Tesla Direct Case

Tesla: Direct Marketing vs Franchising

Joyce A. Young, Indiana State University, Adiba Fattah, University of the Sunshine Coast, Australia, Paul W. Clark, Coastal Carolina University
January 11, 2021
North America
Marketing & Sales, Strategy & General Management
7 pages
channel design, governing structures, franchising, marketing channels
Student Price: 
$4.00 (€3.75)
Average rating: 

This critical incident describes a marketing decision faced by Elon Musk of Tesla. With the growing demand for Tesla electric powered automobiles, the company continued to rely its direct marketing channel. Musk had previously acknowledged that he could use franchised dealers in the future. Tesla remained the only automotive brand in the U.S. that did not use independent franchised dealers. Many states prohibited car producers from owning dealerships. Tesla had successfully challenged the law in several state courts and legislatures, but organized resistance had mounted in others. The latest setback had just occurred in Michigan. Given the state’s importance, Tesla faced the prospect of filing for its first federal court injunction. A win at the federal level would potentially open all 50 states to its direct marketing channel. With the recent rollout of Tesla’s Model 3, an electric car for the mass market, expanded distribution was critical. Students are asked to decide whether Musk should file suit in federal court or should he investigate the opportunities that franchising has to offer?

Learning Outcomes: 
  1. Assess the impact of a good’s product life cycle as it relates to a channel management decision
  2. Examine the concept of corporate channels and the reasons to develop such
  3. Examine the concept of franchising and the appropriateness of franchising to market a given product or service
  4. Explain the differences between product/tradename franchising and business format franchising
  5. Analyze and defend decision criteria relating to the use of contractual versus corporate marketing systems