Groupassignment topic tesla strategy analysis

VIETNAM MARITIME UNIVERSITY INTERNATIONAL SCHOOL OF EDUCATION GROUP ASSIGNMENT TOPIC: TESLA STRATEGY ANALYSIS COURSE: INTERNATIONAL BUSINESS INSTRUCTOR: MSc BUI THI THUY LINH Vu Viet Dung 82550 Truong Bich Ngoc 84248 Pham The Thien 84990 Haiphong, July 2021 PART 1: INTRODUCTION OF TESLA General information: Tesla was founded in 2003 by a group of engineers who intended to show that driving electric didn't have to be a tradeoff - that electric vehicles could be better, faster, and more fun to drive than gasoline cars Tesla now manufactures not only all-electric automobiles, but also infinitely renewable energy generation and storage systems Tesla believes that the sooner the world stops depending on fossil fuels, the better society can happened The Roadster, which debuted in 2008, showcased Tesla's cutting-edge battery technology and electric drivetrain From there, Tesla created the world's first luxury all-electric sedan from the ground up, the Model S, which has gone on to become the finest car in its class in every category In 2015, Tesla increased its product range to cover all categories of national highway safety authorities with Model X, the safest, fastest and most competent sports utilities in its history, with 5-stars ratings In 2016, Tesla completed CEO Elon Musk's "Secret Master Plan" by introducing Model 3, a low-cost, high-volume electric vehicle that went into production in 2017 Soon after, Tesla debuted the Tesla Semi, the safest, most comfortable vehicle ever, which is expected to save customers at least $200,000 in fuel expenditures alone over a million miles In 2019, Tesla introduced the Model Y, a mid-size SUV with seating for up to seven people, as well as the Cybertruck, which will be more utilitarian than a typical truck yet faster than a sports car Business Activities: Page 1 Source: https://bstrategyhub.com/wp-content/uploads/2019/06/Business-model-CanvasTesla-.png Source: https://bstrategyhub.com/wp-content/uploads/2019/06/Business-model-Canvas-Tesla-.png Organizational structure: Tesla, Inc (previously Tesla Motors, Inc.) features an organizational structure that encourages long-term business growth The architecture and system that defines the patterns of interactions among the company's components is known as the organizational or corporate structure In this business analysis of Tesla, the organizational structure is traditional, taking into account the company's managerial concentration and control, as well as its limited global operational expansion Tesla Inc., for example, uses its corporate structure to permit comprehensive control of the company as a manufacturer of electric autos, batteries, solar panels, and related transportation and energy solutions Elon Musk's leadership effectiveness is determined by the corporate structure's ability to disseminate and support the adoption of innovative business growth and improvement methods Through its organizational structure, the corporation maximizes its ability to implement new strategies and manage operational operations and objectives Page Tesla's operations management is reliant on the business structure's ability to accommodate strategic changes and implementations Despite its expanding foreign operations, Tesla Inc.'s organizational structure fosters characteristics that enable strong managerial control of the business The complexity and challenges of growth increase For example, worldwide expansion necessitates a broader set of considerations in order to successfully implement Tesla's generic strategy for competitive advantage and intensive growth tactics The structural qualities of the corporation help optimize top-level managers' understanding about these difficulties, allowing them to respond appropriately Tesla's business goal and vision statements, which stress worldwide leadership in the automobile and energy solutions markets, are thus supported by this organizational structure Tesla has a functional or U-form organizational structure The unitary-form (U-form) structure employs organizational function as the major defining component The firm, for example, has a structural set of people for engineering and another for sales and service Some structural elements of other forms of corporate structures may also be seen in Tesla, but to a lesser level The most important aspect in this firm analysis case is grouping based on business function The following characteristics are significant in Tesla’s organizational structure: Function-Based Hierarchy: The function-based hierarchy in Tesla's global organization is the most notable feature of its corporate structure This structure includes functional teams or offices in charge of domestic and foreign activities This characteristic is most common in conventional corporate systems, when businesses strive to maintain strong managerial control over their activities The following functional offices direct and reflect the worldwide hierarchy in this business analysis example of Tesla's organizational structure: Chairman & Chief Executive Officer Finance Technology Page Global Sales and Service Engineering Legal Centralization: Tesla's corporate structure is based on centralization Centralization focuses on managerial control over the entire organization through decisions made by a central group or team In this instance, the corporation's central headquarters, which has direct authority over all activities, is made up of the heads of the global hierarchy's offices Tesla's regional or abroad offices have the bare minimum of autonomy in this organizational structure The majority of decisions for overseas operations are made at the company's headquarters Divisions: The amount of geographical or other sorts of divisions in Tesla Inc.'s automobile industry is the subject of this feature of the corporate structure These departments are responsible for implementing various marketing plans and campaigns, as well as organizing financial data and reporting The company's corporate structure is divided into two primary divisions: (1) Automotive and (2) Energy Generation and Storage These divisions are minor in comparison to the organization's function-based hierarchy Also, for financial reporting, Tesla's organizational structure contains the following geographical divisions: (1) United States, (2) China, (3) Norway, and (4) Other Business result: Tesla's revenue increased by 28% to roughly $31.5 billion in the fiscal year 2020, compared to the previous year Tesla's biggest market is the United States Revenue rises on model additions: Tesla's automotive business, which includes car design, manufacturing, and sales, generates more than 27 billion dollars in revenue for the company Page Major products/services, facilities & equipment: The Tesla Model S, Tesla Model X, Tesla Model 3, and the newly announced Tesla Y are among the electric vehicle (EV) maker's model lineup as of March 2020 Model legacy: Tesla's Model has become the company's best-selling car, but it has also battled with continuous net losses in recent years, spending a growing amount on both selling, general, and administrative (SG&A) and research and development (R&D) efforts Much of Tesla's expenditure has been focused on the manufacturing of its new Model 3, a highly popular and in-demand automobile Tesla's 2018 purchase of property in Shanghai, China for the building of a Gigafactory, was one response to the Model 3's increase in popularity A plant in China will offer Tesla with consistent access to the Chinese electric car market, which will be welcomed in the context of trade tensions between the United States and China PART 2: STRATEGY ANALYSIS Competitive strategy: Tesla's objective is to provide electric items to customers while also entering the car market with a line of premium vehicles geared at affluent clients When the product is steadily improved and well-sold, the company will join a popular market with more competitors One of Tesla's stated aims is to increase the number of current electric vehicles that are adopted into the mainstream by:  Selling cars manufactured by the Company through online channels and showroom systems and online  Sell electric vehicle components to other car manufacturers  To be a catalyst and a positive role model for other car manufacturers Page Tesla focuses on pure electric technology, even for large segments and distances of further than 200 miles Musk was named the 2010 Automotive Inventor of the Year for his contributions to the global automotive industry's development of electric cars Tesla shops or galleries are located in shopping malls in 22 U.S states and Washington, DC Customers cannot purchase automobiles in shops; instead, they must order through the Tesla Motors website The stores serve as showrooms for Tesla Motors and its automobiles, allowing customers to learn more about the company and its products Showrooms are located in states where regulations prohibit the discussion of price, financing, test drives, and other topics Tesla's direct-sales technique at its stores is a significant divergence from the contemporary business paradigm in the US market Tesla, Inc is a vehicle company that sells automobiles to customers directly rather than via independent dealers Even though Tesla has no independent dealers, dealer organizations in various states have filed litigation against them Tesla is attempting to prohibit Tesla from selling automobiles in certain states North Carolina and New Hampshire supported Tesla, while Virginia and Texas supported the opposing side This has made it impossible for Tesla to operate in both countries Organizational Strategy Analysis: Tesla's objective, according to the About Tesla page, is to speed the world's transition to sustainable energy Tesla Roadster, the company's first cuttingedge and high-performance electric sports vehicle, was unveiled in 2008 Tesla Motors CEO and Co-Founder Elon Musk remarked, “Tesla Motors aims to assist hasten the transition from a mine-and-burn hydrocarbon economy to a solar electric economy, which I believe to be the major, but not sole, sustainable solution” (Musk, 2006) Page The Lotus Elise chassis forms the base for the Roadster Its lithium-ion battery pack, which costs $109,000, allows it to go 244 miles on a single charge Tesla was first brought into the automobile market as a Niche Differentiator, targeting high-tech car categories with its sustainable competitive advantage to distinguish itself from traditional automobile producers with sustainable, eco-friendly electric cars Meanwhile, Musk stated, "Tesla intends to start at the top end of the market, where buyers are willing to pay a premium, and then push the market down as quickly as possible to high unit volume and lower pricing with each succeeding model" (Musk, 2006) In other words, Tesla's competitive strategy in the vehicle business is a broad differentiation to target both categories by targeting luxury consumers and low-price purchasers Based on that basic approach, Tesla distinguishes itself from rivals by expanding its research and development expenditure year after year in order to build a highly inventive unique environment for generating returns on an economic scale Furthermore, Tesla offers a wide range of products and services all over the world, including the premium electric vehicle Model S, Model 3, Model Y, and Model Y SUV They have a range of 250 to 370 miles and varying battery performance, as well as configurable seats and storage They also sell solar roof solutions, powerpack solar panels, megapack batteries, and other related products To better establish a clean-energy ecosystem, SolarCity combined with Tesla, Inc., in accordance with the broad differentiation approach “We think pretty strongly that Solar City's Silevo Front technology combined with Panasonic's cell technology will result in the most efficient and, eventually, the cheapest solar cell in the world,” Musk said (Pressman 2016) Tesla will cut its material costs on batteries through R&D and automation to drive down the market with a cheaper price as a specialty became wide differentiator to leverage on their competitive advantages Production Strategy Page Tesla produces all of its automobiles in Fremont, California Most recently, they constructed a "tent" or factory within the Fremont headquarters to support the weekly manufacturing of 5,000 Model automobiles Furthermore, they manufacture critical components of each automobile, including as the electric motor, battery pack, and charger Tesla manufactures lithium-ion batteries in a Nevada subassembly facility, in addition to its Fremont headquarters They also purchase necessary manufacturing parts in the United States, Europe, China, and other locations Tesla, for example, frequently sources lithium from China and Australia Furthermore, as electric vehicles grow more popular, lithium costs have been constantly rising Because of their strong agreement with a Ganfeng lithium supplier, Tesla now has a tiny competitive advantage over other competitors Tesla is assured 20% of their required Lithium supply through 2020 and possibly for years to come Within the Five Forces frameworks, their production technique of supply assurances, in addition to automation and in-house parts, minimizes the leverage of suppliers Tesla reduces buyer leverage by delivering customisable autos through their manufacturing procedures Tesla transforms its former supply chain weakness/threat (capacity restrictions) with a strength (automation) and lasting competitive advantage in the SWOT analysis Source: https://alecfurrier.medium.com/tesla-business-model-strategic-analysis-c7d00bdc0339 Page Similarly, Tesla perfects the staging component of the Strategy Diamond diagram by fine-tuning their automated performance effectively and efficiently Tesla's automation technologies, for example, may assist in the automation of whole workflows, learning, and adaptability Furthermore, automated robots are used to aid with tasks like as automated stamping, painting, welding, and even final assembly on the assembly line While machines and robots can be useful to the manufacturing industry, Tesla also employs humans to replace robots that are inefficient and underperforming Overall, automation is one of Tesla’s many strengths that sets them apart from other companies and aid them in being able to supply large quantities of custom vehicles that are necessary to keep up with the high demand Adoption of new development strategy in recent years a Mergers and Acquisitions: It is not uncommon for people to express an interest in purchasing Tesla stock However, let us consider the locations where Tesla has undertaken purchases and mergers in recent years Tesla has acknowledged multiple acquisitions totaling US$96 million over a nine-month period The declaration was included in the company's 10-Q SEC filing Notably, Tesla did not reveal the identities of the companies it has purchased According to previous reports, Tesla purchased Hibar Systems, a small Canadian technical firm specializing in battery production, as well as DeepScale, an AI start-up These two businesses must now collect the whole acquisition cost that Tesla had announced in 2019 DeepScale looks to be largely "acqui-hire," and those who join Tesla are likely to receive a large number of shares Aside from these two companies, another acquisition that generated waves was Maxwell Technologies Tesla acquired the energy storage startup in an all-stock transaction valued at $218 million USD The agreement was Page designed to assist the electric vehicle manufacturer in improving its batteries and lowering prices as more competitors enter the market The offer is valued at $4.75 per share for Maxwell's 45.9 million shares and is expected to close in the second quarter of 2019 Maxwell Technologies' principal focus has been on ultracapacitors-like energy storage devices that can charge and discharge quickly, operate at a wider range of temperatures, have a high power density, and have a long operating life Another reason for the purchase is Maxwell's technology for dry electrode production The company says that this dry electrode technology, which can be applied to various chemical batteries, enhances performance and is less expensive than wet electromagnetic technology, which is more commonly used This application could boost Tesla's competitiveness on the electric vehicle market Tesla's most recent notable acquisition was SolarCity in 2016 The US$2.6 billion transaction brings together two of Elon Musk's enterprises, allowing the entrepreneur to offer both electric automobiles and solar roofs to his consumers under a single corporate name Grohmann Engineering, a German company that produces automated production systems for batteries and fuel cells, was also acquired in 2016 The sum is unknown, but SEC records indicate that it was in the neighborhood of US$150 million The agreement was made to assist Tesla in ramping up electric vehicle production b Research and Development: Tesla's stock price soared by over 35% in 2019, thanks to rising sales and improved cost control The company's R&D spending increased from US$0.7 billion in 2015 to around US$1.5 billion in 2018 Tesla's R&D investment, on the other hand, fell by approximately 8% in 2019 to US$1.34 billion The company's R&D revenues are focused on improving the quality and range of batteries for electric cars Tesla's 2020 development strategy is divided into two categories: Launching the cybertruck or the Roadster 2.0, which the firm says accelerates quicker than any production car ever produced, are headlinegrabbing initiatives, and huge investments are being placed on the brand's core cars, the the Models S, X, and Y Page 10 Tesla announced in 2019 that it intends to convert a building in Fremont that is now utilized as a warehouse into a large new vehicle R&D lab, a ‘Future Energy Reliability Lab,' and a vehicle testing facility focused on enhancing reliability Around 250 people were assigned to work at the new location The 'Future Energy Reliability Lab' was designed to be a smaller 8,500 square foot space containing test chambers, a workshop, and solar energy product testing equipment The car testing facility would occupy a total of 165,500 square feet and include a crash track, a crash sledge, a test chamber, vehicle lifts, and labs The carmaker intended to allocate 146 engineers and technicians, as well as 100 employees at the facility c New Product Development: Tesla CEO Elon Musk announced in August 2020 that the company will focus on new product development and product scaling rather than Formula E racing The Tesla Roadster, a high-performance sports electric vehicle, was the company's initial product However, the long-term goal is to develop a diverse range of models, including reasonably priced family cars This is due to Tesla's primary goal of accelerating the transition from a mine-and-burn hydrocarbon economy to a solar-electric one The Tesla Roadster was designed to outperform a gasoline sports car such as a Porsche or Ferrari The company intends to ramp up production of more affordable models such as the Model and Model Y Tesla will begin developing new models that will be even more affordable once the company has established robust production of all available models Tesla had a fantastic 2019 year, with a considerable production rise and multiple releases of new products Tesla launched several of these devices on the market in 2020, and more  Tesla Model Y- In March 2019 Model Y was unveiled The electric cross-over volume manufacturing was anticipated to start in early 2020 in mid-2020  Tesla's Model S and X are getting a makeover Tesla announced the interior redesign of the Model S and Model X in the summer of 2018 Page 11 The firm ultimately decided to focus on Model ramp-up and Model Y production The carmaker is now working on launching its new "Plaid tri-motor powertrain," and it is possible that the firm would deliver both the performance upgrades and the redesigned interior at the same time  Tesla Semi- Tesla announced its all-electric heavy-duty truck, the Tesla Semi, in 2017 with a 2019 release date However, despite thousands of reservations with deposits ranging from $5,000 to $20,000, the company has delayed the introduction of all-electric trucks However, Tesla stated in 2020 that the company intends to begin production of an electric truck in limited quantities in 2020  Elon Musk has announced that Tesla will release a new battery that will last a million miles next year d Geographic Expansion: Tesla's revenues are primarily generated in the United States (up to 60 percent in 2016, according to Thomson Reuters) The company's domestic market has redoubled its efforts to expand internationally, with the goal of tapping into rising transnational demand for electric vehicles (EVs) Tesla intends to diversify its revenue streams by targeting European and Asian markets Tesla now has 438 Tesla Motors Stores and nearly 100 service centers around the world Tesla’s new Shanghai Gigafactory was completed in just 168 days The factory is expected to produce approximately 150,000 vehicles per year Despite rising concerns about a slowdown in the sector, China remains the world's largest car market Until 2019, China needed international carmakers to partner with domestic ones in order to manufacture in the country, with Tesla becoming the first to so and escape a 25% import tariff With Tesla sales in China increasing by more than 175 percent year on year, Musk appears to be in a solid position to maintain the company's position in the highly sought-after market of China Tesla built a factory in Germany Rather than merely purchasing an existing factory in Europe, Musk has chosen to create a completely new one in an Page 12 already crowded market, a move that would directly challenge Tesla's competitors and cost the business $4 billion Elon Musk, the CEO of Tesla Motors, announced in 2018 that the business intends to expand its market beyond North America, China, and Europe Following that, Tesla Motors CEO Elon Musk indicated in a tweet that he hopes to expand his footprint to India, Africa, and South America by the end of 2019 The electric carmaker, on the other hand, had planned to enter the Indian market in 2017, but those plans were put back When the Tesla Model was introduced, consumers in India apparently made reservations [ CITATION Glo21 \l 1033 ] David Leggett, Automotive Analyst at GlobalData, a leading data and analytics company, offers his view: “The automotive sector is among the most severely impacted by the COVID19 crisis and facing decimated markets this year GlobalData’s base COVID19 light vehicle sales scenario forecasts a fall of 17.8% on 2019 to 73.9 million, a greater hit to the market than in the 2007/8 financial crisis Against this background, the share prices of many automotive companies and suppliers have been hit “However, Tesla has out-performed the sector in terms of market capitalisation, and is well positioned to further grow from accelerating sales of electric vehicles over the next few years It is seen as having a favourable mix of upcoming products, engineering expertise, manufacturing capacity as well as retail and marketing strengths that will mark it out as a winner in the post-COVID-19 business landscape “Tesla’s decision to recently open a plant in China, a market that is rapidly recovering and where it leads the EV segment this year, has aided in the company’s current success and positive prospects Moreover, second quarter deliveries and output data confirm that Tesla is performing much better than Page 13 its peers and on course to deliver over 400,000 vehicles in 2020, up on 367,000 last year, in spite of the COVID-19 dent to the global market.” PART 3: CONCLUSION Tesla's strategy considers the whole system of complements required for a consumer to use its product This is why Tesla has developed a nationwide charging infrastructure for its vehicles Because there was already a charging infrastructure in place, Tesla was able to be the sole electric car capable of traveling great distances If other automakers develop charging networks and piggyback on their existing dealership networks to possibly offer more convenient service, this advantage may be eroded in the future But, for the time being, Tesla has the upper hand, which it appears to be expanding by establishing interoperability with new networks Regardless of your thoughts on Tesla's potential prospects, the firm has built an intriguing multi-pronged plan for fundamentally altering an industry The core strategy includes distinct aspects at each level of the ecosystem, such as inverting the fundamental product architecture, placing themselves in critical bottleneck components, and overcoming system-level restrictions that stymie technological adoption Simultaneously, they have used an effective method to grow their innovation capital in order to get the resources and support necessary to carry out their goal Investors are realizing the promise of Tesla's future, as the company's market worth now exceeds the combined market value of GM, Ford, Toyota and FiatChrysler Innovators should take note Tesla was unaffected by the exponential disaster that shook the entire globe It's known as the Covid-19 pandemic The lockout, however, and the global economic reaction, have pushed Tesla's future plans Tesla had its worst quarter ever for solar installations, but a tremendous rise in its battery business Nonetheless, Elon Musk, CEO of Tesla, predicted that the energy firm will one day surpass the size of its car sector Tesla's bottom line, however, is all about electric automobiles, and the brief halt in activity at Tesla's Fremont factory owing to local health restrictions had no meaningful impact on vehicle production and delivery Elon Musk has many plans for the future, including a million “robotaxis” on the road by the end of the year, ‘feature complete' self-driving software, a network of underground roads to avoid traffic, hyperloop, zero-emission solar roofs, an online platform to sell Tesla cars, Tesla's child-sized submarines, the opening of a design and Page 14 engineering center in China, a small and inexpensive Tesla Model 2, advanced telematics, and a network of underground roads REFERENCE [1] Alec Furrier (2020), Tesla: Business Model and Strategic Analysis Avaiable from: https://alecfurrier.medium.com/tesla-business-modelstrategic-analysis-c7d00bdc0339 [Apr 21, 2020] [2] https://www.tesla.com/about [3] Statista (2021), Tesla's revenue from FY 2008 to FY 2020 Avaiable from:https://www.statista.com/statistics/272120/revenue-of-tesla/ [2021] [4] Analytics Insight (2020), Understanding Tesla’s Intensive Growth Strategy In 2020 Avaiable from: https://www.analyticsinsight.net/understanding-teslasintensive-growth-strategy-2020/ [October 14, 2020] Page 15