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Tesla Motors: Final Project

Strategic Analysis of Tesla Motors

yang meng

on 10 February 2015

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Transcript of Tesla Motors: Final Project

Organizational Structure

Rene Birthday
External & Internal Analysis
Projected Market Segment
What is Organizational Structure
Organizational structure refers to the way that an organization arranges people and jobs so that its work can be performed and its goals can be met.
There are six elements for an organizational structure to work:
number of employees
product evolution
distribution of authority

Smallbusiness.com suggest that organizational structures actually have roles:
harnessing experience
decision making
span of control

Pooling of specialists enhances coordination and control
Centralized decision making enhances an organizational perspective across functions
Efficient use of managerial and technical talent
Facilitates career paths and professional development in specialized areas

Control Mechanisms
Comparing Financial Ratios to EnerSys (Leading Li-ion Battery Provider for car and industrial applications)
Looking at Quick Ratio; Favorable for both companies. Tesla has a good control on sort term liabilities
Return on Assets: Great for EnerSys, not for Tesla. Indicates less control on being able to make assets have a return on investment
Return on Equity: EnerSys is very strong compared to Tesla. Shows low control on being able to make money for investors
Return on Invested Capital: Also great for EnerSys. Does not look so great for Tesla. All are negative due to negative income for 2013. Tesla needs to focus on getting profit minus government subsidies.
Operating Ratios
Fixed Asset Turnover: Tesla and EnerSys are both positive in this which is good. This indicates a control over ensuring that they are investing in their fixed assets.
Sales Revenue Per Employee: This indicates that both companies have exhibited control over the number of employees they have and show there is productivity in their employees.
Cash Flow Ratios
Operating Cash Flow to Sales indicates that Tesla lacks some control on their ability to turn their sales into cash.
As for Free Cash Flow to Operating Cash flow; Teslas Capital Expenditures causes their Free Cash flow to be very low resulting in a negative ratio. Tesla needs to increase control in this area.
The last ratio to look at for Cash Flow is the Cash Flow Coverage. Tesla is lagging in being able to fully cover their short term obligations however it is close. They should increase their control of having enough cash available to cover these.
Tesla trades about 4 times that of EnerSys. It appears that Tesla may be over priced compared to their performance in the ratios. However, this shows that the Shareholders have hope in where the company is going and what they are doing.
The EPS is negative for Tesla. The negative income for 2013 does not help this.
Overall, Tesla's control would be in the middle compared to EnerSys. They should focus on getting more profit and reducing debt and this will increase their ratios and give them better control of the company.
Debt Ratios
Tesla and EnerSys have a decent spread on Debt to Equity. Although not as good to be so high, Tesla has some control over their debt by not letting it be more than their equity.
As for interest coverage: Tesla is not able to cover fully their interest expense. This shows that their current obligations interest rates may be substantial. Tesla should have better control on ensuring interest charges are manageable.
Looking at Cash Flow to Debt: Both companies are comparable. This however, that Tesla needs to increase control on their debt to ensure there is enough cash flow to cover it.
Threat of new entrants
Approximately twenty companies worldwide
cost of manufacturing
The amount of experience and expertise needed
Business Scale
Threat of substitution
no risks of substitution
Switching Cost
The risk is in the perception of the consumer as to the performance and range of electric vehicles as a whole.
Tesla has attempted to mitigate any switching costs the consumer may perceive
Supplier power
Global suppliers of lithium
Sociedad Quimica y Minera
FMC Lithium
Chemetall Foote
Buyer power
Tesla is the buyer of its own batteries and faces no real conflict with buyer power.
Tesla has already chosen backwards integration
Competitive rivalry
Battery industry has existed for several years.
Tesla is unique because of its position as being both a producer of batteries and its own consumer.
Delivery Experience Specialist
"I could either watch it happen or be part of it."

Patent Applications
Matrix Organizational Structure
Current Organizational Structure
Current Teams
Proposed new Organizational Structure
Road Map from day 1
Build a sports car (Roadster)
Use money from Roadster to reinvest into more affordable model (Model S)
Use the money made from the Model S to build an even more affordable car
Provide zero emission electric power generation options
Business Level Strategy
So far, yes
Did Tesla’s Strategy Work?
Cost leadership
Corporate Level Strategy
Pioneer/First-Mover Strategy
—Become the leading provider in batteries by 2020
—Build Gigafactory
—Release patents to general public
—Create an infrastructure from scratch with Supercharger network
Joint Ventures
Panasonic: Battery Production
Tesla currently working with
Will utilize for Gigafactory production
Eliminates cost of logistics (packaging, shipping, etc.)
Increases capability of production (supply can meet demand)
Strategic Alliances
—Universal charging network obtained through Tesla’s patents
—Tesla becomes a supplier
Natural Gas Stations
—Stations provide additional infrastructure
—Tesla can provide and maintain solar power to reduce operating costs
Related Diversification
SolarCity and Tesla Motors
Solar City is another one of Elon Musk’s companies
Vertical Integration
Tesla supplies their own batteries and now the equipment to charge them
Panels included on roof of car
Panels sold w/car to install on garage/car port
Supercharger network set up w/SolarCity panels
Objective: Become largest supplier by 2020
Reduces cost due to economies of scale
Demand can finally be met by supply
Overproduction can be sold to competitors for a new revenue stream
—Also lowers cost
Cost Leadership
PESTEL Analysis
-Lithium Ion Batteries
Further travel distance on charge than any competitor
Can swap faster than filling a tank with gas
Vertical Integration for solar panels
Continued vertical integration w/SolarCity Panels
Zero emission charge
Fastest recharge on the market
-Go-to-market strategy
No dealer networks
Superior service from top down
-Only 3 products
-Go-to-market strategy
-Distribution is fully controlled
-Focus becomes lower cost, zero emission batteries
Human Capital
Tesla hires amazing people. I really enjoy working with everyone around me. Tesla has a startup feel. We are extremely hard working, but not particularly formal or traditional. People want to work here to be a part of this fun, innovative community. We are also really changing the world. Those who work here are passionate about what Tesla is doing.

I think that our products and mission attract people initially. Once they experience time in the Tesla community, I think our community is as much of a motivating factor as any. We have a small but incredibly talented training team. Those who are excellent here are rewarded quickly.
Josh Cohen | Marketing
3500 Deer Creek Road, Palo Alto, CA 94304
e: jcohen@teslamotors.com

1. What is the company culture? Why people want to working for Tesla?
2. How you attract and retain human capital? Training program?
Porter's 5 Forces
Tacit Knowledge
Management Team
Jeffrey Brian Straubel
Elon musk
Work culture
Charging Specialist
Recorded: January 22, 2013
December 8th, 2014
Conference Room 2309

SWOT analysis
Strengths: characteristics of the business or project that give it an advantage over others.
Weaknesses: characteristics that place the business or project at a disadvantage relative to others
Opportunities: elements that the project could exploit to its advantage
Threats: elements in the environment that could cause trouble for the business or project
Porter five forces analysis
Porter five forces analysis is a framework to analyze level of competition within an industry and business strategy development. It draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market.
PESTEL analysis
PEST analysis ('Political, Economic, Social and Technological analysis''') describes a framework of macro-environmental factors used in the environmental scanning component of strategic management.
Value chain
A value chain is a chain of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market.
Industry lifecycle
A concept relating to the different stages an industry will go through, from the first product entry to its eventual decline.
Differences in functional area orientation impede communication and coordination
Tendency for specialists to develop short term perspective and narrow functional orientation
Functional area conflicts may overburden top-level decision makers
Difficult to establish uniform performance standards
Current Organizational Structure
Increases market responsiveness through collaboration and synergies among professional colleagues
Allows more efficient utilization of resources
Improves flexibility, coordination, and communication
Increases professional development through a broader range or responsibility
Dual-reporting relationships can result in uncertainty regarding accountability
Intense power struggles may lead to increased levels of conflict
Working relationships may be more complicated and human resources duplicated
Excessive reliance on group processes and teamwork may impede timely decision making

Charging stations
Alternative uses for Tesla batteries
Organizational change
Full transcript