Assignment $5$: Strategy Tool: Experience and Learning curve

Background:

$3$y $2016,$ Tesla had been named the most innovative company in the world by Forber. After ocusing on the high$-$end market $($Roadster$,$ Model S$,$ Model X$),$ Tesla was preparing to scal roduction with the launch of the Model $3,$ its first mass$-$market vehicle. Elon Musk annou old production and sales target of $400,000$ vehicles in $2018,$ a move that puzzled many an

While scale$-$ups are typically seen as growth strategies, Tesla's situation raises a strategic pura caling up actually reduce risk, particularly the risk of underperformance and capacity aderutilization?

ou are asked to assess this decision using two key economic principles:

Experience Curve: Costs fall with cumulative production $($due to learning over time

Scale Curve: Costs fall with higher production volume in a given period $($due to econ of scale$)$

arning Objectives

Understand how scale and experience curves influence cost dynamics.

Assess strategic capacity decisions in light of cost structure and market goals

Apply regression analysis to real$-$world strategic decision$-$making,

Evaluate vertical integration versus outsourcing in scale$-$up strategies

Role:

future business school graduate, you are tasked with analyzing Tesla's scale$-$up decision an rering the following questions:

Was Elon Musk's decision to enter the low$-$end EV market and scale up product sound strategic move?

Musk publicly sets the target of $400,000$ vehicles for $2018,$ but where does this number come from?

If Tesla is entering the low$-$end market, why does it continue to insource key components like batteries instead of outsourcing like other automakers?