MGMT20132: Business Model Analysis of Tesla Motors

This report provides a comprehensive analysis of Tesla Motors' business model, focusing on key elements such as its novel value proposition, business operations, supply chain, and competitive advantages. It delves into the disciplined entrepreneurship and business model canvases, examining channels, customer relationships, revenue streams, and cost structures. The report explores Tesla's customer acquisition strategies, product unit economics, and overall financial performance. It also examines the company's design, build, and scaling processes, along with the assumptions related to customer desirability, technical feasibility, and financial viability. The analysis includes an argument for the selection of innovation tools and concludes with a reflection on the student's understanding of the subject matter.

Running head: BUSINESS MODEL ANALYSIS
BUSINESS MODEL ANALYSIS
Name of the Student
Name of the University
Author Note

1BUSINESS MODEL ANALYSIS
Executive Summary
The report is based on the analysis of the business model that has been developed by Tesla
Motors in the automotive industry. Some of the major elements of disciplined
entrepreneurship canvas and business model canvas have been discussed in the report in
detail. The innovation tools that had been previously discussed are also examined in the
report as well. The reflection is mainly based on the ways by which I have been able to
analyse the innovation tools and models of Tesla Motors in the industry. The support
provided by business model of Tesla Motors to improve the operations of the firm and its
customer base are analysed in the report as well.

2BUSINESS MODEL ANALYSIS
Table of Contents
Introduction....................................................................................................................3
Novel value proposition based on the business model...................................................3
Business model description........................................................................................3
Value proposition development.................................................................................3
Business operations development..............................................................................4
Supply chain development.........................................................................................4
Competitive advantage...............................................................................................4
Financial value capture..............................................................................................5
Strategic fit.................................................................................................................5
Customer acquisition..............................................................................................5
Product unit economics..........................................................................................5
Sales.......................................................................................................................5
Overall economics..................................................................................................6
Design and build....................................................................................................6
Scaling....................................................................................................................6
Elements of business model canvas...........................................................................6
Channels.................................................................................................................6
Customer relationships...........................................................................................7
Revenue streams.....................................................................................................7
Key resources.........................................................................................................7
Key activities..........................................................................................................7
Key partners...........................................................................................................8
Cost structure.........................................................................................................8
Business model canvas of Tesla Motors....................................................................8
Assumptions related to customer desirability, technical feasibility and financial
viability..................................................................................................................................9
Argument based on selection of the innovation tools................................................9
Reflection.............................................................................................................10
Conclusion....................................................................................................................11
References....................................................................................................................12

3BUSINESS MODEL ANALYSIS
Introduction
Tesla Motors is an energy and automotive based company that is of American origin
and it specialises in production of the electric cars. Headquarter of Tesla Motors is located in
Palo Alto, California. The influence that sustainability has on the operations of Tesla and its
business model will be an important part of the discussion that is to be made in the report.
The operations of Tesla Motors in automotive industry are influenced in a huge way by the
sustainability trends that are a part of the market (Tesla.com. 2019). The report will also be
based on the development of a proper business proposal of Tesla Motors. The reflection will
also be related to the disciplined entrepreneurship canvas of the organization and the business
model canvas of Tesla Motors as well.
Problem statement
The problem statement that will be addressed in the report is mainly based on the
automation related issues that have been faced by Tesla Motors due to which the company
has received huge criticisms as well. The accidents that have been caused by the fully
automatic cars are major issues that will be addressed in the report in detail.
Novel value proposition based on the business model
Business model description
The market of electric vehicles in which Tesla Motors is currently operating has been
able to depict immense levels of growth in the last few years. The new regulations that have
been set based on the vehicle emissions and the advances in technologies have been able to
influence the operations and business model of Tesla as well. The acceptance of electric cars
on a mainstream basis is mainly based on the customer base that has been formed by Tesla
Motors. The direct sales and services that are a part of the operations of Tesla have an impact
on the customers who are attracted towards the organization (Forbes.com. 2019).

4BUSINESS MODEL ANALYSIS
Value proposition development
The value proposition of Tesla Motors is developed with respect to the performance
that is depicted by the cars or vehicles of the organization and connective services that are
provided to them as well. The organization has aimed at increasing the connectivity levels
between consumers and the environment that is mainly enabled by the IT based hardware and
the software applications as well. Data network is offered by Tesla in cars with the support
that is provided by its telecommunication partners (Cherubini, Iasevoli & Michelini, 2015).
Business operations development
The management of the operations of Tesla Motors has developed many different
objectives based on the strategic decisions that have been made by the firm. The strategic
decisions that have been made by Tesla motors are mainly related to the solutions related to
energy business and automotive solutions that are offered by the organization. The success
levels of Tesla Motors are based on the appropriate application of various practices related to
the development of proper operations (Degirmenci & Breitner, 2017).
Supply chain development
Tesla Motors has been able to stand out in the electric vehicles industry with the help
of the world class level supply chain that has been formed by the organization. Tesla has been
able to design, manufacture and sell the cars of the organization with the help of the services
network and the sales operations of the firm as well. Tesla has formed an efficient supply
chain by including different types of suppliers in the industry.
Competitive advantage
The competitive advantage that has been formed by Tesla Motors is based on five
major factors that include,
 The battery based supply chain that the company has developed for itself.

5BUSINESS MODEL ANALYSIS
 The wonderful network of the superchargers that have been formed by Tesla
Motors.
 Software that is highly effective and is able to support the processes and
customer services (Ehsani et al., 2018).
 The reputation for development of superb levels of products that have amazed
people.
 Tesla Motors also has the reputation for serving the customers in an honest
and direct way.
Financial value capture
The value that is created by Tesla Motors in the industry is affected in a huge way by
the financial capabilities of the organization and the customers as well. The organization has
also been able to create a new sector that is a part of the car industry and is able to provide
better solutions to the organizations as well (Helmers, Dietz & Hartard, 2017).
Strategic fit
Customer acquisition
The customers of Tesla Motors mainly include the entrepreneurs and executives who
are tech-savvy in nature. Mostly the male customers who are looking for cars are major
customers of Tesla Motors in the automobile industry. The young and wealthy customers are
purchasing the crossover SUV of Tesla Motors.
Product unit economics
The pricing of products or cars of Tesla Motors are considered to be quite high in
comparison to the cars that are provided by the organizations. Tesla aims at maintaining the
operations and offering its product in the premium segment of industry (Kim, Ko & Park,
2015).

6BUSINESS MODEL ANALYSIS
Sales
Tesla Motors is dependent on many channels for the purpose of the selling the
products and reaching the customers as well. Different places that are involved in the
development of the channels of Tesla include the company-owned galleries and stores,
company-owned service centres, charging stations and the official website of the organization
as well.
Overall economics
Tesla Motors has spent huge amounts in the research and development based
activities that have to be performed by the organization. Research and development is able to
assist the operations and improvement of the products or cars that are offered by the
organization (Li et al., 2017).
Design and build
The unique designs and offerings of the products of Tesla Motors have been able to
attract the customers towards the organization. The corporate objectives that have been
developed by Tesla have been able to influence the product development process of Tesla
Motors.
Scaling
The cars of Tesla Motors are considered to be quite unique in nature and have the
ability to fulfil needs of consumers based on future of the automobile industry. The
environmental concerns that have been raised in the last few years have an impact on
development of the cars and the customer relationships as well (Liao, Molin & van Wee,
2017).

7BUSINESS MODEL ANALYSIS
Elements of business model canvas
Channels
According to Manzetti & Mariasiu, (2015), Tesla Motors is considered to be a
newcomer in the automobile industry and the company uses conventional network of
dealership for the purpose of vehicle distribution network. The multi-channel model has been
formed by Tesla Motors that involves the retail stores and the online stores as well. The
potential base of customers of online stores of Tesla is helpful for providing chances of direct
purchase to them. High integration of the IT services have an impact on the culture that is
developed by the company.
Customer relationships
The customer relationships that have been established by Tesla Motors are supported
by the software updates that are provided by the organization based on vehicle recalls. The
charging stations that have been formed by Tesla Motors in diverse parts of the world have an
impact on range of the batteries that have been used by the firm (Manzetti & Mariasiu, 2015).
Revenue streams
As discussed by Moons & De Pelsmacker, (2015), the revenue model that has been
formed by Tesla Motor is mainly named as ownership-as-usual model for revenue. The
purchases that are made by customers in the electric vehicles industry are related to the ways
by which the customers are able to possess cars of Tesla that include expensive batteries.
Innovation is considered to be an important part of the revenue streams that have been
developed by Tesla.
Key resources
The patents of Tesla Motors have been gained in the year 2014 and open source based
innovation is considered to be a major resource of the firm as well. The location of

8BUSINESS MODEL ANALYSIS
headquarters of Tesla Motors is able to influence the innovation levels of Tesla. Top
management team of the company has been hired with respect to the capabilities that have
been gained by them (Moons & De Pelsmacker, 2015).
Key activities
According to Rezvani, Jansson & Bodin, (2015), the services based on electronic
manufacturing and production model are considered to be a vital part of the key activities.
Electric sports cars that are manufactured by Tesla Motors is a major activity of the firm.
Tesla has also made high levels of investments on the development of charging stations in
various parts of the country.
Key partners
The suppliers of Tesla Motors are considered to be major partners of the firm who are
able to supply greater than 2000 parts that are used for development of the cars. The
navigation systems of Tesla Motors are developed and offered by an organization named
Chei Mei OptoElectronics (Rezvani, Jansson & Bodin, 2015).
Cost structure
As discussed by Manzetti & Mariasiu, (2015), major costs that have to be incurred by
Tesla Motors are based on the development and maintenance of the manufacturing plants of
the firm. The loans that are provided for development of environment friendly cars are also a
vital part of the operations of the firm. Governments of the countries provide subsidies to the
development of electric cars.
Business model canvas of Tesla Motors
Key Partners
 Tesla
Motors has
greater than
150
Key Activities

Manufacturin
g of
electronic
Value Proposition
 High end
luxury
vehicles and
sports cars.
Customer
Relationships
 Developme
nt of
charging
Customer Segments
 High end
and
environmen
t conscious

9BUSINESS MODEL ANALYSIS
suppliers.
 More than
2000 parts
are
provided to
Tesla by
suppliers.
services
model.
 Tesla designs
bulk
assemblies in
the cars.
 Powertrain
designs
innovated by
Tesla.
stations. customers.
 Customers
of battery
packs.
Key Resources
 Patents,
open source
innovations.
 Capable top
management
team.
Channels
 Direct
sales.
 Online
sales.
Cost Structure
 Costs related to manufacturing plants.
 Federal loans provided by governments.
Revenue Streams
 Licensing agreements.
 Sales of electric cars and sports cars.
Source – Created by Author
Assumptions related to customer desirability, technical feasibility and financial viability
The assumptions that have been made by Tesla Motors with respect to desires of the
customers are related to the development of the electric cars of the firm. The demands and
needs of the customers in changing environmental conditions have been fulfilled with the
help of innovative products of Tesla. The prices and innovative technologies have also been
able to play a key part in improvement of the operations and profitability of Tesla Motors
(Helmers, Dietz & Hartard, 2017).
Argument based on selection of the innovation tools
The innovation tools that have been used by Tesla Motors mainly include Artificial
intelligence and the self-driving technologies as well. Tools related to innovation within the

10BUSINESS MODEL ANALYSIS
organization has an impact on the organization and its revenue levels as well. Tesla Motors
has thereby been able to uphold its position in the automobile industry with respect to the
electric car development (Rezvani, Jansson & Bodin, 2015).
Reflection
I have analysed Tesla Motors previously based on the methods by which Tesla
Motors has aimed at developing its unique position in the automotive industry. The major
competitive advantage of Tesla Motors that I have discussed previously is based on the high
levels of investments that have been made by Tesla Motors in the process of production. The
development of electric cars is considered to be a significant aspect that is related to
pioneering in the electric car based industry (Moons & De Pelsmacker, 2015). I have
discussed a major sustainability trend that is applied by Tesla Motors in order to maintain its
operations in the automotive industry for a longer period of time. The trend based on
sustainability that I have taken into consideration for the analysis is the application of
artificial intelligence in improving the operations of Tesla Motors (Rezvani, Jansson &
Bodin, 2015).
Various aspects of the society and operations have been affected in a huge way by the
artificial intelligence based implementation. I have also been able to understand that the
implementation of artificial intelligence is considered to be a vital aspect that is related to the
development of Autopilot based software. Tesla has however faced major levels of criticism
based on the accidents that have been faced by the cars that are manufactured by Tesla
Motors in the industry (Helmers, Dietz & Hartard, 2017). Another major technology that I
had discussed in the report is the usage of self-driving technologies. The cars and their
operations have been improved in the last few years due to usage of this technology on an
extensive manner. Tesla Motors has been able to face the challenges that are provided by the

11BUSINESS MODEL ANALYSIS
other organizations with the usage of major levels of technologies for proper development of
the cars (Kim, Ko & Park, 2015).
Conclusion
The report can be settled by stating that an organization like Tesla Motors that
operates in the automotive industry will be able to maintain its operations and profitability in
a sustainable manner with the help of various trends. The automatic technologies have an
influence on the processes of Tesla Motors and the profits that are earned by the organization
as well. The organization has aimed at maintaining its position in the industry with the
support that is provided by the sustainable trends. The manufacture of electric cars has played
a major part in the methods by which Tesla Motors has aimed at the reducing the impact of
its operations on the environment.