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Business Strategy - Tesla Motors
Transcript of Business Strategy - Tesla Motors
Parshva M Shah
Nick Timpelis Company Overview, Strategic Goals and Objectives Overview, PESTEL Analysis, Industry Analysis, Resource and Capability Analysis, VRIN, Options & MCDA, Recommendations Company Overview Tesla Motors, Inc. is an automotive company that designs, manufactures and sells electric cars and electric vehicle powertrain components. Founded: 2003 Head Quarters: California, USA Employees: 2,964 (December 2012) Products Roadster Model S Model X (to be launched in 2014) Overview of Strategic Goals & Objectives Strategic Goals Strategic Objectives Enter Mass Market with new car models.
Be the first to build a broad network of charging stations for all Electric Vehicles.
Sell patented electric powertrain components to other automakers. Threat of Substitutes BMW i3
Mercedes SLS electric Supplier Power Buyer Power Industry Rivalry Industry Analysis Nissan Leaf
Ford focus electric
Toyota RAV 4
EVHonda fit EV
Competition:Moderate;High Entry Barrier
Major brands competing, Tesla’s tech is very innovative as compared to rivals, market sector is niche and largely untouched New Entrants Threat Hybrids and PHEV
Porsche Panamera Hybrid
Toyota (PHEVs are their main target)
Low displacement turbo-diesels with low emissions and good fuel economy Battery Companies
-Bargaining Power: Low, since Tesla buys Li-ion cells from many different manufacturers
Engine Manufacturer (In-house)
-Bargaining Power: High, exclusive partnership, no clear alternative for current market
Transmission (In-house, previously Magna)
-Bargaining Power: Supplier failed, now production in-house; Magna lawsuit B2C
Bargaining Power: Low; since demand is very high.
Bargaining Power: Low; no other comparable technology available Complementing Factors Oil prices are expected to rise from current price of $87/barrel
Low electricity prices
Availability of charging stations and home charging facility
Tax/parking incentives – similar to hybrid tax breaks
Scope for further development in Battery technology Resource & Capability Analysis Recommendations Founder, Chairman, CEO: Elon Musk Traded as: NASDAQ - TSLA Revenue: US$413.3 million (2012) Powertrain Components Source: Crunch the Numbers Revenue By Region Political & Legal Economic Technological Environmental and Social PESTEL Analysis Canadian and American governments have had great influence on withholding the electric car to the mainstream public.
Hybrid vehicles have been making a serious push in the North American market and electric vehicles are gaining traction.
Vancouver’s city council now requires all new condominiums built in the city to install the 240 volt outlets needed to charge the Tesla in 20 per cent of all parking spots.
The Ontario government has announced that it wants to have one out of every 20 vehicles driven in Ontario to be electrically powered by 2020 + incentives with rebates from $4,000 to $10,000. Pedestrian Safety Enhancement Act of 2009 - In 2011, legislation was passed that EVs should make noise. This was done to protect the safety of blind pedestrians.
Plug-in hybrids and all-electric vehicles qualify for a $2,500 to $7,500 federal tax credit.
US$8 billion program for advanced vehicle technologies supports engineering and production of the Model S sedan, and the development of powertrain technology.
Department of Energy grants US$465 million loan to Tesla in 2009.
House Bill 3351/Senate Bill 1659, which would allow manufacturers of electric cars to sell directly to consumers in Texas. The cost of operating a vehicle is increasing mainly due to rise in fuel costs.
According to the Consumer Price Index, transportation prices in Canada rose four per cent in the 12 months to May, 2010 after increasing six per cent in April.
The new Harmonized Sales Tax in Ontario has increased the taxation on pump gas by eight per cent as of July 1, 2010.
Economic incentives from the Ontario government offering rebates and insurance companies offering discounts on auto insurance for hybrid and EV (electric vehicle) cars. Maximum range for Tesla cars is 300 miles. Charging station infrastructure required on long highways.
In California, the Department of Transportation has created charging stations throughout the state and listed them on a publicly accessible website.
Canada is already “plugged in” for electric charging stations as many cities already have 120 volt outlets.
Over 50 patents for Powertrain components. Tesla's awareness to climatic changes and low carbon footprint in production.
Promotion of new technologies and changes in energy policies by government.
Increase in environmental consciousness of consumers (green/eco products).
Declining preference for petroleum fuel.
Tesla vehicles produce zero emission. Threat: Low;
Small number of competing vehicles, different niches, some are collaborating with Tesla motors Threat: High; Large no. of substitutes available. The possible substitutes are other existing powertrains used in hybrids and other EVs but none of them has the same range capability combined with performance. Competitive Advantage: VRIN Analysis Tesla’s competitive advantage is the Powertrain that they build and conforms with the V.R.I.N. framework. The conformance is demonstrated below: Valuable Massive car manufacturers like Toyota and Daimler are buying the powertrain components from Tesla to use it in their vehicles. Rare Tesla cars are the only ones that have a range of 300 miles on a single charge because of this particular powertrain technology Imperfectly Imitable All big car manufacturers have created pure electric powered models but none can match the performance and efficiency of Tesla’s cars. Non-substitutable Strategy Options Option 1: Maintain a niche market for car models (like the roadster) and create a new range of cheaper (upto $50,000) cars in order to enter mass market (like some versions of Model S).
Option 2: Enter the mass market and dominate the EV segment.
Option 3: Create supporting infrastructure in a manner which enables traveling through the entire N. America (one “Supercharger” every 150 mi).
Option 4: Create strategic alliances with big car manufacturers (probably Toyota due to the already existing co-operation) to use their factories and service centres, taking under consideration the 'moral hazard' involved.
Option 5: Investigate the feasibility for customizing the powertrain components or applications in other industries.
Electric Bikes industry: ZERO bikes and BRAMMO for electric bikes the current max range is 80 mi and the required time for full charge is 7-8 hours.
Aviation industry: Boeing with the 787 Dreamliner battery issues.
Railway Industry: Subway or commercial trains that use batteries for lighting, air-conditioning emergency braking and door opening systems etc. Achieve steady production rate of 400 cars per week in 2013.
Deliver 20,000 Model S in 2013.
Develop 3rd generation cars in price range of $30,000 by 2015.
Expand to over 100 “Supercharger” stations at strategic locations in North America by 2015. Concept Cars According to the results of the MCDA we suggest two out of the initial five strategic options. These two options are: The two suggested options are both aligned with the existing strategy of Tesla. Moreover, they are complementary to each other so it is possible for Tesla to go with both simultaneously considering the available resources. Advantages of the 2nd recommended option:
Explores the potential for expansion into new untapped markets.
Explores new potential B2B buyers for powertrain components. Advantages of 1st recommended option:
Leverages product portfolio.
Wealth generated from niche segment can be invested in mass-market segment.
Leads to increase of market share in EV segment. “Maintaining a niche range while creating a cheaper one to enter mass market”
“Investigate the feasibility for customization of the powertrain applications in other industries” MCDA