Tesla Strategic Management

Subject: Strategic Management

Assignment (1)

Date of Submission: Feb/2020

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Executive summary
The bellow report analyzing the external and internal environment of the industry and
the firm, in the first part of the macro analysis the researcher has made environmental
analysis using PESTEL and Porter Five Forces to identify the attractiveness of electric
vehicle industry in Europe, moving on to the second part the analysis has been done
using Core competence, VRIN analysis and Benchmarking to determine the competitive
advantages for tesla firm with the major competitor to find the distinctiveness. In
summary, the industry indicates attractiveness to the corporate beside the firm was
distinctiveness and have a competitive advantages against the market.

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Table of Contents
Executive summary..................................................................................................................... 2
Table of Contents........................................................................................................................ 3
Introduction.................................................................................................................................. 4
External analysis.......................................................................................................................... 5
TRENDS.................................................................................................................................. 5
Key Drivers.............................................................................................................................. 6
Power....................................................................................................................................... 7
Attractiveness........................................................................................................................... 8
Internal analysis........................................................................................................................... 8
Resources................................................................................................................................ 9
Skills......................................................................................................................................... 9
Knowledge............................................................................................................................... 9
Core competence and VRIN analysis.....................................................................................10
Benchmarking........................................................................................................................ 11
Distinctiveness....................................................................................................................... 12
Conclusion................................................................................................................................. 13
References................................................................................................................................ 13
Appendices................................................................................................................................ 16

Table of Figure
Figure 1: Porter Five Forces in two periods of time......................................................................7

Table of Tables
Table one: VRIN analysis.......................................................................................................10
Table Two: Comparing conclusion.........................................................................................12

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Introduction
The automotive industry is the most important sector worldwide that plays a critical role in
economic and social development which comprise around 20% of total sales in the USA and it
employs around 17.9 million people [CITATION KIM \l 1033 ]. Also, it considers as sixth of the
largest economic market and it has approximately 3.65% of Total world GDP. The industry
enhances the economic situation of other industries like glass, plastic, rubber and different parts
needed in automotive manufacture.[ CITATION Beh18 \l 1033 ]

The electric automotive industry is growing market, which the first electric vehicle developed in
1870 according to the US Department of energy[ CITATION Ene19 \l 1033 ], it expands rapidly
with market size valued at 118,864.5 million dollars in 2017 and it is forecasted to reach
567,299.8 million dollars at 2025, and growing in compound annual growth rate of 22.3% during
8 years (2017-2025) [ CITATION Rah19 \l 1033 ].

Tesla is a full electric car with sustainable energy, as per their official website, it was founded
before 17 years at 2003 by group of energizers, they were aiming to change mindset of
population about electric vehicles and show the superior benefits of electric over fuel vehicles
and it will be quicker, more safety and better technology [CITATION Tes \l 1033 ]. The 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”.[ CITATION Elo06 \l 1033 ]

Moreover, this report will discuss and demonstrate external analysis to identify the
attractiveness of electric automotive industry through using trends, key drivers and power
depend on PESTEL and Porter 5 forces analysis. Moving on, the report will explore more
internal details to determine the distinctiveness of the firm “Tesla” through using
VRIN analysis to evaluate the competitive advantages of tesla over other
automotive companies.

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External analysis
Electric Vehicle industries are a growing market in Europe with a 1.1% market share of newly
registered vehicles, it grew around 1% of newly registered cars from 2011 until 2018 based on
Statista[ CITATION Sta191 \l 1033 ]. Moving on Electric vehicles consider as environment
protection from emissions and they are highly supported from the European government for
example Norwegian road federation aims to reach zero emissions at 2025 through “All cars sold
should be electric”.[ CITATION Rah191 \l 1033 ]

External analysis, it's depending on PESTEL analysis and Porter five forces in two periods
“Right now and after 5 years” to determine and explain three elements that have a positive and
negative impact of the EV industry, these elements divided into TRENDS, Key Drivers, and
Power.

TRENDS
Trend is the outcome of mixing one or more points in the external analysis that’s lead to
certain changes in the industry so that corporates can benefit from them. [ CITATION
Aya17 \l 1033 ]

1. Government enhance people comfortably with EV.

European government and European Commissioner of Energy are focusing on reducing many
risk factors that affect the environment from the excess level of CO2, SO2, and NO2 and
provide a more comfortable life for populations for example: reduce noising and road crowded,
these things considered as an opportunity for Electric vehicle industry. Moreover, they are
encouraging the deployment of EV and prepare and distribute an establish charger stations for
long-distance travel between cities which reflected on EV to be more acceptable from people.
[ CITATION Mar19 \l 1033 ]

2. EV batteries and climate

The European research and innovation program put an 80 billion euro funding to encourage
electric vehicle to be better and meet customer need [ CITATION Ams14 \l 1033 ], this fund
should use by EV industries to enhance the performance of their batteries in cold weather which
negatively affected in cold weather which compatible with Europe climate.[ CITATION Fre18 \l
1033 ]

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 3. Government support

Many studies found people don’t buy EV due to high prices of battery and electric
vehicle[ CITATION Ams14 \l 1033 ]. In the other hand, the government offer a city park
especially for EV as free parking, reduce road taxes and free recharging. [ CITATION Mar19 \l
1033 ]

4. Future technology

Smartphones, high-speed internet, and smart technology are available in Europe and these
technologies are compatible to work with the electric vehicles for example auto-park through
smartphone and wireless charger which are developed by some EV industry [ CITATION
cor19 \l 1033 ]. Furthermore, these technologies helped to solve some challenges are faced by
people for instance: daily EV charged. [ CITATION Ger14 \l 1033 ]. Also, these technologies are
supporting olds age and future adults through using smart technology and connect EV with a
smartphone.[ CITATION Ams14 \l 1033 ]

Key Drivers
Collection of external factors that have highly impact on industry to be success or failure, also it
explains the opportunities, threats and give the highest priority driver and their effect, which
depend on number and percentages for example: economic growth in specific sector.
[ CITATION Rob17 \l 1033 ]

1) Air Pollution and taxations

The elements are emissions from vehicles harmful to the environment, while the European
Commissioner of Energy focusing on reducing these elements especially CO2 by Electric
vehicles. Also the European government support electric vehicle through taxation rules which
most of European countries put new taxation schemes based on emission of co2 [ CITATION
Eur19 \l 1033 ]for instance electric vehicles are zero taxes due to zero co2, but the diesel and
petrol vehicles have a new tax according to Co2 emission percentage, if the emission of vehicle
about 95 g, the government add two euro on every gram above 95g. [ CITATION Mar19 \l
1033 ]

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Electric vehicles depending on a renewable source consider a friendly vehicle to the
environment for a great reduction in CO2 that occur in Europe during the last years. It reduces
co2 per kilometers from 130 g CO2/Km in 2012 to 95 g co2/Km in 2020 and forecasting to reach
68 g Co2/km in 2025.[ CITATION Ams14 \l 1033 ] through use the electric vehicle, it has less
emit of No2 and zeroes emit of CO2 due to electric vehicles depend on renewable sources.

2) Future of Electric vehicles and economic situations

Electric vehicles are capture around 5% market share of total vehicles selling in Europe to
achieve around 15% market share during 2021. This shows a significant growth in between
automotive sectors to reach over one million EVs in Europe [ CITATION Aut19 \l 1033 ]. On
the other hand, the government working to reduce gasoline vehicles by 50% in 2030.
[ CITATION Ams14 \l 1033 ]

Moreover, the economic situations of European countries are still on positive GDP “1.53%”
but less than last years[ CITATION HPl19 \l 1033 ], while the electric vehicles are less in
taxation, free parking and free recharging, these encourage people to purchase electric
vehicle to save money. Furthermore, the positive GDP indicator of steady growth and
investment which provide more opportunities to industries.

Power
Power is the influences or abilities in the external analysis that can affect the direction of
the corporate.[ CITATION Ste02 \l 1033 ]

The power will determine by using porter's five forces to analyze the competition level and
explains the factors that will influence the attractiveness of the industry. Bargaining power of
buyer in the first time is “Low to Moderate” due to their a few companies manufacture EV that
doesn’t give a choice to people to decide EV, moreover, their narrow product differentiation
between companies and alternative companies provide same benefits which reflect to decrease
the power of the buyer.[ CITATION DAN19 \l 1033 ]

Bargaining power of supplier is low due to a lot of companies’ manufacture lithium-ion batteries
and a few differentiations between them, which reflected to decrease power of supplier.
[ CITATION EvT19 \l 1033 ]

On the other hand, Rivalry intensity among competitors and threat of new entrants are high and
low respectively, these positively affected the attractiveness due to the level of competitions is

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very high and this create a barrier from strong brand against start-up companies. [ CITATION
Ewa18 \l 1033 ]

Portor Five Forces

New entrant threats
10

5
Bargaining power of supplier Rivalry intensity among competitors

Bargaining power of buyer Threats of substitutes

Now Future

Figure 1: Porter Five Forces in two periods of time.

Attractiveness
Attractiveness is a demonstration and explanation of the market potential and if they are an
interesting market to be attractive for the investors to invest in and they affected by external
factors, also it determines the market if profitable or not. [ CITATION Mar191 \l 1033 ]

Based on the external analysis that includes trends, key drivers and power of the electric
industry market, the EV industry was an interesting market and highly attractiveness market in
Europe for many reasons mentioned in the external analysis part.

Internal analysis
This part will demonstrate internal factors of tesla company that impact on company to be
distinctiveness or not through determine resources, knowledge, skills and core competence to
reach competitive advantages.

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Resources
Resources is the abilities of the firms which contains material and intangible assists
which help the reach its objectives. [ CITATION Abd97 \l 1033 ]

Tesla company was a growing company in EV industries and it have great resources include
huge assets number approximately 34 billion dollar[ CITATION Tes19 \l 1033 ] , also their
industries have 185 robots while ten of them are the largest robots in the world[ CITATION
Gre18 \l 1033 ], large factories in different countries depend on renewable sources to produce
thousands of vehicle per year with zero energy cost these factories called GIGA factory in
addition to factory specialized in assembly vehicles parts[ CITATION Jam17 \l 1033 ], tesla has
new machines to build production machine to reduce time of manufacture[ CITATION Kat16 \l
1033 ], deal with 300 suppliers around the world which reflected on tesla company to have high
number of supplier[ CITATION Pat16 \l 1033 ], their factories ranked as the safest industries
worldwide, and the last but not least tesla headquarter in Silicon valley which considers as the
innovation place [ CITATION Gre18 \l 1033 ]. Moreover, it selects their engineers based on
specific criteria to hiring high experiences employees from different companies.[ CITATION
Gre18 \l 1033 ]

Skills
Skill is a competence to produce or make something, and it can be directed or
combined.[ CITATION Ste171 \l 1033 ]

Tesla company was established since 2003, in these years it acquires high skills in production,
manufacture, design, and marketing. these skills impact on periods that needed to produce one
car, which tesla provide the world more than 10,000 vehicles per week [ CITATION Gre18 \l
1033 ], the marketing department has the competence to meet the need of customers, close the
small gap in the electric vehicle market and reach high number of investors and customers
[ CITATION Tes15 \l 1033 ], moreover, tesla designers and engineers experience have a
positive impact on battery duration of distance covered range, which the design of vehicle to

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make larger space to enlarge battery in addition to materials used in it.[ CITATION The191 \l
1033 ]

Knowledge
Knowledge is the set of information the corporate use to produce or lead the cooperate
in its strategy.[ CITATION Ann14 \l 1033 ]

Tesla acquired knowledge to improve its employees and the structure of the company, which
create a program of training in 2018 called “TESLA START” to give training for students to
provide them sufficiency knowledge during 3 months to meet the criteria of tesla company
especially in Service center and improve their career[ CITATION Cha19 \l 1033 ]. Furthermore,
Tesla working in involving their employees in innovation for continues standing against changes
that occur in the market and rapidly respond to these changes.[ CITATION Pau19 \l 1033 ]

Core competence and VRIN analysis

Valuable is the level of necessity of an item in the market [ CITATION Nun12 \l 1033 ]

Rare is an object or service that is unobtainable from other places, which is considered
worthy to the market [ CITATION Nun12 \l 1033 ]

Impartially inimitable is an indication of tangible or intangible assets or product that

cannot be duplicate or imitated by others. [ CITATION Nun12 \l 1033 ]

Non substitutable is a description of a feature of certain activity the is cannot be

exchanged with others to do the same objective [ CITATION Nun12 \l 1033 ]

Core Value Rarity Inimitability Non- Competitive

competence substitutable advantages

Batteries Yes No No No Temporary

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centrality competitive
advantage
Quick move Yes No No No Partial
competitive
advantage
Efficiency Yes Yes No Yes Highly
competitive
advantages
Environmental Yes Yes Yes Yes Highly
centrality competitive
advantages
Brand Yes Yes Yes Yes competitive
recognition advantages

Table one: VRIN analysis

Batteries centrality

Tesla batteries have the longest lifetime among all-electric vehicles due to two reasons include
type and concentrations of materiel that used in manufacture the battery and tesla vehicle
design to get a bigger size of battery than other EV industry [ CITATION The191 \l 1033 ], which
provide better distance covered in single charge for customers.

Quick move

Tesla working on the continuous development of vehicles by involving all company employees
to innovate and create a new idea to meet changes in culture, trends and customers' needs.
[ CITATION Gre18 \l 1033 ]

Environmental centrality

All productions process in these factories are zero energy cost, which reflect to reduce cost of
batteries around 30% while this advantages will reduce price of tesla vehicles to increase
demand from customers and increase profitability.[ CITATION Jam17 \l 1033 ]

Efficiency

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The highest performance comparing to other EV manufacturers include acceleration of tesla
vehicle which faster than Ferrari, Lamborghini and other super cars while their acceleration from
0-100 km during 2.4 seconds [ CITATION Pet17 \l 1033 ]

Brand Recognition

The reputation of a company is considered specializing in luxury electric companies, which

reflect on reach a high number of customers and well-known companies in an electric vehicle.

Benchmarking
Rarity, Inimitability and Non-substitutable are determine in specific criteria include core
competence of Tesla comparing to major competitors to it in Europe market. Their main
competitor BMW[ CITATION Jos19 \l 1033 ].

This part will demonstrate and compare core competence between Tesla and BMW.

BMW brand is well known as sport and dynamic performance vehicle but it can’t reach the
acceleration of tesla, while it faster than Ferrari and Lamborghini. This reputation differs
between two companies due to tesla well-known as the electric vehicle industry while BMW
knows as a sports vehicle. [ CITATION UKe18 \l 1033 ] Furthermore, BMW spends a million
dollar on Research and development to increase innovation criteria in their vehicles like Tesla
company, that reflected on increase threats of BMW in batteries durability. Also, tesla has a
rarity in the GIGA factory to reduce energy consumption which reflects to enhance the quality of
the environment.

Distinctiveness
Distinctiveness is illustration of how certain company have diversity among others in the
market and how it can associate in achieving company strategy. [CITATION Def \l 1033 ]

Competitive advantage is the corporate strength points in the competition arena.

[ CITATION Ann10 \l 1033 ]

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Tesla company have combination of competitive advantages that reflected to be a
distinctiveness firm, these competitive divided to three categories include, highly, temporary and
partial competitive advantages.

GIGA factory and highly efficient vehicle support tesla company over companies, which gives
highly benefits to customers include long distance covered, performance, luxury and healthy
environment, also tesla company specialize and innovate in niche segment only which give
them advantage to develop EV more quick than other companies.

Based on European Environment Agency, they determine many factors affect purchase process
to EV in Europe include price, technology, distance cover and performance. [ CITATION
Eur16 \l 1033 ] While many of these factors are meeting competitive advantages of Tesla
company for instance GIGA factory reduce energy cost that impact to reduce price of vehicle
and cost of battery, tesla battery covered long range of distance around 600 Km in addition to
performance of tesla which well-known in high efficient vehicles.

Conclusion
EV industries Attractiveness Non-attractiveness

Tesla
Distinctiveness EV industries are
attractiveness and tesla
company is distinctiveness.
Non- Distinctiveness

Table Two: Comparing conclusion.

The Researcher found that EV industries are attractiveness based on Trends, Key driver and
Power, and found the distinctiveness of tesla company through core competence, VRIN
analysis and competitive advantages.

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Appendices
Porter five forces

Threats of substitutes High High

Plane, Train, bikes, Fuel- The same transportation
Vehicles “most of them are substitute will remain at
Diesel” and public work and there might be a
transportation new form of substitute like
renewable energy
Threats of new entrants Low Moderate
New entrants of new The governments are
companies are completely facilitating the process of
difficult due to the EV need a manufacturing and
strong branding for gaining the investing in EV which will
trust of consumers. reflect on automotive
Start-up in EV need a lot of industry to manufacture
time and expenses. EV for example general
Company need to produce high motors are planning to
number of vehicle to gain cost produce new pickup
advantages. “HUMMMER) fully electric
Research and development to Soon the knowledge and
innovate new model of skills of using electrical
transportation need a lot of batteries will be
time, a lot of money, and accessible to all.
develop strong brand.
Most of European Automotive
are focusing on innovate
Electric vehicle for instance:
VW, Benz, and BMW

Bargaining power of supplier Moderate-Low Low

They are many battery After few years the world
suppliers worldwide, this mean will have many industries
every company has a one will be manufacturing
supplier of battery that reflect batteries for electrical
on bargaining power of vehicles this results in a
supplier, but the expansion of large number of suppliers
battery manufactures is lower around the globe
the power of supplier. consequently the
Product differentiation is bargaining power of
medium (all batteries are supplier will be low.

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 lithium-iron)
Product quality is high
All companies that manufacture
EV depend on one supplier that
provide them a battery.
For example: Northvolt provide
battery for VW.
E-one moli energy for BMW

Bargaining power of buyer Moderate-low Moderate

Their a few companies that sell The power of buyer will be
an electric vehicle. in moderate level despite
Product differentiation the increasing number of
“moderate”, their a few people who will adopt and
alternative company produce buy the EV there will be a
same benefits, which reflect on high number of
consumer to make a decision. competitors who will sell
Government is encouraging EV.
usage of EV due to reducing
the Co2 emissions
Low switching cost between
companies.

Rivalry intensity among High High

competitors Electric Vehicle industries are All existing companies are
very competitive in promote planning to start the EV
their product to achieve and production and the share
gain much more customers, of European industry in
which the market between EV EV will reach 15% of total
companies are high in European vehicles
competition and marketing. industry, another reason is
EV companies highly pay on that the ability to enter the
marketing to gain customers industry will be easier.
and to build a strong brand
name in EV.
Most of EV has same cost of
Vehicle “low switching cost”
Their around 10 companies
manufacture a EV.
Innovation competitions that
include: battery, shape of
vehicle and technology, to
create differentiation between
them.
Major competitors to tesla are
BMW, Renault and VW

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PESTEL analysis EV industries in Europe market

PESTEL analysis

Political  The institution of green systems solution (EGVI) are Opportunity

supporting the electric vehicles to maintain a low level
of pollution.

 The European research and innovation program are Opportunity

supporting the deployment of electrical vehicle with
funding of 80 billion euro.

 a subsidy on supplies are supported by the European Opportunity

governments to facilitate the electric vehicle business

 The governments are supporting the infrastructure by Opportunity

enabling charging stations and parking places

 Many European governments and cities (e.g., Norway, Opportunity

Denmark, the Netherlands, France, UK, as well as
Oslo, Amsterdam, Paris, and London) are incentivizing
consumers to opt for electric mobility, each with their
own schemes

 Norway, Denmark, Netherlands, France, UK are giving Opportunity

incentives to the people to in choosing electric vehicles
each country have its own incentive methodology.

Economic
 Some European cites has built a citywide parking only Opportunity
for the electric vehicles

 The government are reducing taxes on purchase, Opportunity

lease, and road taxes

 The government also offering facilities on driving Opportunity

lanes, and waiving of toll fees

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  The sales of electric vehicles are expected to increase Opportunity
10-12 % by the end of 2020. With market share 15%
 Many studies are presuming that most people are not Threat
buying the electric vehicles because of its high price

Social  Important surveys conclude most Europeans think that Opportunity

electric vehicles can help reduce pollution problems,
where air pollution (81%), road crowding (76%), noise
pollution (72%).
 After many testing for users on electric vehicle Opportunity
adoption they conclude that charging the car will be /threat
one of the daily routines of the people and it will
become a habit for them and satisfy as the normal
gasoline cars.
Opportunity
 People are easily adopting the use of BEV (car
battery) and they want it for long distance trips and this
result in demand on the charging stations
Opportunity
 Big number of people are open of the idea of car and
ride sharing and it consider as normal behavior among Opportunity
Europeans
 83 million people are not feeling well because of the
exposure to the road noise threat
 People have the idea that it’s not easy to find charging
points for the electric vehicles

Technology  The distance that electric vehicle can achieve is short Threat
comparing with gasoline cars
 The vehicle car can drive 100-120 km I one charge Threat
which is very short
 There is no enough infrastructure for charging the cars Threat
battery
 The battery price is high and its consequently Threat
increasing the car price
 European countries and is able to distribute the electric Opportunity
charging station all over the country to cover the need
of the people
 Smart phones, high speed internet and good Opportunity
communication line are available in Europe and these
technologies are compatible to work with the electric
vehicles
Environmenta  The electric vehicles can decrease the air pollution Opportunity
l  The electric vehicles can decrease the levels of COx, Opportunity
NOx and SOx emissions.
 The energy plants where the electric vehicle charge Threat
the energy can create pollution

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  The electric cars are not friendly with the cold weather; Theat
the batteries are negatively affected by not making fast
response and easily damaged

Legal  In 2011 a white paper roadmap has been stating that Opportunity
the gasoline vehicles must reduce 50% by the year of
2030 the other part of the paper states that the
greenhouse gas emission from transportation must
deducted to 60% by the year 2050.
 The EU “Proposal for Directive of the European Opportunity
Parliament and of the Council on the Development of
Alternative Fuels and Infrastructure” status that the
members must prepare established charging points
and can easily accessed by the public beside
considering the safety and technical maintenance
 The urban mobility package is supporting EV by Opportunity
accessing regulation in the direction to emission level
of the vehicle to create low emission territories in the Opportunity
European cities
 In some cities EV can drive over pedestrian and
environmental zones areas as long as they comply Opportunity
with car white level.
 MEPs have a proposition by making a higher goal for
reducing fleet-wide in European union counties for the
new care by the year of 2030 of 40 %.

University of Bedfordshire-Business School 21 | P a g e