Strategic Analysis of Tesla Motors: Challenges and Opportunities

This report provides a comprehensive strategic management analysis of Tesla Motors. It begins with an introduction to the company, its products, and its position in the electric vehicle market. The report then delves into Tesla's internal and external environments, examining its competitive advantages, core competencies, and business model. It highlights the company's strengths, such as its technological innovation and brand reputation, as well as its weaknesses, including limited market presence and high product prices. The report explores the opportunities available to Tesla, such as expanding into new markets and diversifying its business, while also acknowledging the risks associated with its business strategy, including competition and fluctuating material prices. Furthermore, the report identifies key challenges Tesla faces as it grows, such as competition, and offers recommendations to mitigate these risks, including expanding its global presence and investing in research and development. Overall, the report provides a detailed assessment of Tesla Motors' strategic position and its prospects for future success.

Running head: STRATEGIC MANAGEMENT 1
Tesla Motors: Charging into the Future?
Student Name
Institution Affiliation

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Introduction
Tesla Motors was co-founded in 2003 and is based in Palo Alto, California. Since its inception in
2003, the company has made significant growth in the electric vehicle market. Tesla Motors
designs, manufacture, and sells electric PowerStation components and cars. Also, the company
manufactures battery charging equipment (Motors, 2010). This assignment will focus on the key
strategic management processes of the Tesla Motors and the internal and external environment of
the organization. It will also focus on the trends and conditions in the external environment that
affects the firm's strategic actions. We will examine the advantages and risks that the firm's
business strategy faces (Hughes & Drury, 2015). Lastly the task will identify the challenges that
the firm is likely to face as it grows and the recommendations to reduce the risks.
1. Electric cars are likely to overtake the traditional vehicles and demand for transport services
like uber are being preferred to public transportation and owning vehicles altogether. Tesla
motors emerged to be the world’s manufacturer of these electric cars but its facing competition
from Federal signal, Ford Motor Company, General Motors, Honda Motor Company, Toyota
Motor Corp and many others firms. Due to this competition, the company has experienced loss
of $0.01 per share than the expected sales. Even though it has invested heavily in infrastructure,
it's expected to reduce the costs of batteries that are set in the vehicles by 30% (Palin et al.,
2012). Tesla is among the most shorted stocks because its stock price has remained inflated as
compared to Ford and General Motors. One source of its competitive advantage is that it is a
technology firm which builds technology platforms other than being an automotive company
(Mangram, 2012). This has made it to become a leading player in the energy industry because
the aim is to bring the same integration and data analysis as it did in the automobile industry.
Tesla has taken advantage over its competitors by equipping its new cars with sensors necessary

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to the autopilot software. Every function of Tesla cars is controlled by software hence the
company has optimized its functioning just like the google search do. Another competitive
advantage is that; Tesla will be able to use these improved technologies to create a Tesla
Network that will enable the car owners to rent their cars as taxis hence making profits from this
(Yurynets & Tomyuk, 2014). Tesla has ensured that its business is diversified in case the
automotive industry sinks. The batteries of the Tesla cars are commercializing because they are
rechargeable hence providing people with solar-captured which they use at night when there is
power breakages. Tesla has been able to provide energy storage systems to utility companies and
this increased their production hence a cost advantage (Rothaermel, 2015).
2. Tesla Motors Company is capable of manufacturing electric vehicles of high quality,
technology, self-driving and beautiful screens. They have manufactured different vehicle models;
the company has produced Tesla Model S which is a luxury model with the highest acceleration
on the car market. Tesla company is also capable of manufacturing Tesla Model X which has
more technology than model s but with lower acceleration. (Hughes & Drury, 2015) Tesla Model
III is also manufactured by the company which was released in 2016 and this will be able to
target the middle class. The company is capable to produce high-performance batteries like Tesla
Power Wall, Tesla Power Pack, and Tesla Solar Roof. This has enabled the company to establish
a smart energy management services. The company is capable to draw a consistent future
because the CEO of the company is involved in many successful companies which is important
in the next future. Every project that the founder has developed is capable of improving the
world-wide situation hence this can be the hidden feature of Elon Musk’s businesses (Yurynets
& Tomyuk, 2014). This has made the Tesla Motors to be the best electric cars manufacturer
hence its success.

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Vehicle engineering, innovative manufacturing techniques, and powertrain are the core
competencies of Tesla Motors. The distinctive competency of the company includes; safety
design, battery pack technology and also distribution. With these competencies, Tesla has gained
a competitive advantage over its rivals because the customers look unto them as the leaders in
the electric vehicle manufacturer (Motors, 2010). The business model of the company is unique
as compared to the other automotive industries and by integrating the vehicle sales, the prices
have become non-negotiable. Tesla uses direct and online sales to develop customer experience
and their sale and service staff creates a value propositions for their customers. The company has
also developed charging stations for their vehicles to increase the rate of electric vehicle
adoption. By providing energy efficient and environmentally friendly electric vehicles has made
the company stronger and successful. The use of advanced technology has transformed the
automotive industry because of more investors and partners.
Tesla has experienced several weaknesses which have limited its ability to compete in future and
reduced the business growth. The company has a limited market presence because it generates
most of its income in the US and a small presence in developing countries hence reducing the
business growth. Tesla has a limited supply chain and this makes the company not to expand in
the overseas markets. Another weakness is that the products of the company are expensive than
those of their competitors (Nykvist & Nilsson, 2015). This weakness makes the company not to
increase its customer base and market share. These weaknesses have reduced the company’s
competitiveness and business growth.
3. Tesla Motors has many opportunities which increase its growth and development, improve its
performance and strategic growth. To increase its business growth, the company can expand the
global automobile market. By increasing global sales, the company will experience economic

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growth of those countries it has no market presence (Rajashekara, 2013). Example, the company
can expand the Asian automotive markets so as to increase its revenue.
The company can also expand its supply chain and this will be important because it will support
the global expansion of sale operations and production. The company can also diversify its
business by creating new businesses and this will be able to reduce risks in the automotive
industry (Cherubini, Iasevoli, & Michelini, 2015). The company is expected to reduce prices of
their products so as to start making more profits.
The company will establish a factory which will be able to produce batteries at lower costs than
the previous, this factory will be able to increase capacity (Chaika, 2016). Offering more
government incentives will make the customers to switch to electric vehicles hence Tesla work
with the federal government to increase the financial incentives.
The company has bought a solar energy company which will be able to increase its capabilities
in the energy storage. By adopting a new automotive technology, Tesla will be the world's
leading company to switch the public to sustainable transportation (Rothaermel, 2015). The
company has done this by producing tesla autopilot and more improved car batteries. Tesla
company manufactures environmental friendly automotive vehicles and this has reduced air
pollution hence having more markets for their electric cars due to high demand.
4. Tesla Motors applies a generic business strategy so as to achieve a competitive advantage over
the other firms producing similar products. The business level strategy has both advantages and
risks (Teece, Peteraf, & Leih, 2010).
Advantages

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The business level strategy gives a reflection of the company’s focus to use advanced
technologies in the electric vehicles so as to compete with its competitors.
The business strategy ensures business growth in terms of the company’s popularity and
profitability.
The business strategy of Tesla company helps it to maintain competitive advantage and attract
more markets in the automotive industry because they are interested in the environmentally
friendly products (Mangram, 2012).
Differentiation applied in the business strategy enables the products of the company to be unique
hence decline in production costs.
Risks
The company is likely to experience delays in design, manufacture, launch and production of
new vehicles in the past and in future.
Delays and complications in connection with new vehicle models in the past have been
experienced like production delays of model s and model x vehicles.
The company may experience delays in realizing their timelines, cost and volume targets for
production of model 3 vehicle. This could lead to harming the business prospects and financial
condition.
There is lack of experience in manufacturing vehicles at high volumes and hence need to acquire
efficient, automated and manufacturing capabilities which will be able to support such volumes.
There is a risk of failing to meet the growing production and delivery plans of the company and
this may harm the business and its prospects (Teece, Peteraf, & Leih, 2010).

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The manufactured vehicles may fail to perform as expected hence affecting the company’s
ability to develop, market and sell their automotive vehicles.
5. Tesla Motors is faced with many challenges as it grows and expands internationally. The
challenges are discussed below;
Competition in the automotive industry is high because electric motors have become so popular
and hence increasing more competitors in the market. This will reduce the market share and
profit margin of the company (Yurynets & Tomyuk, 2014). The Tesla company has many
competitors including general motors, Honda, Nissan, and Ford. This is because these companies
have more experience in the car industry and also their resources are unlimited as compared to
Tesla. Tesla products are expensive and its competitors have luxury cars with combustion
engines. The company will be required to prove that its capable of competing with the other
companies which have financial, manufacturing and marketing capabilities.
The fluctuations in the material prices is another challenge that Tesla motors face. For example,
the cost of lithium is fluctuating and increasing (Nykvist & Nilsson, 2015). This is a material that
the company uses in the storage of energy products. This will reduce the company’s profit
margin.
There is a possibility that the employees of Tesla Motors company will unionize. This will make
the company have higher employee costs in the production stoppage.
Another challenge that the company faces is the dealership regulations. This is because the
company sells its products to customers directly without dealership hence increasing selling
prices. This has led to some states opposing the direct selling of the company’s products by
making sure that the sales undergo dealership. Hence for the company to remain profitable, it
should be able to maintain competitive advantage regardless of competition from other
automotive industries (Yurynets & Tomyuk, 2014).
Recommendations

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Tesla motors is capable of becoming successful in future and must address some issues so as to
improve its profitability and competitiveness. The company should expand its multinational
presence by establishing new facilities and sale operations in developing countries hence
increasing business growth (Cherubini, Iasevoli, &Michelini, 2015). By doing this, the mission
and vision of the company will be satisfied.
The company should continue with the investment in research and development and this will
ensure that they produce more technologically advanced products (Rajashekara, 2013). This will
make the company to compete globally with other automotive companies.
The company should also expand its diversity in the supply chain and this will reduce the risks
on the supply side.
The company needs to be more innovative in reducing costs and match their revenues to the
levels of funding.
Conclusion
This task has discussed the Tesla Motors which is a company that manufactures electric vehicles
and battery charging equipment. We have also discussed the swot analysis of the company its
capabilities and core competencies. We have also discussed the challenges that the company
faces as well as the advantages and risks of the business level strategy adopted by the company.

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