Tesla Model S, Case Study Example

Major problems

• How could Tesla increase its net revenue of $10 million on $560 billion of sales (Van Den Steen 1)?
• How could Tesla remain as the first U.S. firm which gained entry into the automobile market without bankruptcy since World War II (Van Den Steen 1)?
• How could Tesla break away from the conventional model of the automobile manufacturers (Van Den Steen 2)?
• How could Tesla differentiate the market with the high price of lithium ion batteries (Van Den Steen 4)?
• How could Tesla achieve the goal of the desired market differentiation of the Tesla automobiles when the price of the lithium ion batteries are so expensive (Kamath 10; Van Den Steen 1)?

Significant factors

• The conflict with the dealership lobby (Van Den Steen 8).
• The traditionally high cost of automobile plant production.
• The maintenance of low costs while producing the care without outsourcing.
• The differentiation of markets when the consumers are not accustomed to a high performance low cost electric vehicle.
• The profitable delivery of services at the Tesla retail outlets.

Alternative Strategies/ Marketing Planning Opportunities

One of the alternative strategies would be to form a strategic alliance with one of the automakers. This strategic alliance may involve an automaker which has developing markets and has the need to differentiate its product. The most likely candidate would be Daimler. BMW is presently promoting the BMW i3. The automobile is efficient and there is a need for product differentiation from Daimler. In addition, Tesla could apply the structure of the Daimler showrooms in order to promote the Tesla automobile.

Recommended Course of Action

There are two recommendations. Sell the Tesla organization and its technology to a large highly profitable automakers such as Daimler, Toyota or Nissan.  This option would be attributed to the rising cost of lithium and the lack of availability of recycling the lithium batteries that have been marketed (Kamath 17). The second recommendation would be to enter into a strategic alliance with Daimler and share some of the technologies that are applied in the construction of the Tesla products (Van Den Steen 9). Tesla would gain from the established brand recognition that is experienced by Daimler.

Implementation Plan

The best implementation plan would be to follow the product differentiation which has been the objective of the company. Take the profits and invest in acquiring technology with regards to the production of less expensive battery cells. The battery cells compose a substantial amount of the cost of the Tesla vehicle. In having a high end product, middle product and low cost EV which is accessible to the consumer, there is the potential of raising the organization’s annual net revenues by means of product differentiation (Van Den Steen 9).

Contingency Plan

The best case scenario would be that Tesla is able to reach its sales goal of 100,000 automobiles per year. The worst case scenario is to enter into a joint venture with either Daimler, Toyota or Nissan. In the event that a strategic alliance was not feasible, sell the organization to one of the larger automakers (Van Den Steen 9).

Works Cited

Kamath, Haresh. “Lithium ion batteries for electric transportation: Costs and markets.” Electric Power Research Institute, 22 September 2009. Web 24 March 2015. http://www.arb.ca.gov/msprog/zevprog/2009symposium/presentions/kameth.pdf

Van Den Steen, Eric.” Tesla Motors.” Harvard Business School 9-714-413 (2014): 1- 25.