The environment, and internal environment. First of

The aim of this report is to
conduct a marketing audit of Tesla Inc., an automotive company with focus on
manufacturing electric vehicles.

The reasons for conducting this
marketing audit are to identify the company’s position in the marketing
environment, its objectives, strategies, and activities, which eventually aim
to identify strategic issues and problems, but opportunities too (Fahy and
Jobber 2015).

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Tesla was founded in 2003 by a
group of engineers who wanted to prove that electric driving was more possible
than most people would think (Tesla Inc. 2018). The electric cars segment in
which Tesla is operating has some unique features compared to the traditional
automobile segment. Electric vehicles take advantage of high oil prices but are
sensitive to changes in government regulations and technological innovations
that can affect costs and sales. Moreover, governments have started to
implement regulations regarding CO2 emissions and also, an
increasing amount of people are becoming environmentally concerned.

The marketing audit focuses on
the external environment, industry environment, and internal environment. First
of all, the external environment analysis focuses on aspects such as political
and legal factors, economic factors, social factors, technological factors, and
ecological factors (PESTEL analysis). The PESTEL model enables companies to
remain competitive by becoming aware of their external environment and identifying
any possible threats (Fahy and Jobber 2015).

Then it continues with the
industry environment analysis concentrating on the threat of new entrants, the
threat of substitutes, the bargaining power of suppliers, the bargaining power
of buyers, and the intensity of rivalry (Porter’s five forces). This framework
helps the company to identify the profit potential of an industry, and its key
players and/or new entrants (West, Ford and Ibrahim 2010).

Finally, the internal environment analysis is carried out
highlighting the company’s strategies regarding its organisational
infrastructure, human resource management, technology development, operations,
marketing & sales, and services. These factors were chosen because they
identify organisational strengths and weaknesses, and develop responsive
strategies (Aaker and McLoughlin 2010).

The United States government,
after successfully implementing greenhouse gas and fuel economy regulations for
vehicles manufactured between 2012 and 2016, they decided to develop additional
regulations in the future, starting from 2017 to 2025 (International Council on
Clean Transportation 2014). As a result, the new regulations would set a significantly
lower level of CO2 emissions allowed by vehicles produced during
that time.

The European Union has taken
similar action on this matter as well. They have passed laws that promote
innovative technologies for producing eco-friendly vehicles, eventually aiming
to reduce greenhouse gas emissions by 30% by 2020 (International Council on Clean
Transportation 2013). Moreover, they have stated that manufacturers whose CO2
emissions exceed the proposed targets will be fined (Official Journal of
the European Union, 2009).

The Chinese government has also
enforced regulations on fuel consumption standards and greenhouse gas emissions
since 2004, and recently, these regulations were developed even further.
However, China’s approach is more flexible with automotive manufacturers than
the European Union (Transportpolicy.net 2015).

All in all, the above lead to
tighter emission controls in the future and a shift in customers’ demand to
more environmentally friendly vehicles. Consequently, Tesla will most likely
benefit from this.

The financial crisis of 2008 had
a major impact on the world economy. However, China’s GDP was not affected as
much as the EU’s or the US’s, thus becoming the largest auto market in 2009
(OECD Economic Outlook 2009).

But, automotive companies are
part of a cyclical industry which means they produce high-value products with a
long lifetime. This implies that better financial conditions help vehicle sales
to increase. As a result, this relates to business cycles and GDP
(InvestingAnswers 2015).

Furthermore, commodity prices
have a major role. Oil prices affect customer demand and running costs, and raw
materials (e.g. aluminium and lithium) influence production costs (Bloomberg
2016; Market Realist 2015).

Ultimately, Tesla’s sales have
increased since world economies and people have recovered from the financial
crisis (Tesla Inc. 2015), and also oil prices are expected to increase which
might turn customers to alternative options (Bloomberg 2016). However, lithium
prices are high as well, which is used to manufacture their batteries (Market
Realist 2015).

Recently, an increasing number of
people have become environmentally concerned resulting in intentionally
avoiding certain brands (HuffPost Business 2015). In addition, when customers
can afford environmental-friendly products that are more expensive than
non-environmental-friendly products, they feel their social reputation
increases (Vladas et al. 2010).

In this case, Tesla is a premium
electric car manufacturer displaying environmental consciousness. Therefore,
this highly influences socio-cultural factors and people’s perception of this
company.

Technological advancements are
extremely rapid in today’s era. A few noteworthy examples are electric cars,
automatic parking systems, and improved safety controls. However, despite all
the enormous development in the automobile industry, customers still have
second thoughts on adopting an electric vehicle, mainly due to battery costs
and range anxiety (Tesla Inc. 2015).

Nonetheless, Tesla is offering a
variety of technological advanced electric cars and has also built a network of
charging stations to deal with battery range issues (Tesla Inc. 2015).
Moreover, Tesla has managed to cut down significant battery production costs
(Clean Technica 2014).

Climate change and environmental
pollution are much-discussed issues nowadays. A large amount of CO2 emissions
come from vehicles with internal combustion engines (Go Electric Drive, 2015).
Therefore, governments are seeking ways to reduce CO2 emissions by
trying to limit them and issue a fine to those who do not comply (International
Council on Clean Transportation 2013; Official Journal of the European Union,
2009).

However, Tesla manufactures
electric cars with little to none emissions that could harm the environment
(Tesla Inc. 2018). Furthermore, governments are trying to promote eco-friendly
automotive companies (International Council on Clean Transportation 2013; Go
Electric Drive 2015).

The automobile market requires
high capital investments for new entrants to cover production costs and staff
salaries. Tesla spends far less money compared to bigger industry players but
it re-invests a higher percentage of sales revenue to keep the company in
operation (Tesla Inc. 2015).

In addition, technical expertise
and technological innovations are another barrier companies have to face. In
order for automobile manufacturers to keep their cars affordable for more
customers, they need to achieve economies of scale and remain competitive.

Finally, Tesla is directly
selling its own cars to customers through their own dealerships. However,
well-established companies in this industry already have their own distribution
network in place, which makes it easier for them to enter the electric vehicle
segment, and also as they have the required capital in place Alternative forms
of transportation include buses, trains, airplanes, and bikes. However, none of
these are as convenient as a car. In densely populated areas, public transport
is more preferred but in rural locations, where public transport is less
available, more people own a car (American Public Transportation Association
2015).

Currently, electric cars are more
suitable for short distance journeys, thus public transport might be seen as a
threat. Also, for people who greatly take cost into consideration, public
transport seems like a better option. However, people who want to buy an
electric car are willing to pay the extra price, therefore Tesla’s customers
choose this vehicle based on its features.

Cars require numerous parts to be manufactured and in the
past, automakers would have many suppliers for these car parts. However, after
the 2008 financial crisis, this number has fallen. Now they use a significantly
smaller number of suppliers and have closer bonds between them (Bain &
Company 1999; Automotive News 2015).

Regarding Tesla’s batteries and
car components, they are produced by only a few companies which creates an
advantage for suppliers. However, Tesla is a significant customer who buys the
majority of the parts needed to build an electric car (Automotive News 2015).

The majority of automobile companies use traditional
distribution channels (i.e. ‘middle man’) through dealerships to sell their
vehicles. On the other hand, Tesla has its own network of dealerships which
cuts down costs and reduces the bargaining power of customers (Tesla Inc.
2015). However, price-sensitive customers may easily change to another company
for a lower price. Nevertheless, Tesla customers are very satisfied with the
company and its cars that they do not complain about the premium price

Tesla competes not only with
internal combustion automobiles, but with other electric-powered cars too.
Given the fact that electric vehicles are still in the introduction stage and
internal combustion automobiles have reached the maturity stage, it is only a
matter of time that electric cars will enter the growth stage and the mass
market (Johnson et al. 2011). Also, government regulations promote the
production of electric cars giving Tesla an advantage over traditional
automobile manufacturers. At the moment, there might not be a high level of
competition among electric car manufacturers but, an increasing number of
companies are planning to expand in the electric vehicle segment in the near
future (KPMG 2015).

Tesla’s organisational structure
is cost efficient because it hires less managers and employees, thus being able
to pay better salaries despite being a small player in the automobile industry.
However, only people with a high level of knowledge and expertise work for the
company (Tesla Inc. 2018b).

Moreover, this organisational
structure boosts productivity because it allows clear communication. For
example, fewer people are required to be consulted for a decision and less
supervision is needed, giving managers the opportunity on issues concerning
their goals and not spending time monitoring employees.

Tesla not only offers its
employees high salaries but also other incentives to boost their motivation and
productivity. For example, it gives its employees the ability to buy company
stocks (Tesla Inc. 2018b).

Although electric cars are a relatively
new technology, Tesla has a head start compared to other companies. Since it
has been active in this industry for a long time, Tesla has in its possession
the latest technologies and expert staff, making its cars the most advanced,
eco-friendly, and safe electric vehicles on the road (The Motley Fool 2016).

The Tesla factory in California
has been designed in a particular way to allow multiple products to be produced
at the same time while maintaining high quality standards (Tesla Inc. 2015).
Additionally, the company has plans to build its own battery manufacturing
facility in the US and also plans to expand in other countries as well to cut
down logistics costs (Tesla Inc., 2018c).

Tesla does not a great amount of
spend money on advertising. It simply relies on media coverage during its
events and word of mouth after that. Furthermore, as it has been already
mentioned, Tesla sells its cars through its own network of stores. In order to
place an order, customers have to go online on the company’s website and
customize their vehicle (Tesla Inc. 2015).

Due to customers’ range anxiety,
Tesla has focused on placing charging stations alongside main roads in America,
Europe, and Asia (Tesla Inc. 2015). Also, by the end of 2015, they owned over
100 service centres where customers could drive their Tesla car for it to be
repaired (Tesla Inc. 2015). To conclude, the external, industry, and internal
environmental analysis have showed that Tesla is operating in a very
interesting industry with great potential for growth and development in the
future.

From the external analysis it can
be concluded that electric cars are being promoted by all the key factors.
Recent regulations urge automotive manufacturers to adapt or comply to them.
Consequently, Tesla will most likely benefit from this. Furthermore, there is
an increase in Tesla’s sales since oil is getting scarce and thus more
expensive. Also, there is an increase in awareness of environmental problems
and hence willingness of people to buy an eco-friendly vehicle. In addition,
the company has developed a variety of extra features for its vehicles and has
also built a charging station network to deal with battery range issues.
Finally, Tesla manufactures electric cars with little to none emissions that
could harm the environment.

The industry analysis showed that
the electric cars industry has much potential in the future with new entrants
joining in. However, Tesla holds the upper hand which creates barriers for new
entries. Moreover, public transport or other electric car manufacturers may
appear as a threat at the moment due to costs. In addition, suppliers are
limited meaning that they have an advantage over the company. On the other
hand, buyers do not have much bargaining power since the majority are satisfied
with the company. Finally, there are not any major rivalries in this sector yet
but more manufacturers are expected to enter.

Overall the company’s internal
analysis showed that its organisational infrastructure is cost efficient and
boosts productivity, hires the most appropriate employees and motivates them
with high salaries and extra incentives, has in its possession the latest
technologies, does not spend a large sum of money on advertising but yet
manages to be trending, and pays great importance to after-sales services.

Based on the above, Tesla should adopt a more affordable
pricing strategy in the future to make its products more affordable and
attractive to maintain its competitive advantage, since it is almost certain
that new, well-established players will be joining soon in this small but
rapidly growing industry.

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