about the strategic management and the components, detailed statement of the vision and mission, strategies of the organization, strategic roles of the CEO, effectiveness of strategic management of Tesl motors
OPEN UNIVERSITY MALAYSIA
FACULTY OF BUSINESS MANAGEMENT
STRATEGIC MANAGEMENT (BBPS 4103)
Course: Bachelor in Business Administration
Name: Fathmath Juhaina Rasheed
Student ID Number: S11423051
ID Number: A345468
Lecturer’s Name: Ibrahim Firushan
Tesla Motors Inc is the only company to succeed in manufacturing Electronic
vehicles. This assignment will demonstrate more on the introduction of the company, what is
strategic management, the components and elements of strategic management. Also strategic
roles of the CEO, Elon Musk will be discussed. Moreover it will detail in the effectiveness of
strategic management of Tesla Motors Inc.
Starting a business is easy, but to nurture and make it a success it takes a lot
of uphill struggle. As advancement in technology is reforming the world at a drastic
speed it will be more difficult to uphold the position in the market. To maintain the
position one might learn the art of formulating, evaluating and implementing the best
decisions and objective to keep an organization running.
Therefore, strategically running a business in manner that it can last longer
in the market is the main target of any of the business organization. According to Gluck
and Jaunch (1984) strategic management is defined as, “strategic management refers to
a set of decisions and actions that leads to the formulation of an effective strategy to
achieve the objectives of the organization.”
One of the fastest growing industries is the Automobile industry. Electric
cars and Hybrid cars have been in the market for some times now. However the
companies have struggled to sell these cars. In a twist, the current growing trend in the
automotive industry is the demand for electric vehicles by the Tesla motors. Tesla
motors sold twice more than as many cars as Nissan when they introduced their
battery powered vehicles. Competition soared up between well-known brands such as,
Toyota, Nissan, Volkswagen, Hyundai, etc. Tesla is the 2nd company according to the
MIT Technology Review website, among a list of 50 world’s smartest companies
around the globe.
The award winning company was found in 2003 headquartered in Palo
Alto, California. This remarkable discovery was done by a group of Silicon Valley
Engineers who desired to prove that these electronic vehicles could become the next big hit.
Indeed, the production was a remarkable after it hit the streets in early 2008. It is an American
company which deals in manufacturing, designing and wholesaling electric cars and vehicle power
train components. Some of the power components Tesla Motors promotes include lithium-ion
battery packs to automakers such as Toyota and Daimler.
According to the official website of Tesla motors, the award winning model was
launched in 2012, Model S. The model received numerous awards such as Car of the year awards
and a 5-star safety rating from the U.S. national Highway Traffic Safety Administration. This was
the company’s second invention, a fully electric Luxury Sedan. However the first model, Tesla
Roadster, the first fully electric sports car was the reason to gain widespread interest around the
The business was growing ever since launching the first car, Tesla Roadster. The
employment doubled by January 2014. The strategy is the main component to run a business
smoothly in the long run, according to Johnson and schools:
“Strategy is the direction and scope of an organization over the long-term: which
achieves advantage for the organization through its configuration of resources within a
challenging environment, to meet the needs of markets and to fulfill stakeholder expectations".
The company operates in retail locations around all around the world, in small focused
teams. Tesla Motors focuses on excellence and are work driven by contributing to a global impact
and are passionate about becoming the best in the automotive industry in the future. Therefore the
managing, implementing and formulating of strategic management is tremendously important for
Looking at some of the benefits caused by implementing strategic management, one of
the benefits can be improvement in financial performance of the organization in which it enables
to make clear strategic decisions effectively along with improving the corporate governance and
COMPONENTS & ELEMENTS
Three major components of strategic management, they are
1. Strategy formulation
2. Strategy implementation
3. Strategy evaluation and control
In each of these components there are several other elements which make it a component.
STRATEGY FORMULATION: the main elements in the formation are the vision, mission,
goals and objectives of the organization. Moreover external analysis, internal analysis, industry
analysis and competitive analysis are the other elements. In this component the organization also
must classify the strategic alternatives and selection of the strategic choices.
As any other strong organization, it is vital for Tesla Motors to have a strategic
plan for success. As mentioned above the basic components of strategic management,
the plan starts with the strategic formulation.
To start with the strategic formulation the company must state it vision and
mission in order to set the goals. Tesla Motors States it as;
Vision: “create the most compelling car company of the 21st century by driving the World’s
Transition to electric vehicles”
Mission: “move from a mine and burn hydrocarbon economy towards a sustainable, solar
Furthermore, to complete strategy formulation component, doing a thorough
internal, external, competitive and industrial analysis is very important. This analysis
should be done as often as possible if there are any changes in the environment,
competitor’s new innovations or any other change in the internal and external factors.
Therefore, Tesla Motors must keep up-to-date with the varying trends and technology to compete
in the market.
STRATREGY IMPLEMENTATION: The key elements that will affect the strategy
implementation are the organizational structure, leadership and people and other organizational
systems and procedures. This means Tesla Motor needs to define the organizational goals at the
operational level which should be defined into objectives. According to Elon Musk, Co-Founder
& CEO of Tesla Motors, the master plan is to:
a) Build sports car
b) Use that money to build an affordable car
c) Use that money to build an even more affordable car
d) While doing above, also provide zero emission electric power generation options
The CEO of the company, Elon musk states in the company overview “Our goal
when we created Tesla a decade ago was the same as it is today: to drive the world’s
transition to electric mobility by bringing a full range of increasingly affordable electric cars
STRATREGY EVALATION AND CONTROL: This is the last component of strategic
management. In this component, the managers have to ensure that the implemented strategy is
assessed consequently and it is reviewed periodically. The evaluation can be done either by
comparing with competitors or it can also be done by comparing the previous year of business by
The company is aiming to build an SUV; model X to keep the trend going and also it was
scheduled to release the car in the 4th quarter of the year 2014. However, the company changed
the release date to be in the 2nd quarter of 2015. Several evaluations were made by the company
in the decision making process as the evaluation strategy is to make the best decision for the
company’s current implemented strategies.
One reason, mentioned in Los Angeles Times newspaper , R.D,.white (2013) said
“Tesla Motors inc, said in its annual report Thursday that is has received federal approval to
complete the repayment of its $465 million is U.S. Energy Department loans five years ahead of
schedule.” The company’s plan is to finish the loan by 2017 which was scheduled to
be done by 2022.
STRATEGIC ROLES OF CEO
“The CEO helps a transformation succeed by communicating its significance, modeling the
desired changes, building a strong top team, and getting personally involved.” (AikenandKeller,
The Chief Executive Officer or the CEO is responsible for setting the strategy
and the vision of the company. Though board of directors or the senior management
helps to develop the strategy and also the investors can be the people to approve a
business plan, ultimately CEO is the person who sets the path.
The Chief executive Officer of Tesla Motor Inc is Elon Musk, a man with
immense plans. He is also the famous founder of the companies such as Zip2, PayPal
The motive behind his interest in Electronic cars was because he was aware of
the peak oil. Therefore in order to cater car to an economy where the resource is going
to decrease was the idea behind electronic cars.
Some of the strategies he uses in his business are:
No Stationed Tesla Dealers: the company is to do their own sale through their own
showrooms and by ordering on website. This way the company believes it would be less costly
as even now the prices of the vehicles are high. He believes in quality, the staffs are not given a
sales target, the price offered in the showroom is the last price as of no discounts- take or leave
as a result everyone is treated fair and square. Moreover, the cars are marketed better as the
company will be dealing directly with the customers.
Sharing Technology: Recently a new plan was unveiled by Elon Musk: the plan not to
initiate patent lawsuit against anyone that uses the company’s technology. On June 12th when
Tesla informed the new plan, CEO Elon Musk said “Technology leadership is not defined by
patents, which history has repeatedly shown to be small protection indeed against a determined
competitor, but rather by the ability of a company to attract and motivate the world’s most
talented engineers.” The plan intends to create more electronic vehicles from others who use
Tesla Company’s technology, this will also create competition. However Elon Musk believes
that the company will be one step ahead by the time any electronic vehicle will be out in the
market from any other party. This is also to encourage bigger competitors to use their technology
and create electronic vehicles and use their massive sales and marketing power to make people
aware. This will lead for others to create power stations all around which will reduce the cost of
making their own power stations by Tesla Company. The main reason behind the plan is that
Elon Musk needs the electronic industry to succeed for him to be in business for a longer time.
Master plan in action: Elon Musk also puts action on to achieving the Master plan which
he already planned after setting the Vision of the company. Model by model the company’s
target is to create a cheaper model than the previous model. This will be discussed on how the
company’s effectiveness of the strategic management.
Moreover, Elon Musk brought two of the major companies in as long-term investors to
supply electric Powertrain systems.
EFFECTIVENESS OF STRATEGIC MANAGEMENT
As mentioned earlier there are 3 components of strategic management. The strategic
management will show how effective it is when these three components are assessed thoroughly.
Therefore to imply the best practice in strategic formulation a thorough internal, external,
industrial and a competitive analysis should be done.
The first to develop entirely electronic sports car
A strong competitor to major other brands. I.e.; Toyota
proficiency in technological area of electronic transmissions and
Manufacture only electronic cars: the problem with the fuel cells
is that they are always 10 years into the future. When it comes to
hybrid and diesel, if oil is used faster than it can be replenished, it
will eventually run out or become more expensive.
The model S, won the 2013 most trendiest car of the year, a
competition that began in 1949
Model S also became a 5-star safety rating from the U.S. National
Highway Traffic Safety Administration.
WEAKNESS Production cost is higher than their competitors
The infrastructure around electric cars does not exist: stations to
charge the cars like gas stations
Limited operating history considered to the competitors
Limited revenues which leads to lack of profitability
OPPORTUNITIES Supply of oil is limited, therefore higher oil prices leads to more
demand for electronic cars
People are more concerned with the environmental issues;
Alternate use of battery technology such as absorbing powers
from solar panels
THREATS More competition over environment friendly cars by the larger
competitors than Tesla
Expensive than the combustion engine cars
This analysis show the current analysis of the company, this analysis will
keep varying according to any change in the environment, political, competition and
technology. The company can put its best interest in to areas where the company is
likely to face any threat before the threat actually happens. Therefore, looking at the
analysis done for Tesla Motors the biggest threat is the competitive market and their
high prices. For this the company is already working towards the goal, making their
main motive to create an affordable version of electronic vehicle.
As mentioned earlier in the strategic implementation component, the
company has already defined the organizational goals from the operational level.
“The strategy of Tesla is to enter at the high end of the market, where customers are prepared to
pay a premium,” Musk wrote in a post titled in 2006.The master plan is the objective that the
company said. Having mentioned the master plan earlier Tesla motors have already achieved the
first objective, their first model Roadster was a luxury sports car sold at a base price for more
than $90,000 in the United States earlier when they started. This model created a boost in the
demand for electronic vehicle among several government incentives across the world and as well
as the public. Thus, the profit obtained from selling the car lead to introduction of a new model,
model S, which was very much cheaper compared to Tesla Roadster. According to Tesla Motor
website, the base price for the model is believed to be roughly US$64,000. This model also led to
an increase in the company reputation by achieving different world wide awards.
The company is set to launch its third model the Model X. According to Tesla
Motors it was earlier schedule to release by the 4th quarter of 2014; however the automakers are
now estimating the model would not be released before 2015. Moreover, the company assures
that the Model X price will be lower than model S as the company CEO Elon Musk having said
earlier that the prices are to be cheaper by model by model when he set the goal. Not only this
but also, there is another model to be released by not later than 2017 and this is supposedly
cheaper than the previous two models.
With this information, it can be concluded that Tesla Motors had set a strategy in
place to implement to go along; the company’s future is looking bright if the implementations
are made at the correct timing.
Furthermore the evaluating and controlling is a process which the company needs to
follow after implementing the strategy. Hence, as mentioned early in the strategy
implementation, the company is aiming to build an SUV; model X to keep the trend going and
also it was scheduled to release the car in the 4th quarter of this year 2014. However, the
company changed the release date to be in the 2nd quarter of 2015. Several evaluations were
made by the company to take the decision
One reason was as mentioned in Los Angeles Times newspaper , R.D.,
White (2013) said “Tesla Motors inc, said in its annual report Thursday that is has
received federal approval to complete the repayment of its $465 million is U.S.
Energy Department loans five years ahead of schedule.” The company’s plan is to
finish the loan by 2017 which was scheduled to be done by 2022.
Another reason was in order for the company to cater to the production
target of the Previous Model, Model S and as well as the company was more focused
on the overseas rollouts. The company is taking the initial step to ensure that both the
vehicles are focused properly. As of the current situation model S has a lot going on
right now with the demand according to the company.
These were some significant changes which the company brought to the
strategy planned after evaluating the current trend of business.
Tesla Motor’s formulated logical game plan is currently going smoothly. The
company jump started an entirely new industry by avoiding bankruptcy. Firstly to begin with, the
Company built a very exclusively expensive sports car which helped the company to get noticed.
Then the plan was to step down and create a luxury car. In return for this model the Tesla motor
received all kinds of awards from safety to the best car model. Not only this but also with this the
company proved that the electronic vehicles can be taken to a new level where most of the
people thought would never be possible. The demand for Tesla auto mobiles tends to increase
model after model.
In conclusion, the main 3 components are strategy formulation, strategy
implementation and strategy evaluation and control. To start with the formulation Tesla Motors
Inc stated its vision and mission along with the objectives and goals. Following with the
objectives, a master plan was implemented for the company to achieve its vision. For smooth run
of achieving its vision Tesla Motors ensures of the evaluation and what needs to be controlled of
the strategies implemented. Therefore the main reason company postponed its next model to be
released was due to evaluation of the market demand.
Moreover the strategic role of the CEO, Elon Musk was discussed. Some of the
strategies used are; no car dealers for Tesla, the technology sharing plan and the master plan
implemented as the company strategy.
The company is to become the world’s leading Electronic vehicle
supplier if the implemented strategy works out.
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