Tesla, Inc. was founded in 2003 as Tesla Motors by Martin Eberhard and Marc Tarpenning in San Carlos, California. According to Chen and Perez (2018), Eberhard and Tarpenning connected with Elon Musk in February 2004 when looking for venture capital funding. Musk contributed the majority of the sum for the initial round of investment and became chairman of the board of directors; nowadays, Tesla, Inc. is primarily associated with his name. Tesla has overcome barriers in the development of high-performance cars, which are currently the world’s best-selling long-range pure electric vehicles with no pollutant emissions whatsoever (Analytics Insight, 2020). In addition to the flagship sedan Model S and the sports utility vehicle Model X with its Falcon-wing doors, the company offers a simpler, smaller, and more affordable Model 3. Analytics Insight (2020) states that Tesla expects Model 3 to be the model to propel electric cars into the mainstream. Moreover, not so long ago, the company started offering a full range of energy products that include storage, solar, and grid services. In other words, Tesla is at the forefront of the world’s inevitable transition to a sustainable energy platform.
In order to evaluate the company’s current business strategy, one is to primarily turn to its mission and vision statements. A mission statement is a short declaration of the purpose a company serves to its audience. Tesla’s mission statement used to be “to accelerate the world’s transition to sustainable transport”; however, in 2016, it was changed to “to accelerate the world’s transition to sustainable energy” (Tesla, n.d.). According to Rowland (2018), this change represents a small but significant shift in the company’s approach: now it wants to exploit market opportunities related to renewable energy. In a sense, Tesla’s new mission acknowledges the relevance of its energy storage products, whereas before, they seemed to be focused only on the electric vehicle market. in addition to the market for electric vehicles. Moreover, the verb ‘accelerate’ determines Tesla’s role in driving the industry towards high-tech solutions for sustainable business and products relying on renewable energy. Additionally, the phrase ‘the world’s transition’ indicates Tesla’s expectations of successful domination in the global electric vehicle and related products market.
An organization’s vision statement is the articulation of what it intends to achieve. Rowland (2018) states that Tesla’s vision statement is to “create the most compelling car company of the 21st century while driving the world’s transition to electric vehicles”. From the use of the adjective ‘compelling’, it is clear that the company aims to excel and exceed expectations. Tesla approaches it by incorporating advanced technology into its vehicles and products, constantly perfecting them. However, Rowland (2018) notes that the ‘car company’ component of the sentence points to Tesla’s primarily focusing on the design and production of cars. The significance of the reference to the 21st century is in the company’s intention to address the issues the new age brings — first and foremost, the environmental situation. Additionally, ‘the world’s transition’, just like in the mission statement, sends a message about the organization’s global goals. In other words, the phrasing of Tesla’s vision statement unfolds its aim of being the prevailing player in the global market of electric vehicles.
In terms of the operational goals of a business, these tend to be the driving force behind its corporate vision. From what can be concluded from the above, Tesla is committed to delivering high-quality electric vehicles. The 21st-century technologies will be leveraged to create a better and safer car company and promote the introduction of renewable and sustainable energy worldwide. According to Han (2021), Tesla has developed a nuanced operational strategy based on three key components to achieve all that. First of all, the company’s desire to be the best car company manifests itself in constantly wanting to improve on all fronts. Han (2021) states that, after coming last in the annual J.D. Power Initial Quality Study in 2020, Tesla decided to tackle the quality issues it had. Functional quality control mechanisms were implemented so that product problems could be better addressed. Tesla’s introduction of standardized trending and reporting for all of its plants, factories, and assembly lines worldwide resulted in its increased awareness of remedial measures. As a consequence, the company’s rankings rose in the subsequent J.D. Power 2020 APEAL Study, which evaluates both subjective and objective measures.
Moreover, Tesla tends to engage its employees and stakeholders in the implementation of critical mission-related processes. As per Han (2021), the organization’s symptom control program permits employees to help determine issues and recommend solutions. However, Tesla is very demanding and always expects everyone to work hard. Granted, guaranteeing perfection on such a high level is a challenge, but, according to the organization’s policies, anything is possible with hard work. For one, Tesla executives wanted to reach the milestone of 500,000 units in 2020 – and the company’s employees made great efforts to help achieve it in the last five days of the year (Han, 2021). This is why Tesla believes in the power of engagement: when people are motivated to work for a company, amazing things can happen.
Additionally, Tesla values safety and continuously advances the production processes on the foundation of the lessons learned from past experiences. New techniques are used to create improved risk management systems – for instance, the Find It-Fix It initiative encourages employees to report safety risks and rewards them for doing it (Han, 2021). Tesla also uses modern technologies to reduce injury risks in its factories and on the roads. In 2021, optimized repair services were announced: it now includes collision repairs, as well as managing of suspension, axle damage, and other disruptions (Kolodny, 2021). Access to these services can be quickly obtained through the Tesla app on one’s phone. Safety is essential for every business, but Tesla makes it evident how much it cares about it.
Among the most popular tools to analyze a company’s strategy and make strategic decisions are SWOT analysis and Porter’s Five Forces. According to Hall (2020), SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This model outlines internal and external factors that can contribute to the organization’s success and hinder it. In turn, Porter’s Five Forces helps one analyze the competitive market within a chosen industry (Hall, 2020). Its five key components are the existing competition, the potential for new entrants, supplier power, consumer power, and the arrival of substitutes.
As per SWOT analysis, strengths and weaknesses are the attributes of the internal origin that are helpful and harmful to achieving the objective. In Tesla’s case, one of the main strengths is, evidently, energy efficiency: the company is a pioneer in the electric vehicles industry because of its outstanding use of renewable energy sources. Another of Tesla’s strength is collaborations with renewable energy giants, which helps it to expand these efforts into the global market (Dutta, 2020). Moreover, Tesla is highly innovative, which is reflected in the quality of its vehicles; additionally, its brand image is strong: now, sustainable and profitable products are expected of the company. Among Tesla’s weaknesses are manufacturing complications due to such a high standard of innovation and its products being premium range, which can cause problems in terms of affordability (Dutta, 2020). Additionally, Tesla is viewed as Elon Musk’s one-man show, which puts a lot of responsibility on his shoulders.
Opportunities and Threats in the SWOT analysis model are factors of external origin that can influence a business strategy. One of the main opportunities for Tesla is its eco-friendly cars: as the world is becoming more sustainability-oriented, the demand for electric vehicles is growing (Chez and Perez, 2018). Another opportunity is autopilot technology, which has impressed the world with its safety and convenience; now, it needs to inspire the confidence of a regular driver. Moreover, Tesla’s battery cells are to be produced in-house: if implemented, their production costs are to be reduced and new jobs are to be created. In terms of threats, a major one is extensive competition: many brands are not only getting ready to launch alternative-fueled, self-driving cars as well – their prices are to be much lower (Dutta, 2020). Competitive pressure might result in high operational costs of the implementation of new technologies and lower rates of return. Additionally, Tesla has problems with maintaining long-term sustainability – which is essential for a public image – due to the instability of manufacturing conditions.
When it comes to assessing Tesla’s competitive advantages as per Porter’s Five Forces analysis, each factor is to be evaluated on a scale from low to high. For one, the threat from the existing competition is high: everyone – from start-ups to large brands – realizes the benefits of the sustainability policy. Competitors’ pricing and differentiation strategies limit Tesla’s successful market presence and profitability growth (Fortuna, 2020). The new entrants’ potential is high as well due to the lowness of barriers to entry. Chinese companies prevail in the electric vehicles start-up market, whereas Europeans and Americans dominate in the traditional marketplace, with their companies switching to electric.
Supplier power for Tesla is high because there is a limited supply of chain networks for the electric vehicle industry. According to Fortuna (2020), a disruption in the economy of any foreign supplier will have a negative impact on the company and its production. Tesla’s consumer power is low: its products are in the high-end market, and its pricing is high. Prevailing in the high-end market is easier due to a lack of competition, but to stay relevant there one must offer unique products and services. The final factor, the arrival of substitutes, is high: Fortuna (2020) notes that Tesla owns a little more than 1% of the automobile market share and around 15% of the global electric vehicle market. Bigger automakers have loyal customer bases, and the markets are becoming saturated with start-ups; if things go wrong, Tesla might lose its followers.
In general, Tesla’s current main competitive advantage is its constant perfection of technology to enable further development of electric vehicles. It is these cars that have earned the company its reputation: by consuming clean energy, they produce no pollutant emissions and contribute to the modern world’s highly-popular sustainability-oriented policy. In formulating the strategy that is to help Tesla achieve a sustainable competitive advantage, one is to determine the company’s deficiencies and address them in the strategy. The high threat of new entrants and market substitutes calls for the creation of differentiated products and services and better competition strategies. The bargaining power of suppliers demands the shortening of the chain supply network. The bargaining power of buyers, while currently low, still needs to be lowered by the diversification of the products in the popular segment. Finally, launch, production, and delivery ramp delays are to be improved: granted, this is often the case with more complicated technologies, but it is still unacceptable.
When it comes to strategy implementation, recommendations are the following: differentiating products and services are made with the expansion of technology innovation and the constant pursuit of better ideas. Flattening the company’s structure, as per Dess et al. (2021), is to improve the communication between management and, consequently, lead to the emergence of new concepts and notions. The threat of substitutes is to be eliminated by charging premium pricing in the high-end market while keeping a level of quality. The chain supply network can be shortened by constructing factories across the globe and diversifying suppliers; that way, Tesla is not to rely on the economies of other countries and supplier power is lowered. Designing more affordable models for the low-end market and making them advantageously differ from competitors will bring new customers and more profits for the company. For the ramp delays to be dealt with, manufacturing excellence is to be enhanced with the perfecting of manufacturing technologies. The best way to evaluate the success of the recommendations is to watch over time whether the company’s current problems will be solved and whether current weaknesses will stop affecting Tesla’s business outcomes.
References
Analytics Insight. (2020). Understanding Tesla’s intensive growth strategy in 2020.
Chen, Y., & Perez, Y. (2018). Business model design: Lessons learned from Tesla Motors. In D. Attias & P. da Costa (Eds.), Towards a sustainable economy: Paradoxes and trends in energy and transportation (pp. 53-69). Springer International Publishing.
Dess, G. G., McNamara, G., Eisner, A. B., & Lee, S. (2021). Strategic management: Text & cases (10th ed.). McGraw-Hill Education.
Dutta, A. (2020). A deep dive into Tesla’s business strategy. Feedough.
Fortuna, C. (2020). Tesla’s 5 biggest competitive advantages.CleanTechnica.
Hall, M. (2020). Porter’s 5 Forces vs. SWOT Analysis: What’s the Difference?Investopedia.
Han, J. (2021). How does Tesla Motors achieve a competitive advantage in the global automobile industry?Journal of Next-Generation Convergence Information Services Technology, 10(5), 573-582.
Kolodny, L. (2021). Tesla’s service now includes collision repairs, fulfilling Elon Musk’s 2018 promise. CNBC.
Rowland, C. (2018). Tesla, Inc.’s mission statement & vision statement (an analysis). Panmore.
Tesla. (n.d.). About Tesla.