MBA FPX 5910 Assessment 3

Executive Summary

Tesla Motors, an electric luxury vehicle manufacturer, launched its first cars in 2008. Tesla’s Roadster, Model S, and Model X have revolutionized the auto world. Having its headquarters in California, Tesla is now operating globally. In January 2019, Tesla began constructing Gigafactory Shanghai to manufacture Model 3 in local configuration for the Chinese market at a reasonable price (ir.tesla.com, 2019). Tesla’s vehicles are known for their rarity, value, and exclusivity, which have positioned the company to have a competitive edge. The company has nonetheless had problems with quality and delivery that have negatively impacted its market share. Profit margins have taken precedence over performance and quality in leadership, leading to customer discontent. Tesla must, in order to reclaim its position, advocate for more synergy between its global teams and restore quality and performance. Further, management has to come up with plans to target individual product segments in the event that they fall behind in the EV market.

MBA FPX 5910 Assessment 3:Introduction

The Organization: Tesla, Inc.

Background and Current State

Though Tesla involves other businesses, e.g., energy production and storage, its automotive segment accounted for 23% of the company’s gross profit margin in 2018 (Statista, 2019).

Competition in the Electric Vehicle (EV) Sector

Tesla’s competitive environment can be explained using Porter’s Five Forces model. According to John Dudovskiy (2018), competition within the EV market is high, and Tesla must sail through it successfully.

Current Product Lines of Tesla, Inc.

Tesla’s principal lines of products focus on the automotive, energy storage, and energy generation sectors (Kissinger, 2018).

Business Issue

Tesla has lost market share due to a series of challenges, including quality, performance, and delivery problems. Share prices declined during Q1 2019 due to delivery challenges with the Model 3 in China, which were primarily fueled by production shortfalls and government delays (Alverez, 2019).

The Electric Vehicle (EV) Sector and the Future of Tesla, Inc.

Threats to Tesla’s Future in the EV Market (PESTEL Analysis)

PESTEL analysis plays a crucial role in identifying areas of improvement and possible threats. Yuksel (2012) describes the tool as one that helps organizations address external matters that may influence their operations. Tesla’s focus on solar cell development is an area of concern, as it may distract it from its advancement in battery technology. Other manufacturers are developing at a rapid pace, which could challenge Tesla’s leadership in this area (Barcom, 2019).

Five Forces Analysis of Tesla in the EV Market

Five Forces analysis can help in analyzing the position of Tesla within the EV industry through its emphasis on competition and industry threats (Fern Fort, n.d.).

Pros and Cons of Independent Product Lines

Stand-alone product lines for Tesla may have a positive as well as a negative impact on the competitiveness of Tesla and its ability to maintain leadership in the market.

Tesla’s Ethical Issues in the EV Market

Trust

Trust is paramount to organizational effectiveness and innovation. Tesla faced moral challenges when it sold second-hand vehicles previously registered to a German firm, which affected its image and eligibility for local tax incentives (Hyatt, 2019).

Quality

Prioritizing profit over quality has reduced product standards around the globe, leading to market loss. Employees reported cuts as a means to meet targets, further contributing to the company’s poor image (Kolodny, 2019).

Leadership

Leadership Environment

While leadership in Tesla has been very commanding, there has been a slide away from the basic business principles with a focus on profit, which has created issues of performance. There should be strong control so that quality is aligned with organizational goals (Kunnannatt, 2016).

Team Leadership

More collective team leadership in Tesla is necessary to create individual contribution to organizational objectives. Leaders must inspire and empower their teams towards group achievement (Kunnannatt, 2016).

Collaboration

The functional/unitary organizational structure at Tesla limits flexibility and worldwide cooperation. For instance, center-based decision-making limits regional offices from addressing local challenges, thus degrading overall performance (Meyer, 2018).

Strategies

Mitigation of Loss in the EV Market

Tesla can prevent loss by eliminating quality issues that are already prevalent and establishing an overall risk management plan. For instance, Tesla provided to correct defects in over 5,000 Model 3 vehicles following Consumer Reports’ withdrawal of its recommendation (Olsen, 2019).

Diversification of Product Lines

Tesla should diversify its product lines in order to reduce dependence on a single market segment.

Recommendations

Mitigation of Loss in the EV Market

Tesla must shift more research and development (R&D) efforts to the EV segment rather than investing primarily in solar technology (Barcom, 2019).

Solidifying Individual Product Lines

Tesla has also developed revolutionary battery and drivetrain technologies, giving it an edge over rivals like Ford and Toyota. Despite being a relatively new firm, Tesla’s market capitalization is higher than that of Ford (Hoium, 2018).

Conclusion

Tesla, Inc. is a global corporation with a diversified presence in some sustainable energy sectors, but its EV business is still its largest source of income, with 85% of overall income (Tesla, 2017). Tesla has tried to solve quality and performance issues too, but more R&D in battery technology and effective leadership are necessary in order to maintain market share. By focusing on long-term innovation and customer satisfaction, Tesla can maintain its position in the EV market and continue to establish a strong base of single product lines.

MBA FPX 5910 Assessments 3 Capstone Project Annotated Outline

Kunnannatt, J. T. (2016). 3D leadership-strategy-linked leadership framework for managing teams. Economics, Management and Financial Markets, 11(3), 30.

Meyer, P. (2018). Tesla Inc.’s organizational structure & its characteristics (analysis). Retrieved from

http://panmore.com/tesla-motors-inc-organizational-structure-characteristics-analysis

Olsen, P. (2019). Tesla Model 3 loses CR recommendation over reliability issues. Consumer Reports. Retrieved from https://www.consumerreports.org/car-reliability-owner-satisfaction/tesla-model-3-loses-cr-recommendation-over-reliability-issue

Statista (2019). Tesla’s gross margin from FY 2014 to FY 2018, by segment. Retrieved from https://www.statista.com/statistics/783477/gross-margin-by-segment-of-tesla/

Tesla, Inc. (2017). Tesla annual report 2017. Available from http://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_TSLA_2017.pdf

Yuksel, I. (2012). Developing a multi-criteria decision-making model for PESTEL analysis. International Journal of Business and Management.