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Elon Musk has the reputation of being a serial entrepreneur. This reputation made people think about how this would affect his current focus which is Tesla Motors. Tesla has made a name for itself as the leading all-electric car technology amidst the alternative fuel vehicle industry. One of its models, the Tesla Model S, was named the Motor Trend 2013 Car of the Year. Despite this and its high stock price, Tesla Motors has many challenges to hurdle in its future.
Frank T. Rothaermel; Erin Zimmer
Harvard Business Review (MH0017-PDF-ENG)
January 03, 2014
Case questions answered:
- Develop a Strategy-SWOT for Tesla using the method discussed in class. You should have 2 strategies per box (8 total).
- Evaluate the strategies generated from your Strategy-SWOT to pick the 3 highest priorities. Explain your logic (criteria) in selecting the most important strategies. This context is important.
- Articulate your 3 highest priority strategies with a clear Strategy Statement and the associated tactics. Metrics should be integrated into these strategies.
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Case answers for Tesla Motors (2013): Will Sparks Fly in the Automobile Industry
Tesla Case Memorandum
Executive Summary: Tesla has been successful with its differentiation strategy in the premium segment of EVs market. However, as Tesla is entering a new segment of upper-middle-class with the introduction of Model 3, and will likely expand to the middle-class segment in the long-term, the differentiation strategy will no longer be the best fit for Tesla.
It is time for Tesla to switch to a better strategy that can overcome a huge disadvantage resulting from the loss of Federal tax credits. The strategy that makes the most sense for Tesla in facing this threat is the best-cost provider. When integrated with supplier strategy and marketing strategy, Tesla will be likely to cover most of its weaknesses and neutralize most of the threats, giving it a full potential to prospect in the new segments.
Tesla Strategies Evaluation: there are three groups of strategies derived from S-SWOT analysis [see Table 1]: Competitive strategies (Focused differentiation vs. Best-cost provider), Supplier strategy (Alliances and partnerships vs. Backward vertical integration), and Marketing strategy.
1. Competitive strategy evaluation:
Why best-cost provider strategy is better?
[see Table 5] Tesla’s current strategy is mostly about focused differentiation. However, this strategy will no longer be the best fit for Tesla as the company moves forward, especially with the introduction of Model 3. The evaluation results in a higher score for the Best-cost provider strategy (BCPS) when comparing to the Focused differentiation strategy (FDS). Although both strategies require the same point of resources, BCPS can take advantage of opportunities, neutralize threats, and minimize the weaknesses much better:
- BCPS takes advantage of opportunities better: since the upper-middle class and middle-class segments are more price-sensitive than the premium segment, offering a better price will result in higher sales and an increase in market share. Evidently, the total reservation of Model 3 in 2016 is 400,000, much higher than Model S and X deliveries in 2015 (50,580 deliveries) or in 2016 (expected at 90,000 deliveries).
- BCPS neutralizes threats better: one of the severe impacts on Model 3 sales is the loss of incentives from Government / States as it can result in a 30-50% sales decrease.1 BCPS can offer attractive prices, therefore, reduce the impact of this threat.
- BCPS minimizes weaknesses better: one of Tesla’s key weaknesses is from manufacturing. The company has not reached the breakeven point yet due to…
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