Individual Authentic Learning Case-Study Assignment Essay

Tesla Operation in China
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Tesla Operation in China
Introduction
When it comes to the automotive industry, there are a lot of dynamics that often factor in their profitability. When these factors align, there is a lot that affect not only the larger aspects of the business itself, but also the economies that benefit directly or indirectly from the same. One such company, Tesla, embodies these dynamics. It has been one of the fastest growing automobile companies in the world but facing the usual challenges that are faced in the industry, and also, for a start-up. The task at hand is to critically analyse the factors affecting its growth, with a specific focus on the Chinese market.
Tesla Inc is an automobile company that manufactures electric cars and other green energy products. Since its establishment in 2003, the company has undergone numerous changes including moving its manufacturing operations from the US to China. Although the cost of manufacturing is low in China, there are serious threats that the company must handle to secure its long-term existence. This paper is structured in three sections; the first section looks at the background of the company, the second section addresses the challenges that the company has faced since its establishment, and the last section examines the environmental factors that affect the company in China.
I Background
Tesla Motors was established in 2003 by Eberhard and Tapenning with the aim of manufacturing electric sports cars. Initially, Tesla’s operations were financed from numerous sources including $30 million contribution from Elon Musk. In 2010, the company went public and raised $226 million from its first IPO. In 2015, the company started venturing in green energy products used in homes and businesses. Consequently, the company changed its name to Tesla Inc, which indicates that it does not just manufacture electric cars only.
II Challenges faced by Tesla
* Strong competition
Tesla operates in a highly competitive market that is associated with low switching costs and high aggressiveness. Although the competitors are few in number, they are more established and have better marketing mix than Tesla (Caplan et al, 2018). According to Porter (2008), low switching cost enables customers to purchase products from other companies with ease. In this case, Tesla customers can purchase cars from other companies such as Ford or even use public transport.
* Supplier problems
Generally, suppliers have a moderate force with regards to the automobile industry. However, Tesla suppliers’ such as Panasonic, which provides software expertise, holds enormous power because Tesla is too much depended on it. Consequently, the company failed to deliver Model S and Model X on time due to supplier problems. Unfortunately, Wu and Yang (2017) indicate that it is impossible for Tesla to solve the supplier issues it experiences because it lacks enough funds to invest into another supply chain.
Irrespective of these challenges, Tesla has managed to compete favorably because its products reflect the predominant market of the day (green energy produc...