Business Policy

University of Guelph-Humber
Presentation Date
BADM 4000
Charles Janthur July 27, 2015

Mark Timothy Narinder Savanna Jelisaveta Karen

Bilhete Brilhante Dhaliwal Fernandes Knezevic Macwan
ROADMAP

Tracking Tesla Strategic Recommendations Synthesis/Q&A

1 5 6

Situation Analysis Problem Analysis

2 4

Industry Analysis
3

2
TESLA MOTORS

• Founded in 2003 by
engineers in Silicon
Valley
• Electric car with instant
torque, incredible
power, and zero
emissions
• Accelerate the world’s
transition to sustainable
transport

3
TRACKING TESLA

1888 2003 2008 2010 2012

Nikola Tesla Tesla Motors Tesla Roadster IPO raised US The world’s first
patents incorporated launched with $226M premium electric
powertrain 0-60 mph (NASDAQ:TSLA) sedan is launched
design built acceleration in at $17/share – Model S
around AC 3.7 seconds and and closed at
induction motor 245 miles per $23.89
charge on a (+40.5%)
lithium-ion
battery

4
TRACKING TESLA

2013 2014

Model S named CEO Elon Musk Announcement of Nevada selected Tesla shares some
Motor Trend’s unveils two dual Battery Swap as site for of its patents to
Car of the Year motor all-wheel Pilot Program Panasonic and promote open
and achieved 5- drive Tesla’s new source
star rating from configurations of battery development of
the U.S. National Model S that Gigafactory electric cars
Highway Traffic further improve
Safety the vehicle’s
Administration handling and
performance

5
TRACKING TESLA

2015 2016

Tesla prepares to Tesla will unveil

launch its new plans for its
crossover vehicle future mass
– Model X market electric
vehicle
– Model 3

6
SITUATION ANALYSIS

BOTTOM LINE SALES SHARE PRICE TODAY EXPANSION

$294M 54% $262 30

from Decline in NASDAQ: New Service
$74M Model S TSLA Locations
in EU

7
 INDUSTRY ANALYSIS
• Adoption of electric vehicles slow
S • Tesla Model S $70K+ and X $80K+
SOCIAL • Tesla Model 3 $35K+ in future
• Demand for lithium-ion batteries
T • New $5B ‘Gigafactory’ will provide
TECHNOLOGICAL
competitive advantage for Tesla
• Low oil prices (WTI NYMEX $48-60)
E • 1.2 million EV’s by end of 2015
ECONOMIC (0.5% of total global vehicle sales)
• Global warming and climate change
E • G7 goal to eliminate carbon and
ENVIRONMENTAL greenhouse gas emissions by 2100
8
• Tax credits and incentives
• $7,500 income tax credit across US P
• $8,500 rebate + carpool access in ON POLITICAL
• Emission regulations and penalties
• NADA prevents Tesla from selling L
directly to consumers in some states LEGAL
• Exporting US jobs and manufacturing
• Tesla sharing patents to encourage E
development of electric vehicle market ETHICAL
• Higher female employment
(47.5% of US workforce in 2013) D
• Smaller households (smaller cars) DEMOGRAPHIC
PORTER’S 5 FORCES MODEL

UNDERSTANDING THE Barriers

HIGH
to Entry
COMPETITIVE LANDSCAPE

MODERATE
Industry

HIGH
Power of Power of
Suppliers Rivalry Buyers

Threat of
HIGH Substitutes HIGH

9
 PROBLEM 1 – PRODUCTION CAPACITY

PROBLEM ANALYSIS
KEY ISSUE
Tesla’s vehicle • Single assembly line causes
production significant delays and extremely
capacity is low long wait times for consumers
and depends on
• Reliance on few suppliers can
one manufacturing
threaten production
plant located in
Fremont, CA • Unable to generate positive cash
flow for the past 5 years

10
FIRST QUARTER 2015

VEHICLES

11,160 10,045
produced delivered

11
EXHIBIT 1.1 – GROSS PROFIT

Gross Profit in Billions ($US)

Total Revenues Total Cost of Revenues
$3.1
$2.3
$2.0
$1.5
$294
M$0.4 $0.3

2012 2013 2014

12
EXHIBIT 1.2 – NET LOSS

Net Loss in Millions ($US)

$396
$294
$254
$154
$294 $74
M
2010 2011 2012 2013 2014
13
PROBLEM 1 – RECOMMENDATION
STRATEGIC
ALLIANCE

JOINT
VENTURE

COOPERATIVE
STRATEGY

14
JOINT VENTURE WITH BOEING

• Boeing is the largest aerospace company and leading

manufacturer of airplane parts and aircrafts
• Long tradition of aerospace leadership and innovation
• Share similar values of innovation, environmental protection,
and inclusive corporate culture – groundwork for strong
synergistic strategic alliance

15
ADVANTAGES FOR TESLA

• Leverage Boeing’s suppliers, distribution network, production facilities

and TQM systems
• Maintain centralization in California, but can move production to other
areas of the country
• Can use Boeing’s large capital structure to purchase a production
facility and the necessary equipment to start producing vehicles outside
of California

16
 Boeing Facility
Everett, WA

New JV Facility
Detroit, MI
Tesla Factory
Fremont, CA
BOEING PARTNERSHIP

• Would allow Tesla to pursue their differentiation strategy

• Partnering with a company in a related industry also creates
diversification advantage and increases Tesla’s market share
• Tesla’s overall returns would increase as they would be able to better
meet customer demand

18
 PROBLEM 2 – CORPORATE LEADERSHIP

PROBLEM ANALYSIS
KEY ISSUE
Tesla’s • Overdependence on CEO Elon
performance has Musk for strategic direction
been slow to
improve due to • Role duality within corporate
the current structure hindering effective
corporate decision-making
leadership • Need for leadership balance
approach between vision and management
• CFO Deepak Ahuja’s retirement

19
PROBLEM 2 – RECOMMENDATION
CORPORATE
GOVERNANCE

REVISE
CORPORATE
STRUCTURE

STRATEGIC
LEADERSHIP

20
 EXHIBIT 2.1 – CURRENT CORPORATE STRUCTURE
Shareholders

Board of Directors

Elon Musk
CEO, Product Architect, Chairman & Board of Director

JB. Straubel J. Vijayan D. Ahuja D. O’Connell P. Carlsson J. Guillen

CTO CIO CFO (Retiring) VP Business Development VP Supply Chain VP WW Sales

21
 EXHIBIT 2.2 – REVISED CORPORATE STRUCTURE A
Shareholders

Board of Directors

Elon Musk
CEO, Product Architect & Board of Director
NEW CHAIRMAN
President & Board of Director
(New Position – Managerial Leader)

JB. Straubel J. Vijayan D. Ahuja COO

CTO CIO CFO (Retiring) (New Position)
D. O’Connell P. Carlsson
VP Business Development VP Supply Chain

22
ADVANTAGES FOR TESLA

• Elon Musk can focus entirely on leading Tesla as CEO

• President can help achieve synergy between vision and management
• Tesla’s corporate governance will be more effective in terms of
accountability and transparency
• Better performance, decision-making, and response to change

23
 EXHIBIT 2.3 – REVISED CORPORATE STRUCTURE B
Shareholders

Board of Directors ELON MUSK

Product Architect,
Chief Executive Officer Chairman & Board of Director
(New Strategic Leader / Vision + Management)

President & Board of Director

(New Position – Managerial Leader)

JB. Straubel J. Vijayan D. Ahuja COO

CTO CIO CFO (Retiring) (New Position)
D. O’Connell P. Carlsson
VP Business Development VP Supply Chain

24
ADVANTAGES FOR TESLA

• Elon Musk is also the CEO of SpaceX and Chairman of SolarCity

• Appointing a new CEO will allow Elon Musk to focus on multiple
responsibilities more efficiently, while remaining Chairman of Tesla
• Tesla will benefit from strategic leadership with both vision and
management effectiveness
• Potential candidate: Calin Rovinescu, CEO of Air Canada
• Helped Air Canada through bankruptcy and returned it to profitability in 2014
with a 4% profit margin

25
SYNTHESIS

STEERING TESLA Ultimately lead to

IN THE RIGHT improvements in Tesla’s
DIRECTION performance and
Strategic strategic direction
recommendations
include a new JV and
revised corporate
structure
Tesla must address
its production
capacity and
corporate
leadership issues
26
Thank You
REFERENCES
Boeing. (2015, July 20). Our Company. Retrieved from
Boeing: http://www.boeing.com/company/
Euromonitor International. (2015, July 20). Automotive
Industry Analysis. Retrieved from Euromonitor
International:
http://www.portal.euromonitor.com.rap.ocls.ca/portal
Hason, S. (2015, June 19). Tesla Motors Inc Secures $15M In
Tax Credits In California. Retrieved from Business
Finance News:
http://www.businessfinancenews.com/22742-tesla-
motors-inc-secures-15m-in-tax-credits-in-california/
Hitt, M. A., Ireland, R. D., Hoskisson, R. E., Rowe, W. G., &
Sheppard, J. P. (2009). Strategic Management:
Competitiveness and Globalization Concepts (3rd ed.).
Toronto, ON, Canada: Nelson Education.
Nasdaq. (2015, July 20). Crude Oil WTI (NYMEX) Price.
Retrieved from Nasdaq:
28
http://www.nasdaq.com/markets/crude-
oil.aspx?timeframe=5y
Tesla Motors. (2014, December 31). Annual Report.
Retrieved from Tesla Motors:
http://ir.teslamotors.com/secfiling.cfm?filingID=15645
90-15-1031&CIK=1318605
Tesla Motors. (2015, July 20). About Tesla. Retrieved from
Tesla Motors: http://www.teslamotors.com/about
Tesla Motors. (2015, July 20). Blog. Retrieved from Tesla
Motors: http://www.teslamotors.com/blog
Tesla Motors. (2015, July 20). Forums. Retrieved from Tesla
Motors:
http://my.teslamotors.com/forum/forums/tesla-
timeline-0
All images sourced from Tesla and Boeing websites.