Tesla Inc.’s Organizational Strategy

Abstract

Tesla Inc. is an American corporation involved in designing, manufacturing, and selling of electric vehicles and technology for the generation and storage of sustainable energy. The company was founded in 2003 as Tesla Motors but rebranded to Tesla Inc. to reflect the organization’s diversification into the development and manufacture of clean energy solutions. Over the years, Tesla Inc. has registered impressive growth due to the adoption of an effective organizational strategy, structure, control mechanisms, and leadership approaches. The company has established itself as a technology company and leverages artificial intelligence to drive innovation, competitive advantage, and steer growth.

Introduction

Tesla Inc.’s organizational strategy reflects its commitment to accelerating the global transition towards sustainable and clean energy as demonstrated by its mission statement and planning methodologies. Tesla’s mission is to expedite the paradigm shift in the global energy consumption and storage patterns, which defines the company’s overall strategic objective and long-term plan (Tesla Inc., 2021). This is illustrated by the rapid innovations and technological improvements focused on harnessing sustainable energy and moving the automotive industry from internal combustion to electricity powered engines (Perkins & Murmann, 2018). For instance, Ingram (2018) contends that the introduction of Model 3 in 2017 was a major milestone in the global electric vehicle market, particularly due to its affordability. Notably, this was revolutionary, considering that this car segment was confined to small urban vehicles and luxury models. Additionally, Tesla Inc. utilizes goal-based and continuous improvement planning methodologies to enhance the organizational focus on its mission, vision, values, and objectives. These two components play a prominent role in guiding the company’s strategic decisions and fostering operational effectiveness.

Definition and Assessment of Tesla Inc.’s Strategy

Tesla Inc. applies intensive growth and generic strategies to achieve competitive and technological advantages in the production eco-friendly cars and clean energy solutions. Notably, the intensive growth strategy is demonstrated in the organization’s aggressive market penetration, accelerated product development, and diversification to safeguard its present position and expand progressively to achieve growth targets. Similarly, the broad differentiation strategy is reflected in the firm’s focus on the design and production of electric automobiles, battery technology, and such environmentally friendly commodities as solar roof tiles (Kim, 2020). From this perspective, Tesla Inc.’s strategy is defined by its exclusive focus on developing technologies and products that promote the global transition to clean and sustainable energy.

Tesla Inc.’s Customers and Competitors

Tesla’s target customers are the middle and upper-class individuals interested in exploration, status symbols, and being perceived as environmentally friendly. For instance, the mono-segment positioning of its products targets people concerned with mitigating the adverse environmental effects of fossil fuels and are also prepared to pay a premium price for the products. Tesla is also facing growing competitive pressures from emerging electric vehicle manufacturers and established internal combustion engine developers diversifying their product portfolio and venturing in this market segment. For instance, Toyota, Volkswagen, Honda, BYD, and Hyundai have already released various models of their electric cars into the market as they seek to capitalize the changing consumer habits (Graham & Brungard, 2021). This competition is also being experienced from other emerging forms of clean and sustainable energy, including biomethane, which are influencing the widespread manufacture of powertrain technologies in vehicles. As Tesla diversifies into the energy generation and storage market, it experiences competitive threats from other established firms operating in the clean energy industry.

Organizational Structure

Tesla utilizes a functional organizational structure, which divides the company into different departments based on their areas of expertise. For instance, the company is segmented into energy, engineering, production, sales and service, legal, finances, and human resource as the most prominent functional units. Notably, this structure supports operational effectiveness and facilitates the implementation of organizational strategies for business growth and development. Andergassen et al. (2018) and Gaspary et al. (2020) argue that this structure enhances smart specialization, which sparks innovation and creativity. For instance, this structure enables a given department to advance its expertise by maximizing its focus on a defined functional area. However, in recent years, Tesla Inc. has progressively reorganized its structure and adopted a flat model at the managerial level to streamline executive operations by eliminating excess management layers.

Tesla Inc.’s decision-making process is defined by its participatory and collaborative nature. This approach is intended to promote interorganizational integration and enhance the management and employees working together in identifying, analyzing, and developing solutions through a shared process (Khan, 2021). Tesla Inc. manages changes and transitions by tracking activities based on the proposed plan and expected outcomes. For instance, the management collaborates with the employees in developing a vision which is articulated to the subordinates and progressively monitored to ensure effectiveness in the implementation.

Organizational Leadership, Motivational Environment, and Organizational Communication

Tesla Inc. applies transformational leadership style to foster innovation, employee productivity, and engagement. This leadership model is action-oriented, open to new thinking, opposed to risk aversion, and tolerant to intelligent risks. Additionally, it is characterized by the leader’s willingness to accept responsibility for all decisions, and inspire participatory engagement from all employees. Afsar and Umrani (2020) contend that this leadership approach encourages innovative thinking and influences employees by modeling expectations and desired behaviors. Notably, transformational leadership at Tesla Inc. creates a motivated workforce by articulating the organization’s vision, setting challenging yet attainable objectives, and demonstrating trust and confidence in the employees.

Tesla Inc. utilizes a multifaceted organizational communication encompassing formal, informal, directional, written, and oral approaches. This atypical communication protocol challenges the traditional strategies characterized by their bureaucratic tendencies, which only entrench managerial powers. The multidirectional unstructured communication is distinctively effective and has contributed significantly in the outstanding organizational performance. This strategy has been adopted at Tesla Inc. to inspire rapid execution of action, open and continuous dialogue, and break rigid hierarchical lines that impede engagement, integration, and interaction (Ahmad et al., 2018; Hasanaj & Manxhari, 2017). Notably, this communication model has strengthened the organization’s operational effectiveness and fostered its growth and expansion.

Organizational Control

Tesla Inc. has robust and elaborate control processes to enhance the regulation and management of their manufacturing, budgetary, and financial operations. For instance, the organization makes regular financial reporting on an ongoing quarterly basis with the Securities and Exchange Commission. Additionally, the company has an internal audit department created to help detect and prevent the perpetration of fraud in the organization. The effectiveness of these controls is reflected in the opinions rendered by auditors who contend that the file financial statements conform with the established requirements and accounting principles. For instance, Tesla Inc. maintains records in reasonable and detailed accuracy to permit the preparation of financial statements.

However, the company has experienced various quality issues in its processes and products, which have adversely affected the commodities’ perception of reliability. Notably, this challenge can be attributed to the pressure of consumer demands, which compels the organization to build fast, thereby compromising quality and reliability. Bauchwitz (2020) corroborates this view and notes that the rising demand for Tesla Model 3 contributed to it becoming the most popular but the least reliable electric vehicle brand. Therefore, Tesla Inc. has robust and effective financial and budgetary controls but inefficient quality regulation systems.

Information systems play an influential role and is deployed across multiple aspects of the organizational processes and operations. Teece (2018) posits that Tesla Inc. was built on the artificial intelligence (AI) platform and utilizes information systems and technology for innovation and manufacturing. For instance, this technology has been deployed in manufacturing and enhancing battery, recharging technologies, and vehicle’s autopilot features for better safety and improved performance. These technological advancements have also been transferred in the manufacture and production of Optimus, a humanoid robot powered by AI.

Organizational Ethics and Innovation

Tesla Inc. observes various managerial practices that enhance organizational innovativeness. The company extensively leverages information technology and artificial intelligence, develops its workforce entrepreneurially, and implements effective feed-forward practices to foster innovation. For instance, the introduction of autopilot features in the Model S reshaped the automotive industry and forced other players in the sector to adapt (Kumari & Bhat, 2021; Lang et al., 2021). Tesla Inc. encourages entrepreneurship by exploring the market readiness for innovative products and technologies and developing enabling policies. Notably, the organization utilizes various forms of employee empowerment, including involving them in decision-making, training, recognition awards, allowed autonomy in their operations, and managerial support. Tesla Inc. has established itself as a company driven by technology and develops products on that basis. In this regard, technology is at the center of Tesla Inc.’s operations and processes.

Tesla Inc. faces an ethical dilemma in the self-driving cars, particularly due to their comparative environmental friendliness over their fossil-fueled counterparts and their inability to completely avoid accidents. While electric vehicles provide enhanced safety features for car’s occupants and pedestrians and are more environmentally friendly, their instant response and unexpected braking in unforeseen situations could increase rear-end collisions (Kallioinen et al., 2019). This implies that introducing electric and self-driving cars will significantly reduce some accidents and environmentally hazardous emissions while sparking a rise in other forms of traffic incidents.

I would like to join Tesla Inc. and work as the human resource executive in the future. This would be an exciting undertaking as the organization provides numerous learning opportunities for their employees. Notably, my desire to join the organization would be to help the company recruit talent and formulate policies to enhance employee retention and hire remote workers.

Part 2

Tesla Inc. trades in the Nasdaq Global Select Market stock exchange under the TSLA ticker and can be contacted through 3500 Deer Creek Rd, Palo Alto, CA 94304, USA postal address and email address [email protected]. The company’s phone numbers and web address are +1 650-681-5000 and tesla.com, respectively (Tesla Inc., 2021). However, Tesla Inc. does not have or operate any social media accounts.

Company Profile

Tesla Inc. operates in the manufacturing sector in the automotive and energy generation and storage industries. The sector and industry play an integral role in the growth and development of an economy, primarily by driving technological innovations, productivity, research, and development. For instance, the conception of self-driving cars stimulated the development of supportive software and upgrading of the manufacturers’ technical capabilities (Mamasioulas et al., 2020). Similarly, the disruptions occasioned by vehicle electrification, carbon neutrality, and connectivity in the automotive industry have necessitated progressive investment to avoid obsolescence. These innovations and progresses enable a country to become increasingly productive, minimize unemployment and poverty pressures, and generate foreign exchange for the country. These contributions generated by the automotive sector are replicated in the sustainable energy segments through a reduction in dependence on imported fuels, diversifying country’s energy sources, and fostering energy efficiency, which promote economic growth (Arroyo & Miguel, 2020). In this regard, the manufacturing, automotive, and energy generation and storage sectors and industry contribute significantly to economic growth and development.

Tesla Inc.’s top executives include Elon Musk, who is the chief executive officer, Zackary Kirkhon, the chief financial officer; Andrew Baglino, the senior vice president for Powertrain and Energy Engineering, and Vaibahv Taneja, the firm’s chief accounting officer. Musk, Baglino, Kirkhon, and Taneja have worked at Tesla Inc. for 18, 3, 3, and 5 years, respectively. Tesla Inc.’s total sales for the financial year 2021 amounted to US$53.82 billion and recorded a net income of US$5.52 billion in the same year (Tesla Inc., 2021). The total assets for the financial year ended 2021 was US$62.131 billion (Tesla Inc., 2021). Notably, automotive sales are the company’s leading source of revenue and generated US$44.125 billion in 2021 (Tesla Inc., 2021). Notably, the organization fragments its total revenue according to the trading segments, including the automotive sales, leasing, energy generation and storage, and service. Therefore, Tesla Inc.’s revenue streams reflect the business segments through which the company trades.

Company Competitive Environment

Rivian Automotive Inc. and Ford Motors Corporation are among the prominent and publicly traded American companies competing against Tesla Inc. Tesla Inc.’s SWOT analysis over the past two alongside Rivian Automotive Inc. is as shown:

Tesla Inc.’s strengths, weaknesses, opportunities, and threats are constantly changing, reflecting the dynamic of the industry and sector in which it operates and the implementation of interventions by the company. For instance, the company has accelerated its innovation potential over the last one year, particularly in developing innovative wall connector chargers, superchargers, and destination charging equipment. This implies that while other electric vehicle manufacturers are still perfecting the cars, Tesla Inc. is already developing solutions to the entire electric vehicle system. However, more entrants into the sector are increasing competition, while challenges in quality controls adversely affect Tesla Inc.’s image. Further, Tesla Inc. continues to experience problems with its quality assurance system (Bhardwaj et al., 2020). This challenge is continuously hurting the company image.

Notably, Rivian Automotive SWOT analysis is distinctively different from that of Tesla by the reliability of its products, manufacture of vehicles with off-road capabilities, and the relatively low brand image. Additionally, the company is yet to diversify and does not have complex manufacturing systems. For instance, Tesla Inc. allows drivers to update their vehicle systems to fix bugs without visiting the manufacturer’s service center. Similarly, Rivian Automotive has a limited innovation and manufacturing potential compared to Tesla.

Additionally, Tesla Inc. has progressively diversified its operations by venturing in the energy storage and generation sector. In this regard, the company has increasingly reduced its reliance on other companies for the manufacture of critical vehicle components. In recent years, Tesla Inc. has also accelerated its global market penetration by establishing subsidiaries in Europe and Asia.

Conclusion

Tesla Inc. is a successful company considering the level of innovation, progressive market penetration, competitiveness, diversification and brand image. Notably, it has established itself as the most innovative entity globally in the electric vehicle industry, which has allowed it to succeed and realize growth where many companies have struggled to establish a footing. From this perspective, I would like to work for Tesla Inc. as opposed to Rivian Automotive. Similarly, I would also invest in Tesla Inc. and retain the investment for at least 5 years due to the growth potential, innovativeness, and the aggressive exploration in the relatively nascent and rapidly developing electric vehicle industry.

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