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Tesla motors case Strategy management

Tesla Motors’ Strategy to Revolutionize the Global Automotive Industry
Assignment Questions
1. What are the key elements of Tesla Motors’ strategy?
Answer: Tesla motors’ strategy is to manage their funds and increase more research on
producing more electric cars so as to dramatically decrease the world’s dependency on
petroleum-based cars. Tesla also have a core competency of observing and making their
products in a way to oversee the competition in the car industry in the coming years.
Tesla’s strategy were based on product line, technology and product development
strategy, vehicle design and engineering, manufacturing strategy, distribution strategy: a
company owned and operated network of retail stores and service centers and marketing
strategy. All of these strategies tesla motors plan to execute were aimed at research on
developing and improving the vehicles models (the tesla roadster and models) and also
meeting the demand of the customers by selling at a low price to increase their market
share. Also it was reported in the case since tesla’s funding they have spent over $900
million on developing their research and design in producing motor parts like battery
pack, induction motors and power electronics.
2. Which one of the five generic competitive strategies discussed in Chapter 5 most closely
approximates the competitive approach that Tesla is employing?
Answer: I think it’s the focused differentiated strategy. I know in the case it was reported
that tesla motors are also focused on providing their vehicles at a low to customers
considering that fact about the cost they use in producing their batteries. But in the whole

of a competitive approach I think it’s the focused differentiated strategy. So according to
the book, focused differentiated strategy means concentrating on a narrow buyer segment
(or market niche) and outcompeting rivals by offering niche members customized
attributes that meet their tastes and requirements better than rivals’ products. With the
definition given, that is a proof that tesla motors are using the focused differentiated
strategy. Now relating that back to the case and why I said it a focused differentiated
strategy is because tesla motors are known as the first electric motor manufacturing
company, they are based in America which means they are focused and differentiated and


also their strategy about improving the research and design about their models which earn
the Model S 5.4 rating mark in safety test and also a 99 out 100 mark and customer
satisfaction test, make it the first vehicle to earn those marks. So it’s fair to say tesla
produced their vehicle to meet the taste of customers and to outcompete their rivals.
Everyone might have a different about opinion but I think this the generic strategy they
are using.
3. Are you impressed by the strategy Elon Musk has crafted for Tesla? Why or why not?
Answer: I’m highly impressed by the strategy Elon Musk has crafted for tesla motors. In
business and innovation, you must be ready to sacrifice and take risk and that what Elon
Musk has done. In the case, they gave a brief summary about his career and everything I
read about his career were impressive of a person who is willing to give his all to his
business. Why I said I’m impressed by Elon Musk’s strategy for tesla is that it will most
certainly work. Elon Musk strategy is focused on making an entirely different unique
product with good quality from that of his rivals. He also encourages collaboration with
other companies so as to produce funding for tesla. Tesla were mentioned to form a
partnership with a German company Daimler. He also conducting funding programs for
the company when weren’t enough funds to complete their projects. And the most
impressive part was that he invested his own money into the business by taking part of
the funding program and donating huge sum of money for the company. He also manage
other companies like PayPal and eBay and so I think with the success of those companies
it’s fair to say Elon musk will take tesla motors to new height and will most certainly do
something good about the company.
4. What is your assessment of Tesla’s financial performance as shown in case Exhibit 1?
Use the financial ratio information in Table 4.1 of Chapter 4 (pages 81–83) to assist you
in calculating a revealing set of financial ratios and interpreting them.
Answer:
Cash ratio
Current ratio

Cash and cash equivalents/ current liabilities

Current assets/ Current
2010= 2.76, 2011= 1.95, 2012= 0.97, 2013= 1.88.
The current ratio decreased over the years as indicated


Quick ratio

Net profit Margin

above.
Current asset- Inventory/ Current liabilities.
2010= 2.23, 2011= 1.69, 2012= 0.48, 2013= 1.37
The quick ratio of tesla motors decreased drastically too
over the years. Going from 2.23 to 1.37 ratio.
Net income/Net revenue

5. What do we learn from the data in case Exhibit 2? Does the data provide additional
valuable information? Why or why not?
Answer: exhibit 2 is all about tesla’s financial performance through quarter 1 of 2013 to
quarter 1 of 2014 on a GAAP and non-GAAP basis. We do learn that tesla’s selling
expenses through those quarters increase drastically and also their net loss on GAAP
basis increase in quarter 1 of 2014 compared to the other quarters reported in the data. On
a non-GAAP basis there hasn’t been any net loss but only net income but in the course of
the quarters, net income decrease mostly in the quarter 1 of 2014 and most of its net
income was in quarter 4 of 2013. The additional information added in the data of exhibit
2 are the information about tesla’s revenue on the basis of GAAP and non-GAAP. On the
basis of GAAP the tesla’s revenue take a downward turn on the second quarter of 2013
and the third quarter of 2013. But the revenues increased in the fourth quarter of 2013
and also did very well increase dramatically in the first quarter of 2014. On the nonGAAP basis, The revenues decreased a little bit in the second quarter of 2013 and
increased respectively in the third and fourth quarter of 2013. But the revenues decrease a
little bit again in the first quarter of 2014. And what I really learned from this data is that
on a GAAP basis, the expenses reported are bigger than that of the expenses reported on a
non GAAP basis but the revenues reported on a GAAP basis are lesser than the expenses
reported on a non-GAAP basis.
6. What grade would you give Elon Musk for his handling of the battery pack fires and
battery-charging fire in the residential garage of a Model S owner?
Answer: If I was to grade him on a scale of 10 I would give him 10 out of 10. What he
did was extraordinary especially in the case of the battery-charging fire in the residential
garage of a Model S owner. The reason I said I would give him a 10 out of 10 was


because they redesigned those battery packs again just to make sure they were risk free.
In the case of that residential garage fire, they examined the case and came up with
results that showed that the fault weren’t theirs but were from the wall socket still the
opted to redesign the charging cable to minimize the charging process to eliminate any
fire issue and also the provided all of the newly redesign model charging cable to all of
their customers that have that model free of charge. Now that act will attract more
customers to their products even me and it would also give them a good reputation and a
good advantage over their rivals and competitors.
7. What are the issues/problems that Elon Musk and other members of Tesla’s top
management team need to address?
Answer: The problems that Elon Musk and other members of Tesla’s top management
team need to address are few but that are important and so the company need to take care
of them. Problem about technology. Technology is always a problem in the car industry
and even though tesla has been near perfect in their innovation there has been flaws that
led to those fire incidents concerning their batteries and so they need to eliminate those
flaws. Another problem is think that need to be solved in the problem about charging
stations that people may encounter. As I was going through the case I asked myself
questions like how do they charge and how long is the battery supposed to last. And so I
think Elon Musk and his team should take care of charging stations so as people don’t
need to travel far to charge their batteries.
8. What, if any, changes/adjustments in Tesla’s strategy would you recommend
that Elon Musk consider?
Answer: I think it should reconsider the strategy of selling at a low cost. Tesla motors has
been a success so far and through the years of coming up there has been situations where
by the company would run out of funds and they to conduct funding programs to come
out of those situations. So I think, tesla has produced quality models of electric cars and
they are unique and trustworthy and so I think Elon musk should think about increasing
the price considering the fact that demand in the cars increased and also their expenses in
producing those cars. I would also recommend that tesla form more partnership with
other car companies as they can in the United States and also try in expanding their


market more to reach out to more customers in the world that could be looking electric
cars.
9. 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?
Answer: Tesla future look bright and good considering the fact that they have good
strategy and a good visionary Elon Musk. Tesla is working releasing a new model of their
electric which I think will be a good for the market and I think customers will like it and
comparing them to gasoline-powered engines it will reported that they will reach 800,000
units in the year 2020.
Preference
Thompson, A. A., Peteraf, M. A., Gamble, J. E., & Strickland III, A. J. (2016). Crafting and
executing strategy: The quest for competitive advantage ; concepts and cases (20th ed.). (C245C272) New york, NY: McGraw-Hill education.
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