tesla case study

Tesla: A Comprehensive Strategic Analysis

By: Herb Benson, Robert Korn, Samantha Nettnin, and Kevin Peterson

Tesla Motors (TSLA) History• Founded in 2003 by Elon Musk (Current CEO), JB Straubel (CTO), Martin Eberhard, Marc Tarpenning,

and Ian Wright

• Tesla Roadster

• First manufactured product, offered from 2008-2012

• Model S

• Currently only vehicle offered, 2012-present

• Model X

• SUV, expected to be sold in early 2016

• Model 3

• Expected to be offered in 2017

• Target Price: $35,000

• IPO: January 29, 2010, raised US$226 million

• First American car company to go public since Ford (F) in 1956

• Turned first profit in Q1, 2013

Mission and Vision

• Mission Statement: Tesla Motors designs and sells high-performance, highly efficient electric sports cars, with no compromises. Tesla Motors cars combine style, acceleration, and handling with advanced technologies that make them among the quickest and the most energy-efficient cars on the road.

Courtesy www.teslamotorsinc.blogspot.com

• Vision Statement: To “create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles.”

Copyright | CENGAGE Learning | Strategic Management

General Environment Analysis

Segment Elements Industry Effect

Political/Legal • Regulations on Emissions and Safety Standards• National Traffic and Motor Vehicle Safety Act, 1966• Energy Policy and Conservation Act, 1975

Neutral

Technology • Higher demand for reliable, fuel efficient vehicles• Alternate fuel vehicles (Ethanol, Biodiesel, Hydrogen Fuel

Cells)• Online shopping/research

Positive

Sociocultural • Luxury vs. Economy Vehicles• Power vs. Fuel Efficiency

Positive

Industry AnalysisForce Description Influence on Industry

Threat of New Entrants • Mature Industry has reached Economies of Scale

• High Initial Capital Requirements• Difficult Access to Distribution Channels

Low

Bargaining Power of Buyers

• Private and Commercial buyers account for majority of revenue

• Low Switching Costs• Buyers are unable to integrate backwards

Moderately High

Intensity of Rivalry Among Competitors

• Gaining Market Share means Reducing Market Share of Competitor

• Few Opportunities for Differentiation

High

Type of Firm Description Industry Attractiveness

New Entrants High Startup Costs, Legal Fees, Intense Competition Very Unattractive

Incumbent High Liquid Assets, Distribution, Holding Costs Moderate

Integrated SWOT Analysis• Strengths

• Brand Equity

• Product Quality

• Eco-friendly Product Line

• Enhanced Opportunities• Increase Market Share through High-Growth EV Industry

• Limited Threats• Consumers Deterred due to “Range-Anxiety”

Competitor Analysis: Toyota

Strategy Current Strategy

Business Differentiation: The firm seeks the broadest possible market with distinctive offerings

Corporate Related Linked: The firm operates five automotive brands (including Toyota, Lexus, and Scion) in addition to partnerships with other automotive and nonautomotive firms

Cooperative Horizontal Complementary Strategic Alliance: Each partner is committed to combining their resources and skills to create value within the value chain

International Transnational: the firm seeks to achieve both global efficiency and local responsiveness.

Competitor Analysis: General Motors

Strategy Current Strategy

Business Differentiation: The firm seeks the broadest possible market with distinctive offerings

Corporate Related Linked: The firm operates thirteen brands (including Chevrolet, Buick and Cadillac) in addition to partnerships with other automotive and nonautomotive firms.

Cooperative Horizontal Complementary Strategic Alliance: Each partner is committed to combining their resources and skills to create value within the value chain

International Transnational: The firm seeks to achieve both global efficiency and local responsiveness.

Competitor Analysis: Conclusions• Strategic Competitive Advantages

• Toyota• Market Power

• Capital Resources

• Just-in-Time (JIT) Inventory Management System

• General Motors• Capital Resources

• Diverse Product Offering

• First to Offer New Technology• Chevrolet Volt, Wi-Fi in cars

• Future Industry Assumptions• Culture shift towards energy efficient

and renewable energy

• Eco-Friendly companies will have more long term success

• Future Major Objectives• “Greening”

• Product Lines• Supply-Chain Networks• Operations• Marketing Messages

Current Strategies• Business Level: Focused Differentiation

• Target early adopters with high income

• Corporate Level: Related Constrained• Dominant business selling cars but also sells electric power train parts

• Cooperative Level: Strategic Alliances• Panasonic, Toyota, Dailmer, Mercedes Benz,

• International Level: Transnational• U.S, Asia, Australia, Europe, and Canada

• Centered in California

Value Chain ComparisonToyota General Motors

Marketing Superior Superior

Distribution Inferior Inferior

Important Financial and Nonfinancial DataTesla Toyota General Motors

Earnings Per Share -$2.36 $10.67 $1.64

ROE -10.81% 14.8% 7.5%

Net Income -$294,000,000 $19,891,000,000 $3,949,000,000

Long-Term Debt to Capitalization Ratio

55.5% 2.8% 18.4%

Revenue $3,198,000,000 $256,585,000,000 $155,929,000,000

Important Nonfinancial Factor: Culture

VRIN Analysis: BatteriesValuable Yes

Rare Yes

Inimitable Yes

Nonsubstitutable Yes

Result: Sustainable Competitive Advantage

Strategic Issues• Small company• Limited capital

• Niche market• Charger network• Range concerns

• Lithium-ion batteries

• Distribution network

Distribution Network

New Strategy FormulationStrategy Positives Negatives Response


New partnerships for supplying drive train components

-Growth potential-Valuable expertise-Furthers EV adoption-Early-mover-Distribution network-Low risk

-Limited Resources-Competitor conflicts-Lower Margins

-Imitation





-Imitation

Enter mainstream automotive market

-New customers-Furthers EV adoption-Limits partnerships

-Lacking resources-Distribution network-Moderate risk

-Pricing-Alliance relations-Litigation





-Imitation


-New customers-Furthers EV adoption-Limits partnerships

-Lacking resources-Distribution network-Moderate risk

-Pricing-Alliance relations-Litigation

Enter renewable energy market

-Growing industry-Valuable IP-Green Energy-New Market

-Lacking experience-Higher risk

-Pricing-Contracts

New Partnerships for Drive Train ComponentsStrategy Old New

Business Differentiation Differentiation

Corporate Related Constrained Related Constrained

International Transnational Transnational

Cooperative Strategic Alliances Strategic Alliances

7S Implementation

Strategy Expansion of production facilities, Aggressive R&D

Skills Acquire employees with mass production experience

Staff Increase in all levels of staff

Action Item Timeline

New production facility – additional capital required 2-4 years

Develop partnerships to supply drive-train components 1+ years

Enter Mainstream Automotive MarketStrategy Old New


Corporate Related Constrained Dominant Business


Cooperative Strategic Alliances Vertical Strategic Alliances

7S Implementation

Strategy Expansion of production facilities

Skills Acquire employees with mainstream automotive experience

Staff Increase in low and mid-level staff


New production facilities – additional capital required 4-5 years

New distribution network 2+ years

Enter Renewable Energy MarketStrategy Old New


Corporate Related Constrained Related Linked


Cooperative Strategic Alliances Horizontal Strategic Alliances

7S Implementation

Strategy Expansion of production facilities

Skills Acquire employees with renewable energy experience

Staff Increase in upper-level staff


New production facilities – additional capital required 2-3 years

New partnerships with similar companies 1+ years

Consumer-level renewable energy 1-2 years

Business-level renewable energy 3-4 years

New Strategy ChoiceStrategy Reason


Smallest change from current strategy Least risk Large growth potential Shortest time frame Distribution network


x Distribution networkx Moderate riskx Competitor response

Enter renewable energy market

x Largest change from current strategyx Unfamiliar with marketx Competitor responsex Contracts

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tesla case study