Question

1.            Within a few short months between the summer of 2019 and early 2020, Tesla added more than $100 billion to its market cap. Do you believe that Tesla’s stock market valuation making it the second most valuable car company globally is rational or do you think it is a hyped-up overvaluation?

2.            What business model is Tesla pursuing? How is Tesla’s business model different from traditional car manufacturers?

3.            Historically, the automotive industry in the United States has been identified by high barriers to entry. How was Tesla able to enter the automotive mass-market industry?

4.            What type of innovation strategy is Tesla pursuing? Tie your explanation to Elon Musk’s “Master Plan, Part 1.”

5.            In which stage of the industry life cycle is the electric vehicle industry? What core competencies are the most important at this stage of the industry life cycle? What are the strategic implications for the future development of this industry?

6.            Apply the Crossing-the-Chasm framework to explain some of the challenges Tesla is facing and provide some recommendations on how to overcome them.

7.            Evaluate Elon Musk’s “Master Plan, Part 2”ii and assess if Tesla can gain and sustain a competitive advantage.

Answer 1

1.I am a conservative investor and I believe that Tesla is highly overvalued because it has not even consistently making profit and it is also highly loaded onto debt so it is extreme optimistic approach from investors to discount it's future earnings and assigning such a huge growth rate so that shares are extremely overvalued. I would refrain from investing into Tesla.

2. Tesla is into electronic car manufacturing and it is a new method of technology which is devoid of use of petrol and diesel so this method is providing Tesla with competitive moat against its competitors. Traditional car manufacturing companies are focusing over old methods of car manufacturing features, not energy efficient like Tesla which can be electronically operated, Tesla is highly venturing into electronic cars and it does not manufacture any cars which is related to to petrol and diesel.

3. Tesla was able to enter into the market with low barriers because it has always been a hyped company because of its differentiation strategy in car manufacturing process so it is providing Tesla with an competitive edge to its competitors so it was entering into market with low competitive barriers.

4 . Elon Musk master plan one is inclined towards making Tesla create a low volume car which would necessarily be expensive and use that money to build medium volume car and again use that money to build high volume car and he is also focusing onto building solar cars and such cars which offers with low imitation of energy so that they could be highly efficient in the long run.