Case Study: Tesla Motors in 2016 - Strategic Analysis

This case study analyzes Tesla Motors in 2016, examining its strategic position amidst challenges like low gasoline prices and growing competition. It includes a SWOT analysis, evaluating Tesla's strengths (e.g., innovative electric cars, supercharger network) and weaknesses (e.g., production costs, limited model variety), along with opportunities (e.g., rising demand for electric cars, advancements in solar power) and threats (e.g., competition from Nissan, sales bans in certain states). The analysis covers Tesla's diversification strategy with Tesla Energy, vertical integration in distribution, manufacturing strategy, and marketing approach. It also explores key elements of Tesla's culture, identifying both positive aspects and potential pitfalls like overpromises and profit challenges. The study offers recommendations for long-term goals, focusing on production capacity, addressing battery stigmas, and expanding charging infrastructure.

Running Head: MANAGEMENT 0
CASE STUDY

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Q1) SWOT analysis, conclusion, implications and recommendations.
Strengths
 Their best performing electric car
which can give tough competition
to Mercedes and BMW.
 National Highway Traffic Safety
Administration gives best safety
test score to Model S (Ingram).
 The customer can get reliable
services due to Tesla
superchargers as they charge
much faster than regular charging
stations.
 It also makes appealing to
customers as their “Showroom”
technique of selling cars is very
identical to Apple.
 Their sales growth is continuously
increasing without much aggressive
advertising.
Weaknesses
 Not adequate capital to meet the
demands.
 In terms of cost of production
and mileage, battery seems to
be inefficient.
 No varieties for customers as
Model S is only their
manufactured cars.
 The selling price of Model S
is very high.
Opportunities
 In future, there is a positive sign
for electric cars as oil is becoming
scarcer.
 There is a rising demand for
electric cars.
 In China, the quality of air is going
continuously poor and this makes
Chinese government subsidize
buyers of electric cars.
 Advancement in solar power
technology.
 The cost of production may be
reduced by 30% due to battery deal
between Tesla and Panasonic
(Simon).
Threats
 Tesla can face tough
competition from Nissan in the
electric car industry.
 In many states, sales of Tesla
have been banned.
 Some people do not perceive
Tesla as a feasible option. There
is stigma that their charging
does not give much mileage.
 Competition of Tesla is against
combustion engine powered
cars, a technology that has been
reliable.
Tesla has the potential to transform an entire industry, however, they still own less than 1%
of the new car market in North America. For many people, electric car is still a new and

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misunderstood technology, although Model S of Tesla is a primary cause. My
recommendations are linked with long term goals achievement.
Elon Musk needs to proactively act on opportunity as due to scarcity in oil, demands for
electric cars are rising and still, Tesla has not improved their production capabilities as a
faster rate to meet up with growing demands. If this drift continues, the new vehicles cannot
be delivered at time and causing poor customer service. Hence, on urgency basis, Tesla needs
to invest in new plant as North America is still their biggest market.
I also believe that Tesla needs to continue to break the stigma surrounding electric vehicles.
For many customers, batteries are not as much developed as combustion engines and this can
cause not buying electric vehicles. I also recommend to build up more charging stations all
over the world and Tesla need to ensure that their superchargers are faster and more powerful
as compare to regular charging areas.
The company should confirm signed a deal with Panasonic to become the primary provider of
battery. Signing agreement with Panasonic and going forward with “Gigafactory” will help
their cause (Loveday).
Q2) Potential pitfalls of this alliance
Tesla Partnership with Mercedes-Benz: Daimler AG is the parent company for Mercedes-
Benz. It is one of the famous brands in the globe. Being an American based company, Tesla
is focusing on building automobiles through solar power and electricity. Gaining an equity
stake of nearly 10 per cent in Tesla for a stated $50 million will speed up the development of
Tesla lithium-ion battery technology. However, from other perspectives, this alliance build up
with Mercedes will lead to potential pitfall on share of organisation on the market command.
There can also be resistance of certain employees to new concepts that can cause chaos on the
efforts to develop a flourishing treaty. In addition, Tesla is doing impressive innovation and
they have more than 700 patents. Entering of Mercedes into the system will lead to
solidification of the patents.

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Q3) Type of diversification strategy does the launch of Tesla Energy represent
Related diversification is a strategy when a firm expands its activities into product lines that
are parallel to those it currently offers. The launch of Tesla energy represents using of related
diversification as due to significant similarities with the enterprise existing industry. In
addition, they were also in the process of diversification acquired SolarCity and constructed
the Gigafactory to warehouse its battery and automobile production. In 2016, SolarCity
succeeded more solar systems for homes than any other solar enterprise in the US. Yes, they
have met the three tests of corporate advantage since the business is attractive including
strong potential revenue for the industry. It is hard to get realise of any other manufacturers
as being serious about electrification when they are so far behind Tesla. Hence, it can be said
that Tesla dominates the future of automobiles.
Q4) What kind of vertical integration strategy did Tesla choose for its distribution and
supply chain?
In respect to distribution and supply chains and considering vertical integration strategy,
Tesla opts for forwarding integration where organisation will get many benefits with
ownership over the preceding consumers. With forwards integration strategy, Tesla will get
control of direct distribution or supply of organisation products. The major benefits of this
strategy will be improved quality of suppliers, lower costs, enhancement in the coordination
in supply chain, and good market share. In addition, Tesla will also be able to create
economies of scale as by keeping management consolidated, overhead and other costs are
often reduced. Considering disadvantages, it includes rise in bureaucracy and reduced
flexibility due to greater investment. Moreover, there can also be lower quality of products
due to ownership of channels related to supply and distribution. Being an innovative
company, Tesla will now be more rigid to trends, given how the supply chain is set up.

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Q5) Tesla manufacturing strategy
By reviewing Tesla manufacturing strategy, it can be said that their value chain is definitely
made strategic sense as in most cases they cut costs and understand the true insource-
outsource trade-offs enabling the frugal outcomes. With seasoned supply chains, the
company work to rapidly developing and churning out their own electric cars in align with
government options to pursue low-emission and eco-friendly transit options. In addition,
Tesla is doing things radically dissimilar than various other car markets. The company is
focusing on making everything in house rather than outsourcing. The sales channels are also
insourced by them seeking for innovation. Tesla sells directly to the public through their
websites and in showroom in shopping centres.
Q6) From which five generic strategies are Tesla pursuing with its marketing strategy?
Tesla has adopted a broad differentiation strategy in extent with the premium electric vehicle
company so as to widen the respective sales and capture the market. (Leinwand & Mainardi).
However, in this case, it was founded that Tesla motors are also concentrated on offering
their vehicles to consumers at lower prices in relating to the costs they use in generating the
batteries. Since analysing the complete economical approach, focused differentiated strategy
will be best preferred. It is not only an electric company, however, but it is also one of the
major foremost premium brands in the industry right now.
Therefore, it is rational to say that the vehicles are produced by Tesla produced to meet the
perception of consumers by outcompeting all its competitors. Hence, employing this strategy
is leading them to achieve competitive advantage.
Q7) key elements of Tesla’s culture
There is been identified three major key elements of Tesla culture which includes ambitious
innovation, lack of bureaucracy and adherence to ‘First Principles’ method. The major
problems that can be seen in their culture amid growing competition are – overpromises and
under delivers, workman claims and lawsuits and earning of continuous profit. In detail,
Tesla not fulfil order of Model 3, their first electric vehicle designed for masses. In addition,

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complaints by the workmen also not addressed properly related to threatened violence,
pervasive harassment and so on. Lastly, the company also not able to earn the profit
continuously, as later ten years of losses, it was finally announced by Tesla its first-ever
quarterly profit in 2013. Conversely, in February 2018, the enterprise proclaimed that it
ended 2017 with its biggest quarterly loss of around $675 million.

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References
Ingram, Antony. “Tesla Models S Gets Highest Safety-Test Score Ever Awarded By
NHTSA.” Greencarreports, 20 Aug. 2013,
https://www.greencarreports.com/news/1086352_tesla-models-s-gets-highest-safety-test-
score-ever-awarded-by-nhtsa
Leinwand, Paul., & Mainardi, Cesare. “Your Whole Company Needs to Be Distinctive, Not
Just Your Product.” hbr, 19 May. 2016, https://hbr.org/2016/05/your-whole-company-needs-
to-be-distinctive-not-just-your-product
Alvarez, Simon. “Tesla partner Panasonic to boost Gigafactory battery production capacity
by 30% to address Model 3 ramp.” teslarati, 31 July. 2018, https://www.teslarati.com/tesla-
panasonic-gigafactory-battery-output-model-3-ramp/
Loveday, Eric. “Panasonic To Sign Gigafactory Battery Deal With Tesla This Month.”
insideevs, 17 July. 2014, https://insideevs.com/panasonic-sign-gigafactory-battery-deal-tesla-
month/
Lee, Timothy. “Batteries could be Tesla’s secret weapon.” 18 April. 2017, Vox,
https://www.vox.com/new-money/2017/4/17/15293892/tesla-batteries-gigafactory-bet