BM1807

Names ____________________________________________________ Section __________________

Date____________
ACTIVITY
Tesla Drives to Change the Structure of an Industry
Every car manufacturer who sells in the United States does so through a network of locally-owned dealerships.
The car manufacturers have structured their business to deal with the only sales channel allowed by law in
most states. Into this arena comes Tesla. Much to the surprise of many, Tesla was not founded by Elon Musk,
but by Martin Eberhard and Marc Tarpenning in 2003 with the goal of utilizing an induction motor patented
in 1888 by Nikola Tesla to prove that battery-powered cars could be better than gas-powered cars. Their
primary investor was PayPal co-founder Elon Musk who then served as Chairman until 2008 when he also
became the CEO.

While certainly not a mass-market car (the Tesla Roadster started out at US$109,000 or 5.4 million pesos), the
company had no problem selling every car they made. Tesla opened car information locations at malls in the
United States, where customers would learn about the car, its features, and how to order one. Customers can
use a website to select the features they want, pay a deposit, and wait for Tesla to build their car. Tesla offers
financing and accepts third-party loans, but delivers the cars directly to the customer that ordered it. The
organization has been structured around a retail concept that is more oriented toward providing information
rather than selling. Tesla successfully managed to build its business using this unconventional model by
combining their functional units with their project teams, which encourages more dynamic and open
communication in their entire organization. The price of Tesla vehicle is not negotiated, and every feature is
clearly labeled on the website. There are no teams of employees working with franchisees, no logistics teams
negotiating car allotments, no sales groups crafting the next “big” sale/marketing campaign. The company
simply establish a strong camaraderie and personnel commitment in their small pool of employees. In
addition, Tesla ensures that the activities of their organization are well aligned to their company strategy,
which enables them to successfully match personnel requirements to their overall strategy that drives
optimum growth for the company.

General Motors has almost 4,900 franchise dealers in North America, and the company is prohibited from
selling directly to consumers because of contracts with those dealers and state laws that protect the
dealerships from factory competition. General Motors has invested significant resources in attempting to
prevent Tesla from entering markets. They successfully prevented a move into Michigan but failed in the
courts of Massachusetts. If Tesla is forced to deal through a franchise dealer system, it will radically affect the
structure and design of the organization. Sometimes the reality of the markets dictates how a company is
organized.

Answer the following questions: (3 items x 10 points)

1. What is/are the prerequisite/s of strategy implementation present in the case study?
2. What type of offensive tactic is being used by Tesla?
3. What is the most appropriate offensive/defensive tactic should Tesla employ to retain its market
share?
Rubric for grading:
CRITERIA PERFORMANCE INDICATORS POINTS
Content Provided pieces of evidence, supporting details, and factual
8
scenarios
Grammar Used correct grammar, punctuation, spelling, and capitalization 1
Organization of Expressed the points in clear and logical arrangement of ideas in
1
ideas the paragraph
TOTAL 10
Reference:
Bamford, C., Hoffman, A., Hunger, D., & Wheelen, T. (2018). Strategic management and business policy: Globalization, innovation and sustainability (15th ed.). United
Kingdom: Pearson Education Limited.

09 Activity 1 *Property of STI

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