Tesla's Business Model and Strategy

This assignment examines Tesla's unique business model and strategic approach. It explores how the company's focus on developing high-performance sports cars and cultivating a desirable public image among celebrities has attracted high-income earners. The analysis also delves into Tesla's financial strategies, including its reliance on vendor credit and access to substantial long-term funding through share issuances.

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Question one
Is Tesla Really a Disruptor?
A disruptive innovation according to Clayton Christensen refers to the process which a
product or a service takes cause initially in fewer applications at the lowest point of a market,
then steadily moves up and substitutes the dominant competitors.
The main argument is whether Tesla is in a position to alter the whole automobile sector
(Cao, and Emadi, 2012, pp 125). The firm best poise to be performing well reflecting on the 500,
000 pre-orders of all-electric Model 3 to be shipped to non-employees. The company can be
considered as innovative, considering its 14-year-old startup valuation which was over $53
billion. However, Tesla does not qualify to be described as being wildly creative or disruptively
innovative since it is not bright enough the kind of technology the firm is using. This is because
the electric cars which Tesla produces have been used for almost a decade now with no change
in technology. The technology itself is considered to be expensive and weak compared to the
internal combustion.
For Tesla to be a disruptive innovation, it must make use of cheaper technology to
produce substitutes that are of lower quality as compared to those provided by mature well-
established competitors (Debe, 2012, pp 48). Subsequently, the disruptor battens its
accomplishments, catching the industry unaware in the future.

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Additionally, it is recommended that as a result of the evolving technology, Tesla would
introduce substitute products which are considered to be better and affordable right from the
introduction stage (Massa, and Tucci, 2013, pp 18). Thus, initiating sudden renouncement of
consumers away from the incumbents to the upcoming participants who best make use of the
ability and change the economics of the disruptive technology.
The Company can also apply the different paths to industry change. It may decide to offer
a product that is more expensive, which will shift the buying patterns of the consumers due to its
superiority (Kimble, and Wang, 2013, pp 15). The alternative helps redefine the expectations of
the consumer thus leading to the creation of a new market space, and a prolonged period for
revenue to grow, but at the same time shrinking the gains which cause the industry to fall and
causes the sector to be reborn. This is based on new worth suggestion.
Second Article
The article gives a detailed argument for comparing and analyzing the four main
appearances of innovating current vehicle models which are portrayed by Toyota, BYD, and
Tesla. This study is based on the three major types of new energy vehicles which include hybrid
cars from China, perfect electric cars, and the fuel cell vehicles (Eberle, Müller, and Von
Helmolt, 2012, pp 8790). Tesla focuses on manufacturing electric luxury vehicles, targeting the
rich individuals who pursue to have the best quality products and the need to attempt recently
made brands. China’s leading BYD brand attaches importance to conserving the environment
and trying to curb air pollution. Finally, Toyota focuses on fuel cell vehicles and pure electric.

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The manufacture of new energy vehicles has to be based on an ecological environment
that is innovative. With the growth of the new automotive industry, this technology has got a
significant duty in leading to the growth of the automobile sector. The core technological
development is the battery, motor, and the electric control technologies (Gong, Wang, and Wang,
2013, pp 215). Thus, growth of new energy vehicles is impacted by innovation and the
ecological environment where proper utilization of resources, and creating cooperation with
research institutes helps create a climate conducive to innovation.
The market positioning is of significance when coming up with the new energy vehicles.
This is because individuals do not have enough information regarding new energy vehicles.
Creating awareness helps people understand the habits of the cars. Additionally, elaborating the
acquisition of energy would be of significance when coming up with the new energy regulated
vehicles. Hence, for the technology to succeed in the field and to gradually open up the market,
the target population must be well stipulated. This helps to have a good competition in prices but
occurs after creating a good understanding to the customers about the new energy vehicles.
The critical feature to developing a new energy automotive understands the business
model. A mature model is formed after a long-participation of all the sectors in the new energy
automotive industry and the inter-market (Turton, and Moura, 2008, pp 1096). Thus the model
developed for innovating new energy should involve the government, related to the enterprise,
and should be related to the operations of the company, based on research.
Mastering of the innovation path is also crucial in the development. Mastering enough
technology in the new energy vehicle is seen to be the only way the industry will propel to

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achieve growth that is long-term. The stages undertaken by BYD are the most suitable for the
manufacture of new energy cars.
Having a clear understanding of the customers is important to determine how the firms
tailor-make their products. For example, Tesla targets the rich in the society thus comes up with
car brands that are luxurious, including sports cars. On the hand, BYD targets the public
transportation sector, basing the technology of its vehicles to ET-Power of the. Based on the
customers, appearance of the cars and the accessories used make them attractive. The source of
energy to be used should as well be in a position to meet the desired needs and demands of the
target users. This results in innovation of new energy by the companies that are involved in the
production of vehicles such Tesla.
Question Two
The first article argues that there is little evidence to show that Tesla is an innovative
company. It deliberates that the firm has a transition from manufacturing few cars to making
massive productions of the same. Furthermore, investors prospect on the firm dominating a
future that may feature self-standing vehicles and with sustainable energy consumption.
However, the second article gives significant justification to show that the company is innovative
enough (Mazloomi, and Gomes, 2012, pp 3029). The article shows that the firm has developed to
become among the top ten most innovative organizations in the car industry, with solely over ten
years of operation. The team associated with the firm all have technical knowledge which when
put together significantly make the firm to be extra innovative.

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Second, the first article states that Tesla does not fit to be defined as a disruptive
innovation. The argument behind this is that it cannot be precisely defined the kind of disruptive
technology that the firm offers. This is because electric cars have been in place for a long time
without becoming cheaper. However, the second article argues that the coming up of Tesla’s
team to build a high degree of similar cars makes it achieve disruptive innovation among the
incumbent industries. Despite the focus on having an entirely electric vehicle by all the sectors,
Tesla has a design that is outstanding, with the interior materials being more luxurious. Their
prioritization in luxury cars enables them to achieve success in their sales.
Third, the article elaborates that there is uncertainty about Tesla becoming the winner in
the automotive technology since other main companies manufacturing cars apply the same
technology. In some instances, the make use of the same components (Thackeray, Wolverton,
and Isaacs, 2012, pp 7858). However, the other article argues out that Tesla shared out its patent
innovation with other firms, enhancing the growth of the new energy vehicle industry. The
company aimed to encourage the development of the technology.
The first article distinguishes Tesla from other companies such as iPhone which invented
cell phones, PDAs, and even digital cameras. Nonetheless, the second article gives the company
a thumbs-up as the only electric car firm that uses 18650 ternary battery. The Model S is the
award winning car in European when we consider the road safety. Its body makes use of
aluminum, hence the single in North America using the aluminum body.
Tesla is compared to Netflix which is viewed as a disruptive innovator in the video rental
market, first with DVDs and second by use of its live streaming. Also, there is no steady supply

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of revenue from any of it more mature products which help fund other progressive
experimentations and research. Though, in the second article, we see the success of Tesla
resulting from its unique business model (Richardson, 2013, pp 249). A Clear understanding of
its customers and meeting their demand, and ensuring that the worth of the business is
maintained is the main determinant of its progress. Development of high-end, highly performing
sports cars and dominating the industry, has helped attract high-income earners. Its focus is on
the public image that is perceived of celebrities. Tesla has got many vendors who provide it with
credit. The firm also was in a position to acquire a huge sum of long-term money as a result of
issuing common shares and preferred shares by the new US Department of Energy’s Advanced
Technology Vehicles Manufacturing projects.

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Bibliography
Cao, J. and Emadi, A., 2012. A new battery/ultracapacitor hybrid energy storage system for
electric, hybrid, and plug-in hybrid electric vehicles. IEEE Transactions on power
electronics, 27(1), pp.122-132.
Debe, M.K., 2012. Electrocatalyst approaches and challenges for automotive fuel
cells. Nature, 486(7401), pp.43-51.
Downes, L. and Nunes, P., 2014. Big bang disruption: business survival in the age of constant
innovation. Penguin UK.
Eberle, U., Müller, B. and Von Helmolt, R., 2012. Fuel cell electric vehicles and hydrogen
infrastructure: status 2012. Energy & Environmental Science, 5(10), pp.8780-8798.
Gong, H., Wang, M.Q. and Wang, H., 2013. New energy vehicles in China: policies,
demonstration, and progress. Mitigation and Adaptation Strategies for Global Change, 18(2),
pp.207-228.
Kimble, C. and Wang, H., 2013. China's new energy vehicles: value and innovation. Journal of
Business Strategy, 34(2), pp.13-20.
Marquis, C., Zhang, H. and Zhou, L., 2013. China's quest to adopt electric vehicles.
Massa, L. and Tucci, C.L., 2013. Business model innovation. The Oxford handbook of
innovation management, 20, p.18.
Mazloomi, K. and Gomes, C., 2012. Hydrogen as an energy carrier: prospects and
challenges. Renewable and Sustainable Energy Reviews, 16(5), pp.3024-3033.

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Richardson, D.B., 2013. Electric vehicles and the electric grid: A review of modeling
approaches, Impacts, and renewable energy integration. Renewable and Sustainable Energy
Reviews, 19, pp.247-254.
Thackeray, M.M., Wolverton, C. and Isaacs, E.D., 2012. Electrical energy storage for
transportation—approaching the limits of, and going beyond, lithium-ion batteries. Energy &
Environmental Science, 5(7), pp.7854-7863.
Turton, H. and Moura, F., 2008. Vehicle-to-grid systems for sustainable development: An
integrated energy analysis. Technological Forecasting and Social Change, 75(8), pp.1091-1108.

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Appendices