MGT 201: Strategic Evaluation of Tesla Inc.'s Market Strategy

This essay provides a comprehensive strategic analysis of Tesla Inc., beginning with an outline of the company's operations and a proposed Corporate Level Strategy Statement. It examines Tesla's strategic position, strategic choices, and strategy in action, utilizing the Sixteen Fundamental Questions in Strategy. The analysis covers Tesla's unique positioning in the automobile market, its competitive advantages, and its intensive growth strategies, including market penetration and product development. The essay further evaluates the market's reaction to Tesla's strategy, considering factors such as international market challenges, cost reduction pressures, and sales performance in various regions. It concludes that Tesla's global standardization strategy and focus on technological synergies have contributed to its success, recommending a cost-leadership strategy for entering developing nations. The analysis references various academic and corporate sources to support its findings.

Running head: STRATEGIC MANAGEMENT
Strategy Management
Name of the Student
Name of the University
Authors Note
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Strategic Management- Tesla, Inc.
Introduction:
Tesla Inc. is the American automotive corporation that is based in Palo Alto,
California. The business holds specialization in manufacturing of electric car. It has several
production facilities and assemblage plants in its main car making facility is at Tesla Factory
in California. In July 2003 Tesla was founded by the engineers Martin Eberhard and Marc
Tarpenning under the name of Tesla Motors1. After operating for 10 years in the market Tesla
is placed as the world’s chart-topping plug-in passenger car maker in 2018, both in terms of
brand and by motorized group. Having delivered more than 245,240 units the company
currently occupies 12% of the plug-in section sales.
Corporate Level Strategy:
The mission and vision statements reproduce the feature of its protuberant electric car
making and other related business. Having founded in 2003, the company turned into a
money-making business in 2013. Continuous development of the company displays that the
marketplace is answering to the company’s automotive and energy storing products.
Essentially, the corporate mission of Tesla guides its strategic decision such as what the
company is required to do so that it can achieve its business effectiveness2. While the
consistent corporate vision report outlines the Tesla’s course of structural development.
Tesla arrived in the market through the luxurious high-end cars that was directed
towards more monetarily advantaged group of customers. Once the company is more well-
1 Ivanov, D., Tsipoulanidis, A. and Schönberger, J., 2017. Global supply chain and operations management. A
Decision-Oriented Introduction to the Creation of Value.
2 Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2016. Strategic management: Concepts and cases:
Competitiveness and globalization. Cengage Learning.

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known and broadly observed as positive idea, it would scheme into a highly competitive
market of low cost models3. Hence, Tesla’s first model was launched to achieve the mission
of company in the market. The battery and electric technology for every model would be
created and paid partially through the sales of previous models.
The production strategy of Tesla comprises of higher degree of upright integration
which comprises of production component and patented infrastructure of charging. Unlike
majority of the manufacturers, Tesla does not follow the approach of franchise dealership.
The company prefer selling their product to customers directly through its self-owned
showrooms across several main urban centres in the world. The company believes that this
method of selling can help in speeding up their product development. Tesla operates big
factories to obtain economies of scale. The online sales strategy of Tesla allows the
customers to customize and order their vehicles products.
The corporate mission of transitioning the world clearly indicates Tesla anticipation
of up-and-coming ascendency in the international marketplace for electric cars and associated
products. This constituent is directed related with the corporate vision report focus on
international market and change from “sustainable transport” to “sustainable energy”
evidently displays Tesla, Inc.’s corporate mission report changes to match existing strategic
purpose of business4.
Strategic Position, Strategic Choice and Strategy Action for Tesla, Inc.:
Tesla’s unique positioning in the automobile market is regarded as one of the main
strengths. Tesla beside selling cars it also sells the technology. The positioning statement of
3 Tjemkes, B., Vos, P. and Burgers, K., 2017. Strategic alliance management. Routledge.
4 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.

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Tesla reads as “the sole stylish car which can go from 0 to 100 in 3 seconds without a drop of
oil”. The company offers product that has high prize and higher added value which seems as
the feasible strategy. Having revolutionary and innovation oriented product, Tesla’s
ambitions is creating an improved customer value which would make the product perceived
as having value for price5. Tesla is tactically positioned in the electric car market as the high
end producer and seller. The company achieves competitive advantage over the other
producers due to their direct sales to consumers, stores and service centres, advanced
customer financing options and technical revolutions. The company faces rivalry from the
manufactures of electric cars which can be observed from the several stages.
Tesla faces competition from two levels namely fully electric vehicles and hybrid
carriages. The electric cars have not yet faced much rivalry however makers are tiring
themselves in developing the car. The company emphasis on the intensive growth strategies
which involves product development and market penetration. With increase in sales revenue
it provides Tesla with the added opportunity of technological advancement and eco-friendly
products of the business.
Considering the strategic choice of Tesla, the company applies generic strategy to
attain the competitive benefit against the other businesses that are operating in the world. The
generic strategy of Tesla reveals that the corporation places emphasis on employing the
forward-looking technology in its electric cars and connected products as the way forward to
compete against the General Motors Company, Toyota Motor Corporation, Honda Motor
Company, Nissan and Volkswagen amid some other competing automobile manufacturers6.
5 Wieland, H., Hartmann, N.N. and Vargo, S.L., 2017. Business models as service strategy. Journal of the
Academy of Marketing Science, 45(6), pp.925-943.
6 Teece, D.J., 2018. Tesla and the Reshaping of the Auto Industry. Management and Organization
Review, 14(3), pp.501-512.

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Apart from the generic competitive strategy, the business uses intensive strategy to
assure commercial growth of company. Tesla’s intensive strategies of development generally
evolve. The progress reflects the business’s rising amount of popularity and improved
productivity together with the commercial strengths. The strategic adjustment over the time
assures that the firm’s flexibility in the age of technical progress and evolving consumer
preferences.
The intensive growth oriented corporate strategy allows Tesla to uphold the
competitive benefit and appeal the early adopters in the international car market. The
equivalent intensive strategy corresponds to the organizational growth on the basis of
increasing sales revenue from the present market Tesla operates7. Matching of intensive
strategy with the generic competitive advantage strategy contributes to the company’s
operational efficiency.
Considering the strategy in action, Tesla, Inc. makes the use of market penetration as
the present primary intensive development policy. This intensive strategy allows the business
grow by increasing the sales revenue in the present market. For instance, with the aggressive
promotion, Tesla purposes to rollout and sell more of its electrical vehicles in US. In such a
way, Tesla can maximize the revenue from the market in which it presently operates. Tesla is
currently on track to render completely independent driving capability earlier than several
cars manufacturers by leveraging billions of miles of driving information which Tesla has
been collecting.
The intensive strategy of growth is related with the Tesla’s generic strategy by
developing the competitive advantage on the basis of improved market share. Another
strategy in action is the Tesla’s product development strategy the company is growing by
7 Lee, M. and Jay, J., 2015. Strategic responses to hybrid social ventures. California Management
Review, 57(3), pp.126-147.

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developing the new products which generates the new sales. The policy is in action for Tesla
with the objective of evolving new products with the progressive technology for minimum
ecological effect.
The company adopts the disruptive innovation strategy as Tesla’s ambition is to
finally reach the lower-end of customer segment matches as this will help in preserving the
bottom market. Tesla is present luring the competitors in the eco-system to promote growth,
it then aims to overtake the market with the disruptive innovation which completely makes
sense8. This intensive strategy of Tesla’s differentiating generic competitive strategy focuses
on the unique high-tech cars and the interrelated products which attracts its target consumers.
In relation, a strategic purpose for this intensive growth strategy is mainly directed towards
maintaining the extensive amount of investment in the research and development.
Tesla also implements diversification, however only as the marginally important
intensive growth strategy. Therefore, this intensive strategy enables the business to attain
growth through new business creation. The strategy action of Tesla is linked with the
diversification of increasing the Tesla’s R&D investment to recognize the new opportunities
for business. Tesla mainly emphasis on market penetration and product development to
expand its motorized and energy solution business.
Market Reaction to Tesla’s Strategy:
Even though Tesla has been successful in establishing around 164 stores and galleries
in around 26 countries but the company still faces numerous problems in foreign market. The
international homogeneousness of the market divisions suggests that Tesla faces low pressure
from the local responsiveness. However, in the international market the company faces
8 Akakpo, A., Gyasi, E.A., Oduro, B. and Akpabot, S., 2019. Foresight, organization policies and management
strategies in electric vehicle technology advances at Tesla. In Futures Thinking and Organizational Policy (pp.
57-69). Palgrave Macmillan, Cham.

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extreme pressure of cost reduction. Tesla operates in the highly competitive industry where
the price is the key driver of demand. Due to high prices, Tesla has not been very successful
in establishing stores in any underdeveloped countries where it may have very few customers.
The low pressure for the local receptiveness faced by Tesla have enabled the business
to standardise the products and constantly focus on the reducing the consumer switching
costs. Tesla has been successful in selling more than 14,106 vehicles in Europe which reflects
a rise of 250% from the figures posted in June 2018. Data reveals that the market share of
Tesla in 2019 was 2.1% in comparison to 1.1% share in the 2018. Because of few electric
makers in the market, Tesla sells at a higher price and yet maintains the share in the electric
car market.
Conclusion:
Conclusively, the higher pressure for reduction in cost and lower pressure for local
receptiveness have allowed Tesla to accept a global standardisation strategy. The business
has been successful in concentrating its production capabilities and creating a technological
and functional synergies which allows the company with economies of scale and experience a
cost saving. The international expansion strategy of Tesla is dependent on employment of
network charging stations for increasing the customer perceived value. The company should
use the cost-leadership strategy for entering into the developing nations.

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References:
Akakpo, A., Gyasi, E.A., Oduro, B. and Akpabot, S., 2019. Foresight, organization policies
and management strategies in electric vehicle technology advances at Tesla. In Futures
Thinking and Organizational Policy (pp. 57-69). Palgrave Macmillan, 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.
Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2016. Strategic management: Concepts and
cases: Competitiveness and globalization. Cengage Learning.
Ivanov, D., Tsipoulanidis, A. and Schönberger, J., 2017. Global supply chain and operations
management. A Decision-Oriented Introduction to the Creation of Value.
Lee, M. and Jay, J., 2015. Strategic responses to hybrid social ventures. California
Management Review, 57(3), pp.126-147.
Teece, D.J., 2018. Tesla and the Reshaping of the Auto Industry. Management and
Organization Review, 14(3), pp.501-512.
Tjemkes, B., Vos, P. and Burgers, K., 2017. Strategic alliance management. Routledge.
Wieland, H., Hartmann, N.N. and Vargo, S.L., 2017. Business models as service
strategy. Journal of the Academy of Marketing Science, 45(6), pp.925-943.