Case Study: Tesla

Oleg Lozytskyi

College of Business, Liberty University

BUSI 400: Strategic Planning/Business Policy

Dr. John M. Borek

2022, February 19
Executive Summary

This case study summarized current state of Tesla Inc. by describing ideas behind vision

statement and current objectives. These aspects of the company discussed using information

provided by the company themselves and by analyzing actions that are being taken in order to

improve current climate of Tesla. Internal and external analysis provides different examples of

strengths and weaknesses of the company. This part of the analysis provides robust outlook on

the company’s current state. Furthermore, competitive advantages are discussed while also

sharing ideas on better strategy implementation during changing market conditions. Evaluation

of given recommendations provides comprehensive outlook on developmental options of the

company.

Current state of organization:

Tesla Inc. originated in Silicon Valley in United States and was named after Nikola

Tesla, who was a very successful inventor and scenting of his time. He is most commonly known

for his achievements in radio and electrical engineering technology.

Current vision statement that Tesla Motors shared with the world states: “to create the

most compelling car company of the 21st century by driving the world's transition to electric

vehicles.” This signifies that the world as we know it is ready for a new era of renewable energy

but it might take a lot longer to execute such vision, if it's not prioritized. When looking over the

history of growth of the company starting from 2003, it is easy to witness rapid increase in

output of the company especially towards last couple of years. While there are many reasons

why the company is succeeding, there is underlying factor of moving away from fossil fuels and

transitioning to renewable energy that seems appealing to investors. Users of the vehicles save
not only their own money on gas and oil changes, but simultaneously reduce damage to the

environment. With this vision statement Tesla Inc. is attempting to not only change our daily

modes of transportation, but also maximize solar panels output harnessing the energy of the sun.

While current technology might now allow the company to fully execute current vision, there is a

gradual process of moving away from fossil fuels and increase of funds being directed by private

investors and government entities to accelerate change.

Tesla shares their simple, but powerful message through their mission statement: “Tesla's

mission is to accelerate the world's transition to sustainable energy.” (Beene, 2022) This

statement emphasizes the vision statement, but more specifically identifies what Tesla is going to

do in order to act on their vision. This mission statement goes outside of just car-manufacturing

goals of the company, but also expands on opportunities of renewable, sustainable energy

sources. Examples of such diversification include Tesla Powerwall - introduced in 2015,

rechargeable lithium-ion battery that is placed in the house of the owner and serves as a self-

consumption storage of electricity and used to backup power and streamline load shifting in time

of use. (Jiang, 2018) Another example is solar panels for residential and commercial buildings.

This branch of the company is focused on bringing lowest cost solar panels to US houses while

saving money on electricity and harvesting solar power.

Most important current objective of Tesla Motors in 2022 is to “achieve the highest

production volume possible in their factories, while maintaining good gross margins and

efficiency.” Tesla Inc. has gone through a lot of volatile periods of existence and only recently

was able to post positive annual cashflow (2020-2021). In the fourth quarter of 2021 Tesla’s free

cash flow was just under $2.8 billion, which topped the estimates. While financial situation of

the company is stabilizing, it is important to focus attention on the production side. Over the
course of last four years, the company succeeded in accelerating rates of production tenfold. In

the fourth quarter of 2017 company produced 24,565 vehicles worldwide; fast forward to fourth

quarter of 2021 they had produced 305,840 vehicles. Company is becoming more efficient in

producing their vehicles as well as decreasing costs. This is directly related to Giga Shanghai

factory that opened in January 2021 with the purpose to build Tesla Model 3 and Tesla Model Y.

Current strategies include bringing battery producing technology fully in-house instead of

outsourcing it. Currently the company is purchasing MOST of their batteries from Panasonic.

Having the ability to build their own batteries will allow them to save money and repurpose it in

to other projects. Second strategy of the company is focused on making their cars more

affordable - this would allow wider audience to enjoy benefits of electric vehicles and ultimately

allow company to tap in to a new market. Similarly with making car more affordable will come

the opportunity to enter Asian, African and European markets. As demand for electric vehicles

grows, more people are looking for variety of options like trucks. 17.6% of the US Automotive

market uses trucks and companies like Rivian Inc. could become significant competitors in the

industry. Elon Musk had recently announced that Tesla Truck is not going to be ready in 2022,

which disappointed a lot of enthusiasts. It is possible that the company will take similar approach

to Apple Inc. - instead of implementing new technology into their phones, they wait for

companies like Samsung to test market appreciation for new implementation and then decide on

significance of this new technology. Tesla could choose a similar path allowing other companies

to get ahead, test the market with electric trucks and then improve upon their experience. This

can also apply to other aspects of Tesla’s business model. Example of that would be software

that allows for fully automated self-driving car.

There are few important strengths and weaknesses in this company that uniquely place it

on the top of electric vehicle automaker in U.S. and across the world. These aspects will be

discussed further in this paper through strengths, weaknesses, external opportunities and threads

(SWOT) analysis. Following strengths of Tesla Inc. ensured company’s profitability, expansion

and popularity in 2022.

Despite issues that Tesla Inc. has faced in the past with cash shortage, their sales

increased in Q2 of 2020 with over 90,000 cars delivered to their customers. This has increased

general valuation of the company to $208 billion and surpassed Toyota’s market capitalization of

$202 billion. Company has gained the title of world’s most valuable automaker. Increase in cash

flow allowed company to hire more engineers, invest more money in to new battery cell and

open a new Gigafactory in China, ultimately increasing the output.

Traveling up to 400 miles on a single battery charge Tesla’s electric vehicle is proven to

be the best at covering maximum distance. When compared to other brands, all four models take

the top places in terms of range.

One of the most important features of the company that a will allow it to thrive in current

market conditions is inclusion. The company has been found to be one of the most dominant

companies in the world because it created “ideal conditions for employees” capitalizing on

achievements and not degrees, as well as providing opportunities for growth. The company has

also been featured in Forbes “America’s Best Employer 2019.”

Another important advantage that the company has is owning their processes to include

convenient “at home” repair, low cost insurance by the company and even 30,000+ infrastructure

of supercharging stations across the globe. At a certain point this goal seemed ambiguous and
unachievable, but due to parabolic growth of the company and support of investors (to include

U.S. government) they were able to build affordable and convenient supercharger stations.

Few other positive advantages of the company include innovation, cross-sell,

diversification and unconventionally effective strategies. Tesla has a very high rate of innovation

- just recently they had developed two new models of cars targeting different markets: truck and

semi-truck. The company has proven the ability to create profitable and competitive products,

which grants them automatic support by investors as well as solidifies their position in the car-

industry. Second part of their success grants them the ability to better withstand economic

uncertainty when compared to other U.S. automakers. Last major strength of the company is in

outsourcing their own insurance and partnering up with Liberty Mutual. Final product is called

InsureMyTesla which is a comprehensive insurance program for their clients. This serves as an

example of indirect benefit of company’s success - every other company is interested in

supporting them and looking for partnership opportunities.

Some of Tesla’s weaknesses that are listed below are acknowledged by Elon Musk

during conventions and public events and most of them have a plan of correction and are being

worked on.

Depending on the model the customer is ordering the wait time could be anywhere

between 14-20 weeks which is longer if compared to other car companies. This is a result of

supply chain issues over the course of 2020-2022. There is no doubt that Tesla is the pioneer of

energy-saving and zero emission cars, but because they are the first ones to produce popular

electric car on the large scale, they also have to create a way to do it. There are no other

companies that have laid out the path for full scale production that can change based on demand

on the short notice.

by high ambitions of the company and no tangible way to execute set goals on time. Higher

standard of innovation certainly became a mantra of Tesla Inc. over the last couple of years, but

one other thing that has not changed is manufacturing and production ramp delays.

Shortage of batteries became more pronounced due to popularity of the electric vehicles.

As other companies enter the EV field, they take over a share of the market that was untapped or

has been used by Tesla Inc. in the past. This leads to increased competition for natural resources

that are required to manufacture battery cells. These shortages directly impacted sales of electric

vehicles across the industry. Since Tesla Inc. is one of the largest companies of EV in the world,

this affected them the most.

Financial situation of the company is not as weak as it was from 2003 until 2019, but

there is still work that needs to be done to improve financial cash flows. In 2021 company made

over $5.5 billion in profit last year and just over $3.47 billion in net income in 2020 (Stringham,

2021). Considering that the company was consistently posting annual net losses, last couple of

years brought it in to the positive territory. Another important aspect to consider is that shares of

Tesla Inc., ticker symbol TSLA have been one of the most volatile blue-chip stocks on

NASDAQ and balance sheets of the company tend to fluctuate significantly.

While Tesla company has been recognized as one of the most prestigious places to work

at, places that creates conducive environment for growth of their employees, it is not the safest.

There was an incident in the state of California where employees were placed in the assembly

line that was under the tent and it was not properly insulated. This issue could have resulted in

breathing issues for the employees located under the tent. When this issue was brought up to the
public, Tesla was fined for creating a production line without appropriate permit or safety

inspection.

Lastly, there is one other aspect of Tesla Inc. that will need some work and attention -

management interactions with board of directors. (Szatkowski, 2019) There have been few

instances where friction between different levels of management undermined productivity. In the

future this could have a ripple effect on long-term success of the company.

Competitive advantage

When measuring competitive advantages of the company, it is important to understand

the definition of the competitive advantage. There are two different types of competitive

advantage: company could produce the product at a lower cost or it is producing a better product.

When Tesla first entered the market, they did not have a competitive advantage in comparison to

other companies. They were also limited by technology of that time, limited range and software.

Almost two decades later, the company is leading the EV market around the world and has been

able to achieve significant progress in both of the categories.

Focusing attention on the EV market, Tesla offers the cheapest cars in the industry when

comparing to cars with similar features from other automakers. The reason why Tesla is able to

offer cars at a competitively low prices and still have significant profit margins is because a lot

of the factory features are automatized and streamlined. This process did not happen overnight

and has been carefully worked on by many ingenues over the course of last 19 years. Vertical

integration means that the company tries to control the most of the manufacturing process as

possible. The company is also constantly re-investing in themselves and perfecting the method of

car manufacturing. There is one specific, 12,000-ton piece of machinery that’s called Giga Press
that can cast the entire $25,000 car part (The Economist, 2021) in one piece saving a lot of

money in assembly, manufacturing and adds durability. This also eliminates the need for 370

parts that normally be needed to construct body of the car. Another competitive advantage

includes 278 patents on technology that was issued to Tesla in 26 countries. Example of the huge

advantage includes cell to vehicle technology that grants the car more range, durability and is the

most efficient based on the current standards. There is a long list of advantages that Tesla has

when it comes to different technologies, but last one that should be mentioned is chips. World is

currently experiencing a chip shortage and the problem is not expected to go away any time

soon. Tesla has developed their own chip for their cars. This allows them streamline the process

and keep the funds that otherwise would have been used to outsource this product.

Evaluation and recommendations

It is imperative to say that there is nothing simple about Tesla Inc., their achievements so

far had the impact on the entire world. Ever since the company was founded they knew that EV

market was untapped, but also significantly underdeveloped. This paved the way for the

company to choose most beneficial strategy - sustaining innovation. Tesla is following a

disruptive innovation strategy and the theory is that they will continue to do so. This means that

company’s priorities will be divided in to two major aspects of business - streamlining

production of released EV models and innovating in new markets by developing new

technology. While it is difficult to operate in these conditions, company has proven that they are

capable of continually doing so. Unfortunately for them, many other companies have entered EV

market place and are now catching up to the leader. This means that Tesla would need to spend a
lot more resources on distancing the competition in the fields of innovation and affordable

manufacturing.

Second recommendation would be for the company to clarify levels of authority across

board of directors. There have been instances when Elon Musk, using his personal Twitter

account with 47 million followers, significantly influenced prices of Tesla stock. Most recently

he hosted the opinion pool where he asked his followers to vote on whether he should sell 10%

of his stock in the company. 3.5 million participants supported him in selling his stock. While

Elon Musk owns over 20% of Tesla stock, there are millions of people who personally invested

in the price of the company and he would be influencing those individuals based on his unique

approach. Unfortunately, this approach does not work in case if the company wants to have

stable balance sheet, allowing them to pay their debt off. This recommendation would limit the

use of CEO’s personal social media accounts by filtering company-related messages.

Investor markets do not appreciate uncertainty and if there is a comprehensive business

plan in place that includes policies of rules of engagement about company’s future intentions and

current state, will streamline the process of solidifying fluctuations of the stock prices.

Segregation of duties of CEOs would eliminate overstepping. Most of the other weaknesses

discussed in this case study are currently being worked on by the company.

"The Model 3 became the best-selling premium vehicle globally." Even more

impressively, Musk predicts, "We think the Model Y will be the best-selling vehicle of any kind

globally. So I think it will exceed the Model 3.” In order to achieve this performance, Tesla has

to continue to improve manufacturing capability without sacrificing quality of their cars.

Luckily, EV’s performance can also be adjusted by software update. While there is only one

Tesla headquarters facility in Europe, it would be beneficial to have more locations there. Some
customers have reported waiting for their Tesla cars for over 10 months. It is difficult to compete

on the territory where BMW and Mercedes established their roots, but luckily Tesla Motors re-

investing most of their money in to company’s infrastructure.

All above mentioned recommendations the company is already actin on, but things are

going to change for Tesla Motors in the upcoming years. Over the past few decades the company

has been operating based on the needs of their customers and making advancements to their

technology without exterior influence. As EVs becoming more popular, companies like General

Motors will be entering the market with their models of cars. Up until recent years most car

companies were capitalizing on the gasoline powered engines and car structure around it. As the

market’s demand is changing, Tesla will need to learn how to operate in market conditions with

increased competition, which would be significantly different from untapped market operations

that are dictated only by company’s goals.

1) Stringham, Edward Peter. “Overcoming Barriers to Entry in an Established Industry:

Tesla Motors.” California management review. 57.4 (2021): 85–103. Web.

2) Khan, Md Rahat. “A Critical Analysis of Elon Musk’s Leadership in Tesla

Motors.” Journal of global entrepreneurship research. (2021): n. pag. Web.

3) Beene, R. (2022). How an automotive outsider forges Tesla's supply chain: Q & A

PURCHASING EXECUTIVES: PETER CARLSSON TESLA MOTORS. Automotive

News,  86(6530), 18. http://ezproxy.liberty.edu/login?qurl=https%3A%2F

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4) "Business." The Economist, 13 Feb. 2021, p. 8(US). Gale In Context: Biography,

link.gale.com/apps/doc/A651479480/BIC?u=vic_liberty&sid=summon&xid=140f3021.

Accessed 17 Feb. 2022.

5) Szatkowski, D. (2019). Tesla slumps as investors despair: EV company faces falling

subsidies, greater competition and continuing cash worries. Automotive News, 93(6883),

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6) Jiang, H., & Lu, F. (2018). To Be Friends, Not Competitors: A Story Different from

Tesla Driving the Chinese Automobile Industry. Management and Organization

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