Question

Tesla is

- International or national corporations or privately publicly held

- Type of business

E- Who are their customers?

F-What are their core competencies

-What is their ethics policy?

Answer 1

The market for fully electric vehicles is growing. Some reasons behind the growth include new regulations on safety and vehicle emissions, technological advances, and shifting customer needs and expectations. But much of the mainstream acceptance and excitement for electric cars can be traced back to Tesla Motors Inc (TSLA). In this article we review Tesla’s business model and how it differs from traditional automobile manufacturers.

Tesla founder and CEO Elon Musk launched the company with the mission, “to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible.” This mission has served as the backbone to Tesla’s very successful business model.

In the Beginning

Tesla took a unique approach to getting its first vehicle in the market. Instead of trying to build a relatively affordable car that it could mass produce and market, it took the opposite approach, focusing instead of creating a compelling car. In a post on Tesla's website, CEO Elon Musk said this about the company's mission, “If we could have [mass marketed] our first product, we would have, but that was simply impossible to achieve for a startup company that had never built a car and that had one technology iteration and no economies of scale. Our first product was going to be expensive no matter what it looked like, so we decided to build a sports car, as that seemed like it had the best chance of being competitive with its gasoline alternatives.” So Tesla delivered to the market the first high-performance electric luxury sport car, the Tesla Roadster. The company sold approximately 2,500 Roadsters before ending production in January 2012.

The Next Stage

Once Tesla established its brand and had produced and delivered its concept car to the marketplace, it reinforced its business model. Tesla's business model is based on a three-pronged approach to selling, servicing, and charging its electric vehicles.

1. Direct sales: Unlike other car manufacturers who sell through franchised dealerships, Tesla uses direct sales. It has created an international network of company-owned showrooms and galleries, mostly in prominent urban centers around the world. By owning the sales channel, Tesla believes it can gain an advantage in the speed of its product development. But more importantly, it also creates a better customer buying experience. Unlike car dealerships, Tesla showrooms have no conflict of interest. Also, customers only deal with Tesla-employed sales and service staff. Including the showrooms, Service Plus centers (a combination of retail and service center), and service facilities, Tesla has 318 locations around the world as of the end of Q3 2017. Tesla has also made use of Internet sales—consumers can customize and purchase a Tesla online.
2. Service: Tesla has combined many sales centers with service centers. They believe that opening a service center in a new area corresponds with increased customer demand. Customers can charge or service their vehicles at the service centers or the Service Plus locations. Also, in certain areas, Tesla employs what it calls Tesla Rangers – mobile technicians who can service vehicles from your house. Sometimes, no onsite technician is required at all. The Model S can wirelessly upload data so technicians can view and fix some problems online without ever needing to physically touch the car.
3. Supercharger network: Tesla has created its own network of Supercharger stations, places where drivers can fully charge their Tesla vehicles in about 30 minutes for free. The premise behind building and owning these stations is to speed up the rate of adoption for electric cars. Without the ability to charge on the go (similar to the concept of getting gasoline while driving), electric cars face a huge obstacle to mass adoption. Tesla will continue adding to the network of Supercharger stations in the United States, Europe, and Asia.

Tesla Has The Highest Customer Loyalty Of All Car Brands-

In fact, electric vehicle owners (regardless of brand) have a high propensity for loyalty. According to Experian, “Once dealers have customers in an EV, there’s a good chance they get them back again in the future. Electric vehicle customers are showing early signs of being a highly loyal customer segment. When EV customers return to market, 62 percent buy another EV.”

So what about industry leader Tesla?

Experian found, “Tesla owners show an even higher make loyalty rate than EV customers as a whole. More than 4 in 5 Tesla customers — 80.5 percent – buy or lease another Tesla when they return to market. Tesla has the highest level of make loyalty in the industry, ahead of Subaru at 72.1 percent and Ford at 72 percent.” Experian also found that, “Tesla led the industry with a Conquest/Defection ratio of 13.77 to 1.”

While Tesla plans to introduce a lower-priced Model 3 option, its current vehicle lineup remains relatively expensive. Therefore, it’s no wonder EV owners tend to be a well-heeled crowd. Experian reports that, “individuals with higher education and high home values are currently more likely to purchase EVs.” Furthermore, if trends start in places like California, EV fever could be spreading. According to Experian, EV buyers “are also more likely to be found [see chart above] on the west coast.”

These insights into electric vehicles (and industry leader Tesla) are definitely encouraging. Experian concludes, “the auto industry should be enthusiastic about the electric vehicle segment’s future … as battery costs continue to come down, EV [pricing] will more closely mimic today’s vehicles. All things being equal, customers are likely to opt for a more environmentally friendly option in the future and eventually, the scales will tip in the favor of EVs.”

Tesla’s Strengths (Internal Strategic Factors)-

This aspect of the SWOT Analysis of Tesla Inc. deals with the business strengths that contribute to organizational growth and improvement. Business strengths are internal factors that empower the company to compete against other firms, and to ensure profitability, especially in the long term. For example, the company’s strong brand can support strategic expansion in the global market. In this company analysis case of Tesla, the following strengths shape the capabilities of the business as a competitive player in the automotive industry:

1. Highly innovative processes
2. Strong brand
3. Strong control on production processes

Tesla, Inc. is known for its high rate of innovation, especially in introducing the world’s first fully electric sports car. This internal strategic factor is a strength that empowers the company to develop competitive and profitable products. Also considered in this SWOT analysis, the Tesla brand is a strong symbol of innovation and renewable energy solutions, in line with CEO Elon Musk’s business goals. Such a strong brand optimizes the company’s ability to attract and retain new customers. The internal factor of strong control on production processes is based on vertical integration, as well as the centralization and hierarchy in Tesla’s organizational structure. For example, the company manufactures automobiles and many of their components. This factor is a strength that minimizes issues linked to the involvement of third parties. Overall, this aspect of the SWOT analysis of Tesla points to innovation and brand image as major strengths of the company.

Tesla Supplier Code of Conduct -

Tesla is a technology and manufacturing company with a focus on energy innovation and sustainable transportation. We live by the principles of hard work, exceptional performance, integrity, and fairness.

This Tesla Supplier Code of Conduct (“Code”) is the foundation for ensuring social and environmental responsibility and ethical conduct throughout our supply chain. The principles outlined below serve as the cornerstone of Tesla’s relationship with our partners.

Tesla will identify and do business with organizations that conduct their business with principles that are consistent with the Code. We encourage Supplier Partners to develop policies defining the operating principles for their own organizations and supply chains and to share these in a transparent manner.   

Suppliers shall maintain accurate and up-to-date recordkeeping indicating their compliance with this Code and all applicable laws and regulations. Tesla, along with our partners and independent 3rd parties, will conduct audits to observe these principles in action. If there is a reasonable basis to believe a supplier partner is in violation of the Code, Tesla will transition away from that relationship unless the violation is cured in a satisfactory manner.

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