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Harvard
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Management
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Topic:

Strategic Appraisal of Tesla Motors Inc. (Coursework Sample)

Instructions:

Assessment 2 brief:
The second assignment of this module is a Strategic Appraisal to be undertaken on a given real company – (Tesla). Please refer to the module Moodle site to access the link to the relevant case study. The link will be available not earlier than teaching week 6, due to the Sequential-Learning process of teaching taken at this module: students are required to engage with relevant theory before starting working on this assignment.
Please note: if an alternative company or case is taken for Strategic Appraisal, the submission will be given 0 mark.
You will be expected to apply the strategy tools/theories/models you have learned throughout the module. This will include: 1) the analysis of the external and internal environment of the company; 2) the identification and evaluation of its main strategic options for growth, and 3) recommendation for further development of the company.
You may include appendices (not more than 5 pages) at the end of your report to provide supporting data/evidence of research, but all essential information should be included in the main body of your work. Please note evidence of additional researched material, mechanical structure, and soundness and how well the different sections are linked and integrated within the overall report will be greatly appreciated. A good report emphasizes clear, concise writing with focused and solid content. This is crucial since report writing skills are essential to any strategic management exercise.
The purpose of the assignment is to draw out the key strategic issues and challenges encountered in running the company; apply the relevant models/frameworks; rationalize and justify the key decisions taken; describe and discuss the underlying strategic principles. You would need to carry out additional relevant research to inform your analysis and findings. Please present your analytical frameworks in a table format in order to save enough space for your written discussion and evaluation.

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Content:


STRATEGIC APPRAISAL
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Contents TOC \o "1-3" \h \z \u STRATEGIC APPRAISAL OF TESLA MOTORS, INC. PAGEREF _Toc91677226 \h 2INTRODUCTION AND COMPANY BACKGROUND PAGEREF _Toc91677227 \h 2PART 1: EXTERNAL ANALYSIS PAGEREF _Toc91677228 \h 31.1 PESTEL MODEL PAGEREF _Toc91677229 \h 31.2. PORTERS FIVE FORCES FRAMEWORK PAGEREF _Toc91677230 \h 51.3. INTEGRATED EXTERNAL ANALYSIS DISCUSSION PAGEREF _Toc91677231 \h 7PART TWO: INTERNAL ANALYSIS PAGEREF _Toc91677232 \h 82.1. VALUE CHAIN ANALYSIS PAGEREF _Toc91677233 \h 82.2. APPRAISAL OF RESOURCES AND COMPETENCIES PAGEREF _Toc91677234 \h 112.3. INTEGRATIVE INTERNAL ANALYSIS DISCUSSION PAGEREF _Toc91677235 \h 12PART 3: COMPANY’S BUSINESS STRATEGY AND BUSINESS MODEL PAGEREF _Toc91677236 \h 133.1. BUSINESS STRATEGY PAGEREF _Toc91677237 \h 133.2. TESLA’S BUSINESS MODEL PAGEREF _Toc91677238 \h 14PART 4: ISSUES, CHALLENGES AND STRATEGIC OPTIONS FOR GROWTH PAGEREF _Toc91677239 \h 144.1. ISSUES AND CHALLENGES PAGEREF _Toc91677240 \h 144.2. STRATEGIC OPTIONS FOR GROWTH PAGEREF _Toc91677241 \h 15PART 5: EVALUATION OF THE STRATEGIC OPTIONS FOR GROWTH AND IMPLEMENTATION PAGEREF _Toc91677242 \h 175.1. NEW MARKATING STRATEGYAND VERTICAL INTEGRATION PAGEREF _Toc91677243 \h 185.2. SO2: NEW PRODUCT DEVELOPMENT PAGEREF _Toc91677244 \h 195.3. SO3: ENTRY INTO THE INDIAN MARKET PAGEREF _Toc91677245 \h 195.4. SO4: DIVERSIFICATION IN TECHNOLOGIOCAL INNOVATION PAGEREF _Toc91677246 \h 19CONCLUSION PAGEREF _Toc91677247 \h 20
STRATEGIC APPRAISAL OF TESLA MOTORS, INC.
INTRODUCTION AND COMPANY BACKGROUND
Tesla Motors, Inc. is a company that designs, develops, manufactures and sells electric vehicles. Tesla Motors, Inc. was founded in 2003 in Silicon Valley by Marc Tarpenning and Martin Eberhard (Tesla, 2021). Its first car, which was released in 2006, was a two-sear car called Roadster. It was powered by an AC induction motor and moved at maximum speed of 130mph. The commercial production of Roadster began in 2008, unveiling the company’s cutting-edge battery technology. The company operates within the automobile industry where it partners with other automobile firms to manufacture its electric vehicles. The main market for Tesla’s electric cars is the United States, followed by China, Europe, Netherlands, Denmark, Switzerland and France (Jones, 2014). This report therefore evaluates the internal and external environments of Tesla to develop potential strategies that the company could employ to stimulate its growth in the automobile industry.
Tesla’s mission and vision correlate to give its workforce a direction in their operations:
Mission: Tesla aims to stimulate the world’s ability to shift to sustainable energy.
Vision: To create the best cars of the 21st century by directing the world’s transition to electric vehicles (Tesla, 2021).
Values: Tesla operates on the values of best performance, forecast, respect, constant learning and respect for the environment.
PART 1: EXTERNAL ANALYSIS
External analysis of a company ensures that development of its strategic decisions considers multiple perspectives. The PESTEL model and Porters Five Forces Framework help to perform the external analysis of the company.
1.1 PESTEL MODEL
FACTOR

IMPACT

POLITICAL

The U.S government supports investments in electric cars and renewable energy in general. The department of Energy gave the company $465 million loan to boost its production of electric cars. Further, some states give customers state tax credits of more than 5000 dollars to motivate them to purchase electric cars. However, some states such as Michigan have laws that force all manufacturers to distribute their products through third parry dealerships, a form of distribution that Tesla is struggling to do away with.

ECONOMIC

The economic growth rate in the U.S is slow. The average growth rate from 2017 to 2019 was about 2.2%. However, the year 2020 experienced a negative growth rate of 3.41%. Nevertheless, people still purchase cars on credit through special deals. The sale of new cars has been increasing in the country since 2008. Further, Tesla managed to rise up from the recession with constantly increasing stock prices.

SOCIO-CULTURAL

A greater percentage of Americans support investments directed towards sustainable energy and environmental protection. Going green has become a popular term in the culture of the American society.
Tesla cars also fall under the category of luxury cars which attract high income buyers hence contributing to profit maximization.
However, consumer perceptions regarding the use of electric vehicles is negative due to the need for constant recharging and overall cost of operating the vehicles.

TECHNOLOGICAL

Tesla’s goal is to provide technological leadership in the area of electric fields. In the process of developing its workforce, the company searched for a team of technological specialists from the car industry and the people from Silicon valley. The team has contributed to the technological advancement of the company’s batteries and other features such as aerodynamics, charge balancing systems, safety systems, vibration and environmental systems, motor technologies, energy storage and rolling resistance (Toumi, 2018).
The innovations have given the company an extensive intellectual property portfolio.
Technology has increased the efficiency of Tesla’s cars by 40 t0 50%.
Roadster has been the first car to reach a range of 400 miles.

ENVIRONMENTAL

Tesla has focused on developing battery packs to complement solar panels in making it eco-friendly.
Further, the company exists in an era where environmental protection is at the top of the agenda of the US and the world at large. Consequently, its innovations receive massive support from the government and international agencies (Chinta, 2018).

LEGAL

Tesla has the legal opportunity to grow its business overseas due to its international patent protection. It is also able to growth its operations in other states in the US due to the prohibition of direct sales in those states.

1.2. PORTERS FIVE FORCES FRAMEWORK
Force

Strength

Main Discussion

Competitive Rivalry

Low

Tesla Motors, Inc. experiences low competition levels within the electric car segment. The number of companies that manufacture luxury electric vehicle cars are few. Tesla is specialized in the production of high-end electric cars while the other entities only produce few versions of electric cars. Its major competitors include Volkswagen, Mitsubishi, Nissan, Toyota, Honda, Chevrolet, and Hyundai. However, all these companies have invested heavily in research and development of electric cars (Hardman et al, 2015). They also understand the aim of the world to shift towards sustainable energy.

Bargaining Power of Buyers

Low

The low competition in the market makes the bargaining power of buyers to be also low. The electric cars are high innovation vehicles that offer value to consumers, leaving them minimum room to increase their bargaining power. The consumers do not have a wide range of options to choose from. Furthermore, at a global level, the switching cost of buyers is high within the electric car segment which also reduces their

Bargaining Power of Suppliers

Low

The company is a vertically integrated producer. It purchases its model 3 batteries from Panasonic. Further, it has a long term partnership with the company to produce its next generation batteries (Parekh et al, 2021). Tesla Inc. also incorporates in its strategy proprietary packaging of cells from different battery suppliers. This reduces the power of its battery supply chain. Additionally, Tesla has an agreement with Lotus company which supplies it with Roadster vehicle body parts. This gives Lotus a significant power over Tesla as it relies entirely on it to supply the body parts. However, the fact that the company has specific suppliers and that there are many entities that produce the vehicle components gives it a higher bargaining power over its suppliers.

Threat of new entrants

Low

There are high barriers of entry into the non-petroleum automobile segment. Although the hybrid technology is known to major automobile companies which have used it to manufacture and market their cars, the hydrogen fuel-cell automobile and all-electric technology is unique and needs multiple resources

Threat of substitute from services and products

high

The switching cost of electric vehicles is high due to the presence of other means of transportation including public transportation which attracts customers. However, the many substitutes have low performance levels as compared to the electric vehicles. For example, public transportation does not offer the same versatility as private cars. Hence, the force of substitutes is low for Tesla’s products.

1.3. INTEGRATED EXTERNAL ANALYSIS DISCUSSION
The electric vehicle industry currently f...

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