Tesla Motors Case Solution
So, it is a concern for the company that its competitive advantage might turn into disadvantage because the company has been offering unique and customized components rather than standard ones, which would increase the costs associated with the manufacturing of cars. Similarly, the exhibit 9 in the case elaborates the features of the cars with each other. Many features of the Tesla Model S are more unique as compared to two other models of Nissan Leaf, and BMW5.
But, the retail price of the Model S is higher than other competitors. However, the features of the Model S such as the acceleration time, range, volume, cargo capacity, safety rating, sum of sub ratings NHTSA, and consumer report ratings in these all factors Model S has competitive edge over the competitors because the car has higher retail price and its compensation to the features added to the car, and margin of safety, or the central policy of company.
There are many complications and complexities in the market given that there is huge competition in the market. However, Tesla’s approach to the market is very unique, and it has been providing good services to the customers in the market. Because, it also been providing a platform to charge cars free of costs. Indeed, these attributes and characteristics of the company have been a source of competitive advantage.
The cost structure of the Tesla Motors is very simple. Since, the cost of material and other parts consist about 50% of the price, and other such as body, Chassis, powertrain constitute 18%, 14%, and 18%. On the other hand, the manufacturing and assembly cost bears to be 10% of the price. However, it can be determined that Manufacturer’s suggested market price is Euro 61,070. This price if much higher than other two competing brands such as Nissan Leaf, and the BMW Series 5. Furthermore, if we assume that upper bound would be 15% higher and lower bound would be 25% lower. See Exhibit 1
Competitors in the industry
The advantage and disadvantage of the Tesla’s Model S can be understood by understanding the type of competition in the market. Since, it can be determined that Model S is an electric car, and it has stimulated the rise of electric car industry. Whereby all companies entered into this market to capture the market share, and they have significantly invested in the huge technology, and has focused on the key features of the Model S because it is considered as a benchmark for the whole industry.
However, it can be determined that Tesla has not much experience in the car manufacturing industry. Although it has successfully entered into the market with the unique Model S that is competitive to many large manufacturers of sports cars worldwide. Also, it is the only company that has successfully entered into market since WWII no company has entered with mass production of cars.
On the other hand, the exhibit 12 in the case indicates that company has been operating on net loss since 2010. However, after the introduction of Roadster, and the Model S in the market company came out of net loss, and started assuming net profit for the first time. Certainly, it has approached to good heights in the market in terms of profit, growth, and competition as well. Similarly, it can be determined that company has invested huge capital in same period see exhibit 12. Because, it has significantly increased assets and invested capital.
Implications for the company
Company has been operating on net profit since the introduction of electric vehicle models in the market. Despite the cars, it has added unique characteristics and attributes, and it also has given competitive advantage to the company over the rivals in the market. Since, competitive advantage to company is in terms of attributes in the car, services, and performance of the car, rather than on the costs.
However, it is a concern for the company that how could it sustain that competitive advantage in the market. Because, there are many players in the market that have entered into the electric vehicle industry and have increased investment in that industry. So, it can be determined that company might have tough time. But, the important matter is that Tesla is the only company that is disruptive, and innovation oriented rather than profit oriented. And, its second priority is customer satisfaction, and meeting with their expectations as well.
It could only be possible if company maintains its competitive advantage, and sustain its growth in the market. In order to attain that it has to be very responsive and creative to changing market dynamics, and trends in the industry. Such as competitors, customers’ need, expectations, and how it should further sustain the competitive advantage given that there is huge competition in the market.
Tesla Motors started manufacturing electric vehicles in 2003. The company’s founders had no special experience in the car manufacturing industry. However, company’s key founders had gathered a team of professionals from the industry and from Silicon Valley to produce one of the disruptive and innovative products in the market……………
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