Comprehensive Strategic Analysis of Tesla Motors Inc. Report

This report provides a strategic analysis of Tesla, evaluating the impacts of the macroenvironment within the automobile industry using PESTEL and Porter's Five Forces frameworks. It identifies critical success factors for Tesla, including access to capital, government support, battery technology, infrastructure changes, and consumer education. The analysis highlights opportunities such as increased partnerships and rising gas prices, as well as threats from competitors and financial risks. The report also discusses Tesla's strategic position, anticipated future strategies, and risk evaluation, concluding with a description of a selected strategy and risk management approaches. This student-contributed document is available on Desklib, a platform offering study tools and resources for students.

0Running head: STRATEGIC ANALYSIS OF TESLA
Strategic Analysis of Tesla
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1STRATEGIC ANALYSIS OF TESLA
Table of Contents
PESTEL Analysis................................................................................................................2
Five forces analysis..............................................................................................................4
Critical success factors........................................................................................................7
Opportunities and threats.....................................................................................................9
Strategic position of the company.....................................................................................11
Anticipated future strategies..............................................................................................13
Evaluation of options- Suitability, Feasibility and Acceptability......................................14
Description of selected strategy.........................................................................................16
Risk evaluation and management......................................................................................16
References..........................................................................................................................18

2STRATEGIC ANALYSIS OF TESLA
PESTEL Analysis
PESTEL Analysis of Tesla facilitates in determining the impacts of industry’s macro-
environment within the automobile industry. These external factors impact other aspects of the
business that includes community based or consumer organizations. With effective brand image
and enhancing profitability, Tesla can improve its long term success through considering the
results of this evaluation in strategy development.1
 Political- Politucal stability of the major markets makes the macro-environment
favorable for market penetration strategies of Tesla. Tesla has the opportunity to improve
its financial performance by means of attaining government incentives. Such external
factor is directly associated with insignificant carbon emissions from the company’s
offerings. Free trade agreements present several opportunities to the company in
expanding its global business operations.2
 Economical- Economic conditions in the macro-environment are observed to impact the
business of Tesla. Business performance of the company attains advantages from low
battery expenses. For instance, such external factor transforms into the affordability of
Tesla’s automobile products. In consideration to same, decreasing renewable energy
1 "Tesla - Annual Report." Ir.tesla.com. N.p., 2018. Web. 19 Apr. 2018.
2 Aaij, R., et al. "Tesla: an application for real-time data analysis in High Energy
Physics." Computer Physics Communications208 (2016): 35-42.

3STRATEGIC ANALYSIS OF TESLA
expenses makes the products of the company more attractive.3 This also considers that
economic stability concerns threaten the company’s financial performance in Asia and
Europe.
 Social- The socio-cultural trends that impacts Tesla’s macro-environment are increasing
popularity of low carbon lifestyles, enhancing [reference for renewable energy and
enhancing wealth distribution within advancing markets.4 The company has growth
opportunities relied on increasing popularity of low carbon lifestyles along with
enhancing renewable energy preferences. These are the external factors that are deemed
to enhance market demand for Tesla's electric vehicles along with associated products.
 Technological- Increasing rate of technological changes presents high opportunities for
Tesla to improve technologies related with its products. In addition such external factors
also presents risks for the company in consideration to the potential fast obsolesce in
technology employed within products.5 The company also has growth opportunities
3 Abbas, Zaheer, et al. "Analysis of proton‐density bias corrections based on T1 measurement for
robust quantification of water content in the brain at 3 Tesla." Magnetic resonance in
medicine 72.6 (2014): 1735-1745.
4 Ajuied, Adil, et al. "Diagnosis of glenoid labral tears using 3-tesla MRI vs. 3-tesla MRA: a
systematic review and meta-analysis." Archives of orthopaedic and trauma surgery (2018): 1-11.
5 Asgar, Majid, Ebrahim Afjei, and Hossein Torkaman. "A new strategy for design and analysis
of a double-stator switched reluctance motor: Electromagnetics, FEM, and experiment." IEEE
Transactions on Magnetics 51.12 (2015): 1-8.

4STRATEGIC ANALYSIS OF TESLA
through high automata ion of its business processes. In addition, growing popularity of
online mobile systems facilitates Tesla to integrate such systems within its automobiles.
 Environmental- Tesla has attained better opportunities in promoting all its electric
automobiles relied to certain issues such as climate change, growing environmental
programs and increasing standards for disposal of waste disposal. For instance, Tesla’s
electric automobiles are deemed to be suitable in dealing with the external factors elated
with the business sustainability along with environment friendly offerings.6
 Legal- Tesla has increased opportunities to expand safely its business internationally in
consideration to expanding global patent protection. Moreover, the organization has the
chance of promoting its electric vehicles. This is relied on consumption of energy
regulations that the consumer company needs to follow. Moreover, the company has also
attained the opportunity to grow its business by means of direct sales that is allowed in
several states in US.
Five forces analysis
Tesla sustains its profitability by means of strategic measures that facilitates in attaining
competitive advantages though addressing challenges revealed within Porters Five Forces
analysis of global automotive industry.7
6 Beiker, Sven A. "Evolution–Revolution–Transformation: A Business Strategy Analysis of the
Automated Driving Industry." Road Vehicle Automation 2. Springer, Cham, 2015. 139-151.
7 Birk, Dominic. Evaluation of the Marketing Strategy of Tesla Motors Inc. GRIN Verlag, 2015.

5STRATEGIC ANALYSIS OF TESLA
 Competitive Rivalry (Strong Force)-Tesla operates within a high competitive market.
This aspect of indicates the impact of competition on energy and automotive solutions
industry environment. There are just a few numbers of companies operating within
automobile industry that impacts the competitive environment of the company. To
maintain a competitive position within the industry, Tesla intends to follow aggressive
innovation and product promotion. For instance, large automotive organizations tend to
follow aggressive marketing campaigns.8
 Bargaining Power of Buyers (Moderate Force) - Low switching costs decreases
barriers for the consumers of Tesla for purchasing cars from other manufacturers. In
consideration to the five forces analysis, the external factor is deemed to exert a high
force against the organization and its business rivals in automobile industry. For instance,
the substitute’s availability is moderate with several cases that decrease bargaining power
of its Tesla’s consumers. Moreover, the decreased volume of purchases decreases the
impact of consumers on Tesla. For this reason, consumers bargaining power acts as
moderate force and a secondary management priority.9
 Bargaining Power of Suppliers (Moderate Force) - Tesla’s suppliers are deemed to
have low forward integration level. Such external factor indicates limited control of
suppliers in sale and distribution of their products. For instance, certain suppliers employ
8 Dawes, John. "The Ansoff Matrix: A Legendary Tool, But with Two Logical Problems."
(2018).
9 E. Dobbs, Michael. "Guidelines for applying Porter's five forces framework: a set of industry
analysis templates." Competitiveness Review 24.1 (2014): 32-45.

6STRATEGIC ANALYSIS OF TESLA
third party for selling their materials to Tesla. On the other hand, most of thee suppliers
are sized moderately that has decreased impact on the automobile business surrounding.
One more external factor is considered as moderate supply level that empowers the
suppliers to impact Tesla to a certain extent. 10
 Threat of Substitutes (Moderate Force) - Tesla faces the threat of substitutes within
automotive industry. Low switching cost increases competition for the company and this
facilitates substitutes including public transportation for simply attracting consumers.
Such external factor has a strong force in the company’s external business environment.
Conversely, the moderate substitute’s availability decreases such suppliers influence. For
instance, consumers in the automobile industry have limited and moderate number of
substitute options within the industry. For instance, public transportation is not that
versatile in comparison to a private car that decreases substitute force against the
company.11
 Threat of New Entrants (Weak Force) - Business of Tesla is complex to compete with
particularly due to high brand development cost along with increasing Elom Mask
popularity. For instance, it is not easy for the new entrants to compete with the
company’s strong brand that contributes to one of Tesla’s business strengths. In addition,
10 Gardener, Alexander G., and Peter Jezzard. "Investigating white matter perfusion using
optimal sampling strategy arterial spin labeling at 7 Tesla." Magnetic resonance in medicine 73.6
(2015): 2243-2248.
11 Grant, Robert M. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons,
2016.

7STRATEGIC ANALYSIS OF TESLA
the automobile manufacturing maintains high cost that presents a barrier for the new
entrants.
Critical success factors
Critical success factors impacts the competitors within the automobile industry directly.
Considering the same, Tesla must make attempts to implement activities associated with critical
success factors at highest level for outperforming the competition.12
Industry Success Factors
 Access to capital- Electric vehicles needs to make high investments in research and
development due to internal workings of the vehicles. The company attains enough
capital for developing technologically efficient software and battery capability that is
crucial for company’s success.
 Government support- Government policies are observed to support the electric vehicles
manufacturing that facilitates the industry to continuous grows continuously.13
 Battery technology- For successfully competing within the there is a need to innovate
within lithium-ion battery technology. The company is developing products based on the
12 Moritz, Manuel, et al. "Tesla Motors, Inc.: Pioneer towards a new strategic approach in the
automobile industry along the open source movement?." Management of Engineering and
Technology (PICMET), 2015 Portland International Conference on. IEEE, 2015.
13 Oliveira, João Pedro. "Sustainable development, strategy and costs at Tesla." (2014).

8STRATEGIC ANALYSIS OF TESLA
fact that electric vehicle manufacturing costs are battery-related that is estimated to drop
drastically.14
 Changes in infrastructure- Quality and convenience of the available charging stations
are available to the electric vehicles of Tesla that serves as major key success factors as it
is vital for continuous vehicle functioning.
 Consumer education- Educating consumers on financial, environmental and economical
advantages along with switching costs to a fully electric vehicle that can result in
consumer’s ability to make more informed decision sat the time of purchasing vehicles.
Tesla Success Factors
 Disruptive technology- This technology of effectively powering a better performing car
with lithium-ion batteries that drives Tesla for innovating forefront of the electric vehicle
industry.15
 Superchargers- Tesla supercharges are placed in the highways and city centers.
Moreover the company has also attained partnership with particular destinations to offer
Tesla Wall Connector at the location. 16
14 Pham, T., et al. "EP-1857: Multi-parametric MRI at 3.0 Tesla for the prediction of treatment
response in rectal cancer." Radiotherapy and Oncology 119 (2016): S874-S875.
15 REZAEI, MR, A. KHAVARIAN, and M. GHAFURZADEH. "The Development of Industry
in Yazd Province by Using the SOAR Strategic Framework and ANSOFF Matrix." (2016): 45-
56.
16 Rothaermel, Frank T. Strategic management. McGraw-Hill Education, 2015.

9STRATEGIC ANALYSIS OF TESLA
 Experience of consumers- Tesla has a strong business advantage as it sells its cars in its
showroom. The company also provides its consumers with representatives that are
willing to educate consumers regarding pros and cons of consumer’s likely car purchases.
 Strong and sustainable brand image- Tesla has a remarkable brand reputation within
the electric vehicle as well as automobile industry. The company’s business is committed
to employ sustainable energy with exceptional and attractive car design.
Opportunities and threats
Opportunities
 Increased partnerships to maintain
enough resources
 Increased prices of gas
 A shared standard along with
engineering criteria for autonomous
driving
Threats
 There are several competitors within
the automobile market that offers
identical products like Tesla
 Strategic along with sector risk is faced
by the company
 Financial risks associated with the raw
materials
 Sales and marketing related risks can
also be faced by the company
 Tesla is also deemed to face great threat
from the likely backlash taking place
from Samsung batteries

10STRATEGIC ANALYSIS OF TESLA
Opportunities- Certain opportunity that must be pursued by Tesla includes making more
strategic partnerships for increasing their resources.17 The company must also consider
establishing a shared standard along with engineering criteria for autonomous driving. Tesla
must focus on developing a safe and effective manner for the industry to introduce autonomous
driving. In addition, rapidly rising gas prices can offer the company with an opportunity to
generate a highly sustainable fleet of vehicles.18
Threats- Along with significant opportunities there are increased number of threats that
are faced by Tesla. Tesla must be aware of the fact that there are several major competitors such
as BMW that offers identical products as the company. Moreover, there are certain economic and
political risks that are faced by Tesla while entering a new market. The company also faces a
financial risk threat associated with its raw materials like carbon fiber that is cost and requires
being used in limited amounts.
17 Ruan, Na, et al. "Toward optimal dos-resistant authentication in crowdsensing networks via
evolutionary game." Distributed Computing Systems (ICDCS), 2016 IEEE 36th International
Conference on. IEEE, 2016.
18 Sutherland, Ewan. "Lobbying and litigation in telecommunications markets–reapplying
Porter’s five forces." info 16.5 (2014): 1-18.

11STRATEGIC ANALYSIS OF TESLA
Strategic position of the company
Bowman’s strategy Clock: Focused Differentiation
Tesla has launched its differentiation strategy with increased focus on a small
demographic segment of environmentally conscious wealthy consumers.19 Through focusing n
this narrow consumer group, Tesla avoids competing with its major competitors like BMW. The
reason for setting focus differentiation strategy is that it facilitates in maintaining a forward
vision and addresses issues like production capacity limitation along with improperly developed
charging network. Following such strategy, the company develops technologically advanced
vehicles for consumers those can afford other vehicles for their every transportation.
Ansoff Matrix Analysis of Tesla
Ansoff matrix analysis of Tesla indicated that the company has effective product
development strategy that is focused on carrying out regular market acceptability test for all its
19 Thijsen, Thomas, Tong Tong, and Jelmer van Leer. "Ansoff Model." Marketing (2014).