Incorporated in 2003, Tesla Motors, Inc. has, for its mission, "to accelerate the advent of sustainable transport by bringing compelling mass-market electric cars to market as soon as possible." More than a decade later, the company was facing many challenges. Additionally, more intense competition is prevailing. The company's CEO, Elon Musk, must come up with solutions on how to handle these challenges to keep Tesla Motors, Inc.'s success level.
Frank T. Rothaermel
Harvard Business Review (MH0032-PDF-ENG)
December 17, 2015
Case questions answered:
Case study questions answered in the first solution:
- What are the key elements of Tesla Motors Inc.’s strategy?
- Which one of the five generic competitive strategies discussed in Chapter 5 most closely approximates the competitive approach that Tesla is employing?
- Are you impressed by the strategy Elon Musk has crafted for Tesla? Why or why not?
- What is your assessment of Tesla’s financial performance, as shown in case Exhibit 2? Use the financial ratio information in Table 4.1 of Chapter 4 to assist you in calculating a revealing set of financial ratios and interpreting them.
- What do we learn from the data in case Exhibit 3? Does the data provide additional valuable information? Why or why not?
- What are the issues/problems that Elon Musk and other members of Tesla’s top management team need to address?
- What, if any, changes/adjustments in Tesla’s strategy would you recommend that Elon Musk consider?
- What is your outlook for Tesla’s future performance and its prospects for revolutionizing the global automotive industry’s use of gasoline-powered engines versus battery-powered engines?
Case study questions answered in the second solution:
- Which industry did Tesla enter into? Was it an attractive industry? (Hint: 5 forces (+1) analysis)
- How does Tesla create and capture economic value? How does it differ from how other players in the industry create and capture economic value? (Hint: Economic value framework)
- What are some resources/capabilities you think will allow Tesla to gain/sustain a competitive advantage? (Hint: VRIO framework and Isolating Mechanisms in Session 5’s reading)
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Case answers for Tesla Motors, Inc.
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What are the key elements of Tesla Motors, Inc.’s strategy?
Tesla Motors, Inc.’s strategy is based on effective management of their funds to enhance more research for the production of more electric cars to reduce dependency on petroleum-based cars. The core competency of Tesla is to observe and produce high-quality cars to gain a competitive advantage in the motor industry. The company’s strategy is based on technology and product, product line, vehicle design, and engineering, development strategy, manufacturing, and distribution. These strategy elements are aimed at the research and development of vehicle models that sell at a low cost to increase their market share.
Which one of the five generic competitive strategies discussed in Chapter 5 most closely approximates the competitive approach that Tesla is employing?
Tesla is using the differentiated strategy. It is concentrating on a narrow buyer segment. Tesla is known for the production of electric cars. Tesla Motors, Inc. produces its vehicles to meet the taste of their customers and outcompete its rivals in the market.
I can say they are using a differentiated strategy because they produced electric cars to help distinguish their products from similar products that their competitors offer. Electric cars are unique for customers in terms of vehicle design, features, brand image, quality, and customer service.
Are you impressed by the strategy Elon Musk has crafted for Tesla? Why or why not?
Yes, I am highly impressed by the strategy. It is important to note that in business and innovation, one must be ready to take risks and sacrifice, and Elon has done just that.
Elon’s strategy is focused on making a completely different unique product of high quality to compete in the market.
Simultaneously, he encourages collaboration with other organizations to ensure that the firm gets enough funds to complete the projects. With his innovative approach and strategies, Elon is taking Tesla Motors, Inc., to…