BUSINESS POLICY AND STRATEGIC MANAGEMENT

ASSIGNMENT – 1
COMPANY – TESLA

Tesla, Inc. is an American electric vehicle and clean energy company based in Palo

Alto, California. Tesla's current products include electric cars, battery energy
storage from home to grid scale, solar panels and solar roof tiles, as well as other
related products and services. Tesla is ranked as the world's best-selling plug-
in and battery electric passenger car manufacturer, with a market share of 16% of
the plug-in segment (which includes hybrids) and 23% of the battery electric (purely
electric) segment 2020 sales. Through its subsidiary SolarCity, Tesla develops and
is a major installer of solar photovoltaic systems in the United States. Tesla is also
one of the largest global suppliers of battery energy storage systems, with 3 GWh of
battery storage supplied in 2020.
Founded in July 2003 by Martin Eberhard and Marc Trepanning as Tesla Motors, the
company's name is a tribute to inventor and electrical engineer Nikola Tesla. Elon
Musk, who contributed most of the funding in the early days, has served as CEO
since 2008. According to Musk, the purpose of Tesla is to help expedite the move to
sustainable transport and energy, obtained through electric vehicles and solar
power. Tesla began production of their first car model, the Roadster, in 2009. This
was followed by the Model S sedan in 2012, the Model X SUV in 2015, the higher
volume Model 3 sedan in 2017, and the Model Y crossover in 2020. The Model 3 is
the world's all-time best-selling plug-in electric car, with more than 800,000 delivered
through December 2020. Tesla's global vehicle sales were 499,550 units in 2020, a
35.8% increase over the previous year. In 2020, the company surpassed the
1 million mark of electric cars produced.
Tesla has been the subject of numerous lawsuits and controversies arising from
statements and acts of CEO Elon Musk, allegations of whistle-blower retaliation,
alleged worker rights violations, and allegedly unresolved and dangerous technical
problems with their products.
HISTORY
Founded as Tesla Motors, Tesla was incorporated on July 1, 2003, by Martin
Eberhard and Marc Trepanning. Eberhard and Trepanning served as CEO and CFO,
respectively. Elon Musk stated that the AC Propulsion zero also inspired the
company's first vehicle, the Roadster. Eberhard said he wanted to build "a car
manufacturer that is also a technology company", with its core technologies as "the
battery, the computer software, and the proprietary motor".
Ian Wright was Tesla's third employee, joining a few months later. The three raised
US$7.5 million in series A funding in February 2004 from various investors, including
Elon Musk, who contributed the vast majority at $6.5 million. Following the
investment, Musk joined the company and became chairman of the board of
directors. J. B. Straubel joined Tesla in May 2004. A lawsuit settlement agreed to by
Eberhard and Tesla in September 2009 allows all five – Eberhard, Trepanning,
Wright, Musk and Straubel – to call themselves co-founders .

GLOBAL EXPANSION
In recent years the company has been expanding their production capacity globally.
Tesla opened its first Gigafactory outside the United States in Shanghai, China, in
2019. The Giga Shanghai was the first automobile factory in China fully owned by a
foreign company, and was built in less than 6 months. The following year Tesla also
started construction on a new Gigafactory in Berlin, Germany, and another in Texas,
United States. In March 2020, Tesla began deliveries of its fifth vehicle model,
the Model Y crossover.
On January 10, 2020, Tesla reached a market capitalization of $86 billion, breaking
the record for greatest valuation of any American automaker. On June 10, 2020,
Tesla's market capitalization surpassed those of BMW, Daimler and Volkswagen
combined. The next month, Tesla reached a valuation of $206 billion,
surpassing Toyota's $202 billion to become the world's most valuable automaker by
market capitalization. On August 31, 2020, Tesla had a 5-for-1 stock split following
the increase in value.
From July 2019 to June 2020, Tesla reported four profitable quarters in a row for the
first time, which made it eligible for inclusion in the S&P 500. Tesla was added to the
index on December 21 of the same year. It was the largest company ever added,
and the sixth-largest company in the index at the time of inclusion. As investors tried
to buy more shares as a result of this inclusion, some analysts, such as J.P.
Morgan's Ryan Brinkman, suggested investors exercise caution as Tesla was
"dramatically" overvalued. In 2020, the share price of Tesla increased 740%, and on
January 26, 2021, its market capitalization reached $848 billion, more than the next
nine largest automakers combined and making it the 5th most valuable company in
the US.
On October 6, 2020, Tesla told Electric that they had dissolved their PR
department (with the exception of a few PR managers representing Tesla's
European and Asian markets), becoming the first automaker to do so.
Tesla hit its goal of building a half-million cars in 2020. The company ended the year
with over US$19 billion of cash, compared to US$6.3 billion at the end of 2019. In
February 2021, it was revealed that Tesla had invested some US$1.5 billion in
the cryptocurrency Bitcoin, and the company indicated it would soon accept Bitcoin
as a form of payment

MISSION AND VISION STATEMENT

Tesla’s mission statement was “to accelerate the world’s transition to
sustainable transport.” However, in mid-2016, under Elon Musk’s leadership, the
company changed the corporate mission to “to accelerate the world’s transition to
sustainable energy.” This new statement indicates a slight but significant shift in the
company’s business, to address market opportunities for renewable energy. In a
way, the new corporate mission recognizes the relevance of the firm’s batteries and
related energy storage products in markets in addition to the electric vehicle market.
Tesla Inc.’s mission statement has the following notable components:

1. To accelerate
2. The world’s transition
3. To sustainable energy

The “to accelerate” component of the corporate mission statement establishes

Tesla’s role in pushing the industry toward advanced technologies for sustainable
business and products that rely on renewable energy. The corporate mission also
mentions “the world’s transition,” which indicates the company’s expectation of
successful dominance in the global market for electric automobiles and related
products. This component directly relates with the corporate vision statement’s
emphasis on the global market. Moreover, the change from “sustainable transport” to
“sustainable energy” shows that Tesla, Inc.’s corporate mission statement evolves to
match the current strategic objectives of the business. For example, the company
used to focus on producing electric automobiles only. However, this company
analysis case shows that the growing demand for renewable energy is now reflected
in the corporation’s improved business scope, to cover products like batteries and
other potentially profitable renewable energy solutions in the future.

Tesla’s vision statement is “to create the most compelling car company of the
21st century by driving the world’s transition to electric vehicles.” This corporate
vision emphasizes the company’s focus on renewable energy. Specifically, the
corporation addresses the electric vehicle market as a major avenue for facilitating
growth of the global renewable energy market. The following components are
significant in Tesla Inc.’s vision statement:

1. Most compelling
2. Car company
3. 21st Century
4. The world’s transition to electric vehicles

In its corporate vision statement, Tesla, Inc. aims to be the most compelling in the
industry. This component indicates leadership and excellence in the business. The
company approaches this aim by integrating advanced technology in its electric
automobiles and related products. On the other hand, the “car company” component
of the corporate vision focuses Tesla Inc.’s efforts on designing and manufacturing
cars. The company’s leadership in electric vehicle design and production satisfies
the “21st century” component. This component implies the firm’s use of advanced
technology to address current concerns, such as environmental conservation. The
fourth component points to the company’s global goals. For example, the business
continues to expand its operations, with plans for new factories in developing regions
in Asia. Such expansion addresses major competitors, such as Toyota Motor
Corporation, General Motors Company, Volkswagen, Nissan Motor Company,
Honda Motor Company, and BMW (Bavarian Motor Works), among others,
considering the competitive landscape described in the Porter’s Five Forces analysis
of Tesla Inc. Thus, in this business analysis case, the company’s vision statement
reveals the organization’s aim to be the dominant player in the global electric vehicle
market.

CURRENT BUSINESS STRATEGIES

Tesla’s mission is to accelerate the world’s transition to sustainable energy. Throwing
back to 2008, Tesla introduced its very first cutting-edge and high-performance
electric sports car — Tesla Roadster. Elon Musk, the CEO of Tesla Motors and Co-
Founder, stated that “Tesla Motors is to help expedite the move from a mine-and-
burn hydrocarbon economy towards a solar electric economy, which I believe to be
the primary, but not exclusive, sustainable solution”(Musk, 2006). The Roadster is
based on the Lotus Elise chassis. It can travel 244 mi on a single charge with its
lithium-ion battery pack, priced at $109,000. Tesla was first introduced into the
automobile market by targeting high-tech car segments as a Niche Differentiator, with
its sustainable competitive advantage to distinguish itself from the traditional
automobile makers with sustainable, eco-friendly electric cars.

In the meanwhile, Musk also pointed out that “Tesla is to enter at the high end of the
market, where customers are prepared to pay a premium, and then drive down
market as fast as possible to high unit volume and lower prices with each successive
model”(Musk, 2006). In other words, Tesla’s competitive strategy is a broad
differentiation to target both segments by targeting premium buyers and low-price
buyers in the automobile industry. Based on that generic strategy, Tesla differentiates
itself among the competitors by increasing its research and developing investment
every year to develop a highly innovative unique ecosystem for increasing returns to
an economics scale.

In addition, Tesla provides a variety of products and services all over the world,
including premium electric sedan Model S, Model 3, Model Y, an SUV version of
Model Y. They have a range of 250 miles to 370 miles, plus come with different
battery performance and customizable seats and storage. They also sell solar roof
solutions, solar Panels powerpack, megapack batteries, and some other related
products. Aligned with the broad differentiation strategy, SolarCity merged with Tesla,
Inc. to better build up a clean-energy ecosystem. Musk said, “we believe quite that
Solar city’s technology on the Silevo Front added to Panasonic’s cell technology will
make it the most efficient and ultimately the cheapest solar cell in the world”
(Pressman 2016). To capitalize on their competitive advantages, Tesla will reduce its
material cost on batteries via Research and Development and Automation to drive
down the market with a lower price as a niche turned broad differentiator.

Research and Development

In general, Tesla increased its investment in the Research and Development

department. According to the article “How Does Tesla Spend Its Money” published in
Forbes.com, Tesla kept investing more in the past two years. “Tesla’s R&D Expenses
grew from $0.7 billion in 2015 to about $1.5 billion in 2018. We expect R&D spending
to fall to about $1.4 billion over the next 2 years.” However, with huge investment in
research and Development, Tesla still reports a loss up to 2015.
Tesla is playing the long game with Research and Development, focusing on
Automation, Material Costs, and Software Updates. “We believe that an approach
based on advanced AI for vision and planning, supported by efficient use of inference
hardware is the only way to achieve a general solution to full self-driving.” Their huge
spending in long term Research and Development distinguishes them from the
market of motor vehicles. “one of the company’s strategic objectives is to increase
investment in research and development (R&D) to develop new products that satisfy
market demand for enhanced renewable energy solutions, such as batteries for
various purposes’’, Christine Rowland claimed in an annalistic report about Tesla’s
strategy on Panmore Institute. However, electric vehicles are being adopted by many
other companies as well, and Tesla wants to sustain their competitive advantage by
making their products hard to imitate. The heavy spending in Research and
Development is aimed to develop more sophisticated technology for their products,
increasing the barrier to entry in the electric vehicle and battery markets. The
significantly higher amount of investment in R&D compared to other companies in the
market granted Tesla the position of being the innovator and the leader of the market,
which keeps Tesla in the niche position of having a sustainable competitive
advantage in the market of (electric) motor vehicles.
Heavy spending allows Tesla to keep updating its Neural Networks and AI algorithms,
enhancing Tesla’s autopilot feature which differentiates itself from the current
automobile market. Within the Diamond Strategy, the staging of software update
packages lowers the perceived age of Tesla car models. Software iterations
differentiate their products from the market by enabling a customizable UI interface
for the end-user, plus adds the side benefit of self-parking and self-driving features.
Automation and Customization research has been a vehicle for their entrance to the
automobile arena, lowering the costs and increasing Tesla’s position as the leading
electric car seller. Lithium batteries have also been an innovative area for Tesla.
Software updates have caused an increase in battery performance, but battery
hardware technology is arising from Tesla’s RnD spending, allowing for more range
out of their niched, electric engines.

Production

In terms of production, Tesla manufactures all of its vehicles in Fremont, California.

Most recently, they have built a sort of “tent” or factory within the Fremont
headquarters in order to accommodate the production of 5,000 model 3 vehicles per
week. Additionally, they produce their own key components of each car including the
electric motor, the battery pack, and the charger. Aside from its Fremont
headquarters, Tesla manufactures its lithium-ion batteries in a subassembly factory in
Nevada. They also buy necessary manufacturing parts across the U.S., Europe,
China, and varying locations. For instance, Tesla often purchases its lithium supply
from China and Australia. Furthermore, lithium prices have been steadily increasing
as electric vehicles become more popular. Tesla now has a slight competitive
advantage over various companies due to their secured relationship with a Ganfeng
lithium supplier. Tesla is guaranteed 20% of their needed supply of Lithium
throughout 2020 and possibly for years to come.
Within the Five Forces frameworks, their production tactic of supply guarantees
reduces the leverage of suppliers in addition to automation and in-house parts. Tesla
minimizes the leverage of buyers by offering customizable automobiles via their
production techniques. Within the SWOT analysis, Tesla replaces its previous supply
chain weakness/threat (capacity limits) with a strength (automation) and sustainable
competitive advantage.

Similarly, within the Strategy Diamond diagram, Tesla perfects the staging
component by effectively and efficiently crafting their automation performance. For
instance, Tesla’s automation systems are able to help make entire workflows,
learning, and adaptation automated. Additionally, automated robots are implemented
to assist in the assembly line, helping with things such as automated stamping,
painting, welding, and even final assembly. However, while machines and robots can
be beneficial to the production sector, Tesla also replaces robots that are slow and
underperforming with human employees. Overall, automation is one of Tesla’s many
strengths that sets them apart from other companies and aid them in being able to
supply large quantities of custom vehicles that are necessary to keep up with the high
demand.

Human Resources

Human resources are utilized to fulfil their strategies for production effectiveness and
efficiency through hiring the people who carry the same vision of the company,
having a fast-paced, long hour work environment, intense recruitment and training
process and their continuous expansion worldwide to meet their business objectives.

According to Tesla’s career page, its main mission is “to accelerate the world’s
transition to sustainable energy” by hiring the world’s best and brightest people that
share the same passions in changing the world and are willing to work in their fast-
paced and innovative culture. Pauline Meyer of Palmore Institute mentions that
Tesla’s strategy is to keep innovating continuous solutions and support continuous
improvements by maintaining human resource capabilities to increase growth in the
global market of electric cars. By achieving these goals, Tesla instills an
organizational culture that encourages its employees to keep being creative and
innovative to improve their technological capabilities in which employees are
rewarded and compensated.

The company demands long hours to achieve production efficiency. Elon Musk
admits, “the Model 3 production ramp was only made possible due to “excruciating
effort” and “hundred-hour workweeks by everyone.” According to Justin Alvarez, this
intense work culture attracts young applicants because it provides a flat
organizational structure that allows anyone regardless of any background the
opportunity to be heard and express their creative ideas which not a lot of big
companies exercise. Through their increasing ambitious innovation targets, the
company expects to continue demanding long hours for the next years ahead.

The company also undergoes an intense recruitment process. According to ex-Tesla

recruiter Marissa Perutz, the hiring process starts with background screening of each
candidate’s background, accomplishments, and technical abilities, then asking them
about the company’s cultural questions, the next step is onsite with interviews with
Tesla’s employees and undergoing technical and engineering tests and finally is to
get the approval of the CEO. Meyer says, Tesla’s HR management also provides a
training program to orient employees about their organizational culture and how it is
an important factor in their business strategies. By doing this, they take advantage of
employees’ talents and skills to ensure product effectiveness.

The company aims to expand its market worldwide by establishing new offices and
facilities upon which as part of its strategy of being a global leader in the automotive
industry. In their career page, they state that they aim to solve the world’s problems
by hiring talented individuals worldwide and building an inclusive environment. This is
their strategy for production efficiency to push their company into the global market,
by opening offices and hiring employees from around the world rather than just
relying on their local bases.

Recently, Tesla is experiencing a high turnover rate among its executives. According
to Alliance Bernstein, Tesla has an annual turnover rate of 44% during the past nine
months which is dramatically higher than other companies according to analyst
Succotash. They are also experiencing a decline in external hires. According to
Matookes, “Tesla has lost external hires and executives in particularly important roles,
like chief accounting officer, general counsel, and head of global security, at
abnormally high rates.” The high turnover rate is possible through the effects of the
demanding work culture and the pressure to keep innovating. According to the data
gathered by Farlinger, Tesla’s hiring got declines in spite of turnovers and layoffs and
limited open positions are not being filled. They are also focusing on hires in their
Fremont headquarters and main vehicle manufacturing operations.
Total Quality Management

Tesla’s products are known for their outstanding performance, sustainable energy,
and unique design. However, balancing and improving productivity without sacrificing
quality has been a huge challenge for Tesla in the past. Overpromising and under-
delivering problems happened frequently in the early stages. Reliability has been a
huge factor for customers purchasing decisions according to Consumer Reports 2015
Annual Auto Reliability Survey. Frequent worldwide recalls further confirmed the poor
quality control. To improve productivity and quality, Tesla invested a lot of money on
factories and automation. Instead of outsourcing from parts suppliers, Tesla directly
participated more in manufacturers. Tesla owns several Giga factories worldwide,
Shanghai Giga factory has 150K already and Tesla will deliver 500k+ cars in 2020.
Instead of using different sizes of batteries, Tesla uniformed batteries size in the
Model 3 and simplified processes. This shift increases the administrative cost but
improves quality and productivity.

Marketing

Tesla uses the four Ps in their marketing strategies to achieve their corporate
objectives in their business. Product. Tesla’s products. includes automobiles, electric
vehicle components, batteries, energy storage, and solar panels. The company also
adds new products gradually. They also offer solar panel installation services and
batteries for home and industry. Tesla is focusing more on its electric vehicles as they
seek expansion as a multinational and global company because of its growing
demand and innovation.

Place. The locations where they display their products and services have been the
same over the years. They are found mostly in company-owned stores, official
company websites, company-owned service centers, and charging stations. They are
also located in some mall locations for easy public access. This acts as a showroom
and to also promote their products through car displays in these public areas. Tesla
has its own service centres for repairing and maintaining their customer’s cars. This
also adds to its sales strategy in terms of them only handling the services of their
cars. Tesla utilizes its media presence and website to offer their online purchasing
experience, allowing for the customization and delivery of their cars.

Promotion. Tesla’s promotion relies primarily on viral marketing but it also utilizes

personal selling, public relations, sales promotion, and direct marketing. According to
Daniel Kissinger of Palmore Institute, “the Tesla Model S for Kids is largely promoted
through viral videos on social media, thereby also promoting the company’s product
mix.” They leverage social media as a prime earned media tactic. CEO Elon Musk
engages with his loyal 17.9 million followers on Twitter and shares tweets that are
often casual by taking advantage of memes and personifying the company’s brand
image. He is also open about the failures of the company which makes the company
personable gains the interest of customers. Tesla uses public relations by building the
customer’s perceptions acknowledgment by making its patents an open-source as a
movement to support sustainable energy. They make use of sales personnel in their
store locations for personal marketing and direct marketing to promote their
components and batteries. According to Marketing Manage Anna Melton they also
make use of referral campaigns as promotions. She says, “You can get exclusive
benefits with a personal referral code. From charging points, Model S’s for kids to
sporty alloys, extended warranties and even solar panels, it’s fair to say it certainly
pays to refer your friend to Tesla.” Tesla does not invest too much in advertising
because their promotional strong points are word of mouth due to their strong brand
identity from its media presence, especially in social media.

Price. Tesla’s pricing supports their profits and customer’s perception. They make
use of premium pricing primarily when the company was starting out as a niche
differentiator. As they were transitioning to a Broad differentiator strategy, they made
use of both premium pricing and customizable price points for their selection of cars.
Premium pricing makes use of high price points upon which customers value high
performing technologies that cannot be found in any other products out in the market.
They also make use of market-oriented pricing where it makes us of lower pricing that
is used with their newer car model 3 and their other products such as solar panels
and their services. All of their transactions are only done online which is unique to
other car companies and this is also a strategy to lower the selling cost.

Distribution Channels, Intermediaries, Relationships

Recently, their strategy is entering the global market. They are opening new
locations, expanding their promotions and they are developing new unique products
that will attract customers and generate sales. They are currently forming new
relations with other companies to expand their business ventures. Tesla avoids the
use of intermediaries as they prioritize the Direct-to-Consumer strategy to aim better
service delivery and cost minimization. They have full control over their distribution
channels which are their online website and company-owned stores to process their
sales. B2B markets could be lucrative for Tesla in the future.

SWOT ANALYSIS OF TESLA

STRENGHTS

1. A Top Employer Company

Any organization is as good as it employs. In the case of Tesla Inc., it is one of the
key factors for the company’s remarkable success. Wall Street Journal reports that
Tesla has emerged as an ideal company for employees due to its diversity
and innovation-encouraging culture.

2. The Leading Automotive Company

Despite its issues, Tesla’s sales have only increased. It has become a leading
automotive brand for 2019, delivering 367,500 vehicles.

3. Best in-class Electric Cars

Tesla has left behind every other brand in the race of the finest electric cars. When
compared by their range, Tesla’s electric cars have proven to be the best covering
maximum distances. The recent comparison shows that Tesla occupies the top three
places in terms of range. The Tesla Model S will get you the furthest – traveling up
to 600 kilometers on a single battery charge. The nearest another brand has got is
the Opel Ampera, with a range of 520 kilometers

4. Tesla Dominates the U.S Electric Vehicle Sales

According to Statista, Tesla model 3 is the most sold electric vehicle of 2019 with a
sales number of 187,971. On the second position, Chevrolet Volt stands, with
155,477 cars sold. Where Tesla model S is again on the third position with a close
call, having 134,392 cars sold. In short, Tesla is topping the electric car sales chart.

5. Cross-sell and Diversification

Tesla has launched a comprehensive insurance program for its vehicles in
association with Liberty Mutual insurance company called as InsureMyTesla.

WEAKNESS

1. Manufacturing Complications
The higher standard of innovation, the greater will be mechanical complications and
production risk factor. Tesla faces continuous launch, manufacturing and production
ramp delays while launching their new vehicles and other products.

2. Unable to meet demand might affect brand value

Due to highly experimenting and complicated procedures, Tesla’ might face an
unbalanced supply and demand, unable to meet the production requirement. In fact,
their delivery rate in the first quarter of 2019 is quite alarming. The company has
delivered 63,000 cars in the first quarter of 2019, which is a 31% drop from last
quarter of 2018.

3. Shortage of Batteries
In the annual shareholder meetings, CEO Elon Musk accepted that their production
rate has decreased due to the limited supply of batteries. The shortage directly
affected the sales of electric vehicles and energy storage systems.
4. Lack of High Volume Production
There is no doubt that Tesla is the pioneer of actual energy-saving cars. But it has
failed to produce high volumes of automobiles for any of its models. Even now, as
the company plans to manufacture Model 3 vehicles at high volume, it faces issues
in terms of production cost and management resources and space expansion in
Gigafactory 

5. Elon Musk as Tesla’s Sole Representative

Tesla accepts that the company is a ‘one-man show.’ Sadly, that man, Elon Musk
has a lot on his shoulders to give his hundred percent to the company. Musk is also
deeply involved in other projects like space launch vehicles at Space Exploration
Technologies Corporation and The Boring Company.

OPPORTUNITIES

1. Sales expansion in untapped Market

The most significant opportunity for the company right now is the Asian market,
which is still unsaturated in the field of automotive and renewable energy markets.
Especially in the situation where Tesla needs to expand its global market to increase
its financial stability and stronger market presences.

2. Less Expensive Car

Tesla is expensive due to its unconventional reliance on innovation, which requires
maximum financial support to entertain new technology.

3. Bringing battery production technology in-house

Tesla intends to make its own battery cells. The move can be a big game-changer as
it will help the company to increase its manufacturing rate while reducing its
production cost. Currently, Panasonic is their primary supplier of battery. 

4. Introduction of pick up truck

According to National Automobile Dealer Association market share data, Pick up
truck accounts for 17.6 percent of the US automotive market, which  has huge
opportunity of growth in Electric Vehicle. 

5. Market Confidence in Tesla

The stock market has shown confidence in Tesla after seeing two consecutive
profitable quarters. The price of Tesla stock has doubled since the start of this year.

THREATS
1. Product Liability Claims
Despite Tesla’s premium quality assurance and high standards of manufacturing, the
automobile industry, in particular, is accustomed to facing significant product liability
claims which the company’s fears to be one of the biggest financial blows.

2. Extensive Competition
Tesla, Inc. faces aggressive competition from both alternative fuel
vehicles (Hybrid, Plug-in hybrid, fully electric car) and self-driving technology.
Many automotive brands in the luxury segment like Mercedes, BMW, Audi, Lexus
and in the economy segment like Toyota, Ford, Volvo, General Motors are getting
ready for a fierce competition.

3. Product Defects
Due to highly complex engineering for innovative vehicles, Tesla’s cars and other
energy products have exhibited major flaws in many cases. The defected products
often have weaknesses in design, manufacturing, and other features which can harm
the company’s image permanently.

4. Long term confidence

For any company, the assurance of long term sustainability is essential to maintain
the public image and the company’s morale. Tesla, due to its unstable manufacturing
conditions, suffers from disbelief among the public about its long-term existence,
which can result in a deficiency in further business development.

5. Costumer Adaptation
Any business run along the lines of customer’s acceptance. If the public is ready to
adapt change, companies benefit from the innovative range of products. However, it
can be a slow, unforgiving process, producing new challenges for companies like
Tesla. The organization highly depends upon customers willingness to adopt electric
vehicles.
PORTER’S 5 FORCE MODEL OF TESLA
Tesla Inc.’s success as an innovative manufacturer of electric vehicles is partly
based on its strategies that tackle the external factors in the automotive industry
environment and the energy storage and solutions market. This Five Forces analysis
(Porter’s model) shows that Tesla must prioritize competitive rivalry as the most
significant of the forces in its multinational business environment. Pressures from
substitutes, suppliers and buyers are also considered in this business analysis.

Firms in the international automotive industry environment experience a variety of

external factors, including raw material availability and technology-based firm
competitiveness. Tesla’s resilience is a reflection of strategic effectiveness. This
company analysis shows that the business manages to grow in spite of competitive
challenges. However, Tesla must ensure that it addresses external factors according
to the intensity of the forces impacting the business, as shown in this Five Forces
analysis:

1. Competitive rivalry or competition (Strong Force)

2. Bargaining power of buyers or customers (Moderate Force)
3. Bargaining power of suppliers (Moderate Force)
4. Threat of substitutes or substitution (Moderate Force)
5. Threat of new entrants or new entry (Weak Force)
RECOMMENDATIONS/SUGGESTIONS
A potential challenge of Tesla is the risk of increasingly expensive batteries. ... This,
however, does not dissuade my recommendation to invest in Tesla Motors. The
company has been rapidly increasing its sales and has yet caught up to its consumer
demand even through its better and more efficient production.

The results of this Porter’s Five Forces analysis of Tesla, Inc. show that competition
is the most significant force that impacts the business. Thus, the company must
prioritize this force in its strategic formulation. A recommendation is to continue
strengthening Tesla’s competitiveness: Stronger competitive advantage is
achievable through innovation and increased market presence. For example, in
terms of innovation, the company can boost its research and development (R&D)
investment to outpace competitors’ rate of energy storage innovation. In terms of
increasing market presence, aggressive marketing campaigns support Tesla’s vision
and mission statements. The other forces outlined in this Porter’s Five Forces
analysis also have significant intensities, but to a lower degree compared to
competitive rivalry. Managerial initiatives must address these forces according to
their intensities.

ASSIGNMENT BY:-

1. ADITYA SHAH (BBA E1) 00524401718

2. AAKASH TUTEJA (BBA E1) 00124401718
3. AYUSH BATRA (BBA E1) 0024401718
4. ABHISHEK ANAND (BBA E1) 0034401718