4 The Nature and Sources of Competitive Advantage

The core skills that Tesla offer is a software/Apple like marketing. Tesla single-handedly forces the automotive industry to enter the high-tech world—a place where the rules are different: the focus is on innovation, R&D, and the customer. Here are five fundamental ways Tesla is disrupting the automotive industry:

B2C – Tesla allows customer to buy a car over the web CAAS model, and save time and money by skipping the middleman.

Simple application updates – Customers can treat a Tesla car as an App that can be upgraded on the fly when bug or better algorithms are found.

Personalization – Customized experience for different drivers with car seat, climate control, and other features etc.

Quality QA and R&D – As a high-tech company, Tesla is always working to create better cars.  If an error is found, Tesla will pick up a customer’s car and return it the next day with the error fixed, as they did with Tesla’s lightweight solution that prevents fires in the Model S.

Open Source Technology: Very much like Google open sourced its core technologies to get more users, Tesla is opening their patents in hopes to universally raise the bar for auto technology.

PRICE: I know people think that Tesla is more expensive than a regular gas car, but check out this comparison between driving a diesel car and Tesla for one full year and you'll see how that's a bit of a misconception.

Keeping factories running at full tilt - Many automakers in the past have made decisions solely on keeping factories running at full tilt to increase plant utilization and because of the cost of shutting down a plant. They would build substandard cars or sell cars at a loss just to keep factories running - which has nothing to do with building cars that people want and maintaining margins. Tesla is building cars as fast as they can because of demand at the moment.

Satisfying dealers - While dealers do make some money on the sale of new cars, dealers make more of their money on used cars and service. They'd much rather sell a gasoline car that requires significant service at regular intervals than an electric car that doesn't need such work. Not having an established dealer network, Tesla doesn't have to worry about this and as an added benefit has much better control over the sales process to improve the experience. They can also shortcut the traditional dealer service process by updating the software on their cars remotely.

Reusing parts from other cars - When many automakers design a new car one of the things they do to reduce development and production costs is reuse parts that they've already developed for another car. Often their offerings are very similar and this can lead to "brand engineering" or substandard design. Tesla was able to start with a clean slate, but is of course reusing the best technologies that they've developed between models.

Branding - Many people have had poor experiences with a manufacturer in the past and swear to never buy a car from them ever again. Or a manufacturer (like Porsche or BMW) may have a certain history or brand that they're trying to maintain, which may involve loud exhaust sounds from an internal combustion engine.

Unions - This goes along with keeping factories running at full tilt because often unions made it difficult to appropriately adjust the production capability downward because they wanted to preserve jobs.

Cannibalizing existing products - Tesla doesn't have to worry that by making a better car they'll lose sales of their other cars, or have to shut down an engine or transmission plant, for example.

No bureaucratic inertia - Tesla has a goal that they're intently focusing on, a charismatic leader who is making sure the company stays focused, and enough control over the company to make sure that what he wants to happen will happen. In many existing large companies there is no overarching goal and employees are more interested in protecting their jobs and status than actually doing things that benefit the company.