BUSM4304 International

Operations Management Ass 01

Tesla Inc. Case Study
•Olaoye, Tomiloba Quadri - 21000829
•Ogunmuyiwa, Samuel Olaoluwa - 21001332
•Okonji, Olubukola Onome - 19004286
•Ogundipe, Oluwayemisi Abosede - 21001207
•Ajimati, Oluwabusola Mary - 20011358
Introduction

• Customer value is the balance between the benefits a product or service provides to the customer and
the effort (money and time) applied in obtaining the product.
• The benefits make up the perceived value of the product.
• Customer value is vital as it contributes to a company’s competitive advantage.
• Customer value= ( Perceived value- Costs)(Kumar & Reinartz, 2016)
An Overview of Tesla Inc.
•Tesla Inc. is an American electric vehicle and energy
company based in Palo Alto, California, United States. It was
founded in 2003 by two American Entreprenuers, Martin
Eberhead and Marc Tarpenning. However, it was named
after an American Inventor and electrical engineer, Nikola
Tesla.
•In February 2004, through a $6.5million investment, Elon
Musk became the largest shareholder in the company and
in 2008, he assumed leadership position of the company as
CEO
•Tesla is majorly into the manufacturing of electric
automobile, solar panels and batteries for cars and home
power storage.
An Overview of Tesla Inc. (cont’d)
• Tesla’s mission is to speed up the transition into the use of sustainable energy with a grand plan of
producing and marketing zero – emission electric sport cars and ploughing back the profits to a more
affordable electric family vehicles (Musk et al..,2018)
• The goal is to identify and transforms the policymaker decision to reduce carbon emission through
technology innovation by producing a battery electric car with no tailpipe and zero emission.
• The market value of Tesla surged by more than seven times in 2020, surpassing $600 billion moving
ahead of Toyota to become the highest car in the world.
Tesla’s Products
• Tesla currently has four different electric car models;
• In 2008, Tesla designed an electric sedan, Model S which
is now the best car in every category.
• In 2015, the company expanded its product line with
Model X, a sporty utility vehicle
• In 2016, came the launch of Model 3, a low-priced high
volume electric vehicle; and
• In 2019, Tesla launched a mid size SUV, Model Y with a
seating capacity of seven persons.
• Aside from its own vehicles, it is worth noting that Tesla
sells home batteries and solar panels to residential and
commercial customers, making powering easier.
Value Proposition
• Value Proposition is the product and services that create
value for certain customer segments. It defines the
benefits that a product brings to the customer and the
expected costs (Osterwalder et al., 2014)
• Tesla’s value proposition is categorised into three aspects;
• Innovation on Vehicles – Autonomous driving and
connection technology
• Innovation on Batteries – There is an understanding
between Tesla’s engine and the battery management
system which also gives owners opportunity to have
control over the battery system
• Super charging stations in various locations
• Unlike other car manufacturers who sell through
dealerships, Tesla sells directly to its customers and this
helps to create a better customer buying experience.
Value Chain
• The value chain describes the entire set of
activities required to bring a product or service
from conception to delivery to final consumers,
as well as final disposal after use (involving a
combination of physical transformation and the
input of various producer services (Morris,
2014)
Value
Chain
Analysis
Inbound Logistics
• Tesla inbound logistics entails receiving and storing raw
materials used to construct electric vehicles, energy storage
systems, and solar panels. Tesla employs a variety of scarce
materials, including aluminium, steel, cobalt, lithium, nickel,
and copper, in addition to a standard set of raw materials. In
the United States, the company receives parts from thousands
of suppliers worldwide, including its own Gigafactory in
Sparks, Nevada, at its Fremont automotive factory.
• As a raw material storage facility, the electric automaker
leases three warehouses totaling 1.3 million square feet in the
Oaks Logistics Centre in Livermore, California, just 20 miles
northeast of the Fremont factory. In addition, Tesla built an
870,000-square-foot facility in Lathrop, California, in 2019 as
a massive spare parts storage facility.
Operations
• Tesla manufactures and assembles vehicles at facilities
in Fremont, California, Lathrop, California, Tilburg,
Netherlands, and Shanghai, China. Tesla's operations can
be divided into two categories:
• Automotive: This segment includes electric vehicle
design, development, manufacturing, and sales.
• Generation and storage of energy: This segment consists
of the design, manufacture, installation, and sale or lease
of stationary energy storage products and solar energy
systems, as well as the sale to customers of electricity
generated by Tesla solar energy systems.
• Tesla's primary source of value creation is the high level
of integration of robots into various manufacturing
processes. "Up to eight robots at a time work on a single
Model S in a choreographed routine, each performing up
to five tasks: welding, riveting, gripping and moving
materials, bending metal, and installing components,"
according to the report.
Outbound Logistics
• Tesla outbound logistics entails the storage and distribution of
the company's electric vehicles, energy storage systems, and
solar panels. Tesla ships electric vehicles to its own stores and
galleries in the United States as well as 35 other countries and
regions around the world. Customers can also order electric
vehicles directly from the company.
• Typically, the electric automaker keeps a small inventory of
vehicles on hand at its retail locations for immediate sale. The
vast majority of customers prefer to personalise their vehicles
by ordering them online.
Marketing & Sales
• Tesla's marketing and sales practises are unconventional, as are the
electric automaker's other business practises. Tesla "spends
virtually nothing on advertising and endorsements, and relies
heavily on word of mouth," according to CEO Elon Musk. As a result,
Tesla's marketing strategy is also known as "Zero Dollar
Marketing." The ability to attract extensive media coverage on a
global scale is a significant source of value in terms of increasing
brand awareness on a global scale.

• Tesla also sells used automobiles. Furthermore, Tesla's used car

business complements new car sales by "integrating the sale of a
new Tesla vehicle with a customer's trade-in."
After Sales Services
• Tesla's customer service practises, on the other hand, have
improved in recent years. The electric vehicle company wants to
own the customer experience and, as a result, does everything
in-house, from production to sales. Tesla does not sell through
dealerships, which means that the customer experience is not
influenced by a third party.
• In order to deal with customer complaints more effectively, the
electric automaker allowed customers to "directly escalate their
issues to a company executive." Tesla offers after-sales service
through company-owned service centres and Service Plus
locations. On top of the 150 service centres it already has, the
company is constructing 100 new ones. Furthermore, Tesla is
deploying 350 new on-demand service vans across the country.
Internationalisation
• This is a strategy which involves expanding into foreign markets. Tesla’s first expansion move
into the foreign market was the opening of a showroom in London and Murich in 2009.
• As at 2016, the company staff had gone up to 17,782 and it has sold more than 186,000
electric cars worldwide.
• Tesla currently controls about 272 stores worldwide with 164 of these stores located in 26
different countries outside USA.
Internationalisation Strategy
• Tesla uses ”Transnational strategy” as its international strategy. The goal here is to achieve
low costs through economics of scale, location economics and learning effects while also
differentiating its automobile across geographic markets.
• This strategy means that a company maintains its operations in its parent country but extends other
ventures beyond international borders(Barnes, 2018; Fletcher et al., 2013). Still, the same
strategies are applied in international markets as they are used locally. Most of Tesla's operations
are in the United States, but it also runs manufacturing plants and sales outlets in Europe and Asia.
Its first international operation was opening a showroom in England in 2009. These international
operations are beneficial to Tesla's customer value creation.
International Strategy and Its Benefits
Tesla’s International Strategy are as follows;
• Direct Selling – Tesla sells to it customers directly and not through middle-men thereby
reducing total cost and eliminating conflict of interest.
• Buy back program – Tesla model S can be returned to the company after three years for a
payment of 43-50 percent of the original price. The company refurbishes it and sell to new
customer for 62% of the new car’s price.
• Strategically positioning stores and galleries – Tesla strategically positions its stores and
galleries in places with people traffic like malls and shopping streets (musk 2012).
• Local response to customer preference : Tesla uses its customer feedback to modify its cars
e.g the model S in china, adding an “executive rear seat” to the model. This costs about $2000
more than the standard model
International Strategy And Its Benefit contd.

• The benefits are as follows:

• Higher level of customer satisfaction as tesla is able to relate with
customer to know what they like .
• They reduce total cost by removing dealer cost like inventory
financing,insurance,advertising and sales commission (Bodisch,2009).
• They are able to secure revenue as they resale profit comes to them
because they sell directly to customers.
• Tesla is able to penetrate the main stream market as they are able to
sell to the middle class at an affordable price.
• The strategic positioning help people as Musk (2012) says “reach out to
people before they make a decision on a new car “.
Challenges Tesla faces with Customer Experience

• Inability to meet the growing demand - The demand for Tesla EVs is growing fast, and the
company is under pressure to fulfil the increasing orders and customer service needs(Jones
et al., 2020).
• Queues in Charging stations -
• Battery issues caused by environmental conditions.
• Software upgrade
Recommendations

• Optimize Collaborative Intelligence

• Collaborating with other Companies on Standard Charging
• Increasing Research in Battery Technology