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Tesla and its CEO Elon Musk implemented major but risky moves for the expansion of the scale and scope of Tesla's business sometime from 2014 to 2016. This was done while Tesla was still financially struggling. Are these moves too ambitious and too risky for Tesla and the investors?
David B. Yoffie; Eric Baldwin
Harvard Business Review (717431-PDF-ENG)
November 21, 2016
Case questions answered:
- Evaluation of Elon Musk's Aspirations for Solar City.
- Strategic Assessment and Recommendation for Tesla.
- Strategy Advice for Elon Musk.
- As a board member of Tesla, would you have voted for or against the merger with solar city? Why? Provide detailed arguments in favor and against it.
- Assess Musk’s strategy to build the Gigafactory: What are the pros and cons of building the largest factory in the world for batteries? Why enter a commodity business?
- Assess Musk’s strategy for Tesla: If you were Elon Musk, would you drive Tesla to become a large automobile company, a battery company, a sustainable energy company?
- Would you advise Musk to continue to shoot for the moon (or more accurately Mars)? Stay the course but take on nothing new? Or retrench, and narrow his focus?
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Case answers for Elon Musk's Big Bets
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Evaluation of Elon Musk’s Aspirations for Solar City:
The aspiration and strategy are complementary. Elon Musk’s statement for SolarCity, “becoming energy positive by providing zero-emission electric power generation options,” showcases the vision to achieve the goal. The mission/aspirations to specifying means to achieve it remains unclear.
The statement above was used in conjunction with Tesla’s mission, “the overarching purpose … car without compromises,” highlighting personal/organizational aspirations and intrinsic motivation.
However, organizational aspirations should go beyond inspiring its employees. It should be strategic to be able to communicate the game plan and values. Thus, the mission is motivation rich but lacks to reflect business strategy (Appendix 1).
Strategic Assessment and Recommendation for Tesla:
Tesla is an impressive futuristic company focused on maximizing its value chain by vertical integration. The company started in automobiles by launching Electric Vehicles (EV) and has expanded into battery manufacturing, solar panels, and energy storage sectors (Appendix 2).
Using Porter’s Analysis, we can Assess Tesla’s strategies leading to its growth and forecast the company’s future. Tesla established the market for EV by launching its test product Roadster in the year 2008.
Since then, Tesla has introduced 3 models, with the most recent model in the year 2016. Since EV production is capital intensive, with 30% of the cost attributable to the car’s battery, the barrier to entry in this industry is high.
With Tesla improving its value chain through vertical integration (battery production in Gigafactory), it will considerably reduce suppliers’ bargaining power. With product sales intended toward high-end consumers with less price sensitivity, consumers’ bargaining power is low.
One factor that might affect the company big time is the…
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