Comprehensive Strategic Analysis of Tesla's Business Performance

This report provides a comprehensive strategic analysis of Tesla, examining its performance over a five-year period. It begins with an overview of Tesla and its position in the automotive industry, followed by an analysis of its internal and external environments, including political, economic, social, technological, and environmental factors. The report then evaluates Tesla's strategic responses to these factors, including product development, cost reduction, and differentiation strategies, and assesses its key performance indicators such as profitability, revenue, market share, and customer satisfaction. It identifies Tesla's competitive advantages, both sustainable and temporary, such as its brand image, leadership, and gigafactories, and concludes with recommendations for future strategic options, including expansion and environmental focus, to maintain its competitive edge in the electric vehicle market. The analysis utilizes various theoretical models and data to support its findings.

RUNNING HEAD: STRATEGIC ANALYSIS
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Strategic Analysis
Tesla

Strategic Analysis
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Abstract
The aim of this report is to understand the process of strategic management that includes
strategic planning, strategic implementation and strategic evaluation and control. This report
includes strategic analysis of Tesla considering five years. Tesla is a leading brand in the
automotive industry in the US and offers electric vehicles across the globe. With the analysis
it was identified that the company is successful because of its strategies. As the company in
2016 was not developed and had limited competitive advantage and strengths. But with its
competitive advantage such as innovation, leadership style of Tesla and technology the
company is able to compete in the market.in order to identify these competitive advantages
the external and internal analysis is done. After that report includes strategic implementation
and key performance indicators to evaluate the performance of the company and to know
impact of its strategies. At last recommendations are given followed by conclusion.

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Table of Contents
Task 1.........................................................................................................................................3
Task 2.........................................................................................................................................5
Task 3.........................................................................................................................................8
Task 4.......................................................................................................................................11
Bibliography.............................................................................................................................13
Appendices...............................................................................................................................14
Appendix 1: Internal Analysis..............................................................................................14
Appendix 2: External Analysis.............................................................................................17

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Task 1:
About Tesla
Tesla is a leading company in the automotive industry based in America. Tesla manufacturer
electric vehicle using solar energy panels and offers unique designs to its customers. At
present, the company’s Model 3 and Model X are trending as due to these designs the sales of
Tesla improved by 50% (Tesla,2019). In order to understand the strategies used by Tesla and
its impact on its growth and success five-year analysis is done that includes changes in the
external environment and internal environment in which the company operates.
Internal Analysis
From the internal analysis of Tesla it is identified that the company have strong human
resources and physical resources. As the strength of workforce doubled in 2019 that is full
time 49,817 employed. Further physical assets of the company increased by 25% as
compared to 2015 (see appendix 1). That indicate that Tesla have resources and capabilities
to compete in the automotive industry with competitors like Toyota, Ford and Nissan (Wolf
et.al,2015). Moreover, strengths and opportunities of Tesla are its brand image, innovation
and design and huge investment of the company on R&D department (Rothaermel,2016). On
the other side, changing mindset and increasing awareness amongst people about
environmental harm shifting focus of people towards using electric vehicle that created an
opportunity for the company in the market (Figure,1). But increasing competition from
players like Ford, Mercedes and BMW is a threat for the company to grow in near future as
the financial position of Tesla is not that good; the company is running in losses from last 5
years. Tesla is doing well in term of sales, assets and growth but due to financial position and
competition the company is struggling.

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Figure 1: Electric Vehicle Sales growth till 2019 and expected growth
Source:
External Analysis
PESTLE analysis is done in order to analyse the external environment of Tesla for last five
years. It is identified that from last five years the US government supported and promoted
green initiative taken by Tesla. As president Obama in 2016, offered $ 4.5 billion of subsidies
for EV charging stations (Ravallion, 2016). Further, at present the company is getting
support from Trump for investing amount in development of supercharging stations in remote
areas. The political factors from the starting are in favor of Tesla. However, Economic
factors that impacted on the operations of Tesla were growth rate, changing interest rate and
fluctuation in exchange rates. Economic growth rate at the global platform and in the US is
not that good (Figure 2). This also impacted the growth status of Tesla from past years and
due to that the company is growing but at the decreasing rate (Cooper, 2018).
Figure 2: Economic Growth rate at the global platform and in the US

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Source: (Perkins and Murmann,2018)
Technological factors and Social factors during five year prove to be favorable for Tesla.
Elon Musk launched innovative models such as Model S, Model X and Roadster due to that
the disruptive innovation took place. Further, changes in the technological factors such as use
of batteries, solar panel, and charging infrastructure are factors that drive automotive
industry. Social factors in 2016 that affected the automotive industry were focus of people on
global issues such as climate change and increasing level of global emission. Due to that the
company is able to take advantage of various opportunities. Hence, external factors prove to
be favorable for Tesla from last few years (Valentin,2019).
Task 2:
The changes that are identified from the above analysis include changes in political factors,
social factors, technological factors and environmental factors. In order to survive and
operate in this changing environment the company opted for strategies such as product
development, reducing cost of production, improving value chain by focusing on
maintaining strong relationship with suppliers, and using transformational leadership style in
order to bring revolutionary change and to gain competitive advantage (Perkins, and
Murmann,2018).
In order to gain competitive advantage through product development the company integrate
environmental friendly technology in its operations that attracts most of its stakeholders and
resultant in improved sales of the company from last two years. Further, from the internal
analysis it is identified that innovation and technology become strength of the company and
helped Tesla to remain competitive in the market. Further, the company use product
differentiation strategy and focus on targeting new market. For instance; the uniqueness and
design of Model 3 of Tesla targets the early adopters that help the company to build strong
brand image. In a nutshell, with changing environment Tesla shifted its strategy to broad
differentiation (Kauerhof, 2017).
Strategy evaluation includes analysis and control of strategies as it helps the organization to
know whether the strategies that are implemented are able to achieve strategic objectives or
not and if any changes are required then it will be done (Gamble et.al,2016). In order to
evaluate whether strategies that are implemented by Tesla worked or benefit the company or
not firstly key performance indicators are set and then positive changes in those indicators

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help in to understand whether strategies adopted and implemented by the company resultant
in achieving of strategic objectives or not.
Key Performance Indicators for Tesla are:
 Profitability
 Revenues
 Market share
 Customer Satisfaction
Looking into the profitability of aspect of Tesla it can be said that the company improved its
condition as losses in 2017 were $1,961 million and losses reduced to $888 million in 2019
this is a positive indicator that the company is in recovery position (Tesla,2019). Further,
sales of Model S and Model 3 of hybrid electric vehicle is the main reason behind the
increasing revenues, profits and market share of Tesla in the US and at the global platform
(Musonera, and Cagle, 2019).
Total revenues of Tesla in 2015 were $ 4,046 million and in 2017 revenues increased to
$11,785 million and in 2019 because of increasing trend and sales of electric vehicles sales of
the company doubled and was $24,587 million (Musonera and Cagle,2019 ). From this it is
clearly seen that the performance of Tesla improved because of its strategies that were
product development, higher investment on R&D and reducing cost of production and
focusing on broad differentiation.
Another key performance indicator for Tesla is market share in the US as domestic sales of
its Model 3 in 2019 was 42,000 units in third quarter and other com[editors such as Nissan,
BMW and Ford had low market share (Figure 3). The increasing market share and trust of
customers on Tesla considered as strength for the company and will help Tesla to stay ahead
in the competition and to retain its competitive advantage. Due to changing trend and shift of
customers to electric vehicles and increasing sales of the company indicate that customer
satisfaction level is also higher as the quality, safety and design are the unique selling
proposition of Tesla vehicles that leads to more satisfaction amongst target customers.

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Figure 3: Sales of electric vehicle in 2019 in the US
Source: (Thomas and Maine,2019)
Task 3:
The competitive advantage that Tesla developed in last 2 years are brand image and its assets
that is huge investment in gigafactories in order to make these manufacturing units a high
technological manufacturing units. Further, the strategies that the company implemented
helped in to build strong brand image and to gain larger market share. Further, the
competitive advantages that Tesla has from starting are innovation and leadership style of
Elon Musk. The financial position of the company is weaknesses that might affect the
company operations in near future but it can be improved if the company will grow in the
same manner (Chen and Perez, 2018).
Competitive advantages that are sustainable are:
 Elon Musk leadership style
 Gigafactories
 Brand Image
Competitive advantages that are temporary are:
 Charging Infrastructure
 Self-Learning cars

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The investment by Tesla in gigafactories prove to be sustainable advantage for the company
as this thing cannot be imitable by other competitor and can help the company to gain long
term advantage. Because of high technology advancement manufacturing unit the company
reduced its battery costs and this give advantage to the company in terms of prices and
operating expenses (figure 4). Hence, gigafactories considered as the sustainable competitive
advantage for the company.
On the other side, brand image and Elon Musk leadership style are two more competitive
advantages that help the company to develop core competencies. Further, these competencies
are sustainable because leadership traits cannot be copied and traits that Elon Musk possesses
are courage, long term vision, innovative, self-awareness and ability to transform the industry
(Endsley, 2017). Moreover, brand image of Tesla in last two years become strength for the
company due to quality, design and services provided by Tesla to its target customers. This is
valuable and rare for the company to gain sustainable competitive advantage.
Distinctive
Competencies
 Electric Cars
 Focus on eco-
friendly and
sustainable product
Competitive Advantage
 Goodwill
 Innovation
 Elon Musk
Leadership
Core Competencies
 Accessibility to
funds
 Technology
advancement
 Vehicle engineering

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Figure 4: Competitive advantage of Gigafactories
Source: (Munson, 2018)
At last, self-learning cars and charging infrastructure are two competitive advantages that are
temporary. These competitive advantages are imitable and can be copied by other
competitors such as Ford and Toyota. As other companies that operate in automotive industry
can invest also huge amount in development of infrastructure and can also introduce self-
learning cars so these competitive advantages are not that beneficial for long run and can be
used by its competitors (Munson,2018). Hence, these two competitive advantages are
temporary and cannot give competitive advantage to tesla for long run. Further, it can be said
that gigafactories, leadership style, brand image and product development are sustainable
advantages.

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Task 4:
From the above analysis it can be said that the company can further stay competitive by using
other alternative strategies. The strategic options that the company use at present are direct
sales, services, supercharger network and design of products (Ravallion, 2016). The other
alternatives for the company are focus on product development strategy and broad
differentiation strategy. Tesla can focus on improving its financial position by improving its
market share. Hence, the company should focus on expansion strategy as at the global level
the market for electric cars will expand by 2030 and most of people switch to electric
vehicles from traditional vehicles which can help Tesla to lead in the market for long run with
strong financial position and strong brand image (Teece, 2018).
Another strategic alternative for Tesla is focusing on reducing the environment issues at the
global platform as the company can gain positive publicity at the global level by focusing on
issues like global warming, climate change and exploitation of natural resources (Langhelle
et.al,2019). With that the company can expand in different product lines such as by offering
Electric trucks and electric trains and electric products that operate through solar panel
energy sources. Hence, the company can integrate the concept of “creating shared value “
with its business objectives in order to be suitable for long run and with that Tesla become
the future of automotive and logistics industry
From the above two strategic options, it is recommended that Tesla should focus on
integrating creating value shared concept in the business and focus on developing value for
the society and business with social considerations. This help the company to expand at the
global level, gain publicity and to be a trendsetter in the automotive industry as future will be
electric cars and vehicles and tesla can gain suitable competitive advantage by following
this strategy (Thomas and Maine,2019). In a nutshell, Tesla becomes well renowned brand in
the automotive industry and growing because of changing social factors and technological
factors. The company can remain be the leader if is able to maintain its competitive
advantage that are technology, innovation, leadership and gigafactories. At last, it is
recommended that tesla should focus on improving its financial position in order to compete
in all aspects with its competitors.

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Bibliography
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In Towards a Sustainable Economy (pp. 53-69). Springer, Cham.
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pp.41-55.
Cooper, C., 2018. The Truth about Tesla: The Myth of the Lone Genius in the History of
Innovation. Race Point Publishing.
Endsley, M.R., 2017. Autonomous driving systems: A preliminary naturalistic study of the
Tesla Model S. Journal of Cognitive Engineering and Decision Making, 11(3), pp.225-238.
Gamble, Thompson, A.A. and Peteraf, M.A., 2016. Essentials of Strategic Management: The
Quest for Competitive Advantage. McGraw-Hill Education.
Kauerhof, A., 2017. Strategies for Autonomous, Connected and Smart Mobility in the
Automotive Industry. A Comparative Analysis of BMW Group and Tesla Motors Inc. GRIN
Publishing.
Langhelle, O., Meadowcroft, J. and Rosenbloom, D., 2019. Politics and technology:
deploying the state to accelerate socio-technical transitions for sustainability. In What Next
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Munson, R., 2018. Tesla: Inventor of the Modern. WW Norton & Company.
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Industry: Recommendations for Sustainable and Innovative Marketing Strategies. Journal of
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Ravallion, M., 2016. Are the world’s poorest being left behind?. Journal of Economic
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