from those, there is also General Motors which actually, just as Tesla Motors, is American based and pays close attention to whatever innovations implemented by this company. However, Tesla Motors enjoys two major advantages over its competitors (Lahart, 2013). First, it specializes in the production of electric vehicles only, thus has enough time to try out and understands a lot about the electrical propulsion concept on automobiles. Secondly, having pioneered a number of innovations in the electric vehicle sector, such as the lithium-ion power batteries, many consumers and investors in the electric car business are more inclined to try out with Tesla Motors before any of its competitors.
Figure 2: Source (Tesla Motors, Inc., 2013)The Investment Proposal – Intercontinental Manufacturing Operations
Having been in progressive operation since its launch in the year 2003, Tesla Motors have since expanded and opened up more showrooms across the major United States frontier as well in a couple of other countries in locations where its products are relatively affordable. However, even with the current international galleries and showrooms, that have led to international consumption of the Tesla Motors products, the manufacture of the products is still based in the Californian Headquarters Company. This investment proposal recommends the establishment of several other manufacturing and assembly facilities, at least one in every continent. In so doing, Tesla Motors will not only enjoy heightened levels of business excellence and performance, but will also achieve its corporate goal of manufacturing electric vehicles that are easily affordable even by the standard citizen across the entire globe (Lahart, 2013). This means that Tesla Motors will increase its market share by tapping into a new target audience, the middle income earners, who comprise the largest group of potential customers. The rationale behind this kind of investment is pretty simple to capture.
The Rationale of the Investment Proposal
Deducing from the current order of occurrences, all the additional showrooms outside of the United States have reported positive feedback from both actual and prospective customers of the Tesla Motors products. Logically deductions allows to conclude that most of the prospective buyers end up not purchasing the products due to a number of factors, but the primary one is the price of the Tesla electric cars. Unfortunately, the current price of the Tesla products must remain as it is since it has taken a number of production costs to arrive at that price. In light of this, strategically reducing the cost of production is one way to lower the prices, and as a result increasing international consumption (Saran, 2006).
Setting up manufacturing and assembly factories across the globe will be of great help. To start with, Tesla Motors should identify the most strategic location in each continent with respect to labor, raw materials availability, and other relevant production factors. Once the optimal location is identified, the company should start set up a factory and start operations from there with the corporate and business excellence strategies aiming at meeting the needs by the residents of the continent in question. The focus of Tesla Motors is majorly about improving and enhancing electrical propulsion on automobiles. This means that for the other components of the cars, locally available materials can be used, as well as locally available labor. These two factors will lead to the reduction of production cost.
One of the current trends in the world today is environmental conservation. There are numerous campaigns across the world pushing for technological advancement in line with the conservation and maintenance of the natural balance in the ecosystem. In light of this, opening up manufacturing and assembly factories across the globe will be highly appreciated by the campaigners and is a sure way to either get subsidies, tax exemptions, or business protection from the respective authorities in the locations where such factories will be established (Saran, 2006). The main objective of each business entity is profit realization and continuous existence in the respective industrial sector for an unforeseeable future. In light this, all the above factors will culminate into Tesla Motors achieving both aims, which will be indicated by the various measures of business excellence.
Market Share Expansion
One directly expected business excellence measure resulting from the above investment proposal is the expansion of the company’s market share. Establishing production factories for their electric cars in new frontiers brings with it new actual and prospective customers. For example, Tesla Motors has no showroom in Africa as of now. Establishing a production factory there will not only create the awareness of its existence but will also create a sense of belonging since it will be viewed more as a local company than a multinational. This is specifically true across all the places where new factories will be started. This sense of belonging, coupled with the cheaper prices will automatically see its market share rise.
Reduced Cost of Production
As aforementioned, the current prices of Tesla Motors electric cars are relatively high due to the cost of production associated with them. Apparently, the cost of raw materials, the shipping costs, the importation taxes and freight insurance, all greatly contribute to the increase in the final prices of the end products. However, the use of local raw materials, exemption of taxes, cheap labor and new target audience will greatly reduce the current production cost (Saran, 2006). Consequently, the selling prices go down, with subsequent increase in profits.
With the reduction in the cost of production, it is logical that after the break-even point, Tesla Motors will be able to adjust the selling prices of their products from the new factories while at the same time remaining competitive and making as much profit as possible. The reduction in prices will lead to the affordability of the company’s products, once again attracting more customers, expanding the market share and thus the company realizing its strategic goal of manufacturing readily available cars to the middle income earners.
New Target Audience
As stipulated in the above investment proposal, the major consideration is establishing a new target audience. Currently, only the relatively affluent can readily afford Tesla Motors electric cars. However, the proposal underlines the middle income earners as the new target audience for the company’s products. All the pre-mentioned measures of business excellence including affordability, reduced cost of production and market share expansion all lead towards the realization of this objective. The resulting affordability gives the middle income earners the ability to acquire electric vehicles without giving up too much.
Tesla Motors has been reported to carry out clean deals over the years of its operations (Tesla Motors, Inc., 2013). With respect to materializing all the concepts brought forward by the investment proposal, it would be of great importance for Tesla Motors to continue practicing the same techniques for the operations in the new frontiers. More so, it should consider a number of important features as indicated below.
Corporate Social Responsibility
Under this strategy, the establishment of the new Tesla Motors factories would be met with little or no resistance from residents of the surrounding environments. Furthermore, it acts as a way to create awareness of its presence, thus paving way for market penetration (Saran, 2006).
Maximum Utilization of Local Labor
Tesla Motors should ensure that most of the necessary labor is sourced from within the community or the country in which it establishes the new manufacturing facilities. Only expert labor should be imported from the United States. The local employees will talk about their new employer, creating good mouthing which is also a strategic market entry and penetration technique.
Environmental Conservation Campaigns
Essentially, the idea behind the innovation of electric cars is their environmental friendly nature and approach. This is one aspect capable of determining the success of a new factory anywhere across the globe. Through advocating environmental conservation and explaining how its products fit in the environmental friendly category, Tesla Motors attract positive criticism from the activists of environmental conservation, thus paving way for easy establishment of operations as well as market penetration (Saran, 2006)
Just ten years after it was launched, it has been a dream come true for the Tesla Motors Company to end up as a pace setter in the electric automobile sector. Starting with a single showroom in California, then expanding its consumer base across the entire United States as well as in various other places beyond the United States borders, stands out as a strong pointer of the progress and positive business excellence for this company. With the current global trends being in favor of environmental conservation, it is a high time that Tesla Motors embraced tapping into more markets through any viable strategy available. The investment proposal above is one of the available strategies this company should implement towards increasing its competitive dominance, business excellence, and acquiring new and diverse target audiences.
- Lahart, J., 2013. Getting the Short Story on Tesla Motors. Wall Street Journal, p.C.8.
- Planes, A., 2014. Morgan Stanley’s “Utopian Society” Will Be Built By Tesla Motors Inc. Is It Time to Call a Top? [Online] Available at: HYPERLINK “http://www.dailyfinance.com/2014/02/25/morgan-stanleys-utopian-society-will-be-built-by-t/” http://www.dailyfinance.com/2014/02/25/morgan-stanleys-utopian-society-will-be-built-by-t/
- Ramsey, M., 2013. Corporate News: Tesla Motors Approaches Crossroad — Output Figures for Battery-Powered Model S Are Expected to Shed Light on Car Maker’s Viability. Wall Street Journal, p.B.3.
- Reuters, 2014. Tesla Motors Inc (TSLA.O). [Online] Available at: HYPERLINK “http://www.reuters.com/finance/stocks/companyProfile?symbol=TSLA.O” http://www.reuters.com/finance/stocks/companyProfile?symbol=TSLA.O
- Saran, A., 2006. Market orientation and order of entry strategies: An empirical analysis. PhD Thesis. Dallas: UMI Dissertations Publishing University of Texas.
- Tesla Motors, Inc., 2013. Clean Technology – Deals and Alliances Profile. GlobalData Company Deals and Alliances Profiles, pp.1-37.