Strategic Challenges and Recommendations for Tesla Motors

Tesla Motors has strategically positioned itself as a leader in the electric vehicle (EV) market, leveraging innovative technologies and expanding its presence globally. The company’s strategic approach includes various facets such as product differentiation through technological advancements, expansion into emerging markets with customized products, and partnerships to bolster supply chain efficiencies. Tesla's focus on core competencies like advanced battery technology and autonomous driving features underpins its competitive advantage. However, the company faces significant challenges including high raw material costs, particularly lithium for batteries, and intense competition from established automakers entering the EV space. To sustain growth and market leadership, Tesla must address these strategic issues by upgrading production technologies, securing cost-effective supply chain partnerships, and continuing to innovate in key areas. By focusing on these strategies, Tesla can maintain its competitive edge in an increasingly crowded market.

Running Head: Strategic Management
Strategic Management
Tesla Motors

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Contents
Summary of SWOT......................................................................................................................................1
Identification of Tesla’s Strategies...............................................................................................................2
Strategic Issues faced by Tesla....................................................................................................................3
Conclusion and Recommendations.............................................................................................................4
References...................................................................................................................................................6

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Summary of SWOT
Strength
 Electronic vehicle infrastructure structure acted as biggest for the company to gain
appreciation in the target market.
 High level of confidentiality helped organization in implementing their action plan easily.
Also confidentiality decreased the problem of data theft and other crimes as well.
 Low cost of marketing helped the company invests their funds in other resourceful
activities (Birk 2015).
Weakness
 In today’s era, Tesla Motors faces the difficulty in arranging funds due to which they face
difficulty in expanding their business.
 Also Tesla faces high debt load which cuts the earnings of the organization.
Opportunities
 Due to emergence of electronic vehicles in the society, the governments also support the
customers to purchase such vehicles from the company and earn rewards.
 Increment in the prices of oil and gas will give a push to the demand of electric vehicles
due to which the company will also increase the supply of them in the market (Radius
2017).
Threats
 Lack of adequate knowledge about EV in the minds of customers is the biggest threat to
the organization Tesla. People are inefficient in analyzing the benefits of such vehicles
and its use due to which the demand of the product decrease. Also it dissatisfies them as
they do not know how to use them (Tansel 2015).

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Identification of Tesla’s Strategies
Business Level Strategy: the business level strategy which is currently used by Tesla is focused
differentiation. Focused differentiation refers to the strategy which combines elements of two or
more generic business strategies of Porter. Cost leadership, differentiation and focus are the three
main strategies with the blend of which the focus differentiation strategy is formed. Under this
strategy the organization Tesla focused on small groups of customers present in the target market
and provides them differentiated products so as to meet their demand present in the market. Tesla
targeted the early adopters present in the market who hold high income and have the potential to
purchase the electric vehicles supplied by the company. Understanding the above statements, it
was seen that the organization identified and picked the customers who have keen interest in
buying the technological innovative products present in the market and have the serious mindset
to buy the product. This method helped the company to accurately analyze the prospective
buyers and serve the product to them and create identification in the market (Tansel 2015).
Corporate Strategy: The corporate strategy which Tesla used is its business functions is the
mixture of product development and vertical integration in the manufacturing process. With the
use of product development strategy the organization aimed to become the leading market
innovator in the field of automotive. The company also invested in the field of research and
development so as to make their vehicles more affordable and attractive in the market. The main
aim of the organization the initiation of this strategy was to enter in the high end target market
under which the customer only requires the quality product for which they are willing to
premium amount as well. Later after receiving satisfactory results from the customers they aimed
to drive to increase the sales, for this purpose the company reduced the prices of their vehicles
due to which more products were sold in high volume. This strategy helped Tesla to substantially
gain the customers in the market (Hill 2013).
Co-operative Strategy: under the co-operative strategy, the organization developed a strategic
alliance with other profound companies present in the target market. This process helped the
organization to make use of fame of other companies and initiate he sale of their organization as
well. Tesla formed their alliance with many company like Mercedes Benz, Toyota, Daimler, with
the initiation of this process the company also eliminated the competition as these are those
companies which are present in same target market and serve same kind of products. So, co-

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operative strategy gives advantage to both the company and cuts competition. Further this type
of strategy helped the company to equalize their skills which lacking in their organization’s
process. The company made use of resources present with other company with the help of which
they developed their core competencies in the market. Also international expansion program was
also initiated in the company with the implementation of co-operative strategy (Nykvist, and
Nilsson 2015).
International Level Strategy: this strategy refers to the plan that directs the international
transaction happening between the companies of different countries. In order to initiate the
international transaction the company needs to take care of the language, belief and culture of the
other so as to initiate the transaction without any hindrance. The international strategy of Tesla
played an important role in helping the company to grow in the international market of
automobile. Transactional international business strategy was initiated by Tesla which helped the
electric vehicles to increase the sales worldwide (Hoang, and Rothaermel 2016). Under this
process the company co-operated and co-ordinated the business between the head office and
other operational divisions of the organization. This strategy of the company helped them to
circulate their business actins worldwide but keep the profits centralized only. Also this strategy
helped the organization to gain the satisfaction of local customers by spreading their business in
different part of the world. The area where Tesla is most prominent in serving their products is
US, Australia, Asia, Canada and Europe. Also the company headquartered in California
(Rothaermel 2015).
Strategic Issues faced by Tesla
 Long Production Cycle: long process of production cycle leads to increasing demand of
the product in the competitive market and decrease in the supply of them. Resulting to
which the customers get agitated while waiting due to which their level of satisfaction
decreases and the customers switches to products of competitors brands. Tesla needs to
speed up their production process otherwise it can act as a major threat for the
organization. Due to this issue the company is also unable to meet up to the demand of
the product forecasted in the target market. One of the reason due to which the
organization faces this issue is the lack of adequate human resource, lack of human

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resources leads to increase in the production and manufacturing process and substantially
the customers receives the products late. Thus, such complication shall be resolved by the
organization on the highest priority so as to increase the sales volume of the product
currently present in the market (Martin 2014).
 Rise in price of raw material: the company Tesla spends billions of dollars on the
purchasing the massive batteries and sub-parts of the vehicles. supposing if the company
produces around 500,000 cars then they need to purchase a large amount of lithium ion
batteries which cost a huge expense to the company due to which the prices of the
product also increases. Also the company faces the dilemma that if they sell the product
at high prices, very few customers gets interested in actually buying it, and if they lowers
the prices then they are unable to compensate with the expenses of raw material. Also it
shall be noted that the company cannot even replace the raw material expense of lithium
with that of some other cheap material like silicon because with the use of silicon the
products are not made according to the expectations. Thus, the high prices of raw
material acts as a major concern for the company (Chen, and Perez 2015).
 Cut-throat competition: although currently the company is gaining competitive edge in
the target market but this situation will not survive for a long time as there is cut throat
competition present in the market of electric cars. Companies like, Honda, Toyota, Ford
etc. have also now gained the competence of producing the electric vehicles, so this gives
the power to the customers as they can easily switch between many other companies
products present in the market. Electric vehicles are the sole product with the help of
which the company is sustaining in the target market and if the customer will find
alternative for this product then will become difficult for the company to survive their
current growth in the target market. Due to which competition acts as a major issue of
concern in the target market (Mosey, and Kirkham 2017).
Conclusion and Recommendations
Thus in the limelight of above-mentioned events it shall be noted that the company Tesla has the
competence to ace the target market they just need to analyze and eliminate their strategic issues.
Further the recommendation to Tesla Motors is discussed below:

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 The company should make use of upgraded technology and employ adequate human
resource who can match up to the product and create them without any issues. Qualified
human resource will also help the company to acknowledge new and innovative
technology and make use of it in the production process to increase its pace.
 Tesla should find supplier of raw material who sell the product at feasible rates. This will
help the company to decrease the cost of production.
 Lastly, in order to eliminate competition the company should focus on their core
competencies and effective work on them so as to gain competitive edge in the target
market (Wieland, Hartmann, and Vargo 2017).

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References
Birk, D., 2015. Tesla Motors, Inc. Market Analysis and Definition.
Chen, Y. and Perez, Y., 2015. Business model design: lessons learned from Tesla Motors.
In GERPISA International Conference.
Hill, J, 2013. electronic vehicle sale expected to grow globally to 1.8 miilion by 2023.
Viewed on November 6, 2017 from https://cleantechnica.com/2014/08/12/electric-vehicle-
sales-expected-grow-globally-1-8-million-2023/
Hoang, H. and Rothaermel, F.T., 2016. How to Manage Alliances Strategically. MIT Sloan
Management Review, 58(1), p.69.
Martin, C., 2014. Driving change in the battery industry(Doctoral dissertation, Nature
Research).
Mosey, S. and Kirkham, P., 2017. 2 Entrepreneurial strategy. Building an Entrepreneurial
Organisation, p.21.
Nykvist, B. and Nilsson, M., 2015. Rapidly falling costs of battery packs for electric
vehicles. Nature Climate Change, 5(4), pp.329-332.
Radius, 2017. Tesla Motors: achieving excellence and innovation overseas. Viewed on
November 6, 2017 from < https://www.radiusworldwide.com/knowledge/case-studies/case-
study-tesla-motors>
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Tansel, A.K., 2015. Analysis of Tesla Motors’ Marketing Communications Strategy.
Tansel, A.K., 2015. Marketing Report on" Tesla Motors".
Wieland, H., Hartmann, N.N. and Vargo, S.L., 2017. Business models as service
strategy. Journal of the Academy of Marketing Science, pp.1-19.