Strategic Analysis of Tesla Corporation: Business Development Report

This report provides a comprehensive strategic analysis of Tesla Corporation, examining its background, market position, and challenges. It delves into the company's history, including its founding by Elon Musk, its initial focus on electric vehicles, and its evolution in the automotive industry. The analysis highlights key problems faced by Tesla, such as production bottlenecks, supply chain issues, competition, and leadership challenges. The report identifies the root causes of these problems, including leadership inefficiencies and financial constraints. Furthermore, it offers recommendations for improvement, such as attracting investors, improving customer satisfaction, and focusing on cost management. The report concludes by emphasizing the company's potential to become a world leader in the electric vehicle market.

Running Head: Strategic Analysis of Tesla Corporation
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STRATEGIC ANALYSIS OF TESLA INCORPORATION

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Table of Contents:
Contents
Section 1.....................................................................................................................................3
Introduction................................................................................................................................3
Background of the Company.....................................................................................................3
Section 2.....................................................................................................................................5
Root Cause of the above problems.............................................................................................5
Recommendations......................................................................................................................6
References..................................................................................................................................7
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Section 1
Introduction
Tesla Inc. is an American company that was incorporated in the year 2003 by the
engineers namely Marc Tarpenning and Martin Eberhard. The company was founded by Elon
Musk who was also appointed as the chairman of Tesla. Elon Musk was responsible for
ninety-eight percent of the initial funding to Tesla Inc. The company was mainly focused on
clean energy and electric vehicles. Elon Musk was followed by J.B Straubel and Ian Wright
who later became the co-founder of the company. Tesla aimed at providing a range of
electronic cars at affordable prices. It was committed to providing commercial sports electric
vehicles and premium sports car (McGarvey et.al. 2016). The idea of forming an organization
is named after, GM recalled its entire electronic vehicle in the year 2003, and destroyed it
completely. Hence to provide a market of commercial vehicles that are based on clean
energy, a company was incorporated named Tesla.
Background of the Company
It has been observed that the company was suffering from losses in the initial years.
The company researched the basic requirements of its potential customers and concluded that
the customers require electric vehicles at a range of more than 300 km as well as to have a car
with high speed. Tesla released its three models based upon the expectations of the
customers. In the year 2018, Tesla became the best seller electronic passenger car
manufacturer. Tesla was having twelve per cent market share in the U.S car market as the
company was successful in selling its product as well as the company has created a brand
name of TESLA amongst the competition from various car manufacturers like BMW, Audi,
Mercedes, etc. In the year 2018, three U.S makers accounted for nearly 46% of U.S, whereas
General Motors have a market share of 17.9% only. Since the organization was running on
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the losses until September 2019 but in October 2019, the accounts reports of the company
reflected that the company has been running on profits until now. As Tesla has successfully
increased its market share by 280 % there is an increase in profits of the company. The
organization has been continuously increasing its target from the year 2017. As per the
reports the company has been successful in tripling its sales target from the year 2017. The
following data reflects the sales data of the company:
(Source: Mental Floss, 2018).
Problems faced by Tesla
The organization was formed in the year 2003 to provide commercial vehicles of
clean energy. However, it was observed back in the year 2003 where a company like GM
recalled all its electronic cars and destroyed it. The company had a clear vision since the time
of its incorporation (Endsley, 2017). Tesla and its engineers were fully focused on making a
commercial vehicle with the use of electric energy. The company had also the burden of
competition with its existing rivals such as Mercedes, Audi, BMW, etc. Tesla had a burden to
provide greater quality than its rivals and to build a machine according to the need and
demands of its customers. The firm is however successful in providing electronic vehicles to
the customers. Tesla has been struggling with the demand and supply of its products. In the
first quarter of the year 2019, it was aimed that the company will produce at least 7000
vehicles per week but as per the reports it was observed that the company has managed to
provide only 5300 vehicles to the customers. The shortage of parts is also been one of the
major issues which the company is facing which are directly increasing the cost per product.
Such a poor rate of production is one of the root causes of the rise in the cost of the product
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as the company is currently is not focusing on exporting its products to other countries as
well. According to the current market scenario the company is also facing competition from
various countries regarding the production and sale of various electronic vehicles. As per the
Bernstein survey, the company is inefficient in providing better customer satisfaction to its
customers. Customers of the company are now finding it difficult to handle the maintenance
cost of the products which are being sold. Another major problem for the company is the
trade war between the United States of America and China, such trade war has led to a huge
loss for the company. Lastly, Tesla is also facing leadership as well as legal issues that are
pending against SEC and the Department of Justice is having an investigation against the
company, such matters have directly or indirectly has affected the business of the company as
the company (Gaus, 2018).
Section 2
Root Cause of the above problems
The major cause of the problem is leadership. The lack of leadership in the company
has been the major cause of the struggle of the company. Facing the allegations of fraud by
the SEC for which the investigation against the company is still in process. The leadership
skills of the company are inefficient as the company is not able to supply the growing
demand for its products in the market. As it can be observed from the case study, that Tesla
has ceased the production level in order to find out the bottle necks resulted in slow sales.
The leadership skills possessed by Tesla are not feasible to increase the production capacity
of its products and with such poor production of its products the company is facing problems
regarding the cost of its products. Due to the high debt burden, the financial capacity of the
company is a very low level which has increased the chances of facing risks in the
companies. High debt is one of the reasons behind the inefficiency in the decision making of
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the leadership (Saracsalinas, 2019). The leadership is also inefficient in providing the
required funds for the company so that the company might get efficient in the manufacturing
of its products which will also result in lowering down the operating cost of its products. The
leadership must attract investors who want to invest in the company. However, the leaders are
inefficient in taking certain steps to attracting investors for the company. Due to such floating
share price of the company, the investors restrain themselves in investing in the company.
The top management and the leaders of the company so far are unable to maintain a regular
growth of the share price of the company which has resulted in a shortage of funds in the
company.
Recommendations
The company needs to change its working style as well as the leadership style in the
organization. To increase its production capacity, the company needs to attract a large
number of investors to remove the problem of shortage of funds. Tesla should have trusted
legal as well as financial advisors which will help the company in meeting its day to day
compliances. The organization should also focus on providing better customer satisfaction if
the company is still unable to provide better customer satisfaction services than the company
also has the option of outsourcing its services to a trusted organization that can manage the
affairs of the company. To meet the demand requirements, the company needs an efficient
cost advisor which manages to cost and the production capacity of the products which are to
be manufactured under him. Lastly, the company has the opportunity to become a world
leader in providing electronic vehicles at the global level, hence the firm should also focus on
providing a range of products based on the needs and demands of the local customs of the
region.
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References
Endsley, M. R. (2017). Autonomous driving systems: A preliminary naturalistic study of the
Tesla Model S. Journal of Cognitive Engineering and Decision Making, 11(3), 225-238.
Gaus, A. (2018). Tesla's 4 biggest challenges in 2019. Retrieved from
https://www.thestreet.com/world/tesla-biggest-challenges-2019
McGarvey, C., Harb, Z., Smith, C., Houghton, R., Corbett, S., & Ajuied, A. (2016).
Diagnosis of rotator cuff tears using 3-Tesla MRI versus 3-Tesla MRA: a systematic
review and meta-analysis. Skeletal radiology, 45(2), 251-261.
Mental Floss, (2018). 10 Things You May Not Know About Tesla Motors. Retrieved from
https://www.mentalfloss.com/article/66675/10-things-you-may-not-know-about-tesla-
motor
Saracsalinas. (2019). Tesla's biggest problem is its customer service, according to a new
Bernstein survey. Retrieved from https://www.cnbc.com/2019/03/11/teslas-biggest-
problem-is-customer-service-new-bernstein-survey.html
Smith, D. F., Podgorski, D. C., Rodgers, R. P., Blakney, G. T., & Hendrickson, C. L. (2018).
21-tesla FT-ICR mass spectrometer for ultrahigh-resolution analysis of complex organic
mixtures. Analytical Chemistry, 90(3), 2041-2047.
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