Introduction
It is common to experience poor performance in a company operating in a modern business environment. When a firm performs well in a market, the implication is that there is growth. The performance is an indication of the fact that consumers are willing to purchase the products of the firm. However, there are cases where the performance of a company is not as expected. In such cases, the organization is forced to come up with innovative measures to overcome the impediments to growth and attract more consumers. Companies can improve performance by adopting practices that are known to increase customer loyalty. The 6 Sigma is one of the avenues through which companies can enhance their performance (Pande, Neuman & Cavanagh, 2000).
In this paper, the author provides a framework through which Six Sigma can be used to increase customer loyalty to solve other challenges facing Tesla Motors. To this end, an overview of the model is provided. The analysis is done from the perspective of the consumer. To this end, the author of the paper evaluates what the customer values and are willing to pay for as far as the products of Tesla are concerned. The selection of Tesla Motors is ideal, given its poor performance in the stock market. A recent review of the company’s stock revealed a $5 decline in prices. The findings show that consumers are not willing to pay for the company’s products. Consequently, the organization provides an appropriate rationale for the application of the Six Sigma concept.
The essay is divided into three sections. In the first part, an analysis of the Six Sigma Way is outlined. A brief literature review on the application of this approach is provided. The discussion provides an insight into the best theoretical frameworks to use in underperforming companies (Pande et al., 2000). The second section provides an analysis of Tesla Motors. The aim is to establish the actual problem in the company. The third section provides the Six Sigma management plan for Tesla Motors using an appropriate theoretical framework.
Overview of the Six Sigma Way
As previously mentioned, Six Sigma is used to improve performance in a company. Chakravorty (2009) argues that the strategy provides a statistical variation required to analyze the status of the firm. The concept is also ideal for the development of suitable business strategies for companies aiming to improve consumer loyalty. According to Chakravorty (2009), the model was developed by Motorola in 1981. Companies make use of this concept to improve, among others, the quality of their products. Chakravorty (2009) adds that Motorola developed the strategy in a bid to identify and eliminate the causes of defects in its products. In this regard, Six Sigma can be used to improve the production processes of a company. Consumers are willing to pay for high-quality products. As such, the performance of the company improves.
The improvement of a company’s performance is an opportunity to increase its competitive positioning. Truscott (2003) points out that most consumers prefer a brand with high perceived value. To this end, Six Sigma allows a company to improve these perceptions. The statistical aspect of the model is realized in the improvement of the quality level to a maximum of 3.4 defects per million.
The Six Sigma approach has been tried and tested in several companies and business scenarios. For instance, the study by Chakravorty (2009) found that Motorola saved $17 billion as a result of integrating the model into its processes. However, some studies argue that the concept is only suitable for consumers of products from small and mid-sized enterprises (Pande et al., 2000). In spite of this, Chakravorty (2009) points out that the strategy can be used on organizations of all sizes as long as there is strict adherence to its tools. The following is an outline of the principles of this model:
- Focus on customer needs.
- We are reducing process variations using statistical analysis.
- Improvement and control of manufacturing processes.
- We are enhancing team spirit.
Analyzing Tesla Motors
Tesla Motors was founded in 2003. The objective of the founders was to produce fuel-efficient vehicles for the discerning consumer. The company produces vehicles based on the rising demand for alternative sources of fuel. However, the firm’s sales records reveal that it has been making losses consecutively from 2003 to 2013. The company is facing several problems in addition to its poor performance in the fourth quarter (Ratner, 2015). Some of the company’s problems include poor performance of the batteries produced and logistical challenges. Consumers are dissatisfied with the low quality of these products.
The automotive industry is very competitive. Issues touching on production have to be properly addressed to ensure that consumer perceptions towards a brand remain high. Recently, the Business Reference Services (2014) published an article describing demands in the automobile industry. According to the authors of this article, owners of motor vehicles are interested in performance. As such, Tesla Motors should improve the quality of its production processes to minimize the incidences of battery failure. Improved performance increases the brand’s ‘perception of value’ among consumers.
The drop in market share price implies that Tesla Motors needs to improve one of its operational procedures to boost the confidence of the market. The major challenges lie in the company’s production and supply chain departments. Ratner (2015) points out that Tesla Motors has a small target market. Consequently, the production of vehicles with poor quality parts has a negative impact on consumer perceptions. As a manager at Tesla Motors, I will use the Six Sigma concept to improve the situation.
Six Sigma Way and its Adoption in Tesla Motors
Overview
A critical analysis of Tesla Motors reveals a scenario where consumer perceptions of the brand are extremely low (Ratner, 2015). With regards to this, the Six Sigma concept will be used to develop an ideal plan to address this problem that is affecting performance at Tesla Motors. The plan is based on the theory of constraints. It will bring together the theoretical framework and the Six Sigma concept.
The Plan
The following is an action plan illustrating the actual procedures to be employed at Tesla Motors based on the Six Sigma principles:
Six Sigma is a process. The procedure outlined in the figure above is derived from the theory of constraints. According to Chakravorty (2009), the theoretical framework assumes that a company can improve its performance without having to increase costs of production. Truscott (2003) points out that the theory helps an organization to adopt Six Sigma by following the steps below. Implementation of the theory and the plan should take into consideration consumer preferences.The steps below will be followed by Tesla Motors in the implementation of the strategy:
- We are identifying constraints.
- They are exploiting constraints.
- Subordinating process.
- You are elevating constraint.
- You are repeating the cycle.
The steps are explained in the section below:
Identification of constraints
The production aspect of Tesla Motors contributes towards brand perception among consumers. Six Sigma identifies weaknesses based on the type of waste associated with the production process (Truscott, 2003). In this regard, the following is a list of the production weaknesses at Tesla Motors:
- Research and development.
- Overproduction.
- Transportation.
- Correction.
The production of faulty batteries is a result of a failure by the research and development department. Based on the theory of constraints, the research and development weakness emerges when companies tend to waste time on ambitious projects. Chakravorty (2009) argues that companies must focus on delivering quality services to the consumer. The overproduction cited is a result of Tesla Motors’ assembling of more vehicles than consumers demand. Transportation and correction are all elements of the supply chain. The slump in vehicle delivery is a result of the company’s inadequate flow (Truscott, 2003). Customers complain when deliveries are delayed.
Improvement of constraints
Most consumers opt for vehicles produced with minimum waste. Adoption of the Six Sigma approach will help me in minimizing this waste. Consequently, the performance of the company will improve (Pande et al., 2000). The theory of constraints supports the idea of innovation that puts emphasis on quality of production as opposed to the development of new products. In this regard, Tesla Motors’ research and development department should emphasize the improvement of the fuel efficiency of the vehicles as opposed to the development of new models (Truscott, 2003).
Delivery of vehicles to consumers is another major setback to Tesla Motors’ realization of profits. In this regard, I will recommend outsourcing the processes of its logistics department to minimize the time wasted due to weather challenges. According to Truscott (2003), Six Sigma alleviates transportation challenges by identifying process flows and providing an efficient site layout with corresponding lead-times.
Application of control measures
The improvement phase requires control measures to guarantee the success of the development plan. The study by Chakravorty (2009) found that Six Sigma comes into effect once the points of wastes in production are identified. The constraint theory points out that Poka-Yoke is one of the tools of Six Sigma that can be used in the identification of the activities that bring about wastage. Consequently, I will make use of this tool in the proposed plan. The approach will help the company to save on financial resources and improve consumer perceptions of its products. A similar approach was applied to General Electric. It resulted in a $2 billion rise in profits. Such a move will enable Tesla Motors to increase its market performance by reducing wastage in production (Ratner, 2015).
Conclusion
Six Sigma is one of the approaches used by modern organizations to enhance performance and consumer perceptions in the global market. The strategy is used to identify and improve the attitudes that clients have towards a given brand. Some of the issues that negatively impact consumer perceptions include wastage, bottlenecks in the distribution network, and faulty products. Currently, Tesla Motors is facing a number of problems that negatively impact its financial performance. Such problems include the production of faulty vehicles and erosion of market share and stock price. In this paper, I developed a plan to highlight the use of Six Sigma concepts to solve these problems. The plan was based on the assumptions made in the constraints theory. If Tesla Motors follows the recommended strategy, its performance in the market is likely to increase.
References
Business Reference Service. (2014). Research on modern automobile manufacturing automobile technology and innovation.Web.
Chakravorty, S. (2009). Six Sigma programs: An implementation model. International Journal of Production Economics, 119, 1-16.
Pande, S., Neuman, R., & Cavanagh, R. (2000). The six sigma way: How GE, Motorola, and other top companies are honing their performance. London: McGraw Hill.
Ratner, J. (2015). Tesla Motors Inc. has more problems than weak Q4 results. Web.
Truscott, W. (2003). Six Sigma: Continual improvement for business. London: Butterworth Heinemann.