MBA FPX 5910 Assessments 4 Capstone Project

Student Name

Capella University

MBA-FPX5910 MBA Capstone Experience

Prof. Name

Date

Executive Summary:

Tesla Motors, an all-electric luxury vehicle manufacturer established in 2008, introduced the Tesla Roadster, Model S, and Model X, reshaping the automotive market. Despite its global presence, the company faced quality and delivery challenges impacting its market share. The focus on profit margins over delivery, performance, and quality led to a decline in its once-dominant position. To regain competitiveness, Tesla’s leadership must foster global collaboration, strengthen product lines, and devise strategies for potential market share loss.

Introduction:

This paper analyzes how Tesla, Inc. has maintained its leadership in the Electric Vehicle (EV) Market amidst global scrutiny. Examining its ability to survive without the EV market, the proposal presents strategies, data scope, and an action plan for utilizing current product lines to ensure market share and enhance survivability.

Background and Current State:

Tesla Motors, a California-based all-electric luxury vehicle manufacturer, initiated sales in 2008, with the Tesla Roadster, Model S, and Model X revolutionizing the auto market. Despite global acclaim, quality and delivery issues have affected Tesla’s market share. Prioritizing profit margins over quality compromised its standing in the market.

Tesla, Inc.’s Business Strategies:

Tesla’s business strategies focus on differentiation, aiming to offer higher value to customers than competitors. The company’s multifaceted business model, aligned with Elon Musk’s Master Plan, emphasizes sustainable energy solutions, vehicle diversity, and global expansion.

Current Product Lines of Tesla, Inc.:

Tesla’s core product mix includes electric vehicles, EV powertrain components, charging packs, batteries, and solar panels. Diversifying into sustainable energy solutions enables Tesla to address a broader market while maintaining a primary revenue stream from its core product lines.

Business Issue:

Tesla, Inc. faces challenges in quality, performance, and delivery, resulting in a decline in market share. Quality issues, production delays, and negative media attention have impacted the company’s growth and profitability, raising concerns about its long-term viability.

The Electric Vehicle (EV) Sector and the Future of Tesla. Inc.:

While Tesla engages in various market segments, the EV sector remains crucial, representing 23% of the company’s gross profit margin in 2018. To assess Tesla’s survival, a PESTEL analysis and Porter’s Five Forces Model are employed to understand the external factors affecting the EV sector.

PESTLE Analysis:

Political, economic, sociological, technological, legal, and environmental factors shape Tesla’s business impact. Factors like environmental regulations, tax incentives, and societal trends influence consumer behavior, affecting Tesla’s market position.

Porter’s Five Forces Analysis:

Analyzing the threat of new entrants, bargaining power of suppliers and buyers, threat of substitutes, and competition among existing rivals highlights the competitive landscape. Tesla’s strong position is evident, but challenges such as supplier bargaining power and rising competition need attention.

Tesla’s Ethical Issues in the EV Market:

Tesla faces ethical challenges related to trust, quality, and customer treatment. Instances of selling previously registered vehicles and quality issues erode trust, impacting Tesla’s reputation and market share. Addressing these issues is crucial for ethical corporate behavior.

Leadership:

Tesla’s leadership, particularly Elon Musk, plays a significant role in the company’s success. However, Musk’s public actions, legal issues, and communication style create uncertainties. Effective leadership is essential to address ethical concerns, enhance quality, and maintain market leadership.

Collaboration:

Collaboration within Tesla’s global teams is crucial for success. The current unitary structure limits autonomy, hindering quick responses to regional market challenges. A more collaborative approach, possibly embracing a global team structure, could enhance efficiency and responsiveness.

Strategies:

To maintain its leadership, Tesla must prioritize quality, address delivery challenges, and instill trust. Strengthening global collaboration, optimizing product lines, and implementing proactive quality measures are essential strategies. Additionally, diversifying into energy solutions and addressing ethical concerns will contribute to long-term success.

These strategies align with Tesla’s mission to accelerate the world’s transition to sustainable energy, ensuring the company’s continued growth and leadership in the automotive market.

Mitigation of Loss in the Electric Vehicle (EV) Market Sector

In an ideal scenario, it is in the best interest of Tesla, Inc. to maintain its current position in the EV sector. Despite facing significant losses, retaining their current standing would allow the company to eventually recover from the challenges it has encountered. The strategy for achieving this recovery involves implementing a mitigation of loss plan within the EV market sector. This entails addressing quality issues in previously released vehicles and devising a risk management plan to prevent future occurrences. According to Olsen (2019), Tesla has already taken steps to address defects in over 5000 Model 3 EVs, though Consumer Reports withdrew their recommendations in response. By holding onto their existing market share and proactively mitigating further losses, Tesla, Inc. can preserve its current profitability at a lower cost compared to recovering from a substantial loss of market share.

Diversification of Product Lines

As highlighted in earlier sections, Tesla, Inc. boasts a diverse product portfolio, encompassing not only electric vehicles but also the batteries powering them. Beyond manufacturing cars, Tesla produces components utilized by direct competitors in the electric and hybrid vehicle market. The addition of solar energy and advanced battery technologies positions the company to contribute to the development of a sustainable energy ecosystem, catering to homeowners, businesses, and utilities (Tesla.com, n.d.). While the gross profit margins for the solar power sector alone may not be sufficient to sustain the company independently, leveraging Tesla’s expertise in battery technology and its global charging network can enhance profitability by offering charging services to users of other electric vehicle brands.

Pros and Cons of Independent (Diversified) Product Lines

The diversified product lines of Tesla, Inc. bring both advantages and disadvantages. On the positive side, the company has a wide array of products that can serve as a support system in the event of a significant downturn in the electric vehicle market. However, not all product lines are equally lucrative. For instance, Tesla’s POWERWALL and solar energy products accounted for only 7.9% of their Q1 2017 revenue, with the service and other sector experiencing a negative 11% margin (Tesla, 2017). The challenge lies in ensuring that each product line contributes sufficiently to overall revenue and does not solely rely on the success of the electric vehicle segment.

Recommendations

After conducting an extensive external analysis of the EV sector in which Tesla operates, two distinct recommendations emerge. First, to mitigate losses within the EV market sector, Tesla must address and rectify quality issues, demonstrating a commitment to customer satisfaction and market leadership. This entails implementing robust quality metrics and procedures to prevent future defects and reassure consumers and investors. Additionally, Tesla should consider offering affordable yet technologically advanced EV models to recapture lost market share (Barcom, 2019).

Second, Tesla, Inc. should focus on solidifying its independent product lines. This involves intensifying research and development efforts in battery technology and expanding into global markets for solar energy products, especially in regions with higher electricity costs. By emphasizing the unique strengths of its products, such as the POWERWALL, Tesla can establish these lines as prime revenue generators, reducing dependence on the automotive sector.

To ensure the success of these recommendations, it is crucial for Tesla’s leadership to prioritize a global image that emphasizes ethical and social responsibility. Elon Musk’s social media presence, while innovative, has at times put the company in precarious situations. By placing a greater emphasis on teamwork, customer-centric values, and product quality, Tesla can navigate risks effectively and rebuild lost market share.

In conclusion, Tesla, Inc. must adopt a dual strategy of mitigating losses within the EV market sector and solidifying its independent product lines. Through addressing quality issues, offering innovative yet affordable EV models, and leveraging its technological expertise in batteries and solar energy, Tesla can not only regain lost ground in the EV market but also establish a robust foundation for sustained growth and profitability.

MBA FPX 5910 Assessments 4 Capstone Project

References

Olsen, P. (2019). Tesla Model 3 Loses CR Recommendation Over Reliability Issues. Retrieved from https://www.consumerreports.org/car-reliability-owner-satisfaction/tesla-model-3-loses-cr-recommendation-over-reliability-issues/

Tesla.com. (n.d.). Powering the Tesla Ecosystem. Retrieved from [URL]

Barcom, G. (2019). Capstone Project summary, PM-FPX5910 Asst 1Capstone Project Summary. Capella University.

Tesla. (2017). Annual Report. Retrieved from [URL]