Question 1
The current situation that is evolving with regards to the Tesla’s involvement in China is very interesting at the moment (Du and Ouyang, 2017). This week was especially important due to the fact that there was confirmation from Tesla with regards to the fact that Chinese government is allowing them to build a factory near the city of Shanghai (Du and Ouyang, 2017). It is a huge development as it would allow them to make sure that they can access the huge Chinese market with greater ease now. The deal at the moment though is not confirmed and if that happens, it is going to be one of the biggest achievements for Tesla in the coming time period (Moritz et al. 2015). The other major development that has happened currently is that there is confirmation with regards to the way Chinese government is allowing Tesla to setup their shop in the free trade zone (Moritz et al. 2015). The rumors were circulating in this regard for considerable amount of time as the electronic car maker has a clear agenda with regards to the Chinese market that how they want to enter into this market and capture the huge potential that this economy has to offer (Du and Ouyang, 2017).
The deal that they are going to setup with the Chinese Government is about making sure that three main objectives of there are achieved (Lin and Wu, 2017). The first objective is to make sure that the share in the Chinese market of their can be increased. The other thing that they want to achieve in this deal is to make sure that they are able to stay independent with China’s requirement that how foreign automakers are supposed to forge the JV with the manufactures that belong to China. The third objective is to make sure that how the proprietary and intellectual property rights of their Electronic vehicles can be protected (Du and Ouyang, 2017). The important thing that is needed to be noted that China itself is becoming more and more flexible in terms of the way they are going to be operating at the global scale now and how they are going to allow foreign companies to operate in their country (Du and Ouyang, 2017).
On Tesla’s part, they had carried out a deal with Tencent Holdings which means that Tencent is going to be a major support as far as the expansion narrative of Tesla in the Chinese market is concerned (Jia et al. 2018). What Tesla seems to be planning at the moment is to make sure that they increase their production of the Model 3 small scale Sedan whose starting price is about $ 35,000 and it is supposed to charge about 220 mile per change range. It has to be noted that at the current moment, there are huge financial implications for Tesla to be operating in Chinese market as the company is thinking about its production to be increased by 500 % in next year (Du and Ouyang, 2017).
Question 2
Now, as far as the production and the way it is needed to be managed, it is an interesting scenario that Tesla has to make sure that they get it right. The way Chinese market is operating at the moment (Du and Ouyang, 2017); there are several key considerations that are needed to be taken into consideration (Jia et al. 2018). The way tax laws are working in China at the moment, they are pretty relaxed when it comes to facilitating the foreign investors. Not only is that, the general environment and the new government’s approach such that they are fairly liberal when it comes to their trade expansion (Du and Ouyang, 2017).
Coming towards the way this whole thing is supposed to be managed, the key thing that is needed to be kept in mind is that how the municipality and the production facilities are going to work out in the given time period (Du and Ouyang, 2017). Not only that, the cost of production that one gets to see in China is also on the fairly lower side (YANG and LIANG, 2017). All these things point out towards the fact that how China is a country that can be very good as far as the production perspective is kept in mind (Nunes et al. 2016). The other factor that is needed to be kept in mind is the way cost of production is going to work out. In China, the cost of labor and the electricity is on the lower side, so eventually the cost of production is always going to be lower in China (Du and Ouyang, 2017).
Keeping these considerations in mind, it would be better for Tesla to make sure that they should not keep their production at home and allow for setting up the production plants in China (Du and Ouyang, 2017). If the production plants are setup in China, another major advantage that is going to be happening is that how in the long run, it would turn out that when the cost of production is lower, the margins that Tesla expects to gain from this market is going to be severely increasing (Du and Ouyang, 2017). It has to be noted that China is one of the biggest market in the world and the way things are setting up at the moment, there is significant earning potential that Chinese people have at their disposal (Winkler et al. 2018). So the demand forecast for the region is quite positive. Not only is that, as the financial stakes that Tesla is taking in the region huge (Du and Ouyang, 2017). And as they have support from the government and the local company as well, it is a worth that they should be willing to take to make sure that they consolidate their position in the electronic vehicle market in the Chinese region. It also goes with the CEO’s plan where they see considerable future for Tesla in the Chinese market (Du and Ouyang, 2017).
Question 3
At the moment, things are going on fairly smoothly for Tesla in the Chinese market. There are few things though that could be done by Tesla to make sure that they strengthen their hold in the Chinese market (Du and Ouyang, 2017). There must be effort on Tesla’s part to make sure that they keep the prices at the initial level rather low in the Chinese market. Even though Tesla does not operate like that, it has to be noted that this is not the first time that companies have lowered their profit when operating in China to make sure that they are able to capture the market (Du and Ouyang, 2017). The idea is to make sure that the general consumer in China is able to have an insight about the product that they would be having at their disposal. The advantage that Tesla has over some of the other organizations that while other companies would not be able to lower the price due to the higher tax rate, the sort of understanding that Tesla has with the Chinese government might work to their advantage (Du and Ouyang, 2017).
The other thing that is needed to be done by them is to make sure that they do away with the traditional dealership model (Du and Ouyang, 2017). Tesla does not need any major dealership due to the fact that it is one of the more established brand names, so the idea that should be there on part is to make sure that they must be opting for the direct selling (Du and Ouyang, 2017). Effort must be made by them to make sure that they take control of the way marketing is working and setup their market channel, pretty much like the way Apple is currently operating in China (Han et al. 2014). Looking at the consumer profile of the people in China, it can be seen that they are highly technical savvy, but at the same time, they are some of the more price conscious customers (Han et al. 2014). As discussed in the earlier parts, if Tesla setup their production plant in the region, the lower cost of production would mean that they would be able to execute their business plan with greater degree of ease. The key consideration that has to be kept in mind is that how it would be made sure that proprietary issues are going to be resolved. This is where the some sort of clout that is enjoyed by Tesla is China is going to work out well for their advantage (Du and Ouyang, 2017).
The other major thing that is needed to be done by Tesla in the Chinese market is to make sure that they get the market segmentation right (Tan et al. 2017). What it means that the marketing interline has to be used to by them to make sure that they are able to develop insight about the sort of pricing mechanism that they need to have at their disposal to make sure that they get their pricing right (Han et al. 2014). The market dynamics of the Chinese market are changing all the time and the current market segments that are witnessed in China are based on the income level. What Tesla can do is that they target this market segment that values the efficiency in the technology. The characterization of the market segment is another area where they have to look after (Du and Ouyang, 2017).
The security of the value delivery chain is another deliverable that they have to take care off in an appropriate manner (Han et al. 2014). The idea on their part is to make sure that they are able to deliver the quality stream in their business (Han et al. 2014). What it means that the local partnership is needed to be carried out in order to make sure that whatever the value stream model that they are working on is being looked after in the appropriate manner (Winkler et al. 2018) . Tesla has always been one of the organizations that stresses on technology advancement as well as making sure that the personalized in store experience are being offered to the customer (Han et al. 2014). What is needed to be done is that the same experience should be replicated and attempts should be made to make sure that the Tesla enthusiasts that are residing in China are being looked after in the appropriate manner (Han et al. 2014). Tesla has amazingly adapted to this political environment (Jaruzelski et al. 2014). One must admitted its dramatic change in its attitude towards the Chinese governmen t (Jaruzelski et al. 2014). To build a better relationship with Chinese Government in the future, Tesla will have to consider both central and local factors (Jaruzelski et al. 2014).
Works Cited
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