Analyze Case Studies in 40 Characters

How to Analyze a Case Study
Included in these cases are questions to help you understand and
analyze the case. You may, however, be assigned other case
studies that do not have questions. This Hands-on Guide
presents a structured framework to help you analyze such cases
as well as the case studies in this text. Knowing how to analyze
a case will help you attack virtually any business problem.
A case study helps students learn by immersing them in a real-
world business scenario where they can act as problem-solvers
and decision-makers. The case presents facts about a particular
organization. Students are asked to analyze the case by focusing
on the most important facts and using this information to
determine the opportunities and problems facing that
organization. Students are then asked to identify alternative
courses of action to deal with the problems they identify.
A case study analysis must not merely summarize the case. It
should identify key issues and problems, outline and assess
alternative courses of action, and draw appropriate conclusions.
The case study analysis can be broken down into the following
steps:
1. Identify the most important facts surrounding the case.
2. Identify the key issue or issues.
3. Specify alternative courses of action.
4. Evaluate each course of action.
5. Recommend the best course of action.
Let's look at what each step involves.
1. Identify the most important facts surrounding the case.
Read the case several times to become familiar with the
information it contains. Pay attention to the information in any
accompanying exhibits, tables, or figures. Many case scenarios,
as in real life, present a great deal of detailed information.
Some of these facts are more relevant than others for problem
identification. One can assume the facts and figures in the case
are true, but statements, judgments, or decisions made by

individuals should be questioned. Underline and then list the
most important facts and figures that would help you define the
central problem or issue. If key facts and numbers are not
available, you can make assumptions, but these assumptions
should be reasonable given the situation. The "correctness" of
your conclusions may depend on the assumptions you make.
2. Identify the key issue or issues.
Use the facts provided by the case to identify the key issue or
issues facing the company you are studying. Many cases present
multiple issues or problems. Identify the most important and
separate them from more trivial issues. State the major problem
or challenge facing the company. You should be able to
describe the problem or challenge in one or two sentences. You
should be able to explain how this problem affects the strategy
or performance of the organization.
You will need to explain why the problem occurred. Does the
problem or challenge facing the company comes from a
changing environment, new opportunities, a declining market
share, or inefficient internal or external business processes? In
the case of information systems-related problems, you need to
pay special attention to the role of technology as well as the
behavior of the organization and its management.
Information system problems in the business world typically
present a combination of management, technology, and
organizational issues. When identifying the key issue or
problem, ask what kind of problem it is: Is it a management
problem, a technology problem, an organizational problem, or a
combination of these? What management, organizational, and
technology factors contributed to the problem?
· To determine if a problem stems from management factors,
consider whether managers are exerting appropriate leadership
over the organization and monitoring organizational
performance. Consider also the nature of management decision-
making: Do managers have sufficient information for
performing this role, or do they fail to take advantage of the
information that is available?

· To determine if a problem stems from technology factors,
examine any issues arising from the organization's information
technology infrastructure: its hardware, software, networks and
telecommunications infrastructure, and the management of data
in databases or traditional files. Consider also whether the
appropriate management and organizational assets are in place
to use this technology effectively.
· To determine the role of organizational factors, examine any
issues arising from the organization's structure, culture,
business processes, work groups, divisions among interest
groups, relationships with other organizations, as well as the
impact of changes in the organization's external environment-
changes in government regulations, economic conditions, or the
actions of competitors, customers, and suppliers.
You will have to decide which of these factors—or combination
of factors—is most important in explaining why the problem
occurred.
3. Specify alternative courses of action.
List the courses of action the company can take to solve its
problem or meet the challenge it faces. For information system-
related problems, do these alternatives require a new
information system or the modification of an existing system?
Are new technologies, business processes, organizational
structures, or management behavior required? What changes to
organizational processes would be required by each alternative?
What management policy would be required to implement each
alternative?
Remember, there is a difference between what an organization
"should do" and what that organization actually "can do". Some
solutions are too expensive or operationally difficult to
implement, and you should avoid solutions that are beyond the
organization's resources. Identify the constraints that will limit
the solutions available. Is each alternative executable given
these constraints?
4. Evaluate each course of action.
Evaluate each alternative using the facts and issues you

identified earlier, given the conditions and information
available. Identify the costs and benefits of each alternative.
Ask yourself "what would be the likely outcome of this course
of action? State the risks as well as the rewards associated with
each course of action. Is your recommendation feasible from a
technical, operational, and financial standpoint? Be sure to state
any assumptions on which you have based your decision.
5. Recommend the best course of action.
State your choice for the best course of action and provide a
detailed explanation of why you made this selection. You may
also want to provide an explanation of why other alternatives
were not selected. Your final recommendation should flow
logically from the rest of your case analysis and should clearly
specify what assumptions were used to shape your conclusion.
There is often no single "right" answer, and each option is
likely to have risks as well as rewards.
A Guide to
Case Analysis
I keep six honest serving men
(They taught me all I knew);
Their names are What and Why and When;
And How and Where and Who.
— Rudyard Kipling
A Guide to Case Analysis2
In most courses in strategic management, students use cases

about actual companies to practice strategic
analysis and to gain some experience in the tasks of crafting and
implementing strategy. A case sets forth, in
a factual manner, the events and organizational circumstances
surrounding a particular managerial situation.
It puts readers at the scene of the action and familiarizes them
with all the relevant circumstances. A case on
strategic management can concern a whole industry, a single
organization, or some part of an organization;
the organization involved can be either profi t seeking or not-
for-profi t. The essence of the student’s role
in case analysis is to diagnose and size up the situation
described in the case and then to recommend
appropriate action steps.
Why Use Cases to Practice Strategic Management?
A student of business with tact
Absorbed many answers he lacked.
But acquiring a job,
He said with a sob,
“How does one fi t answer to fact?”
The foregoing limerick was used some years ago by Professor
Charles Gragg to characterize the plight
of business students who had no exposure to cases.1 The facts
are that the mere act of listening to lectures
and sound advice about managing does little for anyone’s
management skills and that the accumulated
managerial wisdom cannot effectively be passed on by lectures
and assigned readings alone. If anything had
been learned about the practice of management, it is that a
storehouse of ready-made textbook answers does
not exist. Each managerial situation has unique aspects,
requiring its own diagnosis, judgment, and tailor-
made actions. Cases provide would-be managers with a valuable
way to practice wrestling with the actual

problems of actual managers in actual companies.
The case approach to strategic analysis is, fi rst and foremost,
an exercise in learning by doing. Because cases
provide you with detailed information about conditions and
problems of different industries and companies,
your task of analyzing company after company and situation
after situation has the twin benefi t of boosting
your analytical skills and exposing you to the ways companies
and mana gers actually do things. Most college
students have limited managerial backgrounds and only frag
mented knowledge about companies and real-life
strategic situations. Cases help substitute for on-the-job
experience by (1) giving you broader exposure to a
variety of industries, organizations, and strategic problems; (2)
forcing you to assume a managerial role (as
opposed to that of just an onlooker); (3) providing a test of how
to apply the tools and techniques of strategic
management; and (4) asking you to come up with pragmatic
managerial action plans to deal with the issues
at hand.
Objectives of Case Analysis
Using cases to learn about the practice of strategic management
is a powerful way for you to accom plish
fi ve things:2
1. Increase your understanding of what mana gers should and
should not do in guiding a business to
success.
2. Build your skills in sizing up company resource strengths and
weaknesses and in conducting strategic
analysis in a variety of industries and competitive situations.

3A Guide to Case Analysis
3. Get valuable practice in identifying strategic issues that need
to be addressed, evaluating strategic
alternatives, and formulating workable plans of action.
4. Enhance your sense of business judgment, as opposed to
uncritically accepting the authoritative
crutch of the professor or “back-of-the-book” answers.
5. Gaining in-depth exposure to different industries and
companies, thereby acquiring something close
to actual business experience.
If you understand that these are the objectives of case analysis,
you are less likely to be consumed with
curiosity about “the answer to the case.” Students who have
grown comfortable with and accustomed to
textbook statements of fact and defi nitive lecture notes are
often frustrated when discussions about a case do
not produce concrete answers. Usually, case discussions
produce good arguments for more than one course
of action. Differences of opinion nearly always exist. Thus,
should a class discussion conclude without
a strong, unambiguous consensus on what do to, don’t grumble
too much when you are not told what
the answer is or what the company actually did. Just remember
that in the business world answers don’t
come in conclusive black-and-white terms. There are nearly
always several feasible courses of action and
approaches, each of which may work out satisfactorily.
Moreover, in the business world, when one elects a
particular course of action, there is no peeking at the back of a
book to see if you have chosen the best thing
to do and no one to turn to for a provably correct answer. The

best test of whether management action is
“right” or “wrong” is results. If the results of an action turn out
to be “good,” the decision to take it may be
presumed “right.” If not, then the action chosen was “wrong” in
the sense that it didn’t work out.
Hence, the important thing for you to understand about
analyzing cases is that the managerial exercise
of identifying, diagnosing, and recommending is aimed at
building your skills of business judgment.
Discovering what the company actually did is no more than
frosting on the cake—the actions that company
managers actually took may or may not be “right” or best
(unless there is accompanying evidence that the
results of their actions were highly positive.
The point is this: The purpose of giving you a case assignment
is not to cause you to run to the library or
surf the Internet to discover what the company actually did but,
rather, to enhance your skills in sizing up
situations and developing your managerial judgment about what
needs to be done and how to do it. The
aim of case analysis is for you to become actively engaged in
diagnosing the business issues and managerial
problems posed in the case, to propose workable solutions, and
to explain and defend your assessments—
this is how cases provide you with meaningful practice at being
a manager.
Preparing a Case for Class Discussion
If this is your fi rst experience with the case method, you may
have to reorient your study habits. Unlike
lecture courses where you can get by without preparing
intensively for each class and where you have
latitude to work assigned readings and reviews of lecture notes
into your schedule, a case assignment

requires conscientious preparation before class. You will not get
much out of hearing the class discuss a case
you haven’t read, and you certainly won’t be able to contribute
anything yourself to the discussion. What
you have got to do to get ready for class discussion of a case is
to study the case, refl ect carefully on the
situation presented, and develop some reasoned thoughts. Your
goal in preparing the case should be to end
up with what you think is a sound, well-supported analysis of
the situation and a sound, defensible set of
recommendations about which managerial actions need to be
taken. The Case-TUTOR soft ware downloads
that accompany the text and that are available on this same Web
site will assist you in preparing the cases—
the Case-TUTOR fi les contain a set of study questions for each
case and step-by-step tutorials to walk you
through the process of analyzing and developing reasonable
recommendations.
To prepare a case for class discussion, we suggest the following
approach:
1. Skim the case rather quickly to get an overview of the
situation it presents. This quick overview should
give you the general fl avor of the situation and indicate the
kinds of issues and problems that you will
need to wrestle with. If your instructor has provided you with
study questions for the case, now is the
time to read them carefully.
2. Read the case thoroughly to digest the facts and
circumstances. On this reading, try to gain full

command of the situation presented in the case. Begin to
develop some tentative answers to the study
questions your instructor has provided or that are provided in
the Case-TUTOR software package which
you can download at the Web site for the text. If your instructor
has elected not to give you assignment
questions or has elected not to use Case-TUTOR, then start
forming your own picture of the overall
situation being described.
3. Carefully review all the information presented in the
exhibits. Often, there is an important story in the
numbers contained in the exhibits. Expect the information in the
case exhibits to be crucial enough to
materially affect your diagnosis of the situation.
4. Decide what the strategic issues are. Until you have identifi
ed the strategic issues and problems in the
case, you don’t know what to analyze, which tools and
analytical techniques are called for, or otherwise
how to proceed. At times the strategic issues are clear—either
being stated in the case or else obvious from
reading the case. At other times you will have to dig them out
from all the information given; if so, the
study questions and the case preparation exercises provided in
the Case-TUTOR software will guide you.
5. Start your analysis of the issues with some number
crunching. A big majority of strategy cases call
for some kind of number crunching—calculating assorted fi
nancial ratios to check out the company’s
fi nancial condition and recent performance, calculating growth
rates of sales or profi ts or unit volume,
checking out profi t margins and the makeup of the cost
structure, and understanding whatever revenue-
cost-profi t relationships are present. See Table 1 for a summary

of key fi nancial ratios, how they are
calculated, and what they show.
6. Apply the concepts and techniques of strategic analysis you
have been studying. Strategic analysis is
not just a collection of opinions; rather, it entails applying the
concepts and analytical tools described
in Chapters 1 through 13 to cut beneath the surface and produce
sharp insight and understanding. Every
case assigned is strategy related and presents you with an
opportunity to usefully apply what you have
learned. Your instructor is looking for you to demonstrate that
you know how and when to use the
material presented in the text chapters. The case preparation
guides on Case-TUTOR will point you
toward the proper analytical tools needed to analyze the case
situation.
7. Check out confl icting opinions and make some judgments
about the validity of all the data and
information provided. Many times cases report views and
contradictory opinions (after all, people don’t
always agree on things, and dif fer ent people see the same
things in different ways). Forcing you to
evaluate the data and information presented in the case helps
you develop your powers of inference
and judgment. Asking you to resolve confl icting information
“comes with the territory” because a great
many managerial situations entail opposing points of view,
confl icting trends, and sketchy information.
8. Support your diagnosis and opinions with reasons and
evidence. The most important things to prepare
for are your answers to the question “Why?” For instance, if
after studying the case you are of the opinion
that the company’s managers are doing a poor job, then it is

your answer to “Why?” that establishes just
how good your analysis of the situation is. If your instructor has
provided you with specifi c study questions
for the case or if you are attempting to complete any one of the
case preparation exercises on Case-TUTOR,
by all means prepare answers that include all the reasons and
number-crunching evidence you can muster
to support your diagnosis. Work through the case preparation
exercises on Case-TUTOR conscientiously or,
if you are using study questions provided by the instructor,
generate at least two pages of notes!
9. Develop an appropriate action plan and set of
recommendations. Diagnosis divorced from corrective
action is sterile. The test of a manager is always to convert
sound analysis into sound actions—actions
that will produce the desired results. Hence, the fi nal and most
telling step in preparing a case is to
develop an action agenda for management that lays out a set of
specifi c recommendations on what to do.
Bear in mind that proposing realistic, workable solutions is far
preferable to casually tossing out off-the-
top-of-your-head suggestions. Be prepared to argue why your
recommendations are more attractive than
other courses of action that are open. You’ll fi nd the case
preparation exercises on Case-TUTOR helpful
in performing this step, too.
Table 1
Key Financial Ratios: How to Calculate Them and

What They Mean
Ratio How Calculated What It Shows
Profi tability ratios
1. Gross profi t margin Sales – Cost of goods sold
Sales
Shows the percentage of revenues available to cover
operating expenses and yield a profi t. Higher is
better and the trend should be upward.
2. Operating profi t margin
(or return on sales)
Sales – Operating expenses
Sales
or
Operating income
Sales
Shows the profi tability of current operations without
regard to interest charges and income taxes. Higher
is better and the trend should be upward.
3. Net profi t margin (or net
return on sales)
Profi ts after taxes
Sales
Shows after tax profi ts per dollar of sales. Higher is
better and the trend should be upward.
4. Return on total assets Profi ts after taxes + Interest
Total assets
A measure of the return on total investment in the

enterprise. Interest is added to after tax profi ts to
form the numerator since total assets are fi nanced by
creditors as well as by stockholders. Higher is better
and the trend should be upward.
5. Return on stockholders’
equity
Profi ts after taxes
Total stockholders’ equity
Shows the return stockholders are earning on their
investment in the enterprise. A return in the 12-15%
range is “average”, and the trend should be upward.
6. Earnings per share Profi ts after taxes
Number of shares of common stock
outstanding
Shows the earnings for each share of common stock
outstanding. The trend should be upward, and the
bigger the annual percentage gains, the better.
Liquidity Ratios
1. Current ratio Current assets – Current liabilities Shows a fi
rm’s ability to pay current liabilities using
assets that can be converted to cash in the near term.
Ratio should defi nitely be higher than 1.0; ratios of 2
or higher are better still.
2. Quick ratio (or acid-test
ratio)
Current assets – Inventory
Current liabilities

Shows a fi rm’s ability to pay current liabilities
without relying on the sale of its inventories.
3. Working capital Current assets – current liabilities Bigger
amounts are better because the company
has more internal funds available to (1) pay its
current liabilities on a timely basis and (2) fi nance
inventory expansion, additional accounts receivable,
and a larger base of operations without resorting to
borrowing or raising more equity capital.
Leverage Ratios
1. Debt-to-assets ratio Total debt
Total assets
Measures the extent to which borrowed funds have
been used to fi nance the fi rm’s operations. Low
fractions or ratios are better—high fractions indicate
overuse of debt and greater risk of bankruptcy.
2. Debt-to-equity ratio Total debt
Should usually be less than 1.0. High ratios
(especially above 1.0) signal excessive debt, lower
creditworthiness, and weaker balance sheet strength.
3. Long-term debt-to-
equity ratio
Long-term debt

Shows the balance between debt and equity in
the fi rm’s long-term capital structure. Low ratios
indicate greater capacity to borrow additional funds
if needed.
4. Times-interest-earned (or
coverage) ratio
Operating income
Interest expenses
Measures the ability to pay annual interest charges.
Lenders usually insist on a minimum ratio of 2.0, but
ratios above 3.0 signal better creditworthiness.
Activity Ratios
1. Days of inventory Inventory
Cost of goods sold ÷ 365
Measures inventory management effi ciency. Fewer
days of inventory are usually better.
2. Inventory turnover Cost of goods sold
Inventory
Measures the number of inventory turns per year.
Higher is better.
3. Average collection
period
Accounts receivable
Total sales ÷ 365
or

Accounts receivable
Average daily sales
Indicates the average length of time the fi rm must
wait after making a sale to receive cash payment. A
shorter collection time is better.
Other Important Measures of Financial Performance
1. Dividend yield on
common stock
Annual dividends per share
Current market price per share
A measure of the return that shareholders receive in
the form of dividends. A “typical” dividend yield is
2-3%. The dividend yield for fast-growth companies
is often below 1% (maybe even 0); the dividend
yield for slow-growth companies can run 4-5%.
2. Price-earnings ratio Current market price per share
Earnings per share
P-e ratios above 20 indicate strong investor
confi dence in a fi rm’s outlook and earnings growth;
fi rms whose future earnings are at risk or likely to
grow slowly typically have ratios below 12.
3. Dividend payout ratio Annual dividends per share
Earnings per share
Indicates the percentage of after-tax profi ts paid out
as dividends.
4. Internal cash fl ow After tax profi ts + Depreciation A quick

and rough estimate of the cash a company’s
business is generating after payment of operating
expenses, interest, and taxes. Such amounts can
be used for dividend payments or funding capital
expenditures.
Table 1 continued
As long as you are conscientious in preparing your analysis and
recommendations, and have ample reasons,
evidence, and arguments to support your views, you shouldn’t
fret unduly about whether what you’ve
prepared is “the right answer” to the case. In case analysis there
is rarely just one right approach or set of
recommendations. Managing companies and crafting and
executing strategies are not such exact sciences
that there exists a single provably correct analysis and action
plan for each strategic situation. Of course,
some analyses and action plans are better than others; but, in
truth, there’s nearly always more than one good
way to analyze a situation and more than one good plan of
action. So, if you have carefully prepared the case
by either completing one of the Case-TUTOR case preparation
exercises or developing your own answers to
the assignment questions for the case, don’t lose confi dence in
the correctness of your work and judgment.
Participating in Class Discussion of a Case
Classroom discussions of cases are sharply different from
attending a lecture class. In a case class students
do most of the talking. The instructor’s role is to solicit student
participation, keep the discussion on track,

ask “Why?” often, offer alternative views, play the devil’s
advocate (if no students jump in to offer opposing
views), and otherwise lead the discussion. The students in the
class carry the burden for analyzing the
situation and for being prepared to present and defend their
diagnoses and recommendations. Expect a
classroom environment, therefore, that calls for your size-up of
the situation, your analysis, what actions
you would take, and why you would take them. Do not be
dismayed if, as the class discussion unfolds, some
insightful things are said by your fellow classmates that you did
not think of. It is normal for views and
analyses to differ and for the comments of others in the class to
expand your own thinking about the case.
As the old adage goes, “Two heads are better than one.” So it is
to be expected that the class as a whole will
do a more penetrating and searching job of case analysis than
will any one person working alone. This is
the power of group effort, and its virtues are that it will help
you see more analytical applications, let you
test your analyses and judgments against those of your peers,
and force you to wrestle with differences of
opinion and approaches.
To orient you to the classroom environment on the days a case
discussion is scheduled, we compiled the
following list of things to expect:
1. Expect the instructor to assume the role of extensive
questioner and listener.
2. Expect students to do most of the talking. The case method
enlists a maximum of individual participa–
tion in class discussion. It is not enough to be present as a silent
observer; if every student took this
approach, there would be no discussion. (Thus, expect a portion

of your grade to be based on your
participation in case discussions.)
3. Be prepared for the instructor to probe for reasons and
supporting analysis.
4. Expect and tolerate challenges to the views expressed. All
students have to be willing to submit their
conclusions for scrutiny and rebuttal. Each student needs to
learn to state his or her views without
fear of disapproval and to overcome the hesitation of speaking
out. Learning respect for the views
and approaches of others is an integral part of case analysis
exercises. But there are times when it
is OK to swim against the tide of majority opinion. In the
practice of management, there is always
room for originality and unorthodox approaches. So while
discussion of a case is a group process,
there is no compulsion for you or anyone else to cave in and
conform to group opinions and group
consensus.
5. Don’t be surprised if you change your mind about some
things as the discussion unfolds. Be alert to
how these changes affect your analysis and recommendations
(in the event you get called on).
6. Expect to learn a lot in class as the discussion of a case
progresses; furthermore, you will fi nd that
the cases build on one another—what you learn in one case
helps prepare you for the next case
discussion.

There are several things you can do on your own to be good and
look good as a participant in class
discussions:
Although you should do your own independent work and
independent thinking, don’t hesitate before (and
after) class to discuss the case with other students. In real life,
managers often discuss the company’s
problems and situation with other people to refi ne their own
thinking.
• In participating in the discussion, make a conscious effort to
contribute, rather than just talk. There
is a big difference between saying something that builds the
discussion and offering a long-winded,
off-the-cuff remark that leaves the class wondering what the
point was.
• Avoid the use of “I think,” “I believe,” and “I feel”; instead,
say, “My analysis shows —” and “The
company should do ______.because ______.” Always give
supporting reasons and evidence for your
views; then your instructor won't have to ask you “Why?” every
time you make a comment.
• In making your points, assume that everyone has read the case
and knows what it says; avoid reciting
and rehashing information in the case—instead, use the data and
information to explain your
assessment of the situation and to support your position.
• Bring the printouts of the work you’ve done on Case-TUTOR
or the notes you’ve prepared (usually
two or three pages’ worth) to class and rely on them extensively
when you speak. There’s no way

you can remember everything off the top of your head—
especially the results of your number
crunching. To reel off the numbers or to present all fi ve
reasons why, instead of one, you will need
good notes. When you have prepared thoughtful answers to the
study questions and use them as
the basis for your comments, everybody in the room will know
you are well prepared, and your
contribution to the case discussion will stand out.
Preparing a Written Case Analysis
Preparing a written case analysis is much like preparing a case
for class discussion, except that your analysis
must be more complete and put in report form. Unfortunately,
though, there is no ironclad procedure for
doing a written case analysis. All we can offer are some general
guidelines and words of wisdom—this
is because company situations and management problems are so
diverse that no one mechanical way to
approach a written case assignment always works.
Your instructor may assign you a specifi c topic around which
to prepare your written report. Or, alternatively,
you may be asked to do a comprehensive written case analysis,
where the expectation is that you will
(1) identify all the pertinent issues that management needs to
address, (2) perform whatever analysis and
evaluation is appropriate, and (3) propose an action plan and set
of recommendations addressing the issues
you have identifi ed. In going through the exercise of identify,
evaluate, and recommend, keep the following
pointers in mind.3
Identifi cation It is essential early on in your paper that you
provide a sharply focused diagnosis of
strategic issues and key problems and that you demonstrate a

good grasp of the company’s present situation.
Make sure you can identify the fi rm’s strategy (use the
concepts and tools in Chapters 1–8 as diagnostic aids)
and that you can pinpoint whatever strategy implementation
issues may exist (again, consult the material in
Chapters 9–11 for diagnostic help). Consult the key points we
have provided at the end of each chapter for
further diagnostic suggestions. Review the study questions for
the case on Case-TUTOR. Consider beginning
your paper with an overview of the company’s situation, its
strategy, and the signifi cant problems and issues
that confront management. State problems/issues as clearly and
precisely as you can. Unless it is necessary
to do so for emphasis, avoid recounting facts and history about
the company (assume your professor has
read the case and is familiar with the organization).
Analysis and Evaluation This is usually the hardest part of the
report. Analysis is hard work! Check out the
fi rm’s fi nancial ratios, its profi t margins and rates of return,
and its capital structure, and decide how strong
the fi rm is fi nancially. Table 1 contains a summary of various
fi nancial ratios and how they are calculated.
Use it to assist in your fi nancial diagnosis. Similarly, look at
marketing, production, managerial competence,
and other factors underlying the organization’s strategic
successes and failures. Decide whether the fi rm has
valuable resource strengths and competencies and, if so,
whether it is capitalizing on them.
Check to see if the fi rm’s strategy is producing satisfactory

results and determine the reasons why or why
not. Probe the nature and strength of the competitive forces
confronting the company. Decide whether and
why the fi rm’s competitive position is getting stronger or
weaker. Use the tools and concepts you have
learned about to perform whatever analysis and evaluation is
appropriate. Work through the case preparation
exercise on Case-TUTOR if one is available for the case you’ve
been assigned.
In writing your analysis and evaluation, bear in mind four
things:
1. You are obliged to offer analysis and evidence to back up
your conclusions. Do not rely on unsupported
opinions, over-generalizations, and platitudes as a substitute for
tight, logical argument backed up
with facts and fi gures.
2. If your analysis involves some important quantitative
calculations, use tables and charts to present
the calculations clearly and effi ciently. Don’t just tack the
exhibits on at the end of your report and
let the reader fi gure out what they mean and why they were
included. Instead, in the body of your
report cite some of the key numbers, highlight the conclusions
to be drawn from the exhibits, and
refer the reader to your charts and exhibits for more details.
3. Demonstrate that you have command of the strategic concepts
and analytical tools to which you have
been exposed. Use them in your report.
4. Your interpretation of the evidence should be reasonable and
objective. Be wary of preparing a
one-sided argument that omits all aspects not favorable to your

conclusions. Likewise, try not to
exaggerate or overdramatize. Endeavor to inject balance into
your analysis and to avoid emotional
rhetoric. Strike phrases such as “I think,” “I feel,” and “I
believe” when you edit your fi rst draft and
write in “My analysis shows,” instead.
Recommendations The fi nal section of the written case
analysis should consist of a set of defi nite
recommendations and a plan of action. Your set of
recommendations should address all of the problems/
issues you identifi ed and analyzed. If the recommendations
come as a surprise or do not follow logically
from the analysis, the effect is to weaken greatly your
suggestions of what to do. Obviously, your
recommendations for actions should offer a reasonable prospect
of success. High-risk, bet-the-company
recommendations should be made with caution. State how your
recommendations will solve the problems
you identifi ed. Be sure the company is fi nancially able to carry
out what you recommend; also check to see
if your recommendations are workable in terms of acceptance
by the persons involved, the organization’s
competence to implement them, and prevailing market and
environmental constraints. Try not to hedge or
weasel on the actions you believe should be taken.
By all means state your recommendations in suffi cient detail to
be meaningful—get down to some defi nite
nitty-gritty specifi cs. Avoid such unhelpful statements as “the
organization should do more planning” or
“the company should be more aggressive in marketing its

product.” For instance, if you determine that
“the fi rm should improve its market position,” then you need to
set forth exactly how you think this should
be done. Offer a defi nite agenda for action, stipulating a
timetable and sequence for initiating actions,
indicating priorities, and suggesting who should be responsible
for doing what.
In proposing an action plan, remember there is a great deal of
difference between, on the one hand, being
responsible for a decision that may be costly if it proves in error
and, on the other hand, casually suggesting
courses of action that might be taken when you do not have to
bear the responsibility for any of the
consequences. A good rule to follow in making your
recommendations is: Avoid recommending anything you
would not yourself be willing to do if you were in
management’s shoes. The importance of learning to develop
good managerial judgment is indicated by the fact that, even
though the same information and operating data
may be available to every manager or executive in an
organization, the quality of the judgments about what
the information means and which actions need to be taken does
vary from person to person.4
It goes without saying that your report should be well organized
and well written. Great ideas amount to
little unless others can be convinced of their merit—this takes
tight logic, the presentation of convincing
evidence, and persuasively written arguments.
Preparing an Oral Presentation
During the course of your business career it is very likely that
you will be called upon to prepare and give a
number of oral presentations. For this reason, it is common in
courses of this nature to assign cases for oral

presentation to the whole class. Such assignments give you an
opportunity to hone your presentation skills.
The preparation of an oral presentation has much in common
with that of a written case analysis. Both
require identifi cation of the strategic issues and problems
confronting the company, analysis of industry
conditions and the company’s situation, and the development of
a thorough, well-thought out action plan.
The substance of your analysis and quality of your
recommendations in an oral presentation should be no
different than in a written report. As with a written assignment,
you’ll need to demonstrate command of the
relevant strategic concepts and tools of analysis and your
recommendations should contain suffi cient detail
to provide clear direction for management. The main difference
between an oral presentation and a written
case is in the delivery format. Oral presentations rely
principally on verbalizing your diagnosis, analysis,
and recommendations and visually enhancing and supporting
your oral discussion with colorful, snappy
slides (usually created on Microsoft’s PowerPoint software).
Typically, oral presentations involve group assignments. Your
instructor will provide the details of the
assignment—how work should be delegated among the group
members and how the presentation should
be conducted. Some instructors prefer that presentations begin
with issue identifi cation, followed by
analysis of the industry and company situation analysis, and
conclude with a recommended action plan to
improve company performance. Other instructors prefer that the
presenters assume that the class has a good
understanding of the external industry environment and the
company’s competitive position and expect
the presentation to be strongly focused on the group’s

recommended action plan and supporting analysis
and arguments. The latter approach requires cutting straight to
the heart of the case and supporting each
recommendation with detailed analysis and persuasive
reasoning. Still other instructors may give you the
latitude to structure your presentation however you and your
group members see fi t.
Regardless of the style preferred by your instructor, you should
take great care in preparing for the
presentation. A good set of slides with good content and good
visual appeal is essential to a fi rst-rate
presentation. Take some care to choose a nice slide design, font
size and style, and color scheme. We
suggest including slides covering each of the following areas:
• An opening slide covering the “title” of the presentation and
names of the presenters.
• A slide showing an outline of the presentation (perhaps with
presenters’ names by each topic).
• One or more slides showing the key problems and strategic
issues that management needs to
address.
• A series of slides covering your analysis of the company’s
situation.
• A series of slides containing your recommendations and the
supporting arguments and reasoning
for each recommendation—one slide for each recommendation
and the associated reasoning
has a lot of merit.

You and your team members should carefully plan and rehearse
your slide show to maximize impact and
minimize distractions. The slide show should include all of the
pizzazz necessary to garner the attention of
the audience, but not so much that it distracts from the content
of what group members are saying to the
class. You should remember that the role of slides is to help you
communicate your points to the audience.
Too many graphics, images, colors, and transitions may divert
the audience’s attention from what is being
said or disrupt the fl ow of the presentation. Keep in mind that
visually dazzling slides rarely hide a shallow
or superfi cial or otherwise fl awed case analysis from a
perceptive audience. Most instructors will tell you
that fi rst-rate slides will defi nitely enhance a well-delivered
presentation but that impressive visual aids, if
accompanied by weak analysis and poor oral delivery, still adds
up to a substandard presentation.
Researching Companies and Industries via the Internet
and Online Data Services
Very likely, there will be occasions when you need to get
additional information about some of the assigned
cases, perhaps because your instructor has asked you to do
further research on the industry or company or
because you are simply curious about what has happened to the
company since the case was written. These
days it is relatively easy to run down recent industry
developments and to fi nd out whether a company’s
strategic and fi nancial situation has improved, deteriorated, or
changed little since the conclusion of the
case. The amount of information about companies and industries
available on the Internet and through
online data services is formidable and expanding rapidly.

It is a fairly simple matter to go to company Web sites, click on
the investor information offerings and
press release fi les, and get quickly to useful information. Most
company Web sites allow you to view or
print the company’s quarterly and annual reports, its 10K and
10Q fi lings with the Securities and Exchange
Commission, and various company press releases of interest.
Frequently, a company’s Web site will also
provide information about its mission and vision statements,
values statements, codes of ethics, and
strategy information, as well as charts of the company’s stock
price. The company’s recent press releases
typically contain reliable information about what of interest has
been going on—new product introductions,
recent alliances and partnership agreements, recent acquisitions,
summaries of the latest fi nancial results,
tidbits about the company’s strategy, guidance about future
revenues and earnings, and other late-breaking
company developments. Some company Web pages also include
links to the home pages of industry trade
associations where you can fi nd information about industry
size, growth, recent industry news, statistical
trends, and future outlook. Thus, an early step in researching a
company on the Internet is always to go to
its Web site and see what’s available.
Online Data Services
Lexis-Nexis, Bloomberg Financial News Services, and other on-
line subscription services available in many
university libraries provide access to a wide array of business
reference material. For example, the web-

based Lexis-Nexis Academic Universe contains business news
articles from general news sources, business
publications, and industry trade publications. Broadcast
transcripts from fi nancial news programs are also
available through Lexis-Nexis, as are full-text 10-Ks, 10-Qs,
annual reports, and company profi les for more
than 11,000 U.S. and international companies. Your business
librarian should be able to direct you to the
resources available through your library that will aid you in
your research.
Public and Subscription Websites with Good Information
Plainly, you can use a search engine such as Google or Yahoo!
or MSN to fi nd the latest news on a company
or articles written by reporters that have appeared in the
business media. These can be very valuable in
running down information about recent company developments.
However, keep in mind that the information
retrieved by a search engine is “unfi ltered” and may include
sources that are not reliable or that contain
inaccurate or misleading information. Be wary of information
provided by authors who are unaffi liated with
reputable organizations or publications and articles that were
published in off-beat sources or on Web sites
with an agenda. Be especially careful in relying on the accuracy
of information you fi nd posted on various
bulletin boards. Articles covering a company or issue should be
copyrighted or published by a reputable
source. If you are turning in a paper containing information
gathered from the Internet, you should cite your
sources (providing the Internet address and date visited); it is
also wise to print Web pages for your research
fi le (some Web pages are updated frequently).
The Wall Street Journal, Business Week, Forbes, Barron’s, and

Fortune are all good sources of articles on
companies. The Wall Street Journal Interactive Edition contains
the same information that is available daily
in its print version of the paper, but also maintains a searchable
database of all Wall Street Journal articles
published during the past few years. Fortune and Business Week
also make the content of the most current
issue available online to subscribers as well as provide archives
sections that allow you to search for articles
related to a particular keyword that were published during the
past few years.
The following Websites are particularly good locations for
company and industry information:
Securities and Exchange Commission EDGAR
database (contains company 10-Ks, 10-Qs, etc.)
http://www.sec.gov/cgi-bin/srch-edgar
CNN Money http://money.cnn.com
Hoover’s Online http://hoovers.com
The Wall Street Journal Interactive Edition http://www.wsj.com
Business Week http://www.businessweek.com
Fortune http://www.fortune.com
MSN Money Central http://moneycentral.msn.com
Yahoo! Finance http://fi nance.yahoo.com/
Some of these Internet sources require subscriptions in order to
access their entire databases.
Learning Comes Quickly With a modest investment of time,
you will learn how to use Internet sources
and search engines to run down information on companies and
industries quickly and effi ciently. And it
is a skill that will serve you well into the future. Once you
become familiar with the data available at the
different Web sites mentioned above and with using a search

engine, you will know where to go to look for
the particular information that you want. Search engines nearly
always turn up too many information sources
that match your request rather than two few; the trick is to learn
to zero in on those most relevant to what you
are looking for. Like most things, once you get a little
experience under your belt on how to do company and
industry research on the Internet, you will fi nd that you can
readily fi nd the information you need.
Th e Ten Commandments of Case Analysis
As a way of summarizing our suggestions about how to
approach the task of case analysis, we have compiled
what we like to call “The Ten Commandments of Case
Analysis.” They are shown in Table 2. If you observe
all or even most of these commandments faithfully as you
prepare a case either for class discussion or for a
written report, your chances of doing a good job on the assigned
cases will be much improved. Hang in there,
give it your best shot, and have some fun exploring what the
real world of strategic management is all about.
Table 2
The Ten Commandments of Case Analysis
To be observed in written reports and oral presentations, and
while participating in class discussions.
1. Go through the case twice, once for a quick overview and
once to gain full command of the facts;

then take care to explore the information in every one of the
case exhibits.
2. Make a complete list of the problems and issues that the
company’s management needs to
address.
3. Be thorough in your analysis of the company’s situation
(either work through the case preparation
exercises on Case-TUTOR or make a minimum of 1 to 2 pages
of notes detailing your diagnosis).
4. Look for opportunities to apply the concepts and analytical
tools in the text chapters—all of the
cases in the book have very defi nite ties to the material in one
or more of the text chapters!!!!
5. Do enough number crunching to discover the story told by the
data presented in the case. (To help
you comply with this commandment, consult Table 1 in this
section to guide your probing of a
company’s fi nancial condition and fi nancial performance.)
6. Support any and all off-the-cuff opinions with well-reasoned
arguments and numerical evidence;
don’t stop until you can purge “I think” and “I feel” from your
assessment and, instead, are able
to rely completely on “My analysis shows.”
7. Prioritize your recommendations and make sure they can be
carried out in an acceptable time
frame with the available resources.
8. Support each recommendation with persuasive argument and
reasons as to why it makes sense
and should result in improved company performance.

9. Review your recommended action plan to see if it addresses
all of the problems and issues you
identifi ed—any set of recommendations that does not address
all of the issues and problems you
identifi ed is incomplete and insuffi cient.
10. Avoid recommending any course of action that could have
disastrous consequences if it doesn’t
work out as planned; therefore, be as alert to the downside risks
of your recommendations as you
are to their upside potential and appeal.
1 Charles I. Gragg, “Because Wisdom Can’t Be Told,” in The
Case Method at the Harvard Business School,
ed. M. P. McNair (New York: McGraw-Hill, 1954), p. 11.
2 Ibid., pp. 12–14; and D. R. Schoen and Philip A. Sprague,
“What Is the Case Method?” in The Case
Method at the Harvard Business School, ed. M. P. McNair, pp.
78–79.
3 For some additional ideas and viewpoints, you may wish to
consult Thomas J. Raymond, “Written
Analysis of Cases,” in The Case Method at the Harvard
Business School, ed. M. P. McNair, pp. 139–63.
Raymond’s article includes an actual case, a sample analysis of
the case, and a sample of a student’s
written report on the case.
4 Gragg, “Because Wisdom Can’t Be Told,” p. 10.

Endnotes
tho75109_case18_C191-C215.indd C-191 12/18/18 10:49 AM
Tesla Motors in 2018: Will the New
Model 3 Save the Company?
Arthur A. Thompson
The University of Alabama
Tesla Motors began assembling the first mod-els of its new
“affordably-priced” entry-level Model 3 electric car in May
2017 and delivered
the first units the last week of July, with a goal of
gradually ramping up production to a total of 1,500
units by the end of September. The first production
vehicles, delivered to employees who had placed pre-
production reservations over a year earlier, were pre-
configured with rear-wheel drive and a long-range
battery; had a range of 310 miles and 0 to 60 mph
acceleration time of 5.1 seconds; and a sticker price
starting at $44,000 with premium upgrades available
for an additional $5,000. Deliveries of the standard
Model 3, with a base price of $35,000, 220 miles of
range, and a 0 to 60 mph acceleration time of 5.6 sec-
onds, were expected to begin in the United States in
November 2017. Dual motor all-wheel drive configu-
rations were scheduled to be available in early 2018.
Plans called for international deliveries of the Model
3 to begin in late 2018, contingent upon regulatory
approvals, starting with left-hand drive markets and
followed by right-hand drive markets in 2019.

Tesla had unveiled six drivable prototypes of the
Model 3 for public viewing and a limited number of
test drives on the evening of March 31, 2016. Buyer
reaction was overwhelmingly positive. Over the next
two weeks, some 350,000 individuals paid a $1,000
deposit to reserve a place in line to obtain a Model 3;
reportedly, the number of reservations grew to nearly
400,000 units over the next several months. Because
of the tremendous amount of interest in the Model
3, Tesla Chairman and CEO Elon Musk announced
in May 2016 that Tesla was advancing its schedule to
begin producing the Model 3 from late 2017 to mid-
2017 and further that it was going to accelerate its
efforts to expand production capacity of the Model
3, with a goal of getting to a production run rate of
500,000 units annually by year-end 2018 instead of
year-end 2020.
In early August 2017, in a letter updating share-
holders on the company’s second quarter 2017
results, Musk said:
Based on our preparedness at this time, we are confi-
dent we can produce just over 1,500 [Model 3] vehicles
in Q3 and achieve a run rate of 5,000 vehicles per week
by the end of 2017. We also continue to plan on increas-
ing Model 3 production to 10,000 vehicles per week at
some point in 2018.1
But in his third quarter 2017 update on
November 1, 2017, Musk related a host of produc-
tion bottlenecks and challenges that were blocking
the ramp-up of Model 3 production and delaying
deliveries, saying, “this makes it difficult to predict
exactly how long it will take for all bottlenecks to be

cleared or when new ones will appear. Based on what
we know now, we currently expect to achieve a pro-
duction rate of 5,000 Model 3 vehicles per week by
late Q1 2018.”2
But Tesla’s “production hell” with the Model 3
continued to haunt the company in early 2018. Many
analysts believed Tesla’s problems stemmed from
having taken huge shortcuts in the parts approval
process, production line validation, and full beta test-
ing of the Model 3 in order to begin early assembly
and production ramp-up. There were other reasons,
including ongoing parts bottlenecks and inconsis-
tent manufacturing quality. Production line employ-
ees interviewed by reporters indicated significant
CASE 18
Copyright ©2019 by Arthur A. Thompson. All rights reserved.
Final PDF to printer
C-192 PART 2 Cases in Crafting and Executing Strategy
numbers of units coming off the assembly line had
quality problems involving malfunctioning parts/
components and/or faulty installation issues that
required reworking. A big parking lot just outside the
assembly plant in Fremont, California, was said to be
full of Model 3s awaiting corrective attention; a few
were even being junked because of the high cost of
restoring them to a condition that would pass final

pre-delivery inspection. On February 7, 2018, Musk
reported:
We continue to target weekly Model 3 production rates
of 2,500 by the end of Q1 and 5,000 by the end of Q2.
It is important to note that while these are the levels
we are focused on hitting and we have plans in place to
achieve them, our prior experience on the Model 3 ramp
has demonstrated the difficulty of accurately forecasting
specific production rates at specific points in time. What
we can say with confidence is that we are taking many
actions to systematically address bottlenecks and add
capacity in places like the battery module line where we
have experienced constraints, and these actions should
result in our production rate significantly increasing dur-
ing the rest of Q1 and through Q2.
Despite the delays that we experienced in our pro-
duction ramp, Model 3 net reservations remained stable
in Q4. In recent weeks, they have continued to grow as
Model 3 has arrived in select Tesla stores and received
numerous positive reviews, including Automobile maga-
zine’s 2018 Design of the Year award.3
A week or so later, Tesla shut down the Model 3
assembly line for four days to address some of the
assembly problems being encountered. Nonetheless,
in early March 2018, there were reports from mul-
tiple sources that Tesla had not been able to consis-
tently achieve a production run rate of 800 units per
week. So Musk’s target of a weekly production rate
of 2,500 Models 3 by the end of March seemed very
much in jeopardy.
In addition, there were accumulating reports
from the owners of Model 3s relating to touch-

screen issues—one related to the audio system vol-
ume suddenly blasting higher without the screen
having been touched; another related to drivers
returning to their parked Model 3 and discovering
the touchscreen on and the audio sound blaring;
still another related to “phantom” inputs along the
edges of the touchscreen when certain apps were
opened. In some instances, Tesla had replaced the
touchscreens; in others, it promised a software solu-
tion would soon be forthcoming. A second reported
problem, in which the battery capacity decreased
noticeably while the car was parked in the sun on
a hot day for several hours, had been reported by a
number of Model 3 owners and, to a lesser extent,
by a few Model S and Model X owners. It appeared
that battery drain problems often occurred in Model
3 vehicles experiencing touchscreen issues. A cou-
ple of Model 3 owners with technical backgrounds
had speculated the problem related to touchscreens
being mounted on a large metal pedestal such that
large temperature differentials between a vehicle’s
hot interior and its cooler exterior caused the touch-
screen and plastic touchpad to warp and produce
other anomalies as the metal pedestal absorbed heat
from inside the vehicle. As of March 27, 2018, the
cause had not been pinpointed, but if the problem
did relate to a faulty pedestal design, then correct-
ing the design problem could cause further delays in
ramping up Model 3 production and drive up war-
ranty costs for Model 3s already delivered. During
the last week of March, Elon Musk tweeted that he
had taken over the role of supervising Model 3 pro-
duction for the time being.
The first week of April 2018, Tesla reported that it

produced 34,494 vehicles in the first quarter of 2018.
Tesla’s Q1 deliveries were 29,980 vehicles, of which
11,730 were Model S; 10,070, were Model X; and
8,180 were Model 3; as of March 31, 4,060 Model S
and Model X vehicles and 2,040 Model 3 vehicles
were in transit to customers. Tesla also reported that
after shifting some production resources away from
Model S and Model X production over to production
and assembly of the Model 3 during the last week of
March, it was able to produce 2,020 Models 3s in the
last seven days leading up to April 3. In its produc-
tion and delivery announcement, the company fur-
ther said:
Given the progress made thus far and upcoming actions
for further capacity improvement, we expect that the
Model 3 production rate will climb rapidly through Q2.
Tesla continues to target a production rate of approxi-
mately 5,000 units per week in about three months.
Finally, we would like to share two additional points
about Model 3:
• The quality of Model 3 coming out of production is
at the highest level we have seen across all our prod-
ucts. This is reflected in the overwhelming delight
experienced by our customers with their Model 3s.
Our initial customer satisfaction score for Model
3 quality is above 93 percent, which is the highest
score in Tesla’s history.

CAse 18 Tesla Motors in 2018: Will the New Model 3 Save the
Company? C-193
features. Retail sticker prices in 2018 ranged from a
base price of $80,700 to $97,000 for a well-equipped
Model X to $140,000 for a fully loaded model. Both
the Model S and Model X were being sold in North
America, Europe, and Asia in 2017 and 2018.
The Model S was the most-awarded car of
2013, including Motor Trend’s 2013 Car of the Year
award and Automobile magazine’s 2013 Car of the
Year award. The National Highway Traffic Safety
Administration (NTSHA) in 2013, 2014, and 2015
awarded the Tesla Model S a 5-star safety rating, both
overall and in every subcategory (a score achieved
by approximately 1 percent of all cars tested by
the NHTSA). Consumer Reports gave the Model S
a score of 99 out of 100 points in 2013, 2014, and
2015, saying it was “better than anything we’ve ever
tested.” However, the Tesla Model S did not make the
Consumer Reports list of the “10 Top Picks” in 2016,
2017, and 2018, but the Model S did earn a perfect
100 score on the 2018 road test drive.
The sleek styling and politically correct power
source of Tesla’s Model S and Model X were thought
to explain why thousands of wealthy individuals in
countries where the two models were being sold—
anxious to be a part of the migration from gasoline-
powered vehicles to electric-powered vehicles and to
publicly display support for a cleaner environment—
had become early purchasers and advocates for
Tesla’s vehicles. Indeed, word-of-mouth praise among
current owners and glowing articles in the media

were so pervasive that Tesla had not yet spent any
money on advertising to boost customer traffic in its
showrooms. In a presentation to investors, a Tesla
officer said “Tesla owners are our best salespeople.”5
As Tesla’s current chairman and CEO, Elon
Musk’s strategic vision for the automotive segment
of Tesla’s operations featured three major elements:
1. Bring a full-range of affordable electric-powered
vehicles to market and become the world’s foremost
manufacturer of premium quality, high- performance
electric vehicles.
2. Convince motor vehicle owners worldwide that
electric-powered motor vehicles were an appealing
alternative to gasoline-powered vehicles.
3. Accelerate the world’s transition from carbon-
producing, gasoline-powered motor vehicles to
zero emission electric vehicles.
At one point, Musk’s stated near-term strate-
gic objective was for Tesla to achieve sales of about
• Net Model 3 reservations remained stable through Q1.
The reasons for order cancellation are almost entirely
due to delays in production in general and delays in
availability of certain planned options, particularly
dual motor AWD and the smaller battery pack.4
Despite the difficulties being experienced with
the Model 3, production and sales of the company’s
trailblazing Model S sedan (introduced in 2012) and
Model X sports utility vehicle (introduced in late
2015) were proceeding largely on plan. Combined

sales of these two models reached nearly 101,500
units in 2017 (see Exhibit 1). The Model S was a fully
electric, four-door, five-passenger luxury sedan with
an all-glass panoramic roof, high definition backup
camera, a 17-inch touchscreen that controlled most
of the car’s functions, keyless entry, xenon head-
lights, dual USB ports, tire pressure monitoring, and
numerous other features that were standard in most
luxury vehicles. The cheapest Model S had a base
price of $75,700 in 2018 and, when equipped with
options frequented selected by customers, carried a
retail sticker price ranging from $95,000 to $136,000.
The Model X was the longest range all-electric pro-
duction sport utility vehicle in the world; it could seat
up to seven adults and incorporated a unique falcon
wing door system for easy access to the second and
third seating rows. The Model X had an all-wheel
drive dual motor system and autopilot capabilities,
along with a full assortment of standard and optional
EXHIBIT 1 Tesla’s Deliveries of the
Model s, Model X, and
Model 3 to Customers, 2012
through the First Quarter
of 2018
Period
Model S
Deliveries
Model S plus
Model X
Deliveries

Model 3
Deliveries
2012 2,653
2013 22,477
2014 31,655
2015 50,332
2016 76,230
2017 101,420 1,734
Q1 2018 21,815 8,182
Source: Company 10K reports and press releases.
enable them to compete head-on with the Model S,
Model X, and Model 3. Several vehicle makers were
also pursuing the development of electric-powered
semi trucks for commercial uses.
3. Tesla had yet to prove it could boost operating
efficiency and lower costs enough to be both
price competitive and attractively profitable in
producing and marketing its vehicle models. It

reported both a loss from operations and a net
loss each of the past five years, despite growing
its automotive sales and leasing revenues from
$2.61 billion in 2013 to $9.64 billion in 2017—see
Exhibit 2. In February 2018, the company did say
it expected to generate a positive quarterly oper-
ating income before the end of 2018 (but not a
positive operating income for the year). While
Tesla’s ongoing operating losses and net losses
were partly, or perhaps largely, due to the sizable
new product development costs associated with
the Model X and Model 3 and to the required
accounting treatments for both leased vehicles
and Tesla’s generous stock compensation plan, it
was nonetheless disconcerting that Tesla’s oper-
ating loss of $1.63 billion in 2017 was the largest
in the company’s history—an outcome that had to
be reversed soon. The extent of Tesla’s growing
operating losses was illustrated by the fact that in
the first quarter of 2017 General Motors reported
an operating profit of $1,418 for every vehicle it
sold around the world and Ford’s reported oper-
ating profit per vehicle sold was $1,174—in com-
parison, Tesla’s operating profit per vehicle was
−$15,855.6
A possible fourth challenge seemed to be gath-
ering steam on the Tesla message boards. People
with Model 3 reservations who, because of all the
production problems and delivery delays they had
been hearing about, had posted concerns about tak-
ing delivery of the Model 3 they had ordered. In
one anecdotal case, a poster told of when he went
to the Tesla delivery location to take delivery of a
black Model 3, he could clearly see paint swirls on
the hood; when told by the delivery person that the

service department had done the best job it could to
buff out the swirls and that the car would be sold
“as is,” the poster refused delivery. But after further
conversation with the delivery person he said he
then agreed to pay an extra $1,000 for a red Model 3
500,000 electric vehicles annually by year-end 2018,
but the difficulties in ramping up production of the
Model 3 has pushed achievement of this objective out
to the end of 2019 at the earliest and more probably
the end of 2020, assuming sales of the Model 3 took
off as expected. Musk planned for the company to
begin deliveries of the Tesla Semi truck in late 2019
and a new version of the Tesla Roadster in 2020. His
strategic intent was for Tesla to be the world’s big-
gest and most highly-regarded producer of electric-
powered motor vehicles, dramatically increasing the
share of electric vehicles on roads across the world
and causing global use of gasoline-powered motor
vehicles to fall into permanent long-term decline.
At its core, therefore, Tesla’s strategy was aimed
squarely at utilizing the company’s battery and elec-
tric drivetrain technology to disrupt the world auto-
motive industry in ways that were sweeping and
transformative. If Tesla’s strategy proved to be as suc-
cessful as Elon Musk believed it would be, industry
observers expected that the Tesla’s competitive posi-
tion and market standing vis-à-vis the world’s best-
known automotive manufacturers would be vastly
stronger in 2025 than it was in 2018.
But in 2018 there were three challenges with the
potential to imperil Musk’s vision for Tesla Motors:
1. Gasoline prices across much of the world had

dropped significantly from 2015 to early 2017 and
were expected by many knowledgeable observ-
ers to remain permanently “low” (below $80 or
even lower) because the abundance of shale oil
and the sharply-lower costs of extracting oil from
shale deposits. Affordable gasoline prices made
the purchase of electric vehicles less attractive,
given that (1) electric vehicles were higher priced
than vehicles with gasoline engines, (2) electric
vehicles so far were limited to an upper range of
about 300 miles on a single battery charge, and
(3) new vehicles powered by gasoline engines were
getting more miles per gallon (due to government-
mandated mileage-efficiency requirements).
2. Tesla was facing the prospect of much more formida-
ble competition from virtually all of the world’s major
motor vehicle manufacturers (BMW, Mercedes,
Jaguar, Volkswagen-Audi, Toyota, Honda, Nissan,
General Motors, and Ford) that were rushing to
introduce affordable and high-end electric vehicles
with features and engine configurations that would
Company? C-195
positive in Q3 and Q4.”7 The company also reported
significant increases in energy storage deployments
for utilities and other commercial enterprises and
record deliveries of Powerwall systems for residences,

resulting in Q1 revenues for energy generation and
storage of $410.0 million, versus $213.9 million in
the first quarter of 2017. Musk believed the company
would generate positive cash in Q3 and Q4.
On the negative side, however, Tesla reported its
largest quarterly net loss ever—$784.6 million, a loss
from operations of $597.0 million, a negative cash flow
from operations of $398.4 million, and a net decrease
in cash and cash equivalents of $745.3 million. It was
unclear whether, given expected capital expenditures
of almost $3 billion, the company would need to raise
additional capital to get through the year; the com-
pany ended Q1 with a cash balance of $2.67 billion.
Despite all the uncertainties, in May 2018 Musk had
pledged no capital raise would be needed in 2018.
This pledge baffled many Wall Street analysts, most
all of the company’s critics and skeptics, and other
keen observers because Musk, during the May 2,
2018 conference call with analysts to discuss Tesla’s
Q1 2018 financial results, expressed his appreciation
to the Chinese government for its announcement that
foreign companies would henceforth be allowed to
have 100 percent ownership of manufacturing facili-
ties in China and said Tesla could have a Gigafactory
capable of vehicle production in China “not later
than the fourth quarter” of 2018.8
Exhibit 2 presents selected financial statement
data for Tesla for 2013 through2017.
COMPANY BACKGROUND
Tesla Motors was incorporated in July 2003 by
Martin Eberhard and Marc Tarpenning, two Silicon
Valley engineers who believed it was feasible to pro-
duce an “awesome” electric vehicle. Tesla’s name-

sake was the genius Nikola Tesla (1856–1943),
an electrical engineer and scientist known for his
impressive inventions (of which more than 700
were patented) and his contributions to the design
of modern alternating-current (AC) power transmis-
sion systems and electric motors. Tesla’s first vehicle,
the Tesla Roadster (an all-electric sports car) intro-
duced in early 2008, was powered by an AC motor
that descended directly from Nikola Tesla’s original
1882 design.
after being promised by the delivery person it would
be ready for pickup in one week—after 10 days, the
poster said he had received no notification to come
pick up the red Model 3. There were also message
board posts from some Model S and Model X own-
ers about the repair problems they were experiencing
with their vehicles. There was one extreme example
where an unhappy Model S owner reported having to
take his vehicle to the Tesla service center for repairs
six times in the past five months. Then in late March
2018 Tesla announced it was recalling about 123,000
Model S sedans globally after discovering that cer-
tain corroding bolts in cold weather climates could
lead to a power-steering failure.
However, when Tesla announced its finan-
cial and operating results for the first quarter of
2018 ending March 31, the outcomes were in some
respects better than many investors and Wall Street
analysts expected. Tesla reported delivery of 8,182
Model 3s during the quarter and after having imple-
mented numerous adjustments in assembly methods
and correcting problems with faulty and improperly
designed parts it was now able to sustain a produc-
tion rate of 3,000 Model 3s per week. Elon Musk said

that continued refinements of the assembly process
and improved operational uptime of the associated
machinery should lead to a production rate of “well
over 5,000” vehicles per week by the end of June or
beginning of July. Musk admitted that he had been
wrong in mandating use of so many robots along
the assembly line, and that now the assembly line
had been and was still being greatly simplified, with
more use being made of semi-automated and manual
assembly to perform certain tasks until the com-
pany had enough time to perfect the use of robots
and enable full automation to resume. Musk con-
fidently predicted that the Model 3 would become
the best-selling medium-sized premium sedan in the
United States before year end—the company had over
450,000 Model 3 reservations at the end of Quarter
1. Musk indicated that if Tesla executed according to
plan the company would achieve positive cash flows
and positive net income (excluding non-cash stock-
based compensation) in both the third and fourth
quarters of 2018. According to Musk, this was “pri-
marily based on our ability to reach Model 3 pro-
duction volume of 5,000 units per week and to grow
Model 3 gross margin from slightly negative in Q1
2018 to close to breakeven in Q2 and then to highly
EXHIBIT 2 selected Financial Data for Tesla, Inc., 2013–2017
(in millions, except

share and per share data)
Years Ended December 31
2017 2016 2015 2014 2013
Income Statement Data:
Revenues:
Automotive sales $ 8,534.8 $ $5,589.0 $ 3,431.6 $ 2,874.4 $
1,921.9
Automotive leasing 1,106.5 761.8 309.4 132.6
Total automotive revenues 9,641.3 6,350.8 3,741.0 3,741.0
Energy generation and storage 1,116.3 181.4 14.5 4.2
Services and other 1,001.2 468.0 290.6 191.3 91.6
Total revenues 11,758.8 7,000.1 4,046.0 3,198.4 2,013.5
Cost of revenues:
Automotive sales 6,724.5 4,268.1 2,639.9 2,058.3 1,483.3
Automotive leasing 708.2 482.0 183.4 87.4
Total automotive cost of revenues 7,432.7 4,750.1 2,823.3
2,145.7
Energy generation and storage 874.5 178.3 12.3 4.0
Services and other 1,229.0 472.5 286.9 166.9 73.9

Total cost of revenues 9,536.3 5,400.9 3,122.5 2,316.7
1,557.2
Gross profit (loss) 2,222.5 1,599.3 923.5 881.7 456.3
Operating expenses:
Research and development 1,378.1 834.4 717.9 464.7 232.0
Selling, general and administrative 2,476.5 1,432.2 922.2
603.7 285.6
Total operating expenses 3.854.6 2,266.6 1,640.1 1,068.4
517.5
Loss from operations (1,632.1) (667.3) (716.6) (186.7) (61.3)
Interest income 19.7 8.5 1.5 1,126 189
Interest expense (471.3) (198.8) (118.9) (100.9 (32.9
Other income (expense), net (125.4) 111.3 (41.7) 1.8 22.6
Loss before income taxes (2,209.0) (875,624) (875.6) (284.6)
(71.4)
Provision for income taxes 31.5 13,039 13.3 9.4 2.6
Net loss $ (2,240.6) $ (773.0) $ (888.7) $ (294.0) $ (74.0)
Net loss attributable to noncontrolling
interests and subsidiaries
(279.1) (98.1) — — —
Net loss attributable to common

shareholders
$ (1,961.4) (674.9) $ (888.7) $ (294.0) $ (74.0)
Net loss per share of common stock,
basic and diluted
$ (11.83) $ (4.68) $ (6.93) $ (2.36) $ (0.62)
Weighted average shares used in
computing net loss per share of
common stock, basic and diluted
165.8 144.2 128.2 124.5 119.4
Balance Sheet Data:
Cash and cash equivalents $ 3,367.9 $ 1,196,908 $ 1,196.9 $
1,905.7 $ 845.9
Inventory 2,263.5 2,067.5 1,277.8 953.7 340.4
Total current assets 6,570.5 6,259.8 2,791.4 3,198.7 1,265.9
Company? C-197
S and $100 million for a powertrain manufacturing
plant employing about 650 people that would supply
all-electric powertrain solutions to other automakers

and help accelerate the availability of relatively low-
cost, mass-market electric vehicles.
In June 2010, Tesla Motors became a public com-
pany, raising $226 million with an initial public offering
of common stock. It was the first American car com-
pany to go public since Ford Motor Company in 1956.
Management Changes at Tesla
In August 2007, with the company plagued by delays
in getting its first model—the Tesla Roadster—into
production, co-founder Martin Eberhard was ousted
as Tesla’s chief executive officer (CEO). While his
successor managed to get the Tesla Roadster into
production in March 2008 and begin delivering
Roadsters to customers in October 2008, internal
turmoil in the executive ranks prompted Elon Musk
to decide it made more sense for him to take on the
role as Tesla’s chief executive officer—while continu-
ing to serve as chairman of the board—because he
was making all the major decisions anyway.
Elon Musk
Elon Musk was born in South Africa, taught him-
self computer programming and, at age 12, made
Financing Early Operations
Eberhard and Tarpenning financed the company
until Tesla’s first round of investor funding in
February 2004. Elon Musk contributed $6.35 million
of the $6.5 million in initial funding and, as the
company’s majority investor, assumed the position
of Chairman of the company’s board of directors.
Martin Eberhard put up $75,000 of the initial $6.5
million, with two private equity investment groups
and a number of private investors contributing the

remainder.9 Several rounds of investor funding
ensued, with Elon Musk emerging as the company’s
biggest shareholder. Other notable investors included
Google co-founders Sergey Brin and Larry Page, for-
mer eBay President Jeff Skoll, and Hyatt heir Nick
Pritzker. In 2009, Germany’s Daimler AG, the maker
of Mercedes vehicles, acquired an equity stake of
almost 10 percent in Tesla for a reported $50 mil-
lion.10 Daimler’s investment was motivated by a
desire to partner with Tesla to accelerate the devel-
opment of Tesla’s lithium-ion battery technology and
electric drive train technology and to collaborate on
electric cars being developed at Mercedes. Later in
2009, Tesla was awarded a $465 million low-interest
loan by the U.S. Department of Energy to acceler-
ate the production of affordable, fuel-efficient elec-
tric vehicles; Tesla used $365 million for production
engineering and assembly of its forthcoming Model
Property, plant, and equipment, net 10,027.5 5,983.0 3,403.3
1,829.3 738.5
Total assets 28,655.4 22,644.1 8,092.5 5,849.3 2,416.9
Total current liabilities 7,674.7 5,827.0 2,816.3 2,107.2 675.2
Long-term debt and capital leases, net of
current portion
9,415.7 5,860.0 2,040.4 1,818.8 599.0
Total stockholders’ equity 4,237.2 4,752.9 1,088.9 911.7 667.1
Cash Flow Data:
Cash flows from operating activities $ (2,240.6) $ (773.0) $

(888.7) $ (57.3) $ 263.8
Proceeds from issuance of common
stock in public offerings
400.2 1,701.7 730.0 — 360.0
Purchases of property and equipment
excluding capital leases
(3,414.8) (1,280.8) (1,634.9 (970.0) (264.2)
Net cash used in investing activities (4,419.0) (1,416.4)
(1,673.6) (990.4 (249.4)
Net cash provided by financing activities 4,414.9 3,744.0
1,523.5 2,143.1 635.4
Sources: Company 10-K reports for 2014, 2015, and 2017.
a man on Mars in 10 years.15 In May 2012, a SpaceX
Dragon cargo capsule powered by a SpaceX Falcon
Rocket completed a near flawless test flight to and
from the International Space Station; since then,
under contracts with NASA, the SpaceX Dragon
had delivered cargo to and from the Space Station
multiple times. Going into 2018, SpaceX secured
contracts of over $12 billion to conduct over 100

missions. Currently, SpaceX was working toward
developing fully and rapidly reusable rockets and test
launching its new Falcon Heavy rocket, said to the
world’s most powerful rocket. The company was said
to be both profitable and cash-flow positive in 2013
to 2017. Headquartered in Hawthorne, California,
SpaceX had 5,000 employees and was owned by
management, employees, and private equity firms;
Elon Musk was the company’s CEO and largest
stockholder.
Another of Elon Musk’s business ventures was
SolarCity Inc., a full-service provider of solar system
design, financing, solar panel installation, and ongo-
ing system monitoring for homeowners, municipali-
ties, businesses (including Intel, Walmart, Walgreens,
and eBay), universities, nonprofit organizations, and
military bases. Going into 2016, SolarCity managed
more solar systems for homes than any other solar
company in the United States. While Solar City had
installed many solar energy systems, it had never
been profitable or cash flow positive due to its busi-
ness model of recovering the capital and operating
costs of the installed systems through leasing fees
and power purchase agreements. In November 2016,
to rescue Solar City from probable bankruptcy, Tesla
acquired the company and continued its operations
as a new division named Tesla Energy. However, the
business model was changed to one where custom-
ers financed their new solar power installations with
cash and loans, thus producing a healthier mix of
upfront and recurring revenue; moreover, the costs of
installing solar-powered installations were expected
to decline, partly because of improvements in solar
technology, greater efficiencies in manufacturing
solar-generation systems, and cost savings achieved

by operating Tesla’s automotive and energy divisions
as sister companies.
In August 2013, Musk published a blog post
detailing his design for a solar-powered, city-to-city
elevated transit system called the Hyperloop that
could take passengers and cars from Los Angeles
$500 by selling the computer code for a video game
he invented.11 In 1992, after spending two years at
Queen’s University in Ontario, Canada, Musk trans-
ferred to the University of Pennsylvania where he
earned an undergraduate degree in business and a
second degree in physics. During his college days,
Musk spent some time thinking about two impor-
tant matters that he thought merited his time and
attention later in his career: one was that the world
needed an environmentally clean method of trans-
portation; the other was that it would be good if
humans could colonize another planet.12 After
graduating from the University of Pennsylvania, he
decided to move to California and pursue a PhD
in applied physics at Stanford; however, he left the
program after two days to pursue his entrepreneur-
ial aspirations instead.
Musk’s first entrepreneurial venture was to join
up with his brother, Kimbal, and establish Zip2, an
Internet software company that developed, hosted,
and maintained some 200 websites involving “city
guides” for media companies. In 1999 Zip2 was sold
to a wholly-owned subsidiary of Compaq Computer
for $307 million in cash and $34 million in stock
options—Musk received a reported $22 million from
the sale.13

In March 1999, Musk co-founded X.com, a
Silicon Valley online financial services and e-mail
payment company. One year later, X.com acquired
Confinity, which operated a subsidiary called PayPal.
Musk was instrumental in the development of the
person-to-person payment platform and, seeing big
market opportunity for such an online payment plat-
form, decided to rename X.com as PayPal. Musk
pocketed about $150 million in eBay shares when
PayPal was acquired by eBay for $1.5 billion in eBay
stock in October 2002.
In June 2002, Elon Musk with an investment
of $100 million of his own money founded his
third company, Space Exploration Technologies
(SpaceX), to develop and manufacture space launch
vehicles, with a goal of revolutionizing the state of
rocket technology and ultimately enabling people to
live on other planets. Upon hearing of Musk’s new
venture into the space flight business, David Sacks,
one of Musk’s former colleagues at PayPal, said,
“Elon thinks bigger than just about anyone else I’ve
ever met. He sets lofty goals and sets out to achieve
them with great speed.”14 In 2011, Musk vowed to put
Company? C-199
really understand it’s do or die but if we work hard and
pull through, there’s going to be a great outcome, peo-

ple will give it everything they’ve got.
Asked if he relied more on information or
instinct in making key decisions, Musk said he made
no bright-line distinction between the two.
Data informs the instinct. Generally, I wait until the
data and my instincts are in alignment. And if either
the data or my instincts are out of alignment, then I
sort of keep working the issue until they are in align-
ment, either positive or negative.19
Musk was widely regarded as being an inspiring
and visionary entrepreneur with astronomical ambi-
tion and willingness to invest his own money in risky
and highly problematic business ventures. He set
stretch performance targets and high product quality
standards, and he pushed hard for their achievement.
He exhibited perseverance, dedication, and an excep-
tionally strong work ethic—he typically worked 85 to
90 hours a week. Most weeks, Musk split his time
between SpaceX and Tesla.
In 2017, Elon Musk’s base salary as Tesla’s CEO
was $49,920, an amount required by California’s
minimum wage law; however, he was accepting only
$1 in salary. The company’s Board of Directors in
2017 established an executive compensation plan for
Musk tied to Tesla’s performance on various metrics;
compensation was in the form of stock option awards
subject to various vesting conditions. Musk con-
trolled 37.8 million shares of Tesla common stock
(worth some $13 billion in March 2018); his share-
holdings gave him 21.9 percent of total shareholder
voting power in Tesla.

TesLA IN 2018
Following the acquisition of Solar City, Tesla
described its business in the following way:
We design, develop, manufacture and sell high-
performance fully electric vehicles, and energy genera-
tion and storage systems, and also install and maintain
such systems and sell solar electricity. We are the world’s
only vertically integrated sustainable energy company,
offering end-to-end clean energy products, including
generation, storage and consumption. We have estab-
lished and continue to grow a global network of stores,
vehicle service centers and Supercharger stations to
accelerate the widespread adoption of our products, and
to San Francisco (a distance of 380 miles) in
30 minutes. He then held a press call to go over
the details. In Musk’s vision, the Hyperloop would
transport people via aluminum pods enclosed inside
of steel tubes. He described the design as looking
like a shotgun with the tubes running side by side
for most of the route and closing the loop at either
end.16 The tubes would be mounted on columns
50 to 100 yards apart, and the pods inside would
travel up to 800 miles per hour. The pods could
be small to carry just people or enlarged to allow
people to drive a car into a pod and depart. Musk
estimated that a Los Angeles-to-San Francisco
Hyperloop, with 70 pods departing every 30 sec-
onds and spaced 5 miles apart, could be built for
$6 billion with people-only pods, or $10 billion for
the larger pods capable of holding cars with people
inside. Musk claimed his Hyperloop alternative
would be four times as fast as California’s proposed
$70 billion high-speed train, have a pleasant and
super-smooth ride, and be “much cheaper” than

air travel. Musk announced that he would not form
a company to build Hyperloop systems; rather he
was releasing his design in hopes that others would
take on such projects. As of 2018, there were several
Hyperloop projects under development and others
being formally considered.
Since 2008, many business articles had been
written about Musk’s brilliant entrepreneurship in
creating companies with revolutionary products that
either spawned new industries or disruptively trans-
formed existing industries. In a 2012 Success maga-
zine article, Musk indicated that his commitments
to his spacecraft, electric car, and solar panel busi-
nesses were long term and deeply felt.17 The author
quoted Musk as saying, “I never expect to sort of sell
them off and do something else. I expect to be with
those companies as far into the future as I can imag-
ine.” Musk indicated he was involved in SolarCity
and Tesla Motors “because I’m concerned about
the environment,” while “SpaceX is about trying to
help us work toward extending life beyond Earth on a
permanent basis and becoming a multiplanetary spe-
cies.” The same writer described Musk’s approach
to a business as one of rallying employees and inves-
tors without creating false hope.18 The article quoted
Musk as saying:
You’ve got to communicate, particularly within the
company, the true state of the company. When people

common stock, other types of long-term debt, and
issues of new common stock to provide funding for
research and development (R&D), the development
of new models, expanded production capabilities,
an ever-growing network of recharging stations, and
opening retail showrooms and Tesla service centers.
Tesla’s long-term debt and contractual capital lease
obligations grew from $600 million at year-end 2013
to $9.4 billion at year-end 2017, and the number
of shares of common stock outstanding rose from
119 million to nearly 166 million during the same
period. In the most recent four years, Tesla had
burned through cash at a torrid pace because of
the heavy expenses it was incurring for design and
engineering, gearing up to produce certain parts
and component systems internally, constructing
new facilities, equipping vehicle assembly lines with
robotics technology, tools, and other machinery, and
adding over 31,000 new employees to the almost
6,000 employees it had at year-end 2013.
Tesla ended 2017 with $3.4 billion in cash and
cash equivalents. Executive management expected
that the company’s capital expenditures in 2018
would total about $800 million.
TesLA’s sTRATeGY TO
BeCOMe THe WORLD’s
BIGGesT AND MOsT HIGHLY
ReGARDeD PRODUCeR OF
eLeCTRIC VeHICLes
In 2018, Tesla’s strategy was focused on gearing up
production of the Model 3 and expanding the compa-

ny’s production capacity, finishing the construction
of its $5 billion Gigafactory 1 near Reno, Nevada,
to produce batteries and battery packs for Tesla’s
vehicles, and adding sales galleries, service centers,
and Supercharger stations in the United States, much
of Europe, China, and Australia. At the Tesla Energy
division, efforts were underway to (1) begin manu-
facturing of photovoltaic cells and a new Solar Roof
product at Gigafactory 2 in Buffalo, New York; (2)
begin to grow the sales of its energy storage products
currently being manufactured at Gigafactory 1; and
(3) introduce the first-of-its-kind Solar Roof for com-
mercial and residential applications. Tesla’s near-
term objective was to triple its sales of energy storage
products in 2018.
we continue to develop self-driving capability in order to
improve vehicle safety. Our sustainable energy products,
engineering expertise, intense focus to accelerate the
world’s transition to sustainable energy, and business
model differentiate us from other companies.
We currently produce and sell three fully electric
vehicles, the Model S sedan, the Model X sport util-
ity vehicle (“SUV”) and the Model 3 sedan. . . . We
also intend to bring additional vehicles to market in
the future, including trucks and an all-new sports car.
. . .We sell our vehicles through our own sales and ser-
vice network which we are continuing to grow globally.
The benefits we receive from distribution ownership
enable us to improve the overall customer experience,
the speed of product development, and the capital
efficiency of our business. We are also continuing to
build our network of Superchargers and Destination
Chargers in North America, Europe, and Asia to pro-
vide both fast charging that enables convenient long

distance travel.
. . .In addition, we are leveraging our technological
expertise in batteries, power electronics, and integrated
systems to manufacture and sell energy storage prod-
ucts. In late 2016, we began production and deliver-
ies of our latest generation energy storage products,
Powerwall 2 and Powerpack 2. Powerwall 2 is a home
battery. . . . Powerpack 2 is an energy storage system for
commercial, industrial, and utility applications.
Finally, we sell and lease solar systems (with or
without accompanying energy storage systems) to resi-
dential and commercial customers and sell renewable
energy to residential and commercial customers at
prices that are typically below utility rates. Since 2006,
we have installed solar energy systems for hundreds
of thousands of customers. Our long-term lease and
power purchase agreements with our customers gener-
ate recurring payments and create a portfolio of high-
quality receivables that we leverage to further reduce
the cost of making the switch to solar energy. The elec-
tricity produced by our solar installations represents a
very small fraction of total U.S. electricity generation.
With tens of millions of single-family homes and busi-
nesses in our primary service territories, and many
more in other locations, we have a large opportunity to
expand and grow this business.
We manufacture our vehicle products primar-
ily at our facilities in Fremont, California, Lathrop,
California, Tilburg, Netherlands and at our Gigafactory
1 near Reno, Nevada. We manufacture our energy stor-
age products at Gigafactory 1 and our solar products at
our factories in Fremont, California and Buffalo, New
York (Gigafactory 2).20

During 2014-2017, Tesla raised billions of dol-
lars via the sale of senior notes convertible into
Company? C-201
Tesla’s Second Vehicle—The Model S Customer
deliveries of Tesla’s second vehicle—the sleek, eye-
catching Model S sedan—began in July 2012. Tesla
introduced several new options for the Model S in
2013, including a sub-zero weather package, parking
sensors, upgraded leather interior, several new wheel
options, and a yacht-style center console. Xenon
headlights and a high definition backup camera were
made standard equipment on all Model S cars. In
2014 an all-wheel drive powertrain was introduced
to provide buyers with four powertrain options. The
Model S powertrain options were further modified
several times. In March 2018, the Model S was being
offered with three powertrains options:
• 75D—all-wheel drive, 75 kWh battery pack,
259 mile driving range, 0 to 60 mph in 4.2 sec-
onds, with a standard price of $74,500
• 100D—all-wheel drive, 100 kWh battery pack,
335 mile driving range, 0 to 60 mph in 4.1 sec-
onds, with a standard price of $94,000 (which
included Smart Air Suspension)

• P100D—maximum performance all-wheel drive
with dual front and rear motors (mounted on
the front and rear axles), 100 kWh battery pack,
315 mile driving range, 0 to 60 mph in 2.5 seconds,
with a standard price of $135,000 (which included
the best interior and other premium upgrades)
Popular options included enhanced autopi-
lot software ($5,000); full self-driving capability—
subject to further software validation and regulatory
approval ($3,000); and third-row, rear-facing seating
($4,000). From time to time, Tesla sent software
updates to all Model S vehicles previously delivered
to customers that included new and updated features.
In 2018, all Model S vehicles had a standard software
feature called “Range Assurance,” an always-running
application within the car’s navigation system that
kept tabs on the vehicle’s battery charge-level and
the locations of Tesla Supercharging stations and
parking-spot chargers in the vicinity. When the vehi-
cle’s battery began running low, an alert appeared
on the navigation screen, along with a list of nearby
Tesla Supercharger stations and public charging facil-
ities; a second warning appeared when the vehicle
was about to go beyond the radius of nearby char-
gers without enough juice to get to the next facility,
at which point drivers were directed to the nearest
charge point. There was also a Trip Planner feature
that enabled drivers to plan long-distance trips based
Product Line Strategy
A key element of Tesla’s long-term strategy was offer
vehicle buyers a full line of electric vehicle options.
So far Tesla had introduced four models—the Tesla
Roadster, Model S, Model X, and Model 3. But plans

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