For most of us, buying a new automobile is one of the most expensive and also one of our most important purchase decisions. Here in the US, a new car typically cost at least $20,000 and many people keep their cars for five years or more. Now cars are also quite interesting because they are products that are both highly functional it also very symbolic in nature. Most people who own cars drive them nearly every day. And since they're large and highly visible, they often serve as a signal to others. For example, the symbolic meaning of a Subaru is very different than that of a BMW. Now, I don't know about you but I really like cars. My first car was a used 1976 Chevy Camaro. I'm [LAUGH] sure many of you are not live at that time. But buying that car was where the highlights of my life. Since then I've owned a number of different cars including BMW, Land Rover, Alexis, Nissan, Plymouth. Remember those? Pontiac, Saturn, and several Saabs and Volvos. However, by far the best car that I've ever owned is a car that I currently own, a 2018 Tesla Model 3. What I like most about this car is how different it is from every other car that I have owned over the past 35 years. Now, what is most different about Tesla is what it doesn't have. For example since test those are electric vehicles. They have no engine, no transmission, no radiator, no muffler and of course, no gas tank. Because of all these differences, I had to completely change my perspective of automobiles. As a result, when I drive my Tesla, I feel like I'm driving a car for the very first time. In fact, I'm feel like I'm back in my Camaro in the early 1980s. That's just my Tesla makes me feel young again. Well, that's enough about me. Let's talk about the purpose of this case study. What we're trying to do here in this Tesla case is to illustrate and apply the concept of new retail to an actual business. Let's take a look at Tesla's background. Tesla is an American automobile manufacturer of electric cars and trucks that was founded in 2003. It is based in Palo Alto, California and the Heart of Silicon Valley and is headed by a fellow named Elon Musk, who currently serves as its CEO. As you may know, Elon is one of the world's best-known CEOs has appeared in movies such as Iron Man and has a huge social media following. He's really a celebrity. Now despite its recent founding and relative high price of his vehicles, Tesla is currently one of the world's largest automobile manufacturers and quickly expanding in scope. It's sales have steadily increased over time is introduced a number of new vehicles including a new space age Cybertruck and is opening new manufacturing plants in both Asia, and also Europe. Now in contrast, many traditional automobile manufacturers are facing declining sales now shrinking their product line. So on the surface, Tesla seems to be a company on the rise. However, over the past few years, its stock price has experienced dramatic ups and downs and both Tesla and Elon Musk are the targets of a substantial degree of skepticism variety of business leaders, academic experts, and the mass media. Now part of the reason for this skepticism is a way in which Tesla and Elon Musk conduct business, which is very different from traditional automobile manufacturers in almost every way including the way which Tesla handles its retail operations. Tesla's retail strategy is dramatically different from the way in which automobiles have traditionally been sold the assigned reading and video highlights some of these key differences. In brief, there are three main ways the Tesla differs from traditional car companies in terms of the retailing strategy. First of all, the number of retail locations. For a number of reasons, Tesla has far fewer at retail locations compared to nearly every other traditional automobile company. For example, there are around 50 Volkswagen dealers in the state of Illinois. But only six Tesla retail stores, and all of them are located in the Chicago area. Second, size and design of retailers. Traditionally, dealerships are large buildings located at the edge of a city or a town. They usually have dozens of cars lined up in expansive parking lot and also several within a large and glitzy showroom. In contrast, Tesla's retail stores are quite small and often located within a mall or shopping center and have just two or three vehicles in a rather austere showroom. Third, the role of retailers. The main role of most traditional dealerships is to make a sale which often involves a somewhat pushy sales person and may take several hours to negotiate the deal and complete the paperwork in contrast. The main role of a Tesla retail store is provide information about its vehicles. Also, prices are not negotiated and the purchaser Tesla can be done within five minutes or less on its website. In fact, over 70% of all Tesla sales are made online, away from stores. Perhaps in your pajamas. Now sometimes being different can be quite good but it can also be rather risky. Thus, I like you to consider the wisdom of Tesla's retail strategy in terms of marketing in a digital world. Specifically, I like you to answer the following three questions. First of all, what role do digital tools play in Tesla's retailing strategy and what are those tools? Second, what are the pros and cons of this strategy? And third, how can Tesla improve its retailing strategy? Well, I hope you enjoy working on this case study and I look forward to seeing your thoughts. Hey, thanks for sticking around here. Here's your bonus fact. Although Elon Musk is its current CEO and widely recognized as the face of Tesla, it was actually not one of its initial Founders. You know who they are? Well, before you Google it, the company was initially founded by two fellows, Mark Carpeting and Martin Eberhard and Martin is alumnus of the University of Illinois, go Alana. Good luck with the case.
