Individual Blue Ocean Strategy (BOS) project report analysis for 'Tesla company'

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Table of Contents
Background:.................................................................................................................................... 2
Introduction of Tesla motors:.......................................................................................................... 2
Product and services: ...................................................................................................................... 3
Financial performance: ................................................................................................................... 4
Customer groups and Competitors: ................................................................................................ 5
Non customer analysis:................................................................................................................... 6
Buyer experience cycle and Buyer utility map:.............................................................................. 7
Reconstruct industry boundaries:.................................................................................................... 7
Four action framwork: .................................................................................................................... 9
New strategy canvas: .................................................................................................................... 11
Success story:................................................................................................................................ 12
References:.................................................................................................................................... 13

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Background:
The automotive industry is a wide range of companies and organizations involved in the design,
development, manufacturing, marketing, and selling of motor vehicles. It is one of the world's
most important economic sectors by revenue. The automotive industry does not include
industries dedicated to the maintenance of automobiles following delivery to the end-user, such
as automobile repair shops and motor fuel filling stations.
Introduction of Tesla motors:
The invention of the internal combustion engine in the 20th century changed the world. This
invention was one of the greatest single discoveries in human history. It gave opportunities to
human kind that did not exist before its discovery. New ways of transportations began to be
found, new industries, like the energy industry were formed, the world became industrialized for
the first time in human history and nothing has been the same since. Remarkably, the internal
combustion engine has been transformed by Tesla Motors into an engine that is far superior to
anything that any motor vehicle has had under its hood, ever. Period. Tesla Motors has created
the world’s first successful high performance, high luxury motor vehicle that runs entirely off of
an electrical motor.
Tesla Motors, Inc. is an American company that was founded in 2003 by a group of brilliant and
innovative Silicon Valley engineers. These engineers proved that electric vehicles could be
awesome substitute of the gasoline powered cars. Tesla not only designs, produces and markets
electric cars, but it also provides advance electric vehicle powertrain components to other

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automakers including Daimler and Toyota. (Tesla Motors) Tesla headquarters is located in Palo
Alto, California, and it has wholly-owned subsidiaries in North America, Europe and Asia. At
present, Tesla has more than 2000 employees. It has 31 stores and service locations spread
worldwide, and more stores are expected to be opened in the future. In 2012, Tesla opened its
first store in Toronto as the first step to enter the Canadian market (Tesla Motors).
Tesla aims to offer high-performance and electrically powered vehicle at a price affordable to the
average consumer. In 2008, Tesla first gained widespread attention by producing the Tesla
Roadster, a solely electric operated sports car. Tesla then expanded its technological advantage
to the luxury sedan market. Model S, a zero emission and sustainable luxury sedan, was then
introduced as their second vehicle to the electric vehicle in 2012. The third model named Tesla
model X is scheduled to be delivered to the market in 2014. Thus, Tesla is the only automaker
that sells zero-emission sports cars in serial production at present (Mangram, 2012).
Product and services:
Tesla Motor manufactures and sells not only electric cars but also electric vehicle powertrain
components, such as Lithium-ion battery packs. The Tesla Roadster is the first highway-capable
and all-electric sports vehicle produced by Tesla in 2008. “This high-performance BEV, with a
range of up to 250 miles, uses a proprietary lithium-ion Polymer battery pack that stores as much
as twice the energy” (Mangram, 2012). Furthermore, it is “capable of acceleration from zero to
60 mph in less than four seconds, with a self-limited top speed of 125 mph” (Mangram, 2012).
Tesla’s Model S sedan targets mid-level customers, with a lower price around $57,000 compared
to the Roadster. “Tesla’s longer-term product objectives include the development of a $30,000
sedan by 2015 (codename ‘BlueStar’), as well as a crossover/SUV-type vehicle (codename

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‘Model X).” (Mangram, 2012). Tesla is expected to deliver Model X by the end of 2014. “Model
X is designed from the ground up to blend the best of an SUV with the benefits of a minivan, as
only an electric car can” (Tesla Motor, 2014). The Company develops and creates lithium-ion
battery packs, electric motors, gearboxes and components for both its vehicles and for customers.
Financial performance:
Tesla Motors is a public company that trades on the NASDAQ stock exchange under the symbol
TSLA. From the figure below, it showed that Tesla had a net loss in 2012. It was until the first
quarter of 2013 that Tesla finally posted profits for the first time in its ten year history. Tesla
suffered significant losses and invested approximately $709.2 million of cash in operations
through December 31, 2012. They reported $201.9 million in cash and cash equivalents at the
end of year 2012 (Tesla, 2013).At the moment, company current revenue $US$4.04 billion
(2015).

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Customer groups and Competitors:
High end, environment conscious, luxury and sports car segment is the primary target of Tesla.
Tesla also plans to sell battery packs independently to home users for domestic use.
The customers are primarily from the upper middle class at this point of time. Tesla has a plan to
introduce low priced cars at around $30,000 in the next 5 years to target the lower income
segments as well.
Electric car makers such as Nissan Leaf are the main competitors of Tesla Motors.
Hybrid electric cars such as Toyota Prius and Chevrolet Volt are eating into the eco-friendly
vehicle market share of Tesla Motors
The as is strategy canvas:
The strategy canvas for automobile industry for Tesla’ competitors current offering as below:
Nissan Leaf Tradional premim cars

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Non customer analysis:
The dominant customer of electric car services is “upper higher income customers”. It is because
electric car gives higher price compared to the other land transportation services. Based on 3
tiers of non-customer analysis, there are 3 groups that currently not using electric car services but
they still a potential customers of rickshaw services in the future.
1st Tier: Executives group of customers:
Most of the executives has their own cars and prefer not to use public transport. Some of the
executives also using cars that provided by the company. The other reason of executives not
using electric car services is because of the high risk of accident for speed purpose.
2nd Tier: middle income customers:
The middle income customers are travelling by using their own cars and motorbikes. Some of
them also prefer to travel by using Taxi, other services. Majority of middle income class are
employees in the private sectors and government. . They rarely use electric car. Electric car is
considered as less convenient even thou it gives high price for the maintance.
3rd Tier: lower income group of customers:
Most of lower income citizens are prefer not to travel using taxi or services. It is due to the
comfortability and safety of the services. It is because lower price compared to the other land
transportation services.
.

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Buyer experience cycle and Buyer utility map:
purchase delivery use supplement maintenance disposal
Customer
productivity
Take a
week
simplicity Needto go
to nearest
store
driving
training
Require
mechanic’s
convenience Parking
proble
m
Frequently
repair
required
Very difficult
risks Price
misleadin
g
sometime
Fun and
image
Environmen
t friendliness
Affect the
environment
Eco system
Reconstruct industry boundaries:
Path 1: Look across Alternative Industry
Two popular land transportation that can be alternatives of electric car services is taxi and buses.
Taxi has a better service, comfortability and safety, but it offers higher price. Taxi usually have
better booking system compared to other services. The other alternatives is bus. Bus provides a
bit better service than taxi, because it also offers a very competitive price.

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Path 2: Look across Strategic Groups Within Industries
Middle to High Group:
• Taxi and Private Limousine
Taxi and private limousine usually gives excellent service and facilities. They will ensure about
the cleanliness of the car, politeness of the driver and also comfortability for the passenger.
Middle to High Class Group:
• Bus & Rickshaws
Bus and rickshaws are usually giving lower price compared than other land transportation
services.
Path 3: Look Across The Chain Of Buyers
Users are the people who directly use the car service. Some of imporant factors that matters for
user in using car service are economical factors, safety factors and convenient. They want lower
price with better comfortability, security, safety, fast and convenient services.
Path 4: Look across Complimentary Product and Service Offerings
Complimentary product that can be offer in car services are:
1. Before The Ride
• Application System
2. During The Ride
• Air Condition, Tracking System, and auto pilot

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3. after The Ride
• Easy System , auto parking system
Path 5: Look across Functional or Emotional Appeal to Buyers
Tesla put a lot of effort to gain better customer experience in using their services. Tesla has
improved the booking system, comfortability, facilities, services and safety get better
engagement with the customer. They want to make the customer happy and building the
emotional appeals to buyers.
Path 6: Look across Time
New ways of transportations began to be found, new industries, like the energy industry were
formed, the world became industrialized for the first time in human history and nothing has been
the same since.
Four action framwork:
The four action frame work describes as below:
Eliminate:
Gasoline usage, carbon emissions, messy maintenance like eliminating oil fitters, air filters,
power steering etc.
Reduce:
Tesla have to reduce service requirement, vehicle option, and battery charge time for creating
blue ocean strategy.

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Raise:
In order to getting path of Blue Ocean the Tesla motors have to raise its energy efficiency
compared to gasoline and hybrid vehicle. Also need driving range compared to other electric
vehicles and lastly, acceleration rate need to improve.
Create:
Tesla Company create Blue Ocean by a beautiful stylish, unique, and high-performance electric
sports car which is fun to drive. Also, built-in battery charging system that can plug into outlet.

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New strategy canvas:
Nissan Leaf Tesla motors Traditional premium cars

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Success story:
This automobile manufacturer that sells battery-charged electric cars created a blue ocean for
itself by designing a car that integrates the features of a green vehicle with that of a high-octane
driven premium sports vehicle. The company redefined the industry metrics with Tesla Roadster,
a lithium-ion battery fuelled car that clocked 0-60 mph in 4 seconds with zero emissions and a
sports-car look.
The Roadster hit the markets in 2008 and was the first highway-capable all-electric vehicle in
serial production for sale, which eliminated fossil fuel usage and related high maintenance costs.
Although electric cars occupy a small portion of the global automobile market, Tesla has
acquired substantial market share within this niche segment. Its subsequent car Model S was the
best-selling electric vehicle in the U.S. in the first half of 2015.
Tesla delivered a record high of 11,532 vehicles in the second quarter of 2015, representing a
year-over-year improvement of 52%. The company anticipates annual sales of 500,000 units by
2020. Thereafter, Tesla hopes to double its production every year for a few years to attain annual
sales of several million vehicles by 2025.

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References:
http://businessmodeladev.blogspot.my/2015/05/tesla-business-model.html
https://www.blueoceanstrategy.com/tools/buyer-utility-map/
http://usedcars.about.com/od/safetyratings/fl/2015-the-Year-of-the-Used-Electric-Vehicle.htm
https://hbr.org/2015/10/how-tesla-under-armour-and-sonos-do-branding
http://analysiscasestudy.blogspot.my/2014/10/blue-ocean-strategy-tesla-motors.html
http://www.frontierstrategy.com/tesla.html
https://carriehalle.wordpress.com/2009/08/08/tesla-motors-drives-blue-ocean-space-by-creating-
performance-sports-car-with-zero-emissions/
https://en.wikipedia.org/wiki/Tesla_Motors#Competition
http://studymoose.com/tesla-motors-2-essay
http://blog.ihs.com/q14-tesla-motors-a-case-study-in-disruptive-innovation