for megawriter

Tesla Motors Strategic Audit

by Wesley Farnsworth #4081924

I. Current Situation

a. Current Performance

Tesla Motors is continuing to grow and expand their product line offerings. They are also revamping manufacturing on current programs like their All-Wheel Drive Model S 85D in order to become more efficient and increase their overall return on investment. (Tesla Motors, 2015, p. xx)

b. Strategic Posture

Mission: To accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible. (Musk, 2013)

Objectives: To bypasses dealers and reaches customers directly through company-owned showrooms and online retail channels. This goes along with their mission perfectly because by skipping the dealers aka the middlemen, they are able to more efficiently get their cars in the hands of their owners. ("Strategic Corporate Profile of Tesla Motors' Global Operations - MarketWatch," 2014)

Strategy: To become a mass producer of electric vehicles. Electric cars are the next revolution of cars that are in demand. It used to be great gas mileage, now people want electric cars that will get them around efficiently without hurting the planet. ("Strategic Corporate Profile of Tesla Motors' Global Operations - MarketWatch," 2014) They market their cars by selling them in corporate owned dealerships instead of third party dealerships so that they can have direct access to their customers and as well as no have to deal with any middlemen.

Policies: Tesla gathers a variety of personal information from its customers to give them the best service possible. However they have the policy to sell this data to third parties but in a batch format. They sell individual specs on people that when given alone can’t be used to identify the individual person. Tesla also doesn’t collect data on anyone under the age of 16. Finally, they have a policy to protect their customers data as much as possible to ensure it’s not compromised. ("Privacy & Legal | Tesla Motors," n.d.)

Finally the company believes in having a safe and discrimination free work place. So they challenge their employees to help them make that a reality. They also encourage their employees to be honest when it comes to competition because they want to outperform their competition fairly and honestly. ("Code of Business Conduct and Ethics | Tesla Motors," n.d.)

II. Strategic Managers

A. Board of Directors The board of directors is made up internal employees.

Elon Musk is the Chairman, Product Architect and CEO of the company. He started the company with a passion for electric cars and has been working on electric cars for more than two decades.

Brad W. Buss, Robyn M. Denholm, Ira Ehrenpreis, Antonio J. Gracias, Steve Jurvetson and Kimbal Musk are all directors within the company. Each is responsible for managing their own area of the company. All of them have a very extensive background in both schooling and business experience having worked for other car makers and or related companies before joining Tesla Motors. ("Board of Directors | Tesla Motors," n.d.)

All of the board members serve on various committees within the company, and play an active role in it.

B. Top Management

Tesla’s top management is made of individuals with a minimum of a Master’s degree but many have two or three different Master’s or PhD degrees. All of their top management has prior experience in the auto industry, some even working on large companies like Chrysler or Toyota. Several of the management also has experience working and / or learning abroad. Several of the top management also own common stock in the company according to some 2015 SEC filings made by the company.

III. External Environment

a. Natural Environment

Many believe that because Tesla makes electric cars that they must be an environmentally friendly company. While it’s true that their cars are in fact friendly, many think that their plants may not be as friendly. This may be true since they vehicles themselves must be produced in a similar fashion as every car the company’s competitors make. Plus all the transportation costs of the raw materials used in making them.

According to a Forbes article, the company does make very environmentally friendly cars, until you look at the big picture. If you have to charge 100,000,000 cars that is going to take a ton of energy which must in turn be produced someplace else. So while Tesla makes an environmentally friendly product there are other areas to take into consideration. (Conca, 2013) This type of media could lead to the company having some sustainability issues in the future.

b. Societal Environment There is several societal environment factors facing Tesla Motors. One of which is the ever changing technologies. Automakers like Tesla must adopt these new technologies and hope that the government will support these new technologies in vehicles with policy and that they will pass the R&D. Likewise, these companies must update their business model to collaborate with their competitors to get these new technologies passed, while at the same time being in competition with them. (Happel, 2011)

Tesla must also look to improve their position in the economies where they are week, similarly to what they did in China recently. After underperforming in sales they threatened to fire key executive from the China team because there was a huge boom in the electric car market and Tesla was being left behind. Shortly after that the executive stepped down. Now Tesla Motors is trying to play catch up and find a way to get their share of this booming market in China. (Tillemann, 2015)

c. Task Environment

There are many factors that Tesla must take into consideration for their Task Environment. In China there are other manufactures of Electric cars that Tesla must compete with. This is especially true when they decide to start importing them to the United States for public sale.

In addition they must compete with the Hybrid cars manufactured by other companies such as GMC and Toyota. With these cars accepting both electricity and gasoline they are more appealing to the mass market. They are also cheaper to produce which still leaves Tesla Motors on the high end of the electric car market.

IV. Internal Environment

a. Corporate Structure

Tesla Motor’s corporate structure consists of a board of directors which is made up by seven individuals who oversee the company and make recommendations to the company’s top management. Among these seven individuals is the company’s chief executive officer.

Next they have the company’s management. Their management is made of up nine different individuals. This allows them to never have a tied vote on issues. Each individual in responsible for running or managing their own area of the company such as, research and development, finances, human resources and distribution to name a few.

Management and Board of Director members also sit on and chair various committees within the company that oversee specific projects or tasking’s.

b. Corporate Culture Tesla Motors runs its company differently than any other company today. They don’t do any advertising, they don’t offer any discounts and they don’t hold any patents. In fact their culture is to share their knowledge with other manufactures. That’s why their cars use software that is open source to run their cars. All the software can be updated when there is a problem with the car often removing the need for a mechanic. By making their software open source they hope that other car manufactures will join the electric car market. (Nicholson, 2014)

The company also realizes the lack in infrastructure for its current vehicles. So they have made it a part of the culture to offer recharging stations not only across the United States but in other countries as well, enabling their drivers to take longer road trips without having to worry about finding places to charge their vehicles. This helps save the environment as well, because there isn’t as much pollution entering it from the fuel burning vehicles.

c. Corporate Resources

Tesla does not currently do any marketing to sell its cars. All cars sold are by word of mouth.

Tesla Motors use various funding methods to finance their company. But has yet to turn a profit. In the third quarter of 2014 the company reported a $74.7 million dollar net loss, which was double what they loss in the third quarter of 2013. (Nicholson, 2014) There is no comparing their company to others however, as currently they are the only company of its kind in the market. They are paving the way as some would say.

Tesla’s current goals are to drive their batter and assembly prices down so that they can offer cheaper entry level vehicles. One way they are attempting to do that is by building their $5 billion dollar battery factory in Nevada. They are hoping that by doing so they can find a way to not only lower the price, but also produce more batteries than anyone else.

V. Analysis of Strategic Factors

a. SWOT

Strengths:

· The company was the first to develop a 100% electric sport car.

· They are a strong competitor to other major brands.

· They employ people that are extremely proficient at what they do.

· They only make Electric Cars, giving them more time to focus on improving them.

· Several of their cars are award winning.

· Their Model S car has earned a 5 start rating from the U.S. National Highway Traffic Safety Administration.

Weaknesses:

· It costs more to make one of their cars then their competitors.

· They are a newer company so they don’t have their history behind them.

· There still isn’t a ton of support for electric cars. While more places are offering spots for electric cars to park and charge, it’s not common yet. This can make selling an electric car a bit harder.

· Limited sales due to the support of electric cars can limit the profitability of the company.

Opportunities:

· With the cost of oil continuously rising and falling on a daily basis people are looking for other alternatives. This could lead to a rise in demand for electic cars.

· Growing concern about global warming and the effects of gasoline cars on the world could lead to a higher demand for electric cars.

· Electric cars also pave the way for new technologies such as solar power and wind power to be incorporated into the cars.

Threats:

· Major car makers like Toyota and GM are looking into manufacturing electric cars. This could make it harder for Tesla to maintain their market share.

· Electric cars are more costly to produce and as a result cost more to buy. This could lead to buyers choosing to go the gasoline route and avoid buying their cars.

b. Review of current Mission and Objectives Tesla’s current mission is to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible. (Musk, 2013) They do this by bypassing dealers and reaching their customers directly through company-owned showrooms and online retail channels. This goes along with their mission perfectly because by skipping the dealers aka the middlemen, they are able to more efficiently get their cars in the hands of their owners. ("Strategic Corporate Profile of Tesla Motors' Global Operations - MarketWatch," 2014)

So far the company is right on track to keeping with their mission and stated objectives. The one thing the company should look at changing is their stance on advertising. If the company started doing some advertising, it could increase their sales as well as bring in additional resources. This could enable them to possibly turn a profit as a company.

VI. Strategic Alternatives and Recommended Strategy

a. Strategic Alternatives

At this stage in the game Tesla Motors is able to meet their goal of bringing electric cars to market using their existing objectives. However, they may need some fine tuning as time goes on if they want to do it in a mass market setting. Currently they do no advertising and they don’t offer any discounts. This could hurt their sales because even though they are the only 100% electric car manufacture, all of their gasoline car competitors offer discounts throughout the year.

b. Recommended Strategy

Tesla Motors should hire a marketing and advertising company to develop a campaign for them. Advertising has been proved to help increase a company’s brand name recognition as well as increase sales. In addition it can help attract new customers and inform the public about your offerings. ("Advertising: The Basics | The U.S. Small Business Administration | SBA.gov," n.d.) In the case of Tesla Motors it would inform potential customers about the savings they could have in gas and monthly maintenance by losing their gas vehicle. It would also inform them of the economic benefits to having an electric vehicle compared to a gas vehicle.

Once this campaign has been running and the company gets going. Tesla should hire and appoint a director of marketing and public relations. They need an experienced person to keep the Tesla name in front of people and their reputation in tact as a solid company. As the name and reputation grow over time so will the company.

In addition the company needs to find a way to increase their production to meet the demand from this marketing drive.

VII. Implementation

New production methods and marketing methods will need to be developed to keep this company on track for success. These should be developed by respected firms that can get the ball rolling successfully. Tesla then should hire individuals with respected track records and experience to take these new programs to the next level.

While this can be costly for the company to do, it can and most likely will pay itself off over time. With Tesla currently being the only manufacture of its kind on the auto market, they are paving the way. They are setting the standards that others will follow. If they don’t do it correctly they could actually hurt the entire electric car market.

All of this will also mean developing new standard operating procedures. Their current operating procedures work, but as advertising kicks in and new customers arrive they will be quickly overworked. They must find a way to improve their workflow and production to meet the rising demand for their vehicles.

VIII. Evaluation of Control

Currently Tesla Motors is able to meet production demands, and even sell out before their cars are produced. Meaning they are leaving money on the table. This will mean they will need to continue to evaluate their production methods and control them to maximize their output.

In 2014 they did just that and revamped their factory. Prior to 2014 they were only able to produce 22,000 cars a year, they can no do about 35,000 a year and by the end of 2015 should be able to increase that number by another 50 percent. They have also done a study and have improved production time by 5 to 10 percent. This includes reducing the time it takes to install a battery in the car from four minutes down to just two minutes by buying a robot that can do it faster than any human can, saving the time and the human from having to do a very labor intensive job. (Tesla Motors Team, 2014)

If the company continues on this path, and continues to measure and evaluate itself then they have a good chance of success. But if they fall behind and stop displaying this level of control then it could really hurt the company and its potential for success in the future.

References

Advertising: The Basics | The U.S. Small Business Administration | SBA.gov. (n.d.). Retrieved from https://www.sba.gov/content/advertising-basics

Board of Directors | Tesla Motors. (n.d.). Retrieved from http://ir.teslamotors.com/directors.cfm

Code of Business Conduct and Ethics | Tesla Motors. (n.d.). Retrieved from http://ir.teslamotors.com/corporate-governance-document.cfm?documentid=7159

Conca, J. (2013, July 21). Are Electric Cars Really That Polluting? - Forbes. Retrieved from http://www.forbes.com/sites/jamesconca/2013/07/21/are-electric-cars-really-that-polluting/

Happel, A. (2011, October 24). 3 Hurdles Facing the Electric Vehicle Industry | GreenBiz. Retrieved from http://www.greenbiz.com/blog/2011/10/24/3-hurdles-facing-electric-vehicle-industry

Musk, E. (2013, November 18). The Mission of Tesla | Tesla Motors. Retrieved from http://www.teslamotors.com/fi_FI/blog/mission-tesla

Nicholson, D. (2014, November 9). Facebook's Right-Wing, Twitter's Left-Wing. Discuss. - Forbes. Retrieved from http://www.forbes.com/sites/davidnicholson/2015/04/27/facebooks-right-wing-twitters-left-wing-discuss/

Privacy & Legal | Tesla Motors. (n.d.). Retrieved from https://www.teslamotors.com/about/legal

Strategic Corporate Profile of Tesla Motors' Global Operations - MarketWatch. (2014, January 13). Retrieved from http://www.marketwatch.com/story/strategic-corporate-profile-of-tesla-motors-global-operations-2014-01-13

Tesla Motors Team. (2014, November 17). Factory Upgrade | Tesla Motors. Retrieved from http://www.teslamotors.com/blog/factory-upgrade

Tesla Motors. (2015). Tesla Motors – First Quarter 2015 Shareholder Letter. Retrieved from http://files.shareholder.com/downloads/ABEA-4CW8X0/235817984x0x827135/90332b15-f6ae-4f44-b634-624be548291e/Tesla_Motors_Q1_15_Shareholder_Letter.pdf

Tillemann, L. (2015, February 19). China’s electric car boom: should Tesla Motors worry? - Fortune. Retrieved from http://fortune.com/2015/02/19/chinas-electric-car-boom-should-tesla-motors-worry/