MSL 711

STRATEGIC MANAGEMENT

Case -3
Tesla Case Study

Submitted to
Prof. Sushil Sir

Submitted by
Group – 1 (Section B)

Sujata Dutta 2021SMF6513

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Ans.1.) 
The business model of Tesla comprises of being a leading firm on three different fronts:
electric cars, renewable energy, and space exploration at one time Elon Musk had three
companies simultaneously Tesla, SolarCity, and SpaceX
Its master plan includes the strategy of :
1. Create a stunning solar roof with seamlessly integrated battery storage: With the
acquisition of SolarCity, Tesla Inc has morphed into one of the fully integrated
sustainable energy companies while providing zero-emission vehicles.
2. Expanding electric vehicle product line to address all major segments: Elon Musk has
planned to expand the lineup of Tesla’s electric vehicles to address all major segments
including pickup trucks, buses, and heavy duty semis.
3. Developing a self-driving capability that is significantly safer than manual: The goal
is to make self-driving cars and thus be able to offer fully autonomous.
4. Enable car to make money when it is not used: Musk’s goal was to offer an Uber-like
service made up of Tesla vehicles without drivers.

Tesla Business Model Canvas:

 [Ref: https://businessmodelanalyst.com/tesla-business-model/ ]

What makes the business model of Tesla different from others: In today's software-driven
world, traditional manufacturers are unprepared to compete. They are huge, bureaucratic,

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slow to respond to customers, reliant on customer financing for unit sales growth, and
culturally different from a software firm, unlike nimble Tesla. 
Tesla's rate of innovation in the high-end automobile industry is comparable to that of Google
or Amazon rather than an automaker. And its increasing market value is a clear signal to
other automakers that, in order to survive, they'll need to develop more inventive, Tesla-like
business models.
Tesla’s business model highlights some features which differentiate it from other
traditionalcar manufacturers. Those are listed below.
 Direct Sale: Unlike other automotive manufacturers, Tesla sells directly to people,
rather than through franchised dealerships. It has built a worldwide network of
company-owned showrooms and galleries, the majority of which are in large cities.
Tesla has a believe that by controlling the sales channel, it will be able to speed up
product development. More importantly, it enhances the customer's purchasing
experience. Unlike car dealerships, Tesla showrooms are free of potential conflicts of
interest. Tesla sales and service staff are the only ones who deal with customers..
 Innovations: Tesla creates automobiles by developing software on custom hardware,
similar to how Apple creates the iPhone. This allows the corporation to upgrade the
software functionality of its vehicles every few weeks. In contrast to the old auto
industry model, where the product remains the same for as long as you drive it, this is
a significant change.
 The Supercharger Network: Tesla has its own network of "supercharger stations"
where drivers may get a free charge for their Tesla vehicles in roughly 30 minutes. Of
course, the goal is to accelerate the adoption of electric vehicles by making them
cheaper and easier to maintain.
 Minimizing total cost of ownership: Tesla's electric automobiles are far less
complicated than their internal combustion counterparts. They have roughly 20 parts
per car, compared to 2,000 in internal combustion engines, according to some
estimates. The total cost of ownership for consumers is considerably reduced as a
result of this simplicity.
 Environment-friendly standpoint: They are leveraging the recent market trend of
going green. Having a very low carbon footprint Tesla cars get the market attention
and have a great advantage over the other traditional car manufacturers.

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Ans.2.) 

Musk's innovation strategy is straightforward, focusing entirely on a high-quality car that can
be profitable. Musk's initial plan has no intention of posing a threat to competitors or offering
any product distinction. It is just a discrete and average-based technique of market entrance.
Musks gradually begin to unravel his rudiments of a strategy. With the debut of his sports
vehicle, he starts with a limited target market and low production, then moves on to a larger
target market with more production and lower prices. Musk's initial plan was to go from the
low output and high costs to high production and reduced costs while improving quality.
Musk's sales increased gradually from 50,658 automobiles in 2015 to 76,297 in 2016, and
now to 500,000 vehicles in 2019. Musk's strategy works because each layer of models
produced provides financial security. Although Tesla has only sold 200,000 vehicles since
2015, it has a larger profit margin than GM, which has sold over 10 million. Musk used these
resources as a competitive advantage after he was able to achieve product differentiation and
cost leadership. Musk's innovation strategy, in general, concentrates on technology and
manufacturing in order to capture a larger market.
Tesla is presently taking a more gradual approach, looking for ways to improve a vehicle that
already exists. EVs (Electric Vehicles) are not new, but they have not always been favorably
received. Tesla increased consumer interest and awareness of EVs by giving a more unique
and appealing appearance. The notion about electric vehicles has been around for a long time,
but Tesla's business strategy is what has propelled the firm to greater success. Tesla's goal
was to develop a better battery system that would allow for longer battery life.

Ans.3.) 
The electric vehicle industry is in the process of transitioning to the growth stage, in which
the overall market growth rate is dramatically high and the potential for growth is enormous.
The electric car's technology and infrastructure are reliable, but they could be improved. The
cobalt-lithium-based battery is adequate for urban commuting, but the entire industry requires
research to increase battery density while lowering cost.
Because the United States and China are Tesla's primary target markets, the electric vehicle
industry has a promising future. 

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Furthermore, government policies, technological development to meet the diverse demands
of consumers, and the cost structure of building electric vehicles are three critical
implications for the industry's future development. 
To encourage even more electric vehicle sales, the government should extend the tax break
until a mandate requiring gasoline-powered vehicles is repealed. 
Another significant implication is technology and infrastructure, as the consumer wants a
battery with longer travel miles and shorter charging time, and would prefer to do so in their
garage, in addition to those who don't have a garage. Another aspect that a company should
work on is reliability and comfortability. Furthermore, consumers have space, function, and
luxury requirements. In general, customers want electric vehicles that are comparable to or
better than their current gasoline vehicles.

At this stage, the primary strategy focuses on technology and branding. Because the market is
small and technology is still in its early stages, Tesla should maintain its position as "the"
electric car manufacturer. Because technology is advancing, the firm must continue to
upgrade its models rather than incrementally improve the existing ones. Furthermore, the
current market volume is insufficient to support a scale economy. Additionally, brand
recognition is an important strategy as Tesla strives to dominate the electric vehicle market
and intends to do so in the long run. Profits appear feasible in the future as long as Tesla
maintains its competitive advantages until the market matures.

Ans.4.) 

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