2nd Semester, AY 2022-2023

COURSE CODE: MM ELEC 309

ACTIVITY No. 3

Name: De Dios , Joseph Ivan Mari M.

Year/Section : BSBA MM-3A
Date: March 3 ,2023

CASE STUDY: TESLA'S ENTRY INTO THE CHINESE MARKET

I. Main Problem
▪ What approach does Tesla need to take, on the intense competition with Chinese
automakers while entering the market?
II. Secondary Problem
▪ What better way to address the increase price issue of Tesla Products caused by
competitors and government regulation there?

III. Objective/s

▪ To boost company sales in Chinese Market .

▪ To successfully attract Chinese consumer and gain edge in Chinese market intense
competition by creating great opportunities .
▪ To fully comprehend the Chinese market and adopt suitable approach.
▪ To address the issue of company pricing caused by local automakers as well the
government tariffs.

IV. SWOT Analysis

▪ Strengths
- Making high-quality, and unique excellent products that are innovative.
- Possess a cutting-edge research team and worldwide leading technology.
- Have single leader , achieved vertical integration in the value chain, enabling a high
degree of control that has fixed costs and price control.
- A well-known brand on the global stage.
- Possess edge financially and investor advantage.
 ▪ Weaknesses
- Chinese market control is relatively low as new company to entry .
- A customer buys based on custom .

▪ Opportunities
- Additional government incentives as a green company .
- Increase the product variety offer gain more market share.
- Establish a local manufacturing facility given the low labor cost of China's labor
market.
- Used promotional techniques to increase brand exposure and maximize strategy
high price equal to high quality.

▪ Threats
- Possibilities of an increase in raw material prices
- Tesla become test subject to import fees and taxes in electric car industry from the
Chinese government.
- Currently operating automakers in the Chinese market copy Tesla products
uniqueness .
- Chinese market intense competition .

V. Alternative Courses of Action 1

Along with their traditional products, Tesla should offer while entering the new Chinese
market by creating and developing .Variety of electric models such taxis , trucks, bus and
other forms of transportation vehicle by utilizing their cutting-edge technologies and
research team .

▪ Pros
- It can reach more potential customers by introducing a different product into the same
market .
- Sales will rise as more customers show an interest in purchasing.
- Gaining an advantage in the Chinese market by setting the standard for the electric
vehicle sector industry .
- For the benefit of their society, the government will not use tariffs and trade regulations
to prevent interference with the adoption of cutting-edge technologies of Tesla , such as
the electric model in some transportation vehicles in their community .
▪ Cons
- It requires a lot of effort and time.
- There is a chance that a competitor will use the same approach.
- It's very expensive and dangerous.
 Alternative Courses of Action 2
Utilize celebrity endorsements to strengthen brand identity and increase marketing strategies
using penetration pricing strategies high price equal to high quality for Tesla products .

▪ Pros

- When a customer perceives that a product's high price is equal to quality, they are more
likely to buy it.
- Tesla will successfully attract specific markets and create a beneficial brand image by
charging a significantly higher price than competitors thanks to celebrity endorsement.
- Will create greater sales attract endorser followers .
▪ Cons
- A rival could easily adopt the same strategy and as well possible do the same method
already.
- Method might not have an impact and not gain consumer attraction in the Chinese
market.
- Choosing a celebrity endorser carries a potential risk to gain negative brand image from
the chosen Endorsers .

Alternative Courses of Action 3

Tesla should approach Chinese market through establishing local manufacturing there rather
than through direct import as they have financial capabilities to do so.

• Pros
- It will increase cost control for the company and will increase company sales by having
more control to lower the tesla price product .Providing have capacity to become
benchmark for the Chinese market .Because at same time have edge compared to other
competitors in Chinese market in terms of advanced technology and brand recognition.
- Avoid the threat for receiving high government tariffs on imported goods and gain an
advantage over Chinese market rivals.
- Take advantage of the world's cheapest labor market.
- Increase production leading increasing sales.

▪ Cons
- Costs were high and planning is vital . Because the procedure must be followed.
- The threat of a sudden change in the labor rate in the Chinese market.
- Sudden increase of raw materials pricing needed for manufacturing products in Chinese
market .
- Government regulation implementing high taxes .
 VI. Decision Criteria

5 (Excellent) 4 (Very Good) 3 (Acceptable) 2 (Less than Acceptable) 1 (Unacceptable)

Decision Criteria ACA 1 ACA 2 ACA 3

Time 2 5 3
Sale 5 3 5
Expenses 3 5 4
Impact 5 2 5
TOTAL 15 15 17

VII. Recommendation
Based on the decision criteria to generate enormous sales and acceptable time and costs, the
third ACA , in which Tesla should approach the Chinese market through establishing local
manufacturing rather than direct import as they have financial capacity to do so, is highly
encouraged solution. Since it has a particularly positive impact on the business and is an
appropriate strategy for dealing with China's market intense automaker competition, to have
price control, and not threatening by government regulation . Giving competitive advantages of
not effect by tariffs, and trade restrictions, giving cheap labor, capital subsidies, better logistics,
and so on. Combining this with Tesla's leading advanced technology and research team will lead
to giving Tesla benefits to help achieve the objective in this case study .

VIII. Conclusion
In conclusion for Tesla when entering the Chinese market faced the problem of fierce
competition from the already well-established electric vehicles automaker in the Chinese
Market. At the same time, government supports to local competitor in form of tariffs gives
hindrance. For this reason, applying the method gives the business positive results and solutions
to problems is necessarily needed . As concluded in this case study, out of three reasonable
courses of action to solve the problem, establishing a local factory, which Tesla is currently doing,
is the most successful because of its impact on stakeholders, society, Chinese market
environment, and evident broad a lot of benefits as tesla gain successful outcome in Chinese
market even in 2022.
Reference

▪ (2022, August 9). Tesla in China: Dominating the EV market with 0 marketing
budget. Daxue Consulting - Market Research China.
https://daxueconsulting.com/tesla-in-china/
▪ Top Electric Car Stocks. (2022, December 12). Investopedia.
https://www.investopedia.com/top-electric-car-stocks-for-q4-2020-5080568