Strategic Positioning Of Tesla Motors

The developing e-car business experiences numerous challenges in this competitive marketplace. These challenges include narrow range of driving and higher prices of cars. Corporations functioning in this industry require generating value and should search for a way to deal with such problems (Kond and Bi, 2014). Many new automobile manufacturers are trying to enter this industry due to limited resources (Kottler, 2011), latest technologies and an elevated need for sustainability (Becker et al., 2009; Sadek, 2012). In this paper, study is made on the strategic positioning of Tesla motors with the help of analyzing its external drivers and value addition. The entire car manufacturing is on its technological passage (Bozem et al., 2013). Tesla Motors Inc. happens to be an American automotive as well as an energy storage Corporation which manufactures, designs and sells electric cars holding a luxury feature. It is also having EV powertrain constituents and battery components. Recently Elon Musk being the owner of Tesla motors has revealed that the company is looking forward to launch and present a budget vehicle in 2017, which will be way cheaper and smaller than its previous models. Tesla’s base of competitive benefit originates from its capacity to utilize present technology in much effective mode (Tesla motors, 2016).

Question # 01: External drivers of change affecting Tesla Motors

In view of Lynch (2009) environmental analysis is vital for obtaining a competitive advantage which is not only profitable but also sustainable and recognizing opportunities It allows the corporation to forecast conditions that can happen in future and can impact the company in different ways (Bivolaru et al., 2009).

1: PESTLE Analysis of Tesla Motors


  • To go ‘electric’ is initiative of global government
  • The format of ‘going electric’ is different like Japan – Hybrid
  • Incentive and global programs are ready for EVs
  • Favoritism with local company
  • It seems that regulations and rules on emission and safety are different from one country to another.



  • Cost of manufacturing is still high
  • Cost saving for EV is still uncertain
  • EV market increase
  • Free charging (superchargers) or affordable if there is better availability, it is a big advantage.
  • Household income in US has dropped after the financial crisis so also for other developed countries.  



  • A factor of having an EV is ‘coolness’
  • Increase of refueling stations
  • Lack of security with distance or ‘refueling’ of EVs



  • Tesla EV is already using art technology but infrastructure for charging is still missing.
  • Battery technologies mostly dependent on LG and Panasonic
  • Build more chargers rapidly


  • EV is examined to be one of the more desirable options in its past history of global warming and oil spills reports.
  • Developed countries of the world are trying to get free of nuclear power plants.
  • Serious air pollution have been observed in developing countries
  • Recycling of battery is uneconomical




  • Tesla Motors Inc. declared on 12th June 2014 to not initiate copyright lawsuits against anyone who wants to use their technology in good faith (Tesla Motors, 2014).

(Tesla motors, 2016)



Performance of Tesla in terms of risk and profitability is affected by the Macro-economic factors. Demand and need of automobiles is a function of different factors. Profit to a large extend determined by factors which it has especially economic growth, no influence and the price of gas and oil. Though on some extend revenues are also determined by factors that are influenced by Tesla. The most significant is infrastructure and battery costs. As Tesla is leading and operating the way in the plug-in electric vehicle market so they are able to affect the external factors which influence the market (Tesla motors, 2016). So, external analysis has also distinguished these factors in order to offer the full picture of external drivers. The future growth of automotive industry, Tesla and the adoption of electric vehicles mostly depend on a huge number of external factors. The most important for automotive industry is the economic growth that affects the buying ability of consumers to purchase vehicles especially premium models. GDP is predictable to grow especially the most growth coming from Asia. As customers increase, this will have a positive and strong effect on sales in premium segment. Prices of oil and gas will also increase in the long as the driving adoption of EVs and result of economic growth. But this effect will probable offset by demand petrol and gas driven vehicles from rising countries. Over the next years, raw materials are also expected to increase slightly. Some uncertainty is still seen in supply of lithium that is the main input of batteries. Major and high increase in the input materials will hurt the margin of manufacturers. The most important driver of EV adoption is the prices of battery and most crucial constraint of industry is going forward. Whereas it is expected that technology effects and innovation will decrease the costs through 2020, these approximations are highly uncertain for Tesla. The same is the case for infrastructure of Tesla. In order to deal with consumers’ anxiety charging infrastructure will need to be prolonged (Gadenne et al., 2009).

According to Chevrolet Volt, Toyota Prius Hybrid Electric Vehicles and Plug-in Hybrid Vehicles are still major technologies. By strong patent portfolio the proprietary technology of Tesla is protected. Customers are now becoming environmentally conscious, this trend increase by the adoption of green choice of companies. Safety, connectivity and fuel efficiency are the most important and top priority of automobile buyers and so the ability to innovate in these areas will increase the success in future. American company is the mastermind in the e-car industry that manufactures premium electric vehicles powertrain and electric cars components (Mangram, 2012). Depending on the strength of this blog entry of Eleon Musk (the CEO) and how Tesla Automakers will handle their copyright, it can be a big possibility for conservative automobile producers and also for new entrant to have a look at the technology experience of Tesla. It might be a Tesla’s technological start for subsequent technological idea

2: Porters Five Forces Analysis of Tesla Motors

Tesla operates electronic vehicles (EVs) business in premium segment. Most of present major automotive manufacturers produce both internal combustion engine vehicles (ICEs) and other different powertrain electrification vehicles (Tesla motors, 2016).Following is the Porter’s five forces analysis:

Bargaining power of customers

  • Pricing: there are number of customers that prefer less expensive cars. But some prefer even luxury cars like BMW.
  • Delivery. Would like to receive the EV on time.
  • Wants for going ‘green’ image
  • Proffered high-quality fuel efficiency
  • Effortless to fuel
  • Accessibility of fuel station


(power to Tesla)

Competitive rivalry

  • The size of additional automotive companies-huge
  • Suppliers relationship is longstanding
  • Well-known brand globally
  • At competitors, higher manufacturing capacity
  • Strong and well organized netted distribution network exist all over the world.



(power to competitors)


Threat of new entrants

  • Troublesome technology (for charging system and vehicles) might change the market of EV. Continuously monitor.
  • Up to now Tesla IS the company that change the market) current


(power to Tesla)

Threat of substitute products

  • Hydrogen
  • Low end EVs
  • Diesel Engines
  • Hybrids
  • More well-organized combustion engines

(power to substitutes)


Bargaining power of suppliers

  • There are some major parts that are sole sourced from definite supplier.
  • Automotive experienced person companies- familiar with the requirement of market.

(power to suppliers)


(Tesla motors, 2016)


In current world, number of transportation is available for customers including trains, buses, bicycles and airlines. Though none of them provide flexibility and convenience of a car, geographical site of consumers may make the public transportation more preferable. Although there are alternatives to cars but none of them are the direct substitutes. Keeping this, threat of substitutes seems low for Tesla motors.

Entering in an automotive industry can be determined by the economies of scale, capital requirement, distribution network, policies, technological complexity and infrastructure (Praem, 2015). This industry is exemplified as high capital to labor ratio, capital power and large size capability of production. After investigation it is concluded that the threat of entry is low and even lower in automotive premium segment. In premium segment, customers are seen less price sensitive. So overall manufacturers are less need to show the economic cyclicality and profit margins are higher. Because of higher number of customers and enormous amount of resources required to produce vehicles, the risk of backward combination is more or less non-accessible. It is concluded that in the premium segment the bargaining power of buyers is slightly lower and moderate. 

Supply chain structure of automotive industry is divided into “tires”. The main focus of suppliers is on interior, body, exterior electrical, powertrain or chassis. While just limited number of suppliers are able to deliver restricted materials, relative with mass market competitors; premium manufacturer have higher switching costs. Suppliers are quite homogenous and raw materials offer limited differentiation. Variations in prices raw material have considerable impact margins as producers cannot charge higher prices to counteract increased cost (because of price sensitivity of the consumer). Bargaining power of suppliers is moderate in automotive industry for Tesla Motors.

Strong and powerful competition exists in automotive industry. This competition is developing with increase in material costs, environmental regulations, price pressure, invest in alternative fuel and forcing automakers to decrease cost so as to stay competitive. Whereas the ECE segment has attained the maturity stage, well established automakers are investing more seriously in EVs and opposing to establish industry standards. Here it is concluded that the intensity of presented rivalry is high.

The main aim of The Five Forces analysis is determining the degree to which exact factors affect the profitability of industry. It is concluded that the capital strength of the industry limits the threat from new entrance and also increase pressure players to get critical scale. Limited bargaining power exists in this industry as they are dependent on industry. The most significant limitation for profitability is the strong competition and the maturity of industry that leaves few possibilities for taking the market share.

Question # 02: Adding value to Tesla’s strategic position

3: Value chain Analysis of Tesla Motors

Value chain analysis happens to be a valuable tool for identifying how a company can deliver bet value to its users Teece, 2010. In business world, inputs are taken and then value is added to convert those inputs in to such efficient outputs that fulfill customer’s needs and expectations (Maxton, 2004; Chan, 2007). It defines the foundation of how a business concern can builds, supplies, and captures importance and value (Osterwalder and Pigneur, 2010). Tesla has used proprietary technology for differentiating their brand among others and for creating superior products. They have shown their core competencies by means of activities in the value chain in order to create customer value.


Support activities “Technological Powertrain and Battery-Packed Technology”

Currently Tesla owns 203 patents whereas 280 patents are pending. Majority of these patents are related with electric powertrain and battery components. Electric powertrain is a vital component of automobile. The core competence of Tesla is battery pack. The reason behind the designing of this battery pack is to give flexibility for battery cell chemistry, vendor and form for adapting the future advancements (Branger and Pang 2015)

Inbound logistics “The Gigafactory”

Presently, Tesla has sourced battery cells from another company named as Panasonic. This company settled to deliver cells for Model X and Model S. The whole manufacture of battery pack would be vertically incorporated with Gigafactory. Tesla can likely become the leading manufacturer of the world with respect to its lithium-ion batteries. On the other hand, Gigafactory can likely get continuous competitive advantage along with generating new source of income (Klug, 2014).

Production “Manufacturing at the Fremont factory”

The proprietary technology of Tesla is creating difficulty in sourcing the parts of Model S from suppliers. That is why; Tesla has acclimatized integrated manufacturing strategy where engineering, design and assembling will be done in-house. The entire production of vehicles is completed at Fremont Factory that is located in California. 500000 vehicles are manufactured in this factory every year. This manufacturing capacity has decreased overhead requirement as well as reduced the cost. Both the engineering and design team are situated in Fremont factory that enables better products, decrease in logistics waste and quicker processes. Tesla is regarded as only organization that has in-built plant for manufacturing electric automobiles. Tesla has great opportunity in maintaining advantage in the production of electric automobiles in short-term because the technical know-how and construction time will make rivals lag some years behind. Therefore, Fremont factory is considered as short-term competitive advantage (Mathews and Tan 2014).

Outbound logistics “Company-owned stores”

Integrated distribution model has been followed by Tesla that is diverse from conventional dealership model. Stores of Tesla are situated in visible locations like shopping streets and malls for allowing them to reach customers. There is no inventory in stores and they are only designed to give information. Brand perception plays significant role for Tesla. With the help of integrated stores, this company is controlling all customers’ experiences. On the basis of analysis, the services centers and stores of Tesla are important for this company for educating customers as well as maintaining superior brand perception.

Marketing and sales “Supercharger network”

On an average, superchargers of Tesla are 16 times quicker than communal charging stations that are their competitive advantage. However, it is possible for rivals to imitate similar network. The supercharger network of Tesla is regarded as transitory competitive advantage. Customers are loyal for the premium brands and therefore these companies invest more money for their marketing with the intention to develop revenue prospective (Khan, 2006). Customers have also connected coolness factor to company, its product and Elon Musk.

Based on the value chain analysis, Tesla’s most valuable resources and capabilities are identified. VRIO-model is used to assess the competitive implication of each factor. The findings from the internal analysis are summarized in table below:


4: Resource Audit of Tesla Motors


  1. Tesla owns several financial resources. As per the financial report of Tesla 2012, it has produced above 400 million dollars through the issuances of long-term debt and shares.
  2. Tesla has above 150 suppliers all through the globe that delivers nearly 2000 components.
  3. Tesla is the first company which has lavish zero emission automobile for providing the competitive advantage over its rivals (Tesla motors, 2016)


  1. Magnificent higher level management team is hired from leading technology and automobile companies being led by Elon Musk (CEO) and Product Architect.
  2. It is a well-known brand with respect to its visual appeals that are related with huge marketing efforts and products offerings.
  3. It utilizes creative technology. It also owns patents of battery and drivetrain. These characteristics keep Tesla in leading position (Tesla motors, 2016)

Tesla has made huge investments on its Research and Development. Tesla has been producing Model S in its own Fremont Factory at California. Tesla has been assembling and delivering Model S for its European customers by means of its European Distribution Centre located in Tilburg. Finally, for ensuring long-distance driving for valuable customers, Tesla is designing the most inclusive and fastest worldwide networks of charging stations (Tesla motors, 2016).

Capabilities of Tesla

Tesla has the capacity to apply small-cylindrical lithium cells to automobiles by means of best proprietary power supervision. These cells are commonly utilized in consumers’ electronics. It has self-driven and empowering personnel for promoting the development of company. It has best partnerships with Daimler AG, Panasonic and Toyota that are responsible for providing support to Tesla with respect to battery technology R&D and future improvements (Chan, 2007).

Design skills used to make quality products

According to MacKensia (2013), the capability of Tesla related with design skills that are considered essential in producing quality products are as follows:

  1. Model S gives packaging opportunities that can be created from compact electronic automobile powertrain. 
  2. The cabin is quit roomy although raked roofline compels on back seat headroom.

Engineering Excellence

With respect to the engineering brilliance of Tesla, the body of Model S is light due to its aluminum. Though the body stiff and strong. The back and front suspension are generally made with aluminum. Electric motor is situated between back wheels that greatly contribute to 47/53 % front/back weight allocation (MacKensie, 2013).


R&D of EV Powertrain Components

Innovative leader can get more advantage in the emerging market of electronic automobile. However, risks are also there. Battery pack is considered as key innovation for Tesla Motors. This pack is comprised of their creative efforts as well as the components from alliance partners.

Core competences of Tesla

The cost of Tesla battery is very low that has made the price of Model S very affordable along with 300 miles range. This range is not yet delivered by any of its rivals. The high-class battery technology of Tesla has made this possible and it is their main advantage over rivals. Tesla is the sole owner of 40 patents and its nearly 200 patents applications are yet pending. This can help in abiding by the zero emission focus, visuals of cars and their performance (Iberg, 2015).

Question # 03: Conclusion on the strength of Tesla Motors strategic position

The study reveals that Tesla efficiently placed itself in the marketplace by opting for a niche segment. It greatly turned its lack of knowledge into competitive edge by offering latest train for its automobiles which is electric driven and by bringing an exclusive selling model which is customer directed. By this, the company has provided an unmatchable experience to its user which no other automobile manufacturer can give to its customers. Main driver of Tesla’s success is its innovation in production and creative supply chain. Besides this the arrangement of  ‘Gigafactory’ for manufacturing of cells of Lithium-ion on a huge level, has helped Tesla a lot in  becoming one of the major manufacturer  of cell in US and a great supplier to remaining manufacturers of EV automobiles. The patents opening may seem an unsafe move but Tesla can possibly change its opponents into collaborators as well as it helps in reduction costs of EV manufacturing. In conclusion, it is identified by Tesla that developing full EV ecosystem on its own is not possible and it requires partners. Though, Tesla is still having first mover advantage in its research and development of EVs and its first move for producing battery still gives it an upper hand than its competitors and enables it to secure dominance in upcoming EV market world. Investors seem interested and confident in policies and innovation of Tesla and consider it as a leader in future of EV automobile industry. Tesla has established a vigorous and exclusive ecosystem of its value chain for its automobiles which brings improved value and innovative experience to its end users and customers. 

It is recommended that Tesla should grow its capacities of production to make sustenance of mass production as well as to lessen time of production and fix definite standards of industry to boost the usage of company’s technology which will make other companies dependent on Tesla.  It should keep on inventing its resources in R&D in order to gain competitive advantage and endorse an exceptional charging system to be authorized in the industry. Tesla must keep on organizing and positioning superchargers in relation to other makers of cars and stimulate its brand by international promotional campaign.


















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