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Tesla Motors: Final Project

Strategic Analysis of Tesla Motors
by

Michael Booz

on 6 May 2013

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Transcript of Tesla Motors: Final Project

Strategic Objectives External Analysis:
Define Car Industry How to lower the cost of enterprise sales? Rene Birthday TEsla Motors
By Michael Booz Tesla Motors designs and sells high performance, efficient sports cars. Tesla combines style, acceleration, and technology to create a one of kind electric car to be the most energy efficient vehicles on the road Mission S _ _ _ _ _ _ _ _ _ _ a s e m e d Vision JIVE Strategic Moves Generic Strategies Five Force Analysis Financial Objecives: Revenue Target Growth Goal to sell in a year $1 Bil 159% 20,000 -Almost any new technology initially has high unit cost before it can be optimized and this is no less true for electric cars. My strategy of Tesla is to enter at the high end of the market, where customers are prepared to pay a premium, and then drive down market as fast as possible to higher unit volume and lower prices with each successive model

-Continue to offer Tax incentives to customers
-Provide Warranties 3 years/36000miles base warranty as well as an option to extend up to 4years/50000miles

-Advertise that the government offers the $7,500 tax incentive upon purchase

-Define Electric vs. Hybrid Vehicle and continue to develop the Tesla brand Since Tesla has high price quality standards and the product line diversification is very low
very defined market niche due to the fact that there are really only two model options
If they can also offer a couple options in the new product line that are a little more affordable to the middle class, they can be in a prime strategic location for growth
Once the efficiencies of production increase and there R&D provides other options for models, then they can move towards this area of the strategic map. See Graph Customer Bargaining Power (Low) Net Income $15Mil 2013 Business Level Strategies? Introduction Core Values guess
what? Corporate Strategy Remove Sales Funnel Cons? Corporate Social Responsibility ? Tools Content Organization Methodology Hire, Train, Compensate and
organize in a flat Structure Trust, Provoke & Consult Leverage Social Media Make it Engaging & Fresh Change the we sell! In the Enterprise way How Pros? There are three main goals is to increase the number and variety of EVs available to mainstream consumers in three ways; by

-Selling its own vehicles in a growing number of company-owned showrooms and online
-Selling patented electric powertrain components to other automakers so that they may get their own EVs to customers sooner
-Serving as a catalyst and positive example to other automakers, demonstrating that there is consumer demand for vehicles that are both high-performance and efficient. @IndoJacco Matrix Partners To the attention of David Skok Thank You for the inspiration David,
Jacco Campbell, CA SWOT Analysis Skills Expert in Engaging, Story Telling & Online Selling Don't forget to call your Mom! Help me! Gross Profit Revenues Cost of Revenues 2012 2011 $204M $413M $142M $383M $61M $30M Diff $209M Increase $258M Increase $31M Decrease Gross Profit Margin 29% to 7% T H N A K Y O U P R E Z I Plans for Execution Why What How The End Create the most compelling car company of the 21st century by driving the worlds transition into electric vehicles -Protect the environment and limit dependence on foreign oil.
-Provide our customers with excellent service and satisfy the needs of our stakeholders
-Create a driving experience like no other electric car on the market through our sports car design and acceleration power
-Pursue growth and learning
-Change the world one car at a time -
-This establishes a production level that will allow us to achieve a goal of 20,000 Model S deliveries in 2013 continuing into 2014. Deliveries will also ramp up during this time to meet objective
-Still experiencing higher per unit costs during part of the year as seen in Cost of revenues due to lower fixed cost absorption, manufacturing inefficiencies with initial production and higher logistics costs as our supply chain process is still maturing.
-Cost of Revenues will decrease as the supply chain process matures and becomes more efficient over the years
-Should plan to open 15 to 20 galleries and 30+ service stations
-Provide power stations for charging along major highways within the next 5 years
-Set a goal of 30% gross profit margin for the next 3 quarters
-Growth should be exponential up until 2017 when it should slow down due to new technologies and competitors
-Have a goal to keep the beta a little over 1 compared to the current 1.72 -Excellent Management team to certify shareholders that the company is in good hands
and provide good insight on the industry
-Great backrounds in Education Develop charging stations throughout major highways and gas stations so people can charge their cars when eating lunch. All should be high power charging stations. Half of the battery can be charged in 30 min so around 150 miles.
Expand service and repair infrastructure by negotiating a service agreement with Toyota.
Tesla should develop additional models other than the Model S and secure the EV luxury niche as well as mid-luxury to premium EV sedans.
Develop a valuable expertise and competitive capabilities over the long term that rivals cannot readily copy.
Tesla needs to continue being the fastest electric sports car of it’s kind. Always seek the competitive advantage over all the other car companies because large corporations could catch up such as B.M.W
Offer Solar panels to charge the car during sunny days for extra charge Expand service and repair infrastructure by negotiating a service agreement with Toyota.
Plan to open 15+ show rooms in the next year. Seven Components of the Macro Environment Demographics: (Threat)
U.S Auto Industry accounts for 5% of GDP
76% of the market is made up of GM, Ford, and Chrysler
5% of the car market is Hybrids and electric vehicles
Consumer for EV and hybrids is between the ages 30 and 50
Upper Middle class to Upper Class Social Forces: (Opportunity)
Increasing popularity on the environment friendly cars
Celebrities are endorsing this action to help the environment
Major social trend towards smaller cars that are sustainable rather than big cars that are not needed
Improvements in socio-economic status means shift towards towards luxury vehicles Political: (Opportunity)
Federal tax credit of $7,500 offered to buyers
U.S government supported 1.3 billion in investments to hydrogen vehicles
Received 465 million dollar loan to be paid over 10 years
Government is very willing to encourage green technology in the auto industry Natural Environment: (Opportunity)
With global warming, pollution, and needed reduction for carbon footprint, more are switching towards sustainable cars Technological: (Opportunity and Threat)
The pace of technology for alternative energy for automobiles is rapidly growing
Tesla is the only company that has created a battery that can run for 300 miles off of a charge
Many other automobile companies are putting a lot of capital into R&D to create this new technology Global Forces: (Opportunity)
With tensions in the middle east, gas prices have rose exponentially
This resulted in the gas hike in 2008 and continued rising prices
Many consumers are moving away from big inefficient cars towards cars with the best MPG so money can be saved General Economic Conditions:
Economic crisis 2008.Gasoline price has more than doubled since 1995 in U.S.Bankruptcy of GM and Chrysler and extremely perishing influence on Ford. Economic crisis put financial strains on consumers which negatively effects the luxury industry, include in Tesla Motors.
People are still becoming wealthier under these conditions and the market is becoming better Barriers to Entry (High) Economies of Scale
Regulation Issues
Technological Innovations
Brand Loyalty
Infrastructure Substitutes (Moderate) There is no pure substitute for an all electric sports car, but there are other options

Hybrids
Flex Fuel
Hydrogen
Diesel
Compressed Natural Gas
Mass Transportation Supplier Bargaining Power (Moderate) Lotus main outsourcing partner

Lotus is providing chassis, body and building Tesla Roadster at Lotus factory in England (High)
Exclusive partnership

AC Propulsion drive train and patent license (high)
Have been developing motors, power electronics etc. using AC's tech

Lithium Ion battery (low): They buy from many other companies

Flexibility to adopt new technologies Luxury item, there is no basis to bargain with. Demand is inelastic

Ability of buyer to extract profits from seller

Green market is emerging

Buyer power is limited due to lack of competition

All electric vehicle so customers save money on gas. Compared to the Chevy Volt that is half electric and gas

There is demand for the product, but Tesla needs to increase visibility Competition from Rival Sellers (High) A green vehicle:
Reduces consumption of petroleum
Uses renewable energy sources
Has Low emissions
Is Fuel efficient In the “green vehicle” market there are four types:
Electric Vehicles Flexible-Fuel Vehicles Hydrogen Vehicles Hybrid Vehicles Rivals Toyota: Yaris, Echo, CamryHonda: Fit, CivicVolkswagen: GolfNissan: Versa, SentraMazda: 2, 3Ford: Focus, Escape SUV, FiestaChevy: Aveo, Cobalt, CruzeHybridToyota: PriusHonda: Insight, Civic HybridVolkswagen: Touareg (2011), Golf, Passat, Jetta (2012)Nissan: LeafGM: VoltMazda: Tribute Hybrid, Premacy HydrogenFord: Escape Hybrid, Fusion Hybrid (2011)Porsche 918 ($600,000; 78 mpg)BMW 7 hybrid ($100,000+; 17/19 mpg)ElectricTesla: Roadster, S SedanEV Noble REV-2 Sport CoupePininfarina (Blue Car)Zap Projected Market Segment Business Segments
-EV (Electric Vehicles)
-Powertrain components to Daimler and Toyota Develop a More Affordable Car - You will reach a larger market
-More Customers
-Market Presence -Competing with other auto makers
-Pricing battle
-Focused energy and time
-R&D costs Low Cost Provider Broad Differentiation Focused Low Cost Provider Focused Differentiation Best-Cost Provider Pros Cons Pros Cons Pros Cons Pros Cons Pros Cons Greater increased market share to the EV market and would attract a lot more buyers from other socioeconomic areas that couldn’t afford the current models Many well established large companies have a grip on this market share and a more efficient value chain as well as supplier power •Focus on diverse range of customers that offers a special value of the pros of an all electric vehicle, and the first all electric vehicle that is luxury as well •Would have to create many more options and variations to different models •Tesla can focus only on developing a model to the niche market of higher cost, higher value, luxury, and sustainable. May miss out on larger market and profitability if the main focus is the luxury sports car approach •There is a large competitive space near the middle of the market competitors and Tesla’s high-quality product •There is a large competitive space between the other companies, but the price is exponentially higher, so Tesla would have to create an approach that would offer a cheaper approach •Would offer a certain model that would appeal to a larger group of consumers and niches. •Costly to R&D a low cost vehicle with less luxury•Rivals have lots of interest in this target segment Mergers & Acquisitions Vertical Integration Defensive Strategy Offensive Strategy Outsourcing -I don't recommend Tesla merge with or acquire any automobile companies

-The only strategic acquisition would be for a lithium ion battery company -For Vertical Integration they would need to own the aluminum plant and produce lithium Ion batteries

-They currently are moving towards vertical integration as a long term goal

-With their in house production of the cars and powertrain, they are very integrated

-Being Vertically integrated would allow Tesla to control unit costs, remain agile, and be able to adapt rapidly - In the past they outsourced to Lotus for the Roadster's body and chassis. Resulted in astronomical costs and inefficiencies

-I would recommend Tesla continue to produce in house
-They have a great brand name for being American made cars in Fremont, CA Multidomestic Approach Transnational Approach Global Approach Pros Cons Pros Cons Pros Cons - Will be able to respond much faster to local shifts in demand -Hinder Resources
-Not conducive to a worldwide competitive advantage -Offers the benefits of both local responsiveness and global integration -More complex and harder to implement -The benefit of a global brand and Reputation -Higher transportation costs and tariffs People and Structure Internal Operations Culture and Leadership -Dedicated to hiring the best of the best employees. -Work is fast paced, stimulated work,
unstructured, and innovation is expected
- Horizontal organizational Structure -Work in teams and offered incentives for the winning team
-Provide compensation packages with competitive salaries, benefits, and meaningful equity.
-Through the value chain every vehicle goes through necessary TQM such as consistent test drives
-Job description, social contract, best practices per position -Thought Leadership
-Innovation
-Challenge the Status Quo
-Entrepreneurship mentality
-Team orientated
-changing the world one vehicle at a time -Code of Ethics/Policies
1. Compliance with laws and regulations
2. Conflict of Interest
3. Insider Trading
4. Corporate Opportunities
5. Competition and fair dealing
6.Health and Safety
7.Record Keeping
8. Confidentiality
9. Protection and proper use of assets
10. Payments to Government
11. Reporting Unethical Behavior
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