Tesla

TESLA STRATEGIC ANALYSIS

Asawari Patil | Dinesh Pushpavanam | Helen Di Wu | Vineet Verma Strategic Management | April 22, 2016

Contents Executive Summary ............................................................................................................ 3 Industry ............................................................................................................................... 4 Past performance and 2016 Outlook ................................................................................... 5 Competitive Forces ............................................................................................................. 5 Support of Government ................................................................................................... 5 Price ................................................................................................................................. 6 Maintenance..................................................................................................................... 6 Running Costs.................................................................................................................. 6 Mileage Costs .................................................................................................................. 6 Five forces ....................................................................................................................... 7 Industry competitors ..................................................................................................... 7 New Entrants ................................................................................................................ 8 Suppliers ....................................................................................................................... 9 Substitutes..................................................................................................................... 9 Buyers ........................................................................................................................... 9 Strategy ............................................................................................................................. 10 Business Level Strategy................................................................................................. 11 Corporate Strategy ......................................................................................................... 12 Value Chain ................................................................................................................... 13 Primary Activities ....................................................................................................... 14 Support Activities ....................................................................................................... 14 Performance drivers ....................................................................................................... 15 Recommendations: ............................................................................................................ 16 Marketing Aspect: ......................................................................................................... 16 Research and development: ........................................................................................... 16 Manufacturing and production: ..................................................................................... 16 Infrastructure Development and Investments: ............................................................... 16 Corporate social responsibility: ..................................................................................... 16 Bibliography ..................................................................................................................... 18 PAGE 1

List of Figures Figure 1 - Annual Sales of EVs globally ............................................................................ 4 Figure 2 – Luxury Car sales comparison .......................................................................... 10 Figure 3 – Tesla motors Revenue and Profit – Historical Data ........................................ 13 Figure 4 – Value Chain ..................................................................................................... 15

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Executive Summary This report was commissioned to perform a strategic analysis of Tesla Motors Inc. The methods of analysis make use of various tools like Michael Porter’s five forces analysis framework, and the Value chain model. The report critically analyzes the business and corporate level strategies and aims to connect it to the value chain of the organization. The industries of luxury car markets and Electric Vehicle industry are also discussed and analyzed in this report. The metrics displayed should provide the reader with a snapshot of the industry. Based on the analyses of Tesla Motors, several conclusions and recommendations are drawn. These recommendations would allow the company to maintain and/or improve its competitive advantage compared to its competitors. Recommendations provided cover the following areas which are detailed further in the document:     

Marketing Research and Development Manufacturing and Production Infrastructure development and Investments Corporate Social Responsibility

The sources for the research of the company involve various online and offline sources that included but are not limited to books, academic papers and websites; all of which are referenced in the Bibliography section. All other references are maintained at the end of each page for the perusal of the reader. Word Count: 4800.

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Industry Annual sales of EVs globally 565000

600000 500000 400000

315000

300000

213000

200000 100000

125000 50000

0 2011

2012

2013

2014

2015

Sales

In five years, global sales of plug-in electric vehicles have increased more than ten-fold, totaling more than 565,000 units in 2015. The sales are mainly driven by China and Europe. Since 2011, the cumulative global sales in total were about 1.27 million plug-in cars and utility vans by the end of 2015.1

Figure 1 - Annual Sales of EVs globally

Till December 2015, more than 425,000 plugin electric passenger cars and vans had been registered in Europe, which made Europe the world's largest plug-in regional market. If all segments of the plug-in electric vehicle market are considered altogether, China is the world's leader with 444,447 new energy vehicle sold between January 2011 and December 2015 and 90% of them were sold during the last two years, which is 331,092 units.2

Quarter

Model S Sales

Q1-13

4901

Q2-13

5150

Q3-13

5500

California leads the US plug-in car, it has the largest American car market, which crossed the 200,000 unit milestone in March 2016, out of approximately 425,000 plug-in cars sold nationwide till February 2016, and it represents almost 47% of all plug-in cars sold in the U.S. since 2008.

Q4-13

6892

Q1-14

6457

Q2-14

7579

Q3-14

7785

Q4-14

9834

Q1-15

10030

Q2-15

11507

Q3-15

11580

Talking about Tesla Motors, it delivered 11,580 vehicles in the July-September quarter in 2015, up from 11,507 units in the previous quarter. Tesla delivered around 33,117 cars to customers in the first nine months of the year 2015, which

1 Argonne National Laboratory, United States Department of Energy (2016-03-28). "Fact #918: March 28, 2016 - Global Plug-in Light Vehicles Sales Increased By About 80% in 2015". Office of Energy Efficiency & Renewable Energy. Retrieved 2016-03-29. 2 Automotive Industry Data (AID) (2016-02-15). AID Newsletter. Retrieved 2016-02-19. Association Nationale pour le Développement de la Mobilité Electrique - AVERE France (2016-03-24).

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is 52 percent increase from the same period in 2014. Tesla has a roadmap to sell 500,000 cars a year by 2020.3

Past performance and 2016 Outlook For the year ended December 31, 2015, Tesla’s recognized total revenues is $4.05 billion, an increase of $847.7 million over of $3.20 billion for the year ended December 31, 2014. Gross margin for the same period was 22.8%, decreased from 27.6% for the year ended December 31, 2014. Automotive revenue during the years ending 2015, 2014, and 2013 were $3.74, $3.00, and $1.92 billion respectively. Service and other revenue during the same period were $305.0, $191.3, and $91.6 million respectively. Gross profit for the year 2015, 2014, and 2013 were $923.5 million, $881.7 million and $456.3 million. Gross margin for the years 2015, 2014, and 2013 were 22.8%, 27.6%, and 22.7%. Compared to 2014, 2015 had a lower margin as there was a shift in product and regional mix for Tesla. A crude oil supply slump and a downturn in demand from China have sent gasoline prices to lows unseen since the 2009 Recession. The lowest gasoline prices (dollar/barrel) in years are making Americans to use more gasoline, lower fuel economy vehicles and battery electric vehicle sales. Although, sales of popular electric and gas-electric hybrids have dropped down at high speed, wealthy Tesla Motors loyalists continue to drive up sales. The operating expenses for Tesla are expected to grow about 20% in 2016 as compared to 2015. Also, Tesla expects to generate positive net cash flow and achieve non-GAAP profitability for the year 2016.4

Competitive Forces The major competitive forces of the electric cars against internal combustion engines are as follows: SUPPORT OF GOVERNMENT

President Barack Obama in his 2011 State of the Union address, set the goal for the U.S. to become the first country to have one million electric vehicles on the road by 2015. Based on forecasts made by the U.S. Department of Energy (DoE) this goal was set , and the Motor companies such as Fisker Karma, Fisker Nina, Ford Transit Connect, Ford Focus

3

http://www.ibtimes.com/tesla-model-s-only-electric-car-demand-right-now-low-us-gas-prices-batter-plug-car-2125907 4 Tesla Annual Report 2016 (http://ir.teslamotors.com/) ibtimes.com

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Electric, Chevrolet Volt, Nissan Leaf, Smith Newton, Tesla Roadster, Tesla Model S and Th!nk City had set the target.5 PRICE

The most important goal for any electric vehicles is to overcome the disparity between their development cost, production cost, and operation cost, compared to those of equivalent internal combustion engine vehicles (ICEVs). Till 2013, electric cars were significantly more expensive compared to conventional internal combustion engine vehicles and hybrid electric vehicles because of the cost of their lithium-ion battery pack. Although, now battery prices are down about 8% per annum with production in bulk, and are expected to drop even more.6 MAINTENANCE

Generally, the electric cars have batteries which are quite expensive. In case, the battery becomes defective, those expensive batteries are needed to be replaced. However, the life of the batteries can be very long. Beside battery replacement, the maintenance of the electric cars are low, specially, if the cars are using current lithium based designs. 7 RUNNING COSTS

According to a study by US department of Energy, cost of per mile for EVs is much lower than the traditional ICEVs. The cost of charging the battery depends on the price paid per kWh of electricity – which depends on location. As of 2012, a Nissan Leaf driving 500 miles per week is estimated to cost approximately US$600 per year in charging costs in Illinois, as compared to cars using gasoline which costs around US$2,300 per year in fuel.8 MILEAGE COSTS

The mileage-related cost of an electric vehicle can be attributed mostly related to costs of charging the battery pack, and its replacement with its age, since the gasoline cars have hundreds of its parts involved in internal combustion engines compared to an electric vehicle which has just five moving parts in the motor. Hence, the cost on battery is required to be calculated to calculate the cost per kilometer of an electric vehicle. The capacity of the battery is also dependent on the usage of the car. Not to forget, even a battery with no life has market value as it can be recycled and used as a spare battery.

5 U.S. Department of Energy (February 2011). "One Million Electric Vehicles By 2015 - February 2011 Status Report" (PDF). Office of Energy Efficiency and Renewable Energy (EERE). Retrieved2013-02-27. 6 Siddiq Khan and Martin Kushler (June 2013). "Plug-in Electric Vehicles: Challenges and Opportunities" (PDF). American Council for an Energy-Efficient Economy. 7 http://cleantechnica.com/2013/09/27/tesla-model-s-almost-maintenance-free/ http://www.earth911.com/eco-tech/electric-car-home-charging-guide/ 8 U. S. Environmental Protection Agency and U.S. Department of Energy (2015-12-04). "Fueleconomy.gov's Top Fuel Sippers (EPA Ratings, All Years)". fueleconomy.gov.

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The Tesla Roadster's very large battery pack is expected to last seven years with typical driving and costs US$12,000 when pre-purchased today. The battery pack of Tesla Roadster costs around US $ 12,000 currently and lasts for approximately seven years. For example, driving Tesla Roadster for 40 miles per day for seven years (365days*7years*40miles = 102,200 miles) leads to a battery consumption cost of US $ 0.1174 per mile.9 FIVE FORCES

The five forces from Michael Porter give us a good insight about the positioning of the corporation or business organization in a particular industry. Taking a look at these five forces for Tesla: Industry competitors

The new generation of electric vehicles powered by alternate drive trains have emerged in the past few years. These are not only electrically powered but also advanced gas electric hybrids; plug-in hybrids. This variation in technology can be one the major segregation. Toyota Prius in gas hybrid and the Chevrolet Volt for plug-in hybrids are good successful examples.10 The following table lists companies that are involved in this technology:

COMPANY

BEV

MODELS(TIMELINE)

COMPETITION ANALYSIS SUMMARY

Audi

Yes

e-tron(2012), A1eTron(2012)

Limited, small build production output. Price: $123,000. Range: 150 miles. Direct competition for Tesla Roadster.

Yes

Mini-E(N/D)*,Active-E (N/D), Megacity (2013)

Only 500 Mini-Es is slated for the production. Active-E scheduled for mass production. Price $500/mo. Range: 100 miles. Direct competition for Tesla Model S but Tesla enjoys technology and range advantages.

E6 (2012), S6DM (N/A)

Production output objectives unknown. Price:$35,000. Range: 200 miles. Significant direct competition for Tesla’s planned Blue Star (mass market) product line.

BMW

BYD

Yes

CODA

Yes

CODA Sedan (2012)

To produce 14,000 cars within 12 months of debut. Price $40,000. Range: 120 miles. Significant direct competition for Tesla’s planned Blue Star (mass market) product line.

Chrysler

Yes

Dodge Circuit (2011)

Priced in the same range as Tesla’s Roadster. Range: 200 miles. Low production numbers

9

United States Environmental Protection Agency and U.S. Department of Energy (2014-07-04). "Compare Side-by-Side: 2014 BMW i3 BEV & 2014 BMW i3 REx". fueleconomy.gov. Retrieved2014-07-26. 10

Myles Edwin Mangram, The globalization of Tesla Motors: a strategic marketing plan analysis, Journal of Strategic Marketing, Vol. 20, No. 4, July 2012, 289–312

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anticipated Direct competition for Roadster. Tesla will be able to compete on technology advantages and range.

Daimler

Fisker

Yes

No

Smart EV (2012) Mercedes A class E-Cell

Smart EV production schedule – 1500 global sales in 2011. Price: $36,000. Range 65 miles. Mercedes A-Class in serial production. Price TBA. Range: 125 miles. Both models are likely significant competition for Tesla’s planned Blue Star (mass market) line.

Karma (2011), Nina (2012)

Plug-In Hybrid. To produce 15000 Karmas annually. Company focused on producing sports luxury plug-in hybrid vehicles. Presents substitute competition to Tesla Roadster models.

Detroit Electric

Yes

e63 (2011) e46 (2011)

To produce 270,000 + vehicles by 2012. Price $25,000. Range: 110-200 miles. Significant Direct competition for Tesla’s planned Blue Star (mass market) product line.

Aptera

Yes

2e

Price $30,000. Range: 120 miles. Manufacturer currently experiencing serious solvency issues. Likely bankruptcy prospect.

Focus BEV (2011)

To produce 5,000-10,000 BEVs annually. No price information available. Range: 100 miles. Significant direct competition for Tesla’s planned Model X.

Ford

Yes

Force rating: Medium, as Tesla already has alliances with major automotive industry brands and has a high technological factor. New Entrants

This industry requires huge initial capital investment in terms of Research and Development, Manufacturing facilities, human resource etc. It is very difficult for a new entrant to gather and invest such capital. Hence the Greenfield entry is very challenging. Another possibility for a new entrant would be through mergers which are again quite challenging. The revenue from other companies owned by Elon Musk provided the huge capital required for Tesla Motors. This wouldn’t be possible for small companies willing to enter this segment. Force Rating: Medium, completely new company being established chances are pretty low, but the existing automotive industry giants like BMW, Audi etc. are exploring this segment and hence can be competitive as these companies have longer experience in car manufacturing sector.

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Suppliers

Tesla ensures the highest safety standards for its cars and has high safety ratings. The suppliers are mainly evaluated by their ability to provide high quality parts. Hence it becomes expensive as most of the time these suppliers are mainly concentrated in the economically strong countries. It also makes shipping expensive. The cost of production too fluctuates according to the world economies .The threat to suppliers would be that some of the major components are manufactured in-house like drive trains, engines etc. Some of the major suppliers for Tesla are Panasonic for batteries. Hence the bargaining power of the suppliers is low.11 Force Rating: Low, Tesla is planning to increase its in-house production for most of its parts to cope up with quality requirements and hence suppliers’ power doesn’t play a major role. Substitutes

Tesla also has a great competitive advantage as it being the pioneer can very well integrate its power train technology with its vehicle design and software to produce a high performing product. But the technological variances like the hybrid, the conventional Internal Combustion (IC) engines or the lug in cars make the situation more competitive. The other factor of considering Tesla as a mode of locomotion is also critical to access as there are other cheaper and more environmental friendly options available to the customer segments like buses, trains, bicycles etc. Force Rating: High, the technology is disruptive technology as cracking the tradition IC engine market is difficult and the network of other modes of locomotion is well established. Buyers

The main customer segment targeted by Tesla is eco-friendly, technology loving people. They are focusing on B2B and B2C markets; An Example of B2B is Tesla and Uber. The price sensitivity of the customer segment is also low as these people are generally who are willing to invest in the luxury cars. Tesla is the pioneer in the high performance electric car segment and hence in terms of technology, it is incomparable in this aspect. Being an early mover has also gained the attention of the customers.12 Force Rating: High, the customer segment has greater capacity to spend and hence might move to established brands like BMW and Audi once the option is available.

11

Edward Peter Stringham Jennifer Kelly Miller J.R. Clark, CALIFORNIA MANAGEMENT REVIEW VOL. 57, NO. 4 SUMMER 2015 CMR.BERKELEY.EDU 12 Foundations of Business Strategy Strategic Analysis Report: Tesla Motors Inc.

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Strategy13 Tesla’s primary strategy is to be a market disruptor in the automotive industry. It follows a top down disruptive strategy; by which it launched its most expensive product in very few numbers first and used the profits to develop the next generation of cheaper cars in larger volume to appeal to a larger customer segment. This is further discussed in the corporate strategy section.

Luxury Car Sales Comparison 30000

26566

25000 20000

18480

15000 10000 5000 0 2014

2015

Mercedes Benz S-Class

Tesla Model S

BMW 7 Series

BMW 6 Series

Lexus LS

Audi A7

Mercedes Benz CLS Class

Audi A8

Porsche Panamera

Jaguar XJ

Figure 2 – Luxury Car sales comparison

This strategy of tesla has been on track as expected and the company is now launching its fourth generation of cars; the Model 3. The success of this strategy can be seen by the number of cars that were sold in each of its generation. The above infographic shows how Tesla has seen success in the number of its cars sold from the year 2014 to 2015. Every other luxury car maker has seen a drop in the number of cars sold. This could partially be true due to Tesla gaining on their market shares. The main reason Tesla has been able to increase its sales while its competitors are losing it, is the fact that it is able to embed technology deeper into the car than its competitors. The digital revolution has made the modern consumer more affinitive to technology and one of the industries that was unable to keep pace with this technological revolution is the 13

http://cleantechnica.com/2016/01/15/1-large-luxury-car-in-us-tesla-model-s-2015-sales-comparison/

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car industry. Since most luxury car makers are well established and large organizations, they lack the innovative and entrepreneurial spirit to develop newer technologies without the corporate sluggishness slowing down the entire process. Since Tesla has minimal bureaucracy, it is more agile and able to innovate quicker than its well established competitors. Most of the customers that purchase a Tesla car, do so because of the technological factor of the vehicle. The environmental friendliness and cheaper refueling (recharging) are only minor added bonuses. The customers are generally early adopters of technology who are comfortable with experimenting with newer technologies. This also allows them to distinguish themselves from the mass market. These customers are the primary revenue drivers for Tesla. Another important advantage of Tesla would be the fact that the entire car is controlled with the use of software. This allows the company to keep updating its vehicles with newer features for the existing hardware. This is a disruptive concept that no other car maker has ventured into. The customer is able to enjoy the newer features of the next generation without having to purchase an entirely new car. BUSINESS LEVEL STRATEGY

The primary business level strategy for Tesla is a focused differentiation strategy, targeted at middle and upper income customers. It is currently handicapped in one aspect compared to its competitors; lack of traditional gas engine. This is one of the Unique Value Propositions that Tesla has to offer to its customers. However, this also limits the customers from being able to refuel their vehicles at any of the extensive network of gas stations. This forces Tesla to develop its own network of “Super-charger” network across the countries that it operates in. Although the consumers can recharge their cars at home, to make Tesla truly compete against the traditional car industry, it would need to extend the range currently available. Tesla tackles this problem with two solutions. Firstly with its increasingly large number of super charging stations enabling its customers to travel longer distances without worrying too much about the recharging. Providing this service free of cost attracts more customers. Secondly, Tesla motors is continually working on improving its battery technology. By increasing the capacity of batteries included in each generation of the vehicle, the reliance on recharging of the vehicle is reduced considerably compared to older generations. Another important aspect to consider is the entire industry of electric vehicles. Since this is disruptive to the traditional car industry, there hasn’t been much support for these ventures. To address this issue; Tesla motors has open sourced several of its patents for

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other companies to utilize.14 This will allow the entire industry to mature and eventually overtake the traditional car market. CORPORATE STRATEGY

Traditionally disruptive technologies start from the bottom, and gradually increase the user base to a point where the technology can no longer be ignored and becomes a main stream product. Alternatively, Tesla Motors had selected a major product viz. an electric car and aims to bring it to the mass market as quickly as possible. This strategy can be better explained by analyzing by what the company’s chairman calls his “Master Plan”. This plan consists of the five following steps for the company to achieve15:     

Build sports car Use that money to build an affordable car Use that money to build an even more affordable car While doing above, also provide zero emission electric power generation options Don't tell anyone.

Tesla motors aims to bring in the disruptive technology of Electric Vehicles to the mass market. The above statements conform closely to what Tesla has been doing in the past few years. It released the very first sports car, the Tesla Roadster, back in 200816 for a base price of $109,000. The Roadster was engineered to compete head to head with high end sports cars at the time, and it outperformed many, rightly so. The second phase of Musk’s plan involved building of a relatively cheaper version; the Model S. The deliveries of the Model S began in June of 2012. It currently has a retail base price of $80,000. The three part plan needed to be extended into four categories due to engineering and economic challenges faced by Tesla Motors. This led to the announcements of two new models; the Model X and the Model 3 on February 2013 and March 2016 respectively. Being a relatively smaller company with limited funds; this strategy allowed Tesla Motors to strengthen up its economic stand point and thereby allow it to achieve an organic growth. While this may be true per say in terms of the revenue generated, the company has actually been making losses year over year as observed in the following illustration.

14

https://www.teslamotors.com/blog/all-our-patent-are-belong-you https://www.teslamotors.com/blog/secret-tesla-motors-master-plan-just-between-you-and-me 16 https://en.wikipedia.org/wiki/Tesla_Roadster 15

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Tesla Motors Annual Reports 5000

Million USD

4000 3000 2000

1000 0 -1000 -2000 Revenue Net Income

2012 413.26 -396.21

2013 2013.5 -74.01

2014 3198.36 -294.04

2015 4046.03 -888.66

Figure 3 – Tesla motors Revenue and Profit – Historical Data17 Any organization reporting such losses would lose the support of its investors and the company would eventually file for bankruptcy. However, being a younger company and having the entrepreneurial flexibility has allowed Tesla to take risks in the short term which would allow it to be profitable in the long term. A clear definition of the future of the company and the vision for the organization has allowed Elon Musk to appease the investors in the short run. He had the following message in a letter to the shareholders: "Simply put, in a choice between a great product or hitting quarterly numbers, we will take the former. To build long-term value, our first priority always has been, and still is, to deliver great cars.” VALUE CHAIN18

Tesla has a high degree of vertical integration which is quite uncommon in the automotive industry. Most car manufacturers focus engine manufacturing and assembly of the cars. Tesla on the other hand, while it has several suppliers, attempts to build the entire car from the bottom up.

17 18

Tesla Motors Inc. Financial Reports http://www.academia.edu/7563935/tesla_motors_startegic_analysis

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Primary Activities

Inbound Logistics. The integral components of the car are manufactured by Tesla inhouse.19 Most of the other components are sourced from several suppliers. This system improves the efficiency of the entire process. Operations. The primary market for Tesla was the United States. By producing the cars in the United States it reduces the cost of the finished car. All of Tesla’s cars are manufactured in its production plant in California20. High levels of automation allows the labor costs to be minimized. The robots can also be easily reprogrammed to create different models unlike human labor which would require training, thus making this process even more efficient and cost effective. Outbound Logistics. Tesla motors sells its cars through its own stores located in 18 countries. Most of the reservations are made online. Forward vertical integration in this manner allows Tesla to remove the car dealerships which would further reduce the cost of its products. Marketing and Sales. Tesla has a rather modern method of advertising. It does not employ any traditional marketing. The Tesla owned stores attract a lot of foot traffic which allows the company to educate people of the need to own zero emission vehicles. Several celebrities owning Tesla cars also provide a mode of advertisement for Tesla. Service. The USP for Tesla in terms of service is its presence of Super-charging network which provides free recharging of its vehicles. No other car manufacturer currently offers free refueling of their products. Tesla is also working on expanding its service centers to better serve its customers. Support Activities

Firm Infrastructure. Tesla being a young organization benefits by being flexible in its organization structure. Elon Musk oversees most of the operations of the company and delegates authority to the managers. This makes the organizational structure quite horizontal21 and provides faster communication and quickens the decision making process. Human Resource Management. Having clearly defined goals for the future of the company, Tesla attracts a large number of highly talented individuals. Candidates aspire to be a part of a company that is attempting to affect the world in a positive way.

19

http://www.supplychainbrain.com/content/blogs/think-tank/blog/article/font-size2tesla-motors-a-tale-ofbeauty-and-painfont/ 20 http://www.teslamotors.com/about 21 Tesla Motors, 2014

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Figure 4 – Value Chain Technology Development. Attracting these highly skilled individuals allows Tesla to be a pioneer in technology. Its Research & Development forms the backbone of the company thereby giving it an advantage over its competitors. Development of newer technologies is integral to the company to keep up its disruptive technology and stay ahead of the competition. Tesla places high importance on its R&D and a great value is added to this process by the personal involvement of Musk to modify and improve Tesla’s products. Procurement. Although Tesla has in-house production of most of its key components, it has several strategic partners to aid in its supply. The batteries used in the production of its cars are provided by Panasonic. PERFORMANCE DRIVERS

Tesla was founded by Elon Musk, who has considerable experience in both, the technical aspect of the business as well as the business perspective. He is the founder of SpaceX, SolarCity, PayPal, and Hyperloop. His experience with running successful businesses makes him the most integral resource for Tesla. His personal involvement with the design and improvement of his products is indispensable to the organization. Tesla’s strategic partnership with Toyota which is also a major investor is also a key resource, to increase its capital. It also has partnerships with other major organizations like Panasonic, on which it relies for the procurement of the batteries for its cars.

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Recommendations MARKETING ASPECT

The major goal of Tesla in the marketing field would be to generate demand for its cars and give leads to its sales teams, generate brand awareness using the advertising media and social media where they are absent and manage the corporate reputation. They should also try to keep their existing customer base happy as it would create customer loyalty in the end and also let customer feedback be a part of their innovation process.22 RESEARCH AND DEVELOPMENT:

Tesla should keep innovating their products at a regular basis. With the competition being high the perfection in designs and innovations bring about the product and company differentiation.23The Tesla Model S has zero emissions. Disruptive innovations like the Auto-pilot feature is a marketing campaign in itself and Tesla would need to continue innovating to maintain its competitive edge. MANUFACTURING AND PRODUCTION

Some capital investments for Tesla come from the money customers invest in the upcoming models. But the problem is the amount of customers investing and the promise to manufacture huge amount of cars can be risky. Tesla should try to forecast their manufacturing strategies well in advance to avoid the problem of not meeting the customer deliveries after the upfront payments. Forecasting would be of immense help to Tesla. INFRASTRUCTURE DEVELOPMENT AND INVESTMENTS

The major investment other than the manufacturing facilities is the charging and serving stations that they need to offer. The Model S has a range of 500 miles in a single charge and hence it is really important to have a good network of charging and to expand their super-charger network across all geographies of operation. They can also take some help from the Government for the same. The infrastructure should be globally expanding. For example in Norway they people have some government subsidy while buying electric cars. This can boost sales.24 CORPORATE SOCIAL RESPONSIBILITY

They should try to invest money in educating people about the advantages of using electric cars and should advertise their zero emission concepts for the same. They should arrange

22

Myles Edwin Mangram, The globalization of Tesla Motors: a strategic marketing plan analysis, Journal of Strategic Marketing, Vol. 20, No. 4, July 2012, 289–312 23 Kotler & Keller, 2009, pp. 325–326 24 http://europe.autonews.com/article/20150512/ANE/150519968/norway-reaffirms-electric-car-subsidiesafter-boom

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environmental campaigns that would also earn good will for the company. Since their core manufacturing process or their products are not harmful to the environment, it serves to be of a good source of reputation for the company. Tesla would need to maintain and improve this reputation in all means possible.

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Bibliography #1 Large Luxury Car In US = Tesla Model S (2015 Sales Comparison). (2016). Retrieved April 21, 2016, from http://cleantechnica.com/2016/01/15/1-large-luxury-car-in-us-teslamodel-s-2015-sales-comparison/ Elon Musk. (n.d.). Retrieved April 14, 2016, from https://en.wikipedia.org/wiki/Elon_Musk Johnson, G., & Scholes, K. (1999). Exploring corporate strategy. London: Prentice Hall Europe. Porter, M. E. (1998). Competitive advantage: Creating and sustaining superior performance. New York: Free. Tesla Motors. (n.d.). Retrieved April 18, 2016, from https://en.wikipedia.org/wiki/Tesla_Motors Tesla's Gigafactory Supply Chain Vertical Integration. (n.d.). Retrieved April 21, 2016, from http://www.supplychain247.com/article/telsas_gigafactory_supply_chain_vertical_integr ation The Secret Tesla Motors Master Plan (just between you and me). (2006). Retrieved April 18, 2016, from https://www.teslamotors.com/blog/secret-tesla-motors-master-plan-justbetween-you-and-me

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