Concept explainers
Inside Tesla’s Strategy for Growth
Tesla has been pursuing a strategy of aggressive growth since its founding in 2003. The company’s mission is to accelerate the move to vehicles that will save energy while saving the planet. The key word here is accelerate. Tesla’s strategy combines a long-term vision of a world fueled by renewable energy with a sense of urgency about creating Earth-friendly vehicles that customers will want to drive now.
Because it relies heavily on technology, it’s not surprising that Tesla is based in Palo Alto, California, home to tech giants like Hewlett Packard and Facebook. The firm operates a single, highly automated manufacturing plant in Fremont, California. It also built its own massive production facility to supply lithium-ion batteries for its vehicles and developed a network of charging stations from coast to coast. Instead of selling through dealers, Tesla’s strategy is to sell directly to consumers. This unusual arrangement allows more control over the sales process and yields a higher profit margin per vehicle, because dealers aren’t part of the distribution channel.
In planning its products, Tesla has gone beyond the “green” appeal to showcase the style, speed, and status of its vehicles, marketing to people who want a special driving experience. Consider the Roadster, a snappy, low-slung sports car introduced in 2008. The attractive and sporty Roadster broke the mold for traditional electric cars and rocketed Tesla into the public eye.
The company stopped selling the Roadster in 2011 as it focused on launching the Model S, a stylish, high-end, high-performance sedan with self-driving capabilities. The head designer knew he had to create an all-electric sedan that would stand out in a crowded field of competing vehicles made by international giants such as Audi, BMW, and Mercedes. His design blends the best of today and tomorrow, creating a classically elegant yet forward-looking exterior. Just as important, the Model S has an extended driving range, thanks to the company’s advanced battery technology.
Next, Tesla introduced the head-turning Model X, a luxury SUV with unique “falcon wing” passenger doors that open upward for access to rear seating. Thousands of consumers rushed to put down a deposit for this new product, eager to be among the first owners. Despite strong demand, the company struggled to increase production output because of the complexities of manufacturing the unique vehicle and because of parts shortages. Tesla delayed deliveries for months while it ironed out these problems.
Expanding the product line and targeting a new customer segment, Tesla then introduced the Model 3. This sedan is more affordably priced than the firm’s previous vehicles, part of the strategy to enter the mainstream of high-volume, all-electric car marketing. The Model 3 has a modern, uncluttered look with curb appeal. The dashboard is similarly uncluttered, replacing the usual gaggle of gadgets and buttons with one touch-screen control panel. Enhancing Tesla’s reputation for technology, the Model 3’s “autopilot” feature allows for some driverless operations. More than 450,000 people have already submitted a deposit of $1,000 each to reserve a Model 3. Still, Tesla has had difficulty bringing production to full throttle and, as a result, has been forced to delay some deliveries.
Looking ahead to the long-term goal of producing 500,000 vehicles per year and profiting from economies of scale, Tesla is hiring thousands of employees and revamping facilities for higher output. It is preparing for several product introductions, including a new Roadster sports car, a Model Y crossover vehicle, and a Semi truck. Can Tesla achieve sustained profitability as it races to meet its ambitious goals, tries to outpace competitors, and seeks to accelerate the transition to renewable energy?30
What are Tesla’s core competencies, and how do they help the company compete with long-established car companies?
Want to see the full answer?
Check out a sample textbook solution- 97) Fill in the blanks. A business that has a large market share and is in an industry with significant growth potential is a ______. A business with insignificant market share in an industry with poor growth potential is a ______. a) Cash Cow, Dog b) Dog, Star c) Cash Cow, Star d) Star, Dogarrow_forwardWhat are Tesla’s core competencies, and how do they help the company compete with long-established car companies?arrow_forwardSTC, in partnership with Nokia (a leading 5G technology provider), has developed a new technology to increase the range of its 5G network coverage. This means STC needs fewer 5G towers to reach the same number of customers as competitors. What business-level strategy is most appropriate to profit from this technology? Justify your choicearrow_forward
- 4-38. What is ToMS’s target market? How might this market change in the future?4-39. What revenue streams does ToMS have that support how the firm competes? How sustainable are these revenue streams?4-40. What key assets does ToMS possess and how sustainable are those assets?4-41. What are the major challenges ToMS faces as the firm continues implementing its business model as a means of reaching its mission? Which of these challenges is the most serious and whyarrow_forwardSolar Rain Umbrella- not only shields you from the sun and rain but also harnesses the power of solar energy and filters rainwater for a dual-purpose. Unique Features: Rainwater filtration system, solar power generation, and smart technology integration What are the areas of SDG (Sustainable Development Goals) 2023 incorporated the Solar Rain Umbrella?arrow_forwardIn the context of Professor Christensen's disruptive technologies literature, we studied multiple reasons why big tech firm often struggle to stay innovative. In particular, we've emphasized the "creosote bush" phenomenon. Which of the following options best describes big tech firm's struggle, in context with the "creosote bush" phenomenon? When new projects are less successful compared with cash cow projects, threatened managers to divert resources away from potentially disruptive innovations, hindering their growth and development Established tech firms focus solely on their existing customer base, ignoring the potential for growth and innovation in new markets Large tech firms tend to prioritize short-term profits over long-term innovation, resulting in a focus on established products rather than disruptive technologies Big tech firms inherently lack the ability to innovate, as their size and structure make them unable to adapt to new technologies and market trends…arrow_forward
- Based on - Xiaomi: Designing an Ecosystem For the "Internet of Things" -, Q1 - What are Xiaomi's main challenges? Is the Ecosystem model the best way to address these? Q2 - How does Xiaomi's Ecosystem model compare to traditional models of corporate venture capital? Does Xiaomi's model make sense? Why or why not? Q3 - Should Xiaomi enter the retail store space? Why or why not? Should it pursue a flagship store model or pursue a program requiring hundreds of stores?arrow_forwardPepkor Holdings Limited -An integral part of the Pepkor business model is to ensure that we enhance and add value to both our customers’ and our employees’ lives. This includes our corporate social responsibility initiatives, which form an essential part of our business. Our four strategic pillars are interlocked and collectively focus on empowering people by meeting our customers’ needs for value-for-money products at the best possible prices, and at their convenience. Woolworths Holding Limited -In 2021, we refreshed our WHL Strategic Framework to ensure its relevance to our Group in the context of the rapidly evolving consumer landscape as we pursue our aspiration of being a leading, purpose driven, and truly connected retailer. This framework centres around three STRATEGIC THEMES. The first is to protect and grow our core businesses to ensure we safeguard the foundation of what truly differentiates us from our competitors. The second strategic theme is to expand for more and…arrow_forwardGive typing answer with explanation and conclusion For pantaloon fashion store which is the top revenue state and low revenue state, Why is it so and what are the methods by which Pantallons can improve its business? Help me with the outline also and with quantitative data to justify the answerarrow_forward
- The chapter describes Apple, Redbox, and Keurig as examples of companies that have been successful with a Blue Ocean strategy. Find another example of a company that has successfully pursued a blue ocean strategy. Explain.arrow_forwardWhat is a good analysis for a medical transportation competition? How can a medical transportation company stack up in the marketplace? How can a company like this break I to the marketplace.arrow_forwardWhat is the firm mission statement of BMW ?arrow_forward