International School ofManagement

Dynamic Strategic ManagementA Classical Comprehensive SWOT Analysis of the Scenario Faced by Tesla

Anteneh Getachew KebedeFebruary 2014

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Table of Contents

1.Historical Background of Green Technology12.Tesla's Historical Background and Business Strategy23. External Environmental Analysis44.Industry Analysis64.2Buyer Power74.3Supplier Power84.4Treat of Entry84.5Treat of Substitutes95.Internal Environment Analysis115.1Key Resources115.2Capabilities135.3Value Chain Analysis176.Core Competencies197.Competitive Advantage208. Strategic Competitiveness209.SWOT Analysis:219.1Internal Strength219.2Internal Weakness229.3External Opportunities229.4External Threats2310Strategy Implication23Reference25

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1.Historical Background of Green Technology According to Bellis (2014) green technology is the long as well as short term impact of new inventions on the environment. This technology has the purpose of making our planet green. The same author pointed out that energy efficiency, recycling concerns for safety and health and renewable resources, among others are what environmentally friendly innovations in energy technology is all about.Due to advocacies of clean and unpolluted world environment by money interested groups and political parties one of the pollutants like CO2 emission has been criticized all over the world. "The CO2 emission has become a bigger and bigger problem around the world today. Its hard to open a newspaper without reading about the polar ice is melting or that its getting warmer" (Lehman, 2009, p. 6). According to the Boston Consulting Group ( as cited in Philipp & Haiss, 2010) "the causal correlation between CO2 emissions and global warming is now widely accepted by a solid majority of the scientific community. The significant damage caused by global warming and the intense public awareness of this topic make the challenge of reducing CO2 emissions the major force currently driving development of alternative concepts for automotive propulsion"(P.9). One of the most pollutant industries is the transportation sector. Karamitsios (2013, p.6) holds that " the transportation sector has contributed significantly to the increase of CO2 emissions worldwide". This is due to heavy reliance of the sector on fossil fuel technologies (Karamitsios, 2013).In order to expand the use of non pollutant alternative vehicles many governments like the U.S. federal government has established various incentives and regulations that urge new entrepreneurs and corporate entrepreneurs to invest in the green-technology vehicle market. An important incentive for new technologies was stipulated in 2007 by U.S. government by enacting the Energy Independence and Security Act, formulated by the Congress, which forced the automobile manufacturers to achieve a limit of 35 mpg by 2020 (Karamitsios, 2013).The same author identified that, various programs that provide financial back-ups to car consumers has also been devised by the U.S. government. These incentives involve: Loans for the promotion of battery research and other green-technology development for vehicles. Support for electric vehicle (EV) battery charging station implementation. The EV purchasing by the federal government (pp. 22-23).Emanating from the governmental regulations and incentive programs on environmental pollution different manufacturers started to come up with environmentally friendly technologies in their operations. One among others is the Electric Vehicles (EVs) which are often described as the most feasible solution (Karamitsios, 2013). 2.Tesla's Historical Background and Business StrategyOne of the major green technology vehicle market is the introduction of EV. Tesla Motors Inc. is among the EV manufacturers in the US. This US company " is an automotive company, which was established in 2003 by a group of Silicon Valley engineers who wanted to develop electric vehicles" (Musk, 2006 as cited in Karamitsios, 2003, p. 16). More specifically The company, Tesla Motors Inc., is a brainchild of Martin Eberhard, Marc Tarpanning (both Eberhard and Tarpanning are cofounders of the electronic book company NuvoMedia) and Elon Musk (founder of PayPal). Sergey Brin and Larry Page (the founders of Google) are investors. This just gives a perspective of the forces, both financial and the knowledge, which are behind the company. The company was established in the summer of 2003 (Lehman, 2009, p. 29).Regarding the strategy of the company as pointed out by its current CEO Elton Musk in 2006, is "The starting point is a high performance sports car, but the long term vision is to build cars of all kinds, including low cost family vehicles" (Hamilton, 2006 as cited in Karamitsios, 2013, p. 16).The same author further classified "The overall strategy of Tesla can be summed up in three steps. The first step was to introduce the Roadster model to the market and consequently establish a keystone for EVs. In continuation, in 2012 the new Model S was introduced to the market and it is targeted at middle to upper-middle class consumers. Finally, by 2014 Tesla plans to produce and market a new model named Model X " (p. 16 ).When we see the growing trend in revenue of the company in 2007 it was $ 0.07million and jumped to 116.74million in 2010 (Aulicino, Waratuke, Williams, & Elliott, n.d.). Tesla's revenue in 2011 and 2012 was $204.24million and 413.26million respectively (Journal, 2014). This is an indication that there is a possibility for a new car company like Tesla to become successful new electric manufacturing company in an already well developed auto industry. This success can exemplified by the companies first profit record in 2013 on revenues of $561.8 million (Mclvor, 2012). In the same year the company produce a record breaking number of cars which put the company's shares to be more than $100 mark for the first time. On top of that a blue print in the success of the organization can be witnessed by the company's ability to pay its a nearly half billion-dollar loan to the Department of Energy nine years earlier (Hall, 2013). This ability of the company comes from the successful sale of its new shares in the stock market (Kershiner, 2013).

3. External Environmental AnalysisAlthough there are many environmental analysis models, the SLEPT approach of Doole and Lowe (2008) will be followed to analyze the socio/cultural, legal, economical, political, and technological dimensions of Tesla. Socio Cultural

Generally there is increasing awareness of environmental health by people in different parts of the world. Emanating from this awareness, environmentally conscious people are currently using public transportation, biking, and walking. Such pattern of increasing environmental awareness leads to increasing interest in green transportation which will have a positive condition for Tesla. (Aulicino, Waratuke, Williams, & Elliott, n.d.). Despite the positive impact of environmental awareness currently the interest for EVs seems to be slipping. Refinements in auto carbon emission and performance in addition to the high price for EVs among others are the reasons (Hall, 2013) Legal

Governments in different parts of the world are stipulating laws in carbon emissions regulations, and regulations increase price of gas autos. These governmental moves are a clear indication for the need of alternative technologies like electric vehicles (Aulicino, Waratuke, Williams, & Elliott, n.d.).In August 2009, President Obama announced a $2.4 billion grant program designed to create an electric vehicle battery industry in the United States (Bullis, 2012). Economic Looking at the Economical environment it is characterized by rising fuel prices, increasing demand for green transportation, increasing dependency like U.S. very dependent on foreign oil. and U.S. auto imports outnumber exports. These conditions are Causing shift toward green transportation (Aulicino, Waratuke, Williams, & Elliott, n.d.). PoliticalLooking the US government move for $7,500 tax credit for EV purchases and the movement to reduce foreign oil imports resulted in increasing purchase of EVs (Aulicino, Waratuke, Williams, & Elliott, n.d.)TechnologicalTechnologically there are advancements to reduce price of building an EV., EV battery lifespan increasing, and strategic alliances allow firms to combine competitive advantages. These will enable lower prices and higher quality product (Aulicino, Waratuke, Williams, & Elliott, n.d.). In addition to the SLEPT analysis it is worth considering the demographic, global and natural environmental factors in order for having a comprehensive understanding of the general environment.Demographic

Demographically, there are growing market segments for green technology and increasing demand for green products. This will have positive impact for the EV market (Aulicino, Waratuke, Williams, & Elliott, n.d.)GlobalGlobalization and international alliances that result in Economies of scale will lower cost of green technologies (Aulicino, Waratuke, Williams, & Elliott, n.d.).

PhysicalPhysically, there are increasing demand for autos, increasing need for environmental protection and increasing need for green technologies. Which have their positive impact for the development of EVs (Aulicino, Waratuke, Williams, & Elliott, n.d.).4.Industry AnalysisTo analyze the EV industry Michael Porters Five Forces Model will be used as analytical framework. For Porter (1979) the five Forces are competitive rivalry, buyer power, supplier power, treat of entry, and treat of substitutes.4.1Competitive RivalryAccording to (Lehman, 2009, p. 42) "Since there arent that many EV manufactures on the market yet, the competitive force exerted by rivals are low. This scenario can change fast. Many car manufactures are thinking of making EVs. Even though the entry barriers are very high, there are still car manufactures that got a lot of the same technology to manufacture EVs. The big difference, and also the key to EVs, is the batteries and the electric engine". With regard to the battery technology the competitive rivalry could be tough in the future for Tesla since lithium-sulfide batteries are believed to have more ability in storing energy than lithium-ion ones (Bullis, 2012). The other challenge as predicted by Lehman (2009) is "the batteries need to be able to hold a lot of energy as well as being recharged fast. The electric engine has been on the market for a long time and the technology can be bought from many different manufactures. It is of course important to get an engine with high performance and which is able to use the power as well as possible" (p. 42).In order to look at the competitive landscape of the EV industry Karamitsios (2013) listed out the direct and indirect competitors of Tesla as illustrated in the following matrix:ProductMajor players (or upcoming)Competitiveness

EV manufacturesThink, GM VoltDirect

Hybrid carsToyota Prius, Lexus, FiskerDirect

Conventional carsGM, Crystler, VW, Porsche Indirect

Source : (Karamitsios, 2013)

4.2Buyer PowerRegarding the bargaining power of buyers Lehman (2009, p.45) summarized the situation as follows " Even though the customers are the ones who bring the money, their bargaining power is still low". The same author identified the EV market has small market niche characterized by customers who are very rich and concerned more about green technology to save the environment. Real competitive EV in this market has been realized by Tesla Motors which is one of the few automakers to do that. Such automakers like Tesla have been identified as competitive because of their ability to fulfill the requirements of driving range, design, speed and acceleration as balanced mix in the EV market. For Lehman (2009) the bargaining power of customers will significantly increase from where it was in the past (low bargaining power) if the EV industry is going to grow in an increasing rate. The same trend has been speculated by Aulicino, Waratuke, Williams, and Elliott (n.d.) looking at the long term success of Tesla as group buyers are its target, Tesla will far high bargaining power from these group buyers. Accordingly "it is important for Tesla motors to be able to adapt to a higher demand from the customers. If Tesla Motors want be an exclusive they have to expect the customers to become more demanding as this market turns from being a niche market into a real market. This is just like Porsche or Ferrari customers who have a higher expectation to the product than a normal car a customer has" (Lehman, 2009, p. 45).

4.3Supplier PowerOne of the suppliers of Tesla are Battery Companies. As Tesla buys Li - ion cells from many suppliers, these companies are characterized by low bargaining Power. The other supplier is Chassis/Engineering (Lotus) which is known for its high bargaining power emanating from exclusive partnership and no clear alternative for current market. Previously suppliers of Transmission like Magna had high bargaining power but now as Tesla started in-house production their bargaining power has failed. As Tesla develops motors, power electronics, etc. using AC's tech. the bargaining power of Sotira body panels has diminished. Finally suppliers: Lotus Chassis and Borgwarner Parts has high and low bargaining power respectively (Aulicino, Waratuke, Williams, & Elliott, n.d.).4.4Treat of EntryFor (Lehman, 2009), "the complementors of the EV industry are the power industry as well as the oil industry. The power industry has a great interest in the EV becoming a success this will sell more power. On the other hand is the oil industry not that interested in this new vehicle. This will affect one of their main sources of income" (p. 44).The potential new entrants and their respective power as indicated by Aulicino, Waratuke, Williams, and Elliott, (n.d.) is that new entrants with similar technologies has low power. On the other hand new entrants with disruptive technologies have high power, these include: Large mass-market manufacturers (Chevrolet, GM, Toyota), Luxury performance sports cars (BMW, Porsche, Mercedes), other boutique manufacturers (Italians and Aston Martin). Besides that Tesla is also facing some challenges from the currently coming none fossil fuel technologies like hydrogen and natural gas (Hall, 2013). The challenges mentioned above are further exacerbated by factors like strategic shift towards gasoline electric hybrids; the promising believes for fuel cells than battery electric cars; and the obvious short comings i.e. driving range, cost and recharging time of electric vehicles is putting them not to become a natural replacement for the conventional cars (Shirouzu, Kubota, & Lienert, 2013). The same author held that the difficult apparent reality of the market for electronic vehicles and the declining demand that they are facing is forcing companies like Nissan to make strategic shift from more green EV investments into hybrids (Shirouzu, Kubota, & Lienert, 2013).4.5Treat of SubstitutesAccording to Lehman (2009) "The other force which is very strong is the substitute products. The largest industry is the car industry, but other alternative vehicles like the hybrid car are also substitutes. Most people still choose to buy a normal car, which of cause makes the car industry the largest competitor. It is because of the substitute products that the competitive force all together is high and still makes the industry less attractive. Firm in the industry should at all time pay attention to the competitive force, since it can change at all time" (p.46).More specifically as pointed out by Aulicino, Waratuke, Williams, and Elliott (n.d.) hybrids (plug-in and otherwise), Toyota FT-HS, BMW 1 and 3 series (mild hybrids), small performance turbo diesels, small non-hybrid sports cars, Mazda Miata, BMW Z4 and Honda S2000 are some of the substitute for Tesla. The same authors show the extent and magnitude of the bargaining powers of its specific substitutes as follows: Tesla faces high bargaining power for its $110,000 Roadster from BMW and Mercedes. The same situation revels in its competition with Toyota and Honda which compute with $50,000 Model S.On top of the aforementioned situation the following are some of the major indications for the increasing treat of substitutes for Tesla's EVs: First there is a continues development on solar cell design and car power supply requirements like heater or air-conditioning (Bellis, 2014). Second there is a strategic shift by automotive executives in Asia, Europe, and North America to new alternative energy sources like hydrogen. Finally the move by Nissan to follow its rival Toyota in changing its power generation for the next big green-tech innovation of hydrogen to electricity and the new alliances of Toyota and BMW to develop hydrogen powered fuel cell cars are the major indicators of aggravated treat for new technology (Shirouzu, Kubota, & Lienert, 2013). To substantiate the analysis of the five forces to look at the industrial environment of EVs, the three types of competitors namely Immediate, Impending and invisible competitors of Tesla are concisely summarized by Aulicino, Waratuke, Williams, & Elliott (n.d.) in the following illustration:Competitor EnvironmentImmediate Competitors Think, Aptera, Fisker, Coda, Zap Direct competitors in EV market BMW, Mercedes, Ferrari Luxury brands, comparable prices Toyota Hybrids successful but not completely green Smart Successful but not intended for luxury or enjoyment

Impending Ford, GM, Hyundai, Honda, Etc. Potential competitors but also potential customers as Tesla contracts to produce EV components to other manufacturers.

Invisible As EV industry grows, more competitors will enter market New startups will appear Disruptive technologies will appear

Source: (Aulicino, Waratuke, Williams, & Elliott, n.d.)

5.Internal Environment Analysis

5.1Key Resources One of the key resources that Tesla possess is the culture of innovation that the company is identified with from its inception. This culture put Tesla in a position to posses various patents for EV components. This is best noticed by Tesla's ability to get over 140 patents awarded and over 240 Patents Pending (Witt, 2013). The other crucial resource of the company is associated with its award winning Chief Executive Officer and Product Architect of Tesla Motors, Mr. Elon Musk is Chairman of the Board. He has served as CEO since October 2008 and as Chairman of the board of directors since April 2004. Mr. Musk has also served as Chief Executive Officer, Chief Technology Officer of Space Exploration Technologies Corporation (SpaceX), which is a company that developing and launching advanced rockets for satellite and eventually human transportation, since May 2002. Mr. Musk has also served as non-executive Chairman and principal shareholder of Solar City, a leading provider of solar power systems in the United States, since July 2006. Thanks to the contribution of its CEO, Tesla has earned worldwide recognitions for its achievements in its successful operations to be the first EV company in the world among others. The following are some of its awards: Automobile Magazine's 2013 Car of the Year, a unanimous decision. Motor Trend 2013 Car of the Year, also a unanimous decision. Popular Science's Auto Grand Award Winner Best of What's New list 2012. Time Magazine Best 25 Inventions of the Year 2012 award. Yahoo! Autos 2013 Car of the Year. CNET Tech Car of the Year for 2012 Green Car Reports' Best Car To Buy 2013 2013 AutoGuide.com Reader's Choice Car of the Year Natural Resources Canada 2013 EcoENERGY for Vehicles Awards in the full-size category (Tesla Motors Model S, n.d.). Tesla had its initial public offering (IPO) on July 2010 and is now treaded on the NASDAQ exchange as TESLA (Boyke, Cheng, Clevers, Schroeder, & Strupp, 2010)In addition to the aforementioned crucial resources as of 03 October 2013,Tesla has operated a network of 42 stores and galleries in the United States and Canada (Tesla Motors Inc. profile, n.d.). Beyond that Tesla has more than 4,000 Employees worldwide (Tesla Motors, Inc. Profile, n.d.).looking at the illustrations: Annex-I (Summarized Financial Statements) Annex-II (Stock Price History), and Annex-III (Financial Ratios vs Industry Averages) the financial condition of the organization can be briefly summarized as follows: Not yet achieved significant profitability. Stock price is expected to rise to $70 per share from the current $25. Strength of its stock price is due to expectations of future earnings or acquisition by a larger firm. Tesla has acquired significant assets valued over $400 million.

R&D has been a large expense for Tesla, and may not decrease even after roll out of the Model S. (Aulicino, Waratuke, Williams, & Elliott, n.d.)Concerning the operational facilities of Tesla, it manufactures the Model S at the Tesla Factory in Fremont, California. For the European market, Tesla is assembling and distributing the Model S from its European Distribution Center in Tilburg, the Netherlands (Tesla Motors,Inc. Model S n.d.).Finally, to ensure long distance drive for its customers Tesla is building the fastest and most comprehensive international network of charging stations (Witt, 2013). Accordingly, in 2012 Tesla Motors began building a network of 480-volt fast charging supercharger stations in order to facilitate the Model S sedans to make long distance trips. In June 2013 Tesla announced that all existing stations in the supercharger network, and all new stations, would become Tesla stations, and have facilities to support under-two-minute battery pack swaps for the Tesla Model S, and for all future Tesla models (Tesla Motors, Inc. Model S, n.d.).5.2CapabilitiesTesla Motor Company has the following capabilities in addition to the above mentioned valuable resources:Design skills used to make quality productsConcerning the design skills necessary in making quality products MacKensie (2013) has described Tesla's capability as follows: The first advantage of Model S is that it provides packaging opportunities resulted from the compact EV powertrain. In addition to that the cabin is identified by the same author to be roomy, though the raked roofline force on rear seat head room. "With no engine up front, the "hood" covers a useful luggage space, and the rear hatch opens to a cavernous load area that gets even bigger when you fold the rear seats flat. Total load capacity is 63.4 cubic feet, not that far shy of the 63.7 cubic-feet in a Chevy Equinox, and despite its rakish looks, the Model S is the first hatchback in the world to offer third-row seating". In addition to these Tesla designed and established its own system because it excels in both hardware and software engineering capability" (MacKensie, 2013, para. 3). On top of that Tesla designed its Model S to allow fast battery swapping, and this feature has facilitated the assembling process (Tesla Motors, Inc. Model S, n.d.)

Engineering ExcellenceLooking Tesla from engineering excellence, the Model S body is light, thanks to its all-aluminum construction, yet strong and stiff. The front and rear suspension are also mostly aluminum. At the rear are extruded rear suspension links that provide the strength of forgings at much lower cost, while up front are hollow-cast front knuckles that weigh 25 percent less than a conventional knuckle of similar strength. The electric motor sits between the rear wheels, contributing greatly to the 47/53-percent front/rear weight distribution (MacKensie, 2013).R&D of EV Powertrain ComponentsBeing an innovation leader is a great advantage when trying to position a company in an upcoming market like the EV market. But there are also a number of hazards when being so. The main innovation at Tesla Motors is their battery pack, which is a combination of their own innovations and parts from collaboration partners. (Aulicino, Waratuke, Williams, & Elliott, n.d.)Cooperate With Partner Firms to Achieve SynergiesAs illustrated by the Karamitsios (2013, p.16) "Tesla Motors has set up partnerships with many firms. Firstly, some of its supplier alliances are Lotus Cars and Panasonic. Also, the R&D departments of Tesla Motors and Panasonic cooperate for the developing of more efficient batteries. Finally, Tesla Motors cooperates with some OEM manufacturers like Toyota and Daimler".The types of Tesla Motors partnerships according to Holmberg (as cited in Karamitsios, 2013, p.18) are listed as follow:

Source: Holmberg, 2011 (as cited in Karamitsios, 2013, p.18)EfficiencyFor MacKensie (2013),... (Efficiency, para. 4) the efficiency aspect of Tesla has been described as follows "The best energy consumption figure we've returned is 118 mpg-e for a 212-mile run from the eastern fringe of the Los Angeles sprawl to Las Vegas, Nevada. For the 313 miles of road loops during the COTY evaluation, where the car was driven at normal speeds by all the judges with the air-conditioning running, it averaged 74.5 mpg-e. Impressive numbers, especially considering the 4766-pound Tesla Model S Signature Performance version will nail 60 mph in 4.0 seconds and the quarter in 12.4 seconds at 112.5 mph, with a top speed of 133 mph" (MacKensie, 2013, para. 4)Safety Tesla Motors has been identified by the same author as top ranking because the Model S is a very stable platform and the car is quick and responsive during high traffic. The advantage of its stability control and anti-lock braking systems and the usual complement of passive safety devices has been identified as typical characteristics of the car with respect to its safety precaution measures. In addition to that MacKensie (2013)... (Safety, para. 5)... held that "clever engineering such as the double octagon extrusions front and rear, and the immensely strong roof structure, is working to protect you. Tesla claims the Model S outperforms federal crash standards, having been impact-tested at 50 mph (the mandatory standard is 35 mph) and exceeding the roof crush requirement by a factor of 2".Value As compared to Mercedes-Benz E-Class, BMW 5 Series, and Audi A6 the 40-kW-hr Model S is competitive at price of $58,570 (before a federal tax credit of $7,500). looking at "a loaded 85-kW-hr signature performance series, like the $106,900 (before tax credit) car Tesla founder Elon Musk drives, is priced right on BMW M5 and the Mercedes CLS63 AMG -- cars of similar performance, remember. Tesla buyers likely don't need to watch their pennies, but the calculation's worth doing all the same: At an average of 74.5 mpg-e, the Model S costs about 6 cents a mile to run, based on California's 13 cents per kW-hr" (MacKensie, 2013, para. 6).Performance of Intended FunctionRegarding the performance of intended function the same author pointed out that "The Model S will easily handle 200 miles of mixed city, suburban, and freeway driving without any hypermiling techniques. For the typical daily diet of commuting and short trips (the average American drives about 40 miles a day), the Model S is a compelling proposition" (MacKensie, 2013, para. 7).5.3Value Chain Analysis SuppliersAccording to Hall (2013) Tesla changed its purchasing practice to strategic global commodity organization from its tactical decentralized entity. However; there is no enough procurement synergy in Tesla's operation with sister companies like SpaceX. The same author maintained the speed and flexibility of the company by citing the following from the Procurement Officer speech " Were telling our suppliers that both parties need to think proactively and work hard at significantly reducing tooling lead-times," he adds, " making sure theyre able and willing to put together engineering support teams for us willing to work with the speed and flexibility were asking for" (Hall, 2013, Building Its Own Supply Chain, para. 13). Finally the relationship of Tesla with its suppliers has been described by Peter Carlsson as follows: " I think the suppliers who were early adopters and who were really willing to take a bit of a risk and bet on us, probably have a profile that fits us a little bit better than a more conservative type. Were the risk takers" (Hall, 2013, Building Its Own Supply Chain, para. 16).

Marketing & SalesTesla uses unique procurement for its model S infotainment system designed by the company from the ground up. In addition to that as it has been stated by Tesla's Chief Procurement Officer Peter Carlsson they are approaching their biggest market and are becoming very close in their development, in other words they can drive, design and implement the technology concurrently in speedy manner (Hall, 2013). On the other hand the target market of Tesla's Roadster has been very small because of the high cost associated with the Roadster Model. However, there is shortage of supply for the Model S because there is high demand from customers that even resulted in a five-month waiting list when we looking at specific cases Model S market in Norway (Tesla Motors, Inc. Model S, n.d.).In 2013 Tesla build about 20 retail stores in order to accommodate its plan for increased Model S production (Hall, 2013). The sales practice of the company has been further explained by (Tesla Motors, n.d.) as follows: "Sales during 2013 totaled about 18,000 units, allowing the Model S to rank as the third top selling plug-in electric car in the U.S. in 2013, after the Chevrolet Volt (23,094) and the Nissan Leaf (22,610). Also in 2013, the Model S was the top selling car in the full-size luxury sedan category, ahead of the Mercedes-Benz S-Class (13,303), the top selling car in the category in 2012, and also surpassing the BMW 7 Series (10,932), Lexus LS (10,727), Audi A8 (6,300) and Porsche Panamera (5,421). As of December 2013[update], about 20,600 units have been delivered in the U.S. since the Model S inception in June 2012" (Tesla Motors, Inc. n.d., Sales & Markets, North America, para. 5). Regarding the sales strategy of the company it follows similar style to Apple. This is because they are following the same type of stores that are "both aesthetically pleasing and allow for the firm to create a unique buying experience. Teslas stores change the entire car buying experience and take away the incentive of both the buyer and seller to compete on price. Furthermore, Teslas stores allow the firm to achieve operating efficiencies as well as capture sales and services revenues that typical automobile manufacturers do not" (Schwartz & Xia, 2013, p. 3).Repair ServiceTesla is pioneering a new approach to vehicle servicing that we believe will revolutionize the customer experience. An announcement about this will be forthcoming shortly. A complete inspection, tire alignment, new brake pads, hardware upgrades, and miscellaneous other maintenance items as needed are among the repair services (Tesla Motors Model S, n.d., Vehicle warranty & maintenance, para. 1).6.Core CompetenciesR&D of EV Powertrain ComponentsTesla is known for its superior battery technology as compared to the other manufacturer's in the industry. This competency of Tesla emanates from long years of research and development in order to realize the very idea of its foundation which is "based on its believe that the same Li-ion technology used in laptops could be used to create fully electric vehicle that is not only eco-friendly but also attractive and fun to drive" (Boyke, Cheng, Clevers, Schroeder, & Strupp, 2010, p. 3). Ability to Envision the Growth of the EVThis is envisioned by its chairman, product architect and CEO Elon Musk. This person is the real chapmen and symbol of the brand of the company. Due to his long vision, ability to create strategic partnership, primary shareholder and his ability to secure DOE loan enable the company to become successful electric vehicle manufacturer (Boyke, Cheng, Clevers, Schroeder, & Strupp, 2010).

7.Competitive AdvantageProprietary EV Powertrain Component Patents Tesla has over 140 patents awarded and over 240 Patents Pending (Witt, 2013). Many of Tesla's patents were in the United States, Britain, and Canada, but many other patents were approved in countries around the globe. Many inventions developed by Tesla were not put into patent protection (Tesla Motors, Inc. Patents, 2014).Design skills Used to Make Quality ProductsThe companies competitive differentiation comes from its ability to deliver the most environmentally responsible vehicles on the market having all quality dimensions and benefits of a premium car: speed, handling, comfort, and fun (Boyke, Cheng, Clevers, Schroeder, & Strupp, 2010).8. Strategic CompetitivenessStarting from the very establishment of the company the strategic competitiveness of the company is based on its excellence in R&D. Such a commitment of the company can be clearly understood by looking at its financial statements. From the very beginning till present the highest expense of the company is R&D (Journal, 2014).Annual Financials for Tesla Motors Inc. R&D 20082009201020112012

53.71M19.28M93M208.98M273.98M

Source: (Journal, 2014) FactSet Fundamentals.

9.SWOT Analysis:Based on thorough analysis of the company's internal and external environmental situations, this part includes the SWOT analysis that are believed to be very critical for the success of the company and which will give hints on strategic implications.9.1Internal Strength First-mover in the EV industry - Tesla become the first EV company by introducing Roadster which was the first federally-compliant highway EV. Innovative corporate culture.

Strong R&D capabilities. Has about 300 patents. Enthusiastic investors due to the promising stock price of Tesla. Young company that can start from scratch to build its own unique image. Partnerships with manufacturers. like Toyota, Mercedes, Daimler and Panasonic have provided the company the opportunity to support their battery technology research and development. Focus on design, performance and efficiency. Tesla is the only auto company that give the same emphases on zero emissions, performance and aesthetics of the car. Battery Technology: The company has superior battery technology to other auto makers in the industry. Tesla has developed its own core technologythe batteries, the electric motor, and the systems for controlling them. Supplier of EV components: Tesla not only benefits from lower costs for its own cars, its also been able to sell its technology to other automakers, providing a boost of revenue that helped it survive in the time between producing its first car, the Roadster, and the current Model S..9.2Internal Weakness Tesla is a new company pitted against established auto companies. Tesla have limited production facility. Teslas stock price is based on future expectations. Possible supplier problems if demand increases drastically. . Tesla Rangers mobile service crews may be ill suited to serve the high demand market of mid-sized autos that Tesla intends to expand into. Tesla has small number of employees compared to well established companies like Toyota. Delay in release of projected models. Logistical disadvantages Lack of brand name recognition9.3External Opportunities Successful in European markets and sees great potential in Asian and Canadian markets. Alliances with other manufacturers to obtain synergies in distribution and service. Rising gas prices will increase the demand for EVs. Government regulations and subsidies as well as economic incentives favor EVs over gasoline autos. There is optimism in the stock price of Tesla. Speculations indicate there will be growth in the global EV market. Innovative sales channel models Sourcing suppliers in the realm of power distribution and high current or high power electricity applications. Theres also a strong case that improvements to the lithium-ion batteries that power the current generation of electric vehicles may be enough. 9.4External Threats Problems of economic and financial crisis globally, may have trouble generating revenue to get back their return on investment. Competition! Automakers already have production and distribution systems, and may have more ability to absorb losses. The end of subsidies and tax credits. Sleepy consumer reviews. . The EV market is still small, worldwide due to expense. Partnered firms may reverse engineer Teslas intellectual property. Disruptive technologies from competing firms. Despite massive investments in battery technology and vehicles, even the most ardent EV adherents seem a bit ambivalent about the future of battery cars (Shirouzu, Kubota, & Lienert, 2013). The gradual tightening of global fuel-efficiency standards from 2020 on is forcing automakers to assess their options, including the application of advanced technology (Shirouzu, Kubota, & Lienert, 2013)10Strategy Implication

Tesla should apply creative promotional campaigns to further enhance its brand as the first mover in the EV industry Tesla should further capitalize on its innovative corporate culture and strong R&D capabilities to reduce charging time for batteries and to increase the range that their EVs can go in a single charge. Tesla should negotiate with other established auto companies to minimize the disadvantages that it faces like delay in the launch of new products and its low level of brand recognitions. Tesla should negotiate service agreements with companies like Toyota in order to tackle problems of after sales service repairs which is challenging to be managed by Tesla mobile service crews at times of expected high demand for mid-sized autos that Tesla intends to expand into. Tesla should expand its production capacity in order to cater the future expected high demand by increasing its financial base both through sell of equities and debt financing. Tesla should try to minimize possible supplier problems to accommodate the future expected significant increase in demand through backward integration. Through the application of conducive human resource management like the introduction of well organized knowledge management it should try to attract knowledge workers from different parts of the world. Tesla should integrate its operational activities in such a way that it will be in a position to develop additional models on the Model S powertrain and secure the EV niche in the luxury vehicle market; at the same time it should commit resources to develop and manufacture economy EVs. If battery pack prices are going to fall in the future Tesla could eliminate Model S 160miles option and reduce the price of the 230 and 300miles options in order to further enhance its competitive advantage.

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Annexes Annex- I Summarized Financial Statements In Millions of USDYear ending 12/31/10Year ending 12/31/09Year ending 12/31/08Year ending 12/31/07

Total Revenue116.74111.9414.740.07

Total Cost of Revenue85.01101.0115.280.01

Gross Profit31.7310.94-0.540.06

Selling/General/Admin. Expenses, Total84.5742.1523.6517.24

Research & Development89.319.2853.7161.95

Total Operating Expense263.58163.8493.2580.01

Operating Income-146.84-51.9-78.5-79.93

Other, Net-6.58-1.45-0.960.14

Income Before Tax-154.16-55.71-82.69-78.05

Income After Tax-154.33-55.74-82.78-78.16

Net Income-154.33-55.74-82.78-78.16

Diluted Weighted Average Shares50.727.026.653.44

Diluted EPS Excluding Extraordinary Items-3.04-7.94-12.46-22.69

Dividends per Share0000

Diluted Normalized EPS-2.98-7.81-12.4-22.54

Source: (Aulicino, Waratuke, Williams, & Elliott, n.d.).

Annex-II Stock Price History Source: (Aulicino, Waratuke, Williams, & Elliott, n.d.).

Annex-III Financial Ratios vs Industry Averages

Source: (Aulicino, Waratuke, Williams, & Elliott, n.d.).