Economic Industrial Organization of Tesla Company - Case Study Example

Introduction

The auto manufacturing industry is a globally competitive market mainly for the alternative fuel vehicles that has become popular due to the increased concerns regarding environmental conservations. This paper presents a detailed analysis of the Industrial Economic Organization of Tesla Motors, an electric manufacturing company. The analysis covers the competitive behavior of the auto manufacturing industries, its market structure, price description, product differentiation, nature of competition, and the market behavior of other components.

Background of the company

Tesla-Motors was established by Martin Eberhard and Marc Tampering in 2003 together with the Silicon Valley Engineers as an electric car manufacturing industry. It was company then launched in 2006 when “Roadstar” was introduced as the company’s first electronic sports car. 2,250 fuel efficient vehicles were sold. Currently, the company provides train components for automobile productions to companies such as Toyota and Daimler as well as for the design and manufacturing of Model S machines (Crane, 2016). Model S machines are known to be the first premium zero-emission sedan across the global automobile market that later became the best-selling super electric car in Europe and the United States. According to the financial analysis by Crane (2016), Tesla Company is worth over $25 billion that is approximately half of the General Motors and shows one of the highest first growing industries in the United States. The success of Tesla Company is attributed to the Product Architect and CEO of Tesla Company, who has always shown a strong vision for the growth and success of the company.

Entry Anticipation of the company into the automobile market

According to Loveday (2011), 70% of oil consumption across the global market is used mainly for transportation. The study shows that passenger vehicles use 70% of the global oil production while a rise in the middle-class vehicles in highly populated countries like India and China is increasing the demand for oil for the passenger cars. As for this reason, Stringham, Miller & Clark (2015) predict that around 1.5 billion cars on the road by 2050 in comparison with 750 million cars recorded in 2014. The kind of the demand thus represents both an opportunity and a challenge in capitalizing on new vehicle technologies for substantial economic benefits in the global automobile market.

In a world, oil is a limited resource and an alternative source of transportation such as an electric vehicle is not only a smart investment but also an inevitable one. Jennifer (2014) in her study further recommends that switch to electronically powered automobile machines will as well create demand for the existing jobs and also create new jobs as well. His statement is further supported by (Crane, 2016) who confirms that the job opportunities in the electronic vehicle industry will continue to grow as they economically create additional development opportunities as it improves the quality of life, decreases reliance on foreign oil, and reduces energy spending. It is as well environmental friendly at a time when climate change and global warming is a global concern as a result of the deterioration the environment that is attributed to many manufacturing companies.

The value chain analysis of the Tesla Motors

Inbound logistics is an essential component of Tesla manufacturer in-house according to (Loveday, 2011). In his review, he further reports that other components are delivered or produced different form supplies promptly. It thus reduces its waiting period to the minimum, thus improving its production efficiency to ensure the success of its goals and objectives. Additionally, its operation system ensures that all the cars are designed in Fremont factory in the Northern California with all the essential manufacturing operations. The manufacturing process of the company is highly automated and innovated with multiple functioning robots that can produce up to 86 vehicles on a daily basis. They can easily be programmed to ensure the production of efficient car models according to (Stringham, Miller & Clark 2015).

For the outbound logistics, the distribution channel of Tesla Motors is made up of their stores across 18 different countries. The stores play a major role in educating customers on the benefits of the electronic cars so as to create the relevant awareness of the customers towards adopted fuel-efficient and greenhouse free-emitting vehicles for a more sustainable environment. The purchasing of the products from the company is also done over the online showrooms and reservations to give the targeted customers easy time for the selection of their preferred delivery (Voelcker, 2012).

The market structure of the company

The market structure of Tesla Company shows a monopolistic type of competition that has been achieved by different effective strategies adopted by the company in its operations. An essential marketing strategy of the luxurious car maker is the role it takes in selling and marketing of the cars that costs over $100, 000. For instance, it is noticeable that the company has no commissioned salespersons, no price negotiation, no dealers, the cars are marketed and not sold aggressively, and one also has to wait on line for several days for you to get your car. Also, one cannot drive any Tesla car without making a deposit of $ 5,000. There are also no inventories as products like the Tesla Model S is only built on order.

In their study report, Stringham, Miller & Clark (2015) note that the cars are only designed on order since many areas may not be much developed and equipped for the safe driving of the car. Despite the fact that they can design or build a new luxury right from scratch, their prices are very high, and only clients who can afford can purchase the products. However, the company still has a world record of awards after the introduction of the Model S thus tracking over 10,000 to 20,000 orders online. As a result, the company swept the prize-winning awards from the Motor Trend, Yahoo Autos, and Automobile Awards trend of the year 2015.

Incumbent monopolistic advantages of the company

It is worth recognizing that the company started with a great product despite the many challenges like lack of road trips, range, as well as buyer confusion among other challenges (Stringham, Miller & Clark 2015). The product differentiation of the company thus shows a first moving machine with 100 miles per gallon equivalence. The machine as well has few moving parts thus reducing the cost of wear and tear. It thus has the most auto-dynamic car with the most cargo space compared to any cargo car in its class. For instance, Model S is sports cars that comfortably carry seven individuals.

The company has also turned the strengths of the auto industries into weaknesses (Loveday, 2011). Luxury cars have for a long time been justified and sold based on their engineering quality. Many luxurious automobile companies focus on performance through engineering as one factor that makes them admirable and special. However, Tesla Company focuses on technological performance while touting or focusing on the simplicity of their product and market platform. While making an observation of the automobile machines through the company’s’ marketing lens, traditional gas cars can be termed as complex, dirty, unreliable, as well as very difficult to maintain. Voelcker (2012) reports that the company has taken a bold marketing move since the service centers of the company are designed with shining white floors aimed at reinforcing that electric cars do not have oil or other dirty fluids that can leak and interfere with the floor.

The company also leverages the traditional press and the media in addition to its new sales and marketing models. The company has thus been a master of driving reviews, press coverage, and awards for its products. Despite the fact that the company has worked hard to get a good position in the global automobile market in positioning the brand with the media, it also ensures the right message comes through to the customers. For instance, its number one message is building not just the beast car but the best car ever made. The message tends to be frequently repeated by the press.

Information Issues

Tesla is the first company to show the potential of becoming the Apple computer in the automobile industry. Like Apple, the company has ventured on a unique product with a big different from what has always occurred before. Both companies focus on innovation and value addition of great products. It is evident that they are building their technological ecosystem as they are challenging the sales models adopted by other competitors with their unique distribution systems. In fact, the previous retail chief of Apple Company was hired by the retail chief in building out the modern distribution channels that it adopts in its automobile marketing (Edelsein, 2012).

The monopolistic advantages of Tesla Company are thus evident from its unique products it offers in the market. It has designed user community and user forums a key part of its online experience as its marketing highlights its unique buying and ownership experience that encourages owners to interact with its products in a full public view on the website of the company. It thus provides a rich base of content on its unique products and their advantages over other cars thus encouraging owner passion (Edelsein, 2012).

Conclusion

The economic, industrial organization of Tesla Company has adopted several methods that have seen it through success in the competitive automobile industry. The market structure of the company shows a monopolistic structure where the Model S cars are very expensive and are only designed on demand. The company offers unique cars that are environmentally friendly, reliable, efficient and easy to maintain and thus achieves its goals despite the high prices. However, it must continue staying on the cutting edge of quality and innovation despite the technological advancements so as to accelerate new product and development. Pursuing differentiation on the cost structure of the company needs a careful management process to keep the cost-effectively in sections not related to higher cost and differentiation in the main distinctive processes like in marketing. Therefore, it is worth recommending Tesla can greatly build a brand identity and overtake the global automobile market through media applications and advertisement of their new brands.