Tesla Case Study

Criteria Facts What does this mean?

Market size The market size for the automobile industry is very large. Being such an immense market, companies in the car industry have a wide range of customers to satisfy. Billions of people have automobiles and these companies must aim to please as many of these consumers as possible based on various factors of their automobiles.

Scope of the competitive rivalry

(The competitive scope criteria addresses geographic scope (Global, National, Regional, Local), product scope, market scope and so on.) The geographic scope of the competitive rivalry is global. The product scope in the case of the automobile industry is very vague, mainly because every manufacturer produces a different product and has different areas of focus. The market scope is also very general since billions of consumers across the globe drive automobiles. The scope of the competitive rivalry spans across the globe since billions of consumers drive automobiles. The market and product scopes are both very generalized but each manufacturer may choose a specific market segment, for example, Mercedes-Benz aims their luxury product toward the wealthy segment of the market, whereas Ford produces a less luxurious product designed for everyone.

Market growth rate and position in the business cycle (development, growth, maturity, decline) The market growth rate is steady because of the amount of vehicle owners across the globe and the current position of the market is in a mature stage. The growth rate of the automobile market is always going to be steady. Automobiles are a necessity for a majority of the world’s population. It is becoming more and more common for youths to retrieve their driver’s license at a young age, making the market size larger.

Number of rivals and their relative size

(Relative size refers to each rival’s market share based on total sales for the overall market or, when applicable, individual market segments.) Each manufacturer within the automobile industry are considered rivals. GM, Ford, Chrysler, and Honda are all contributors to the same market. Some car manufacturers, such as Tesla, an electric car producer, aim toward a different segment. GM, Ford, and Chrysler control 76% of the market. The remaining 24% is composed of a variety of other manufacturers. Three vehicle manufacturers dominate the automobile market. As for a market segment, 5% of automobile sales are electric vehicles which means these vehicles are not yet prominent within the industry but are indeed growing at a rapid rate as they become more and more popular.

Number of buyers and their relative size

(Address the number of buyers in each market and market segment. Buyer size refers to the buyer’s volume of sales for the industry.) The number of buyers in each market and market segment is ??? This means that

Extent of rivals’ vertical integration (How far forward or backwards have the rivals extended their value chain?) Some rivals are further along in vertical integration than others in the automobile industry. For example, Toyota and Tesla have both established themselves as leaders in the electric car industry whereas some of the rivals are either just getting started or not quite there yet. Being a step ahead of market rivals and gaining a competitive advantage in such a large industry is vital for automobile manufacturers. The created value chain is important because it also makes customers think that their car company always has the latest technology.

Extent of rivals’ horizontal integration

(Horizontal integration applies to using the synergies in your value chain to produce different products or provide services for a different industry or market segment.) Horizontal integration is not something that every car manufacturer participates in. When a firm can expand their product focus to a completely different product and provide for different markets and offer different services, it not only boosts credibility but it boosts sales. For example, BMW produces luxury motor bikes, whereas Toyota does no such thing. This is only a minor example of what other car companies offer for extra products or services.

Providing consumers with different products or services expands a firms horizon as well as bringing in more revenue. When a new product or service is introduced, it will not only bring new customers but it will build loyalty with current customers. New products may draw in new customers that were not part of the original target market of the original product.

Types of distribution channels rivals use to access customers. (Do the channel types vary by customer segment?) Automobiles are usually sold through indirect distribution channels. Car dealerships are usually the middleman and are not always owned directly by the manufacturer. Channel types vary by segment. The fact that most cars are sold at dealerships are the main reason why the distribution channels are mainly indirect. Many dealerships carry a variety of vehicle makes and models.

Pace of technological innovation in production process innovation The pace of technological innovation in production process innovation is fair, however, as technology and capability increases, so will the pace of innovation. Creating new ideas in the production process in the automobile isn’t necessarily fast, although it is efficient. Building automobiles takes time and taking action with new ideas takes