Tesla began business in the early 21st century, a time when there were many business opportunities to identify. The Automobile industry was dominated by fossil fuel driven vehicles which created a lot of controversial issues in regards to their contribution to environmental pollution. Many industries were facing a transitional period where new and innovative ideas were coming up and replacing the traditional models. It was an era that saw significant advancements in technology which enable new business to arise. However, most of the startups and some of the already grown companies faced challenges, especially in adopting the technology which was utterly expensive to implement. The market was segmented in income levels and mode of lifestyle. Most companies in this field did not have a specific market but there were a few, though fueled in gasoline like Ferrari, Lamborghini, and Porsche that targeted the exclusive wealthy market segment.
Tesla’s Roadster was structured to meet the qualities of a high-performance sports car: an area that was dominated by the Ferrari and Lamborghini. Sustaining this model proved to be a difficult task because it required to be fired by a lithium battery which had both high initial and maintenance costs. The car also consumed a lot of fuel since it had a high horsepower. The manager had to come up with a good strategic plan on how to convince customers that the car was worth being bought so that they would, in turn, increase the revenue or profits that would be used in the making more investments.
Usually, start-up businesses learn from the experiences of other companies which have excelled in the industry. However, for the Tesla Company, the EV production line was a totally new field in the commercial world, especially in the line of Automobiles. Therefore, to convince the customers of the viability, sustainability and capability of the cars to satisfy their needs were imperative in making sales. To achieve this, the company integrate a business model that focuses on creating a product that has better features in regards to performance and usability, aimed at serving the high-end market.
Another major challenge was the cost of creating a charging network. The unavailability of resources to supplement the functionality of mechanical products discourages the customer from buying them. People would not opt to buy the EVs given that there were no sufficient places to recharge them, unlike the fossil fueled vehicles which have grounded network of fuel outlets distributed all over the country and in close proximities. To counter these challenges Tesla started by defining and narrowing the target market to the wealthy. They also insisted on making the public aware of their contribution to curbing environmental pollution. He expanded the business by creating a solar-powered station for cars to recharge and to generate income for more investment.
Still, in an attempt to increase its market coverage, Tesla focused on catering to the interests of the customers. They cut on the costs that the consumers incurred by creating a direct-consumer channel. Usually, engaging intermediaries in the distribution channel adds up to the production costs which in turn discourages consumers. When concentrating on a narrow range of target market, the most important factor to focus on improving the standard and performance of the product, consequently, gaining their loyalty. Also, by getting hold or charge of the resources that are needed in the production process. Tesla company uses this principle by adopting a value-based model which confers a monopolistic power by getting hold of the supportive services, infrastructure, and high pricing strategies.
Usually, production costs are directly related to the pricing of a product. Investing in the Gigafactory was a strategic move to reduce the cost of outsourcing batteries from the East. The move would lower the price of the model 3 and increase the targeted volume of sales by the year 2020. Initially, the cost of production of lithium batteries was high, since the metal was exported and by the time it reached the factory, the value chain had increased its expense as intermediaries profit from the exchange process. The availability of lithium in Nevada and other local regions helped in reducing the cost which was transferred to the consumers by lowering the price of the batteries. However, the company could not engage in all these activities solely and thus needed to form partnerships with other companies. To succeed in implementing the plan whereby they shared patent rights and resources.
Having managed to develop solar power, power storage, and electric vehicles, Tesla Company acquired SolarCity. The impact was projected to decrease the homestead cost of installing solar panels to 30%. Subsequently, with the availability of solar power in residences, the company would encourage the installation of electric charges, consequently enticing more people to buy the electric cars. Ultimately, the firm would record an improvement in sales. The aspect of marketing all these services as one organization would also reduce marketing costs. However, as much as the new solar charging systems would increase the efficiency and acceptability of the EVs in the country, it is also important to note that the consumers view them as separate but interlinked forms. Apart from improving the functionality of these cars, the company needs to improve the customers perspective or experience with the solar charging systems as a separate commodity.
The business environment keeps on growing and evolving. Therefore, Tesla business has to keep on adapting to the transition and transformations. First, they have to maintain a clear communication channel where they gather information from all the internal and external stakeholders. They should also take time to do regular research studies in regards to the to competition and customer preferences. They also need to keep on modifying the outlook and features of their cars to maintain a steady traction in increasing the level of profits. Currently, the company has grown and is competing highly with giant automobile companies like GM and the EV market has grown substantially.
With this kind of growth, a lot of obligations and duties are expected and the company will not manage to hold on to the three lines, that is EV production, solar energy, and energy storage. The manufacture of EV is most likely to have the highest level of competition as fossil fuel-based car manufacturers shift their production lines. Also, the energy storage and solar energy channels are also highly likely to have more interested companies. Therefore, the best business model would be to integrate the three but partner with several related companies to increase its practicability.
Despite facing financial turmoil, Tesla Company gives an exemplary lead on the need for investors to identify the strengths and weaknesses of their business. The firm also depicts a resolution to create a sense of satisfaction to their consumers while still maintaining a profitable profile. Lastly, there is the continued development by identifying the key areas that will cut the costs of the firm or those that can increase its revenue.
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