Tesla: A Comprehensive Strategic

Analysis
By: Herb Benson, Robert Korn, Samantha Nettnin, and Kevin Peterson
 Tesla Motors (TSLA) History
• Founded in 2003 by Elon Musk (Current CEO), JB Straubel (CTO), Martin Eberhard, Marc
Tarpenning, and Ian Wright
• Tesla Roadster
• First manufactured product, offered from 2008-2012
• Model S
• Currently only vehicle offered, 2012-present
• Model X
• SUV, expected to be sold in early 2016
• Model 3
• Expected to be offered in 2017
• Target Price: $35,000
• IPO: January 29, 2010, raised US$226 million
• First American car company to go public since Ford (F) in 1956
• Turned first profit in Q1, 2013
 Mission and Vision
• Mission Statement: Tesla Motors designs and sells high-performance, highly efficient
electric sports cars, with no compromises. Tesla Motors cars combine style,
acceleration, and handling with advanced technologies that make them among the
quickest and the most energy-efficient cars on the road.
Courtesy www.teslamotorsinc.blogspot.com

• Vision Statement: To “create the most compelling car company of the 21st century by
driving the world’s transition to electric vehicles.”
Copyright | CENGAGE Learning | Strategic Management
 General Environment Analysis
Segment Elements Industry Effect

Political/Legal • Regulations on Emissions and Safety Standards Neutral

• National Traffic and Motor Vehicle Safety Act, 1966
• Energy Policy and Conservation Act, 1975

Technology • Higher demand for reliable, fuel efficient vehicles Positive

• Alternate fuel vehicles (Ethanol, Biodiesel, Hydrogen Fuel
Cells)
• Online shopping/research
Sociocultural • Luxury vs. Economy Vehicles Positive
• Power vs. Fuel Efficiency
 Industry Analysis
Force Description Influence on Industry
Threat of New Entrants • Mature Industry has reached Economies of Low
Scale
• High Initial Capital Requirements
• Difficult Access to Distribution Channels
Bargaining Power of • Private and Commercial buyers account for Moderately High
Buyers majority of revenue
• Low Switching Costs
• Buyers are unable to integrate backwards
Intensity of Rivalry • Gaining Market Share means Reducing High
Among Competitors Market Share of Competitor
• Few Opportunities for Differentiation

Type of Firm Description Industry Attractiveness

New Entrants High Startup Costs, Legal Fees, Intense Competition Very Unattractive
Incumbent High Liquid Assets, Distribution, Holding Costs Moderate
 Integrated SWOT Analysis
• Strengths
• Brand Equity
• Product Quality
• Eco-friendly Product Line

• Enhanced Opportunities
• Increase Market Share through High-Growth EV Industry

• Limited Threats
• Consumers Deterred due to “Range-Anxiety”
 Competitor Analysis: Toyota
Strategy Current Strategy
Business Differentiation: The firm seeks the broadest possible market with distinctive
offerings

Corporate Related Linked: The firm operates five automotive brands (including Toyota, Lexus,
and Scion) in addition to partnerships with other automotive and nonautomotive firms

Cooperative Horizontal Complementary Strategic Alliance: Each partner is committed to

combining their resources and skills to create value within the value chain

International Transnational: the firm seeks to achieve both global efficiency and local
responsiveness.
 Competitor Analysis: General Motors
Strategy Current Strategy
Business Differentiation: The firm seeks the broadest possible market with distinctive
offerings

Corporate Related Linked: The firm operates thirteen brands (including Chevrolet, Buick and
Cadillac) in addition to partnerships with other automotive and nonautomotive firms.

Cooperative Horizontal Complementary Strategic Alliance: Each partner is committed to

combining their resources and skills to create value within the value chain

International Transnational: The firm seeks to achieve both global efficiency and local
responsiveness.
 Competitor Analysis: Conclusions
• Strategic Competitive Advantages • Future Industry Assumptions
• Toyota • Culture shift towards energy efficient
• Market Power and renewable energy
• Capital Resources • Eco-Friendly companies will have more
• Just-in-Time (JIT) Inventory Management
long term success
System
• Future Major Objectives
• General Motors
• “Greening”
• Capital Resources
• Product Lines
• Diverse Product Offering
• Supply-Chain Networks
• First to Offer New Technology
• Operations
• Chevrolet Volt, Wi-Fi in cars
• Marketing Messages
Current Strategies
• Business Level: Focused Differentiation
• Target early adopters with high income

• Corporate Level: Related Constrained

• Dominant business selling cars but also sells electric power train parts

• Cooperative Level: Strategic Alliances

• Panasonic, Toyota, Dailmer, Mercedes Benz,

• International Level: Transnational

• U.S, Asia, Australia, Europe, and Canada
• Centered in California
 Value Chain Comparison
Toyota General Motors

Marketing Superior Superior

Distribution Inferior Inferior

 Important Financial and Nonfinancial Data
Tesla Toyota General Motors

Earnings Per Share -$2.36 $10.67 $1.64

ROE -10.81% 14.8% 7.5%

Net Income -$294,000,000 $19,891,000,000 $3,949,000,000

Long-Term Debt to 55.5% 2.8% 18.4%

Capitalization Ratio
Revenue $3,198,000,000 $256,585,000,000 $155,929,000,000

Important Nonfinancial Factor: Culture

 VRIN Analysis: Batteries
Valuable Rare
Yes Yes

Inimitable Nonsubstitutable
Yes Yes

Result: Sustainable Competitive Advantage

 Strategic Issues
• Small company
• Limited capital

• Niche market
• Charger network
• Range concerns

• Lithium-ion batteries
• Distribution network
Distribution Network
 New Strategy Formulation
Strategy Positives Negatives Response
 New Strategy Formulation
Strategy Positives Negatives Response
New partnerships for -Growth potential -Limited Resources -Imitation
supplying drive train -Valuable expertise -Competitor conflicts
components -Furthers EV adoption -Lower Margins
-Early-mover
-Distribution network
-Low risk
 New Strategy Formulation
Strategy Positives Negatives Response
New partnerships for -Growth potential -Limited Resources -Imitation
supplying drive train -Valuable expertise -Competitor conflicts
components -Furthers EV adoption -Lower Margins
-Early-mover
-Distribution network
-Low risk
Enter mainstream -New customers -Lacking resources -Pricing
automotive market -Furthers EV adoption -Distribution network -Alliance relations
-Limits partnerships -Moderate risk -Litigation
 New Strategy Formulation
Strategy Positives Negatives Response
New partnerships for -Growth potential -Limited Resources -Imitation
supplying drive train -Valuable expertise -Competitor conflicts
components -Furthers EV adoption -Lower Margins
-Early-mover
-Distribution network
-Low risk
Enter mainstream -New customers -Lacking resources -Pricing
automotive market -Furthers EV adoption -Distribution network -Alliance relations
-Limits partnerships -Moderate risk -Litigation

Enter renewable -Growing industry -Lacking experience -Pricing

energy market -Valuable IP -Higher risk -Contracts
-Green Energy
-New Market
New Partnerships for Drive Train Components
Strategy Old New
Business Differentiation Differentiation
Corporate Related Constrained Related Constrained
International Transnational Transnational
Cooperative Strategic Alliances Strategic Alliances

7S Implementation
Strategy Expansion of production facilities, Aggressive R&D
Skills Acquire employees with mass production experience
Staff Increase in all levels of staff

Action Item Timeline

New production facility – additional capital required 2-4 years
Develop partnerships to supply drive-train components 1+ years
 Enter Mainstream Automotive Market
Strategy Old New
Business Differentiation Differentiation
Corporate Related Constrained Dominant Business
International Transnational Transnational
Cooperative Strategic Alliances Vertical Strategic Alliances

7S Implementation
Strategy Expansion of production facilities
Skills Acquire employees with mainstream automotive experience
Staff Increase in low and mid-level staff

Action Item Timeline

New production facilities – additional capital required 4-5 years
New distribution network 2+ years
 Enter Renewable Energy Market
Strategy Old New
Business Differentiation Differentiation
Corporate Related Constrained Related Linked
International Transnational Transnational
Cooperative Strategic Alliances Horizontal Strategic Alliances

7S Implementation
Strategy Expansion of production facilities
Skills Acquire employees with renewable energy experience
Staff Increase in upper-level staff

Action Item Timeline

New production facilities – additional capital required 2-3 years
New partnerships with similar companies 1+ years
Consumer-level renewable energy 1-2 years
Business-level renewable energy 3-4 years
 New Strategy Choice
Strategy Reason
New partnerships for  Smallest change from current strategy
supplying drive train  Least risk
components  Large growth potential
 Shortest time frame
 Distribution network
Enter mainstream x Distribution network
automotive market x Moderate risk
x Competitor response
Enter renewable energy x Largest change from current strategy
market x Unfamiliar with market
x Competitor response
x Contracts