Tesla has historically focused on producing high-end electric vehicles but is considering expanding into new areas. Three strategies are evaluated: 1) Partnering to supply electric drive train components which offers growth with low risk. 2) Entering the mainstream automotive market which increases customers but risks competition. 3) Entering renewable energy which is growing but Tesla lacks experience. The report recommends partnering for components as it minimizes changes while pursuing large growth potential in a short time frame.

1. Tesla: A Comprehensive Strategic
Analysis
By: Herb Benson, Robert Korn, Samantha Nettnin, and Kevin Peterson

2. Tesla Motors (TSLA) History
• Founded in 2003 by Elon Musk (Current CEO), JB Straubel (CTO), Martin Eberhard, Marc
Tarpenning, and Ian Wright
• Tesla Roadster
• First manufactured product, offered from 2008-2012
• Model S
• Currently only vehicle offered, 2012-present
• Model X
• SUV, expected to be sold in early 2016
• Model 3
• Expected to be offered in 2017
• Target Price: $35,000
• IPO: January 29, 2010, raised US$226 million
• First American car company to go public since Ford (F) in 1956
• Turned first profit in Q1, 2013

3. Mission and Vision
• Mission Statement: Tesla Motors designs and sells high-performance, highly efficient
electric sports cars, with no compromises. Tesla Motors cars combine style,
acceleration, and handling with advanced technologies that make them among the
quickest and the most energy-efficient cars on the road.
Courtesy www.teslamotorsinc.blogspot.com
• Vision Statement: To “create the most compelling car company of the 21st century by
driving the world’s transition to electric vehicles.”
Copyright | CENGAGE Learning | Strategic Management

4. General Environment Analysis
Segment Elements Industry Effect
Political/Legal • Regulations on Emissions and Safety Standards
• National Traffic and Motor Vehicle Safety Act, 1966
• Energy Policy and Conservation Act, 1975
Neutral
Technology • Higher demand for reliable, fuel efficient vehicles
• Alternate fuel vehicles (Ethanol, Biodiesel, Hydrogen Fuel
Cells)
• Online shopping/research
Positive
Sociocultural • Luxury vs. Economy Vehicles
• Power vs. Fuel Efficiency
Positive

5. Industry Analysis
Force Description Influence on Industry
Threat of New Entrants • Mature Industry has reached Economies of
Scale
• High Initial Capital Requirements
• Difficult Access to Distribution Channels
Low
Bargaining Power of
Buyers
• Private and Commercial buyers account for
majority of revenue
• Low Switching Costs
• Buyers are unable to integrate backwards
Moderately High
Intensity of Rivalry
Among Competitors
• Gaining Market Share means Reducing
Market Share of Competitor
• Few Opportunities for Differentiation
High
Type of Firm Description Industry Attractiveness
New Entrants High Startup Costs, Legal Fees, Intense Competition Very Unattractive
Incumbent High Liquid Assets, Distribution, Holding Costs Moderate

6. Integrated SWOT Analysis
• Strengths
• Brand Equity
• Product Quality
• Eco-friendly Product Line
• Enhanced Opportunities
• Increase Market Share through High-Growth EV Industry
• Limited Threats
• Consumers Deterred due to “Range-Anxiety”

7. Competitor Analysis: Toyota
Strategy Current Strategy
Business Differentiation: The firm seeks the broadest possible market with distinctive
offerings
Corporate Related Linked: The firm operates five automotive brands (including Toyota, Lexus,
and Scion) in addition to partnerships with other automotive and nonautomotive firms
Cooperative Horizontal Complementary Strategic Alliance: Each partner is committed to
combining their resources and skills to create value within the value chain
International Transnational: the firm seeks to achieve both global efficiency and local
responsiveness.

8. Competitor Analysis: General Motors
Strategy Current Strategy
Business Differentiation: The firm seeks the broadest possible market with distinctive
offerings
Corporate Related Linked: The firm operates thirteen brands (including Chevrolet, Buick and
Cadillac) in addition to partnerships with other automotive and nonautomotive firms.
Cooperative Horizontal Complementary Strategic Alliance: Each partner is committed to
combining their resources and skills to create value within the value chain
International Transnational: The firm seeks to achieve both global efficiency and local
responsiveness.

9. Competitor Analysis: Conclusions
• Strategic Competitive Advantages
• Toyota
• Market Power
• Capital Resources
• Just-in-Time (JIT) Inventory Management
System
• General Motors
• Capital Resources
• Diverse Product Offering
• First to Offer New Technology
• Chevrolet Volt, Wi-Fi in cars
• Future Industry Assumptions
• Culture shift towards energy efficient
and renewable energy
• Eco-Friendly companies will have more
long term success
• Future Major Objectives
• “Greening”
• Product Lines
• Supply-Chain Networks
• Operations
• Marketing Messages

10. Current Strategies
• Business Level: Focused Differentiation
• Target early adopters with high income
• Corporate Level: Related Constrained
• Dominant business selling cars but also sells electric power train parts
• Cooperative Level: Strategic Alliances
• Panasonic, Toyota, Dailmer, Mercedes Benz,
• International Level: Transnational
• U.S, Asia, Australia, Europe, and Canada
• Centered in California

11. Value Chain Comparison
Toyota General Motors
Marketing Superior Superior
Distribution Inferior Inferior

12. Important Financial and Nonfinancial Data
Tesla Toyota General Motors
Earnings Per Share -$2.36 $10.67 $1.64
ROE -10.81% 14.8% 7.5%
Net Income -$294,000,000 $19,891,000,000 $3,949,000,000
Long-Term Debt to
Capitalization Ratio
55.5% 2.8% 18.4%
Revenue $3,198,000,000 $256,585,000,000 $155,929,000,000
Important Nonfinancial Factor: Culture

13. VRIN Analysis: Batteries
Valuable
Yes
Rare
Yes
Inimitable
Yes
Nonsubstitutable
Yes
Result: Sustainable Competitive Advantage

14. Strategic Issues
• Small company
• Limited capital
• Niche market
• Charger network
• Range concerns
• Lithium-ion batteries
• Distribution network

15. Distribution Network

16. New Strategy Formulation
Strategy Positives Negatives Response

17. New Strategy Formulation
Strategy Positives Negatives Response
New partnerships for
supplying drive train
components
-Growth potential
-Valuable expertise
-Furthers EV adoption
-Early-mover
-Distribution network
-Low risk
-Limited Resources
-Competitor conflicts
-Lower Margins
-Imitation

18. New Strategy Formulation
Strategy Positives Negatives Response
New partnerships for
supplying drive train
components
-Growth potential
-Valuable expertise
-Furthers EV adoption
-Early-mover
-Distribution network
-Low risk
-Limited Resources
-Competitor conflicts
-Lower Margins
-Imitation
Enter mainstream
automotive market
-New customers
-Furthers EV adoption
-Limits partnerships
-Lacking resources
-Distribution network
-Moderate risk
-Pricing
-Alliance relations
-Litigation

19. New Strategy Formulation
Strategy Positives Negatives Response
New partnerships for
supplying drive train
components
-Growth potential
-Valuable expertise
-Furthers EV adoption
-Early-mover
-Distribution network
-Low risk
-Limited Resources
-Competitor conflicts
-Lower Margins
-Imitation
Enter mainstream
automotive market
-New customers
-Furthers EV adoption
-Limits partnerships
-Lacking resources
-Distribution network
-Moderate risk
-Pricing
-Alliance relations
-Litigation
Enter renewable
energy market
-Growing industry
-Valuable IP
-Green Energy
-New Market
-Lacking experience
-Higher risk
-Pricing
-Contracts

20. New Partnerships for Drive Train Components
Strategy Old New
Business Differentiation Differentiation
Corporate Related Constrained Related Constrained
International Transnational Transnational
Cooperative Strategic Alliances Strategic Alliances
7S Implementation
Strategy Expansion of production facilities, Aggressive R&D
Skills Acquire employees with mass production experience
Staff Increase in all levels of staff
Action Item Timeline
New production facility – additional capital required 2-4 years
Develop partnerships to supply drive-train components 1+ years

21. Enter Mainstream Automotive Market
Strategy Old New
Business Differentiation Differentiation
Corporate Related Constrained Dominant Business
International Transnational Transnational
Cooperative Strategic Alliances Vertical Strategic Alliances
7S Implementation
Strategy Expansion of production facilities
Skills Acquire employees with mainstream automotive experience
Staff Increase in low and mid-level staff
Action Item Timeline
New production facilities – additional capital required 4-5 years
New distribution network 2+ years

22. Enter Renewable Energy Market
Strategy Old New
Business Differentiation Differentiation
Corporate Related Constrained Related Linked
International Transnational Transnational
Cooperative Strategic Alliances Horizontal Strategic Alliances
7S Implementation
Strategy Expansion of production facilities
Skills Acquire employees with renewable energy experience
Staff Increase in upper-level staff
Action Item Timeline
New production facilities – additional capital required 2-3 years
New partnerships with similar companies 1+ years
Consumer-level renewable energy 1-2 years
Business-level renewable energy 3-4 years

23. New Strategy Choice
Strategy Reason
New partnerships for
supplying drive train
components
 Smallest change from current strategy
 Least risk
 Large growth potential
 Shortest time frame
 Distribution network
Enter mainstream
automotive market
x Distribution network
x Moderate risk
x Competitor response
Enter renewable energy
market
x Largest change from current strategy
x Unfamiliar with market
x Competitor response
x Contracts