Corporate Strategy for Tesla Motors

This report discusses the corporate strategy for Tesla Motors, a renowned automobile company. It includes an assessment of the macro environment, evaluation of industry attractiveness, identification of long term competitive advantage, and assessment of internal strength and capabilities. The report also analyzes the suitability, acceptability, and feasibility of the firm's marketing plan.

Corporate Strategy

Contents
INTRODUCTION.......................................................................................................................................3
TASK 1.......................................................................................................................................................3
P1 Assessment of macro environment.....................................................................................................3
P2 Evaluation of industry attractiveness..................................................................................................5
TASK 2.......................................................................................................................................................6
P3 Identification of long term competitive advantage.............................................................................6
P4 Assessment of internal strength and capabilities................................................................................7
TASK 3......................................................................................................................................................9
P5 Assessing the suitability, acceptability and feasibility of the firm......................................................9
CONCLUSION.........................................................................................................................................11
REFERENCES..........................................................................................................................................11

INTRODUCTION
Corporate strategy is a term implies for the development of new marketing plan for
expansion of business. In this report, corporate strategy has been devised for Automobile giant
Tesla motors. Tesla motors is an American automotive company located in Palo Alto, California.
It was founded in the year the year 2003. The report comprises of analysis of external
environment of United Kingdom. Report also covers the evaluation of industry attractiveness.
Moreover the report also contains the assessment of long term competent advantage of the
company. Further the report includes the identification of strengths and weaknesses along with
the opportunities and strength persist for the given organization. Lastly the report examined the
suitability, acceptability and feasibility of new marketing plan (Krämer, Tachilzik, and
Bongaerts, 2017).
.
TASK 1
P1 Assessment of macro environment
Pestle Analysis
Tesla is a renowned automobile name which produces cars that rely less on fuel and more
on electricity. The cars are categorized as luxury vehicles as the target audience falls under upper
class psychographic. Tesla’s environment friendly technology helps in reducing the carbon
footprints thus making it a more desirable automobile.
The PESTLE analysis evaluates the factors affecting the success and feasibility of the brand in
the market (Springer, Johnson, 2016)

.
Political Factors
The increase in populism in the previous years is proving to be an issue of concern. Since, Tesla
is a USA based automobile brand, the victory of Donald Trump has direct effects on the relations
of the two countries in different areas, including automobile. Other events like the Brexit and the
winning of Marine Le Pen in France has made the world political stability somewhat vulnerable
(Thompson, Strickland, and Gamble, 2015)
.
Economical Factors
The upcoming advanced technologies in the field of renewable energies and batteries have seen a
decrease in the cost. This reduction in the cost of the core resources can help Tesla offer the
vehicles at more affordable price. On the other hand, the Brexit has led to depreciation of the
pound resulting in some economic instability. In 2017, Tesla had to increase the prices of their
products by 5% to face the consequences of the depreciation.
Socio-cultural Factors
The climate is changing drastically. In response to the changing environment people are being
careful about the consumption that is playing a crucial role in the degradation of the
environment. More and more people are encouraged to buy eco-friendly products giving an
advantage to Tesla.
The income inequality level in the UK is higher as compared to the other developed countries.
Tesla has planned to produce more economical friendly vehicle to cater to this income difference
in the UK (Puranam, and Vanneste, 2016)
.
Technological Factors
Tesla markets itself as a brand that supports and implements advance technologies. Although,
this approach of brand image works in the favor of Tesla but also comes with a social
responsibility. The development of the products must go hand in hand with the advancement in
ecological technologies and renewable energies.
Legal Factors
The government has taken major steps for the advancement of electric and hybrid engines. These
actions are taken in the hope to encourage the purchase of environment friendly cars. According
to the government, Tesla models are eligible for the rebates as are few other countries in Europe .

Environmental Factors
Tesla has taken major steps and marketed itself as an automobile brand that contributes in
improving the environment conditions. It manufactures cars with both electric as well as fuel
running capabilities. However; Tesla cars consume less fuel than traditional cars. There are
electronic stations installed at various places making it easier for Tesla users to refill their cars
(Hickman, and Silva, 2018)
.
P2 Evaluation of industry attractiveness
Poster’s Five Forces Analysis
The five forces of Poster have been used to understand the existing and the potential competition
in the market.
The threats from new entrants- Weak force
It is challenging to set foot in the sector Tesla serves in. High capital expenditure can be
estimated to enter the electric vehicle market. Excessive seed investment makes the set up in the
business all the more challenging. Another factor which makes it harder to compete with Tesla is
its zero-compromise investment on brand development. Increasing economies of scale gives
Tesla a privilege over new entrants. Tesla’s founder Elon Musk is a popular influencer and a
respected entrepreneur, his popularity has a significant effect on Tesla’s brand identity
(Silverman, 2016)
.
The bargaining power of buyers- Moderate force
When it comes to electric automobile producers, Tesla has proven to be an important name.
Tesla strives to maintain a strong bond with their customers with their lucrative strategies and
quality service. Due to the availability of other hybrid cars, solar power cars and diesel cars as
options, it is likely for the customers to purchase other brands as the result of the low switching
cost. However, in some cases the low availability of substitutes limits customer’s bargaining
power.
The bargaining power of suppliers- Moderate Force
Supplier’s reliability is very important in Tesla’s supply chain management. The reassurance of
the resources available from the suppliers helps build Tesla a trusted industry environment. Some
of the suppliers associated with Tesla are relatively small enterprise. In addition to this, a good

number of suppliers use third party agencies to sell materials to Tesla thus has minimum
influence on the industry (Zhu, and Chen, 2015)
.
Threats of substitution- Moderate force
Threats of substitution is a weaker force in the Porter’s five force model as the number of
substitutes available in terms of automotive and material are low. Despite the factor of low
switching cost mentioned under the bargaining power of buyers, Tesla offers the highest quality
for the minimum price in the efforts to keep the threats of substitutions adequately low.
Intensity of rivalry among existing firm- Strong force
Existing automobile manufacturers with comparatively profitable market share have an
advantage over those who aspire to establish in the industry with minimum head-start. These
existing manufacturers have both research/development as well financial resources to enter into
this sector. These potential manufacturers put the competitive rivalry in a strong force category.
After analyzing all the five forces of the Porter model, it can be deducted that even though Tesla
is popular amongst the electric automobile sector; it would be beneficial for Tesla to expand the
psychographic segment and the target middle class to rule out the competition (Mazzei, and
Noble, 2017)
.
TASK 2
P3 Identification of long term competitive advantage
Resources are determinant of competent advantage to the company. But level of
competent advantage a resource provides to the company is different from another resource.
Resources competency are determined by the level of difficulty arises in procurement of those
resources, its value, capacity to leverage opportunities and difficulty in making exact copy of the
resource (Adamides, 2015)
.
VRIO Model
VRIO model is a framework used to analysis the competency of each and every resource
of the company in order to find out the most competent resource. VRIO stands for valuable, rare,
difficult to imitate and organised. VRIO analysis of Tesla motors is given below:-

Valuable: Workforce of Tesla motors is valuable because employees have sound
technical mindset. They are experts in bringing the innovation in the product. Patented
technology of the company is highly valuable. Technology of the company is highly advanced
and it have several equipment that can make cars with extremely delighting features. Financial
resources of the firm are also very precious because it aid in taking advantage of lucrative
investment growth that can accelerate the growth of the business. Brand image of the
organisation is excellent which encourage customers to buy Tesla cars (Spear and Roper, 2016)
.
Rare: Financial resource of Tesla is rare because it high number of sales and high profit
margin to gain such a remarkable asset value. Net worth of company is very high. Firm can
invest in profitable businesses and start-ups to further its capital and net asset value. Technology
is a rare component of the organisation that is beating all competitors. Tesla is a pioneer in
manufacturing and selling of electric cars. Tesla has highest market share in category of electric
cars.
Difficult to imitate: Patented technology is extremely difficult to emulate because it
Tesla exercise sole authorization over its technology. Competitors cannot access patent without
permission of Tesla higher authority. Patent is subject to confidentiality. In case if any
unauthorized person steals patent than legal action would be taken. Brand equity of Tesla is
difficult to imitate because it requires excellent branding and improvement in quality. Tesla is
producing electric vehicles and contributing in preservation of nature. This further enhanced the
corporate image of the company (Mollan, and Tennent, 2015)
.
Organised: Technology is organized to leverage other competent resources of the firm.
Tesla invests its capital in research and development to create high end technology that
manufacture fully featured car which sold in market drastically. Hence technological resources
are rendering long term competent advantage to the organisation.
P4 Assessment of internal strength and capabilities
Companies work for earning profit by serving customers. Ultimate motive of any
business is to make profit. Earning money is not tough in itself but competition makes it tough.
Company is required to identify its competency and the impact of external environment on the
growth of business (Arasti, Khaleghi, and Noori, 2017)
SWOT Analysis
SWOT analysis is a strategic technique used for recognizing competent position of a
firm. SWOT stands for strengths, weaknesses, opportunities and threats. SWOT analysis of
automobile giant Tesla is given below:-

Tesla Strengths Weaknesses
1. Company has a
technically sound and
innovative workforce.
It is a top employer in
the automobile
industry. It provides a
conducive
environment to work.
Company attract
talented employees
from all over the world
to become the part of
Tesla team.
2. It is market leader in
the automobile
industry. Company
relish maximum sales
over the year. Firm
overtake some of the
leading brands such as
Mercedes and BMW.
3. Tesla produces best
quality electric cars.
Company’s cars are
finest in terms of
mileage. Highest
mileage by electric
cars is 600 km in
single charge followed
by 520 km battery
backup of Opera
Ampere cars (Tesla
SWOT Analysis. 2020).
Tesla is a innovating firm.
Company regularly update
features of product. Firm is
famous for bringing
competent and convenient cars
in the market (Hardy, 2018).
4. .
1. Company enormous
effort to bring high
standard of innovation
leads to the increment
in the complexity and
production process.
Company is infamous
for delaying launching
of its new product.
2. Company is not able to
meet the demand due
to mechanical
complications. Supply
of Tesla cars is less
than demand which
have bad impact on its
brand value.
3. Company is not able to
achieve economies of
scale. It is unable to do
bulk production of
cars. Company failed
to manufacture cars in
large volume due to
expensive production
process, poor
management and space
complexity.
4. Dearth of batteries is
prominent factor in
low production of cars.
Inadequate supply of
batteries impact sales
and energy storage
system badly.
Opportunities 1. There is huge growth
potential in the Asian
market which is
2. Tesla is looking for in-
house production of
batteries which will

untouched by Tesla.
Asian consumers
aspires cars equipped
with high end
technology. Tesla can
serve the urge of
innovative cars.
lower down the
production cost and
increase scale of
manufacturing.
Threats 1. The biggest threat for
the company is advent
of hydrogen vehicles
which are more fuel
efficient and
environment friendly.
2. Customers are not
giving preference to
electric vehicles
because of time
consuming charging
process and expensive
process. Despite
several initiatives by
the government to
promote electric
vehicles it could not
become a trend
(Krämer, Tachilzik,
and Bongaerts, 2017).
TASK 3
P5 Assessing the suitability, acceptability and feasibility of the firm
Tesla-SolarCity Merger Analysis
In 2016, Elon Musk- the CEO of Tesla presented interest in merging with SolarCity which is a
US based solar power manufacturer. The products of both the companies were similar and were
viewed as strategically complimentary. Both Tesla and SolarCity are ambitious and constantly
growing.
Below is the analysis of the Tesla-SolarCity merger with the application of SAFe criteria to
determine the opportunities and constraints.
The SAFe criteria (Suitability, Acceptability and Feasibility) criteria helps weigh all the crucial
points that are to be considered while evaluating the result of the strategy even before its
execution. Extensive research in all aspects of a business is required to determine what factors
are going to affect the result scenario and by how much. All the possible strategy must follow the
SAFe criteria and the strategy that fits each of the criteria must be selected for the most effective
outcome and maximum profitability. Below is the comparison of all the Tesla-SolarCity
acquisition with all the three criteria of SAF model.
Suitability

Elon Musk saw an opportunity and showed an aspiration to move from a hydrocarbon economy
to an electric economy. He expressed his intentions of co-marketing sustainable products with
association with other companies. The collaboration of Tesla and SolarCity is seen to a
promising step. Meanwhile, other electric companies are struggling to limit solar adoption.
Before the proposal of the collaboration, both the companies were losing cash. Tesla carefully
managed its finances just before dealing with SolarCity’s debt (Chatterji, and et. al., 2018).
Acceptability: In order to examine the acceptability of various stakeholders power
interest matrix model has been implemented.
Power Interest Matrix
Power interest is a strategic tool used to determine the impact several stakeholder on the
dimension on power they possess and interest they exhibit. It is also called stakeholder
prioritization. It suggests the manner in which various in which different stakeholders should be
treated. Power interest matrix of Tesla is given below:-
High power and high interest: Shareholders have sufficient power to influence the
operation of business. They show elevated interest in all the initiatives taken by the company.
They are highly concerned with decline of the company. Firm is required to monitor them
closely. Deal with SolarCity will be cost effective due which profitability of the company will
hike and shareholder will get higher dividend. Therefore this deal will be accepted by
shareholders.
High power and low interest: Government possess highest power in influencing the
working of company but exhibit very low initiative in any initiative by the company. Company is
required to keep government satisfied by complying with rules and regulations enforced by them.
As acquiring SolarCity is green initiative that means it is a step towards sustainable development
using clean and renewable energy therefore government will accept the plan.
Low power but high interest: Customers have less power but maintain keen interest in
the matters of the company. Firm needs to keep them informed with the deals it undergo.
Customer will accept the utilization of solar energy for manufacturing process because it will
neither harm customer interest nor environment. Instead customers will be appreciate the use of
clean and renewable solar electricity.
Low power and low interest: Suppliers are the stakeholders owning less power and least
interested in the matters of the company. Suppliers have to be just monitored and informed.
Since their work will interrupt by this initiative therefore they would not disagree with
company’s decision to adopt solar energy to for electrifying the production unit.

Feasibility
Work in practice of the proposed strategy The success and the failure of the merger depend on
the knowledge of the potential synergies available and also on the fact that how well the capital
markets will rewards these synergies. The proposed strategy would work in practice on the basis
of the following factors:
1) If the two companies are able to reduce the cost of customer acquisition
2) The combination of the battery and solar array sales departments reducing the headcount
of sales force
3) The success of joint marketing and branding of all products
Financial support The shareholders of Tesla approved the merger and Tesla proposed to pay
$2.6 billion to buy SolarCity. The amount was to help SolarCity which was going through a
financial pitfall despite the growth in its revenue. The key question here is to identify whether
both the companies would be able to determine opportunities to reduce expenses.
Existing skilled employees The quality of the product and services is crucial at this stage of the
merger. Tesla began to fire SolarCity employees soon after the merger. These employees were
laid off on the basis of individual performance reports.
CONCLUSION
From the above report it has been concluded that macro environment is favourable for
growth of the company. The report also includes that most threatening force of Porter five force
model is competitive rivalry and the most weak force threat of new entrants. Moreover the report
also concludes that patent technology is the long term competent advantage for the company.
Further the report concludes that company have enough strength to leverage the opportunities
emerging in the world. The report reason out that new initiative taken by Tesla is suitable,
acceptable by the all the stakeholders. It is also very feasible for the business operations of the
company.
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Online
Tesla SWOT Analysis. 2020[Online] Available through< https://bstrategyhub.com/tesla-swot-
analysis>/.
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