Professional Documents
Culture Documents
Name:
University:
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1.0 Introduction……………………………………………………………………3
1.1 History…………………………………………………………………3
2.3 Analysis………………………………………………………………..6
5.3 Diversification………………………………………………………...13
6.0 Recommendations…………………………………………………………….14
7.0 Implementation……………………………………………………………….16
9.0 References……………………………………………………………………..18
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1.0 Introduction
Tesla is a luxury motor vehicle manufacturing headquartered in the United States. The
company was founded in 2003 and builds electric vehicles that are better and quicker to drive
than the gasoline cars. The other company products include energy generation and storage
future since its inception in 2003 (Bloomberg, 2017). The current chairman, Elon Musk offered $
7.5 million financing in 2004 and another $ 13 million in 2005 during the development of the
Tesla Roadster. The first production of vehicle started in 2006 and was unveiled by the existing
CEO, Martin Eberhard (Tesla, 2017). The company experienced leadership changes in 2007
when Ze’ev Drori took over as the Chief Executive and about 10 percent of the staff was
retrenched. The company delivered 2,250 Roadster models between 2008 and 2012, but kept on
struggling in reassuring the customers about its capability of delivering high quality and luxury
models. In 2008, the company unveiled Model S which became to be known as a more
affordable family sedan due to the seating capacity of seven people and low price of $ 50,000
(Bloomberg, 2017). The paper will analyze Tesla’s external environment, the strategic
positioning and core capabilities, and offer recommendations on how the company to attain a
1.1 History
The company raised $ 40 million Series C financing in 2007 to expand the innovation
activities. The new product development led to unveiling of Model X SUV in 2012 and its
innovation led to the stunning gullwing-type doors associated with the model (Tesla, 2017). The
company formed a strategic partnership with Daimler AG by offering 10 percent of its stake for
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an estimated $ 50 million. Another significant milestone in the history of the company is the
2010 initial public offer where the company raised $ 226 million for expansion purposes. The
company invested in electric car charging stations in 2012 that allow the drivers to move across
the US without encountering power problems. The company vehicles encountered nasty
accidents in 2013 and the public started questioning the safety thus leading to a 20 percent
decline in the stock price. The company delivered Model S in 2014 and stock prices soared by
more than 47 percent (Tesla, 2017). Elon asserts that Tesla is committed to delivering a ‘Dual
Motor’ that will be much faster than the earlier models. The company experienced slower market
penetration in China than previously anticipated, and the management decided to branch in to
solar energy by offering the ‘Powerwall home battery’ in 2014 (Tesla, 2017). The model 3 was
unveiled in 2016, and shipments are expected by the end of 2017. The company is planning to
acquire Elon Musk’s Solar City for an estimated value of $ 2.14 billion.
The luxury car segment accounts for just 1 percent of all cars sold across the world and
Tesla faces significant competition for giant Ford motor company, Honda, Nissan, Jaguar, Audi,
Volvo, Porsche, Mercedes, General Motors, and Subaru (Bloomberg, 2017). According to the
2016 figures of electric cars sold in the US by model type, Tesla model S sold 29,421 units,
Tesla model X accounted for 17,129 while Nissan Leaf sold 14,006 units. BMW i3 sold 7,625
units while Fiat 500e sold 5,330 units with Chevrolet Spark selling 3,035 units. The other motor
vehicle companies that have ventured in the electric and luxury car industry include Toyota,
BMW, Mazda, and Lucid motors (Kaminska, 2017). The main director competitor to Tesla is the
Chevrolet Bolt, Honda Clarity EV, Jaguar Magna, and Audi. Volvo is expected to start mass
production in 2019 and Hyundai is working tirelessly to bring on board its longer range EV.
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Porsche and Ford have already announced plans for the small SUVs (Kaminska, 2017).
According to the analysis, Tesla accounts for more than half of the US market for electric cars,
but competition is getting stiffer due to new entrants in the electric vehicle market segment.
The CEO Elon Musk is quoted in several media outlets asserting that his vision for the
company is to ensure Tesla is an independent automaker and Technology Company that aims at
offering the average consumers with affordable electric cars. The company attained high media
coverage and good reputation after the release of Model S that became the best-selling plug-in
car in 2015 and 2016 (Kaminska, 2017). The company was in the media news again for topping
the 2016 consumer reports’ annual owner survey on satisfaction at 91 percent thus meaning that
more of the shareholders were satisfied with the managerial decision-making. In 2014, Tesla hit
all-time high record sales in the US after 2,500 units were sold and Model S, sleek and stylish
sedan received top ratings from the press as the best car ever tested. Good news is that Tesla
continues focusing on rolling new models and expanding the market base by targeting a wide
range of customers. The media outlets indicate that Tesla has expanded manufacturing capacity
in California and Netherlands and partnership with Panasonic has led to the gigafactory in
Nevada (Sunley, (2017). Tesla social media marketing model has attracted positive comments
since it has enhanced the brand recognition compared to bigger companies like Audi and BMW.
Tesla is third in the total number of mentions among the world’s largest car brands as Chairman
Musk gets personal while talking about the new business ventures (Sunley, para 7).
The existing failures in the media include the several lawsuits and case with Fisker
Automotive where Tesla sued for substandard works on its Model S. The court ruled in favor of
Fisker leaving Tesla with a fine of $ 1.1 million payable to Fisker for legal fees. The Top Gear
British Automotive review still gave negative publicity to Tesla by outlining that test vehicles of
the company ran out of charge faster than the company was claiming in its sales campaigns. The
company was thus forced to recall about 600 Roadsters due to design flaw on the chassis that
The model S caught fire in October 2013 and the company was forced to extend the
model warranty to include fire damage. The reports on crash rates, costs, and insurance costs
have pointed out that Tesla cars are expensive to repair and Model X is 41 percent likely to crash
than other SUVs. Although Tesla disputes the media reports, the Insurance Institute for Highway
Safety continue to hold the position that Tesla cars are more likely to get in to crashes. A third
media criticism is the delays in the delivery dates for new models occasioned by the frequent
changes in the model features like the battery module (Bloomberg, 2017).
The analysis demonstrates that Tesla should invest in public relations to restore the public
reputation and build brand loyalty by focusing on the company’s committed to deliver safer
models and improve the car features that enhance the driving experience.
The external company environment is subject to continuous changes and the internal
resources and competencies offer a basis for the formulation of the corporate strategy to
overcome the adverse effects of market changes (Luck, 2008). The resources are the primary
sources of profitability and thus business strategies should exploit the valuable resources and
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competencies to attain a competitive advantage. The company can still build and generate
Tesla’s tangible resources include the financial resources, human capital, physical
resources, and own distribution channel. The company has access to adequate financial resources
since it is listed in the stock exchange and has secured more than $ 70 million for expansion
purposes (Pahl and Richter, 2007). Tesla has excellent electric car technology as evidenced by
the success of Model S sedan that has won several awards for its attractive styling, functionality,
and performance. The superior technology has enabled the company to continue delivering new
The company has creative and skilled workforce that has pioneered innovations in the car
models thus improving features like safety and luxury elements of the new models.
The company has a well established own distribution network across Europe, North America,
and Asia and this allows it to offer compelling customer service and receive valuable feedback
from the customers (Dibb & Simkin, 1999). The company is thus positioned to have better
control of its inventory, warranty service, and brand development activities across the
distribution channel.
Tesla intangible resources include the brand name and customer loyalty that is associated
with the popular Model S car model. In this case, Tesla has made more than 20,000 reservations
for the car model. The company is committed to delivering the all-wheel drive system dual motor
vehicle and improving the electric powertrain components (Tesla, 2017). A second intangible
resource that Tesla has is the successful partnerships with Daimler for the A-Class and B-Class
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electric vehicles and ability to develop powertrains for other companies such as Toyota’s
RAV4EV. The company has several patents and trademarks for its creative design that include
the battery pack intellectual property rights, charge balancing systems, powertrain systems, and
cooling systems. In 2012, Tesla had 117 patents and 258 pending patent applications that protect
the proprietary technology. The company vehicles incorporate proprietary charging system that
allows the drivers to charge from any electrical outlet and faster charging in the company’s
Supercharger network across the United States (Tesla, 2017). The organizational culture offers
The main capability of the firm is the ability to form strategic partnerships with other
vehicle manufacturers in the country. The company embraces collaboration with other
Mercedes-Benz in the production of A-Class E-celll where Tesla produced electrical components
for the trial vehicles. Tesla has worked with Diamler AG in their Smartcard EV and Toyota in
the introduction of small Rav-4 EV SUV (Tesla, 2017). The company has a joint development of
its lithium-ion batteries with Panasonic Energy Company and it know attained the highest market
The company cars are energy efficient and affordable when compared with other similar
hybrid electric vehicles and the use of single electric powertrain ensures that the finished car is
lighter. The Palo Alto facility ensures consistent research and development in cells and
powertrain prototypes thus improving the sales to third parties. The battery pack design is
electronics management systems offer good performance in real-life driving situations (Tesla,
2017). The company has expertise in lithium-ion cells and battery pack systems that allow for
resources, capabilities, and competencies that Tesla can utilize to attain a competitive advantage
The resource-based view of the firm outlines that firms with superior resources will attain
superior returns and competitive resources should be valuable, rare, inimitable, and organized.
The valuable resource should be scarce for competitors to acquire and difficult to imitate like the
brand loyalty, favorable economies of scale, and unique location of operations. The valuable
resources include the supercharger network, the gigafactory, the unique battery packs, own direct
marketing channel, and CEO Musk (Doole & Lowe, 2008). The Supercharger network is rare
and costly to imitate as the company allows its customers to charge their cars for free, although
other companies can still establish their own network. The battery pack and powertrain patents
are valuable and rare resource since the intellectual property laws prohibit the imitation of the
patents and can this can contribute to sustainable competitive advantage. The own distribution
network that avoid dealership enables the company to acquire valuable feedback and thus is
deemed a valuable resource although it is not difficult to imitate (Doole & Lowe, 2008).
Elon Musk leadership and emphasis on continuous innovation offers inimitable, value,
and rare resource. The corporate intangible resources that are inimitable and valuable include the
patents, accumulated learning, and brand recognition. The company enjoys efficiency in mass
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manufacturing and innovations have contributed to better economies of scale thus allowing the
company to reduce it price margins (Doole & Lowe, 2008). The strategy should convert the
VRIO resources in to core competencies that lead to sustainable competitive advantage for Tesla.
The valuable capabilities can be utilized to exploit opportunities and ensure competitiveness
since other firms lack the rare capabilities that are costly to imitate and difficult to substitute. The
(O) implications
Network competitive
advantage
competitive
advantage
competitive
advantage
distribution competitive
network advantage
of model S competitive
advantage
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competitive
advantage
Michael Porter’s five forces model is useful in evaluating the impact of the external
environment and the attractiveness of the luxury electric car industry. The model considers five
forces that include the threat of new entrants, the bargaining power of buyers, the bargaining
power of suppliers, the threat of substitutes, and the degree of rivalry in the industry (Doole &
Lowe, 2008).
According to the analysis, the automobile industry is attractive due to low threat of
entrants. The threat is low due to high capital outlay required to purchase manufacturing
equipments and establish operations, the cumbersome licensing and regulation by the
government, the high economies of scale attained by the existing auto companies, and the brand
loyalty attained by the industry players (Pride & Ferrell, 2016). Tesla should not worry about
new entrants in the electric car market apart from the traditional vehicle manufacturers that are
The bargaining power of the buyers is moderately low due to lots of information
regarding the car safety and motoring features in the mass media and ability of the customers to
request for price cuts. The customers do not purchase in bulky and are not organized thus
controlling their demand for cheaper prices (Doole & Lowe, 2008). The buyers are loyal to
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particular car brand and the different automobile companies offer differentiated car features thus
controlling the buyer power and creating high switching costs to other brands.
The bargaining power of suppliers is moderately high since Tesla and other companies
select the suppliers that provide high quality materials and components. There are few suppliers
for the high end luxury and electric car industry and the supply contracts are always exclusive
and long-term in nature (Pride & Ferrell, 2016). Tesla will face challenges in switching to new
suppliers such as the need to change the car design and components thus incurring additional
costs.
The analysis demonstrates that the threat of substitutes is high due since companies like
Volvo, Chevrolet, BMW, and Nissan offer similar stylish and luxury SUVs that can serve the
same purpose. The level of differentiation is low thus increasing the substitute threat as other
companies are pioneering research on how to improve the quality features of their models
(Wilson and Gilligan, 2012). The customer has low switching costs and other vehicle models are
The last dimension is the degree of rivalry in the industry and analysis demonstrates that
rivalry is high due to low differentiation, high exit costs in the industry, the availability of many
competitors with relative strength in manufacturing capabilities, and the high growth in the
luxury electric car industry that has forced many firms to move towards electric car models
The strengths of Tesla include the continuous focus in innovation that has led to world’s
first fully electric sports car and introduction of new models within a short span of years. The
company has strong brand image due to its stylish designs and this improves the ability to ensure
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customer loyalty (Wilson and Gilligan, 2012). The ability to manufacture energy-efficient that
are environmentally friendly and superior battery technology offer a critical strength for the
company. The company has strong partnerships with Panasonic, Toyota, and Daimler. The main
weakness is the inability to deliver its new model promises within the time since Model X was
delayed in 2015 (Wilson and Gilligan, 2012). The safety of the autopilot technology is still
another weakness faced by the company due to lack of enough manufacturing experience as the
The car has several market opportunities that can be exploited to improve the
competitiveness and reduce the impact of weaknesses and threats. The electric car market will
defy the larger vehicle market as analysis has predicted that the sales spiked by 40 percent in
2015 and the growth rate have averaged 32 percent per annum for the last five years. The
estimates indicate that 10 percent of all cars in US will be electric by 2025 due to demands for
cleaner environment. The company can benefit from US government subsidy programs since the
new models reduce emissions and US government policy is geared at offering tax credits to
greener energy companies (Wilson and Gilligan, 2012). The solar energy products offer another
opportunity with high growth potential due to the high demand for renewable energy in the
country.
Tesla faces market threats that include harsh competition has BMW is focused on
releasing two new electric models by 2020 and Mercedes is planning to launch the electric
vehicles by 2018. Chevrolet Bolt is already causing pressure on Tesla’s margins and Volvo is
determined to go all electric by 2019 (Tesla, 2017). The second threat facing the company is the
public perception that the company cars are highly priced as new models may cost as much as $
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100,000 after launch. Although the cars are quality, the high prices are expensive for the
5.3 Diversification
Tesla’s diversification strategy follows the related model as the company has moved from
the Solar energy products and recently announced plans for acquisition of Solar City Corporation
that will enhance the company’s electric grid and offer back up supply of power. Tesla’s Solar
Roof technology and Powerwall improve operational economies of electric vehicle while lithium
battery technology sustains the electric cars (Tesla, 2017). The analysis thus indicates that Tesla
is committed to diversifying its operations in to related business segments that can utilize the
organizational performance.
5.0 Recommendations
The analysis indicates that viable recommendations that are important in ensuring a
6.0 Implementation
The analysis demonstrates that Tesla controls valuable resources, capabilities, and
competencies that are critical in attaining sustainable competitive advantage. The analysis
demonstrates the market is attractive due to predicted growth in demand in electric cars. In this
case, Tesla is facing stiff competition from other vehicle manufacturers that have entered the
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market segment for electric cars and thus the first recommendation will entail ensuring product
quality (Proctor, 2013). The analysis indicated that Tesla was forced to recall some cars due to
defects and the public is concerned about the safety standards. The luxury electric car industry is
rapidly evolving and thus Tesla should utilize its innovative technology to design new models
with stylish, quality, safe, and energy efficient features in order to attain differentiation and
The company’s future diversification should explore related technologies and businesses
such as the solar and wind power sector, batteries, powertrain systems, and vehicle engine
systems. The backward vertical integration is recommended since it will enable the company to
attain control of all its raw materials, inputs, and key resources thus eliminating the high supplier
power (Hutt & Speh, 2013). The company should focus on additional strategic partnerships with
other manufacturers to improve the autopilot technology and enhance the safety features of the
new car models. The diversification will enable the company increase the revenues from the
alternative and related businesses and leverage on the core competencies to attain market share
The company should use its core capabilities and competencies to resolve the existing
weaknesses and threats. The company has a first-mover advantage in the electric car market and
brand loyalty and can eliminate the weakness of delays in delivering new models by ensuring the
company manufacturing projects stays on course. The company should ensure safety of the
automobile technology and engage in continuous learning to gain critical knowledge and skills in
vehicle manufacturing (Pride & Ferrell, 2016). This will require significant investment in
research and development activities that will facilitate the understanding of the market changes
and predict the customer needs. Accordingly, differentiation of the electric car features will
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create customer switching costs and overcome the high competition in the market. Likewise, the
company should ensure mass production in the gigafactory to enable better economies of scale
The company should continue with the current strategy of offering new products and
meeting the changing customer demands. The new models should include differentiated and
advanced features that earlier models in order to ensure customer loyalty (Pride & Ferrell, 2016).
Accordingly, it is essential to ensure that future car models are affordable by the growing middle
class that offers a viable market for the luxury car brands. The continuous improvement efforts
and innovative culture will foster the new product development (Doole & Lowe, 2008).
The above analysis has demonstrated that Tesla started operations in 2003 and has
attained considerable market share in the electric car industry by offering stylish and quality car
models to clients. The media analysis indicates that Model S has high customer demand and
loyalty, but still mass media criticism exists due to safety concerns and delays in production.
The company core capabilities and strengths include the innovative car manufacturing
technology, the supercharger network, and gigafactory located in Nevada. The findings indicate
that the patents, brand loyalty, and human talent will support growth by ensuring the production
of new models with superior features and safety standards. The external analysis indicated that
luxury and electric car industry is attractive due to low threat of new entrants and moderately low
power of the buyers. The external analysis will require Tesla to differentiate the car features to
create customer switching costs, vertically integrate through acquisitions and partnerships to
reduce the high threat of suppliers, and develop the core capabilities to ensure sustainable
competitive advantage. The SWOT analysis indicated that Tesla can utilize the access to
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financial resources, positive brand recognition, and superior technology to produce advanced car
models, reduce the competition pressure, and diversify in to related industries. Accordingly, the
diversification should utilize existing capabilities and competencies to create additional revenue
streams and offer added benefits to the target consumers. The company will diversify in to the
The implementation process will require the company to focus on strategic partnerships
and acquisitions since the option allows the company to access additional markets, benefit from
new skills, and eliminate the risks associated with own innovation projects. The company should
acquire Solar City to expand its solar energy business and continue the partnership with Toyota
and Daimler.
The implications demonstrate that Tesla is better positioned to attain market leadership
and sustainable advantage in the electric car industry due to its core competencies and the
attractive nature of the industry. This implies that Tesla will have to engage in external
business units.
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9.0 References:
Bloomberg. (2017). ‘Tesla is starting to face serious competition’, Bloomberg, June 5, 2017.
(web): https://www.bloomberg.com/view/articles/2017-07-05/tesla-is-starting-to-face-
serious-competition.
Dibb, S & Simkin, L. (1999). The marketing casebook: cases and concepts. London: Thomson
Press.
Doole, I & Lowe, R. (2008). International marketing strategy: analysis, development and
Hutt, M & Speh, M. (2013). Business marketing management. Mason: Cengage Learning.
Kaminska, I. (2017). ‘Who are Tesla’s competitor’s really?, Financial Times, April 28, 2017,
(web): https://ftalphaville.ft.com/2017/04/28/2188020/who-are-teslas-competitors-really/.
Mercer, D.S. (1998). Marketing strategy: the challenge of the external environment. London:
Sage.
Pahl, N and Richter, A. (2007). SWOT analysis, idea, methodology, and practical approach.
Pride, W & Ferrell, O.C. (2016). Foundations of marketing. New York: Cengage Learning.
Sunley, R. (2017). ‘Tesla’s successful marketing strategy shows it’s time for CEOs to get social’,
https://www.socialmediatoday.com/technology-data/teslas-successful-marketing-
strategy-shows-its-time-ceos-get-social.
Wilson, R & Gilligan, C. (2012). Strategic marketing management. New York: Routledge.