Free Tesla, Inc. Case Study Solution | Assignment Help

MBA Staff Writer
Written by Gary F. Smith
Publish Date: 2024-10-03

Harvard Case - Tesla, Inc.

"Tesla, Inc." Harvard business case study is written by Frank T. Rothaermel. It deals with the challenges in the field of Strategy. The case study is 28 page(s) long and it was first published on : Oct 6, 2017

At Fern Fort University, we recommend Tesla, Inc. to prioritize a multi-pronged strategy focused on sustainable growth, global expansion, and product diversification, while leveraging its core competencies in innovation, technology, and brand building. This strategy should be underpinned by a commitment to environmental sustainability and corporate social responsibility, ensuring Tesla's long-term success in the rapidly evolving automotive industry.

2. Background

The case study focuses on Tesla, Inc., a revolutionary electric vehicle (EV) manufacturer and energy company founded by Elon Musk in 2003. Tesla has disrupted the traditional automotive industry with its innovative technology, sleek designs, and commitment to sustainable transportation. Despite facing challenges such as production bottlenecks, competition from established automakers, and volatile stock prices, Tesla has achieved significant success, becoming a global leader in the EV market.

The case study highlights Tesla's ambitious growth plans, including expanding its product portfolio, entering new markets, and developing advanced technologies like autonomous driving and artificial intelligence. The case explores the strategic challenges and opportunities facing Tesla as it seeks to maintain its competitive advantage and achieve its long-term goals.

3. Analysis of the Case Study

Strategic Analysis:

  • SWOT Analysis:

    • Strengths: Strong brand image, innovative technology, vertically integrated supply chain, strong customer loyalty, first-mover advantage in the EV market.
    • Weaknesses: Production bottlenecks, high reliance on Elon Musk, limited model diversity, high pricing, dependence on government subsidies.
    • Opportunities: Growing EV market, increasing demand for sustainable transportation, expansion into new markets, development of autonomous driving technology.
    • Threats: Competition from established automakers, potential regulatory changes, volatile battery prices, economic downturn, supply chain disruptions.

  • Porter's Five Forces Analysis:

    • Threat of New Entrants: High due to the increasing interest in the EV market and the availability of technology.
    • Bargaining Power of Buyers: Moderate, as consumers have diverse options and can switch between brands.
    • Bargaining Power of Suppliers: Moderate, as Tesla relies on specific battery suppliers and other components.
    • Threat of Substitute Products: High, as traditional gasoline-powered cars remain a viable alternative.
    • Rivalry Among Existing Competitors: High, as established automakers are rapidly developing their own EV offerings.

  • Value Chain Analysis:

    • Tesla's value chain is vertically integrated, allowing for greater control over production and innovation. However, this also increases its susceptibility to disruptions and cost fluctuations.

  • Business Model Innovation:

    • Tesla's business model focuses on direct sales, online ordering, and a premium pricing strategy, disrupting the traditional automotive dealership model.

  • Corporate Governance:

    • Tesla's corporate governance has been subject to scrutiny due to its CEO's unconventional leadership style and the company's high reliance on Elon Musk.

Financial Analysis:

  • Tesla's financial performance has been volatile, with periods of strong growth followed by losses.
  • The company relies heavily on debt financing and has a high valuation, making it susceptible to market fluctuations.
  • Tesla's profitability is impacted by production costs, battery prices, and government subsidies.

Marketing Analysis:

  • Tesla has built a strong brand image through its innovative technology, sleek designs, and commitment to sustainability.
  • The company utilizes social media effectively and has a loyal customer base.
  • Tesla's marketing strategy focuses on attracting environmentally conscious and tech-savvy consumers.

Operational Analysis:

  • Tesla faces challenges in scaling up production due to its vertically integrated model and reliance on specialized manufacturing processes.
  • The company is constantly innovating and improving its manufacturing processes, but production bottlenecks remain a concern.
  • Tesla's operations are heavily reliant on its supply chain, making it vulnerable to disruptions.

4. Recommendations

1. Strategic Growth and Expansion:

  • Product Diversification: Introduce a wider range of EV models, including more affordable options, to cater to a broader market segment.
  • Market Development: Expand into new markets, particularly in emerging economies with high growth potential.
  • Strategic Alliances: Form partnerships with established automakers, technology companies, and battery suppliers to leverage their expertise and resources.

2. Technological Innovation and Sustainability:

  • Autonomous Driving Technology: Invest heavily in research and development to accelerate the development and deployment of autonomous driving technology.
  • Energy Storage Solutions: Expand its energy storage business, offering battery solutions for residential, commercial, and utility-scale applications.
  • Sustainable Manufacturing Practices: Implement sustainable manufacturing practices throughout its value chain, reducing its environmental footprint and enhancing its brand image.

3. Operational Efficiency and Cost Management:

  • Optimize Manufacturing Processes: Improve production efficiency through automation, process optimization, and collaboration with suppliers.
  • Supply Chain Management: Enhance supply chain resilience by diversifying suppliers and implementing robust risk management strategies.
  • Cost Control: Implement cost-cutting measures across all departments, while maintaining quality and innovation.

4. Corporate Governance and Risk Management:

  • Strengthen Corporate Governance: Improve corporate governance practices by establishing a more independent board of directors and implementing robust financial controls.
  • Risk Management: Develop a comprehensive risk management framework to mitigate potential risks related to production, technology, competition, and regulation.
  • Transparency and Accountability: Enhance transparency and accountability by providing investors with regular updates on financial performance, operational progress, and strategic initiatives.

5. Brand Management and Customer Engagement:

  • Enhance Brand Image: Maintain its commitment to sustainability and innovation while expanding its brand appeal to a broader audience.
  • Customer Experience: Improve customer experience through enhanced service offerings, online platforms, and personalized communication.
  • Community Engagement: Engage with local communities and stakeholders to build trust and support for Tesla's mission.

5. Basis of Recommendations

These recommendations are based on a comprehensive analysis of Tesla's strengths, weaknesses, opportunities, and threats. They are aligned with the company's mission to accelerate the world's transition to sustainable energy and transportation. The recommendations also consider the evolving competitive landscape, the growing demand for EVs, and the potential for technological advancements.

  • Core Competencies and Consistency with Mission: The recommendations leverage Tesla's core competencies in innovation, technology, and brand building, while aligning with its mission to accelerate the world's transition to sustainable energy.
  • External Customers and Internal Clients: The recommendations address the needs of external customers by offering a wider range of products, improving customer experience, and expanding into new markets. They also consider the needs of internal clients by focusing on operational efficiency, employee development, and corporate governance.
  • Competitors: The recommendations address the competitive threat from established automakers by focusing on technological innovation, cost management, and brand differentiation.
  • Attractiveness: The recommendations are expected to enhance Tesla's long-term profitability and market share, based on the growing demand for EVs, the potential for technological advancements, and the company's strong brand image.

6. Conclusion

Tesla, Inc. stands at a pivotal point in its journey. By embracing a multi-pronged strategy that prioritizes sustainable growth, global expansion, and product diversification, while leveraging its core competencies in innovation, technology, and brand building, Tesla can continue to disrupt the automotive industry and achieve its long-term goals. This strategy should be underpinned by a commitment to environmental sustainability and corporate social responsibility, ensuring Tesla's long-term success in the rapidly evolving automotive industry.

7. Discussion

Alternatives:

  • Focus solely on luxury EVs: This strategy would limit Tesla's market reach and make it more vulnerable to competition.
  • Abandon vertical integration: This would reduce Tesla's control over production and innovation, but could improve operational efficiency and reduce costs.
  • Merger and Acquisition: Acquiring another automotive company could provide Tesla with access to new technologies, manufacturing capabilities, and market share. However, this could also lead to integration challenges and cultural clashes.

Risks and Key Assumptions:

  • Competition: The EV market is becoming increasingly competitive, with established automakers rapidly developing their own EV offerings.
  • Technology: The development of autonomous driving technology is complex and uncertain, and Tesla may face challenges in bringing this technology to market.
  • Government Regulations: Changes in government regulations, such as tax incentives and emissions standards, could impact Tesla's profitability and market share.

8. Next Steps

  • Develop a detailed strategic plan: Outline specific goals, timelines, and resource allocation for each strategic initiative.
  • Implement a robust risk management framework: Identify and mitigate potential risks related to production, technology, competition, and regulation.
  • Monitor progress and adjust strategies: Regularly evaluate the effectiveness of the strategy and make adjustments as needed.
  • Communicate effectively with stakeholders: Keep investors, employees, and the public informed about Tesla's progress and strategic direction.

By implementing these recommendations and addressing the potential risks, Tesla can position itself for continued success in the rapidly evolving automotive industry.

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Case Description

The case is set in October 2017 and the case protagonist is Elon Musk, co-founder and CEO of Tesla, Inc., one of the first fully integrated sustainable energy and transportation companies. The case focuses on the electric vehicle segment of the business (formerly known as Tesla Motors Inc. prior to the 2016 acquisition of SolarCity, a solar energy company). The case begins by Elon Musk reviewing the latest production data for the newly introduced Model 3. Musk had promised that Tesla would build 1,500 vehicles of its newest car model in the third quarter of 2017, and then ramping up production to 5,000 Model 3 vehicles per week in the fourth quarter (for a total of 65,000 cars). The reality: the maker of all-electric vehicles barely managed to build 260 vehicles of the new Model 3 in the entire third quarter. The poor result is a huge disappointment. The case then goes on to look at Musk's new strategy introduced for the company in 2016 ("Master Plan, Part Deux") to continue the pursuit of its vision "to accelerate the advent of sustainable energy." In 2017, Tesla, Inc. boasted a market capitalization of some $60 billion, an appreciation of more than 1,300 percent over its initial public offering price in 2010 (Exhibit 1 in the case). Indeed, Tesla had become the most valuable American car maker, ahead of both, GM and Ford.

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