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Entrepreneurship

Business Plan for Tesla Company

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Business Plan for Tesla Company

Executive Summary

Times are changing. Over the last decade, the electronic car industry has rapidly grown due to technological advancements. The trends in the growth of the global electric car industry indicate that the market is on the rise (Koçaş, C., & Bohlmann, 2018). This business plan delves into investigating Tesla’s management and organization, its plan to introduce its new products into the market, the company’s marketing strategy as well as its operating and control systems. With these elements, the company’s executives seek to understand its growth plan and financial plan in the future towards realizing a strategic position in the market as well as profitability, relative to its rivals.

Introduction

Recent economic statistics on global sales of new electric vehicles reveal that over a million units of the cars have been sold around the world. Additionally, the recent trend in the growth of the industry shows that that electric vehicle manufacturing companies could quadruple these figures, thus reaching over 4.5 million units by 2020, which translates to almost 5 percent of the overall global market for light-vehicle (Akakpo, Gyasi, Oduro, & Akpabot, 2019). This pattern presents viable opportunities for Tesla to develop new and advanced electric/hybrid vehicles that will increase its competitive advantage in the future. However, for the company to achieve this objective, it will be crucial for the firm’s entrepreneur to develop and implement effective marketing and financial plans that will ultimately lead it towards success in its growth plans.

Company Overview

Tesla Inc was established in 2003 by American Entrepreneurs, Marc Tarpenning, and Martin Eberhard. The American-based manufacturer of electric cars was named after Nikola Tesla-the Serbian American Inventor. The firm recognized the need to develop electric vehicles from the fact that vehicles are the main source of environmental pollution (Akakpo et al., 2019). Tesla Inc. designs develop, produces, and sells fully electric vehicles in addition to manufacturing energy storage systems. It has therefore categorized its production into two segments, including Energy Generation and Storage and the Automotive segment. While the automotive segment entails designing, developing, manufacture, and the sale of electric vehicles, the energy generation and storage segment involves the designing, production, and installation of solar energy systems to customers.

 

Management and Organization at Tesla

 

The organizational chart above illustrates the management and organization of the Tesla organization. The management and structure of the corporation begin with the General Manager as the top-level manager, who is tasked with the responsibility to oversee Tesla’s daily business operations. The general manager also must improve the firm’s overall business functions, manage the budgets, create policies, train departmental heads in addition to developing the organization’s business objectives. Similarly, under the general manager, there are the human resource department and the finance department. The overall responsibility of the human resource department at Tesla is charged with providing executive management with the recommendation on how the organization can implement practices and strategies towards the effective management of employees in the company. The role of the human resource at the company involves the recruitment and selection of employees at all levels of the organization, different training, and development programs to improve the employees’ skills. In other words, the company’s human resource department works closely with managers and supervisors across the organization to cultivate the skills and knowledge of the workers. It also necessitates assigning them tasks that correspond to their set skills and level of training, aimed at enhancing Tesla’s production and operation capacity.

On the other hand, the finance department is responsible for managing the firm’s daily transactional accounting activities. Accountants at Tesla provide the management with reliable information about the financial budget, particularly when making a strategic decision. Moreover, the finance team at the company carries out bookkeeping activities wherein they identify, record, prepare, and present the organization’s financial statements. In other words, the finance team manages Tesla’s cash flow and ensures that the company has enough capital to meet the daily financial needs. Furthermore, the finance manager will work closely with the operations and marketing managers to develop a comprehensive financial plan that will adequately serve Tesla’s future growth plans.

Operating and Control Systems

            The operations and control systems at Tesla include key decision areas such as the design of Goods and Services, process and capacity design, and quality management. In the strategic decision area of designing its products and services, the operations managers at Tesla usually direct their efforts at examining the extent to which Tesla’s products and services adequately influence quality objectives, resources, and the cost the company incurs (Chen & Perez, 2018). The department at the organization addresses this issue through the implementation of concurrent innovation, involving simultaneous innovation across the different sections of the solar panel and automotive operations. Regarding process and the design capacity, the operations and systems management at Tesla Inc. centers on business processes in addition to the related standards, resources, and investments. These processes play a vital role in helping the firm realize high productivity due to operational efficiency in Tesla’s segments. Furthermore, the quality management systems at the company focus on improving the organization to satisfy the quality expectations of its customers (Chen & Perez, 2018). Consequently, Tesla realizes the quality management condition by conducting regular quality checks, researches on energy solutions, and automotive industries in addition to quality improvement efforts.

Product Plan

Over the last decade, research teams and the entrepreneurs at Tesla have sought to design and develop alternative vehicle propulsion systems as a mechanism to manufacture vehicles that reduce carbon dioxide emissions into the environment (Moritz, Redlich, Krenz, Buxbaum-Conradi, & Wulfsberg, 2015). The alternative vehicle propulsion system in hybrid vehicles comprises one or more electric motors that allow for smaller engine capacity. These motors are powered by batteries and provide the engine with extra power. The engine also consists of auxiliary power loads, which play a vital role in reducing engine idling when the car stops.

Significantly, these combined features have provided Tesla’s hybrid electric vehicles a competitive advantage over other firms such as Nio, Volkswagen, and BYD since its products provide users with a better fuel economy without having to sacrifice the performance of the car. Apart from better fuel economy, and high performance, Tesla’s seeks to produce electric vehicles that will have the ability to show the driver to drive efficiently. Currently, the company is working on the design and development of a new supercharged version of the Roadster wherein they allude that the car will be the fastest in the globe with a capacity to achieve 0-60 in 1.9 seconds (Moritz et al., 2015). In contrast to conventional cars that get better mileage as the diver accelerates and brakes gently, Tesla’s new HEVs will allow the users to experience this, particularly when they accelerate steadily enough to the extent that it is only the engine that is used (Hannan et al. 136). On the other hand, the cars will allow the users to beat the United States Environment Protection Agency estimates. Tesla’s executives anticipate launching the car in 2021 and believe that the vehicle will be a step towards the company’s future growth plans of expanding its business to emerging markets in Asia and Africa (Moritz et al., 2015).

Growth Plan

Currently, the electric automobile industry is rapidly growing due to the increasing demand for fully electric vehicles. The increased demand for HEVs across the United States owes to the government’s endorsement of favorable incentives that have made hybrid electric vehicles attractive economically, especially among transit agencies (Mangram, 2012). A report by the Federal Transit Administration (2010) revealed that most people are increasingly opting for alternative and hybrid vehicles instead of diesel cars. Some of the incentives by the government include the reduction in tailpipe emissions to of particulate toxic gases and matter, complying with the existing federal regulations and laws on air quality, specifically in maintenance regions and non-attainment areas in addition to the improvement in local air quality. Besides, the government is advocating for the adoption of the vehicles due to the potential benefit of a reduction of the country on the reliance of foreign oil in addition to realizing domestic priorities, including the increased usage of fuels derived from domestic sources (Mangram, 2012). Accordingly, coupled with the higher levels of state and federal incentives for purchasing alternative HEVs, most individuals are also attracted to purchasing the vehicles as a result of the rising prices of oil.

 

Marketing Plan

Following its mission to “accelerate the advent of sustainable transport by bringing compelling mass-market electric cars to the market as soon as possible” (Mangram, 2012), the company strives to expand its business operations globally (Bilbeisi & Kesse, 2017). The company’s entrepreneurs are eager to expand the production of the vehicles in markets across the world as a strategy of reducing competition among its industry rivals (as illustrated in appendix 1). Upon the production of the new HEVs, the company has developed a comprehensive marketing plan that would establish and position its brand in the marketplace. The delivery of the products into the industry will subsequently require the company to reinforce its current business model to include a three-tier strategy for selling, servicing, and charging its fully electric vehicles.

With the three-pronged strategy, the marketing plan for Tesla would be Direct Sales. In contrast to other automobile manufacturers in the industry who use franchises to sell their products, Tesla Inc has recognized the benefits associated with direct sales (Bilbeisi & Kesse, 2017). Through digital marketing platforms like e-commerce and social media marketing, the company will create a global network of company-owned galleries and showrooms. These galleries and showrooms are usually located in prominent urban centers across the globe. If the company can own these sales channels, then it is likely that Tesla can gain a competitive edge over other companies, especially in its initiative and swiftness towards product development (Bilbeisi & Kesse, 2017). More so, the direct sales marketing objective will generate better customer purchasing experiences.

 

 

Financial Plan

            In the last financial year, Tesla recorded USD 930 million in its cash and cash equivalents to USD 6.3 billion, USD 1.08 billion cash flow less Capex, as illustrated in appendix 3 (MarketWatch, 2020). On the other hand, the company’s GAAP of USD 359 million operating income, 4.9 percent operating margin in the last quarter of the 2019 financial year – USD 105 million GAAP net income (MarketWatch, 2020). Accordingly, the analysis of the company’s financial statements estimates that all factors remaining constant, Tesla’s GAAP net income is set to reach 5.5 percent this year (MarketWatch, 2020).

Conclusion

The increased demand of HEVs across the United States owes to the government’s endorsement of favorable incentives that have made hybrid electric vehicles attractive economically, especially among transit agencies. This has provided Tesla with a viable business in expanding its business operations around the world. After the production of the new HEVs, the company has developed a comprehensive marketing plan that would establish and position its brand in the marketplace. The delivery of the products into the industry will subsequently require the company to reinforce its current business model to include a three-tier strategy for selling, servicing, and charging its fully electric vehicles.

 

           

 

 

 

 

 

Appendices

Appendix 1

 

 

 

 

 

 

 

 

 

 

Appendix 2

 

 

Appendix 3

 

 

 

 

 

 

References

Akakpo, A., Gyasi, E. A., Oduro, B., & Akpabot, S. (2019). Foresight, organization policies, and management strategies in electric vehicle technology advances at Tesla. In Futures Thinking and Organizational Policy (pp. 57-69). Palgrave Macmillan, Cham.

Bilbeisi, K. M., & Kesse, M. (2017). Tesla: A successful entrepreneurship strategy. Morrow, GA: Clayton State University.

Chen, Y., & Perez, Y. (2018). Business model design: lessons learned from Tesla Motors. In Towards a Sustainable Economy (pp. 53-69). Springer, Cham.

Mangram, M. E. (2012). The globalization of Tesla Motors: a strategic marketing plan analysis. Journal of Strategic Marketing20(4), 289-312.

MarketWatch (April 12, 2020). Tesla Inc. Retrieved from: https://www.marketwatch.com/investing/stock/tsla/financials

Moritz, M., Redlich, T., Krenz, P., Buxbaum-Conradi, S., & Wulfsberg, J. P. (2015, August). Tesla Motors, Inc.: Pioneer towards a new strategic approach in the automobile industry along with the open-source movement?. In 2015 Portland International Conference On Management Of Engineering And Technology (picmet) (pp. 85-92). IEEE.

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