Tesla's Innovation Management: A Case Study Report

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Managing Innovation in Business

Executive Summary
The report is carried out based on the innovation in business and in this regard, Tesla has been
chosen. The report shows that the most popular innovation of Tesla in last few years is self-
driving car. The report helps to achieve a brief overview of Tesla along with automotive
industry. In addition, the report is beneficial as this includes the 4Ps model to show the changes
of innovation in Tesla. From the repot, impacts of various internal factors and external factors on
Tesla’s innovation can be obtained. This covers the Pestle analysis along with Porter five forces
analysis to highlight the impact of those factors on the innovation of Tesla. The report is helped
to gain a detail knowledge regarding company’s capabilities and strengths. The SWOT analysis
is encompassed in it as this can assist to analyze the strength and weakness of the organization
regarding their innovation activities along with the challenges it faces. Moreover, the report
includes value chain analysis and with the assistance of this, different activities of Tesla can be
possible to understand. This can be revealed in this regard that Tesla Model S with the hardware
allow for the incremental introduction of the self-driven technology. This encompasses forward
radar, one forward-looking camera, 12 wide range and ultra sonic sensor.

1. Introduction
The following report is developed based on the processes of managing innovation in business. In
this regard, the chosen organization for this specific report is Tesla. The most popular innovation
of Tesla in last few years is self-driving car. The report includes brief overview of Tesla along
with automotive industry. In addition, the report will emphasized the 4Ps model to show the
changes of innovation in Tesla. The report will cover the Pestle analysis along with Porter five
forces analysis to highlight the impact of those factors on the innovation of Tesla. The SWOT
analysis will be encompassed in it as this can assist to analyze the strength and weakness of the
organization regarding their innovation activities along with the challenges it faces. Moreover,
the report includes value chain analysis.
The structure of the report
 Executive Summary
 Introduction
 Discussion
 Conclusion
 References
 Appendices
2. The organization and industry overview
Industry Overview
The automotive industry covers a wide range of companies, which encompass development,
design, marketing, selling and manufacturing of motor vehicles. This can be defined as the
biggest industry economically based on the revenue. This industry does not cover the
organizations such as stations for filling the motor fuel and shops of repairing automobile.
Company background
Tesla, Inc is one of the well known automotive along with energy organization. It is a public type
company and headquarter of the company is situated in Palo Alto, California, United State. Tesla
operates their business in all over the world and more than 44,000 people are there across the

world, working under Tesla (Gaming Law Review and Economics, 2016). In the year 2018,
company’s revenue was more than US$21.40 billion while the operating income in that same
year was approximately US$0.387 billion. The total equity of Tesla was more than US$ 4.900
billion and the total assets was US$29.700 billion (Gaming Law Review and Economics, 2016).
Both the information is given based on the year 2018.
4Ps of Innovation
Model 4Ps will cover product, process, position and paradigm. The 4Ps analysis will be carried
out to show the changes in innovation of Tesla.
 Product
Tesla directs the market in manufacturing premium eco-friendly and battery powered electric
cars (Liu and Meng, 2017). This can be found that Tesla cars come in three different models and
they develop their models with time.
 Tesla Model S: This is the first premium sedan introduced by Tesla and it comprises the
self-driving auto pilot feature and a powerful engine with 0 to 60 mph acceleration time
of 2.28 seconds.
 Tesla Model X: Tesla innovate after that the safest sports usefulness cars with the safety
rating of five stars. These cars are able to go more than 294 miles in a single charge
(Lyyra and Koskinen, 2017).
 Tesla Model 3: After the Tesla Model X, Tesla Model 3 was invented by Tesla and it is
Tesla one of the prime innovation, this increases the accessibility of electric car.
Moreover, Tesla stared to manufacture this type of car from the year 2017. Process
Model 3 is the latest innovation of Tesla. This can be found that model 3 has a bit more than a
kilometer of cable vs 3x that for the corresponding traditional car. As stated by Wieland et al.
(2016), Tesla innovates in this car with a screen that have 2 power systems along with one
communication network. In this power system, one is low and on is high.
 Position

Tesla can be considered as unique as this is not only selling the innovative cars but also sell
innovative technologies as well. There are few aspects that needs to be considered for Tesla’s
position.
 Lack of competition
Tesla in one of the biggest automotive company and this is very hard for other to compete with
Tesla (Chen and Perez, 2018).
 The green car market is segmented
Hybrid vehicles, short-range electric vehicle, plug in hybrids along with long range electric cars
all of these are treated identically (YANG and LIANG, 2017).
 Paradigm
Tesla pushes toward the abilities of self-driving and automation to its treatment of car. The new
paradigms are progressively more visible in the way automakers that are traditional are
engineering and designing their cars (Gao and Wei, 2018).
After the analysis of 4Ps model, it can be told that Tesla’s innovation strategy follows the
incremental and radical strategy.
Impact of Pestle analysis on Tesla’s innovation
There are few factors, which influence the innovation of Tesla and Pestle analysis will carry out
to those factors.
 Political Factors
Governmental incentives for the electric automobiles increase the strength of financial
performance. A new global trade agreement helps to innovate more (Bird and Juliussen, 2015).
 Economic Factors
Decreasing costs for battery along with the renewable energy is very beneficial for Tesla’s
innovation (Kessler, 2015).
 Social Factors

Few factors help Tesla to develop their automotive business and their innovation such as
maximizing preference for renewable energy and developing the wealth distribution (Hecht,
2018).
 Technological Factors
Few technological factors are there, which influence the innovation of Tesla such as high rate of
change in technology and maximizing automation in business. As stated by Martinez et al.
(2017), this can be said that technology changes can be both opportunity and threats.
 Environment Factors
Few factors are there that can be considered as the opportunity of Tesla’s innovation such as
climate change along with disposal of waste.
 Legal Factors
Regulations of energy consumption are the opportunity for Tesla’s innovation while regulations
of dealership sales can be both threats and opportunity (Liu et al., 2016).
Impact of Porter Five Forces Tesla’s innovation
This part of the report will provide a brief analysis of impact of porters’ five forces on the
innovation of Tesla. It shows that the whether the forces are strong, moderate or weak.
 Competitive rivalry or the competition [Strong Force]
 Bargaining power for consumers or purchasers [Moderate Force]
 Bargaining power of the suppliers [Moderate Force]
 Threats for the substitutes [Moderate Force]
 Threat for new entry and entrants [Weak Force]
3. The organizations existing innovation performance and capabilities
SWOT Analysis of Tesla
SWOT ANALYSIS
Strengths
Tesla is not just a business of selling cars; the
Weakness

company also sells new technologies.
Technology: Tesla has been associated always
with the technologies of cutting-edge. This can
be found that there are many technologies of
Tesla, which are adapted and used by other
companies. For examples, this can be revealed
that Mercendes-Benz are using he power train
of Tesla, Toyota use Tesla motors and Pioneers
prefer GE that track of the innovations of Tesla
(Huang, 2019).
Government and political support: The
company has ample support from government.
The organization had achieved a USD 465
billion for the project of energy management.
Monopoly: Tesla began to target a very niche
segment and that was alternate and electric
energy cars.
Distribution:
Tesla understands that what is the necessity of
distribution channel and they build a strong
distribution channels.
Poor Liquidity:
After make a comparison with other companies
like Ford this can be seen that liquidity of Teal
is very poor. For instance, USD of Ford is 20
billion and General Motors is 25 billion. On
the other hand, Tesla has just USD 3 billion.
Capacity Issue:
There is just only one plant, where Tesla
manufactures their cars. This can be found that
the plant has the capability of manufacturing
near about 500,000 vehicles (Chen and Perez,
2018).
Poor consumer awareness
Tesla builds the specialized products that can
be considered as significant for environment
due to their angle of sustainability.
Opportunities
Preference for the new technologies:
In the current time, technologies are
developing every day and this is one of the
significant opportunities for Tesla. Tesla
launched and researched many new and
innovative products in the current time such as
battery control car, electric cars, green cars and
hybrid vehicles.
Threats
There are few threats for Tesla and company is
suffering because of those.
Competition:
Since the last few years, it can be noticed that
competition between the organizations in
automotive industry are increasing every day
(Sharma, 2016). This creates challenges for
Tesla ad few competitors are Ford and General
Motors.

Balancing production with demand:
As the demand from consumers is very high
for Tesla, they are becoming incapable to make
a proper balance between their productions
with consumers demand.
Legal Issues:
Tesla sometimes faces legal issues for their
innovation and this is one of the threats of the
company.
Strategic Capabilities Value of Strategic Capabilities
Tesla has the capability to innovate self-driven cars, which are beneficial for them. This is of
value to its consumers. Moreover, this capability can increase the sale of Tesla.
 Rare/Unique Strategic Capabilities
Innovation of self-driven car can be considered as very rare and it is a unique strategic capability
of Tesla. This can be said in this regard, Tesla Model S with the hardware allow for the
incremental introduction of the self-driven technology (Cheong et al., 2016). This includes
forward radar, one forward-looking camera, 12 wide range and ultra sonic sensor.
 Inimitable Strategic Capabilities
 Complexity
Innovation of Self-driven technology can be revealed as very hard for other organization to
obtain. This innovation can be considered as inimitable strategic capabilities for the
organization.
 Culture and History
Tesla has a historical and cultural background that is very difficult for other to obtain. Moreover,
historical background and culture is needed this type of innovation (Cheong et al., 2016).

Value network and value chain analysis
Support Activity
Firm Infrastructure
Margin
Human Resources
Technology Development
Procurement
Inbound
Logistics
Operations Outbound
Logistics
Sales and
Marketing
Service
Primary Activities
 Primary Activities
 Inbound Logistics
Inbound logistic of Tesla covers storage of raw materials along with receipt for building the
electric cars and energy storage systems.
 Tesla Operations
 Automotive: This covers development, design and electric cars
 Energy storage and generation: This covers installation and design
 Tesla Outbound Logistics
This encompasses distribution of vehicles and warehouse (Huang, 2019)
 Sales and marketing
Sales and marketing practice of Tesla are alternative.
 Tesla service
Tesla provides a high quality consumer service.

4. The industry in 2018 and beyond
From the above discussion, it can conclude that because of the demand from consumers is very
high for Tesla; they are becoming incapable to make a appropriate balance between their
productions with consumers’ demand. Tesla understands that what is the necessity of distribution
channel to develop their innovation capabilities and they build a strong distribution channels.
This can be revealed that there are many technologies of Tesla, which are applied and used by
other companies. For instance, as mentioned in the above discussion that Mercedes-Benz are
using the power train of Tesla, Toyota use Tesla motors and Pioneers prefer GE that track of the
innovations of Tesla. This can be revealed that Model 3 is the latest innovation of Tesla. In this
regard, model 3 has a bit more than a kilometer of cable vs 3x that for the corresponding
traditional car. Tesla innovate this car with a screen that holds two power systems along with one
communication network. In this power system, one is low and on is high. Few technological
factors are there, which influence the innovation of Tesla such as high rate of change in
technology and maximizing automation in business. This can be said that changes of technology
can be both opportunity and threats. In the current time, technologies are improving every day
and this is one of the essential opportunities for Tesla. Tesla launched along with researched
many new and innovative products in the current time such as battery control car, electric cars,
green cars and hybrid vehicles.
Innovation of self-driven car can be considered as very rare and this is a unique strategic
capability of Tesla. This can be said in this regard, Tesla Model S with the hardware allow for
the incremental introduction of the self-driven technology. This encompasses forward radar, one
forward-looking camera, 12 wide range and ultra sonic sensor. Tesla innovate cars like model S
and model X in past while model 3 is one of the popular future innovation for Tesla. Apart from
that few other innovation of Tesla are solar panel and electric car.
5. Conclusion
After completing, the entire report this is found that changes of technology can be both
opportunity and threats for the organization. In the current time, technologies are improving
every day and this is one of the essential opportunities for Tesla. This can be revealed that Tesla
launched along with researched many new and innovative products in the present time such as

battery control car, electric cars, green cars and hybrid vehicles. Innovation of self-driven car can
be considered as very rare and it is a unique strategic capability of Tesla.

6. Reference List
Bird, C. and Juliussen, E., 2015. Improving software, reliability & innovation. Technical report,
IHS Technology.
Chen, Y. and Perez, Y., 2018. Business model design: lessons learned from Tesla Motors.
In Towards a Sustainable Economy (pp. 53-69). Springer, Cham.
Chen, Y. and Perez, Y., 2018. Business model design: lessons learned from Tesla Motors.
In Towards a Sustainable Economy (pp. 53-69). Springer, Cham.
Cheong, T., Song, S.H. and Hu, C., 2016. Strategic alliance with competitors in the electric
vehicle market: tesla motor’s case. Mathematical Problems in Engineering, 2016.
Gaming Law Review and Economics (2016). LAS VEGAS SANDS CORP., a Nevada
corporation, Plaintiff, v. UKNOWN REGISTRANTS OF www.wn0000.com,
www.wn1111.com, www.wn2222.com, www.wn3333.com, www.wn4444.com,
www.wn5555.com, www.wn6666.com, www.wn7777.com, www.wn8888.com,
www.wn9999.com, www.112211.com, www.4456888.com, www.4489888.com,
www.001148.com, and www.2289888.com, Defendants. Gaming Law Review and Economics,
20(10), pp.859-868.