TESLA, Inc.

International Business Strategies

May 30, 2017

Cedric Kamkoum

International Business Oral Presentation, Pusan National

University

Course Lectured by Professor Eon-Seong Lee

 Research Topic

Tesla’s International Business Strategies

and Success Factors of These Strategies
 Research Objectives

• Analyze strategies Tesla used in the foreign

market

• Discuss factors that made its strategies

successful

• Identify problems it should solve

• Outline important managerial implications.

 • Tesla, Inc. (formerly known as Tesla Motors
Inc.) is a US-based automobile company
that designs, manufactures, and sells electric
cars and electric vehicle powertrain
components, with a focus on energy
innovation (Tesla n.d.).
• Although Tesla was initially co-founded by
Introducing Tesla - 1 Martin Eberhard and Marc Tarpenning in
2003, it also considers JB Straubel, Ian
Wright, and Elon Musk as its co-founders
(Burns, Kumparak, and Escher 2015).
• Its current CEO is Elon Musk—who owns
22.25% stake in the company as of April
2017.
Introducing Tesla – 2
(Mission)

Tesla’s mission is to

accelerate the world’s

transition to sustainable

energy (Tesla n.d.).

 • Tesla currently has about 272 stores
worldwide, 164 of which are in 26
different countries outside the US, with
Germany having the highest number
(27) of its foreign stores (Tesla n.d.).
Introducing Tesla - 3
• Tesla’s first expansion moves into the
foreign market were its opening of a
showroom in London on 25 June 2009
and a store in Munich in September
2009.
Introducing Tesla
-4
• Tesla’s core competencies are powertrain and
vehicle engineering.
• Its basic pricing strategy is price skimming: it
initially entered the automotive market with an
expensive, high-end product, the Tesla Roadster,
targeted at wealthy customers. With profits
generated from the sales of the Roadster, it could
finance the production of a less expensive car
model, the Tesla Model S. Profits obtained from
the sales of the Model S, in turn, helped finance
the production of an even cheaper car model
targeted at a larger and less affluent market, the
Tesla Model X.
Introducing Tesla - 5 (Car Models)

The Tesla Roadster:

• The first fully electric car in the
world and the first production
automobile to use lithium-ion
battery cells.

• RRP: From $101,500

Introducing Tesla - 6 (Car Models)

The Tesla Model S:

•An electric luxury sedan which ranks as the
world’s all-time second best-selling plug-in
electric car as of December 2016.

•RRP: From £57,400

•Range: 479.6 to 613.2 km battery-only

•Acceleration 0-62 mph: 2.7 seconds

•Max speed: 139.8 to 155.3 mph

•Battery charge time: 1.75h at 440V

Introducing Tesla - 7
(Car Models)

The Tesla Model X:

•A full-size crossover SUV first
delivered to the public in
September 2015.
•RRP: From £79,900
•Acceleration 0-62 mph: 3.1 to 5.2
seconds
•Range: 416.8 to 540.7 km battery-
only
•Max speed: 139.8 to 155.3 mph
Introducing Tesla - 8
(Car Models)

The Tesla Model 3:

•Unveiled in March 2016

•Its production is
programmed for end 2017
Reasons for Choosing Tesla - 1
“What are the problems that are most likely to affect the future of the
world or the future of humanity? Sustainable energy problem is the
biggest problem that we have to solve this century” (Elon Musk).

• The significant role Tesla plays in transitioning the world to sustainable energy:

14% of the global greenhouse gas emissions in 2010 and 26% of the total US
greenhouse gas emissions in 2014 originated from the transport sector (IPCC
2014, 8; United States Environmental Protection Agency 2017) .
 • Tesla’s dominance in the electric
car sector:

Reasons for As of December 2016, Tesla had sold

Choosing Tesla - 2
over 185,000 electric cars worldwide
(Tesla n.d.), making it the second largest
global pure electric car manufacturer
after the Renault-Nissan Alliance.
International Strategies Tesla Employed in
the Foreign Market - 1

• Tesla’s international-level
strategy is the transnational
strategy
 International Strategies Tesla Employed in
the Foreign Market - 2
Tesla’s international strategies are similar to those it employs in the US

• Direct Selling:
Tesla sells its cars directly to customers through its stores and galleries
or through the Tesla website
• Certified Pre-Owned (CPO) Program:
Tesla uses a buyback program called Certified Pre-Owned (CPO) in
countries such as Germany, France, Sweden, Norway, and Canada.
 • Strategic Positioning of Stores and
Galleries:
Tesla deliberately positions its stores
and galleries in high foot traffic, high
visibility retail venues, like malls and
shopping streets that people regularly
International Strategies visit in a relatively open-minded buying
Tesla Employed in the mood (Musk 2012).
Foreign Market - 3 • Local Responsiveness:
Made modifications to the Tesla Model
S in China, including an ‘executive rear
seat’ option, which costs $2000 over the
standard model and aims to make the
rear seat experience more comfortable
(O’Hara 2015).
International Strategies
Tesla Employed in the
Foreign Market - 4

• Related Diversification:

Tesla’s collaboration with Toyota,

Daimler AG, and Panasonic
Problems Tesla Should Solve in the Foreign
Market - 1
• High Prices and Threat of Substitutes:
As a comparison, Europeans paid an average of US$30,700 for new fuel-using
vehicles bought in H1-16 (Munoz 2016), but a Tesla Model X was priced at
US$80,000 at that time.

Tesla has not been able to establish stores in any underdeveloped countries, where
it would have very few customers.
• Lack of Acquisitions and Joint Ventures in the Foreign Market:
Tesla currently has no main foreign acquisitions or joint ventures
Problems Tesla Should Solve in the Foreign
Market - 2
• An Insufficient Number of Stores and a Lack of Superchargers:

With only about 164 stores outside the US, Tesla is far behind its main
competitors such as Ford, which as of the end of 2015 already had about 8733
Ford and Lincoln dealerships outside the US (Ford 2016).
Factors of Tesla’s Success in the
Foreign Market - 1

• First-Mover Advantage and

Weak Competition:
First company to offer a fully electric
sports car—the Tesla Roadster.

Fewer number of electric carmakers

as compared to the number of fuel-
using car manufacturers
Factors of Tesla’s Success in the Foreign Market - 2

• Support by Governments for Environmentally Friendly Vehicles:

For example, in countries like Malaysia and Hong Kong, zero-emissions electric
vehicles like those offered by Tesla are fully tax exempted.

The Singaporean failure case.

 • Focused Differentiation, Low
Bargaining Power of Buyers, and
Inelastic Demand:
Tesla’s generic business strategy is
Factors of Tesla’s focused differentiation
Success in the Tesla cars are a luxury good
Foreign Market - 3
• Direct Selling:
Creates a closer relationship with its
customers
 Summary - 1

• Tesla is a US-based automobile company that was founded by a group of

innovative Silicon-Valley engineers in 2003.
• Its mission is to accelerate the world’s transition to sustainable energy.
• Its objective is to manufacture affordable zero-emission electric cars.
• It delivered the world’s first fully electric car model, the Tesla Roadster, in
February 2008.
• In addition to the Roadster, Tesla has produced two other fully electric car models
(the Tesla Model S and Model X) and unveiled a fourth model, the Tesla Model 3.
• Tesla’s first expansion moves into the foreign market were its opening of a
showroom in London on 25 June 2009 and a store in Munich in September 2009.
 Summary - 2

Tesla uses similar strategies both in the US and abroad

• Its corporate-level strategy is related diversification

• Its business-level strategy is focused differentiation, and

• Its international business strategy is the transnational strategy.

 Summary - 3
Factors of Tesla’s success in the foreign market include

• the existence of a weak competition in the electric car sector and its
first-mover advantage

• its unique strategies of focused differentiation and direct selling, and

• the support it receives from governments in the form of grants and tax
breaks through programs encouraging green technology
 Summary - 4

Problems Tesla should solve in the foreign market include

• its lack of acquisitions and joint ventures in the foreign market

• the high prices of its car models

• its limited number of stores compared to that of its competitors, and

• its insufficient number of superchargers

 • Tesla is in the right direction, and to maintain its
dominant position in the electric vehicle sector,
it should continue with its direct-selling strategy.
• On the other hand, it must establish more
factories, stores, and galleries worldwide, enter
into more alliances and joint ventures with and
Managerial acquire local firms in the foreign market.
Implications • Tesla should continue with the focused-
differentiation strategy in developed countries,
but should use a focused-cost-leadership
strategy to enter underdeveloped countries since
potential customers in third-world nations have
relatively low incomes compared to customers
in developed countries.
QUESTION Do you have any
S questions?
Thank
you!
References
• Burns, Matt, Greg Kumparak, and Anna Escher. 2015. “A Brief History of Tesla.” TechCrunch, July 28, 2015.
https://techcrunch.com/gallery/a-brief-history-of-tesla/.
• Ford. n.d. “Working with Ford – Dealers.” Accessed April 08, 2017.
http://corporate.ford.com/microsites/sustainability-report-2015-16/people-dealers.html.
• IPCC, 2014: Summary for Policymakers. In: Climate Change 2014: Mitigation of Climate Change.
• Munoz, Felipe. 2016. “Europeans paid an average of €27,500 for the new cars bought in H1-16.” JATO Dynamics. Last
modified September 12, 2016. http://www.jato.com/europeans-payed-average-e27500-new-cars-bought-h1-16/.
• Musk, Elon. 2012. “The Tesla Approach to Distributing and Servicing Cars.” Tesla, Inc. Last modified October 22, 2012.
https://www.tesla.com/blog/tesla-approach-distributing-and-servicing-cars?redirect=no.
• O’Hara, Mark. 2015. “What is Tesla Doing to put Things Right in China?” Market Realist, Inc. Last modified August 31,
2015. http://marketrealist.com/2015/08/tesla-put-things-right-china/.
• Tesla. n.d. “About Tesla.” Accessed March 28, 2017. https://www.tesla.com/about?redirect=no.
• Tesla. n.d. “Careers: Investors.” Accessed March 28, 2017. http://ir.tesla.com/.
• Tesla. n.d. “Find Us.” Accessed March 28, 2017. https://www.tesla.com/findus/list.