Tesla Motors Business Model: Strategic Analysis and Factors

This report provides a comprehensive analysis of Tesla's business model, examining its core strategies and market positioning. It begins with a definition of the business model, emphasizing direct selling, servicing, and the supercharging network. The report then delves into strategic management, applying Porter's generic strategies and five forces to assess Tesla's competitive landscape. It analyzes factors of production, demand conditions, and related industries within Porter's diamond model. A detailed value chain analysis explores primary and secondary activities, highlighting challenges and opportunities. The report includes a competitor analysis canvas and assesses Tesla's competitive advantages and capabilities. Furthermore, it demonstrates the impact of analyzed factors on Tesla's business, including governmental policies, customer bargaining power, and market risks. An environmental analysis using PESTLE and TOWS frameworks provides a holistic view of the external factors influencing Tesla's operations and strategic choices. The report concludes by summarizing key findings and implications for Tesla's future.

TESLA MOTORS BUSINESS MODEL
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Table of Contents
1. Business model definition......................................................................................................3
2. Strategic management analysis..............................................................................................3
3. Demonstration of analysed factors impacting on business....................................................7
4. Environmental analysis..........................................................................................................8
Summary..................................................................................................................................10
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1. Business model definition
The business model is planning for successful implementation of the business activities,
observing required resources and sources to meet organisational goals and developing a
source of customer base, finances and presentation of the products in the marketplace. In the
case of Tesla, the business model of the entity is based on three prolonged approaches that
are direct selling, servicing and supercharging charging network creation for its electric
vehicles.
2. Strategic management analysis
Porter’s generic strategy
In the case of Tesla, the company uses differentiation focused strategy to build the
competitive advantage of its vehicles by creating differentiated facilities from other motor
vehicle manufacturing companies operating in the market. The application of differentiation
focused strategy helps the business firm to create uniqueness in the vehicles for the increasing
experience of its customers. With the influence of a specific strategy, the company is also
focused on the early adopters in electric cars to provide new features for its customers.
Porter’s five forces
Bargaining power of the buyers The customers of electric cars are influenced by a
better car battery, automotive functioning and solar
panelling. These forces are available with every entity,
which reduces the high customer switch to another
brand in the market.
Bargaining power of the suppliers The supplier’s bargain power is moderate, as there s a
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moderate number of suppliers for the electric
automobiles in the market. As there is a low level of
integration, the suppliers in the market have limited
control over the distribution channel for electric cars.
The threat to substitute products The threat to the substitute products are moderate in
the market, as the electric cars have some reasonable
costs, customers go for diesel and fuel equipped cars in
the market. However, the increasing rate of pollution
has maintained the demands for electric cars in the
marketplace.
The threat to new entrances Due to the high cost of brand development, business
initiation and production process of electric cars, the
new business entrances is considerably low. High
manufacturing costs increases the entry barrier for the
new firm in the industry.
Competitive rivalry The competitive rivalry for Tesla is strong as the
company operates in a highly competitive in the
market. The small firms do not have a strong influence
on the electric car market. However, the firms such as
Coda Automotive, Wheego electric cars, Fisker
Automotive providing stiff competition to Tesla.
Porter’s diamond of nation
Factors of production Tesla’s automobile manufacturing unit
currently manufactures electric cars with
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10000 labour forces. There are press lines,
robotic machinery, and battery technologies,
charging infrastructure, equipment, raw
materials and resources used for the
production function.
Demand conditions The demand conditions of Tesla cars are fair,
as 750000 orders of Model 3s, 1.25 million
Model Y and other electric cars are in fir
demand for the entity.
Related and supporting industries In the electric car industry, Tesla Inc is one
of the leading business entities. The electric
cars introduce innovation and automation
technologies which has also supported by the
general automobile industry in the market.
Firm, strategy, structure and rivalry Coda Automotive, Wheego electric cars,
Fisker Automotive, Tesla Inc are the prime
players n the electric cars industry. The
differentiation focused strategy is applied by
Tesla that helps to create a competitive
advantage in the highly competitive market
of electric cars.
Porter’s value chain
Primary activities: In the primary activities of Tesla, the company might face challenges
during the inbound logistics development phase. It might be necessary for the entity to focus
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on the transformation of the raw materials to the finished goods. The operations of Tesla
include assembled approach for initiation of automation, energy storage and generation. As
per the outbound logistics, Tesla introduces its own warehouse, manufacturing and
distribution units for its vehicles. The manufacturing facilities of entity cover energy storage,
solar panel and distribution of vehicles. The marketing and sales of Tesla include used and
new cars. The company attracts huge media coverage due to its brand awareness and
presence through social networking, online and offline media. The Tesla has been faced a
number of complaints about its car performance, the customer service unit of the entity try to
resolve the issues of the customers.
Secondary activities: The secondary activities of Tesla include firm infrastructure which
takes care of quality management, administrative activates, financial management, and
strategic planning for the management of the product value. The Tesla employs 45000
people; the HR functioning of the entity includes training and development, rewarding
performers, motivating employees, performance and personnel management. Automation
software’s, technological customer service system, data analytics, product designing are some
of the technologically advanced and upgrades introduced by the entity. Tesla Inc includes
procurement process to include smooth processing of value, chain, supply chain, inbound and
outbound logistics activities.
Competitor’s analysis canvas
The competitor’s analysis canvas is helpful for the organisation to analyse the level of
competition in the market and the strategies adopted by the competitors for improving their
business operations. This is helpful for the organisation to compare its performance with that
of the competitors as thereby create benchmarks for removal of performance gaps in business
to provide tough competition in the market. The organisation faces tough competition with
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large automobile producers such as General Motors, Ford motor company, Honda Motor
Company and others that carry out business operations with innovative strategies in order to
gain a competitive edge in the market.
Competitive advantage capabilities
The organisation possesses capabilities of achieving a competitive in the market by taking
hep of economies of scale. Large-scale production would help the organisation to reduce the
per-unit cost of its business and thereby produce a broad range of services and products to its
customers at affordable rates in order to improve their standards of living as well as enhance
their demand towards affordable and quality products. It is helpful for the organisation to
improve sales and profits in the business and thereby gain a competitive edge in the market.
3. Demonstration of analysed factors impacting on business
The challenges faced by Tesla are increasing governmental policies on excise duties, trade
charges and import and export duties. This has increased risks of rise in pricing of the
automobiles in the market. Another challenge faces by the entity is moderate rate of customer
bargaining. These issues might increase risks of the brand switch due to increasing
competition in the market. As per the market competitive analysis, Tesla is facing challenge
from high-end competition from rising automated technologies applied by leading automobile
companies in the market. Some of the other prime challenges faced by Tesla include market
risks of supply of lithium and cobalt. The company has been facing an unstable production
process that is increasing delivery failure for its products. On the other hand, there was an
increasing rate of complaints about electric car models presented under Tesla. The company
challenge related to product recalls and federal enquiry on the production and machinery
system of electric cars. The international approach of Tesla is to introduce global
standardisation of its electric cars by providing clean energy, efficient electrical batteries and
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introduction better battery stations. The company has introduced international approach to
expand its business to generate demand and sales of electrical cars in the European and Asian
market.
4. Environmental analysis
PESTLE analysis
Political Governmental initiatives to increase infrastructure and spending to
support the production of electric cars in the market. This might boost
the business opportunity for Tesla
Economical Development of the global and national economy has helped to push
the sales of electric cars in the market. The dip in the electricity rate
has helped to adjust car battery charging rate in the market.
Social The usage of renewable energy and increasing preference for low
carbon footprints has increased intentions and attention of customers
to use electric cars.
Technological Embedded technologies and future scope of introducing augmented
and artificial intelligence have shown a positive future for the
automobile industry.
Environmental The investments in greenhouse gas emissions, wastage and recycling,
has introduced new ways to supporting and maintaining corporate
social responsibility for Tesla.
Legal The increasing regulations and standards might have increased
concerns for the automobile industry. The certified and standardised
usage of electrical energy, fuel engines has been imposed in the
national ad international market.
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TOWS analysis
Strengths:
 Strong research and
development
 Strong brand position
Weaknesses
 The high cost of the
automobiles
 Limited stations for
charging cars
S-O strategy:
 Focus over new
product development
with new features
 Embracing advanced
technologies for the
solution
W-O strategy
 Outsourcing of the
business operations to
reduce the cost of
production
 Promotion of
environmentally
friendly automobiles
Opportunism
 Increasing demand
for electric cars and
increasing risks of
limited oil and
petroleum’s
 The increasing rate of
pollutions increase
demand for usage of
solar panels and
electric cars
Threats
 High-end competition
 Risks of economic
slowdown
S-T strategy
 Targeting new
segments for the
introduction of new
W-T strategy
 Low-cost strategy for
reducing the cost of
products
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 Limited supplies for
electric battery
chargers
products
 Investment in
different businesses
using the
diversification
strategy
 Create a profitable
margin and break-
even for electric cars.
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