Strategic Audit of Tesla Motors

This report is all about the strategic audit of Tesla Motors, an American Automobile company building and planning electric vehicles and cars. The report covers the corporate level strategy statement, strategic choices, strategic position, strategy in action, market reaction and more.

8/3/2019
Running Head: MGT 201 0
TESLA

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Contents
Introduction..............................................................................................................................2
Corporate Level Strategy Statement......................................................................................2
Strategic Position, Strategic Choices and Strategy in Action..............................................3
Market Reaction to Tesla Strategy.........................................................................................5
Conclusion.................................................................................................................................6
References.................................................................................................................................7

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Introduction
This report is all about the strategic audit of Tesla Motors, an American Automobile
company building and planning electric vehicles and cars. At present Tesla is operating at an
international level including the major markets of Europe, America and Asia. It is identified
that the demand for sustainable and electronic vehicle is continuously being rising bringing
various opportunities for Tesla in the market.
Tesla was instituted in 2003 and went public in July 2010. Internationally, the company has
delivered 90,700 vehicles including its various models i.e. X, S, and model 3 (Kopechi,
2019). Their revenue worldwide is 21bn USD and the company spend 1.46bn USD on
research and development department.
Corporate Level Strategy Statement
The corporate strategy statement of Tesla includes three main domains of Tesla i.e., the
company fundamental goals, scope or domain, and specific advantage or capabilities the
company have to deliver all of these. Tesla goal is to accelerate the advent of sustainable
transportation by creating persuasive mass market electrical vehicles to the marketplace and
become the major manufacturer of electric vehicles to match the urgency of the threats to
society showed by a warming ecosystem. In order to attain this end goal, big leaps in
technology are required that eventually needed a high level of scrutiny. Hence, in achieving
these goals, Tesla set various other objectives like making 5, 00,000 cars in the year 2019 and
so on (ttnews.com, 2019). In addition, the company growth strategies also include market
diversification and penetration to fulfil the requirements of all segments of customers. Tesla
strategies this goal by incorporating advanced technology in its electric automobiles and
associated products.
In relation with Tesla scope, the company manufacturers and produce various electric
vehicles for the upper level segments of the customers. The company also have an energy
product group include classifications with a series of applications used in businesses and
homes. The company also intends to invest in supercharging stations for its electric vehicles.
Growing demand for renewable energy also improves business scope while covering

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products such as batteries and other possibly cost-effective renewable energy solutions for the
prospect.
Tesla has several competitive advantages both tangible and intangible. For instance, the
battery supply chain is building for itself, supercharger network, early in innovation and Elon
Musk who fuel the engine of the success of Tesla over a long period of time. Altogether, help
Tesla to achieve its corporate goal effectively and efficiently.
Strategic Choices, Strategic Position and
Strategy in Action
Tesla extensive strategy emphases on worldwide expansion, strategic partnership, and
intensive growth strategy on both product development and market penetration. All these
strategies and its related concerns are divided into strategic choices, strategic position and
strategy in action to better understand the implications.
The macro-environment opportunities to Tesla include development of new Gigafactory to
increase automobile production. Tesla primary relies on its California factory to the
manufacturing of most of the cars (Campanari, Manzolini and De la Iglesia, 2009). As Tesla
aims to eliminate environment threats, government will also aid the company in each country
where they extended and thus prove to be a big opportunity for Tesla. On the contradictory
side, the threats of the company include growing name of big name competition in relation to
the corporations such as Google, Ford and Toyota. Many other companies are planning to
deliver low-cost hybrid and electric vehicles for the customers and this requires Tesla to start
providing lower cost models to significantly reduce the threats.
The industry forces are also managed by Tesla with continuous investment in research and
development to bring unique differentiation to their product portfolio. While facilitating
innovation, it also helps the company to proactively develop strategies for setting up control
over various industries forces. For instance, to deal with competitor, the company can
develop supercharger station in align with the electric cars to gain first mover advantage and
these stations will be profitable as they will be called to charge other cars too in the near
future.

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Tesla also meets stakeholder expectations through understanding their behaviour and motive
at an early stage and develop significant strategies to make them satisfied with the best
interest of the firm. For example, the company do various community-related programs such
as tesla START to bring revolution at the forefront of the electric vehicle.
The purpose of Tesla is explicitly defined under its mission statement to hasten the world
transition to sustainable energy. In a way, this recognizes the significance of the firm’s
batteries and associated energy storage products in marketplaces with aligning to the electric
vehicle market. Their mission and corporate culture also fit with the strategy to bring
revolution in the automotive sector through various innovations and long term directions.
Tesla business units compete while creating great progress on enhancing cost efficiency of
the corporate without forfeiting growth. For instance, Tesla has hired workers from many
business units to enhance their delivery networks. This will lead to making the employees
pitch in from various business units and benefit in delivering cars before the deadline.
Transferring of their resources from one business unit to another help the firm to gain
competitive in the industry (Fang, Palmatier and Steenkamp, 2008). The business portfolio of
Tesla is extensive and does not hold only electric cars segment. For instance, the company
produces batteries, super charger station and also undertakes SpaceX program.
Tesla can also ramp up Model 3 production and other models while preparing to expand
deliveries beyond Canada and U.S. China can be proved to be a wildcard market for Tesla.
To help address demand challenges in China, the company need to build manufacturing
capacity in the market in order to increase the level of localisation by local sourcing and
manufacturing.
Tesla is also innovating by standing out in the electric automotive business through designing
appropriate electrical vehicles. Of course, electric car technology has grew considerably and
there are many other businesses that have formed sustainable models (Bohnsack, Pinkse and
Kolk, 2014). However, Tesla has prospered in doing is resolving all the hang-ups with
innovative electric vehicles. It is also innovative as it has viewed beyond the initial problem
and reflected how energy systems can be formed to function more efficiency and upkeep the
network of vehicles. The company can also use online model to accelerate expansion in other
countries and do further developments.

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It can also be said that Tesla strategy is suitable, acceptable and feasible. Tesla product
concentration includes various energy products that are much required in the current era
diminishing by issues such as global warming and resource scarcity. Thus, their strategy suits
the current needs of environment protection with using more of renewable energy. It is also
acceptable by all stakeholders as the company strategy meets the expectations of almost all
stakeholders while speeding up the rate of adoption of electric cars. Tesla strategy is also
feasible as the company believes in long term future direction and drive down market to
better height.
Considering the process of strategy making, tesla starts with a purpose to produce electric
cars and implement it on particular target segment in order to evaluate effectiveness of the
strategies. The company also do several improvements in their products and brings new
models through diversification while evaluating their strategy timely. The required
organisation structure needs to be decentralised as Tesla is known to be as an innovative
technology company and decentralisation enables bringing out various creative ideas through
various directions. Space X program is the best example of this.
Tesla can also manage change by continuously scanning the business environment and
develop long term vision meeting the expectations of the stakeholders. With the help of
market development and incorporating share valued culture, Tesla can manage the change
effectively during the necessary time. In the strategy process, it is important for the
executives of the company including the CEO i.e. Elon Musk, to collectively join hands with
employees so that it will help in implementing the strategy in the right direction.
Market Reaction to Tesla Strategy
Judging by conventional wisdom, the marketplace reaction confronts each main metric taught
by business schools around the globe. Tesla astounding market capitalization does not require
any explanation. Over the course of 2018, Tesla share of the U.S. automotive market increase
to two per cent (statista.com, 2019). Considering only the electric market segment, Tesla
model 3 along has gained about 60% market share. It was also anticipated that the
international market for electrical vehicles is estimated to upsurge to over 567 billion U.S.
dollars by 2025 (statista.com, 2019b). This shows various opportunities to Tesla in relation to
its whole product portfolio.

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In the fiscal year 2018, Tesla successfully delivered 140,000 Model 3s. However, Tesla share
price crumbles 11% with following the release of lacklustre Q2 results (Walton, 2019). It
may be because potential customers are often required to put down sizeable deposits. In
relation with market commentary, Tesla is expecting to reduce its capital expenditure in the
2019 fiscal year while also meeting its last full year production guidance.

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Conclusion
In the limelight of above discussion, Tesla has shown their effectiveness in many sectors
other than electrical vehicles and due to its big venture in development and research areas, the
corporation is able to positively handle the diverse and complex essentials of the corporate
environment. Though, it is also significant for the enterprise to form up a world-wide
influence like many other corporates comprising BMW, Audi, GM and big enterprises also
working headed for the expansion of electrical vehicles.
Considering all, government support is also essential to boost people to purchase electric cars
and other products considering environmental sustainability solutions. This will also help
Tesla to meet the expectations of all stakeholders and achieve corporate mission statement.

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References
Bohnsack, R., Pinkse, J. and Kolk, A. (2014) Business models for sustainable technologies:
Exploring business model evolution in the case of electric vehicles. Research Policy, 43(2),
pp.284-300.
Campanari, S., Manzolini, G. and De la Iglesia, F.G. (2009) Energy analysis of electric
vehicles using batteries or fuel cells through well-to-wheel driving cycle simulations. Journal
of Power Sources, 186(2), pp.464-477.
Fang, E., Palmatier, R.W. and Steenkamp, J.B.E. (2008) Effect of service transition strategies
on firm value. Journal of marketing, 72(5), pp.1-14.
Kopechi, D. (2019) Tesla shares tumble as much as 10% as company misses Wall Street
vehicle delivery estimates, cuts prices [ONLINE] Available from:
https://www.cnbc.com/2018/12/31/tesla-4q-2018-production-and-delivery-numbers.html
[Accessed 03/08/2019].
statista.com. (2019) Tesla's estimated U.S. market share from January 2018 to December
2018 [ONLINE] Available from: https://www.statista.com/statistics/519579/market-share-of-
tesla-in-the-united-states/ [Accessed 03/08/2019].
statista.com. (2019b) Size of the global market for electric vehicles in 2017 and 2025 (in
billion U.S. dollars) [ONLINE] Available from:
https://www.statista.com/statistics/271537/worldwide-revenue-from-electric-vehicles-since-
2010/ [Accessed 03/08/2019].
ttnews.com. (2019) Tesla CEO Elon Musk Sets Goal of Making 500,000 Cars in 2019
[ONLINE] Available from: https://www.ttnews.com/articles/tesla-ceo-elon-musk-sets-goal-
making-500000-cars-2019 [Accessed 03/08/2019].
Walton, S. (2019) Tesla share price crumbles 11% as key financials miss the mark
[ONLINE] Available from: https://www.ig.com/en/news-and-trade-ideas/tesla-share-price-
crumbles-11--as-key-financials-miss-the-mark-190725 [Accessed 03/08/2019].