Tesla, Inc. is a pioneer of zero-emissions cars. Consumers consider Tesla vehicles to be premium brands for which they are willing to pay upwards of fifty thousand dollars, yet the demand for Tesla vehicles remains largely unmet. This essay examines the production strategies for Tesla vehicles with the intention of recommending strategies through which the company can improve efficiency and meet demand.
The main problem with the company's production line is that it uses ten thousand parts to make each vehicle. Even with an effective assembly line, the high number of constituent parts presents a big challenge for production. The company should focus on a radical redesign of the vehicles with the aim of halving the number of parts required to make one vehicle. With fewer parts to assemble, Tesla will stand a better chance of meeting customer demand for its vehicles.
Our strategy of reducing the constituent parts of a Tesla vehicle will bring down the cost of making a vehicle. To reduce these parts, Tesla will need to combine functions, cut down on some non-critical operations and come up with a more power efficient vehicle in the end.
To raise capital for the redesign and re-launch of more compact Tesla models, the company will raise capital by approaching strategic investors or the sale of a share block. Since the redesigning exercise will directly lead to increased production and higher sales, investors will be confident that their investments will lead to good returns soon.
The benefits of a redesigned Tesla vehicle with engineering optimized for the production line is that the company will finally meet the high demand for Tesla vehicles. Another advantage is that, with customers able to purchase Tesla vehicles, the company will finally overcome its cash flow and loss-making shortcomings.
II. External Assessment: Opportunities and Threats
The motor vehicle industry makes vehicles that are used in the daily transit of goods and people. Motor vehicle manufacturing companies fulfill the need for the movement of goods and services (people) from one place to another. Recent innovations such as ride sharing and cab hailing have caused massive disturbances in the industry. In this section, our analysis seeks to understand the whole industry including the opportunities and threats for all vehicle manufacturers.
One major opportunity for carmakers is the recent trend towards zero emissions to mitigate the effects of global warming. As consumers move towards new models that are carbon neutral, the demand for new vehicles will increase dramatically. Zero emission vehicles present an opportunity for carmakers and energy storage companies. Motor vehicle manufacturers that lead the charge in innovation and designing new products will benefit most from this opportunity.
Another opportunity in the motor vehicle industry is constant technological innovations. With consumers becoming more dynamic and informed, companies that are able to utilize new technologies to make transportation more convenient stand to benefit a lot. For instance, self-driving vehicles have taken the industry by storm and promise to be the product of the future in the industry. Originators of these technologies stand to benefit more because they will lease their patents to their competitors.
Cab hailing services have come as a disruption to the industry, but they present a massive opportunity in serving more customers at once. Carmakers can collaborate with cab hailing companies to provide them with vehicles and maintenance services. New, flexible companies not held back by decades of old strategies are at a better position to adapt to the presence of cab hailing and ride sharing services. Companies can also meet the risk of losing their market to cab hailing by offering their customers a pool of their vehicles.
Some of the threats facing the motor vehicle industry include cab-hailing services and ride sharing concepts. Ultimately, ride sharing means that consumers purchase fewer vehicles. This disruption most affects companies that rely solely on car sales to make profits.
New entrants into the motor vehicle industry have introduced concepts such as of zero-emissions vehicles. They have increased competition and forced carmakers to offer price and efficiency incentives to hold on to their market share. The competition most threatens carmakers that are slow to adapt to market changes.
Another threat is the advent of new technologies and products. For instance, there are currently several ongoing R&D projects for flying vehicles. Flying vehicles would render all carmakers obsolete and cause many of them to go out of business. Companies that fail to invest robustly in R&D for new products will soon be driven off the market by new products.
Five forces analysis;
Bargaining power of buyers (high): World consciousness of global warming caused by cars.
Risk of new entrants (high): Massive disruptions from new products and new entrants into the market.
Threat of substitute products (high): Substitution of cars by alternative means of transportation.
Rivalry among established players (high): Powerful and innovative competitors such as General Motors, Ford, Google, and Uber among others.
Power of suppliers (high): companies that enjoy global distribution channels excel.
Macro environment factors;
Technology forces; ever more sophisticated products introduced in the market.
Social forces; people are more concerned with getting to their destination rather than owning cars.
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