Case Study –
Tesla Motors
Mohammad Maroof Sheikh
BBA(IB) – Sem V
Roll No - 29
Tesla Motors
• Tesla Motors Inc. is an automotive company, which was
established in 2003 by a group of Silicon Valley
engineers who wanted to develop electric vehicles.
More specifically, Tesla Motors was founded by Elon
Musk (founder of PayPal), Marc Tarpenning and Martin
Eberhard. In addition, Sergey Brin and Larry Page (the
founders of Google) are among its investors (Musk,
2006).In 2006, when the co-founder and current CEO of
Tesla Motors Elon Musk was asked about their strategy,
stated: “The starting point is a high performance sports
car, but the long term vision is to build cars of all
kinds, including low cost family vehicles” (Hamilton,
2006).
Corporate Strategy
• A c c o r d i n g t o L o g a n ( 2 0 11 ) , Te s l a M o t o r s u s e s t h r e e p a t h w a y s
in order to enhance the number and the variety of its available
E v s t o c o n s u m e r s : F i r s t , Te s l a t r a d e s i t s E v s v i a b o t h o n l i n e
channels and company owned showrooms. Second, other auto
manufacturers are able to get their own Evs to customers
sooner by buying patented electric powertrain components
f r o m Te s l a M o t o r s . F i n a l l y, Te s l a M o t o r s i n s p i r e o t h e r a u t o
manufacturersby proving that there is pent-up consumer
demand for sportive performance and at the same time socially
r e s p o n s i b l e v e h i c l e s . T h e o v e r a l l s t r a t e g y o f Te s l a c a n b e
summed up in three steps. The first step was to introduce the
Roadster model to the market and consequently establish a
keystone for Evs. This objective has already been
a c c o m p l i s h e d ( L o g a n , 2 0 11 ) . I n c o n t i n u a t i o n , i n 2 0 1 2 t h e n e w
“ M o d e l S ” w a s i n t r o d u c e d t o t h e m a r k e t a n d i t i s t a rg e t e d a t
m i d d l e t o u p p e r- m i d d l e c l a s s c o n s u m e r s . F i n a l l y, b y 2 0 1 4
Te s l a p l a n s t o p r o d u c e a n d m a r k e t a n e w m o d e l n a m e d “ M o d e l
X ” ( L o g a n , 2 0 11 ) .
Partnerships
• Tesla Motors manufactures and markets its
own Evs. At the same time, in
contradictionwith other traditional auto
manufacturers, it acts as an original
equipment manufacturer(OEM) by the
production of electric powertrain
components, which other companies canbuy
and trade with their own brand names
(Adén and Barray, 2008).In order to
facilitate its growth, Tesla Motors has been
following three main strategic alliance
types (Holmberg, 2011): Supplier alliances
R&D alliancesOEM alliances with other
automobile manufacturers.
U.S. Government
Policy
• The U.S. federal government has established various
i n c e n t i v e s a n d r e g u l a t i o n s t h a t u rg e n e w e n t r e p r e n e u r s a n d
corporate entrepreneurs to invest in the green-technology
vehicle market. An important incentive for new technologies
w a s t h e C o r p o r a t e Av e r a g e F u e l ( C A F É ) s t a n d a r d s , w h i c h w a s
established in 1975. The CAFÉ standards had a limit of 27,5
m p g a n d i t w a s v a l i d u n t i l 2 0 1 0 . I n 2 0 0 7 , t h e E n e rg y
Independence and Security Act, which was enacted by the
Congress, forced the automobile manufacturers to achieve a
limit of 35 mpg by 2020.
• Apart from the regulations, the U.S. government has
established various programs inorder to give financial
incentives to customers. Some of those incentives are listed
below:Loans for the promotion of battery research and other
green-technology development for vehicles.
• S u p p o r t f o r E V b a t t e r y c h a rg i n g s t a t i o n i m p l e m e n t a t i o n .
• The EV purchasing by the federal government.
Environmental
Scanning
• The process of environmental scanning helps to understand a
c o n t e x t o f t h e p r e f e r r e d f u t u r e f o r t h e c o m p a n y. I n t h i s
r e s e a r c h p a p e r, I w i l l b e d i s c u s s i n g a b o u t t h e Te s l a C o m p a n y
a n d C u m m i n s C o m p a n y, b a s e d o n t h e i n t e r n a l a n d e x t e r n a l
environment, strategies used to create competitive advantage,
a n d t h e m e a s u r e m e n t g u i d e l i n e s . Te s l a i s a c a r m a n u f a c t u r e
company which based in America, and is focused on designing,
developing and manufacturing all electric cars. The internal
analysis entails of the strengths and weaknesses. The strengths
o f Te s l a C o m p a n y c o m p r i s e o f i t b e i n g t h e f i r s t c o m p a n y t o
s u c c e s s f u l l y c r e a t e e l e c t r i c c a r w i t h c h a rg i n g s t a t i o n s . T h e
niche area of the market enables the company to thrive in the
m a r k e t . Te s l a i s t h e i n d u s t r y l e a d e r a n d h a s e n o r m o u s
consumer support. On the other hand, the weaknesses are due
to the fact that the battery produced by the company has to be
c h a rg e d m o r e f r e q u e n t l y, i n t h a t o n e c a n m a k e i t f u r t h e r i n a
gas/diesel powered vehicle. The company requires more Super
C h a rg e r s t a t i o n s . I n a d d i t i o n , t h e e x t e r n a l a n a l y s i s e n t a i l s o f
t h e o p p o r t u n i t i e s a n d t h r e a t s ( B a r o t o , A b d u l l a h & Wa n , 2 0 1 2 ) .
Opportunities
• T h e o p p o r t u n i t i e s f o r Te s l a C o m p a n y i n v o l v e s t h e c h a n c e t o c r e a t e a
battery that will last longer before it needs recharging, together with
t h e o t h e r t e c h n o l o g i c a l a d v a n c e m e n t s . T h e t h r e a t s t h a t t h e Te s l a
Company faces include of other companies like BMW and Cadillac that
are manufacturing electric vehicles. In addition, the consumers are not
willing to switch towards the electric vehicles, affecting the growth of
t h e c o m p a n y. S i m i l a r l y, t h e r e a r e o t h e r f o r m s o f t r a n s p o r t a t i o n t h a t a r e
u t i l i z e d . Te s l a i s s i t u a t e d i n t h e i r i n d u s t r y. T h e i r s i t u a t i o n i s v e r y
unique, since they are strongly positioned and they are not in any
t h r e a t o f g o i n g u n d e r. W h i l e t h e i r t h r e a t s h a v e s o m e p o t e n t i a l , Te s l a i s
the top contender in this industry because of the business model they
have put into place and their philosophy for doing what they do
( C a m p b e l l , S t o n e h o u s e & H o u s t o n , 2 0 0 2 ) . Te s l a h a s l i m i t e d c o m p e t i t i o n
in the realm of electric vehicles, but in the automotive industry they
are greatly outnumbered. Major competitors include Ford Motor
C o m p a n y, G e n e r a l M o t o r s , To y o t a a n d H o n d a . Wi t h t h e o v e r w h e l m i n g
need to want to sustain energy and reduce a carbon footprint, the
electric car is innovative and provides a solution to an ever growing
p r o b l e m s u c h a s G l o b a l Wa r m i n g . Wi t h t h e n e e d t o s u s t a i n o n t h e r i s e ,
other automotive brands have taken heed and offered their own version
of electric vehicles or hybrid vehicles at a more affordable rate than
Te s l a ( B a r o t o , A b d u l l a h & Wa n , 2 0 1 2 )
Capability
• Te s l a h a s t h e c a p a b i l i t y a n d e x p e r t i s e i n c o m b i n i n g v e h i c l e
engineering and electric powertrain, which has enhanced
integration and electric design. This enables the firm to
sustain its industrial leadership created through production of
M o d e l S a n d Te s l a R o a d s t e r. Te s l a c u s t o m e r s h a v e s e v e r a l
b e n e f i t s s u c h a s r e c h a rg i n g f l e x i b i l i t y a n d l o n g r a n g e a s w e l l
a s c o s t o w n e r s h i p a n d e n e rg y e ff i c i e n c y. Te s l a d o e s n o t t a k e a
low cost provider strategy because they have a very specific
t a rg e t a u d i e n c e a n d v e r y u n i q u e p r o d u c t l i n e . Te s l a i s a m a s t e r
o f d i ff e r e n t i a t i o n . A l t h o u g h t h e r e a r e m a n y e l e c t r i c v e h i c l e
m a n u f a c t u r e r s i n t h e m a r k e t , Te s l a i s t h e f i r s t n a m e y o u t h i n k
o f w h e n y o u t h i n k e l e c t r i c v e h i c l e . I n t e r m s o f d i ff e r e n t i a t i o n ,
Te s l a c a n a s k f o r, a n d g e t , a p r e m i u m p r i c e f o r t h e i r v e h i c l e s .
Wi t h a b r o a d d i ff e r e n t i a t i o n s t r a t e g y i n p l a c e , Te s l a h a s b e e n
able to avoid many problems that have plagued rivals.
P r o d u c t i v i t y a n d c o s t e ff e c t i v e n e s s h a v e b e e n u t i l i z e d b y Te s l a
Company as the measurement guidelines. These strategies have
been able to assist the Company to successfully stay in the
market (Campbell, Stonehouse & Houston, 2002).
Design
• The Cummins Company is the leader in design, manufacturing high-
performance and world class engines for buses, trucks, heavy
equipment and light-duty vehicles. The company produces also power
generation equipment such as diesel generators, fuel systems and
emission solutions. The products of Cummins are renowned for their
r e l i a b i l i t y a n d f u e l e f f i c i e n c y. T h e i n t e r n a l a n a l y s i s o f t h e C u m m i n s
Company entails the strengths and weaknesses. The strengths of the
Cummins Company indicates that the company is the leading
manufacturer of the diesel engines and it is consistent on top line
growth. The company has its presence in 197 territories and countries
with its facility being over 5,000. The Cummins has the strong
workforce which is over 40, 000. The company has strong product
p i p e l i n e a n d R & D f a c i l i t y. I t a l s o h a s t h e s i g n i f i c a n t p r e s e n c e i n
several developing nations. On the other hand, the weaknesses of
Cummins Company is that the company depends heavily on few
suppliers. The tough competition Cummins Company faces implies that
the market share is limited. In addition, there are obligations of
p e n s i o n t h a t a r e u n f u n d e d ( T h o m p s o n e t a l . , 2 0 1 2 ; ( P o r t e r, G o o l d &
Luchs, 1996).
Future work
