Management Consultancy Report: Tesla's Financial Position and Strategy

This report provides a management consultancy analysis of Tesla, evaluating its current financial position and strategic challenges. It begins with an executive summary highlighting key issues such as production and demand imbalances, competition, profitability concerns, logistic issues, and leadership issues. The report then delves into Tesla's resources, business model, core competencies, mission and vision, and organizational culture. Problems affecting Tesla are detailed, including production and demand issues, competition, profitability, logistic issues, and leadership challenges. Factors influencing business growth, including political, social, and economic factors, are analyzed. A SWOT analysis is used to assess Tesla's strengths, weaknesses, opportunities, and threats, followed by strategic recommendations for improvement, including reduced product prices, increased focus on battery technology, and expansion strategies. The report concludes with a summary of the key findings and recommendations.

Running head: MANAGEMENT CONSULTANCY AT TESLA
MANAGEMENT CONSULTANCY AT TESLA
Name of Student
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Author notes

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Executive summary
The purpose of the study is to observe the current financial position of Tesla and give proper
strategy based on the analysis. SWOT analysis is used to understand strengths, weaknesses,
opportunities and threats of the organization. It can be perceived that Tesla was going
through production and demand issue and leadership, logistic and profitability was present in
the previous years. In addition, it can be observed that developing countries are investing in
green zone. Tesla should reduce the price of its products by proper market research. With the
help of governmental regulations, Tesla can improve its production of automotive products.
Tesla should focus more on battery technology and less on electric cars by proper research
and development. Expansion strategies should be used to improve operational efficiency of
Tesla.

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Table of Contents
TESLA INC...............................................................................................................................3
Resources...............................................................................................................................3
Business model.......................................................................................................................3
Core competencies.................................................................................................................4
Mission and vision.................................................................................................................5
Organisational culture............................................................................................................5
Problems at Tesla.......................................................................................................................5
Production and demand balance.............................................................................................5
Competition............................................................................................................................6
Profitability issue...................................................................................................................7
Logistic issues........................................................................................................................7
Leadership issues.......................................................................................................................8
Factors affecting business growth..............................................................................................8
Supporting and blocking forces.............................................................................................8
Analytical model......................................................................................................................12
SWOT Analysis-..................................................................................................................12
Recommendation of strategy....................................................................................................14
Conclusion................................................................................................................................16
References................................................................................................................................17

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TESLA INC
Founded in 2003 by two engineer Martin Eberhard and Marc Tarpening and funded
by Elon Mask, Tesla is an American electric vehicle manufacturing company, which focuses
on building electric vehicles along with battery energy storage and other solar products. Tesla
owns several manufacturing plants in California, New York and China. The headquarter of
Tesla is situated at Palo Alto, CA Tesla designs, manufactures, designs and sells high
performance passenger electric vehicles to the market (Hettich and Müller-Stewens 2017).
Tesla serves their customers worldwide through the outlets. Tesla operates through two
different segments, the automotive segments and energy generation and storage. The
automotive segments develops and manufactures cars wherein the energy generation and
storage segment is focused on the design, manufacture and sale of stationary energy storage
and solar energy products (Voigt, Buliga, and Michl 2017). The energy storage products can
be used in residency, commercial sectors and utility sites. The market capacity of tesla is
worth over 78.8 billion dollars. Tesla’s market is huge and it is leading electric car
manufacturer in the world. Tesla reached $100 billion market capitalisation in 2020, which is
three times than its competitor, Ford.
Resources
As per recent report, Elon mask said that Tesla builds electric cars therefore the need
huge amount of lithium ion cells to power these cars. To secure the resources, Tesla is
building several factories in association with Panasonic to meet their need of lithium ion cells
(Chen and Perez 2018).
Business model
Tesla is an independent car manufacturer and it adhere business to business model
where it encourages partnership with other companies and also business to consumer model
by offering luxury, family and market vehicles to the industry (Wieland, Hartmann, and

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Vargo 2017). Tesla try to serve their customers with best quality electric cars. Tesla have
cars for all price range. Tesla inc is vertically integrated therefore it runs and operates several
manufacturing plants where the cars are manufactured some factories to produce battery
packs and stationary storage system. These products are sold through online and physical
stores. Tesla provides advanced features to the electric cars and also provides solar energy
system for residential and commercial purpose (Bruijl 2017).
Fig 1: Direct Distribution Model
Core competencies
Being a large electronic car manufacturer, it is natural to have competitors in the
global market. Tesla is no exception to this. Tesla has many competitors in the market, as
they become the most successful company over the years (Thomas and Maine 2019). Tesla
primarily competed with General Motors, Toyota, BMW-I series, Mercedes and Ford.
Despite Tesla had losses during 2011 to 2018, they successfully gained the market share of
the company eventually.

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Mission and vision
The mission and vision of tesla is to accelerate the world’s transition from
hydrocarbon economy towards the solar energy economy. The primary objective of Tesla is
to provide electric vehicle that will have zero emission electricity, outperforming gasoline-
powered cars in driving experience and efficiency. Tesla is producing more energy efficient
and affordable vehicles to the global market so that general peoples can afford these cars.
Tesla is focusing to server their customers with best technology and innovative vehicles
(Sharma 2016).
Organisational culture
Tesla always motivates its employees to develop profitable solutions for the
organisation. The culture creates human competence necessary for innovate products in the
global market. Tesla has innovative problem-solving organisational culture, which involves
employee workability to create opportunities for the organisation and innovate new product,
which keep them ahead in the market than their competitors (Rimmer 2018). Tesla always
encourages ideas and solutions from their employees in developing advanced electric
vehicles. Tesla unifies its employees into a team that works for the improvement of the
business. Tesla empowers its employees to search for ideal solutions that will make the
business stand firmly in the global market.
Problems at Tesla
Despite of the successful market capitalization, Tesla has several problems, which are
affecting its market and revenue. Tesla is facing challenges in the market, which is a concern
for the CEO of the company. The problems are identified and noted below.

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Production and demand balance
After the release of model three, Tesla had major problem to meet its production
target as the market demand of this car was high. Keeping up with the production as per the
market requirement is a serious issue that Tesla had faced. The management faced several
difficulties to match the demand market and the production of model 3s within the short
period. This is the biggest challenge that tesla is facing in recent times. Tesla lost $700
million with model 3 production. Production has been lower since 2005 till first quarter of
2018 (Stobbe Jr 2019).
Tesla stopped to produce more cars during that period instead they were focused to
manufacture their cars to inventory. This approach created huge complexity in matching
production vehicles to customers orders. In addition, Tesla laid off 7% of their employees in
2018, which effected its car production negatively.
Fig 2: Unit production volume

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Competition
Tesla had many competitors in the market. With the lower production than demand,
the competitors will easily occupy the electric vehicle market, which is a concern for Tesla.
New companies are coming up with electric vehicle at a lower price than Tesla, which can
make them lose their customers (Cheong, Song and Hu 2016).
Profitability issue
The debt margin of Tesla is going upwards, effecting its profitability. Weak cash flow
can be observed based on the previous years report. As per recent reports, it has been
observed that Tesla had to spend heavy amount to achieve its organisational goals. The sales
of model 3 is blocked in China due to various irregularities in vehicle meant for Chinese
customers. Automotive margins are low compared to previous year (Li 2018). This can be
caused due to internal and external factors such as demand and supply issue. During the first
quarter of 2019, the profitability reduced significantly, affecting the market.
Fig 3: Profit and revenue

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Logistic issues
All of the U.S companies has logistic issues and Tesla is no exception. Tesla
manufactures vehicles to production forecast rather than specific customer needs. Tesla has
its own dealership thereby they have limited storage capacity. There are no physical and
financial buffer to absorb the unsold production inventory (Besbes et.al 2019). Tesla is failing
to serve as per their customer needs. Tesla is continuously improving their technologies
therefore cost of development is high this could affect massively in the finance of Tesla if
they do not resolve the issue as early as possible. Elon mask left recently and Tesla has
appointed new leader in their organisation who does not have knowledge about their
company therefore this leader lacks inventory control and management, which is critical, is
every aspect.
Leadership issues
For year, there is a leadership issue present in Tesla Company. There had been several
arguments present which relates to Elon Mask. Tesla wanted a leader who can focus on the
objective and goals of the organisation. However, Elon Mask, the CEO of Tesla keeps
himself busy with other activities resulting in poor management inside the organisation. The
stock prices are lowering to zero and this is a serious sign of financial collapse in the recent
year (Teece 2018). In the meantime, Elon Mask left Tesla and a new leader has been
appointed to Tesla who have zero experience. Being a newly appointed leader, lack of clear
vision, lack of alignment and lack of accountability is present in the current leader of Tesla,
which can end up being a disaster.
Factors affecting business growth
Tesla had faced several difficulties in the previous year hence still they managed to
stay on top of the electric car industry. This is possibly due to some supporting factors, which

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aided the business to grow (Krüger, K., 2017). Tesla also had several blocking factors, which
are coming in way of their business. The supporting and blocking factors are described below
which will aid to understand the current position of Tesla in the global market.
Supporting and blocking forces
Political factors
The government is the primary supporting factor, which aid Tesla to grow their
business. Governmental entities can aid business to grow in the industries. Political factors
can such as trade policies can influence or limit the business environment (Liu and Meng
2017). The following political external factors significantly aid Tesla and the automotive and
energy solution industries:
Tesla has the opportunity to strengthen its financial performance through incentives
from the government. This external factor directly relates with carbon emission of the
company’s products and operations. With the help of free trade policies, Tesla has open
opportunities to expand its business operation internationally (Zhang 2020). Positive market
penetration stabilized the operation of Tesla. Tesla can grow in the global market with the
help of these political factors such as governmental incentives, global trade agreements and
stabilized market operation.
Social factors
Social factors and trends affects Tesla’s microenvironment through its employees,
investors and customers. The social factors supports the business to grow its operations
globally (Pengyue et.al 2016). The managers ensures that the strategies are applied, ensuring
that the business can get benefits from these factors.
Tesla has growth from the rising popularity of low carbon lifestyle and increase
preferences of renewable energy. This is a supporting factor, which affects the business

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positively. These factors increases the market demand of the non-renewable energy products.
This factor improves business operation of Tesla as they produce electric vehicles and
automotive products. Customers prefer products, which supports renewable energy sources
that is positively affecting Tesla’s business and operations (Pow 2019). Additionally, Tesla
can boosts their financial performance with the help of wealth distribution in the developing
markets. This wealth distribution increases the number of customers who can buy the
expensive electric cars from market. Social factors positively affects the operations of Tesla
to improve their business operations.
Economic factors
Economic factors can affect the business operation of Tesla both positively and
negatively. The economic factors includes the market growth, currencies, trade levels and
other external variables, which influences the market operation of Tesla (Jenčová et.al 2019).
The global cost of lithium ion products are decreasing, which is, improves the
affordability of electric vehicles. Tesla can develop and manufacture electric vehicles with
lower cost with the help of the decrease cost of battery. Renewable sources are also
decreasing which is making Tesla automotive products more attractive to their customers
(Voigt, Buliga and Michl 2017). Tesla is improving, as renewable sources are getting popular
in the market. These factors are the supporting economic factors that is affecting the business
operation of Tesla.
However, the instability of economy is a concern for Tesla as this can threaten the
financial condition of the business operations. Despite of the growth, economic instability can
be a barrier to the growth of Tesla. Economic factors including interest rates, unemployment
rates and retail price index influence the business operation of Tesla negatively (Hena 2018).

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Environmental factors
Environmental factors can influence the business operation. External factors impacts
on business of Tesla positively. Environmental trends identifies the availability of the
material used for the production of Tesla.
Tesla has the opportunity to grow its business in the environment as the demand for
non-renewable sources are decreasing and the customers are preferring products, which are
made through the renewable energy source (Ahmad and Khan 2019). This is a supporting
factor as Tesla produces products, which runs on renewable energy source thereby they can
catch the market effortlessly. Tesla promotes the use of vehicles, which are environment
friendly. Electric vehicles and automotive products from Tesla suits business sustainability
and these products are friendly to the environment. Tesla has growth opportunity, as its
products are environment friendly therefore; environment is the supporting factor of Tesla
(Aybaly et.al 2017).
Regulatory factors-
Regulatory forces both supports and blocks the business operations of Tesla. The
human resource management of Tesla and business partnership are also included in the legal
constraints.
Tesla can increase its business overseas, which will expand its patent protection
internationally. With the help of energy consumption, Tesla promotes its electric vehicles to
the global market. Tesla also has the opportunity to grow through directs sales (Johnson and
Reed 2019). Direct sales is only allowed in U.S however other states does not allow directs
sales therefore this can be a supporting as well as blocking force for Tesla. Other states
requires dealers to transact products to the customer, which can increase cost of the