Transfer Paper (TA)

Matriculation Number 1210-170906

Student Name Rebecca Nilanjana Patra
Program Master of Arts in Responsible Management
Lecturer
Seminar Leading and Managing Organisations
Authorization for YES
publication (SHB/ICRM
online and printed editions) NO

Please note that your answers should be limited to 3 pages.

Transfer Questions:

Please note that the questions should be incorporated in the context of the TA, but do
not have to be answered explicitly.

1. Actual situation: Is your company/organization up to date with respect to the

seminar topic or is there a need to catch up? If yes, in which areas?

2. General conditions for the seminar topic: Which exogenous general conditions
influence your project?

3. Target situation: What is your objective with respect to the seminar topic in the
framework of your project/your company?

4. With regard to the discussed seminar topic, what would have to be improved in
your organization/in your project and which specific measures will you take? Please
justify your proposals.

5. How do you ensure the success of your actions? Please justify this.

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TA Answers

INTRODUCTION
In this paper we will examine the business strategy of a well-known company. Some of
the main aspects of the strategy we will focus on include developing a market for the
company’s product, supply chain relations, their value proposition to customers,
innovation, organizational design and the sources of competitive advantage.
Either criticized or appreciated, Tesla Motors’ business strategy is unique and worthy
of taking a closer look at. Today the company’s vision is defined as accelerating the
world’s transition to sustainable energy. Their aim is to fast track the move to a solar
electric energy which they believe to be “the primary but not exclusive, sustainable
solution.” We will noe examine some of the company’s strategies that have won it
appreciation or have also garnered critique and skepticism

CORPORATE ENTREPRENEURSHIP- NEW MARKETS AND PRODUCTS

Going back to Tesla’s dependance on offering sustainable automotive products to
customers, transitioning to sustainable models is a strategy that we are seeing more
and more across various different industries in order for companies to be relevant as
well as to ensure they meet the evolving demands of their customers. Tesla, however,
has a long history of tapping into this strategy when not many players had started
adapting their products or creating new ones that were sustainable. Specifically within
the automotive industry, Tesla introduced to the scene the idea of battery-operated
cars that are now picking up pace alongside hybrid cars. This entry into a market that
didn’t previously exist, displaying risk taking behaviors, intuition about long term
customer demands are indicative of an entrepreneurial mindset specifically one that
redefines a domain (automobile industry in this case). This means creating and
exploiting a market or product arena that did not exist in the past or was not actively
recognized. Although results may not be quick or steep, as one also sees in the case
of Tesla, this is a long-term strategy that relies on an early mover advantage and
avoids confrontation with competitors as the arena is still unexplored, later entrants are
at a disadvantage.

INNOVATION

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Another aspect of this strategy that is closely linked to entrepreneurship is innovation

that we see clearly in Tesla. According to a Forbes article that talks about the spending
trends and comparative losses at Tesla, the company spends a huge amount as
investment in Research and Development. The major areas of their R&D concentrated
on automation, software updates and material costs in order to develop new products
and satisfy customer needs while providing renewable energy solutions. To this end,
some of the most significant innovations have been- auto pilot feature based on
artificial intelligence, lithium batteries, customizable cars and software updates.
Creating a user interface for the end user is something that differentiates their products
from the rest of the market. The company can be characterized as a prospector- As
they operate in a more dynamic external environment, exploiting new products and
market opportunities, their reputation as an innovator is crucial as they achieve their
growth through development of products and markets.

SEGMENT DIFFERENTIATION
While most traditional enterprises venturing into new products and markets create a
minimum viable product- functionally light and low priced for customers to generate
interest in the new product as well as ensure the company benefits from economies of
scale while reaching their growth goals Gradually they may monetize on their products.
Tesla, however, went on an entirely different route by focusing on a high-end customer
segment and producing niche luxurious products. Their research and customer
intuitiveness showed that customers were willing to pay a premium. Having entered the
market through the high end, they went on to develop lower priced products with each
successive model to finally gain from scale economies. This broad differentiation
strategy was developed as a source of competitive advantage.

SUPPLY CHAIN- VERTICAL INTEGRATION

Perhaps one of the most important sources of competitive advantage to Tesla, is their
move to take complete control of their supply chain themselves. Firstly, they
understood that the definer to their products and technology were the batteries that
they used. They understood that while the success of their products depended on
these batteries, it could present potential problems in the inherent technology it used
as well as in terms of creating a production bottleneck. This pushed them to take
control of the battery production by investing in factories that made the batteries
themselves. This strategic move had three major advantages for the company-
• They were able to control the production of the batteries which ensured the right
technology was in place since outsourcing this technology was too risky. Since

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this was at the core of their product, they couldn’t share the technology or be
dependent on an external supplier for this part.
• Since they now controlled the production, they were able to lower the prices of
batteries by manufacturing at scale. This is extremely significant as lower prices
would mean smoother adoption of electric vehicles. It also creates barriers to
entry for other players who do not have such capabilities
• Finally, since these batteries are integral to their business, they are used across
a variety of products. So they enjoyed the benefit of using batteries in parallel
business ventures such as their PowerAll.
This vertical integration strategy works well for a company like Tesla as it can create or
exploit market power through barriers to entry, price discrimination across segments
and as it helps develop a young market.

ORGNISATIONAL DESIGN
Another aspect of the company is the unique organizational structure that attracts
talent amongst candidates who share the same vision as the company. One of the
unique definig features of the organization design that proves to be a source of
competitive advantage across entrepreneurial companies and start ups is a flat
structure that allows anyone regardless of their background or position to be able to
share their ideas and opinions. This is coupled with a strong intentional effort to create
an innovative and creative company culture which is adequately rewarded and
compensated. The intensive recruitment process and training of employees are also
focused on this aspect to ensure they onboard the right people and develop their
organization in the direction of the company’s vision. Their aim is also to soon expand
their market gloablly and set up offices worldwide hiring international talent.
An aspect that has garnered much attention and discussion is the 100 hour work week.
Although this is not something that is propagated in most companies and is criticized
the company seems to believe this works for them and even attracts people who are
willing to display that level of commitment to their work and organization.

CONCLUSION
While the competitive advantage created by companies with Tesla’s strategies are
achieved through inimitable products, barriers to market entry, first mover advantage. It
also comes with certain challenes that we can also see in the selected example. These
include high risk, low profitability (atleast short term) as well as possible overextension

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of resources. Strategies should thus be applied carefully accounting for various factors
such as external environment, organizational capabilities and long term opportunities.

Appendices/Lists (if necessary)

- Organizational Strategy, Structure and Process. Miles, Snow, Meyer and Coleman
- Discovering your authentic leadership, George, Sims, McLean, Mayer
- Corporate Entrepreneurship and the pursuit of Competitive Advantage, Covin and
Miles (1999)
- Better Strategy through Organisational Design, Bryan and Joyce
- Tesla: Business Model and Strategic Analysis
(https://alecfurrier.medium.com/tesla-business-model-strategic-analysis-c7d00bdc0339)
- Tesla’s Business Strategy is not chaotic
(https://theconversation.com/teslas-business-strategy-is-not-chaotic-its-brilliant-127153)
- Lessons from Tesla’s approach to Innovation
(https://hbr.org/2020/02/lessons-from-teslas-approach-to-innovation)

I herewith declare that I have written the present paper independently in the
course of the Project Competence Program and have not used any sources,
tools and aids other than those stated.

Mumbai, 20th June 2021

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