Tesla Motors’ Strategy to Revolutionize the Global Automotive Industry
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.
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.
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.
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.
|Cash ratio||Cash and cash equivalents/ current liabilities|
|Current ratio||Current assets/ Current2010= 2.76, 2011= 1.95, 2012= 0.97, 2013= 1.88.The current ratio decreased over the years as indicated above.|
|Quick ratio||Current asset- Inventory/ Current liabilities.2010= 2.23, 2011= 1.69, 2012= 0.48, 2013= 1.37The quick ratio of tesla motors decreased drastically too over the years. Going from 2.23 to 1.37 ratio.|
|Net profit Margin||Net income/Net revenue|
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 non-GAAP 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.
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.
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.
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.
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.
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.). (C245-C272) New york, NY: McGraw-Hill education.
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