Tesla Motors, Inc. has electrified the automotive industry since its inception in 2003, driving forward with the ambition to replace gasoline-powered cars with electric alternatives. This strategic audit delves into Tesla’s journey from a Silicon Valley startup to a global powerhouse in electric vehicles. We examine the strategic decisions that propelled Tesla to the forefront of innovation, sustainability, and market disruption, charting a course through the company’s challenges and triumphs.
The first significant achievement of the company was Tesla Roadster that was launched in 2008 (“About Tesla,” n.d.). In 2012, Tesla introduced to the market Model S, which was the first premium electric vehicle (“About Tesla,” n.d.). Two years later the models were improved considerably in the technological sphere. The company’s productivity is about 2,000 vehicles in a week (“About Tesla,” n.d.). Moreover, Tesla, Inc. provides a large number of workers with highly paid positions.
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Strategic Posture
There is no doubt that Tesla is an innovative company that has strong intentions to make the revolution in the automobile business, as well as solve a considerable environmental pollution problem that society faces. Also, it aims at the constant increase of the use of electric engines and substitutes for gasoline. According to the company’s corporate website, Tesla’s mission is to accelerate the world’s transition to sustainable energy (“About Tesla,” n.d.). As for the primary objectives, the company aims to generate demand, increase sales, build long-term brand awareness, and manage the existing customer base to build customer loyalty (“Primary Objectives,” n.d.). Thus, the strategic posture is rather wide and targeted in various directions, which is beneficial for the company.
Strategic Managers
Board of Directors
The Board of Directors includes seven people who are engaged in the company’s directing. The CEO, Chairman, and Product Architect is Elon Musk. He is a co-founder of the corporation and now he determines the product strategy and the whole concept of the company’s development (“Elon Musk,” n.d.). Other participants of the Board of Directors are Brad W. Buss, Robyn M. Denholm, Ira Ehrenpreis, Antonio J. Gracias, Steve Jurvetson, and Kimbal Musk (“Board of Directors,” n.d.). All of them play an important role in the process of managing the company. They have considerable prior experience in business and a high level of knowledge that gives them an opportunity to run Tesla effectively.
Top Management
The top management of Tesla, Inc. consists of three participants who play a considerable role in the management of the company, including Elon Musk, JB Straubel, and Deepak Ahuja. Straubel is the Chief Technical Officer and a co-founder of the corporation. He focuses on the design and technical characteristics of products. Another participant of the top management is Ahuja who takes the position of the Chief Financial Officer (“Management,” n.d.). He is responsible for the financial initiatives of the company.
External Environment
Natural Environment
The natural environment plays a critically important role in Tesla’s strategy. There are different directions to the discussed issue. First, the company is dependent on natural resources, as they are an integral part of its manufacturing process. The raw materials that are used are the elements of the natural recourses; consequently, the corporation is dependent on their supply. On the other hand, one of the company’s main competitive advantages is the use of an electric engine instead of the gasoline or petrol ones that are used by all of the competitors. Therefore, oil and its limits on the Earth are critically important issues for the corporation since the company’s clients are becoming not dependent on this natural resource. In addition, one of the most important issues in the natural environment is the fact that Tesla produces eco-friendly cars that do not cause air pollution. Thus, the company helps to solve a considerable problem of global air pollution.
Societal Environment
The trends of the social environment have a significant influence on the performance of the company and the automobile industry, in general. Various geographic markets have different preferences for vehicles. Customers from the European region prefer small economical cars for use in large cities. On the contrary, people in North and South America give preference to large SUVs and trucks (Zhang, 2017). As for the design, actual trends deal with the popularity of sport and performance cars. Consequently, vehicle manufacturers have to take into account such design priorities. In addition, there is a fast-developing trend of ecological electric cars, which is definitely a beneficial fact for Tesla, Inc.
Task Environment
The task environment includes such important elements of external factors as suppliers, competitors, and customers. Suppliers play an important role in the automobile manufacturing process. The quality of raw materials has a direct influence on the quality of the final goods delivered to consumers. As for competitors, no companies specialize only in electric cars. However, Tesla competes will all of the automobile producers on the market. In addition, most of them have launched the vehicle line with electric engines, including the main US market players such as Ford and General Motors Company. Regarding customers, their needs and wants are studied and taken into account while developing the business strategy and the marketing mix of the company.
Internal Environment
Corporate Structure
The corporate structure of Tesla gives an opportunity to ensure effective and fast cooperation at all the corporate levels. It includes shareholders, the Board of Directors, the CEO, and the chiefs of the departments (see Figure 1).
Figure 1. The corporate structure of tesla, Inc.
Corporate Culture
The corporate culture of Tesla is targeted at the settlement of favorable working conditions for employees. The values of innovations and constant improvement are promoted within the company. In spite of the product improvement, it invests in the improvement of the employee’s knowledge and skills. The company has determined the following features of its corporate culture: move fast, do the impossible, constantly innovate, reason from first principles, think like owners, and we are ALL IN (Meyer, 2017).
Corporate Resources
There is no doubt that the company has various corporate resources that are used in its strategy. First, human resources are critically important for the corporation. The management and employees of Tesla are professional and highly qualified. Among the company’s personnel, there are many inventors and people who are engaged in the research and development process. Another important corporate resource is intellectual property. The company has many patents and corporate inventions that are actively used in the production process. Moreover, it is one of the pioneers in the market of electric engine vehicles. Consequently, the company has developed many improvements and innovations that have become its competitive advantages. In addition, the high level of goodwill is another non-tangible resource of the corporation. The last but not the least element is tangible resources. Manufacturing facilities and the equipment of the company are the resources that ensure the production process of vehicles.
Analysis of Strategic Factors
SWOT
There is no doubt that Tesla, Inc. has many strengths that help it to be the leader of the marketing segment. First, it is one of few companies that specialize only in electric engine vehicles. Most of the competitors perform in both a gasoline engine and electric engine segments. Moreover, Tesla is considered a narrow-oriented professional company that delivers high-quality vehicles. However, the corporation has a considerable weakness since it offers a small range of products. There are only several vehicle models of Tesla. They cannot meet all the requirements, wants, and needs of customers. In addition, there are still problems associated with the use of electric cars due to the lack of charging stations across the country.
There are plenty of opportunities for the company’s development. Then, there is a growing demand for electric engine cars. Consequently, the sales rate of the company’s products may rise considerably. In addition, the rapid development of high technologies gives an opportunity for the improvement of Teslas products. However, the company also has to adjust its business strategy in order to avoid threats. The main one of them is the rising competition in the electric engine segment. In addition, the company is sensitive to any negative changes in the country’s economic and political conditions. They also pose a considerable threat to the corporation’s successful performance on the market.
Review of Current Mission and Objectives
As mentioned earlier, Tesla’s mission is the acceleration of the transition of the world to sustainable energy. Based on the analysis of the corporation’s performance, there is no need to change its mission statement since it stresses the considerable impact of the company on global issues. However, more objectives have to be reached to achieve its mission. The objectives are:
Increase the profitability by 10% in a 5-year period;
Increase the customer’s loyalty by 5% in a 5-year period;
Increase the product range by 5 positions in a 5-year period;
Make a considerable impact on global environmental improvement.
Strategic Alternatives and Recommended Strategy
Strategic Alternatives
There are different alternatives for the company to use. In particular, it can use the niche product strategy. When the company appeared on the market, it offered conceptually new products. In spite of the fact that electric engine vehicles are increasing their popularity in society, the corporation should remain the leader in the niche of the automobile industry. As for the distribution strategy, the company can use both direct and indirect distribution channels. It gives an opportunity to cover a large target market and has significant control over the distribution process. In addition, the broad differentiation strategy can be implemented by Tesla, which will give it an opportunity to widen the product range.
Recommended Strategy
Despite the fact that the applied strategies are rather effective, there is still an opportunity for Tesla’s development. Considering the fact that the company offers a small number of products in a few geographical markets, it would be beneficial to apply the broad differentiation strategy. Apart from having an opportunity to widen the product range, the corporation will be able to increase the number of values offered to clients and make the distribution area larger. The company will also be able to increase the market share and, consequently, the profitability.
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Implementation
The implementation process of the suggested strategy requires a serious and attentive approach. The plan has to be followed strictly and precisely. In order to ensure an effective and resentful implementation process, the company needs to have a planned budget, well-trained and instructed personnel, smart management, and the right approach. In addition, the implementation process has to be flexible. If there are any changes, Tesla has to be able to change the plan fast and adjust it based on the external environment requirements.
Evaluation and Control
Teslas management has to provide strict control at all the stages of the implementation. It is necessary for the right plan implementation and the achievement of the targeted goals. In addition, the evaluation is needed in order to determine the effectiveness of the results reached and compare them with the ones that were planned. Evaluation and control processes have to be constantly held at all the stages of planning and implementation.
