A CASE STUDY ON TESLA

Table of contents………………………………………………...………..1

Abbreviations page…………………………………………………..……...2

Introduction…………………………………………………………………..3

External analysis using Porter’s 5 model…………………………………...4-5

Internal analysis using VRIO(Value,Rare,Imitable & Organized).................6

I. Sources of Competitive advantage…………………..7-8

Globalization………………………………………………………………….9

i.Approach to enter foreign market……………………………………….9

ii.Drivers to foreign market………………………………………………...9

iii.Concluding remarks……………………………………………………..10

References……………………………………………………………………….11

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List of abbreviations

1.Vw-Volkswagen

II.Ev-Electric vehicle

III.VRIO-Value resource imitable & organized

IV.IEA-International Energy Agency

V.OTA-Over the air

VI..BMW-Bayerische Motorenwerke

VII.SIPG-Shanghai International Group

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An introduction

The company introduced in 2003 by a group of Engineers makes electric cars, solar panels,

etc.Headquartered in California it is expanding sales across the world.

Under the CEO Elon Musk ,the first Tesla car (Roadstar) was made in 2008 then Model S, X,&

3 followed. Tesla has gained success valued at about $48 billion surpassing Ford at $45

billion(La Monica,2017).

The report seeks to analyze Tesla’s external and internal environment, source of competitive

advantage, the motivation behind entering the global market and the best strategy to do so.

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External Analysis

Using Porter's Five Forces

Power of buyers -Limited editions mean Low

customers might queue for
order
-Meets the need of customers

Threat of new entrants -Barriers are high due to fixed low

cost
-Strong network/capital
required

Rivalry competition from High

Ford,Hyundai etc

Power of suppliers produces cells itself but still medium

needs components from
supplier

Threat of substitutes -Other means of transport like high

bus etc
-limited options of substitutes
Table 1 for porter’s 5 forces on Tesla

A.Competitive rivalry in the industry is High(Critical factor)

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(IEA,2020)suggests Over 2.1 million electric cars were sold in 2019, surpassing sales in 2018.
According to (Trudel,2021)the VW Group plans to provide 1 million hybrid cars
2025, Diess hopes to overtake Tesla in sales.Can improve by investing heavily in marketing.
According to a Forbes report by Koetsier(2019,), Tesla spends $0 on advertising, Toyota, Ford
etc spend heavily on social platforms.

Tab 2.A brand total table showing how much companies spent on adverts

B.Threat of suppliers is Medium (Critical factor)

Tesla’s vertical integration helps streamline the industry's supply chain by integrating
production. It relies upon suppliers for cells but plans to scale up production, strengthening the
bargaining power. It can develop dedicated supplier networks to rely solely on them.
Ford opted to buy battery cells from suppliers, as Kumar Galhotra states, there needs to be a
mass production to justify building batteries, but not yet(Grezelwski,2021). However, Tesla can
avoid having those problems by strengthening supply chain networks
.

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Internal analysis using VRIO model
VRIO will analyze Tesla’s internal resources for core competencies

Image 1. source;wordpress.com

RESOURCES V R I O

Brand ✅ ✅ ✅ ✅

HRM ✅

Technological ✅ ✅ ✅ ✅
innovation

Supercharger ✅ ✅ ✅ ✅
network

Battery supply ✅ ✅ ✅ ✅
chain
Table 3. VRIO model on Tesla
(Resources which have ✅ in all 4 VRIO are core and can sustain competitive advantage)

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Sources of competitive advantage

A.Technological innovation.
(Dyer et al,2016) suggest Tesla is among the top disruptors, producing innovations that are
revolutionary and hard to clone.Tesla is the only Ev company in Top 10 most innovative
companies list according to (Forbes,2019). Tesla has features other EV companies can only
dream of, such as over-the-air updates. More money should be spent on training and R&D to
bolster innovation.

Tab 2 Showing Tesla as a top 10 innovative company

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B.Super charger networks
Tesla supercharger stations make for a unique piece of signage. Plans for any Ev user to boost
their cars, making the network a growing competitive advantage. As of 2020,Tesla has 20,000
stalls at 2,100 Supercharging stations worldwide(Lambert,2021) To sustain competitive
advantage Tesla can seek to reduce costs of using Superchargers or using a subscription program
to encourage customers.

C.Battery supply chain

Dean Dugger suggests , German electric companies like BMW will suffer from an inability to
meet demand.By 2021, BMW, Mercedes, and VW Group - will reach 10,000 a year, and Tesla,
about 650,000. (Grzelewski, 2021)
To sustain a competitive advantage, Tesla can continue to use blockchain technology to track the
movement of materials across the market like it did in Shanghai. Together with COSCO and
SIPG, Tesla tracked cargo(Mondragon,2020)

(2.)Thomas Reuters suggests Tesla's revenue is mostly in the U.S. (60 per cent in 2016, ), so it's
time to go abroad(Amelia et al,2018) Tesla can engage in the alliance strategy model, where two
companies work together on a project but retain their independence. This ensures both parties
benefit from the project just like the alliance Ford & VW entered as they are set to produce
trucks in 2022. Forming an alliance with BMW for example makes strategic sense as
(Kodama,2014) suggests. A single firm cannot manage to deal with challenges such as shortened
heavy R&D investments, mandatory initial payments because of liquidity management and
shortage of skilled employees.Tesla would have to change through strategy styles, global

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diversification becomes a strategic option, and trade barriers are lowered. Lobbying influences
decision making, strategy and embracing new cultural difference

Motives for Going abroad

i.Market diversification
In such a scenario, Tesla would be better served to go overseas because it would help ease the
risk of slowing demand and also serve as a safety net for regular revenue streams. A company
that is having trouble in the domestic market can use profits from a new market to supplement its
income.

Risk- Countries differ greatly in their business cultures, Most notably between East and West.
Intangibles Business overseas can suffer from misunderstandings and affect profits.

ii. Favourable government laws

Tesla will be pushed to enter a global market like say India where the existing government offers
favourable incentives like low barriers to trade etc
Risk-New government with different policies can put in new laws which would affect the
company negatively.

iii)Cost Drivers
Tesla’s globalization is to achieve economies of scale which allow the firm to optimize its
transportation and distribution logistics. Also, with the benefits of easier access to suppliers,
lower wages, etc these programs permit firms to make their products cheaper in some countries.

Concluding remark;The world is moving away from diesel combustion engines, it would take
time to completely phase out.Tesla has made a huge impact on the industry and is surely on the
right path.

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Reference List

AA Cars, 2018. Top 10 Countries For Electric Car Sales Worldwide. AA Cars. Available at:
https://www.theaa.com/cars/news/aa-cars-news/top-10-countries-selling-electric-cars-
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%20Worldwide,%20%201.6%25%20%206%20more%20rows%20 [Accessed July 7, 2021].

Amelia, Y. & Raina, Q., 2018. Understanding Tesla's Intensive Growth Strategy in 2020.
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%20in,and%20Asian%20markets%2C%20to%20diversify%20its%20revenue%20streams.
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Dean, G., 2021. A Tesla owner sued Elon Musk's EV giant, claiming it broke its promise of free
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Dyer, J. & Gregersen, H., 2016. Decoding Tesla's Secret Formula. Forbes. Available at:
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Grzelewski, J., 2021. Ford Explores Making Its Own Electric Vehicle Battery Cells.
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IEA, 2020. Global EV Outlook 2020 – Analysis. IEA. Available at:

https://www.iea.org/reports/global-ev-outlook-2020 [Accessed July 4, 2021].

Koetsier, J., 2021. Tesla Spends Zero On Ads. Here's Where BMW, Toyota, Ford, and Porsche
Spend Digital Ad Dollars. Forbes. Available at:
https://www.forbes.com/sites/johnkoetsier/2019/05/06/tesla-spends-zero-on-ads-heres-where-
bmw-toyota-ford-and-porsche-spend-digital-ad-dollars/#7b03460811d4 [Accessed July 2, 2021].

La Monica, Paul R., 2017. Tesla is worth more than Ford -- and GM is in sight. CNNMoney.
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[Accessed July 6, 2021].

Musk, E., 2018. The Mission of Tesla. Electric Cars, Solar Panels & Clean Energy Storage.
Available at: https://www.tesla.com/blog/mission-tesla [Accessed July 6, 2021].

Musk, E., 2014. All our patents belong to you. www.teska.com/blog. Available at:
https://www.tesla.com/blog/all-our-patent-are-belong-you [Accessed July 2, 2021].

Elliot, R., 2021. Tesla Faces New Reality of Tough Competition. Morningstar. Available at:
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Stringham, E.P., Miller, J.K. & Clark, J.R., 2015. Overcoming Barriers to Entry in an
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Tesla, 2021. Tesla Q4 2020 Vehicle Production & Deliveries: Tesla Investor Relations.
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Tesla, n.d.. Tesla Factory. Tesla. Available at: https://www.tesla.com/factory [Accessed July 7,
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Trudel, C., 2021. The end of Tesla's dominance may be closer than it appears. Bloomberg.com.
Available
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Wagner, I., 2021. Tesla's turnover 2008-2018. Statista. Available at:

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