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tesla case study

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tesla case study

  1. 1. Tesla: A Comprehensive Strategic Analysis By: Herb Benson, Robert Korn, Samantha Nettnin, and Kevin Peterson
  2. 2. Tesla Motors (TSLA) History • Founded in 2003 by Elon Musk (Current CEO), JB Straubel (CTO), Martin Eberhard, Marc Tarpenning, and Ian Wright • Tesla Roadster • First manufactured product, offered from 2008-2012 • Model S • Currently only vehicle offered, 2012-present • Model X • SUV, expected to be sold in early 2016 • Model 3 • Expected to be offered in 2017 • Target Price: $35,000 • IPO: January 29, 2010, raised US$226 million • First American car company to go public since Ford (F) in 1956 • Turned first profit in Q1, 2013
  3. 3. Mission and Vision • Mission Statement: Tesla Motors designs and sells high-performance, highly efficient electric sports cars, with no compromises. Tesla Motors cars combine style, acceleration, and handling with advanced technologies that make them among the quickest and the most energy-efficient cars on the road. Courtesy www.teslamotorsinc.blogspot.com • Vision Statement: To “create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles.” Copyright | CENGAGE Learning | Strategic Management
  4. 4. General Environment Analysis Segment Elements Industry Effect Political/Legal • Regulations on Emissions and Safety Standards • National Traffic and Motor Vehicle Safety Act, 1966 • Energy Policy and Conservation Act, 1975 Neutral Technology • Higher demand for reliable, fuel efficient vehicles • Alternate fuel vehicles (Ethanol, Biodiesel, Hydrogen Fuel Cells) • Online shopping/research Positive Sociocultural • Luxury vs. Economy Vehicles • Power vs. Fuel Efficiency Positive
  5. 5. Industry Analysis Force Description Influence on Industry Threat of New Entrants • Mature Industry has reached Economies of Scale • High Initial Capital Requirements • Difficult Access to Distribution Channels Low Bargaining Power of Buyers • Private and Commercial buyers account for majority of revenue • Low Switching Costs • Buyers are unable to integrate backwards Moderately High Intensity of Rivalry Among Competitors • Gaining Market Share means Reducing Market Share of Competitor • Few Opportunities for Differentiation High Type of Firm Description Industry Attractiveness New Entrants High Startup Costs, Legal Fees, Intense Competition Very Unattractive Incumbent High Liquid Assets, Distribution, Holding Costs Moderate
  6. 6. Integrated SWOT Analysis • Strengths • Brand Equity • Product Quality • Eco-friendly Product Line • Enhanced Opportunities • Increase Market Share through High-Growth EV Industry • Limited Threats • Consumers Deterred due to “Range-Anxiety”
  7. 7. Competitor Analysis: Toyota Strategy Current Strategy Business Differentiation: The firm seeks the broadest possible market with distinctive offerings Corporate Related Linked: The firm operates five automotive brands (including Toyota, Lexus, and Scion) in addition to partnerships with other automotive and nonautomotive firms Cooperative Horizontal Complementary Strategic Alliance: Each partner is committed to combining their resources and skills to create value within the value chain International Transnational: the firm seeks to achieve both global efficiency and local responsiveness.
  8. 8. Competitor Analysis: General Motors Strategy Current Strategy Business Differentiation: The firm seeks the broadest possible market with distinctive offerings Corporate Related Linked: The firm operates thirteen brands (including Chevrolet, Buick and Cadillac) in addition to partnerships with other automotive and nonautomotive firms. Cooperative Horizontal Complementary Strategic Alliance: Each partner is committed to combining their resources and skills to create value within the value chain International Transnational: The firm seeks to achieve both global efficiency and local responsiveness.
  9. 9. Competitor Analysis: Conclusions • Strategic Competitive Advantages • Toyota • Market Power • Capital Resources • Just-in-Time (JIT) Inventory Management System • General Motors • Capital Resources • Diverse Product Offering • First to Offer New Technology • Chevrolet Volt, Wi-Fi in cars • Future Industry Assumptions • Culture shift towards energy efficient and renewable energy • Eco-Friendly companies will have more long term success • Future Major Objectives • “Greening” • Product Lines • Supply-Chain Networks • Operations • Marketing Messages
  10. 10. Current Strategies • Business Level: Focused Differentiation • Target early adopters with high income • Corporate Level: Related Constrained • Dominant business selling cars but also sells electric power train parts • Cooperative Level: Strategic Alliances • Panasonic, Toyota, Dailmer, Mercedes Benz, • International Level: Transnational • U.S, Asia, Australia, Europe, and Canada • Centered in California
  11. 11. Value Chain Comparison Toyota General Motors Marketing Superior Superior Distribution Inferior Inferior
  12. 12. Important Financial and Nonfinancial Data Tesla Toyota General Motors Earnings Per Share -$2.36 $10.67 $1.64 ROE -10.81% 14.8% 7.5% Net Income -$294,000,000 $19,891,000,000 $3,949,000,000 Long-Term Debt to Capitalization Ratio 55.5% 2.8% 18.4% Revenue $3,198,000,000 $256,585,000,000 $155,929,000,000 Important Nonfinancial Factor: Culture
  13. 13. VRIN Analysis: Batteries Valuable Yes Rare Yes Inimitable Yes Nonsubstitutable Yes Result: Sustainable Competitive Advantage
  14. 14. Strategic Issues • Small company • Limited capital • Niche market • Charger network • Range concerns • Lithium-ion batteries • Distribution network
  15. 15. Distribution Network
  16. 16. New Strategy Formulation Strategy Positives Negatives Response
  17. 17. New Strategy Formulation Strategy Positives Negatives Response New partnerships for supplying drive train components -Growth potential -Valuable expertise -Furthers EV adoption -Early-mover -Distribution network -Low risk -Limited Resources -Competitor conflicts -Lower Margins -Imitation
  18. 18. New Strategy Formulation Strategy Positives Negatives Response New partnerships for supplying drive train components -Growth potential -Valuable expertise -Furthers EV adoption -Early-mover -Distribution network -Low risk -Limited Resources -Competitor conflicts -Lower Margins -Imitation Enter mainstream automotive market -New customers -Furthers EV adoption -Limits partnerships -Lacking resources -Distribution network -Moderate risk -Pricing -Alliance relations -Litigation
  19. 19. New Strategy Formulation Strategy Positives Negatives Response New partnerships for supplying drive train components -Growth potential -Valuable expertise -Furthers EV adoption -Early-mover -Distribution network -Low risk -Limited Resources -Competitor conflicts -Lower Margins -Imitation Enter mainstream automotive market -New customers -Furthers EV adoption -Limits partnerships -Lacking resources -Distribution network -Moderate risk -Pricing -Alliance relations -Litigation Enter renewable energy market -Growing industry -Valuable IP -Green Energy -New Market -Lacking experience -Higher risk -Pricing -Contracts
  20. 20. New Partnerships for Drive Train Components Strategy Old New Business Differentiation Differentiation Corporate Related Constrained Related Constrained International Transnational Transnational Cooperative Strategic Alliances Strategic Alliances 7S Implementation Strategy Expansion of production facilities, Aggressive R&D Skills Acquire employees with mass production experience Staff Increase in all levels of staff Action Item Timeline New production facility – additional capital required 2-4 years Develop partnerships to supply drive-train components 1+ years
  21. 21. Enter Mainstream Automotive Market Strategy Old New Business Differentiation Differentiation Corporate Related Constrained Dominant Business International Transnational Transnational Cooperative Strategic Alliances Vertical Strategic Alliances 7S Implementation Strategy Expansion of production facilities Skills Acquire employees with mainstream automotive experience Staff Increase in low and mid-level staff Action Item Timeline New production facilities – additional capital required 4-5 years New distribution network 2+ years
  22. 22. Enter Renewable Energy Market Strategy Old New Business Differentiation Differentiation Corporate Related Constrained Related Linked International Transnational Transnational Cooperative Strategic Alliances Horizontal Strategic Alliances 7S Implementation Strategy Expansion of production facilities Skills Acquire employees with renewable energy experience Staff Increase in upper-level staff Action Item Timeline New production facilities – additional capital required 2-3 years New partnerships with similar companies 1+ years Consumer-level renewable energy 1-2 years Business-level renewable energy 3-4 years
  23. 23. New Strategy Choice Strategy Reason New partnerships for supplying drive train components  Smallest change from current strategy  Least risk  Large growth potential  Shortest time frame  Distribution network Enter mainstream automotive market x Distribution network x Moderate risk x Competitor response Enter renewable energy market x Largest change from current strategy x Unfamiliar with market x Competitor response x Contracts

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