According (ROCE) and increase profit margins, CEOs need

According to Griffin and Shen
(2013), the automotive industry generated an annual domestic revenue of $2.3
trillion USD and annual global revenues of $9 trillion USD.  As of the December 2017, the industry
employed over 2.9 million people in areas such as manufacturing and retail
trade (“National Employment,” n.d., Seasonally Adjusted Table). 

The following five industry forces
within the automotive industry are the most important factors that executives
should consider:

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

1.                 
Bargaining
power of buyers: As buyers get more sensitive to prices, they would switch to
any other brand that would offer greater value for the money they are willing
to spend.

2.                 
Bargaining
power of suppliers: nowadays, car manufacturers are becoming system
integrators, thus relying heavily on their suppliers

3.                 
Rivalry
between established competitors: 
competition is fierce and car makers should pay great attention to their
competitors.

4.                 
Threat
of entry: The costs of entering the market is very high, which would create a
barrier to new entry.

5.                 
Threat
of substitutes:  Other available
transportations don’t impose a great threat to the car’s market, since they are
not as convenient as cars.

To optimize their return on capital
employed (ROCE) and increase profit margins, CEOs need to consider investing in
new technologies to address the increase in regulations with respect to the
environment and safety standards (Mohr et al., 2013, page 10); maximize their
buying powers to minimize the cost of goods by partnering with various
suppliers; maximize their inventory turnover using electronic data interchange;
and minimize their capital deployment through outsourcing (Grant, 2016, page 62)

A report by KPGM (2017, page 9),
indicates that 50% of automotive executives believe that battery electric
vehicles to be the #1 trend, followed by connectivity and digitalization, and
Tesla seems to be leading the industry in manufacturing electric vehicles. 

Tesla is well positioned in the
market for electrical vehicles (EV) automakers; currently, it offers four
models that cater to different needs and classes.  It offers the Roadster, which is a high-end
car that starts at around $200,000, and it also offers the Model 3 car that
starts at $35,000.  To demonstrate their
successful position, Tesla’s Model S held the first position in EV sales in the
first half of 2017, where the company sold 11195 Model S (Klippenstein, 2018)

Steinbuch (2015) lists seven reasons
on why Tesla has been so successful, and others may have failed:

1.                 
Technology:
Tesla’s battery technology is so advanced that other companies use their
batteries.

2.                 
Timing:
Tesla’s entry to market was at the right place at the right time.

3.                 
Monopoly:
Tesla is moving towards dominating the high-end electric sports car by their
Roadster model.

4.                 
Team:
Their team is a diversified team that has great engineering and sales skills.

5.                 
Distribution:
Tesla’s is working on expanding their factory to the Gigafactory, which will be
able to produce cars at much higher rates.  

6.                 
Durability:  It seems that a 2014 Tesla Model S has been
in taxi services for over three years and surpassed the 250,000-mile mark,
which is uncommon to in the EV market (Szymkowski, 2018)

7.                 
Secrets:
Tesla knew that it needed to design cool EV for the famous eco-conscious
drivers

As population increases, the demand
for a more efficient and affordable car that meets regulations and standards is
on the rise, and the auto manufacturer that capitalizes on this idea will
develop a competitive advantage and increase their market share in this area of
manufacturing.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grant, R. M. (2016). Contemporary
strategy analysis. Chichester, West Sussex, UK: John Wiley & Sons Ltd.

Griffin, G., & Shen, L. (2013).
Automobiles and personal vehicles industry. Salem Press Encyclopedia.

Klippenstein, M. (2018). Electric
Vehicle Sales in the United States: 2017 Half-Year Update. online FleetCarma.
Available at: https://www.fleetcarma.com/electric-vehicle-sales-united-states-2017-half-year-update/
Accessed 14 Jan. 2018.

KPMG. (2018). Global Automotive
Executive Survey 2017. online Available at:
https://home.kpmg.com/xx/en/home/insights/2017/01/global-automotive-executive-survey-2017.html
Accessed 14 Jan. 2018.

Mohr, D., Müller, N., Krieg, A.,
Gao, P., Kaas, H., Krieger, A. and Hensley, R. (2013). The road to 2020
and beyond: What’s driving the global automotive industry?. online Available
at:
https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/the-road-to-2020-and-beyond-whats-driving-the-global-automotive-industry
Accessed 14 Jan. 2018.

National Employment. (n.d.).
Retrieved January 12, 2018, from https://www.bls.gov/iag/tgs/iagauto.htm#emp_national

Steinbuch. (2018). 7 Reasons
Why Tesla Has Been So Successful. online Available at: https://steinbuch.wordpress.com/2015/01/22/7-reasons-why-tesla-has-been-so-successful/
Accessed 14 Jan. 2018.

Szymkowski, S. (2018). Tesla
Model S durability: cars with 250K and 300K miles still humming along happily.
online Green Car Reports. Available at: https://www.greencarreports.com/news/1112465_tesla-model-s-durability-cars-with-250k-and-300k-miles-still-humming-along-happily
Accessed 14 Jan. 2018.

Author:

x

Hi!
I'm Eileen!

Would you like to get a custom essay? How about receiving a customized one?

Check it out