Essay: Tesla Case Study: Improving Strategy for Competitive Advantage in Electric Car Market

Tesla case study
Executive summary
This report is a strategic analysis of Tesla Motors, Inc. that analyzes and establishes how the company can improve its strategy to maintain its competitive advantage in the electric car market, and enhance its position as a leader in renewable energy.
Our analysis highlights the important factors which concern international strategy, competitive advantage, internal and external environment of Tesla Motors. Tesla Inc  is an electric car producer and an energy management services provider. Elon Musk is the current CEO and he applies transformational leadership methods to innovate the business. His leadership, led to the firm’s diversification from electric cars to diversifying into energy storage and solar cells. Tesla has invested money to increase production capacity, but should focus in reaching a sufficient threshold soon otherwise the firm will not be the global leader in the high quality electric car market. Nevertheless, the development of the energy management services could provide the firm with enough economic resources to remain important on the market, and compete with traditional companies making electric vehicles.
External Analysis
The external analysis is split into the dominant characteristics, the prime movers of change in industry, key factors of success, positions taken by competitors, their possible actions, and the intensity of the competitive forces, in order to understand the environment and be able to establish Tesla’s position in the industry. Additionally, a more profound analysis was made using the PESTEL framework. This analysis establishes the effects of the macro environment on the company. Tesla must defeat the challenges generated from the factors mentioned in the analysis. When the company includes the outcome of it in its strategic formulation, it may increase its success in the long run. Thirdly, there is an analysis of the electric car sector using the Porter’s 5 forces framework due to it is an industry that is on the growth stage because of the entry of different competitors, and the current high profit margin. The purpose of this analysis is to determine the attractiveness or profitability of the industry by analyzing environmental threats and opportunities.
Internal Analysis
An internal analysis was made using VRIO which allows Tesla to identify areas that have the highest competitive advantage and will identify their most important competencies. This will act as a formula for an effective strategy to capitalize on.  Firstly, the analysis recognizes Elon Musk as the principal and most important intangible resource of the organization, which is then followed by the leaders and managers of each area who have experience in the market. Through their abilities and  collaborative skills, it will provide Tesla with a strong team for the organization. Additionally, Tesla’s responsibility to the environment is an attribute that enhances its image and the company has  since defined their mission to be a socially responsible. Powertrain technologies and the manufacturing plant are two sources that Tesla has been able to provide and thus make them pioneers in cars using this technology. Also, the most outstanding resource is the Gigafactory, which will have a print of zero energy and will run on renewable energy sources that make Tesla a company with a competitive advantage.
By Analyzing the strategies of the company, diversification, technology and, human resources are the three pillars for success of Tesla. According to diversification, Tesla has realized the diversification is essentially through alliances with Toyota and Daimler. The companies combined their resources to develop the components of propulsion for diverse models. Also, the technological innovations of the firm offer a competitive advantage and its dominance is important for the company. Tesla’s culture of constant innovation also offer a competitive advantage that excels ahead of its competitors. The people who work in the company are one of the main drivers of Tesla’s innovation. Industry leadership has been Tesla’s purpose, to be the exceptional people and leaders with whom they count, and the active participation of everyone in the organization.
Competitive Advantage:
Tesla’s main competition is Nissan Leaf, which is an Electric car, along with few hybrid cars i.e. Chevrolet Volt and Toyota Prius. Toyota, Chevrolet and, Nissan are trying to make their mark in the electric car market by acquiring some of Tesla’s market share however, Tesla has some competitive advantage against its rivals. Tesla got an edge over its competitors by building up Gigafactory worth $5 billion. Tesla has differentiated itself from all its competitors by revolutionizing the Gigafactory that produces  lithium-ion batteries.  When Tesla entered in the market, there were already few electric and hybrid cars, but now general motors and other automobile companies are investing in R&D to compete with Tesla’s electric cars. As Tesla owns its Gigafactory and all the super charging stations, it sets up a new competition for its rivals. For keeping an edge over its rivals company needs to speed up the process for building more super charging stations.
The way Engineers put their enormous efforts in designing of Model S and Model X is amazing, both models S and X are each elegant interactions of aesthetics, ergonomics, and performance without compromising on acceleration and speed. Its Model X 90D goes 0-60 mph in 3.2 seconds beating all other mid-size SUV. All the models from Tesla Roadster, Model S and Model X requires battery charging for which they have built super charging stations across globe that fully charge the car within 45 minutes. Full battery can take up to 300 kilometers although they have to increase the number of super charging stations with an increase the battery capacity to take the car up to 1000 km.
CAGE Framework and PESTLE
Tesla’s international strategy was analyzed using the CAGE Framework and PESTLE. The first country of analysis was China, and their attractiveness in manufacturing Tesla cars for the Asian Market. There has been a spike for Tesla cars in China and have since have doubled the U.S. The Chinese government awards a $15,000 rebate for new electric cars. Although the rebate may help sales in China, they still however, charge a 25% import tax on cars. China’s manufacturing is significantly cheaper than India’s and they have access to all required sources locally, at a large quantity. However, the maintenance facilities in India are inadequate. Culturally, Indians have not yet adjusted from using an internal combustion engine vehicle and will take some time becoming familiar with electric energy. Huge markets, results in huge investment, and Tesla should not invest in a market when all the complementary and service facilities are negligible. The Indian market for electric cars has not done quite well like China has. India still has high upfront cost, and provides no subsidiaries for citizens when purchasing their first electric car. To make a direct foreign investment in India, Tesla is required to source 30 % of resource locally. At the current moment in time, India cannot facilitate this. If manufactured in India foreign investors are allowed to sell products in any matter. Furthermore, Indian labor has increased 20% surpassing China.
Conclusions and recommendations:
Based on the external analysis, Tesla’s profitability will improve over time. There are plenty of opportunities to enhance the growth of the company. The company is currently doing well and by investing in research, plant and equipment, and in property to expand the business, it can become the leader in the electric car market. Although the company might be a little bit new in this market, which creates some uncertainty to the business, Tesla opted to expand its activity to a larger market by developing the solar panels aiming for the sustainable life-style market as another factor of its business.
Tesla should expand Solar Roof everywhere; this represents a great opportunity because houses and buildings are built constantly, all of them must have tiles and Solar Roof would be just a substitute to the traditional tiles. With the current concern about global warming, people is interested in “green” technology and Tesla offers the technology that turns sunlight into electricity while it does not clash with the building’s architecture.
Tesla should consider partnerships with traditional car manufacturers to be the supplier of battery packages. Because if they decide to enter the market massively, the firm might not be able to compete with all of them, so it might be a safe plan to at least be the company that provides the core electronic components to these other companies.
Even though its value on the stock exchange keeps growing, Musk should be very careful because the company’s losses have increased as well. Firm’s debt has growth over sales, which makes Tesla a company more and more leveraged. It all lies on the fact that Musk is able to maintain investor’s fidelity although benefits are still a promise in the future. Therefore, the company should be careful about going into more debt because it could change everything and ruin the plan. Additionally, uncertainty about Tesla increases in the absence of present benefit, although the investors are the responsible for keeping the value of the shares growing, it might not be enough to support the success and the future possibilities of the firm.
If Tesla focuses on the strategy of differentiation, the company should continue to launch models with high performance, without losing quality and designs. As the company moves forward in learning curves and thus reduces its production costs, it could launch a new model with a premium price, but lower than the model X, which allows it to maintain High margins, while at the same time targeting a broader market.This strategy follows the line of the company’s current policy and we believe it can be very positive .maintaining the strategy of differentiation, even though it does not target a mass market, can be very profitable, for example Apple, with which it has great similarities.
It is also considered that the company must continue to expand internationally in order to have access to a broader market, and to increase veins by focusing on high per capita income.  Is necessary to  apply a more local approach to the transnational strategy the company is pursuing.On the other hand, Tesla has to continue in the search for a reliable supply of lithium in view of future increases in demand, as well as look for new technologies such as graphene, which is a strong yet very light component, which in addition Is a very good conductor of energy and therefore could be used for the elaboration of the components of the car, as for its electrical system.
Recently Tencent, a Large Chinese Internet Company, has recently bought 5% of shares in Tesla. What does this mean? Tesla and Tencent could go into a Partnership. Through a partnership, Tesla can acquire companies with a licence to manufacture automobiles in China. This can also mean that Tencent can gain access to Tesla’s technology. They specialise in mapping, entertainment and video systems. This will be beneficial for the Tesla cars in China due to their censorship Google, Android and Apple have no access to navigation capabilities. This can be an exclusive system for the Chinese consumers
If a Gigafactory is built on Mainland China, the company will save consumers a 25% import Tax and it will significantly increase the sales for Tesla model 3. When we analyse China culturally, it will make clear to the Chinese population that Tesla is committed takes their business seriously.
Tesla needs to separate clean energy from his car manufacturing business. There are too many balls being juggled and that can lead to little things being overlooked, such as meeting the needs of customers, and maintaining their satisfaction. Tesla is trying to conquer too much at one time and should only expand in one aspect in the company.
Increase number of Fast Charging Stations:
There are currently 769 charging stations across the globe for Tesla’s customers. They need to keep building up more Super Charging Stations although it requires a lot of money but CEO himself is leader with a lot of belief in himself and he got the immense potential to raise funds as he has proven himself in the past by building a 10 million square feet Gigafactory, so he can build up super charging stations a lot faster to keep an advantage over its competitors.
Strategies for Powerwall:
Powerwall home energy battery is an amazing creation from Tesla but they need to take both the Home market and Car market differently, they have to differentiate these products according to the need and usage. They need to come up with altogether a different strategy for Home energy product as it might be useful for developing countries where electricity is a major problem rather than developed countries. The home energy competition is different and separate from electric vehicle market because it involves government departments, so Elon Musk has to work hard with his team to make a new plan how to tackle this market and how to deal with the Government.