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Module 5: Strategic Development - Case Study "Tesla"

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Compared to other car makers, Tesla is relatively new; Ford, for instance, started in 1903, compared to Tesla starting in 2003. This “age” difference did not stop Tesla from surpassing other carmakers, and be a leader in the Electromobility market. The company’s functional strategies proved to be effective and led the company to deliver over 100,000 cars in 2017 (1). Hereafter is an analysis of the cost-effectiveness of all three functional imperatives of Tesla.

Managing Resources – Tesla’s value proposition is derived from its technological innovation more than any resources it received from the market. As a company, it tries to attract the best manufacturing people in the world, but its internal generalized knowledge management strategy is based on its creation capability of members. An example would be how Tesla got GM’s old factory in Fremont, CA; however, Tesla’s production engineers are continually changing the layout of the factory to learn as much as possible (2).

Tesla had to invest significantly in technology and infrastructure. Unlike traditional auto makers, the company’s R&D department’s budget is roughly three times as high as for most traditional carmakers (3). That, mainly, is how Tesla added value to technological inputs. On the other hand, Tesla was able to differentiate its capital value despite the fact that it was subject to the same constraints and vulnerabilities as any other niche manufacturer. The company overcame the early products being expensive and not always well made, by placing more focus on automation than most traditional automakers; and, producing as many of the parts internally as possible – skipping some normal aspects of quality assurance (4).

Managing Relationships – the emphasis, at Tesla, is on the innovation for growth.

With workforce: Because it relies heavily on technology, Tesla is always on the look for the world’s best engineers. However, last year, the company faced allegations of long hours, preventable injuries and harassment at it Fremont factory (5); this affected the company’s image and is considered a weakness it has to deal with.

With Vendors: Nevertheless, Tesla’s emphasis on growth, is represented clearly in it responsive supply chain strategy. Vendors are qualified based on their willingness to invest in specialized learning, and how they adjust to the concepts of the company; for example, Tesla has fully qualified only two cells from one supplier for its battery packs (6).

With customers: More and more people are environmental conscious. Tesla provides its customers with a unique design that fulfills this consciousness. In addition, and similar to Apple, Tesla provides its customers with an in-store experience, that other traditional car makers don’t. This experience, is how customers interactively communicate with the company, and creates interactive market exchange. This exchange is what classifies Tesla’s CRM strategy as a market-making strategy.

Managing Growth – Tesla’s competitive advantage is driven by adopting an operations management strategy that leverages capabilities (7). The company’s high technological operations necessitate economies of specialization and network. The motivating power of Tesla supports its mission.  Since the company’s inception in 2003, Tesla’s mission has been to accelerate the transition to a sustainable energy future ( www.tesla.com ). All 4 models of Tesla (Roadster, Model 3, Model X, and Model S), demonstrate this value proposition. Finally, the company’s social stewardship is taking roots in everybody’s minds. The concept that ties Tesla to transportation sustainability is growing enormously; and is supported by Musk, Tesla’s CEO. He announced earlier that Tesla would not pursue lawsuits against anyone who wants to use their technology to improve sustainable transport (8).

Tesla is a good example of strategic development. It might have some weaknesses, but it demonstrates how a perpetually dynamic functional strategy could place a company as one of the most innovative and successful companies in the world.

 

 

 

 

References

www.statista.com  “Number of Tesla vehicles delivered worldwide from 2nd quarter 2015 to 4th quarter 2017”, statista 2018.

Micheline Maynard, “4 Differences Between Tesla and Other Carmakers”, Forbes, Aug. 19, 2015.

Matt Pressman, “Culture of Innovation: Tesla has Triple the R&D of Traditional Automakers”, EVAnnex, Nov. 4, 2016.

Quora, “How Tesla Manufacturing Compares to Other Auto Makers”, Forbes, Dec. 5, 2017

Gina Hall, “HR shakeup at Tesla, Silicon Valley Business Journal, May 25, 2017.

CSIMerket.com, “Tesla, Inc.”,  https://csimarket.com/stocks/suppliers_glance.php?code=TSLA

Vipin Gupta, “Functional Strategies for African Advantage”, California State University San Bernardino.

Edie newsroom, “5 ways Tesla is leading the sustainability charge”, edie.net, June 17, 2015.

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