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Q0. Fill up the following table: (Ruhi)

1 2
Products Prominent Features Customers Needs Value proposition Gaps Industries KSFs Strength Weaknesses
1.Roadster, Model S, 1.Fast and light Celebrities and Wealthy 1.Environment friendly Fast and light all electric 1.Driver can be stranded Automobile - Electric 1. For Model S, a 1.New architecture for the car. 1.Inefficient manufacturing process resulting
Model 3, Model X 2. Required less Individuals cars. sports car by lack of charging Vehicle subsidy of $7500 was 2.Vertically integrated and automated in cost increase.
maintenance than 2. Need elegant with a point or repair station provided by the factory. 2.Use of battery which was heavy, volatile,
combustion engine new feature car. 2. Need a technician to government. 3.Auto factory robots could perform 4 tasks expensive and limited storage capacity
3. Model S is the Safest repair cars who go to 2.Government provided on multiple models. 3.Gigafactory can become obsolete if
Sedan ever built every customer house. a loan of $465 million. 4.Developed its own battery in the Japanese company launches its aluminium
4. aluminium light 3. Battery requires 3. From AC Propulsion Gigafactory. air battery.
weight body. costly replacement if it tesla Licensed electric 5.Patent innovation. 4.Need of technician for servicing.
5. Elegant Design becomes empty. drive train technology 6.No paid advertising thus saving cost 5.No spent on advertising, so if Model 3 is
4.Due to new 4.R&D spend 7.Own dealership built then customers may not know of the
architecture the car 5. Alliance with 8.Keeping less inventory in store just for product.
mechanic may not strategic partners like display. 6.30-45 min to charge battery
understand how to Panasonic, Daimler and 9.Charging station located at places like 7.Thinly Spread – multiple lines of vehicle,
repair. Toyota. freeway, restaurant , malls. home energy storage, Gigafactory, charging
5.Model S have station and dealership
reliability issues in its 8.Chargers worked only with Tesla cars.
electric component and
design flaws.
2.Powerwell 1.lithium-ion from Rich Domestic User as 1.need solar power for Recharge your solar 1.Grid power cheaper Domestic power 1. Availability of battery
gigafactory well used in project with home. panel when utility rate then power form from gigafactory.
solar city and sun edison 2.reduce cost of are low and save money powerwell.
electricity consumption.
3.Gigafactory 1.lithium ion battery To be used in tesla car, Tesla needed to save on Build your own battery If Japanese company Energy 1.Panasonic invested 30-
Powerwell cost by bringing a commercialises 40% in building
complex battery aluminium batteries, the Gigafactory
production process Gigafactory will become 2. Panasonic provided
under 1 roof. obsolete. experience in lithium
battery
3.Preventing outsiders to
tour battery production.
4. Good relationship
with raw material
suppliers.
4.Charging Station 1.Solar power Celebrities and Wealthy Charge car battery Charge your car Energy 1.Location of charging
supercharging Individuals Tesla car 1.Queue at charging station.
station if Model 3
2.6-8 free chargers owner
becomes popular
3. Worked only with 2. Takes 30-45 min to
tesla car charge one car
5.Distribution center 1. Located in a high end Celebrities and Wealthy Home delivery of Tesla 1.Since servicing is Retail 1. Location of … …
mall. Individuals car. done at customer home distribution center.(near
2.Limited inventory so if a car is launched apple store)
3.Customer can order for masses then it won't 2.carried less inventory
online or in store. be possible. and sales person.
4.Home delivery of car 2.Need technician to 3. Option to order online
5.display of car parts at service car. or in store,
back of store.
 6.less sales person
7.servicing done at
customer home

Key Commonality v/s differences among KSFs: Co’s performance so far

Commonality 1. Alliance with the strategic partner 2. Location of charging station 3. Spend on R&D 1. Company is having net loss till 2014.
2.Revenue is increasing
… 3. Company is forcing the industry to embrace electric vehicles.
…

Q1. Analyze the co’s value net and its relative strength over the other actors? - Ankit

Company Competitors Complementors Suppliers Customers

● EV manufacturer -
Roadster, Model S, Model
X, Model 3
● Innovative: Gigafactory,
architecture innovation
● BMW i3/i8 ● Government subsidy on ● Panasonic - Battery ● Model S/Model X aimed at
● Ford Focus the buying of the factory suppliers, experienced in Li high value customers -
● Chevy Volt plant setup batteries niche
● Toyota Prius ● Dealership outlets for ● Supercharging stations ● Model 3 aimed at masses
● Nissan Leaf distribution and service ● Increase in customer base
● Cadillac ELR ● Partners: Dana Holdings, from 1999-2014
● Porsche Mission E Sports Daimler and Toyota
● BYD: saw investment from
Warren Buffet
● Highly competitive market
with BEV, HEV, PHEV
makers coming up
● Total HEV market
increased in the US from
1999-2004

How was Tesla different from competitors

Abandoned standard car architecture: systems and drive train were engineered ground up around the battery packs. Electric propulsion allowed to go beyond
the ICE motor.

Subsystem design: traction control was based on technology different than standard car

Tesla S eliminated transmission

Q2. Is it an attractive industry? (Parsis)

FACTOR RESULT CASE FACTS

Bargaining Power of Supplier

Number of suppliers Low Tesla had to vertically integrate and run automated factories to manufacture batteries - started construction of ‘Gigafactory’ - Japanese aluminium-air batteries might make
obsolete
 Tesla creating its own vehicles, charging stations and a network of company owned dealerships
Heavy, volatile and expensive, chemical batteries had limited storage capacity & customer concerns about running out of battery

Size of suppliers Large Lithium ion batteries produced in complex supply chain - raw materials mines in South America, shipped to North America for processing, shipped to Japan for further
processing and back to North America

Uniqueness of each supplier’s product High Architecture of Tesla cars unique, hence customized components have to be manufactured - relationship specific assets

Ability to vertically integrate Low Competences required for manufacture EV and components different

Bargaining Power of Buyers

Number of customers Low Tesla cars only affordable by a niche of wealthy customers (0.06% of US car market in 2014)
Tesla operated own car dealerships

Size of customer order Small Individual buyers

Price sensitivity Low Wealthy customers

Difference from competitors High Performance and perceived benefits of Tesla car unique

Ability to vertically integrate Low High investment required to manufacture electric vehicles

Buyer’s access to information High Despite Tesla not spending money on advertising, the brand has won many awards (Forbes World’s Most Innovative car 2015) - competitors paying more (Nissan paid $25 mn
for Nissan Leaf, GM spent over $3)
Leverages the popularity enjoyed by its co-founder Elon Musk
Stores are source of advertising

Switching cost Low Most drivers skeptical of electric vehicles - afraid of getting stranded by lack of recharging or repair stations
Gas prices cheaper (inflation adjusted all-time low) - even electricity at other places cheaper

Threat of New Entrants

Barriers to entry High Immense cost to develop an electric vehicle and create supporting infrastructure - Better Place failed in Israel

Economies of scale Low Negative unit economies - Tesla losses money with every call it sells

Brand loyalty Low Customer opinions exist at two extremes - favourable opinion kept by ardent supporters

Capital requirements High High fixed cost - - Tesla often in need of new funding

Cumulative experience High

Government policies Favourable Increasing concerns over the environment - $465 million loan from US govt. To companies encouraging energy independence
Depletion of petroleum reserves - US dependence on Middle East for Oil
Government subsidy of $7500 per car - at risk of being taken away

Access to distribution channels Low Poorly developed complementary services

Cost of exiting High High sunk cost

Threat of Substitutes

Number of substitutes High Developing market - not many rivals in EV market, but threat of substitution from gas vehicles

Buyer’s propensity to substitute Low Customers only concerned with “green” value associated with the product

Relative price performance of substitute High Combination of EV (battery electric vehicle) and sports car (with curved lines like Maserati or Jaguar) - 0 to 60 in 3 seconds

Perceived level of product differentiation High Highest consumer rating (99 out of 100)
Unique Tesla architecture - systems and drive trains were engineered around the battery pack - more spacious
 Switching cost High Customers only concerned with “green” value associated with the product
Lower cost of maintenance and repair of additional oil engine
Unique design cannot be repaired by local mechanics

Rivalry Among Competitors

Number of competitors Low Few global players who competed on profitability

Diversity of competitors High No dominant design existing in the market for electric vehicle

Industry concentration Low Emerging market, not concentrated but Tesla facing competition from Nissan Leaf, Ford Focus, GM’s Chevy Volt, Porsche Mission E, BYD
Potential collaborations with Nissan and BMW on charging networks post Tesla’s sharing of patents

Industry growth High High valuation of existing companies - Tesla often over promises to Wall Street
Unit volumes growing steadily - Toyota estimated sales of hybrid models to be more than 1 million in 2012 & planned to rollout 21 new or redesigned hybrid vehicles by 2015

Quality differences High Each company has different architecture and design

Brand loyalty Low Customers only concerned with the “green” value associated with the product instead of the specific brand

Barriers to entry High One of the world’s most difficult to enter industry due to hyper cost-competitive auto industry
Poorly developed complementary services for electric vehicles

Switching cost High High sunk cost

Q3. Is Tesla a disruptive innovation? (Abhinav)

Doesnot serve unserve market

No Asymmetric motivatiion- existing player aare in ev
New feature performance – ev porer then icv
New value etwork is created
Existing player can exploit tesla tch

Against
● Christensen's model says that disruption happens when a new entrant offers substitute products using inferior but cheaper technology that is later improved by a disruptor, catching the market by surprise.
● But Tesla’s technology is still inferior to Internal combustion engines in performance.
● Also it is more costly than IC Technology.
● Its sustaining innovation i.e offers incrementally better performance at higher price.

For
● Tesla’s full stack approach to build a complete, end-to-end product or service that bypasses incumbents and other competitors is a disruption in the auto industry.
● Tesla Autopilot feature using a neural set system is the first commercially available for cars.
● Innovation in lithium-ion batteries has increased the life of batteries and distance / charge exponentially for electric cars.
● Forced the whole industry including rivals to embrace electrification.

Q4. What other types of innovation does it look like? Why? (Bibhas)
It is a Modular innovation

Architectural \ Component Change No Change

Change ● Use of Li -ion batteries instead of ICE ● Falcon wing doors

● Use of Charging Stations instead of Petrol pumps

No change ● Basic structural design of the car intact ● Use of Robots in manufacturing cars on multiple models
● Elimination of transmission with the
chassis kept intact

● ●

Q5. Is Tesla pioneering a new architecture? Yes/ No? Give pros and cons of such a move? ( Gone Rajasheker)

Yes.

Pros:

1) The other subsystems such as transmission were built around the battery with the battery as the central focus
2) It allowed them to innovate and create a premium experience for its users

Cons:
1. Unforeseen errors that could crop up while designing a new platform

2. Many mechanics do not understand the architecture which makes repairs difficult

Q6. How is Tesla protecting its intellectual property? Give pros and cons of its choice(s)? (Praveen Raja Maroju)

Initially to protect innovations:

● Didn’t allow outsiders to tour battery production
● Heavy Patents on all innovations

But later in 2014, it renounced patent control making them “open for use”.

“open for use” Patented

Pros ● It’ll lead to superchargers becoming the industry standards
● Popularity for Tesla’s products
● Access for everyone to contribute to Tesla’s innovations
● It has already attracted collaborations from major
automotive companies
● Can protect the innovations from competitors copying
them.
● Can leverage these patents to gain brand value

Cons ● Big Car companies might copy technology and overwhelm ● Industry would still use inferior technologies even
Tesla though better ones are already created
● Might lose to other companies in battery market
● It’s compromising on possible core competencies
Q7. What should it do? (Nikhil Chandra)

Market Penetration Strategy Product Development Strategy

(Existing Markets - Existing Products) (Existing Markets - New Products)

● Invest in Marketing - Currently marketing is only done on the face
value of founders (Musk especially)
● Fewer service centers, for repairing cars - Increase them for
better customer experience
● Innovate on the charging front/battery front to decrease the time
taken per charge (Now it takes 30 - 45 mins)
● Increasing the number of products to the mass markets at
economy price
● Increase the number of charging points (there are just 500
charging points now) with 6-8 chargers at a time - Be
prepared for the increasing demand

Market Development Strategy Diversification Strategy

(New Markets - Existing Products) (New Markets - New Products)

● Going global with manufacturing plants across the world and ● Entering into Electric Bike Segments and Race Car
targeting the Rich Greens people in the other parts of the Segments
country