Tesla strategic management final

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Tesla strategic management final

  1. 1. Tesla Motors Presented to: Dr. Saneya El. Galaly Presented By: Karim Amir El Deeb Omar Rashed Omar Nadine Khattab
  2. 2. Table of Contents History of Tesla Motors ..................................................................................................................... 2 Current situation................................................................................................................................... 3 Board of Directors ................................................................................................................................ 4 Organization.......................................................................................................................................... 4 Stock market information ............................................................................................................................. 5 Financial situation ................................................................................................................................. 5 BCG.............................................................................................................................................................. 6 Environmental Scanning ................................................................................................................... 7 Internal factor analysis ......................................................................................................................... 7 External factor analysis ......................................................................................................................... 8 Internal Factor Analysis Summary (IFAS) ................................................................................ 10 External Factor Analysis Summary (EFAS) .............................................................................. 12 TOWS Matrix ........................................................................................................................................ 13 Corporate Strategies ......................................................................................................................... 14 Cascading Business Functions among departments ........................................................... 18 Evaluation and KPIs measurements .......................................................................................... 20 1
  3. 3. History Tesla Motors, Inc. is an American company that designs, manufactures and sells electric cars and electric vehiclepowertrain components. Named after the scientist Nikola Tesla, Tesla Motors ($TSLA) was founded in 2003. Exactly who founded Tesla Motors can be discussed, but it was probably by a group of intrepid Silicon Valley engineers Martin Eberhard, Marc Tarpenning, and Ian Wright. Their goal was to build an electric vehicle with the same performance as a Porsche and more environmental friendly than a Toyota Prius. The problem was that the founders didn't have the money needed to realize their idea, so they contacted Elon Musk, who decided to invest in the company. Elon Musk had earlier founded the companies Zip2, PayPal, and SpaceX. The difference between Elon Musk and the founders was that Elon Musk wanted Tesla Motors to become an improved General Motors with several car models, while the original founders wanted to design only a sports car.Elon Musk became interested in electric cars because he is well aware of peak oil. The idea behind peak oil is that oil is a finite resource we will run out of. Elon Musk believes the production of oil will begin to decrease after year 2020. As the production of oil decreases, the price of oil will increase and more people will buy electric cars. 2
  4. 4. Current Situation Tesla Motors headquarters is in Palo Alto, California. Its goal is to speed up this transition from gasoline cars to electric cars, thus their vision is "Create the most compelling car company of the 21st century by driving the world's transition to electric vehicles." To create this improved car, they couldn't begin with an inexpensive electric car - it would have been too expensive. So they had to begin with an expensive sports car: the Roadster. The idea behind this decision was that the profits from the Roadster would pay for a less expensive car: the Model S, and profits from the Model S would pay for an even cheaper car. Tesla Motors had produced the Roadster, only 2500 were sold and you can no longer purchase a new one. Afterwards they produced the model S, About 2,650 Model S cars were sold in the U.S. during 2012, and 4,900 units during the first quarter of 2013, allowing the Model S to become the top selling plug-in electric car in North America during the first quarter of 2013, ahead of the Chevrolet Volt with 4,421 units, and the Nissan Leaf with 3,695.Among other awards, the Model S won the 2013 "Motor Trend Car of the Year", the 2013 "World Green Car", Automobile Magazine's 2013 "Car of the Year" and Time Magazine Best 25 Inventions of the Year 2012 award. Tesla Motors has over than 2,000 employees  Current Mission: Tesla Motors designs and sells high-performance; highly efficient electric sports cars — with no compromises. Tesla Motors cars combine style, acceleration, and handling with advanced technologies that make them among the quickest and the most energy-efficient cars on the road. 3
  5. 5.  Board of Directors  ELON MUSK Chairman, Product Architect and CEO  Brad W.Buus  Director  IRA Ethrenpreis  Director  Antonio J. Gracias  Director  Steve Jurveston  Director  Harald Kroeger  Director  Kimbel Musk  Director  Organization  ELON MUSKCEO  JB STRAUBEL Chief Technical Officer  DEEBAK AHUJAChief Financial Officer  FRANZ VON HOLZAUSENChief Designer  JAY VIJAYANChief Information Officer  JEROME GUILLENVice President, World Wide Sales and Services  GILBERT PASSINVice President, Manufacturing  DIARMUID O’ CONNELVice President, Business Development  ARNNON GESHURI Vice President, Human Resources  PETER CARLSSONVice President, Supply Chain. 4
  6. 6.  Stock Market Information Tesla's initial public offering was on June 29, 2010. The IPO was priced at $17 per share  Financial Situation  Income Statement (Q1-Q3) 2013 2012 2011 2010 2009 Total revenues 1,398,277 413,256 204,242 116,744 111,943 Cost of Selling 1,098,604 383,189 142,647 86,013 102,408 Gross profit 299,673 30,067 61,595 30,731 9,535 Research and development 163,523 273,978 208,981 92,996 19,282 administrative 184,080 150,372 104,102 84,573 42,150 Total operating expenses 347,603 424,350 313,083 177,569 61,432 Loss from operations (47,930) (394,283) (251,488) (146,838) (51,897) Interest income 97 288 255 258 159 Interest expense (26,705) (254) (43) (992) (2,531) Other expense 18,018 (1,828) (2,646) (6,583) (1,445) Loss before income taxes (56,520) (396,077) (253,922) (154,155) (55,714) Provision for income taxes 1,230 136 489 173 26 Net loss (57,750) (396,213) (254,411) (154,328) (55,740) Item Details 5
  7. 7. BCG BCG matrix is a framework created by and named after Boston Consulting Group to evaluate the strategic position of the business brand portfolio and its potential. It classifies business portfolio into four categories based on industry attractiveness (growth rate of that industry) and competitive position (relative market share). These two dimensions reveal likely profitability of the business portfolio in terms of cash needed to support that unit and cash generated by it. The general purpose of the analysis is to help understand, which brands the firm should invest in and which ones should be divested. The four main categories are as follows: In our case Tesla Company current case is Question Marks as the earning and profits are growing but the cash flow is currently negative and its strategy is to invest. 6
  8. 8. Environmental Scanning  Internal Factors Analysis o Strengths: Very Good Calibers, Strong R&D department, Innovation According to the CEO Elon Musk, Tesla Motors is like the Special Forces, such as the Navy Seals. Since the Special Forces are only recruiting the best, so does Tesla Motors. Strong technological expertise in the area of electric transmissions & drive train Experienced CEO,Strong management team; The CEO Elon Musk has earlier founded companies like PayPal and SpaceX, so he has a good track record. Tesla Motors can design really good cars. The Model S won the 2013 Motor Trend's Car of the Year award, which is a competition that began in 1949, and the Model S might be the safest car ever according to crash tests. Great Location near the best talents. They are building their cars in California - not in Detroit. An electric vehicle is like a hybrid between a computer and a gasoline car, so they can find many computer- and electrical engineers in California. The area is also more innovative than Detroit. Large Production Capacity; Only 20 percent of Tesla Motors factory is used to produce Model S, so as new models from Tesla Motors arrives, the company doesn't need to build a new factory. Ability to develop vehicles completely in house including the sub-assemblies required The Tesla Stores are similar to the Apple Stores and are an innovative way to market the Tesla cars. (Innovative Marketing idea, stores)Innovative Sales Channel Model. Unlike combustible engines, electric engines have less moving parts and are much cleaner to work with. 7
  9. 9. o Weaknesses: Tesla Motors are only selling electric cars, and people are still suspicious of electric cars. Few Supercharges. The infrastructure around electric cars does not exist. Tesla Motors are doing their best to change this by building Superchargers, which are like gas stations but for electric vehicles only. Low battery range. The batteries have to improve. Historically, the batteries have improved by eight percent a year, but there's no guarantee that they will improve in the future. Limited operating history - the company is just ten years old. Lack of Brand Name Recognition: Compared to most of its competitors, Tesla is a not a wellknown brand in the auto industry. External Factors Analysis o Opportunities: The world is running out of oil. As the price of oil increases because of the limited supply, more people will buy electric cars. Resources are renewable and more available, most efficient vehicle. People care more and more about environmental issues. Can use their battery technology in other areas, such as storing power from solar panels. Large International Market Potential, Sales outside of the U.S., particularly Europe, Asia, and Canada: Tesla has been very successful in European markets, particularly Germany, and the company sees great potential in Asian and Canadian markets. The growing support by governments across the globe for environmentally friendly vehicles in form of exemptions from duties & other support. Government regulations and economic incentives: Since 2008, the DOE has invested $5B in EV/PHEV technologies. The DOE objectives include reducing battery pack costs 70% by 2015 (this estimate assumes average battery pack cost of $600 - $700/kWh around 2008/2009), improving the public charging infrastructure from 550 level 2 or level 3 charging stations (of which 426 are in California) to 20,550 nationwide by 8
  10. 10. December 2011, and reducing the retail price to consumers by offering a $7,500 subsidy to consumers purchasing EV/PHEV s. The government intends to accelerate consumer adoption of EVs/PHEVs by reducing prices and making owning EVs/PHEVs more convenient to consumers. o Threats: Very Strong Competition. More and more auto manufacturers are releasing their own environmental friendly cars. Since these companies are larger than Tesla Motors, they (not all) have more financial resources, thus they can survive longer if the price of oil doesn't increase in the near future. Lower cost competitors or imports.Competition in the field; established luxury auto heavyweights like BMW, Mercedes, and Lexus expected to join the fray soon. Electric vehicle related accidents may scare away customers. For example, a fire in one of the batteries is generally front-page news. On the other hand, there are more than 750 accidents per day related to combustion engines - and that's not front-page news. Economic slowdown. Electric cars are still expensive and a new recession, like the one in 2008, may limit the demand. Consumer behavior changes required for EV purchase: EVs require greater consumer behavior changes than hybrid or plug-in hybrid vehicles. For instance, it can take several hours to recharge an EV battery, whereas it only takes a few minutes to fill a car with gas. Limited supply for raw materials Limited Experienced resource pool Awareness of importance of EV is not well propagated 9
  11. 11. Internal Factor Analysis Summary (IFAS) Strengths (3.7) Internal Factors Wgt. Score Wgt. Rating Comment Strong R&D department Calibers 0.45 4 1.8 Strong Management Team 0.3 4 1.2 The CEO Elon Musk has earlier founded companies like PayPal and SpaceX, so he has a good track record Excellent Designs 0.1 3 0.3 The Model S won the 2013 Motor Trend's Car of the Year award Great Location, close to best calibers in the US 0.05 3 0.1 They are building their cars in California . They can find many computer- and electrical engineers in California Large Production Capacity 0.1 2 0.3 Ability to develop vehicles completely in house including the sub-assemblies required 10
  12. 12. Weaknesses (2.2) Wgt. Rating Wgt. Score Relatively High Priced compared to fuel cars 0.25 3 0.75 Few Charging stations 0.2 2 0.4 Low Battery Range 0.3 2 0.6 Slow Charging Process 0.3 1 0.3 Battery Charging could take around 30 mins/170 mile Lack of Brand Recognition &Limited operating history 0.05 3 0.15 The company is just ten years old ,Compared to fuel cars manufacturers Internal Factors Comment Tesla Motors are doing their best to change this by building Superchargers, which are like gas stations but for electric vehicles only. 11
  13. 13. External Factor Analysis Summary (EFAS): Opportunities (4.1) External Factors Wgt. Rating Wgt. Score The world is running out of oil. Electricity is a renewable energy. 0.35 5 2 People care more about environmental issues. 0.05 2 0.2 Can use their battery technology in other areas, such as storing power from solar panels. 0.1 4 0.6 The growing support by governments across the globe for environmentally friendly vehicles 0.1 3 0.3 Large International Market Potential Particularly Europe, Asia, and Canada. 0.2 4 Comment 1 Threats (2.4) External Factors Wgt. Rating Wgt. Score Comment Very Strong competition with less operating Costs 0.3 2 0.6 Like BMW, Mercedes, and Lexus expected to join the market soon Economic slowdown 0.15 2 0.3 Electric cars are still expensive and a new recession, like the one in 2008, may limit the demand Limited supply for raw materials 0.3 2 0.6 Limited Experienced resource pool 0.15 4 0.6 Awareness of importance of EV is not well propagated 0.1 3 0.3 Large Segment of the market is not aware of the importance of the EV 12
  14. 14. TOWS Matrix Strengths Weaknesses S1: Strong R&D department W1:Relatively High Priced External Factors EFAS Calibers compared to fuel cars S2: Strong Management Team W2: Few Charging stations S3: Excellent Designs W3: Low Battery Range Internal Factors IFAS S4: Great Location, close to best W4: Slow Charging Process calibers in the US W5: Limited operating history S5: Large Production Capacity Opportunities SO Strategies: WO Strategies: -Focus on new product O1: The world is running out of oil. Electricity is a development with new -Outsourcing some operational renewable energy. O2: People care more about environmental issues technologies and be ahead of the activities to a low Cost (O5,W1) market (S1,3,5+O1,2) O3: Can use their battery technology in other -Expand in new -Promote the awareness of areas, such as storing power from solar panels. markets(S1,3,5+O5) environmental friendly O4: The growing support by governments across -Develop new products in an cars(O1,O4,W1) the globe for environmentally friendly vehicles industry different than the O5: Large International Market Potential. company's core operation Particularly Europe, Asia, and Canada. (S1,S5+O3) Threats ST Strategies: WT Strategies: -Develop new products -Follow Cost reduction strategy to T1: Very Strong competition with less operating attracting the different segments decrease costs(T1,W3) Costs (S1,5+T5) -Sell the company with a good T2: Economic slowdown -Develop new technologies to bargain (T1,T2+W3,W2,W1) T3: Limited supply for raw materials decrease overall operating costs T4: Limited Experienced resource pool (S1,5+T1) T5: Awareness of importance of EV is not well propagated 13
  15. 15. Corporate Strategies 1- Growth Strategy: Market Development (Horizontal Growth): An effective idea for growth is entering new markets. If you have access to more customers, you can sell more products and at the same time concentrating on its primary line of business. You can target new markets by opening additional retail locations, adding an online presence, selling internationally or reaching new types of customers. Tesla should keep focusing on its Niche segment as the current status but expand in different markets such as Europe & Asia in order to increase revenues. Expansion in new markets avoids the fierce competition in USA. As an example, in 2012, the Chinese bought over 19 million vehicles, while the U.S. market only bought 14 million. China is already the world's largest auto market and it's set to grow even bigger in coming years. Chinese central planners have said that they want to have 5 million electric cars on the road there by 2020. That's only seven years away. It currently has facilities in the United States and throughout Europe where parts are being manufactured and assembled. Since they have limited resources, you must be very selective of the location for its expansion o Advantages Organization becomes pioneer at its specialization Build Brand Name Globally This not only affects sales through name recognition, but also helps recruit local employees, sign on new distributors and work with media in each country as part of the overall marketing efforts. Increase sales and thus revenues. Risk diversification. 14
  16. 16. o Disadvantages Organization is vulnerable to industry and other external environmental shifts Needs good monitoring globally to efficiently manage crises. Large capital needed to start the expansion. 2- Growth Strategy: Product Development (Horizontal Growth): Tesla could benefit from its strong R&D department and focus on innovating new cars to target a wider range of customers. If the strategy is properly implemented, Tesla can gain a reputation as a company that is on the leading edge of EV industry. This can help capture more market share and create an expectation of exciting ideas among its customers. In details, tesla motors should produce different types of electric cars like 4x4, hutch back or sports cars not only the existing type, as tesla is currently suffering from number of units sold and sales so we have to diversify the products just to increase the sales and brand recognition as it will get to more customers which have different tastes. So it can be named with different names like model X which will be introduced in late 2014. Advantages: Creates Value. When a company uses a differentiation strategy that focuses on the cost value of the product versus other similar products on the market, it creates a perceived value among consumers and potential customers. Increase Brand Awareness. Increase number of customers and accordingly Consumer Loyalty. Provide a competitive advantage especially in the automotive market which dominated by larger companies. Having multiple product lines may allow a growing business to diversify risk and capitalize on its established reputation 15
  17. 17. can attract buyers with different preferences, increase profitability thanks to market segmentation and, for some businesses, even out seasonal sales patterns Compete more broadly in your industry. Disadvantages: Different Competitors will be added to current competition. Company’s focus might be dispersed after adding new products. Risk of changing consumer tastes or preferences resources may be disproportionately siphoned off for slower-moving products Older models with fewer features become less desirable and eventually obsolete. 3- Stability strategy: Pause/Proceed with caution Tesla is now doing fine by introducing the Model S by end of 2012, to introduce and develop new products we will need a huge investment in R&D but instead we could test the ground before moving ahead with a full-fledged grand strategy, trying to overcome previous losses as a result Tesla will be able to move on with growth strategies. So it is just a temporary strategy. o Advantages: Enables the company to focus on its new product the Model S Gain Some Profit to overcome previous losses Focus on internal issues and enhancing internal processes o Disadvantages Possible loss of market share Loose opportunity for potential investments for a growing industry Delayed to cope with the rapid technology changes 16
  18. 18. 4- Growth diversification strategy (Conglomerate growth) Diversifying into a different industry that the current company’s operation; producing EV cars.Use its battery technology for other uses such as storing power from solar panels.Leveraging the use of common brand name and combining resources to create new competitive strengths and capabilities. o Advantages Transferring skills & capabilities from one business to another Sharing facilities or resources to reduce costs Opportunities to achieve economies of scale and scope through skill transfers, lower costs, common brand name, technology, etc. Opportunities to expand product or service offerings and preserve unity in businesses fully utilize existing resources and capabilities like the Skills in sales & marketing, general management skills & knowledge, distribution channels, etc o Disadvantages Complexity and difficulty of coordinating different, but related businesses (e.g. Philip Morris’ General Food and Kraft subsidiaries) Choosing the appropriate strategy According to the above corporate strategies we will go with the Product development strategy as our main goal is toincrease profits to recover from the negative balance since the company started until last quarter&increase brand awareness for Tesla Motors in order to be able to compete against strong and well known competitors like Ford & as Tesla Motors is relatively a new company in the business and started with electric cars directly unlike its competitors whom started with cars running on gas and a long time ago building brand name and recognition through these years. These goals can only be reached if all the departments work together as a one team to achieve this goal, so below is how are we going to cascade the business functions among all the departments. 17
  19. 19. New Mission: Tesla Motors designs and sells high-performance, highly efficient electric all kind of cars — with no compromises. Tesla Motors cars combine style, acceleration, and handling with advanced technologies that make them among the quickest and the most energy-efficient cars on the road. Cascading Business Functions among departments Marketing: Follow product development marketing strategy by: Dividing market into segments and target each segment separately, different distribution channels. Doing marketing researches to identify customer’s needs and best areas to penetrate. Building brand equity. Promotions. Broad Price ranges. Research & Development: Pioneer new products that increase buyer value. 18
  20. 20. Human Resources: Recruit new talents with diverse backgrounds with low pay. Provide sufficient trainings Information Systems: Implement strong information system connected globally to create connection with suppliers, retailers and customers. Logistics: Create & maintain strong, reliable & fast supply chain to react conveniently to customers demand Finance: Prepare sufficient cash and assets needed for investments Purchasing: Hold good deals with new suppliers needed for the new products providing 19
  21. 21. Evaluation and KPIs measurements  Evaluate the R&D performance Peer benchmarking Compare your own intelligence function against industry peers using GIA (Global Market Intelligence) Survey results in terms of Annual budget Level of development Number of employees within the intelligence team An example is from an industrial company that invited GIA to help run a megatrends workshop to identify new business opportunities from trends that were identified beforehand. The workshop resulted in 41 new business ideas, which was later counted as part of their KPIs for their market intelligence activities. So the business opportunities or new ideas generated can be one set of KPIs, even if they will not show up as revenues immediately. Evaluate the Marketing performance: Social Media fan growth rates, engagement rates, and response rates Having a large number of fans is a solid measurement of your company’s social marketing success. Fan growth helps track the increase in the number of fans or followers of your page, but it does not necessarily determine whether your social efforts are effectively engaging your target audience The engagement rate for Facebook is calculated as the sum of likes, comments, and shares on a given day divided by the number of posts that a page made on that day. That number is then divided by the total number of fans that like that page The Response Rate is a percentage calculated as the number of times the page responds to user posts or questions on their page, divided by the total number of posts or questions. Your goal is to have a high RR in order to show customers that you are actively listening and responding Onsite market interviews 20
  22. 22.  Evaluate the Operating & Financial performance: Speed-to-market—putting the right product in the right market segment faster than a competitor, measuring time from idea formulation to delivering product in market Gross Profit Margin = (Sales-COGS) / Sales Product margin Product adoption—driving the uptake rate in a market at a lower cost and shorter time than a competitor Product launch—improving the response rate from target buyers with fewer impressions Operational Drive Financial Outcome Speed-tomarket Increase product revenue Product adoption Increase product margin Product launch Lower cost of sales 21

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