Tesla Entrance to the Australian Market - Report Example

Tesla entrance to the Australian Market Contents Introduction 3 Discussion 3 PESTEL Analysis 4 Porter’s Five Forces analysis 6 Conclusion 8 References 9 Introduction Tesla Motors is an American car manufacturer. The company mainly manufactures electric cars and holds a considerable market share of the electric car market. The company was founded in the year 2003. The company is listed in NASDAQ stock exchange and is a publicly traded company. The company also manufactures LI-ion battery for other car manufacturers such as Daimler and Toyota. The company started its journey with Roadster model which was a fully electric sports car. The Roadster had the distinction to run for 200 miles based on a single charge. In the period 2008 to 2012, the company sold more than 2250 Roadsters. Its customer base included citizens of 31 countries. The company has since unveiled two more electric car models namely model s and model X. The company usually manufactured cars that were designed for the affluent community but it now proposes to manufacture cars meant for the common people. The following report aims at discussing issues related to the company’s entrance to the Australian market. Discussion TESLA as a company is preparing to enter the Australian market. Before entering a market it is very important to perform a market audit to analyze the potential that exists in the market for the particular business. The market audit report provides a good a starting point and an important first step in the analysis of whether to enter into a market or not. The market audit report also helps in predicting a particular and suitable time that the company should choose to enter into a particular market. While performing the market analysis of a particular market the most common tools that are used are PESTEL analysis, analysis of PORTER’S 5 forces, etc (Porter, 2008). PESTEL Analysis Political The political situation and environment in Australia is a fairly stable one. The company’s political environment is open and progressive and supports investment from foreign countries (Cunningham and Harney, 2012). The Australian political system is very good with respect of the fact that the country has a stable political environment and the government changes policies depending on economic conditions. The government in Australia in fact has framed policies facilitating manufacture and sale of environment friendly vehicles. The political situation in Australia seems to be ideal in respect of TESLA going in to invest in the country. Economic Australia comes in list of wealthy nations and can be said to have a developed economy. As of 2014 It’s GDP on PPP basis is $1000 trillion which is 19th in the world. On the other hand its GDP on nominal basis is $1,483 trillion which is 12th in the world. It’s GDP (nominal) per capita is $62, 822. Australia ranks amongst top three countries in the world in terms of average wealth. Australia’s main economic activities are banking, manufacturing and mining related activities. As the company mainly manufactures cars that are targeted for the affluent sectors of the Economy the company should get a good business in Australia. Social and Cultural Australia shares the same history with USA due to the fact both were former British colonies. In fact Australia is still a constitutional monarchy ruled by Queen Elizabeth of England. The queen is the constitutional head of the sate and governs Australia through her viceroy. Australia’s social and cultural mix is similar to USA in another respect to. That is both this countries were inhabited by native peoples and aborigines and both these countries were captured by the British. The Australia as a country thus presents as a mixed bed of different culture and customs. But Tesla motors should not find it difficult to adjust with the local customs. Technical The car industry is being affected by major technological changes sweeping through the industry. The main guiding criteria of these technological changes sweeping through the industry is to develop models that gives higher mileage, has a more powerful engine and uses more environment friendly technology. The thrust area for most of the company is to develop models that are fuel efficient or uses either electricity or hybrid technology to power themselves. Environmental The car manufacturing industry is focussing more and more on fuel efficiency these days. The thrust area is to manufacture either fuel efficient cars or manufacture hybrid or electrical models. This particular segment has seen a lot of interest in recent years from various cars manufactures. For example one of the leading car manufacturers, Toyota has started manufacturing Camry as their hybrid car for the Australian market. The demand forecast shows that this segment of the market is going to experience huge demand in the upcoming years. This provides a good market opportunity for Tesla that it can target to enter the Australian market. Legal This factor refers to the legal environment in which the firm operates. Australia follows a progressive legal environment that is guided and made by laws that keeps on updating with the need of the time. Legal framework is clear and supportive. TESLA will find it easy to operate in the legal framework of Australia. Porter’s Five Forces analysis Bargaining power of buyer There exists tremendous growth opportunity in the automobile industry of Australia. The high growth rate that exists in the market is driven by increased demand for fuel efficient, high breed and electric cars. The data shows that customers of the particular industry prefer imported cars in comparison to domestically manufactured cars because of the cost difference and because foreign cars are less costly. The increased demand for the new segment of cars will see more business opportunities being generated for components manufacturing business. As the demands for the new breed of cars will increase it will see more and more manufacturers set up their manufacturing facilities in Australia. Automotive imports by the country have risen from about 60% of the total demand in 2002 to about 80% in 2009. Major imports occur from countries such as Japan and Thailand. The growth of the demand for electric vehicles is a positive sign for a company like Tesla which manufactures electric cars however there would be many other manufacturers willing to tap into the market and so there would be a good competition in terms of price and service offered. Bargaining power of suppliers Most of the foreign companies that are going to manufacture their hybrid or electric cars are set to procure some parts from local manufacturers of components in Australia. If Tesla wants to go in the same lines then it should also procure its components from local component manufacturers. However the problem that exists for the local component manufacturers of Australia is that they are being forced to sell components at higher prices due to high cost of raw materials and labour. So maximum local car manufacturers are procuring their raw materials from other countries in order to reduce prices of the manufactured cars and stay competitive. Tesla should thus weigh all options well before deciding on the choosing of component manufacturer. Threat of substitutes As there will be a huge demand in automotive industry fuelled by demand of fuel efficient, hybrid and electric, a lot of manufacturers will like to seize the opportunity and capture this growing market. In fact Toyota has already started manufacturing its hybrid car Camry in the year 2009 and by 2010 had manufactured around 7600. Other manufacturers are also not far behind. The Ford is slated to invest $232 million across two of their models (PWC inc., 2011). Other manufactures in the line include GM HOLDEN which plans to invest a good sum to take on the race to manufactures hybrid cars and NISSAN which has plans to manufacture and sell NISSAN electric. So for TESLA as a company there seems to be enough challenges in the market and TESLA should develop a good model, pricing strategy and a sound business plan to capture the market. Threat of new entrants The Automotive market as said above is a highly competitive market and is characterised by frequent changes in technology. Here no company can retain its absolute advantage over rivals for many years constantly if it is not innovative and stops innovation. So TESLA as a company should keep on innovating and satisfying its customers with innovative state of the art products aimed to please hearts of the customers. The company should try to build a breed of loyal customers and continuously add new customers to that breed in order to succeed in long term. Industry rivalry The automotive industry is fiercely competitive and is composed of companies which are innovating. To succeed in such a market the company must always focus on innovations to keep it ahead of competitors. Conclusion Tesla is an America based electric car manufacturing company incorporated in 2003. It manufactures electric cars especially for the affluent class. However in recent years it has started manufacturing cars for the common people. It now wants to enter into the Australian market. Before entering into the Australian market it needs to access market challenges of the market. For accessing the Australian market it has to access the market based on PESTEL analysis and PORTER’S 5 forces. It is found as a result of this analysis that Australian market provides a good market opportunity for TESLA however there are challenges too that it has to overcome. References Cunningham, J. and Harney, B., 2012. Strategy and strategists.London: OUP. Porter, M. E., 2008. Competitive advantage: creating and sustaining superior performance. New York: Simon and Schuster. PWC, 2011. Potential impact of a carbon price on the Australian automotive industry. [Pdf] Available at: http://www.fcai.com.au/library/Final%20Automotive%20Industry%20Report%2011%20May%202011%20.pdf [Accessed 24 November 2014]. Read More