Tesla's CEA Essay: Strategies, Culture, And Competitors.

The History of Tesla Motors

Tesla motors company was established in 2003 as a new car business by a collection of Silicon Valley engineers aimed at building electric vehicles. According to Tesla (2020), the company was specifically founded by Elon Musk, Marc Tarpenning and Martin Eberhard who were determined to utilise the most innovative technology for competitive advantage.  This was applied by building an independently-electric vehicle named roadster in 2009 and Model S in 2012, (Tesla, 2020).  According to Tesla (2017), the company developed a supercharger network in the US and established extreme tech which was the most expensive luxury car in 2014. 

Elon Musk the current CEO of Tesla was interviewed in 2006 about the company’s strategy and operation for the long operation. He stated, “The starting point is for a high-performance sports car, but the long term vision is to build cars of all kinds, including low-cost family vehicles” (Elon, 2006). Tesla has secured various investments from individuals and companies and acquired loans and grants from “The US Department of Energy” (Forbes, 2021). Tesla’s general strategy is based on funding every new model using profits and investments from the previous sales until affordable cars are available to the general US population and the world at large.

 Tesla has rapidly developed in the last few years making it vulnerable to its competitors. According to Tesla (2021), Tesla’s major competitors are the combustion engine car-producing companies who are globally spread and wealthy hence creating a strong competitive environment. Evidence from John (2019), indicates that the company employs a unique market strategy from its competitors by excluding dealership costs in the supply chain and selling cars directly to consumers. This analysis portrays Tesla Motors’ Corporate Entrepreneurship Audit (CEA) and assessment of the internal and external setting to give recommendations towards Tesla’s competitive market.

A CEA was applied to Tesla company to test the CEO’s orientation towards competition from fuel and engine car producing companies to analyse and operate prospective markets for the company’s future development. The CEA portrays the organisation’s architecture using the four tested pillars, namely, the leadership style, structure, culture, strategy and the commercial environment. The CEA incorporated answering various questions encompassed in the questionnaire to generate Tesla’s CEA report.  

Figure 1: Tesla’s Corporate Entrepreneurship Audit 

Source: Questionnaire results

From figure 1, Tesla’s CEO (Elon Musk) possesses most characteristics of an entrepreneurial leader due to his responsibility towards the company’s activities since car production is majorly driven by his response. Evidence from Joe, Justin, and Sharon (2018) suggests that no company globally has its products tightly attached to the producer as the case for Tesla. Therefore, most of Tesla’s architectural elements are entrepreneurially driven for Tesla’s successful operation in both the short term and long term plans, (Tesla Inc. 2017). Tesla’s culture is majorly entrepreneurial-based implying that employees follow commands from their superiors rather than applying their personal views and knowledge. Myles (2012, 299) continues to highlight Tesla’s top management controls being in charge of the flow of innovation in the organization and limited empowerment of their workers. 

 Tesla’s strategic plans are aimed at conserving non-renewable resources on earth through the introduction of electric cars, and solar panels. The company aims at conserving the environment by reducing pollution in all ways (Tesla, 2021).  Tesla reduces carbon emission indirectly through technology innovation by creating a battery electric vehicle possessing neither a tailpipe, nor gas emission. Tesla’s structure is corporate where decisions are developed from the shareholders, board of directors, CEO, and employees respectively. Appelbaum and Goransonn (n.d) conclude that the application of corporate entrepreneurship in a business operation proves to be crucial for renewing technology and product portfolios. 

Tesla's General Strategy

Arshi and Burns (2018, p160) suggest that corporate entrepreneurship is appropriate for new ventures and technological renewal because it makes markets and the company’s products mature. In addition, Alavi et al., (2014) argue that current corporations are currently focusing on suitable innovations for their prevailing operations which creates a way for missing opportunities due to failure of identifying the advantages of “new business models.”  Therefore, Tesla’s application for the corporate strategy is advantageous in the short and long run because of efficient planning of the unique products it produces.

Tesla employs a corporate leadership style where all operations are dictated by Elon Musk, the company’s CEO, (Gayathri and Kumari, 2019, 1522). The CEO possesses a transformational leadership strategy by creating a significant vision for Tesla to attract investment from shareholders and give direction to the company.  The corporate leadership style has lapses that impact Tesla’s organisation structure and culture. However, evidence from Tesla (2021), indicates the CEO’s claim towards using a flat structure with informal culture. But, Tiwari (2017) highlights that Tesla’s employee reviews evidence that the company uses the corporate strategy with formal policies and procedures which affect the workers’ efficiency and communication. 

The deployment of the dimensions of culture based on gender implies Tesla’s tough rather than tender culture by forcing workers to innovate which affects their productivity. According to Elon (2020), Tesla possesses a high power distribution in the production process which is controlled by the top management hence risking the workers’ health. However, Tesla (2020) argues that the company embraces risk and uncertainty measures by making swift responses towards change and workers’ health to achieve organisational goals and objectives. The corporate leadership style prompts superiors to overwork and exploits employees. The top leaders of Tesla control the flow of invention at work rather than emphasizing a formal procedure and policy with a hierarchical structure. However, Jain and Moreno (2015) suggest that a successful innovation distribution ought to be top-down and not bottom-up.

The hierarchical strategy has proved to be a barrier to Tesla’s production process with Chen and Perez (2015) suggesting that it is Tesla’s biggest disadvantage and the motive towards limited profits. When Model 3 was unveiled in 2017, $1000 reservations were taken for the product and the CEO promised to establish 5000 vehicles after 7 days, (Muwara and Uddin, 2018). Nevertheless, Elon Musk fell short of the promise building only 800 cars. Tesla possessed a customers’ waiting list of 500,000 who deposited $1000 to reserve their Model 3 in 2017 (Muwara and Uddin, 2018)). However, Elon Musk disappointed most of them by only producing 5000 model 3 cars by June 2018, (Muwara and Uddin, 2018). This scenario is caused by a lack of employee advice and unfair treatment imposed on workers in the production process which slows down car manufacturing. The CEO ought to acquire knowledge from the people in the production process to confirm the actual number of products to be produced in a specific period and find ways of how they can be enhanced.

Option 1: Reduction in automation and enhancement in the ecosystem investment.

Tesla's Competitors

Automation has been a major blocker towards Tesla’s operations. The company has experienced various problems which are likely to occur for a long period if new models are frequently produced. Tesla ought to stick to the already made car models namely, roadster, sedan, SUV and semi. According to John (2019), Tesla should concentrate on producing a few products and refine them annually to maximise profits rather than taking risks to develop costly new ones. The company’s acquired solar-city in 2016 led to the development of solar panels which are highly important when it comes to environmental consumption and avoidance of electric bills. Hence, the notion that solar roofs provide power to the wall battery will be highly advantageous to Tesla and increase the demand for solar panels, (Vynakov, Savolova, and Skrynnk, 2016, 15). Consequently, Tesla should develop high-quality products and create no room for consumers to switch to the other hence making it difficult for the company to dialogue with the industry. 

Option 2: Creation of a sub-brand of products for people from humble backgrounds and efficiently marketing the current products.

According to Tesla (2021), the company is not interested in making dilutions towards their brand by putting out fewer quality products. However, Tesla should develop specific cars targeting the cheap market segments. The company has been targeting the luxury market encompassing only rich people. However, if a cheap version of cars is produced on the market, Tesla will make an enormous stride on its production to a fully electronic future.

 The already built car models and solar panels must be efficiently marketed on different platforms, such as social media for the international market and newspapers for US customers. This will provide a way for affordable customers to purchase electric vehicles, notify the world about the introduction of unique cars and acquire support from developed nations and non-oil producing countries. Rich individuals in different parts of the world need to consume luxury goods like Tesla cars, however, without efficient advertisement, they remain with no access to such products, (Perkins and Johann, 2018, 462).

Option 3: Substitution of the corporate leadership strategy with flatarchy type of management.

According to the research study by Stringham, Miller and Clark (2015, p100), Tesla motors is identical to manufacturing companies that operate in dynamic and unstable business settings. Such environments encompass intense competition and customer demand to keep products with the technology change. Hence, Tesla must embrace change and agility in its production plans by discarding the corporate working structure. The structure demoralises and inhibits the workers’ performance and efficiency. 

 A flatarchy structure should be applied since it promotes decentralised decision making in the company and facilitates limited formalisation. The flatarchy leadership structure promotes workers’ self-belongingness, participation and reactiveness hence allowing all Tesla workers to be involved in the decision making process. Flatarchy promotes the flow of new ideas and swift accomplishment of Tesla’s tasks towards the company’s goal of development to beat the competition. A minimum level of formalisation enhances the autonomy power and improves the workers’ innovation, creativity and reactiveness which helps them to develop new skills. Thomas and Maine (2019, p656) suggest that the development of new skills and experience implies increased efficiency in the production of high-quality car products. Turner and Pennington, (2015, p450) conclude that globally competitive companies have to declare entrepreneurial orientation of their workers for them to grow, develop and minimise competition through flatarchy leadership.

Corporate Entrepreneurship Audit (CEA) of Tesla

The company has been operating phenomenally since its establishment in 2003. However, a significant shift is unwise for Tesla if all the above options are applied. Tesla possesses various production problems and no evidence has been produced showing that they have resolved them all, (Daniel, 2019). However, using the three options, the company will be able to produce high quality solid cars and make improvements in solar products for a long period. Re-introduction of the old car models will make slight improvements in appearance and design will keep customers coming back year after year, (Daniel, 2019). Therefore, Tesla ought to change in their manufacturing strategy to eliminate the automation burden. 

Improvements in Tesla’s solar roofing will help to compensate for the stiff competition imposed on cars. Solar roofs will solidify its brand in the home market and continuous revenue will be generated from the ecosystem.  Tesla has to attract more shareholders, investors and donors towards its ecosystem to resemble that of apple. The upgrade of cars and other products will be simplified since consumers will be eagerly waiting for a new model every year. This should reflect apple’s setting of production where a new model of a specific product is produced once in one year. Therefore, Tesla ought to stick to the already made car models and produce high quality products to make it difficult for consumers to switch to substitutes hence making it difficult for the company to dialogue with the industry. Tesla should develop specific cars targeting people from humble backgrounds since it has been aiming at the luxury market. 

Having employees who are determined towards work leads to efficient production and simplifies innovation, (Burns, 2013). Hence, the most favourable step for Tesla is the application of option three where the flatarchy leadership substitutes the corporate management style. Therefore, all three options provide a clear analysis of the problems Tesla is going through, namely, workers’ disengagement, competition, automation and lack of market from developing countries.

The major focus should be upon scaling Tesla’s production process to meet the high demand for their cars in the USA and the global market. Production of many cars at ago is possible through minimising the production costs and developing products at stable prices. Consumers from humble backgrounds are favoured and competition is minimised hence leading to a prospected great market position. This is evidenced by John (2019) where he states that Tesla’s prospected success will be determined by the number of cars produced in a given period with the costs incurred. Tesla should penetrate both the local and the international markets highly since they are still leaders in the industry. 

The company has been operating phenomenally for a long period, however, application of a slight shift will be unwise. Tesla is recommended to apply both options 1, 2 and 3. Tesla should refine its mode of production by reducing efficiencies and producing high quality products at favourable prices. Production of the tweaked old car models will prompt customers to come back for the improved models. Tesla will benefit by avoiding repetitions of the manufacturing steps hence reducing the automation burden. Additionally, making improvements in solar roofing will strongly position Tesla among its competitors.

Leadership Style and Culture in Tesla

Solar roofs are advantageous for both the company’s sustainable mission and the solidification of its brand in the US. Tesla is also recommended to apply an ecosystem identical to that of apple to enhance revenue and command a high place in the market. With the increased sale of EVs, Tesla should become the best or one of the top developers of the product. Many US states have limited or no charging stations and some customers are unaware of the “electronic volt” (EV), (Kuharev, 2014, p93). Tesla should apply some profits to supercharger stations in the US and other external countries of top sales. 

Sufficient advertising will boost customer awareness and marketing other unique offers compared to their competitors, (Raguz and Zekan, 2017). Tesla should also make its products applicable to a wide number of customers specifically low-income buyers. However, various models, incentives, and choices should not lead to difficulty in expanding the market, especially when prices of cars are minimised. This is because the price elasticity of demand for electric cars is inelastic compared to hybrid vehicles. The high position possessed by Tesla in the market today should be utilised as an advantage towards the innovation goal and creation of a pollution-free environment. 

Conclusion

The corporate entrepreneurship audit (CEA) was applied to Tesla company to test the CEO’s orientation towards competition from internal combustion cars to analyse and operate prospective markets for the company’s future development. The CEA portrays the organisation architecture using the four tested pillars, namely, the leadership style, structure, culture, strategy and the commercial environment. This analysis portrays the assessment of the internal and external setting to give recommendations towards Tesla’s competitive market.

Tesla reduces carbon emission indirectly through technology innovation by creating a battery electric vehicle possessing neither a tailpipe, nor gas emission. Tesla should develop specific cars targeted to the cheap market segments because the company has been targeting the luxury market encompassing only rich people. If a cheap version of cars is produced on the market, Tesla will make an enormous stride on its production to a fully electronic future. Tesla’s general strategy is based on funding every new model using profits and investments from the previous sales until affordable cars are available to the general US population and the world at large. 

Tesla’s application for the corporate strategy is advantageous in the short run because of the efficient planning of the unique products it produces. Tesla employs a corporate leadership style where all operations are dictated by Elon Musk, the company’s CEO. The CEO possesses a transformational leadership strategy by creating a significant vision for Tesla to attract investment from shareholders and give direction to the company. A flatarchy structure should be applied since it promotes decentralised decision making in the company and limits formalisation. The flatarchy leadership structure promotes workers’ self-belongingness, participation and reactiveness hence allowing all Tesla workers to be involved in the decision making process. Using the three options, the company will be able to produce high quality solid cars for a long period. However, the most favourable step for Tesla is the application of option three where the flatarchy leadership substitutes the corporate management style.

Tesla's Strategic Plans

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