Globalization is an inevitable trend, but internationalization is not suitable for everyone. Hundreds and thousands of companies fail each year to expand globally. It is thus very important to analyze the causes of their failure and learn from their mistakes. The company I want to use Tesla Company. You can find information online to finish this Project.
The final project needs to address the following issues:
- A description of the company profile, products/services, etc.
- The international marketing failure event(s).
- The causes for the company’s failure.
- Your suggestions to improve the situation based on our class content.
- Implications for future international marketers. The essay should cover all issues.
The essay should be within 10-15 pages long (references included), font 12 Times New Roman, double space, with one inch on the left and right page margin respectively. External sources such as books, articles, newspapers, and websites are encouraged to use.
Solution
Introduction
Globalization means the interaction of one economy with the other. These relations can be of services, goods, finances, etc. Innovations in technology and communication have increased the extent of globalization. It mainly depends upon certain parameters for its success, such as free cash flow due to reduced tariffs, technology sharing, and labor diversity while creating an opportunity for both local and foreign investments. It is accompanied by many beneficial outcomes such as better goods, improved education quality, etc. Although every company wants to increase its global footprint, only a few can do so. We shall begin with a case study of Tesla Company.
Company Profile
Tesla, Inc. which was formerly known as Tesla Motors is an American company specializing in the manufacturing of electric cars, battery technology, and solar panel manufacturing. The ever so ambitious, Elon Musk is the current CEO of the company. The company name pays homage to the ingenious inventor Nikola Tesla. The company released its first electric vehicle in 2008 which was capable of traveling 394 km on a single charge. The company’s Model S has been nominated as the worldwide best-selling electric car in the year 2015 and 2016. Tesla provides services in Canada, Europe, Asia, and Australia.
The company was founded by Martin Eberhard and Marc Tarpenning. These mainly founded the company in the initial phases. Elon Musk joined the board of director in 2004 and also oversaw operations. He became the major investor in the company, also injecting personal funds to keep the company afloat.
Tesla initially targeted sports vehicles, mainly because of ease of adoption and marketability. The main aim was to increase the strength, electrical vehicles in the already fossil fueled market.
Current employee strength of Tesla is around 30,000. Tesla’s IPO was done in 2010. Because of its lucrative investment and product portfolio, it enjoys numerous subsidies from the government, which was almost $5 billion in 2015. It has recently in 2016 acquired Solar City Corp.
Tesla coined and used the term “Complex Coordination” in its production and marketing approach. The main aim here is to challenge large markets with low prices. Tesla relies on vertical integration, which involves the production of components and charging setups. Tesla operates on the economics of scale to keep low operational costs. In this way, Tesla is different from normal manufacturers who outsource large quantities of material to suppliers and maintain focus on the engines, assembly, and final checks. Conventional dealer strategy is avoided by the use of company showrooms and online booking. Continual software updates maintain the reliable connection between customers and Tesla (Boudtte, 2016).
International Market Failure Event
If you are not failing, you are not innovating enough. As quoted by Elon himself. Tesla’s ambitious targets are only thwarted by their disappointment to deliver as promised. The electric car market in Europe is strong due to its strong preference. However, in China, the market is relatively weaker than expected. The company had an aggressive strategy for China, where it opened supercharging stations, hired many people (600 almost), opened stores and service stations (Chen, 2017).
But the efforts were stale. To only rely on a fiscal number such as GDP is not enough, as only 3500 vehicles were sold in 2014, much below the touted sales goal. China has also invested heavily in policies to produce its brand of electric vehicles which can decrease the cost to buyers by almost $15,000. Chinese manufacturers such as BYD and BAIC have been the key players in this case. According to Elon Musk, there is a misconception among the Chinese community regarding charging difficulty.
However, the problem is much worse than simple awareness and communication about vehicle charging. According to some researchers, the Chinese environment is not suited for the electric vehicles. Due to dense population, space limitation is evident. Many people use typical public garages. So, the installation of a standalone charging setup is difficult (Einhorn, Zhang, Zhai, Tian, & Fan, 2018).
Tesla is aiming to reduce the damage by adding almost 200 supercharging networking stations in a bid to reduce the effect of reduced space. Continual work with residential property owners is also in place for charging setups. It proves that China is a difficult market to break into.
The global selling target for the year 2015 was 55,000. Tesla needs to sell at least 1500 vehicles per month in China alone to meet its fiscal targets. Tesla is currently in make-or-break situation in China. With the current Giga factory in production and the looming market situation in China, it is essential for Tesla to achieve both to help keep its share price in the green zone.
Causes of Company’s Failure
Tesla has been the center of attention for both buyers and investors. It continuously stays in the news. It is hard to admit, but Tesla has the automotive world literary terrified. Tesla has been through moments of triumph and grief continuously. Below are mentioned some key problems the company has which are limiting its growth.
- Tesla, being a beginner needs to keep its finances in check. Its spending rival that of major automobile manufacturers. Since 2016, on average Tesla has spent $8000 per minute. The Tesla is seeking to add $2 billion in 2018.It is vowing investors with models which are yet to come and that are a dangerous strategy.
- The company has been subjected to a slew of lawsuits in 2017. The fatal auto pilot crash has also put a dent in its already flailing reputation. Racist behavior toward LGBGQ workers, employee firing having an affiliation with the union are some key problems which are present (Worland, 2018).
- Vehicle production has spiked since 2015, almost 50,000 per year. With the launch of the Model 3, it aims to sell this much vehicle per year which as an aspiring
- Tesla’s main problem is being late on its promise. Some models were as late as two years. Consumers do not want to buy cars like that. With production hanging in the balance, model 3 can be expected to be a full year later. Investors are steering away from Tesla for this reason.
- Reliability is not one of Tesla’s strong suits. Model X has been smitten with quality issues which have dragged its reputation further down the drain. Tesla Model S has been reliable, but it is still plagued with glitches (Schmitt, 2017).
- Tesla employs lithium-ion batteries to power its vehicles. The mass demand for lithium is eminent for this purpose. With competition increasing, the demand for lithium is ever more profound. It is estimated that 190 years of reserved are available for Lithium. But tapping those reserves and supplying them consistently is proving to be a challenge which is causing production hell for Tesla.
- Tesla’s biggest selling point is its potential. The vision inspires to deliver which is intoxicating to every person associated with the company, whether be a consumer or investor. Tesla’s main bet is on the model 3. If it fails to deliver than Tesla could be in huge trouble (Korosec, 2015).
Suggestions for improvement
Despite all its shortcomings, no one can deny that Tesla delivers what customers want. It gives the message that it is here to stay. Tesla is aware that it is in the problem. Awareness has enabled the company to work on its future strategy for continual growth.
Tesla is slowly progressing as a company that is giving large manufacturers a run for their money they too are jumping on the electric bandwagon. Tesla has all the gems in its pocket. The investors are on inclined if they see a profitable venture. Tesla needs to stop spending like a billionaire for starters. AI development will further enhance its grip on the market, and it is also progressing by leaps and bounds.
Tesla model 3 has captured the eyes of everyone. It is what everyone wants. Elon is right in his mind to be such determined, for he is ahead of the pack. Tesla knows that to succeed, the bets need to be big Musk is pivotal for Tesla as he can mobilize the masses and generate investment that Tesla so desperately needs (Boudtte, 2016).
Tesla needs to get the customer service, investment and cost management right. The nurture culture needs to be in place for effective employee engagement, retention and work quality. Machines cannot do what humans can, that is a concept that needs to be strengthened to foster a good work culture.
Implications for Future International Marketers
Consumer markets are volatile, ruthless, and demanding in their nature. The trends in consumer behavior, their analysis, and deliverability on those trends combined in a specific product or service are the single element that can land you in the fortune 500 or down the sinkhole of failure.
The clear market strategy is essential for a business to establish itself anywhere. Trending things such as social media, mobile, etc. can be used to analyze whether a certain idea will generate profit or not. Many companies that try for an international approach collapse, because they fail to realize and match the gap between what is needed and what is available. Business sprout daily and when subjected to markets fail because of poor investment strategy. The economy determines the need for a certain product or service to be deemed consumable, GDP, purchase power and your ability to go far beyond the average competition for success (Chen, 2017).
Consumers are demanding in their own right, are constantly evolving and keep you on the edge if you want to be the star of their eyes. As the product escalates in the eyes of the consumer, the expectations associated with it also skyrocket. Similar is the case with Tesla or any other consumable. Consumers dictate the way any service or product should be used (Einhorn, Zhang, Zhai, Tian, & Fan, 2018).
All in all a sound market strategy, consumer behavior analysis, investment feasibility, return rate and product competitiveness are the bread and butter of any marketer or product manufacturer to consider before any project. The marketing effort is reduced infinitesimally if the above said variables are taken into account. Product diversification and use of technology are also important to keep things afloat and cost-effective (Schmitt, 2017).
Conclusion
In the end, it is concluded that globalization, lucrative as it may seem is nevertheless not without its risks. Optimized use of resources and comprehensive analysis of the variables above can be the fine line between a successful venture and massive failure. Markets are changing day by day, and the need to constantly evolve, analyze and delivery is becoming increasingly important. Social media is an effective tool which can help to analyze the market strategy before an investment like in the case of Tesla. Modern communication media has become a powerful tool to help anyone in any way. When you know your needs, working on them is much easier. Similar is the case with marketing. Proper analysis and market strategy can do wonders.
References
Boudtte, N. E. (2016, September 14). Autopilot Cited in Death of Chinese Tesla Driver. Retrieved from https://www.nytimes.com/2016/09/15/business/fatal-tesla-crash-in-china-involved-autopilot-government-tv-says.html
Chen, Q. (2017, November 17). China’s LeEco set out to change the world. Its failure has changed China. Retrieved from https://www.cnbc.com/2017/11/13/a-chinese-company-wanted-to-beat-netflix-tesla-and-apple–its-turned-into-a-multibillion-dollar-mess.html
Einhorn, B., Zhang, Y., Zhai, K., Tian, Y., & Fan, H. (2018, February 13). Tesla’s China Dream Threatened by Standoff Over Shanghai Factory. Retrieved from https://www.bloomberg.com/news/articles/2018-02-14/tesla-s-china-dream-threatened-by-standoff-over-shanghai-factory
Korosec, K. (2015, March 10). Tesla’s China problem. Retrieved from http://fortune.com/2015/03/10/tesla-china-problem/
Schmitt, B. (2017, June 6). Tesla’s Big China Chances Indefinitely on Hold. Retrieved from https://www.forbes.com/sites/bertelschmitt/2017/06/06/teslas-big-china-chances-indefinitely-on-hold/#6d941d11616b
Worland, j. (2018, January 18). Why China Will Beat Tesla in the Electric Car Race. Retrieved from http://time.com/5107488/why-china-will-beat-tesla-electric-car-race/
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