Company History
Most recently, in 2020, Tesla was able to break the one million car sales mark. It was able to achieve such figures in just 17 years. Martin Eberhard and Mark Tarpenning founded the company in July 2003. The two of them were developing the young company until Elon Musk, a young entrepreneur, invested $30 million in Tesla in February 2004 and became the company’s chairman (Reed). Further milestones for the company were additional investments for the development of the Tesla Roadster, a contract with Lotus for engineering assembly. In July 2007, Tesla presented its first electric car at a special private event. There are changes in the company, and in 2008 Musk becomes CEO. During the following years, Tesla produces Roadster, Model S, Model X, and other cars, gradually becoming a recognizable public company.
Mission and Vision
Without going into detail about the formation of Tesla’s mission and vision, it should only be noted that both statements are similar. For example, Tesla’s vision is to create the most attractive car company of the 21st century, ensuring the industry’s transition to electric vehicles (Cuofano, n.d.). At the same time, the company’s mission is to accelerate the rate at which sustainable transportation enters the market by creating and selling attractive electric vehicles.
Code of Ethics
The fact that Tesla is one of the most progressive companies on the Fortune 500 list imposes special social responsibility requirements. It is imperative that such a powerful conglomerate not be irresponsible for racial, cultural, or gender discrimination. To this end, management has created a corporate environment based on a developed code of ethics (Tesla, 2017). The code covers the most socially relevant issues, and some of its excerpts are shown on the slide.
Top Management
By this point, there is no doubt that Tesla is a global brand. Wagner (2020) estimates that by the end of 2019, the total number of employees exceeded 48,000. Obviously, such a grandiose number of employees requires effective management. This includes delegating responsibilities and differentiating units (Efrati, 2018). The organizational chart shown on the slide demonstrates the hierarchy of authority in the company.
R&D Management
For a company the size of Tesla, which annually announces high-profile innovations like the Cybertruck or Roadster 2.0, it is vitally important to have an adequate management team. The management of this area determines how effectively the company will develop in the industry market and its reputation. Thus, there are at least five functions of R&D management, including planning, organization of internal processes, staffing, administration, and control. Each of the functions is an essential component of commercial success, but at Tesla, in addition to these aspects, leaders are also working to build innovation capital (Furr & Dyer, 2020). Simply put, such capital is formed based on the leader’s name, the number of social connections, reputational capital, and impression enhancers. It is not hard to admit that the central figure in such management is Elon Musk.
It is safe to say that, as CEO, Elon Musk also provides the R&D department with sufficient attention to organizing innovation management. The two main functions associated with management are the creation of innovation capital (which Musk does an excellent job of) and the maintenance of ongoing developments. Particularly at Tesla, Elon Musk has a significant influence on followers and social media users. Many news stories about the company’s developments (even if not always realistic) help raise Tesla’s visibility and stimulate R&D. It is a vital strategy that drives unit momentum. On the other hand, Tesla backs up current cars by updating software, creating new functionality, and developing refueling systems. This together provides R&D with sufficient resources and tasks, and therefore influences management.
Marketing Management
Marketing management at Tesla is the main link that increases sales and maintains the company’s leadership position. Here are some of the main functions of marketing management and how it is implemented at Tesla:
- Tesla provides sales management by building a name brand and a savvy service strategy. The company has set up a loyalty program and lined up customer communication plans based on industry market analysis.
- The assembly of Tesla vehicles covers two aspects of marketing management at once: resourcing the parts factories and meeting the customer’s personal needs. For example, the production of most models takes place at Tesla’s renowned Fremont Factory. At the same time, after a test drive, each customer receives a link to a complete simulated car, which increases loyalty.
- The logistics formed at Tesla allow for a seamless supply chain by coordinating internal processes. Tesla now has three plants: the Gigafactory in the Nevada desert, the Buffalo plant, and the Tesla plant in Fremont (Baldwin, 2020).
Location management storage reduces the time it takes to deliver the product directly and keeps inventory in good condition. In addition to current automotive parts storage, Tesla is also developing the most extensive available energy storage facility (Cohen, 2020)
In its practice, Tesla has not created a new car, but it has standardized electric cars so that in the minds of consumers, the product is closely associated with the company’s name. Tesla’s standards and patents allow it to create a unique car whose parts cannot be replaced by counterparts. At the same time, the company offers guaranteed repairs in the event of a breakdown.
Given the loud announcements and not always reliable news from Musk, there must be quality risk management at Tesla. The company seems to have some problems as they cannot cope with the number of customer requests. However, the CEO’s well-known name and customer confidence and trust create a favorable ground for its success even in case of failure.
Operational Management
In process and operations management, there are at least ten functions at Tesla that ensure almost absolute continuity of supply and increase customer confidence. Let us briefly discuss them all:
- Process design at Tesla ensures a focus on business processes, investments, and standards. The company automates manufacturing processes by introducing robotic assembly. In addition, Tesla’s organizational structure depends on process management, so in the event of errors and inaccuracies, entire departments are de-energized.
- The placement is optimized by minimizing resources, including the full use of production facilities. Competent plant layout reduces transportation costs combined with the involvement of vertical integration.
- Quality is managed through regular audits and industry market research. Vehicle software is continuously updated to achieve the best ownership experience.
- Proper location of distributors and parts factories and proximity to the market meet the needs of location management. Most retail stores offer customers not only cars but also individual parts for them.
- Strategic product and service management focuses on a limited list of locations to improve quality and market presence. Updating supply chains and improving internal production processes allows for high quality.
Managing human resources through a generous compensation program and a competitive recruitment strategy ensures its high performance. A culture of innovation and improvement, stimulated by continuous training and leadership development, satisfies HRM demands (DeBord, 2017).
Automation and reduced delivery times also affect inventory management. In particular, Tesla managers require that the quality of automotive parts is not influenced by parts lead times. Moreover, most parts are integrated into the vehicle immediately. This solution makes it possible to control the quality of inventory and intelligently manage reserves.
Optimized storage, improved supply chains provide the basis for maintenance at Tesla. Internal standards already ensure high quality, but a repair warranty in the event of a breakdown increases loyalty (“Car maintenance,” 2019). Moreover, there is overcapacity in some of the company’s plants, allowing the company to respond to market dynamics promptly.
Creating efficient and low-cost sales chains is a function of operations managers. A robust corporate culture and ethics guarantee effective communication with suppliers. Critical areas of supply are optimized and robotized to reduce the likelihood of errors.
Planning at Tesla is done by continually analyzing market metrics and generating appropriate responses to them. Automation of controls enables timely detection of lagging behind industry averages.
Management in Finance
Over the past five years, Tesla has shown a cumulative increase of nearly 2,200 percent in securities value. In addition, in 2020, the company was able to get out of the expense hole, showing a net profit of $270 million in the last quarter of the year (Ohnsman, 2021). It is logical to find out what management strategy is relevant for Tesla’s financial division in this context. Nevertheless, before that, we need to clarify what challenges the car company deals with every day.
- Tesla operates in one of the most competitive environments.
- Technological advances are fast-paced, so the company needs to keep up with them.
- Technological risks cannot be ruled out.
- Huge R&D expenditures are needed.
- Expanding production is costly.
In addition to the economic pressures already mentioned, Tesla, like any large company, has difficulties with the political regime. Geopolitical decisions and tax policy directly affect the company, preventing good financial management forecasting. In their management, Tesla executives use transformational leadership principles, which is evident in their current agenda. The company actively invests in the development of small public projects: this is necessary to spread influence and create reputational status. In addition, financial management over companies allows Tesla to develop the technological potential of its own facilities and improve management methods by adopting experience.
However, that is not all: the central function of management in such a dynamically developing area is stability. Only stability, equanimity, and management consistency can guarantee reliable control and strict response to market changes. The Tesla business model is based not on franchising but direct services: in this way, the company fully controls internal processes and does not allow interference. Each member of management has a strictly accountable group of employees, which facilitates the delegation of responsibility.
Finally, Tesla’s financial management is not afraid to take healthy risks: it actively invests in development and research. Even if some of the products become unprofitable, their appearance on the market still preserves their relevance and recognition.
Competitive Advantage
All of Tesla’s activities are literally aimed at increasing competitiveness in the industry market. In fact, this is not surprising since this is what every company with effective management does. However, the techniques and marketing tools Tesla uses are impressive.
- First of all, it is about the approach to the product. The company does not create just another car but offers a quality software product accompanied by a high level of service and technology. The software in Tesla cars is updated almost every two weeks.
- Sales technology is the second significant advantage. It is customary to consult with a representative with many companies when buying a car, and the final price is not known until the end. At Tesla, the customer can assemble a car’s desired package on the site and pay for it there.
- The approach to simplicity is noticeable in the assembly of the car as well. The very concept of the cars removes the need for the owner to spend on oil changes, tuning mufflers, or other parts that are not in the electric car.
- The company is committed to high technology, allowing its customers to have an incomparable experience that includes affordable civilization benefits.
However, these are not the only competitive advantages of Tesla.
- The company responds to the trends and demands of society. Their cars are promoted as eco-friendly transportation, and the composition of their workforce encourages diversity and inclusiveness.
- Supporting the products they sell is key to building loyalty. Tesla not only updates car software but also expands fueling areas and offers customers guaranteed repairs.
- Tesla’s genuine commitment to streamlining production chains demonstrates its interest in business excellence.
- Elon Mask’s branding strategy and reputation create an increased interest in the company even among those who do not plan to buy an electric car.
- The functionality of the cars is also striking: with the globally recognizable autopilot system, the company not only demonstrates its technological achievements but also solves the problems of reducing accidents on the road and driver responsibility.
References
Baldwin, R. (2020). Trump claims Tesla’s building a huge new U.S. factory because it has to. Car and Driver. Web.
Car maintenance. (2019). Tesla. Web.
Cohen, A. (2020). Tesla begins construction of world’s largest battery storage facility. Forbes. Web.
Cuofano, G. (n.d.). Tesla mission statement and vision statement in a nutshell. FourWeekMBA.
DeBord, M. (2017). With the Model 3, Elon Musk put the focus exactly where it should be — Tesla’s employees. BI. Web.
Efrati, A. (2018). Tesla. The Information. Web.
Furr, N. & Dyer, J. (2020). Lessons from Tesla’s approach to innovation. HBR. Web.
Ohnsman, A. (2021). Tesla notches first full-year profit, aided by $270 million fourth-quarter net income. Forbes. Web.
Reed, E. (2020). History of Tesla: Timeline and facts. The Street. Web.
Tesla. (2017). Code of business conduct and ethics. Web.
Wagner, I. (2020). Number of Tesla employees from July 2010 to December 2019. Statista. Web.