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Abstract of Tesla Manufacturing Strategy
In this paper, the significance of manufacturing strategy has been explained. In addition to it, the relationship between corporate, manufacturing, and marketing strategies is elaborated. The contribution of manufacturing strategy to organisational efficiency and success is also discussed in terms of Tesla Inc. Furthermore, the business environment of the organisation is analysed with the use of PESTLE analysis and its competitive advantage is analysed with the application of SWOT analysis. It is also determined that Tesla Inc. focuses significantly on coordination among corporate, manufacturing, and corporate strategies. This coordination contributes significantly to its success. At the end of this paper, some recommendations are given which should be considered for improving its manufacturing processes.
Table of Contents
Business,
Marketing, and Manufacturing Strategies
Manufacturing
Infrastructure and Controls
Tesla
Manufacturing Strategy
In general,
manufacturing strategy is a framework that is developed and implemented for
achieving enhanced competitiveness in the market. Often, manufacturing strategy
is an overlooked part of organisational planning in firms. In fact, the
interrelationship between corporate strategy and manufacturing operations are
difficult to grasp. The concept is simple: competitive strategy of an
organisation at a specific time places demand on manufacturing department for
fulfilling tasks which required to be efficient. In this paper, manufacturing
strategy will be elaborated in the context of Tesla Inc.
Tesla Inc. is an
American clean energy and electric vehicle company. It was incorporated in 2003
by Marc Tarpenning and Martin Eberhard. In accordance with the recent
statistics and reports, Tesla has become the second most important and valuable
automaker in the globe with the capitalisation of 104.5 billion dollars
The objective of
Tesla Inc. is concerned with accelerating the transition of world to
sustainable and better energy. In addition to it, it desires to make a
compelling car organisation of twenty-first century by driving innovation.
The strategy of
Tesla Inc. is concerned with entering the high-end of market where consumers
are capable of paying premium costs for efficient cars. The organisation
focuses on making the use of advanced technologies for producing electric
vehicles which perform better than typical cars and provide customers with AI
functionalities which are not provided by other car makers
When it comes to
NPI or new product introduction programme for Tesla Inc. it has some specific
strategies associated with it. For instance, the firm has the strategy of never
releasing the production to target audience at once. Only super-fans are
allowed to drive first models of their electric cars. Once these fans have had
some experience with the car, the firm obtains feedback from them and acts on
this feedback for making necessary changes and improving the product. After the
process of development, these fans become the early adopters
Political Factors: It
would not be wrong to say that Tesla Inc. leads electric vehicles. In contrast
with traditional vehicles that require a significant amount of fuel for
operating, both gas and electricity are utilised by Tesla. However, it is
important to note that these vehicles do not seem to need as much gas as a
typical car. Considering the fact that government has considered significant
efforts and measures for improving the production of hybrid and electric
engines, Tesla is able to operate in a politically stable environment.
Economic Factors: When it
comes to the economic environment, in recent times, the sales of electric cars
have increased. In addition to it, the costs of materials have decreased and it
puts Tesla in quite an efficient position. In particular, the cost is lower for
batteries. It enables the organisation to develop more cost-efficient solutions
for public. Therefore, the economic environment is opportunistic for Tesla and
the firm can make the use of these opportunities or targeting middle class
citizens as well
Social Factors: For
people, electric cars are quite innovative and they like this idea. In
particular, people who invest in eco-friendly solutions. Cars developed by
Tesla eliminate the need of utilising as much fuel as a typical car, which make
them better and efficient for environment. In addition to it, the organisation
has been doing an incredible job throughout the years for maintaining their
place in the mind of people as the ideal electric car company, which makes it
more difficult for other organisations to replace it and build their own
position in the market. Therefore, the social environment for Tesla is also
sustainable.
Technological Factors: For
Tesla, technology is both a foe and a friend. As a friend, it seems to assist
the organisation in maintaining a competitive advantage in the market. It also
enables the organisation to be efficient in terms of fuel consumption, and it
paves the way for sustainability in the future. The vehicles are developed for
adopting newer technologies. Technology is a foe in the sense that Test has to
keep on advancing and evolving for meeting the needs of customers and ensuring
that they do not turn towards other providers. Therefore, even though Tesla has
a competitive edge, the technological environment requires it to further
evolve.
Legal Factors: With time,
Tesla Inc. is expanding into new markets and the organisation will need to be
up-to-date with their international partners. Otherwise, a longer period of
time will be required. Although the current legal environment is stable for the
organisation, it is important for it to ensure that it understands different
legal environments of different nations.
Environmental Factors: Actually,
this is where the most potent strength of Tesla lies. Its vehicles are marketed
and advertised as eco-friendly because they utilise electricity. Be focusing
extensively on environment, the organisation has made a large and strong name
for itself in the market. Thus, the environmental status for Tesla is also
stable
For assessing the
competitive advantage of Tesla, SWOT analysis must be conducted.
Strengths: One of the
major strengths is that it is a top employer organisation. It is reported by
Wall Street Journal that the organisation has become an idea organisation for
employees because of its innovative-encouraging and diverse culture. Another
strength of Tesla is that it is the leading automotive organisation. In spite
of its problems, its sales have only increased. Due to its unmatched advancement
in luxury and innovation, it has left behind many other organisations such as
BMW and Mercedes. When it comes to the development of fine electric cars, the
organisation has left every other firm behind. In comparison with their range,
electric cars of the firm have determined to be the best in covering maximum
distances. It has been identified that top three places are occupied by Tesla
in terms of range
In addition to it,
Tesla Inc. seems to electric vehicle sales in the US. In 2019, Tesla Model3 was
sold the most with its numbers reaching 187,971. Chevrolet Volt stands on the
second position and it reached 155,477 units. Another strength of the firm is
concerned with its diversification and cross-selling strategy.
Weaknesses: A major
weakness for Tesla is concerned with manufacturing complications. For instance,
the higher standards of innovation, the more and greater will be production
risk factor and mechanical complications. Tesla has experienced endless
complications and challenges in manufacturing when they were about to launch
Model 3. Another weakness is concerned with meeting the demand. Because of
complicated procedures and experimenting processes, there is a risk that Tesla
might experience an unbalanced supply and might not be able to meet the demand
of customers. Even though Tesla is recognised as the leader in developing
hybrid cars, it has not been capable of developing its cars in large volumes. Even
at the moment, it experiences significant issues in terms of management
resources, production cost, and space expansion in the manufacturing of more
models of Model 3.
Opportunities: A major and
one of the most significant opportunities for Tesla is to enter new markets. It
will enable the organisation to increase its sales in untapped markets. For
instance, Asian market has become an essential market for many companies
because of the demand it derives. Tesla is recognised as a costly brand because
it relies significantly on innovation, which needs significant financial
support for entertaining new technology. Model 3 has been launched by Tesla,
which is an affordable version of Model S. It presents an opportunity for Tesla
to develop cost-effective vehicles for customers. Another opportunity is to
make more efficient batteries by bringing their production in-house. It might
provide the firm with a significant competitive advantage because it can serve
to reduce its manufacturing costs.
Threats: Product liability
claims present a significant threat to Tesla. Even though the organisation is
considered to produce high quality vehicles, in particular, the automotive
industry is accustomed to experience product liability claims, which are feared
by the company to be one of the largest and most significant financial blows. For
instance, autopilot vehicles have been launched by the organisation but they
have not been effective in cases of accidents. Therefore, the firm has
experienced claims and lawsuits in association with technological failure. A
threat is presented by the intense competition as well. For instance, it faces
competition from both self-driving technologies and alternative fuel cars. It
seems to experience competition from different brands such Audi, Mercedes, and
Lexus. In the future, this competition is expected to increase because other
organisations are also thinking about launching their own eco-friendly vehicles
The connection
between marketing, manufacturing, and business strategy is often considered
hierarchical. However, existing capabilities of restricting the application of
new strategies. This interaction is often neglected by static and hierarchical
models.
Usually, marketing
serves as a communication channel between the customer preference and marketing
environment, and normally deals with the maximisation of revenue while manufacturing
is concerned with minimisation of cost and development of design. Both of these
are guided by the business strategy. However, these strategies are considered
separate in most organisations. With the development of a business strategy, a
firm seems to determine how the SBU or strategic business unit will be
supporting competitive direction, organisational goals, and its scope.
An important task
of corporate strategy is concerned with orchestrating the processes of a firm
along with highlighting development opportunities. Meanwhile, both marketing
and manufacturing strategies, it is stated by researchers that there must be a
connection between functional and corporate strategies. The need for connecting
functional strategies to corporate strategies is claimed often by scholars. The
conceptual model that is explained by Ward and Duray (2000) can possibly be
traced to the time of Skinner (1969) who described the relationships among
manufacturing strategy, competitive strategy, and environment for achieving
effective performance in the market
Figure 1: Conceptual Model
The presence of a
relationship between business performance and manufacturing strategy has been
long supported by the literature on manufacturing strategy. Several studies
which have focused on renowned manufacturers seem to suggest that it is
marketing capabilities and coordination between marketing strategy and other
strategies within the organisation that enable these firms to compete in the
market.
In general, the
top-down approach is quite common the literature of manufacturing strategy. It
determines that the capabilities of manufacturing should support opportunities
of market identified through the business strategy. Therefore, the
manufacturing department is accountable that the way in which business strategy
desires to compete can be achieved. It has been determined in the literature
that organisations that perform ineffectively in the market often do not have
their marketing, business, and manufacturing strategies aligned with each
other. In fact, Hill
(2017) has determined that the manufacturing strategy
should be aligned with the business strategy for supporting the objectives of
corporate unit or else, these objectives would not be accomplished properly.
He designed an exploratory study for
building manufacturing strategy constructs and for examining the connection
among business, marketing, and production strategies. It was indicated by their
results that business strategy and manufacturing strategy, collectively and
individually, have a significant influence on organisational performance. It
has been determined that organisational performance is directly influenced by
manufacturing strategy but it should be ensured that significant focus is being
paid to the strategy. Manufacturing strategy is dynamic and it seems to change
according to market situations
Manufacturing
strategy plays an important role in ensuring the feasibility, effectiveness,
and cost-efficiency of the product that is to be delivered to customers.
Obviously, in the absence of an efficient production strategy, it would not be
possible to attract customers with the product, sustain the advantage of
organisation in the market, and beat the competition. By ensuring and focusing
on all these features and aspects, the manufacturing strategy ensures the success
of an organisation in the market. It is, however, important to note that a
hierarchical process does not involve constrains and functional potential as
much as required.
In case of Tesla,
it is ensured that both the marketing and manufacturing strategies are aligned
with the business or corporate strategy. As it has been explained above, it is
the business strategy that seems to set direction and business objectives. For
instance, it has been determined that Tesla Inc. has the objective of becoming
the market leader and encouraging transformation of the industry towards the
purchase of more eco-friendly vehicles. This is the main objective of the
organisation and the firm sets various temporary strategies for facilitating
the accomplishment of original business objective. The management at Tesla Inc.
realises the importance of relationship
among corporate, manufacturing, and marketing strategies. This
comprehension of interrelationship among them helps in ensuring that there is
effective coordination among these strategies and they seem to complement each
other instead of being in discord.
Marketing strategy
is developed after the manufacturing strategy. For instance, it is the
management that determines what type of product should be launched and what
type of features will it provide to the target audience for ensuring that they
are attracted to the product. Once the management sets this direction, the
manufacturing department becomes accountable to ensure that such a product is
developed. For example, for Model 3, it was considered that a vehicle should be
developed which is more cost-efficient but it has less features than other models
so that the cost of development does not outweigh the profits being made by it
once the product is developed. A manufacturing strategy was developed which was
aligned with this product vision. Similarly, a marketing strategy was
considered which emphasised more on the cost-effectiveness of the Model 3.
Since this collaboration and coordination was among these strategies, it was
possible for Tesla Inc. to achieve success in the market
When it comes to
the manufacturing department of Tesla Inc., the organisation makes the use of a
simple product development process comprising of four steps: idea development
and market potential, design, launch, and beta testing. These are the steps
that are considered when it comes to the development or manufacturing of a new
device.
The very first
stage is concerned with the development of idea about the product. In this
stage, previous data is analysed and new ideas are developed. The management at
Tesla Inc. does not limit the ideas and team is encouraged to think about every
kind of idea that can be considered. Once the idea is selected, market
potential is analysed for it and it is analysed whether such an idea can be
profitable for the organisation or not.
At the second
stage, the concept that is selected is tested properly and thoroughly before a
draft is made on the design. Once the design has been made, it is again
analysed and evaluated to determine whether it is capable of meeting the
quality and other standards set by customers or not. If it meets all the
necessary standards, development is performed on it.
The third stage is
all about testing the developed model or prototype. This designed model is not
launched into the market. Instead of it, fans are given the chance to drive
these cars and provide their feedback so that necessary changes can be made to
the design for improving it.
Once beta-testing
is completed successfully by the new car or vehicle, it is marketed and the
firm relies on marketing function to attract customers. Once the demand of
vehicle begins to grow, it is launched into the market
Actually, there
are a number of design elements in the manufacturing strategy of Tesla Inc.
First of all, management ensures that production has a strong link with the
market so that only an innovative and capable solution will be produced. The
second element is strict financial discipline which means that for ensuring the
completion of project within the specified budget, financial forecasts are
performed. In this manner, there are no additional costs invested in the
project. Another element of production is labour flexibility which means that
employees are not forced to work. Instead of it, they are given all the
flexibility they need for producing a high-quality and innovative product.
Lastly, a lean approach to production is utilised which ensures that quality
does not suffer and it meets all the predetermined standards
Following are the
recommendations that should be considered by Tesla Inc. for improving its
manufacturing processes:
·
First of all, there is a need
to ensure that manufacturing is automated. Even though robots are utilised for
some parts, the information about manufacturing is not automated. A software
should be utilised which helps in acquiring all the necessary information about
manufacturing. It will serve to enhance the efficiency of manufacturing
process.
·
Secondly, there is a need to
utilise more efficient batteries in vehicles. It can be done by bringing
battery development in-house. It will serve to reduce the costs which are
invested in the manufacturing of batteries.
·
In auto-piloting, more research
should be conducted and advanced interface should be utilised which is capable
of protecting passengers and are able to meet their expectations.
·
Materials should be imported
from Asian countries as they produce reliable and high-quality materials at low
prices in comparison with neighbouring nations.
· Lastly, it should make the use of properly developed technologies and not the ones which are still in testing phase. It will help Tesla in ensuring that only reliable vehicles are produced.
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