The automotive industry – one of the most complex and alluring in the world valued at over 1.5 trillion dollars as of 2015 – was transformed through the introduction of one firm – Tesla. Although Tesla is only fifteen years old, it has significantly influenced what kinds of cars high-end luxury competitors manufacture such as the appearance and technology features. With its dashing and ambitious CEO Elon Musk at the helm, the firm has become an icon in the industry – an icon that anticipates and sets trends.
Tesla was founded in 2003 by an array of engineers who believed that people did not have to compromise luxury and affordability to drive an all-electric vehicle. With such a precise mission in mind, Tesla has convinced itself and its consumers that electric vehicles can be better, quicker, and more fun to drive than fuel powered vehicles. As a result, Tesla believes the “faster the world stops relying on fossil fuels and moves toward a zero-emission future, the better.” Consequently, in 2008, the firm finally unveiled its very first vehicle – the Roadster – an all-electric super car that produces 288 horsepower and can travel 244 miles on a single charge of its lithium-ion battery pack. Following the release of the roadster was its revolutionary Model S – the world’s first ever premium all-electric sedan from the ground up. The Model S combines the highest quality of safety, superb efficiency, and extreme performance. With such a vehicle that “reset the world’s expectation for the car of the 21st century with the longest range of any electric vehicle” at the firm’s helm, Tesla’s success germinated.
It is known that a company’s market entry strategy sets the course for its later development. Tesla entered the market with a luxurious, expensive product focused on a financially privileged class rather than attempting to build an affordable car that in turn could be mass produced and marketed to compete on such a massive market. Tesla’s vehicles are all produced at its factory in Fremont, California, where most of the vehicles parts are also manufactured. As a result, mass production is most definitely not feasible even if the firm wanted to. Tesla knew that a startup without experience in manufacturing cars and no economies of scale could not produce an affordable product at a competitive price level like other competitors. Consequently, Tesla developed a ground-breaking sports car – the Roadster – to really distinguish itself. With the Roadster as a luxurious flagship, Tesla branded itself as a premium, reliable, all-electric car manufacturer worldwide. Such a marketing strategy paired with its direct self-owned showrooms in mostly prominent urban centers around the world was and is genius. It was able to start in a small niche market of high-end electric sports vehicles and electric vehicles in general. Such a foundation laid the framework for the aforementioned Model S.
Prior to Tesla’s dominance in the electric part of the automotive industry, a luxurious electric vehicle did not exist. The electric vehicles were mostly unappealing with odd designs and close to no features. These vehicles also had very low distance and poor battery life. They were plain and simply just “not cool”. Tesla’s introduction of both the Roadster and the Model S solved such a glaring issue. By manufacturing vehicles with rolling tablets similar to Apple’s iPads, Tesla became a big fish in a small pond. Not only were the cars cool looking, but they came with Tesla’s state of the art software that can update itself whenever it needs to – an ingenious social and cognitive technology strategy. Such self-updating technology in 2015 was absolutely unheard of. To date (as of 2018), most cars have yet to programmed with a similar feature. Tesla’s engineers as a result can upgrade the AI software and improve the car’s mind by not even touching or servicing every vehicle. Such a strategic move by the firm is genius and implements extreme cost savings in the long-term. Competitors had and have had the ability to tear the Model S apart but ignored. Tesla’s Elon Musk simply is willing to assume the risk of hacking to really make the ultimate difference in the vehicles.
With a strong focus of high-quality builds, Tesla was able to freely experiment and gain experience in the car industry. The firm’s technology and hardware perfected to a point where firms such as Daimler started utilizing Tesla’s battery packs and Toyota utilizing Tesla’s motors. Competitors such as General Motors had even created task forces to follow Tesla’s management teams so that the firm would not fall behind such a mighty firm. With superb quality builds, Tesla was able to gain customer confidence and trust quickly. The brand and its vehicles became a synonymy to speed, security, and “go green”. Celebrities such as Leonardo DiCaprio even purchased and promoted the technology insurgent ultimately bolstering the prestige of the firm.
With directly owned showrooms, Tesla can directly sell to its customers. As a result, it can cultivate a specific, unique customer shopping experience unlike no other. With such an experience, consumers gain even more confidence in making their purchase. Tesla’s management wisely decided to use solely its own sales representatives and service staff. Such a move avoids conflicts of interests that can sprout from dealerships. Consequently, every Tesla location and shopping experience is of the utmost quality and does not vary from location to location unlike its competitors such as Daimler and Volkswagen. Tesla also combines its car sales with its services. The firm has created “Service Plus” centers which combine both retail and service in one location. Such thought process has proven to positively affect consumer enthusiasm and satisfaction.
Furthermore, Tesla continuously acknowledges its consumers. It understands consumer issues such as distance problems as well as charging. As a result, Tesla has listened and manufactured hundreds of simple and fast chargers stations. The firm currently has 1375 supercharger stations with 11,414 superchargers worldwide and continues to grow. Tesla’s superb technology has been upgraded to allow the consumer to enter a destination on his or her touchscreen and the intuitive Trip Planner will automatically route the user through convenient Superchargers along the way. The recharge takes roughly 30 minutes and the Tesla application notifies the consumer when the car is ready for use. Many consumers have purchased cars on promotions that allow these consumers to utilize the charging stations for free. Tesla’s strategy in such promotes a brand that is both thoughtful and mindful of its consumers.
Subsequently, Tesla has been incredibly successful since its foundation in 2003. Tesla launched its IPO on the Nasdaq exchange on June 29, 2010, offering 13.3 million shares at a price of $17 per share. The IPO consequently raised $226.1 million for the firm. As of today, that investment has soared to a gain of over 2,117%. Elon Musk, although ambitious and distinguished, has made many mistakes along his journey as a CEO. He utilizes Twitter to create a persona of “Tony Stark” from Iron Man. He is consistently in the media and ensures that he is constantly being interviewed to gain exposure. Such exposure is then associated with his firm- Tesla. Musk’s social technology strategy is ingenious and one of a kind – no other publicly traded firm has such a risk-taking CEO. However, his risky behavior produces an insane amount of volatility and concern within his stock as well. On August 7th, Elon Musk tweeted about taking the firm private with funding secured at $420 a share – the stock rose from $300 to $380 within two weeks. Following his tweet, the stock fell to $320, and Musk committed to keeping the firm public. On September 27th, the SEC filed lawsuit against Musk stating that his comment was fraudulent and could lose him his role as CEO and Chairman, pushing the stock down to nearly $260 a share. The following Monday, the SEC and Musk agreed to a settlement pushing the stock back over $300 a share. Such volatility scares many investors from the firm but those with a long-term perspective acknowledge that Musk simply wants to gain further social presence through such radical behavior. Such usage of social media tools has left the company only prosperous. The stock currently sits at near all-time highs with the S&P being roughly flat for the last year.
Tesla has clearly executed its corporate strategy beautifully. The firm has been incredibly successful across all boards. However, there are certain things the firm must do to ensure profitability and long-term growth. As Tesla continues to sell its vehicles and gain market share, the firm must maintain its current customer service levels. The firm must continue to offer promotions and be a firm for the consumer rather than for itself even if that means lower profit margins. The firm must also increase its output production to meet demands for its newly produced Model 3. Tesla has taken the risk to produce a more affordable car – the Model 3- a sedan with a 310-mile range and 0-60 acceleration in 3.3 seconds. As a result, the firm must acquire more funding to build another factory or expand its own. The current output per week is roughly 4,401. The firm has succeeded in something that no other automaker can take pride in claiming: “It’s made relatively affordable electric car, the Model 3, that hundreds of thousands of people are lining up to buy. The only problem is that Elon Musk and the company can’t produce enough of them.” Consequently, it is imperative that the firm solve this issue immediately. Also, the firm must continue to invest as much money as it possibly can to improve its lithium ion batteries for longer range. Consumers would strongly value seeing the firm caring about its consumers distance per travel. The firm must also maintain its image of a brand. It must continue to only sell high-end looking and feeling cars regardless if the firm wants to market to lower end consumers or the general market. Although it will cost quite a hefty amount to maintain such a brand image and produce a longer distance battery while maintaining utmost customer service quality, it is essential for the future of Tesla. Tesla has become successful because of these very unique features the niche firm offers. Without them, Tesla becomes just like any other car manufacturer.
In order for all of these recommendations to occur, stakeholders must understand that profits will eventually come. Tesla has proven in 2017 and 2018 that it can be profitable and can meet production goals even though Musk always overestimates the amounts. Tesla is still a young company that is working towards profitability and understanding what works and what doesn’t. It has proven itself in the automotive industry time and time again. Consequently, investors must be patient and provide Musk with the funding the firm requires to manufacture the cars properly and conduct the necessary R&D for long term prosperity.
Musk, as a salesperson and engineer, understands that in order to be successful, a trained and respected team must be in place. Although Musk is a workaholic that almost never sleeps, he must respect his team and must give them the ability to have a work-life balance. A total of 41 skilled executives left Tesla in 2018 which most definitely is not a good sign. Musk must investigate and understand the root of such a glaring issue and improve the company’s culture to bolster the firm’s image and long-term success. In turn, he must promote an environment that is both ambitious and friendly- an environment where employees want to work and thrive in.
Conclusively, Tesla has been bestowed with mostly success since its 15 years in business. The firm has executed perfectly on both social and cognitive technologies which in turn have allowed the business to flourish like no other in the automotive industry. Its previously mentioned dashing and risk taking corporate strategy across all boards has proven to be both volatile and rewarding. However, such success can only evolve in to long term prosperity if the firm maintains its core values. Tesla must maintain the high-end image brand it has created and must stress the utmost customer service quality. It must put the customer and its mission – creating the safest, fastest, and most efficient electric-cars – before profits regardless of stakeholder complaints. Musk must also continue to take quantified risks through social media tools to bolster the company presence and push for R&D to manufacture an even better lithium-ion to power the cars. However, while doing all of this, Musk must self-evaluate himself and his daunting company culture that has resulted in 41 high profile executives from leaving in 2018 alone. He must craft a culture that mixes its mission statement with ambition, quality, and balance. In turn, Tesla will become the number one automotive manufacturer and will see unprecedented prosperity for decades.
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