Strategic Analysis of Tesla Motors: Loopholes and Recommendations

Strategic Analysis

Executive Summary
Tesla Motors has ridden its status as growth company, as led by Elon Musk. The true financial
health of the organization is fragile than what is portrayed. The purpose of his paper is to
determine the loopholes and recommend strategies for Tesla. Based on the findings of internal
and external analysis using SWOT, Porter and PESTEL framework, opportunities and threats are
determined. The findings suggest that Tesla needs to increase its product and service range. Tesla
needs to cut its cost for attaining the profitability level.
The analysis from PESTLE suggests that there is a continuous research and development activity
going in Tesla. Tesla must avoid breaking regulatory laws that are related to unhealthy emissions
into the atmosphere. It is found that Tesla has experienced growth in the automobile industry.
Tesla has to pay higher interest for expanding in the overseas market. The findings of the report
suggest that Tesla nearly had $2.5bn long term debt and capital lease on their balance sheet. The
firm has a great scope for international expansion. The findings from Porter suggest that the
automobile industry faces intense competition. The performance and availability is not that much
of concern for Tesla however they do need to work on the costing factor.
It is suggested that Tesla needs to increase its revenue streams by greater marketing efforts. Tesla
may create a strategic alliance with Apple Inc. As Tesla intends to develop cars, they may use
their financial resources to build an affordable car while providing zero emissions. The report
further suggests that the supply chain needs to be enhanced in a manner that shall decrease the
cost of production, resulting in higher profitability.

Table of Contents
1. Introduction 3
2. Environmental Analysis 4
2.1 PESTEL Analysis 4
2.2 SWOT Analysis 5
2.3 Porter’s Five Forces Analysis 7
3. Organizational Analysis 9
3.1 Strategy Analysis 9
3.2 Performance Analysis 9
3.2 Customer Performance 13
3.3 Internal Current Performance 14
3.4 Internal Long Term Development 14
4. Capabilities 15
5. Recommendations 16
6. Conclusion 17
References 18

1. Introduction
Strategic analysis may be defined as the process of developing strategy for a business by
exploring the business environment. It is the process of conducting research on the business
environment and analyzing the company’s position in relation to the internal and external
environment (ArbabKash et al. 2014). This report shall conduct an environmental analysis using
PESTEL, SWOT and Porter’s framework. These frameworks shall help in analysing the
companies using external and internal forces. As a result, the strengths, weaknesses,
opportunities and threats shall be determined. Further, the organizational analysis shall be
conducted using value chain and VIRO analysis. The strategic issues may be determined so that
ethical and social considerations can be built.
Tesla was founded on 1st of July, 2003 in Delaware, US and it was founded by Martin
Eberhard and Marc Tarpenning but the company also considered JB Straubel, Ian Wright and
Elon Musk as their cofounders. The headquarters is in Palo Alto, California and they have been
working on electric vehicles, solar panel manufacturing and energy storage. Their main aim is to
make the world less dependent on fossil fuels. Tesla believes that the world needs to reduce their
reliability on fossil fuels and work for a zero-emission future. Their CEO, Elon Musk, who has
been the face of this company, sees this company as an independent automaker and aims at
providing electric cars at an affordable price to the average customers. The aim is to accelerate
the era of sustainable transportation by introducing more and more compact electric cars in the
market as much as possible. Tesla’s continuous growth confirms that the market is ready for this
change and responding so well to the organisation’s energy storage products and electric
vehicles. Under Elon Musk’s leadership back in mid 2016, the company’s corporate mission was

“to accelerate the world’s transition to sustainable energy” addressing the renewable resources
and its related market opportunities (Gamble and Thompson 2014).
2. Environmental Analysis
Environment analysis is one of the strategic tools to identify all the internal and external
elements which can affect the organization’s performance. It shall be useful in identifying all the
opportunities and threats.
2.1 PESTEL Analysis
PESTEL Analysis
Political For reducing the dependency on oil, the government is providing incentives to the
electric automotive companies. Therefore, there is a wide opportunity for Tesla for
expanding its market or conducting research and development (Grant 2016).
Economic The consumers are likely to purchase electric vehicles when the gas prices increase.
Tesla has high opportunity of sales as the gasoline prices are on a hike.
Social The consumers are becoming conscious about the environment. Therefore, there is an
increase in preference in the cars that add to fuel efficiency, safety and sustainability.
Technological Tesla is rapidly conducting research and development activities. There is a scope that
they develop innovative technologies while partnering with Apple or Google for
creating software for self-driving vehicles (Shahan 2017).
Environmenta
l
The automobile industry affects climate and natural resources. Tesla is enhancing
sustainability as it produces zero emission vehicles. Therefore, there is a push for

creating hybrid and electric vehicles.
Legal The US government is providing loan and incentives for the automobiles creating
environmental friendly vehicles. Tesla must avoid breaking regulatory laws that are
related to unhealthy emissions into the atmosphere (Frynas and Mellahi 2015).
2.2 SWOT Analysis
Tesla Motors has been designing, developing, manufacturing and selling the energy
storage products and fully electric vehicles. They have their own network of supercharger
stations, service centres and vehicle sales all around the globe (Frynas and Mellahi 2015).
Strengths
Tesla has been delivering new, highly advanced and innovative technologies
transforming the driving experience. They have a distinguished and unique status in the market.
They are not the only company providing such cars but they have dominated the market
thoroughly when it comes to high end luxury electric cars. Their growth shows how rapidly they
have increased their sales over the last few years. The sales increased 59% in 2014 and then 27%
in 2015 (Shahan 2017). The growth came from the demand of their Model S and Model X cars.
It is hard for new companies to enter the market which is already being dominated by Tesla, Inc.
Weaknesses
Tesla has been working on the development of their technology but it comes at a cost.
They have been burning through their cash over the time which is not significantly a very good