Tesla Business Strategy: relentless focus on sustainable energy

By John Dudovskiy
April 22, 2021

Tesla business strategy can be broadly classified as product differentiation. Accordingly, the electric automaker differentiates its vehicles on the basis of sustainability, performance and design. Tesla business plan announced by Elon Musk in company’s website blog in 2006 was the following:

Build sports car

Use that money to build an affordable car

Use that money to build an even more affordable car

While doing above, also provide zero emission electric power generation options

Tesla Business Strategy

Tesla mission statement is to accelerate the world’s transition to sustainable energy. Tesla business strategy aims to accomplish this mission via the following three key principles:

1. Focus on electric cars. Tesla was founded on the belief that “people didn’t need to compromise to drive electric – that electric vehicles can be better, quicker and more fun to drive than gasoline cars.”[1] Accordingly, the company produced its Roadster, Model S, Model X and Model 3 fully electric cars that quickly became successful among the target customer segment attracting billions of dollars of advance payments. Tesla “aims to disrupt the automotive industry by creating many innovative pieces that fit together.”[2]

2. Ownership of distribution. Tesla does not work with dealers and distributors. Instead, the electric automaker is engaged in direct sales through its website. Moreover, Tesla has company-operated stores and galleries in shopping centres and other places popular among the target customer segment in the US and 35 other countries and regions worldwide.

3. Low cost of ownership. Tesla cars run on electricity, which is considerably cheaper than oil and gas. Moreover, owners of electric vehicles are offered various tax breaks and incentives from local governments in some areas. Tesla has a calculator on its website to tell customers exactly how much they save. Low cost of ownership is one of the main sources of Tesla competitive advantage.

4. Unconventional way of doing business. Challenging the status quo of doing business is the core of Tesla business strategy and this can be seen at various aspects of the business. For example, unlike other major companies, Tesla does not spend money on advertising and its marketing strategy is known as ‘zero dollar marketing’. Similarly, the company has unorthodox HR practices, where management hierarchies are blurry and employees at all levels can contact CEO Elon Musk directly to solve work problem they are facing.

Tesla Inc. Report contains the above analysis of Tesla business strategy. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on Tesla. Moreover, the report contains analyses of Tesla leadership, organizational structure and organizational culture. The report also comprises discussions of Tesla marketing strategy, ecosystem and addresses issues of corporate social responsibility.

[1] About Tesla (2018), Available at: https://www.tesla.com/about

[2] Cherkasov, T. (2017) “Why Investors Love Tesla?” Medium, Available at: https://medium.com/@timcherkasov_55909/why-investors-respect-tesla-51b36fa60796            

Category: Strategy