Tesla

Tesla

Q1- How would you characterize competition in the Auto Industry? (1Mark)

The automotive industry has changed over the centuries as vehicles that are more sophisticated are produced. Based on Porter’s five forces, the competition in the automotive industry is significantly different from most sectors. First, the threat of new entrants is particularly low due to the high barriers to entry. The high capital that is required to establish an auto company is one of the restrictive aspects. The cost of purchasing raw materials and setting up manufacturing plants, as well as obtaining licenses, is significantly high. In addition, hiring qualified staff and training them, as well as venturing into research and design, are critical for an organization to compete with already established players.

Secondly, suppliers’ bargaining power in the auto industry is significantly low due to the availability of more suppliers. Suppose a supplier provides goods that fail to meet the standards; their replacement is likely to occur as there are numerous other suppliers waiting to serve the market. For instance, globalization has affected US-based vehicle manufacturers due to the availability of cheaper materials. This has led to bankruptcy or consolidation as American companies reduce the number of suppliers.

Thirdly, the buyers also have low bargaining power. For instance, Tesla is known for its electric vehicle production (Schilling, 2020). The buyers rely on the company exclusively due to a lack of sufficient alternatives. This reduces their bargaining power significantly. Finally, the presence of substitutes affects specific players in the market more than it does others. For instance, companies such as Ford, which has not shifted towards energy-efficient vehicles, have to worry about the public transportation option that a good number of clients are considering (Automotive Manufacturing Industry Analysis, n.d).

Q2- What do you think are Tesla’s core competencies? Does it have any sources of sustainable competitive advantage? (2Marks)

Tesla’s main competencies revolve around the electric powertrains, which comprise the modular battery pack, the motor, the gearbox, and the power electronics module. The battery pack utilizes lithium-ion cells, which contain at least 53 kilowatt-hours of useful energy. This amount of energy exceeds any other electric vehicle’s power in the market by up to two times. Tesla believes that its battery pack will lay a foundation for future developments. The vehicles’ software can be upgraded to improve the users’ experiences and vehicle performance. The placement of the battery pack within the vehicle’s frame is expected to facilitate the cost of future models (Tesla, 2011).

Tesla’s Model S has the largest touch screen, enabling the addition of new features as well as capabilities through over-the-air software. It is possible to repair the cars using innovative techniques or receive the vehicles’ performance updates. These capabilities were instrumental as Tesla wirelessly updated software that fixed 29,222 Model S vehicles which posed a fire risk due to overheating charging plugs. The vehicles’ owners are also able to manage the process of charging through preinstalled applications, track movements within a map, assess their driving tendencies, and heat or cool the car’s interior before they start driving (Hettich & Müller-Stewens, 2014).

Tesla’s power electronic modules are responsible for governing the flow of current within the car, into and out of the battery pack. The main functions include torque generation control while driving and energy delivery control. Tesla’s vehicles can accelerate rapidly due to the delivery of high-power current in a short time (Tesla, 2011). The current powertrains use the 3-phase induction motors. The various innovations that have been made to the motors enhance efficiency and high power. The use of premium quality bearings and balancing the rotor and shaft precision facilitates 13,000 revolutions each minute at optimum operations (Tesla, 2011). The gearbox is designed in-house to combine low mass and high efficiency. Tesla’s exclusion of gear changes leads to high acceleration.

Various aspects create a sustainable competitive advantage for Tesla. The company’s ability to develop and improve software enables its rapid response to clients’ needs. The software improvement leads to the development of vehicles with improved functionality. In addition, the company’s prowess in battery cell technology is instrumental in reducing the total cost of owning a Tesla vehicle. The company’s battery-propelled vehicles are less complicated than internal combustion cars. The vehicles have about 20 parts compared to the 2000 parts in a traditional car’s engine. This reduces the cost of maintenance significantly. Today, Tesla has already acquired companies that manufacture batteries to control the process of gaining more efficiency. This implies that the company is already ahead of its competitors, who will be doing a trial-and-error process. Finally, the shift from fuel-powered to battery vehicles is a significant environmental statement. More people are becoming more sensitive about their impact on the environment. This aspect offers Tesla a marketing advantage over its competitors (Shipley, 2020).

Q3- What do you think Tesla’s (or Elon Musk’s) strategic intent is? (2Mark)

Tesla’s main strategic intent is to revolutionize the automotive industry. This change is already being experienced with the manufacture of electric vehicles that are expected to reduce the exploitation of the natural environment. When Tesla began manufacturing these vehicles, it launched the Cybertruck. Within a month, the company received 200,000 preorders for the new car. The company has been using the media to commercialize its ideas and attain resources for the actualization of the same ideas. For instance, the bets made on Model S, 3, Y, and X seek to entice the clients to buy these vehicles before or as soon as they are produced. The move to gain support from its stakeholders, otherwise known as innovation capital, is propelled by Elon Musk’s impression amplifiers (Furr & Dyer, 2020). These tools entail the materialization of the idea into a physical form that appears real. This strategy generates the desired interest and ‘buzz’ in the product.

In addition, Tesla’s unique approach toward the actual assembly and development of the vehicles creates a hard-to-imitate characteristic. Tesla does not only produce electric vehicles but also creates new hardware and software that controls the entire process. Tesla vehicles have more software than other vehicles. The software is integrated within a single instead of multiple architectures, easing the wireless update and optimization processes. Tesla’s energy hardware comprises a battery pack and front and rear engines and lacks a transmission (Furr & Dyer, 2020). This technology beats other players in the market, who build their electric vehicles using traditional models. It improves the performance of the vehicle as well as acceleration power.

Based on the elements discussed above, Tesla considers the entire vehicle during production. This means that it must develop a product that creates value for the client. The installation of rapid charging stations in different locations is an element that has made Tesla more attractive to clients. In the USA, Tesla has at least 4,000 stations. This assures clients that they can embark on long journeys without losing power or stalling. Previous players, such as Nissan, failed in the market due to a lack of investment in rapid charging stations, which frustrated clients. The approach taken by Tesla creates significant differences as clients believe or experience that the company’s products are more reliable and advanced than their counterparts’ (Bhargava, Boehm, & Parker, 2021).

References

Automotive Manufacturing Industry Analysis. (n.d). Retrieved from http://php.scripts.psu.edu/users/l/a/law5039/assign5.html

Bhargava, H., Boehm, J., & Parker, G. G. (2021). How Tesla’s Charging Stations Left Other Manufacturers in the Dust. Harvard Business Review. Retrieved from https://hbr.org/2021/01/how-teslas-charging-stations-left-other-manufacturers-in-the-dust

Furr, N., & Dyer, J. (2020). Lessons from Tesla’s Approach to Innovation. Harvard Business Review. Retrieved from https://hbr.org/2020/02/lessons-from-teslas-approach-to-innovation

Hettich, E., & Müller-Stewens, G. (2014). Business Model Configuration.

Schilling, M. A. (2020). Strategic Management of Technological Innovation. New York: McGraw-Hill Education.

Shipley, L. (2020). How Tesla Sets Itself Apart. Harvard Business Reviews.

Tesla. (2011). Tesla Motors, Inc. Form 10-K. Retrieved from https://www.annualreports.com/HostedData/AnnualReportArchive/t/NASDAQ_TSLA_2010.pdf

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MGT325: Management of Technology

Assignment 2

Instructions – PLEASE READ THEM CAREFULLY

Tesla

• The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.
• Students must mention question number clearly in their answer.
• Late submission will NOT be accepted.
• Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
• All answered must be typed using Times New Roman (size 12, double-spaced) No pictures containing text will be accepted and will be considered plagiarism).
• Submissions without this cover page will NOT be accepted.

Course Learning Outcomes-Covered

• Demonstrate a solid understanding of the concepts and models for making strategies to face challenges and improve the performance of technology based enterprises. (Lo 1.2)

Assignment 2                                                                                  Marks: 5    

‘Tesla and its flamboyant, and sometimes erratic, innovator Elon Musk have turned the more than a century old industry upside down in a mere 16 years. Traditional automakers are ill prepared to compete in today’s software-centered world. Unlike nimble Tesla, they are big, bureaucratic, slow to respond to customers, dependent on providing customer financing for unit sales growth, and culturally different from a software company. Tesla’s speed in innovation in the market for high-end vehicles is more like a Google or an Amazon than an automaker. And its soaring market valuation is a clear sign to all automakers that they’ll need to develop more innovative, Tesla-like business models in order to survive.’

 Harvard Business Review. February 28, 2020 

As per your Textbook –  

‘Tesla’s cars had rapidly attracted a large and loyal fan base, and sales were growing at an impressive rate. However, designing and launching multiple major car platforms while building a large-scale battery company, a network of charging stations, and operating Solar City was a lot for a company to take on in its first fifteen years. This left some analysts scratching their heads. Was Tesla trying to do too much too quickly?’   

Students are requested to read Chapter 6 Defining the Organization’s Strategic Direction of their textbooks. With the conceptual knowledge from Chapter 6 and your own research, answer the following questions.

Q1- How would you characterize competition in the Auto Industry?            (1Mark) (200 -300 words)

Q2- What do you think are Tesla’s core competencies? Does it have any sources of sustainable competitive advantage?                                                                           (2Marks) (300 -500 words)

Q3- What do you think Tesla’s (or Elon Musk’s) strategic intent is?             (2Mark) (300 -500 words)

Support your answer with valid points from the Textbook and other references.

NOTE: It is mandatory for the students to mention their references, sources and support each answer with at least 2 peer reviewed journal.