STRATEGIC MANAGEMENT ANALYSIS

Dhruv Parekh, Sheryl (Qianru) Wang, Manas Thakre,

Shiyi Luo, Jacob Kovacs, Vaibhavi Rangarajan
Contents

Introduction
Who is Tesla Motors?
Snapshot
History
Leadership
Organizational Structure
Culture
Innovation
Corporate Social Responsibility
Social Role
IT Strategy
Strategic Management Analysis
PESTEL Analysis
Porter Five Forces Analysis
SWOT Analysis
Recommendations
References
Introduction

Greetings!
We are pleased to share our strategic management
analysis of Tesla Motors, an inspiring company with a
bold vision: to “accelerate the world’s transition to Sheryl
Dhruv Manas
sustainable energy” (Tesla, n.d.). (Qianru)
Parekh Thakre
Wang
In this report, we provide an in-depth picture of Tesla’s
operations, followed by a comprehensive analysis of the Tesla’s Corporate Social I am now a big fan of
We got to know a true
landscape Tesla faces at present. We conclude with Responsibility is what I Tesla.
leader.
several strategic recommendations for Tesla. admire.

We enjoyed working together to understand this complex

and exciting company. We all brought strong ideas to the
table and negotiated to form a common vision. We
learned to apply management principles to a real-world Shiyi Jacob Vaibhavi
case, and also built more appreciation for the tremendous Luo Kovacs Rangarajan
good a business can do under principled leadership.
— Team Six Who knew a car Tesla shows it’s possible
Cool company, cool CEO, company could be so to dream big and
cool cars! interesting? achieve those goals.
Who is Tesla Motors?
An in-depth portrait of the company
Snapshot
Model S

Tesla Motors, Inc. is an American automaker In April 2015, Tesla also announced its residential
under the leadership of Elon Musk. The company and commercial power solutions—Powerwalls
marked its entry into the automotive market with and Powerpacks (Riley, 2015).
the Roadster sportscar, a completely battery-
As of today, Tesla manufactures the majority of Model X
powered vehicle. The company developed its own
its cars in Fremont, California, with another
power storage technology in the form of
assembly location in the Netherlands to serve the
lithium-ion batteries for the Roadster, and it
European market. In 2014, Tesla announced its
became the first-ever car that can go up to 200
massive plans to build its own Gigafactory in
miles on the strength of a single charge. Tesla
Nevada for the production of car batteries and
launched the Model S luxury sedan in 2012, which
other power solutions. The Gigafactory is under
earned a five star safety rating and went on to
construction with a $5 billion investment jointly
become world’s best selling plugin vehicle by 2015
made by Tesla and Panasonic. Once fully
(Baer, 2014). As of November 2016, 150,000 units
operational, the facility will be able to produce 36
of the Tesla Model S have been sold worldwide,
GWh of clean electricity to charge the batteries
and the mass-market Model 3 is expected in 2018
that will eventually be used in cars, Powerpacks
(Hanley, 2015). Tesla also has a chain of Model 3 (expected 2018)
and Powerwalls (Tesla, n.d.).
Supercharger stations across the United States,
parts of Europe, and Australia, where the cars can
be charged by their owners at no cost; chargers in “We're running the most dangerous experiment in history right now,
the network have the ability to give a 60% battery which is to see how much carbon dioxide the atmosphere can handle
boost in just 20 minutes (Tesla, n.d.). before there is an environmental catastrophe.”
— Elon Musk
Snapshot

Tesla Motors has shown a ten times revenue

increase from 2012 to 2015, mostly owing to the
commercial success of its Model S. However, due
to increasing investments in manufacturing and
retail stores, the company has yet to show
positive results in terms of net profits, and has
raked in losses the past 4 years with net losses
amounting to $88 million in 2015 (Tesla, n.d.).
Despite these short-term financial losses,
shareholders have shown increasing interest in
Tesla, with share price and company valuation
increasing tremendously since the company went
public in 2010 (Squatriglia, 2010; Tesla, n.d.). As of
today, Tesla has a market capitalization of about
$31 billion, more than half of Ford Motors (Tesla,
n.d.). Tesla Motors also got a significant push from
US authorities in recognition of its effort to make
large-scale production of non-polluting electric
vehicles a reality; this was majorly in forms of tax
credits to the company, with an estimated $2.4
billion of future incentives awaiting Tesla for its
Gigafactory project (Tesla, n.d.).
History

Tesla was founded in 2003 by two engineers,

Martin Eberhard and Marc Tarpenning (Baer,
2014). Fresh from a divorce, Eberhard went
looking for a sportscar but found none that were
climate friendly. He also noticed that battery
technology had advanced enough that a
high-performance electric sports car was
possible—and, since the giants of the 100-year old
automotive industry had outsourced the bulk of
their production in pursuit of the ideal of dynamic
core competencies (Hitt, Haynes, and Serpa,
2010), Tesla could just tap into existing supply
Baer, 2014; Riley, 2015; Stewart, 2016; Squatriglia, 2010
chains instead of engineering every component of
a car. Eberhard persuaded Tarpenning that there the Roadster. Under Musk’s leadership, Tesla has
was a market for a powerful, stunningly-designed gone beyond cars to design a whole ecosystem of
clean energy vehicle, thus launching Tesla with a alternative energy products that gain much of
focused differentiation strategy (Jones and their appeal from the way they fit together “I was thinking I should do what
George, 2012). (Stewart, 2016). For example, Tesla sells solar every guy does and buy a sports car …”
Tesla had several rounds of startup funding before roofing that charges a home battery that charges
its IPO. Elon Musk was their first major investor, an electric car, virtually eliminating home-based — Martin Eberhard
and eventually took over as CEO in 2007—right carbon emissions. Tesla is also trying to expand
before Tesla shipped its first commercial product, into the midmarket next year with the Model 3.
Leadership Traits: Elon Musk

Tesla CEO Elon Musk has a clear vision of Elon musk’s leadership traits are a mix
accelerating the world towards sustainable of opinionated and adaptable leaders,
sources of energy. This vision is clearly reflected in putting him in the quadrant of the most
all the work he does, whether at Tesla Motors or successful and continuously innovating
the other companies he leads—like SolarCity leaders like Steve Jobs. While he has
(recently merged with Tesla; Stewart, 2016) and has a strong persona reflecting his
SpaceX. To evolve and contribute towards the opinions, he is adaptable in nature and
mainstream usage of sustainable energy, Musk ready to accept the many failures in the
has been the central force developing process of innovation—which is the
cutting-edge technologies by employing the best most significant trait of
minds in the field. He has heavily invested human transformational leadership. stalwart
capital and money into developing these in-house
technologies, whether it is high-efficiency cars or
establishment of the Tesla Gigafactory. Musk
leads by example: he has created several
companies that showcase success in such a short
time that he is definitely among the top leaders in impartial opinionated
the world. Musk’s creativity and transformational
leadership has played a pivotal role in the success
and progress of Tesla, which is now seen as the
world’s most prominent brand in the automotive
industry.
adaptable
Leadership 2008
Martin Eberhard, founder
Marc Tarpenning, founder
Daryll Siry, chief of marketing
Musk’s communication style has been described as Jones, 2016). Meanwhile, after reports of low 2009
Michael van der Sanda, chief of marketing
authentic, down-to-earth, and exceptionally clear, contractor pay, UAW is attempting to unionize
Michael Donoughe, chief vehicle engineer
with four times more use of the present tense than production workers (Bloomberg View, 2016). 2010
average (Goldberger, n.d.; Crabtree, 2016; 2011
Tensions have also come to the surface in 2012
Schwartz, 2016). These traits help him rally people
Tesla’s supply chain. As a newcomer to the Ricardo Reyes, VP global communications
behind a very bold vision and motivate them to 2013
intricacies of automotive manufacturing, Tesla
pursue it. His aggressive focus, though, can make 2014
depends on suppliers to build its cars. In fact, Simon Sproule, head of comms. department left
him conflict- prone, blind to his employees’ hard
Tesla and would never have come into 2015
work, and defensive against complaints instead of
existence at as a company without Eberhard, 2016
learning from them (Vance, 2015; Newcomb, 2016). Michael Zanoni, VP finance
Tarpenning, and Musk’s diplomatic in-person
One apparent consequence of Musk’s style is efforts to persuade potential suppliers (Baer, James Chen, VP regulatory affairs
perpetual senior leadership turnover (Morrisson, Josh Ensign, VP manufacturing
2014). Recently, some suppliers have struggled Greg Reichow, VP production
2008; Volecker, 2009; Shall, 2016; Lambert, 2016; to meet Musk’s purposefully optimistic
Korosec, 2016, “Model 3 event”; Korosec, 2016, production targets, and the company Mobileye
“Tesla loses”; see sidebar). Such turnover is costly ended its relationship with Tesla by publicly TESLA’S SENIOR
(Lucas, 2013) for reasons including training costs, citing its concerns that Tesla’s deadlines posed
lost knowledge, and potential negative morale. a safety risk (Rosevear, 2016).
LEADERSHIP EXODUS
As another consequence, employee reviews are
frank about the long hours and poor work-life “Even by the turbulent standards of Silicon Valley's venture-funded
balance—though they overwhelmingly state that
startups, Telsa [has] garnered more than its share of attention for
the company’s mission makes the personal sacrifice
worthwhile (Glassdoor.com, n.d.; Indeed.com, n.d.; missteps, multiple CEOs, layoffs, and lawsuits … ”
(Voelcker, 2009)
Organizational Structure

Tesla has a functional form of organizational Despite maintaining regional divisions,

structure that enables it to exercise strong Tesla’s emphasis of global centralization
control of the business (Meyer, 2016, means that their entire organization is
“Structure”). The various functional controlled through decisions that a central
departments are Human Resources, Business group or team generates. Tesla’s central
Development, Engineering, Processes and headquarters includes the head of each
Autopilot, Manufacturing, Design Through, office of its global hierarchy; the company
Global Sales and Services (see sidebar). does not support autonomy of its regional or
Through this structure, Tesla is able to overseas offices. Instead, Tesla’s
maximize its ability to implement new headquarter makes the majority of
strategies and manage its operational operational decisions for overseas
activities. operations.
Tesla also maintains minimal regional
divisions, specifically four: the USA, Norway,
China, and a catch-all division for operations in
other locations. These divisions allow Tesla to
“Starting and growing a business is as much
tailor their strategies, marketing campaigns, about the innovation, drive, and
and financial reporting to different determination of the people behind it as
geographies with different customer
populations and legal requirements. the product they sell.”
— Elon Musk
Organizational Culture TESLA’S CULTURE
PROS & CONS
Tesla’s organization structure is one of the key As a learning organization, Tesla believes in
factors that influences its culture. The six core personal mastery (“Think like owners”); employees
+ Open and direct communication
features of Tesla’s culture (Meyer, 2016; see are encouraged to think out of the box and bring
+ Highly innovative products
below) contribute to making Tesla a learning innovative ideas (“Constantly innovate”). The
+ Employees unafraid to take risks
organization that is able to surmount a turbulent company tries to reward innovative employee
+ Rapid, responsive problem solving
business environment (Jones and George, 2016). contributions. + Suitable rewards for employees
Because of strong executive leadership, Tesla
Think like owners
employees share a common vision (“Do the
impossible”) that unifies them and reduces conflicts.
We are ALL IN
The global scope of this vision is an example of bold
systems thinking, and, in addition, Tesla managers
Do the impossible
encourage their employees to use complex mental
models (“Reason from ‘first principles’”) to find the
Reason from ‘first principles’
root cause of issues and respond to problems very
quickly and effectively (“Move fast”). Tesla has - Pressure of innovation
training programs to orient its human resources to - Employee burn-out
Constantly innovate - Poor work-life balance
this feature of its organizational culture.
Move fast Finally, from its roots in Silicon Valley’s software
development culture and practices (High, 2014),
Core features of Tesla’s organizational culture
Tesla places a high value on team learning and
(Meyer, 2016).
effective teamwork (“We are ALL IN”).
Innovation INNOVATION
AT TESLA MOTORS
Integrative innovation is part of the fabric of Tesla treats its competitors—traditional auto
Mission
Tesla’s culture; in 2016, Forbes Magazine (n.d.) companies—as potential allies, and formed
and Vision
rated it the World’s Most Innovative Company. strategic alliances early for its battery recycling
The following aspects of Tesla’s culture, structure program. Tesla also “models the way” with open
and daily work are what makes it different patents, as Elon Musk believes that such Products
(Nielson, 2016): knowledge should be shared widely for the and Services
common good.
Tesla has idealistic goals of a greener planet. The Appetite
Tesla’s business strategies are a unique case
company approaches this vision by integrating for Risk
study in themselves. No other auto company
decades of sustainable energy research in many
takes capital from customers upfront before
fields into a viable form.
building the car. Tesla also focuses on engineering View of
Tesla makes unique products—like connected and design over marketing. Finally, their decision competitors
cars that have self-driving abilities, can be to retail directly customers has upended the
upgraded over the air or monitored via phone, traditional dealership- based automotive supply Business
and charge for free on the nationwide Tesla . chain.With such innovation, for the first time in Practices
Supercharger network. automotive history a vehicle has been created
whose price can appreciate over time.
Tesla is known for placing risky bets on
technology and itself. After all, it is a startup in the
over 100 years old automotive industry.
Employees are encouraged to set stretch goals in
“Failure IS an option here. If things are
keeping with the informal Musk Doctrine: “Never not failing, you are not innovating enough.”
set a deadline you are likely to keep”. — Elon Musk
Corporate Social Responsibility

Tesla Motors can be characterized as a company It has enabled Tesla to completely reuse its
that takes a proactive approach (Jones and recycled battery packs, only 10% of which could
George, 2016) its social responsibilities. Tesla is at be used before instituting the program; it has
the forefront of several pressing social causes. reduced the amount of batteries that go to
Thus far its short life as a company can be divided landfill; and, by using a new recycling technology
into two stages: environmental protection, and provided by Umicore, it has reduced at least 70%
energy conservation. of the normal CO2 emissions from the refining
process.
From 2003 to 2015, Tesla included the
responsibility of environmental protection in its In 2015, as Tesla realized the importance of
organizational strategies. In addition to lessening energy conservation to protecting the
the dependence of transportation on petroleum environment, it stepped into a second stage and
and manufacturing its own electric vehicles with directed its strategies toward new energy
zero emissions, Tesla also instituted a closed loop development. Tesla chose not to limit its vision in
for battery recycling to make its production applying new energy in auto market; rather, it Tesla’s closed loop battery
process more environmentally friendly (Kelty, plans to create a suite of integrated products that recycling process (Kelty, 2011).
2011). This recycling loop takes used lead-acid provide clean energy to residential, commercial,
batteries, separates them into coin-sized and industrial markets.
component parts, then sorts, re-processes and
finally reuses the purified lead in battery “If something is important enough, even if the
manufacturing. The recycling program has
valuable outcomes in terms of environmental odds are against you, you should still do it.”
protection. — Elon Musk
Corporate Social Responsibility

Tesla’s energy conservation stage started by bringing An important lesson we learn from Tesla is
solar power into people’s daily life with the how it perfectly combines organizational
Powerwall, a rechargeable lithium-ion battery development and implementation of social
product that stores and provides electricity to homes responsibilities. When focusing on electric
and small businesses (Riley, 2015). With the vehicles manufacturing, Tesla combines the
Powerwall, people could sustainably use solar power: responsibility for decreasing environmental
they store the surplus electricity produced by the pollution with its strategy of expanding market
solar panel system during a sunny day, and use it at share in the automotive industry. It aims at
night or in a rainy day when there is not enough developing cars with more outstanding
electricity generated. After that, Tesla unveiled performances than gasoline cars, in order to
another energy product—the Solar Roof—that works encourage customers to purchase great cars
directly with the Powerwall to collect solar power that happen to be electric. In this way, its
and convert it to electricity. Moreover, in order to market share increases and emissions from SolarCity
(2016)
deepen its expertise in the energy field, Tesla gasoline cars are reduced simultaneously.
Solar Roof
purchased SolarCity in November (Stewart, 2016) And, after entering the energy industry, Tesla (2016)
and consequently strengthened its capability to has developed an integrative product chain PowerWall
(2015)
integrate electric vehicles, Powerwall, and Solar that could greatly increase its profit margins
Roofing in an end-to-end energy plan. It has while, at the same time, providing society with
proposed very specific details in the plan, including a conveniently packaged way to utilize solar
embedding the solar panel system in walls by taking power.
advantage of Tesla’s manufacturing strength. When
Tesla’s idea is realized, humans will move a major
step forward towards independence from fossil fuel.
Social Role

Tesla is an excellent example of the potential for a technological innovation in charging and energy Musk attributed the low market share of
company to have a major impact on society by storage. According to FreshPatents (n.d.), Tesla electric vehicles to closed patents that hold
tackling ambitious problems. has applied for over 200 patents between 2010 back and limit innovation (Masnick, 2015).
and 2016, almost all of which depends on the Therefore, Tesla hopes to move barriers
As a pioneer in the automotive industry, Tesla is
efforts of its R&D teams. Tesla’s innovation is that lie in front of startup peers who have
very strictly focused on innovation to the extent
recognized by the public, as well as being named been struggling to innovate technology and
that it ignores short-term losses and often misses
the number one Innovative Company by Forbes in establish a quickly-evolving platform of
product launch deadlines. It has even worked to
2015 and 2016. technologies in order to encourage and
improve seemingly less needed technologies—for
compel industrial development. Tesla also
instance, autonomous falcon wing doors—to In addition to promote innovation inside the
hopes to promote the involvement of more
appeal to customer desires for convenience and organization, Tesla also contributes to innovation
traditional automotive manufacturers in the
breathtakingly well-designed products. CEO Elon in the entire industry. In 2014, Tesla announced
electric vehicle market.
Musk is often criticized for decreasing the profit that it would make its patents ‘open source’ by
margin by spending an overwhelming amount of sharing them with its peers and promising not to
costs on R&D (AmigoBulls, n.d.). According to the initiate patent lawsuit against anyone who wants
newest statistic, Tesla’s expenses on R&D has to use their technology (Musk, 2014). Musk
surpassed 200 million dollars in the third quarter recognized that there is only a tiny proportion of
of 2016, which represents 10% of its quarterly electric vehicles in the automotive market, while
revenue and one third of its gross profit the enormous amount of gasoline cars
“Tesla is not just an automaker,
(AmigoBulls, n.d.). Nevertheless, with its heavy flooding into the market year after year
investment, Tesla has acquired unparalleled has become the largest barrier to but also a technology and design company
strengths in both quantity and quality of developing transport independent from with a focus on energy innovation.”
fossil fuels and reducing carbon emissions. — “About Tesla” (n.d.)
 A LOOK AT TESLA’S
IT Strategy
INFORMATION
Not only does Tesla bring a software development When it comes to IT, the core principles that drive
SYSTEMS
mindset to the car industry, but there are also Tesla’s strategy as told by the ex-CIO, Jay Vijayan Requirements
strong arguments to be made for calling Tesla (High, 2014) are: Management
itself an Information Technology (IT) company System (RMS)
(High, 2014). First, information systems (IS) are Speed and Agility
Information Flow across
Enterprise
routinely used in many core areas (see sidebar): Departments
Resource
Requirement Management Systems (RMS) and Closed Feedback Loop Seamless Vertical Planning (ERP)
with Customers Integration
Enterprise Resource Planning (ERP) Systems are Asset
used for planning and controlling functions. Management
Just like most automakers, Tesla relies on vendor
Asset Management & Facility Management System
software like FlexNet, Enovia, and Catia for
Systems are used to efficiently run factories and modeling and manufacturing cars. However, when Facility
manufacture the cars. vendors couldn’t provide an ERP solution to Management
integrate their store, manufacturing and retail System
Tesla retails its products through an online store
operations, a team of 25 engineers led by Jay Geographical
supported by an E-commerce System. Information
Vijayan built the system from scratch within four
Tesla’s products themselves have embedded IT. months. This impressive example of a build versus System (GIS)
Geographical Information Systems (GIS) and buy approach to IT is indicative of Tesla’s Product Data
Product Data Management Systems (PDMS) are flexibility, capability and commitment towards Management
used to enrich the customer experience and goals. (PDMS)
create a feedback loop, and PDMS enables
E-commerce
over-the-air updates to the cars’ software.
System
Strategic Management Analysis:
A review of Tesla’s challenges and opportunities
PESTEL Analysis

POLITICAL Tesla has an opportunity to strengthen SOCIAL Tesla has growth opportunities based on
its financial performance through incentives from the rising popularity of low-carbon lifestyles and
governments. Expanding free trade agreements increasing preference for renewable energy
open opportunities for Tesla to grow its (Kissinger, 2016). Moreover, Tesla has great
operations internationally. Tesla is expected to potential to boost its financial performance
increase their sales in environmentally friendly because of higher customer purchasing power in
countries like Norway, as these countries’ developing and developed countries.
governments provide more incentives to
TECHNOLOGICAL The high rate of technological
encourage Tesla to sell more cars there.
change presents opportunity for Tesla to enhance
ECONOMIC Tesla’s business performance its products’ technologies accordingly (Kissinger,
benefits from lower battery costs (Kissinger, 2016). However, the increasing popularity of
2016). The affordability of the company’s electric online B2B platforms and marketplaces have also LEGAL Tesla has opportunities to safely
automobile products will decrease manufacturing given increased opportunities to the car industry grow its business overseas, considering
costs and increase profitability. In relation, the that, in turn, have increased efficiencies and expansions in international patent law;
decreasing renewable energy costs make Tesla’s reduced costs. free trade protocols also help Tesla to
products more attractive, considering that their emerge in international markets.
ENVIRONMENTAL As awareness and support for However, dealership regulations are
business improves as renewable energy solutions
environmentalism increased, the company has causing problems as Tesla expands the
become more popular.
opportunities to promote its electric vehicles domestic market (Kissinger, 2016).
based on concerns on climate change, energy
saving programs, and rising standards for waste
disposal (Kissinger, 2016).
Porter Five Forces Analysis NEW
ENTRANTS
(weak
factor)
Tesla’s SUPPLIERS have a low level of forward
integration. This external factor refers to suppliers’
SUPPLIERS
limited control in the distribution and sale of their
(moderate
products. For example, some suppliers use third parties factor) Tesla already has a strong brand that NEW
to sell their materials to Tesla (Kissinger, 2016). In
ENTRANTS find difficult to match. In addition,
addition, most of these suppliers are moderately sized,
automobile manufacturing has high costs, which
thereby having limited influence on the automotive
impose a barrier to new firms.
industry environment.
SUBSTITUTE
The moderate availability of SUBSTITUTES S There are only a small number of significant
limits the influence of suppliers. In relation, (moderate COMPETITORS operating in the automotive market.
many substitutes have only a moderate level of factor) However, these firms are generally aggressive in
performance in satisfying customers’ practical innovating and promoting their products (Kissinger,
needs, thereby further limiting the threat of this 2016). Such conditions strengthen the effects of
factor against Tesla. competitors against Tesla.

In general, cars have low switching costs which means CUSTOMERS

that BUYERS have considerable bargaining power. This (moderate
factor)
factors is ameliorated by the fact that each customer
buys and keeps only one or a few cars (Kissinger, 2016).
INDUSTRY
COMPETITORS
(strong factor)
 SWOT Analysis

STRENGTHS WEAKNESSES OPPORTUNITIES THREATS

• Outstanding leader: Elon Musk is • Target market too small: At present, • Increasing environmentalism: Tesla • Highly competitive market: more
CEO of other successful companies, Tesla only sells electric luxury cars, so is trying to produce a suite of and more auto manufacturers are
which means Tesla can borrow Tesla is targeting customers who are products that people are likely to releasing their own
ideas from its sibling SpaceX— upper-middle class with a typical use in combination: solar roofing, environmental friendly cars, such
including extensive use of income of over $100,000 and strong home battery, and car. as Volkswagen.
aluminum in the body and chassis awareness of environmentalism as • New segment of market: The Model • President elect Donald Trump
of the Model S (Dyer and well. The current target market is too 3 will have “strong performance” has declared his intention to
Gregersen, 2016). narrow to permit growth. like the Model S, but will be half of increase American energy
• Effective communication: So far • Limited revenues and profitability: the price at $35,000. production in his first 100 days
employees, venture capitalists, Tesla's lack of experience in car (Kelly, 2016). This will make other
• Emerging global market: Due to the
shareholders, and suppliers have manufacturing shows up in frequent energy cheaper and reduce
rapid GDP growth in developing
been strongly motivated by Musk's production delays; moreover, people's incentives to switch to
countries, Tesla just massively
bold vision, which he conveys very production cost is high due to solar energy.
increased its potential sales by
effectively. He has a rare ability to expensive battery technology. adding pre-orders in China, India, • Dealership regulations: About
motivate people to pursue
• Turnover in senior leadership: This Brazil, and potentially others half of American states require
"impossible" goals.
raises questions that weaken the (Kissinger, 2016). automakers to sell through
• First mover advantage: Tesla is the confidence of the stock market and, dealerships, a model Tesla rejects
first company to produce fully most likely, also contribute internally (Kumparak, Burns & Escher,
electric cars. This has allowed the to production delays (Shall,2016). 2016). They will have to fight this
company to acquire superior brand legislatively if they want to
recognition and customer loyalty. expand their market.
Recommendations

Innovation and R&D: The results of our Five

Forces analysis of Tesla show that competition is
the most significant force impacting the
business. Thus, the company must prioritize this
force in its strategic formulation. Our first
recommendation is for Tesla to continue
strengthening its competitiveness. Stronger
competitive advantage is achievable through
innovation and increased market presence; for
example, in terms of innovation, Tesla can boost
its research and development (R&D) investment
to outpace competitors’ rate of innovation.
Stronger market presence: We also recommend
Tesla pursue a stronger market presence globally (Hanley, 2015)
by international expansion. In fact, many
Europeans don’t even know Tesla exist! Thus, the Customer target: As mentioned in the SWOT analysis, currently Tesla’s target market is too
company should seek to increase its brand narrow. Tesla could achieve a differentiation strategy if they widen the range of models
visibility, especially in countries where electric within their first class and small superior car segments. The most important aim for Tesla is to
vehicle infrastructure exists and in countries like be available and affordable so that they can attract different market segments and not only
Finland and Sweden that offer incentives for for superior segment (George, 2016) Thus, the company should have a customer target plan
sustainable businesses. for all income levels to cover the full market.
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