Tesla Motors deals directly with its customers in a direct channel distribution strategy because of two main reasons which are; quality assurance and the limited number of customers with interest or can afford products from Tesla Motors. …
Tesla Motors has a short distribution channel based on the factors mentioned above; it is easier to deal with other manufacturers directly since the products have a limited market mostly due to their high cost. This is well in order, according to Musk (2006), as the company plans to maximize profits for use in further development of less costly products that will be available for other market segments. In this vein, the company produced the first ever fully electric sports car for the high-end market, with the cost of the first Tesla Roadster ranging over 109 thousand US dollars. Offering after sale services for this relatively novel phenomenon of vehicle design is another factor that results in the short channel length for Tesla.
Despite the company’s plans to expand and include middle and low-end markets in the near future Tesla Motors’ market is currently narrow (Babej and Pollak, 2006). If all goes according to plan, Tesla Motors will use all the revenue from the car and component sales, and capital from investors for research and development for vehicles that will see its customer base expand (Lamb, Hair and McDaniel, 2008).
Tesla has not yet announced any plans to include any intermediates in its distribution chain, though it may have to do so if production volumes increase. Since the products are high end, Tesla aims at ensuring that customers receive the value for their money, by offering after sales services and keeping track of its products for quality checks. These quality checks are to enable the firm to make adjustments in its designs to ensure that future products always supersede previous ones in terms of effectiveness, efficiency and usability (Tesla Motors, 2012a). Intermediary Functions by Channel Participants Tesla Motors is the only player in the sale of its sports cars to end consumers. Since these customers are in limited geographical locations, Tesla does all the distribution work as it can easily reach and satisfy all of them. In addition, Tesla offers after sales services and guides customers on the use and maintenance of the sports cars. Since Tesla is the designer as well as the manufacturer of fully electric sports cars, it means that the technology is not common knowledge, and Tesla trained professionals have to be available to train customers on the use of these machines (O'Guinn, Allen and Semenik, 2008). On the other hand, Tesla Motors sells electric vehicle powertrain components to vehicle manufacturers, who then incorporate them in their products for sale to final customers. By so doing, vehicle manufactu ...
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