Part I
Executive Summary

This paper focuses on the problem facing Tesla, Inc. and identifies how Porter’s Five Forces model can be applied to the company. It provides an examination of the company’s SWOT and discusses strategic alternatives and recommendations. It assesses that Tesla must focus on production and the recruitment and retention of talent to get production where it needs to be.

Background of the Business

Tesla, Inc. is a car manufacture in the automobile industry. It specializes in the production if high-end electric vehicles (EVs). Launched in 2003, Tesla’s first car was the Tesla Roadster, which was an ultra-luxury, ultra-sports EV for the specialized, niche car market. From there Tesla moved on to the Model S and Model X—two more luxury EVs that had more mainstream appeal. With the more affordable Model 3, Tesla managed to crack the mass market and become legitimate contender in the auto industry. However, a series of setbacks and delays has caused Tesla to lose its footing and allowed skeptics and critics to question the company’s ability to tackle the big players like BMW, VW, Ford, Audi, and the other majors—all of whom are working on their own lines of EVs.

Statement of Problem Facing the Firm

In order for Tesla to maintain market share and keep out of bankruptcy it has to sell more Model 3’s. However, the Model 3 has been plagued by production problems and the brand is not living up to its potential due to delays in the promised roll-out of an affordable Model 3 for $35,000.

According to Porter’s Five Forces, this problem needs to be addressed because the five forces Tesla is facing are:

1. Competition in the industry

2. Potential of new entrants into the industry

3. Power of suppliers

4. Power of customers

5. Threat of substitute products

Each one of these forces is a drag on Tesla’s ability to advance. Competition is heating up, putting pressure on Tesla to deliver the Model 3 and turn a profit. The potential for new entrants is rapidly increasing, especially in China and other markets. The power of suppliers is increasing, as Tesla has had problems making payments to suppliers and they are beginning to back away from Tesla, like Panasonic is now doing. The Power of customers is increasing, as customers begin shifting to the Chevy Bolt and other EVs, feeling that Tesla has not kept its promises to them. And thus the threat of substitute products is very real: Tesla’s Model 3 is not the only affordable EV they it may still be the most unique. Customers hungry for an EV that works, however, may settle for something less spectacular while Tesla continues to work out the problems in its production.

Summary of the Situation Analysis

SWOT

Strengths

The strengths of Tesla, Inc. are its brand, its focus on sustainability, its visionary leader and CEO Elon Musk, and the fact that it was basically first to market with an EV that had mass appeal to luxury car buyers with the Model S (Yauney, 2018). Aside from these strengths, Tesla’s sales for the most part come from the domestic market (Yuying & Qingrun, 2018). This means that Tesla is still popular in the U.S.

Weaknesses

One of Tesla’s main weaknesses is its inability to figure out production for its Model 3 and deliver it at the price it promised to consumers. Since the rollout last year, the Model 3 has been priced far higher than the promised base price of $35,000. This is because Tesla cannot sell the car at $35,000 and still make a profit. Plus, Tesla is experiencing a cash crunch as debts come due and Tesla is forced to pay bond holders in cash because the stock price is not high enough for notes to convert. Thus, Tesla needs to sell EVs at a profit, but it...…it does nothing to harm the environment and that it wastes nothing. This is a great CSR strategy because it can win people over to the company who might otherwise pass it up. People want to invest in and support companies that share their values and ideals and many people have that value.

Another of Patagonia’s programs is to give back to the community and to support women in the world. This is a progressive policy that shows that the company is interested in making a difference in the world in terms of having a social doctrine. By supporting women, it is showing its progressivism and its willingness to promote equality and liberal values.

D

A high performing culture puts “extra effort into screening and evaluating job applicants—selecting for skill sets, energy, initiative, judgment, aptitudes for learning, and adaptability to the firm’s culture” (Gamble et al., 2015, p. 10-13). It invests in training, gives promising workers interesting challenges that can build on their skills, and it provides coaching to average workers. Unhealthy cultures are highly politicized, are hostile to change, are insular and too inwardly looking and they have no regard for ethical standards. Adaptive cultures are able to adapt to new challenges because they are fluid. They know what ethical principles they need to stand by and embrace and they hold onto these while looking to grow in new directions.

I would characterize the organization where I work as unhealthy because it is highly politicized and there is a tendency for everyone to feel like he has to be always politically correct. I would change the current culture by letting people feel freer to express themselves without fear of retaliation. I would not promote PC values but rather would emphasize ethics of transparency and accountability. I would recommend that the organization change its approach to ethics and drop the insistence on the politically correct issues.