Running Head: CASE 13 Tesla Motors 1 Case 13: Tesla Motors: Disrupting the Auto Industry Lynissa Berry MGT599 Professor Hassan Yemer 4/21/2019 CASE 13 Tesla Motors 2 According to Carraher (2018), a strategy is a detailed or layout plan used to achieve goals or success in short and long run. In simple terms, a strategy is a plan that describes how things are going to get done. It is a roadmap or blueprint used to achieve both short- and long-term goals. The definition of strategy fit the context Elon Musk, the CEO of Tesla Inc in the sense that it directed the company from making losses to realizing profits. The strategy of Tesla Inc was to first build sports cars, then affordable cars, then electric vehicles, and it is now focusing on electric cars that can store energy for long (Moritz et al., 2015). The strategy of Tesla move as it was planned because in 2007 the company released Roadster sports car, followed by Model S, then Model X, and later Model 3. Tesla's Main Strategies To reach where it is now, the first strategy that Tesla Inc employed was the innovation of electric vehicles such as Model 3. The innovation of latest Model S and Tesla Roadster has enabled the company to win a large market share (Dryer & Furr, 2016). The second strategy was differentiation targeting strategy. In differentiation targeting strategy, Tesla Inc offered products depending on market segments of customers. Tesla has also leverage on product line strategy. This has been achieved by broadening its customer base by offering a variety of products as well as substantially cheaper products (Moritz et al., 2015). Tesla Inc also increases the network of service centers and retailers in various part of the world. Therefore, the company was in a position to win a large number of customers and establish itself as one of the leading brands in the industry. Tesla's Industry and Main Competitors CASE 13 Tesla Motors 3 Tesla Inc is operating in automotive manufacturing industry. The major competitors of Tesla Inc include Ford Motor Company, General Motors, Volkswagen, and Chevrolet. Ford Motor Company pursues a generic strategy, electrification strategy, and global market strategy. Ford's generic strategic mainly involve cost leadership. Ford's generic strategy focuses on cost reduction and low prices in order to attract customers. This generic strategy basically aims at cost minimization through streamlining of the process (Akakpo et al., 2019). General Motors leverage on generic strategy but its focus is mainly on product differentiation so as to offer customers with a wider array of products. Ford's generic strategy has been very successful because it has led to an increase in sale volume and profitability. Volkswagen leverages on systems strategy and innovation ecosystem just like Tesla Inc. Volkswagen recently launched Volkswagen e-Golf, an electric vehicle. The aim of Volkswagen is to produce products that are environmentally friendly. Analysts have indicated that Volkswagen e-Golf will give a serious competition to Tesla Model 3 and Tesla Model S (Dryer & Furr, 2016). In terms of marketing, Volkswagen leverage on differentiation targeting strategy where products are offered depending on market segments of customers. Chevrolet focuses mainly on innovation strategy and differentiation targeting strategy just like Volkswagen and Tesla Inc. Recently, Chevrolet launched Chevrolet Volt EV to the market. Industry Analysis for the CEO Using Porter's five forces, the threats of new entrants is low in the automobile manufacturing industry. It is very difficult for new companies to enter the industry and give competition to Tesla Inc because the industry requires high capitalization, high cost of brand development, and a great deal of innovation and investments (Dryer & Furr, 2016). Most of the CASE 13 Tesla Motors 4 companies operating in the industry benefits from economies of scale. In the industry, the power of suppliers is low due to the existence of many suppliers. With the presence of many suppliers in the market, a single supplier cannot influence prices of parts. Companies in the industry can look for suppliers that sell inputs or vehicle parts at low costs. Competitive rivalry in the automotive industry is relatively high. Companies in the industry are trying to outdo others through innovation and product differentiation. General Motors and Ford are two major companies that Tesla needs to keep watching because the two are advancing in technology with electric cars. The highly competitive rivalry in the industry is influenced by changing buying patterns of customers and technology advancement (Akakpo et al., 2019). The power of customers or buyers in the industry is moderate. In most cases, customers influence the prices of products. In the industry, the threat of substitutes is relatively high or strong. Companies within the industry compete for customers by using strategies such as product differentiation and technology advancement. For example, Tesla Model 3 and Tesla Model S offered by Tesla receive competition from Chevrolet Volt EV and Volkswagen e-Golf. In the industry, the competitive position of Tesla Inc is good considering that it is wellendowed with resources and capabilities. With its current investment in electric vehicles, Tesla stands to benefit from the increasing demand for such products (Stringham et al., 2017). Increasing in sale volume, revenues, and net profit is a good indicator that the company is doing good. In 2018, Tesla registered net revenue of $3.3 billion. Increase in global demand for electric vehicles also is good for the company. Most countries in the world have started to encourage consumers to consider eco-friendly vehicles. Proposed Goals for Tesla CASE 13 Tesla Motors 5 For the next one year, the company needs to focus on performance goals such as increasing energy innovation at least by 50 percent, establishing a good relationship with customers and suppliers, and increase sale volume by at least 20 percent. These short terms goals are important in achieving long-term goals (De Propris & Pegoraro, 2019). For the next five years, the company needs to double the number of vehicles produced by day in order to reach 321000, boost its research and development (R&D) in order to outdo competitors, broadening customer base by providing quality products at substantially cheaper prices, and it must hit on a series of escalating profits targets and revenues. CASE 13 Tesla Motors 6 References Akakpo, A., Gyasi, E. A., Oduro, B., & Akpabot, S. (2019). Foresight, organization policies and management strategies in electric vehicle technology advances at Tesla. In Futures Thinking and Organizational Policy (pp. 57-69). Palgrave Macmillan, Cham. Carraher, S. M. (2018). An examination of an instrument to measure Porter’s Five Forces Model. In International Journal of Arts & Sciences Conference at Harvard University. De Propris, L., & Pegoraro, D. (2019). Technological Disruptions and Production Location Choices. In The Changing Strategies of International Business (pp. 221-240). Palgrave Macmillan, Cham. Dryer, J., & Furr, N. (2016). Tesla motors: Disrupting the auto industry. INSEAD. Distributed by Case Centre as case, 316-0006. Moritz, M., Redlich, T., Krenz, P., Buxbaum-Conradi, S., & Wulfsberg, J. P. (2015, August). Tesla Motors, Inc.: Pioneer towards a new strategic approach in the automobile industry along the open source movement?. In 2015 Portland International Conference On Management Of Engineering And Technology (picmet) (pp. 85-92). IEEE. Stringham, E. P., Miller, J. K., & Clark, J. R. (2015). Overcoming barriers to entry in an established industry: Tesla Motors. California Management Review, 57(4), 85-103. Running head: INNOVATION AND COMPETITIVE ANALYSIS Innovation and Competitive Analysis MGT 599 Lynissa Berry 5/2/2019 Professor Hassan Yemer 1 INNOVATION AND COMPETITIVE ANALYSIS 2 This paper will use Porter's five forces of competition to conduct a competitive analysis of Tesla Motor Vehicle Company effectively. Tesla is an American company that puts its focus and strategy in building electric cars to suit the market needs. (Arshed and Pancholi, 2016) explain that the major strategy of this company was first to build sports cars, later cars that were affordable and moving on to electric vehicles including vehicles that can store energy for extended durations. Tesla, just like any other company in the corporate world, keeps a close eye on their rivals but Michael Porter on his tool of five forces encourages them to focus beyond dealings of their competitors and examine other significant factors that could possibly impact the business and its significance. For reasons of this study, we will perform Tesla’s competitive analysis using Porter's five forces. Tesla’s Competitive Analysis Tesla, just like a number of different organizations in the motor vehicle industry, faces stiff competition from a huge number of other electric car manufacturers. Companies like Ford motors and general motors have announced that they shall invest a significant amount of money into the production of electric vehicles in the next few years (Arshed and Pancholi, 2016). Given the influence that such companies have in the auto world, they can significantly bring a lot of competition to the company. The quality of the vehicle from general motors and other such companies has been preferred by a lot of customers as compared to Tesla. When it comes to supplier power, Tesla has the upper hand as a majority of suppliers of electric vehicle parts supplier to this company, given the fact that there exist little manufactures of electric vehicles in this niche. In terms of buyer power, Tesla still maintains their advantage in the sense that their buyers have no luxury of driving their prices down due to the fact that this company has a lot of demand when it comes to electric cars and there are less manufactures of electric cars in its INNOVATION AND COMPETITIVE ANALYSIS niche. There exist little chances that the products that Tesla offers might be substituted for other products by their buyers and customer gave that product of electric cars is not a common factor in the united states leave alone to individuals. When it comes to threat entry, Tesla faces stiff competition from potential General motors and Ford motors that are now investing in electric cars. Innovative trends Tesla, apart from being credited with the production of electric vehicles in today’s market, they are continuing to sharpen their innovation genius and coming up with other models of vehicles and innovations in the auto world. Pohl and Elmquist (2014) explain that the company has continued to develop its range of innovation and it is currently credited with the design of what they call the model x doors to fit a wide variety of vehicles in the auto world. On top of this, this electric car maker has now advanced and it is now making electric cars that are much desirable, can go faster than the previous model and can go relatively further as compared to other electric vehicles (EV’s) in the auto world and are now much safer than internal combustion engine (ICE) cars. These current innovations by Tesla have opened up possibilities that the company never thought possible. For starters, this has led to Tesla shares in the market increasing drastically as a lot of investors are now investing their finances in this company. The same innovations have facilitated Teslas sales, and production to go up by an estimated 49% in the last six months as explained by its co-founder and chief executive officer, Ellen Musk (Pohl and Elmquist 2014). It is with no iota of doubt that such innovation trends have driven Tesla market potentiality to the next level. Tesla’s Development Situation 3 INNOVATION AND COMPETITIVE ANALYSIS 4 This company that is co-founded by Ellen Musk has come a long way to get to the point that it currently stands. With the recent development and innovations, these company capabilities have tremendously grown. Pohl and Elmquist (2014) explain that the average production has increased with an estimated 14% from its previous 10% due to the involvement of shareholders and the customer need for safer, faster and cost-efficient electric cars. Their competitive advantage in the production of electric cars has also seen them enjoy a huge percentage of proceeds from the purchase of their motor vehicle. Tesla has also seen a very significant increase in investment that comes from a majority of the shareholders that have continued to increase their investment in this company due to the high number of popularity and proceeds that Tesla has gained over the years. Tesla Organizational Structure Escobedo (2017) explains that Tesla has a u-form organization structure which is commonly used the organizational function as the main defining factor. The structural group of employees that, Tesla is mostly made of is a group of engineers and other sales and servicing executive. This has given this company a very big advantage when it comes to innovation and its growth. It is the same group of employees and engineers that make a majority of the managerial workforce in Tesla, and this has seen it boost its sales and meet production deadlines with a lot of ease. Many companies understand the importance of meeting deadlines and appreciate it. Therefore, Tesla’s organizational structure does support its ability to innovate. Conclusion Tesla has over the years proved to be a very successful company in terms of innovation and paved the way for the new electric cars that are quickly replacing other forms of INNOVATION AND COMPETITIVE ANALYSIS 5 conventional diesel and petrol driven vehicles. The innovation capability of this company and its advantage has seen it develop new models of electric cars and boost its sales with ease. INNOVATION AND COMPETITIVE ANALYSIS References Arshed, N., & Pancholi, J. (2016). Porters Five Forces and Generic Strategies. Enterprise and it's Business Environment. Escobedo, E. M. (2017). New Product development; the Nikola Tesla extrapolation. 2017 International Conference on Applied System Innovation (ICASI). Pohl, H., & Elmquist, M. (2014). Radical innovation in a small firm: a hybrid electric vehicle development project at Volvo Cars. R&D Management, 40(4), 372-382. 6 Running head: TESLA AND CONSTANT INNOVATIONS Tesla and Constant Innovations Lynissa Berry MGT 599 5/20/2019 Professor Hassan Yemer 1 TESLA AND CONSTANT INNOVATIONS 2 According to Downs & Nunes, (2017), Tesla adopted an open, innovative approach in 2014 due to the low demand for electric vehicles. The strategy has led to increased competition for electric vehicles, although minimally. It is important for Tesla to change its innovative approach to eliminate competition. Downs & Nunes (2017) notes that disruptive technology is one approach the company may use to reduce competition, particularly from established automobile companies such as Ford. Disruptive technology will give Tesla a unique competitive advantage over other automobile companies. The company could also benefit from its previous closed innovation policy by patenting their products. Tesla has numerous competitive advantage over other automobiles companies. The company is the pioneer in electric vehicle manufacturing and has been consistent in its initial goal of producing environmentally friendly vehicles. The company employees have gained invaluable experience, and this has led to the release of exceptional automobiles such as models S and X based on new technologies. Car models produced by Tesla have advanced weight distribution and battery performance and this makes it hard for competitors to build (Vynakov et al., 2016). The cohesive vision of Tesla is also exceptional since the company has managed to sell sustainable cars that are solar powered. The company also offers a tech package option that customers can use to upgrade their vehicles. Information collected on the tech package offers the organization an advantage that is set to benefit the organization in the future. Tesla Inc is a US-based automobile and energy production company. The organization majors in electric vehicle production and is based in California. The organization was formed in 2003 and has led to a revolution in the automobile industry despite being a newcomer in the TESLA AND CONSTANT INNOVATIONS 3 industry. Tesla is popular for electric vehicles and solar-powered batteries, contributing to a sustainable ecosystem. This paper analyzes the importance of innovation Tesla, speculations into the future of the industry, Tesla’s competitive advantage, and strategies that can improve innovation. Tesla’s competitive advantages are exceptional but there are innovative strategies that the company should use to exploit its breakthroughs. First, the company should patent its ideas to private to avoid competition. Secondly, the company can adopt robot automation, which will add more uniqueness to its ecosystem friendly technology (Karamitsios, 2013). Third, the company would reap significant profits from the use of exceptional and advanced branding for its excellent models. The company's purpose of environmental sustainability is noble, and to appeal more to the community, Tesla should get connected ecosystem saving activities in all the communities where its factories are located. The company has managed significant profits since its beginning due to its commitment to innovation. Innovation is an essential aspect of any company, and Tesla's innovative ideas include the cost reduction of electric car batteries and rooftop solar systems. According to Ebersberger (2010), innovation is an approach that helps organizations earn their revenues and enhance their scope. Customers are in search of ways to solve their products in an easy manner and innovation plays a critical role in ensuring that clients receive value for their money through improved and new products (Chiaronni & Frattini, 2010). Additionally, it serves as an approach for companies to enter new markets and increase market share through the production of products that are better than competitors. Companies can only remain sustainable by consistently responding to their clients’ demands. TESLA AND CONSTANT INNOVATIONS 4 In conclusion, Tesla is an electric automobile production company whose main manufacturing plant is located in California, United States. The company has been operating since 2003 and has been an outstanding company for its constant innovations. Innovation benefits an organization in several ways, which include attracting new markets. The company opened its innovations to the public, and this has led to stiff competition from other organizations that have shown interest in the manufacturing of electric vehicles. One approach that would benefit Tesla is the use of disruptive technology that produces unique products to the market. This strategy is essential, especially since there are speculations that the industry will evolve drastically to meet customer demand. The demand for fuel consuming vehicles will decrease, and this creates a necessity for uniqueness. Industry experts speculate that technology will be the most significant change in the automobile industry in the next half a decade. The new selfdriving car will be on significant demand due to its self-integration character that will allow vehicles to collects vital information such as weather and traffic. Consumers will have higher demands for special features in their vehicles as they will expect automatic demands to deliver customized features in their vehicles. The automobile industry will be focused on producing efficient and cost-effective vehicles that will suit their changing lifestyles. Therefore, the industry will be based on customer-led innovations, and this aspect has already begun in most organizations. The number of fuel consuming cars will minimize since companies will focus on producing environmentally friendly vehicles through electrification of vehicles. TESLA AND CONSTANT INNOVATIONS 5 References Chiaroni, D., Chiesa, V., & Frattini, F. (2010). Unraveling the process from closed to open innovation: evidence from mature, asset-intensive industries. R&D Management, 40 (3), pp. 222-245. Downes, L., and Nunes, P. (2017). Is Tesla Really a Disruptor? (And Why the Answer Matters). [online] Harvard Business Review. Available at: https://hbr.org/2017/08/is-tesla-really-adisruptor-and-why-the-answer-matters [Accessed 13 Nov. 2018]. Ebersberger, B., Bloch, C., Herstad, S. J., & Van de Velde, E. (2010). Open innovation practices and their effect on innovation performance. International Journal of Innovation and Technology Management. F. Vynakov, O & V. Savolova, E & I. Skrynnyk, A. (2016). Modern Electric Cars of Tesla Motors Company. Karamitsios, Achilleas, (2013). Open Innovation in EVs: A Case Study of Tesla Motors Running head: ORGANIZATIONAL CHANGE 1 Organizational Change Tesla Motors Lynissa Berry MGT 599 Professor Hassan Yemer ORGANIZATIONAL CHANGE 2 Tesla company posses’ competitive advantage over other automobiles companies since company is the pioneer in electric vehicle manufacturing. Also, in the company is consistent when it comes to manufacturing environmental friendly vehicles. The company is an automobile industry with enormous market all over the world. Due to the environment change people are now conscious of the products they consumer. Thus, the company stands to gain more in future as people shift to buy electric cars. Therefore, since the electric vehicles are environment friendly and helps in reducing the environment pollutions, Tesla stands to gain more market in future. Tesla has managed to sell sustainable cars that are solar powered. The company also offers a tech package option that customers can use to upgrade their vehicles. Information collected on the tech package offers the organization an advantage that is set to benefit the organization in the future. The company’s industry is maturing as it represents opportunity for more market in the future. Porter’s diamond model refers to a strategic analysis that helps in evaluating organization in industry-view and the resource-based view. Advantages of the vertical integration include: it helps in decreasing transportation costs as common ownership ensures closer geographical area. Also, it helps in ensuring specialization and positive differentiation because there more information within the organization. As well, vertical integration can help Tesla to increase its local market share due to its brand reputation. Whereas, the disadvantages of vertical integration include: lack of flexibility as it doesn’t allow more vendors or contractors. Also, it makes business to operate under economic of scale. Outsourcing advantages include: the company gets vendors and contractors who have expertise and specialized in their field such that tasks are completed faster and with better ORGANIZATIONAL CHANGE 3 quality; helps organization to concentrate in core business process since the outsourcing supports process; ensure that the organization doesn’t incur total loss as there is shared risks because certain responsibilities are given to outsourced vendor, as well outsourcing helps in reducing operation and recruitment costs, and material costs. Whereas, the disadvantages of the outsourcing include: company is faces risk of their duplication of the product due to expose of their intellectual property, also hidden costs as well as lack of customer focus. The automobile industry has experienced growth all over the world. Thus, it Tesla company strategies will play an important part in ensuring that the company grows with the industry. Tesla has shown capability of ensuring of manufacturing quality cars which are environmental friendly through evolving innovation. Thus, vertical integration is the best option the company should use rather that to outsource to ensure that the company intellectual property remain within the organization. As well, vertical integration helps the company to access to capital that will allow company to expand and manage its market effectively. The company stands a change to increase its customer base due to its product as well as its value generation. Tesla Company’s must ensure that its development techniques relate to higher intensity to ensure that its competitors are not able to copy the company design. Thus, the company must ensure it has intellectual property right to avoid duplication of its cars. The company must remain competitive to ensure that it attracts customer through product differentiation and marketing aggressively throughout out the world. An increase in the company’ market will help in ensuring that organization increase it benefits (Stringham etal., 2015). The Boston development share matrix was constructed to help the organizations to develop by investigating their diverse specialty unit. Therefore, organization is able to allocate the assets effectively. This ORGANIZATIONAL CHANGE 4 allows suitable utilization of the outcomes in brand showing, strategic management as well as portfolio examination. Boston development matrix helps the organization to graphically describe the organization items. Tesla Inc. should ensure that it incorporates new motor vehicle designs with latest technological advancement to ensure that it achieve its strategies. Therefore, to achieve this approach the company needs to ensure there continuous innovation that effectively monitored in daily basis. As well, effective management team will help in ensuring that Tesla’s products are produced efficiently. The company also must remain grounded with aim of manufacturing environmental friendly vehicle as it will lure customer who are environment conscious. The company also must focus on improving its products to ensure it attract more customers while as well as maintain its market share. The company should ensure that there no defective cars when it comes to manufacturing of self-driving cars to ensure that the brand reputation is not subjected to negativity. As well, the company should ensure that marketing and advertisement are done in all platforms including in social media, print media etc. To ensure growth the company should focus on changing the decision-making style by ensuring that the company increases its market share by venturing into new emerging markets to facilitate sales increase and strengthen company’s position within the market. Tesla Inc. has not tapped into markets around the world; thus, it decision-making style by Elon Musk should change to help in tapping in new markets which presents a potential (Mangram, 2012). As well, the company should consider changing increases it production facilities especially in Europe and Asia since with current production capacity the company might fail to grow to level which it can match leading automobiles companies in the world. Investing in new plants the company stands ORGANIZATIONAL CHANGE 5 opportunities to reach to a bigger market share implying more sales. Moreover, the company should consider introducing new care model apart from existing one which is more affordable to help the company to penetrate to more customers. This will help the company to diversify its product making the company to reach to other customers. Tesla Inc.’s code of conduct on health and safety outlines that the company promotes safe and healthy environment as it is recipe on innovation, encourages adoption of health safety Management systems and follow guidelines maintaining conducive environment (Mangram, 2012). Good management systems will ensure elimination dangers and hazards that can harm employees in workplace. Also, the company puts lot of emphases on environment code of conduct. Thus, Tesla Inc. objective is to accelerate the world toward achieving sustainable energy. Also, the company ensures its Environmental Management Systems helps the organization to comply with environment regulations and policies. Also, the company promotes adoption of ways to reduces environmental pollutions. As such, the company expects all the suppliers comply with the company health and safety, and environment code of conducts. The company should focus on hiring talented employees and seeking right suppliers to help the Tesla’s CEO to implement strategies that were outlined effectively. Creating a friendly working environment for employee will drive the company forward; thus, employees’ empowerment is an important aspect of the code conduct. Conducive and friendly environment for the employees encourages innovation. Also, safe environment that allows employee to work with getting injured and employees’ Wages and benefits must comply with all applicable wage laws are requirements the company has outlined. The Company believes that everyone should be respected and treated with dignity (Mangram, 2012). Thus, Tesla expects its suppliers to have ORGANIZATIONAL CHANGE 6 the same value. The company offer equal opportunity when employing. The suppliers must be an equal opportunity employer. Tesla, Inc.’s code of conduct provides the principles the company follows on its business operations. Thus, the code of conduct improves Tesla’s corporate social responsibility. Thus, helps in empowering employees; reduces environment pollution; promotes social courses by prohibiting discrimination and prejudice; and outlines social and environmental responsibilities of the company, etc. Thus, code of conduct improves the company social responsible since it provides guidelines of partnering with suppliers. Therefore, ensuring the company’s code of conduct is followed, the CEO will be able to effective implement change successfully. In conclusion, Tesla Inc. must continue to produce high quality and highly technological vehicles that are environmental friendly to remain competitive in the automotive industry. Due to the environment change people are now conscious of the products they consumer. Thus, the company stands to gain more in future as people shift to buy electric cars. Therefore, since the electric vehicles are environment friendly and helps in reducing the environment pollutions, Tesla stands to gain more market in future (Burns, 2014). Tesla Inc. should ensure that it incorporates new motor vehicle designs with latest technological advancement to ensure that it achieve large market share as well as should consider introducing new care model apart from existing one which is more affordable to help the company to penetrate to more customers. ORGANIZATIONAL CHANGE 7 References Burns, P. (2014). New venture creation: A framework for entrepreneurial start-ups. Foray, D. (2014). Smart specialization: Opportunities and challenges for regional innovation policy. Grant, R. M. (2013). Contemporary strategy analysis. Hoboken, NJ: Wiley. Hardman, S., Shiu, E., & Steinberger-Wilckens, R. (2015). Changing the fate of Fuel Cell Vehicles: Can lessons be learnt from Tesla Motors?. international journal of hydrogen energy, 40(4), 1625-1638. Mangram, M. E. (2012). The globalization of Tesla Motors: a strategic marketing plan analysis. Journal of Strategic Marketing, 20(4), 289-312. Stringham, E. P., Miller, J. K., & Clark, J. R. (2015). Overcoming barriers to entry in an established industry: Tesla Motors. California Management Review, 57(4), 85-103.
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