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CORPORATE GOVERNANCE

Tesla’s Board of Directors consists of 11 people. First there is Elon Musk who is the Founder,
CEO and Director. Then there is Robyn Denholm who is the chairman of the board. The rest of
the nine board members include Ira Ehrenpreis, Antonio Gracias, Kimbal Musk, Stephen
Jurvetson, Brad Buss, Linda Johnson Rice, James Murdoch, Lawrence Ellison and Kathleen
Wilson Thompson. (Bloomberg, 2019)

For years, Tesla's board remained almost invisible, staying behind the curtain as superstar
Chairman and CEO Elon Musk guided the electric car maker to huge stock price increases. Now,
given Musk's recent questionable behavior, experts say it's time for the board to step onstage and
take action on the company's leadership. (Tesla's Board Problem, 2018)
The list of Musk's offenses include berating Wall Street analysts on a conference call and
labeling as a pedophile via Twitter a British diver involved in the cave rescue of trapped Thai
soccer players.Add to that his abrupt Twitter announcement of a plan to take the company
private even though funding hasn't been solidified, as well as confessing to being overwhelmed
with job stress in a recent interview, and it's likely that most other company boards in a similar
position would have taken action, corporate governance experts say.Yet Tesla's nine-member
board, which includes Musk and his brother, Kimbal, has largely been silent, save for forming a
three-member committee to decide on the go-private plan that has already drawn scrutiny from
U.S. securities regulators. (Tesla's Board Problem, 2018)

At least five of the company's eight non-executive directors have strong ties to Musk or one of
his other companies, throwing their independence into question. (Tesla's Board Problem, 2018)
"I believe Elon Musk is a genius and he needs to be admired and encouraged, but this board of
directors has to do more management oversight of the company. The board of directors is not
meant to be a cheering committee," said William Klepper, a professor at Columbia Business
School and an expert on corporate governance issues. (Tesla's Board Problem, 2018)
Kimbal Musk is among the five directors with ties to Musk. Lead director Antonio Gracias
founded a private equity firm and also is a director of SpaceX, Musk's privately held rocket
company. Director Steve Jurvetson is also a SpaceX director. He's been on leave from his
venture capital firm since allegations of sexual misconduct appeared last year. (Tesla's Board
Problem, 2018)
One of the five, New York City Comptroller Scott Stringer, who manages investments in Tesla,
said in a statement Monday that it's time for the board "to take a hard look at Tesla's governance
and compensation structures to ensure that there are proper processes in place for strong board
independence and oversight." (Tesla's Board Problem, 2018)
Columbia's Klepper said Tesla didn't need more board members; it needed assertive ones. "They
need to make some hard choices about the existing board members and decide whether their
expertise really fits with Tesla's mission," Klepper said.(Tesla's Board Problem, 2018)
Two major firms that specialize in corporate governance issues advised Tesla shareholders to
shake up the company's board earlier this year, citing troubling conflicts of interest and decisions
that raised questions about the directors' links with Musk. (Tesla's Board Problem, 2018)
Tesla's stock has been on a roller-coaster since Musk used Twitter on Aug. 7 to say he was
considering taking the publicly traded company private. Even though Musk said funding had
been secured for what could be at least a $20 billion deal, the company later disclosed that it
wasn't. On the day of the announcement, shares rose 11 percent but since have fallen almost 19
percent, closing Monday at $308.44.Experts say under more normal circumstances, the board
committee would have evaluated the plan before it was made public, a sign that Tesla's directors
aren't taking an active role in running the company. (Tesla's Board Problem, 2018).
Analysis of the external environment

The Porter’s Five Forces Analysis

The threat of new entry


In the case of TESLA, the threat of new entry is low. This is because there are less number of

competitors who have their own niches. Apart from that, entrants would require large

investments to enter the industry.

Bargaining power of buyers

The bargaining power of buyers is moderate since it is a premium product it is catering to a niche

segment hence the bargaining power with the buyers would be low

The threat of substitutes

The threat of substitutes in an automated car industry is considerably high because there are so

many brands like Audi and BMW present in the market who areworking hard to improve

themselves everyday. Customers have large choices available in the premium car industry who

offer similar prices and hence they can be a substitute of Tesla

The bargaining power of suppliers

The bargaining power of suppliers is very high. This is mainly because TESLA is very reliant on

their suppliers because TESLA purchases mechanisms from over 200 suppliers all over the

world and despite of building close partnerships with their main suppliers working together on

replacing Lotus supplier’s chassis with trading by themselves and developing the new battery

cells, suppliers stay single source of components used in their cars.

The intensity of rivalry in the industry

The rivalry in the automated car industry is very competitive. Companies have been trying to

generate their own niches by developing alternatives like environmental friendly cars such as
hybrid cars. Companies have to become more intensive and will need to keep improving and

generating better cars because in the future, rivalry will be more demanding.

Competitors:

1. Jaguar i-pace

2. Porsche taycan cross turismo

3. Audi e-tron

4. Mercedes-benzEQC

5. BMW i4

6. Hyundai kona

7. The hybrids

PEST Analysis

Political

Trading cars in 17 countries of North America, One of the foremost political factor which are

affecting the TESLA industry is the Environmental Protection laws to make more environmental

cars to meet strict emission levels. Another essential factor is the US government energy loan

programs for development and research of new car technologies.

Economic

Economic factors involve economic growth in the alternative energy industries and increase in

the cost of using the cars mainly due to the rise in fuel prices in the short period. Thus, the

demand for more-efficient cars has become higher. The recovery of GDP and inflation rate in
most of the developed countries from the declining period in 2008/2009 has a major impact on

the consumer purchase power.

Social

Social factors are concerned about increasing environmental concerns. Consumers are losing

trust in gasoline fuel and associated cost in production trying to help the environment. Another

social
S Innovative Innovative Differences, Openness/
aspect is technology tecchnology uniqueness friendliness of the
Battery pack Technology company
that User forum on Own sales
website distribution
increasing

in ageing

population

with most

wealth and

savings, consumers like to spend more money on quality electric cars.

Technological

Improving technology, rapid globalization has a major effect on the automotive car industries.

There has been much technology advancement within the industry such as the introduction of

fully electrical cars and computerization of cars that allow automotive car driving and avoid

accidents. In future, this will lead to improvements in safety and convenience of cars.

Analysis of Internal environment


Tesla CORE COMPETENCIES
W R&D cost Limited Limited budget for Only available at
overwhelmed manufacturing marketing Tesla own
RESOURCES
Revenue scale activities networks
Recent technical Limited
issues distribution
S Industry Cutting edge Create unique Customer
leader as manufacturing positive images satisfaction
battery and Word of mouth Exclusive services
electric
engine
CAPABLITIES
technology
W Only making Production Only reaches to Tesla is responsible
electric delays limited consumers for everything
batteries and Technical Limited external
engines issues services

Tesla generate self-reinforcing enthusiasm for the brand, create and utilize cutting edge technology, and
willing to take risk.

Extendability Competitor
differentiation

Consumer
Value

Generating self-reinforcing enthusiasm for the brand has helped tesla focus on R&D through better
resource allocation which overcomes limitations in the external environment related to potential
substitutes and larger budgets of competitors

Tesla use of cutting edge technology from top to bottom is a sign of commitment related to the values
of Elon musk and helps them succeed
Being able to take risks allowed Tesla to find its position in the market, and more importantly, force
others to take notice

Business level strategy

Tesla had been seen to have adopted the differentiation strategy from the very beginning. History
has it that Tesla (the company) succeeded in the market place by introducing products which were
different from what the other competitors proposed. The company makes sure that the products
are differentiated and not resemble with what the other companies have to offer. Consumers are
able to identify the products by Tesla which had been made easy by the differentiation strategy
that the company engages itself into. Furthermore, the company enjoys the liberty of
outcompeting its rivals due to the environment friendly technology that it had enveloped
along.This had the advantage that other companies that were out there, they had vehicles that
used combustion engines while Tesla on the other hand manufactured electric vehicles.
Comparatively, other rival companies such as Toyota had been engaging in the cost leadership
strategy but Tesla on the flip side was not concerned with this. Apparently, Tesla had been found
out to be one of the highest pricing companies which focuses upon differentiating itself rather
than running for the low cost leadership. The company boasts about the technology and the
electric vehicles that they manufacture and doesn’t consider the vehicles which use gasoline
powered engines as their benchmarks. Their technologically advanced operations allow them to
make unique electric cars which are environmentally friendly as well in comparison to the
gasoline vehicles, this had allowed Tesla to enjoy an increasing share in the market.

Corporate strategy

Tesla has a unique way to advance towards its corporate strategy. Tesla sells most of its products
through its company owned showrooms and also through its online platforms that it owns. This
strategy might seem to be a growth strategy in its own. The revenue from the company owned
showrooms and through commissions that they earn give them a way out to more revenues from
their products. Ethical behavior and culture can be seen as the center of Tesla. The company
provides environmental friendly products that avoid harming the societies, nature and people
around. Furthermore, the company distributes reasonable and sufficient remuneration to its top
employees as part of its corporate strategy.

Functional Strategies

Tesla’s promise towards its product and brand controls many aspects of its supply chain and this
in turn influences its supply chain strategy – more directly towards its sales and customer
service.
Tesla wants its cars to be sold by more knowledgeable men so for that they sell them under their
own name and through their own men and salespeople. Just because Tesla spends so much
money to brand their product, it wouldn’t have been possible through some third party dealer
ship because of which Tesla has taken this reaponsibilty on its own self. This attention towards
quality and brand is reflected through the training of their employees and in the atmosphere and
design of their stores. The sleek and fast charging stations as compared to typical charging
stations, the owners of Tesla are incentivized to buy Tesla electric cars.

Analysis of Strategic Factors, Strategic Alliance and Recommendation:


A differentiation strategy is followed by Tesla and this strategy helps them to build competitive
advantage and developments of products and creating a differentiation factors from their rivals.
Differentiation and innovation exist at the core of Tesla. The kind of services they provide add
value to their work and it becomes a culture. Tesla generally focus on advanced technologies in
their electric motors by competing against General motors, Toyota motors, Honda motors,
Nissan motors, Bavarian motors and Volkswagen.Tesla products are competitive because they
made environmental friendly technology, considering the vast majority of automobiles of today
use combustion engine. Tesla also used differentiation focus by coming up unique and
innovative products that not only grab the attention of consumer but also focused mainly on early
adopter and high end market for electric vehicles. Since their production cost are declining and
they need to invest in the research and development centres. They also strengthen
competitiveness by broadening its market reach to generate more sales and increase brand
popularity.
Inorder to bring sustainability in their sales and improve brand popularity, there are four main
objectives that tesla need to work on in order to be in the game and that is:
1. Installing energy generation solar roofs and storage products in homes to work in
conjunction with their electric cars.
2. Tapping into new markets such as electric semis and public transport buses in order to
attract more consumer.
3. Improving their autonomous driving software to make all vehicles fully-autonomous so
that everyone on the same pace.
4. Developing a tesla share fleet and app to customers’ cars can make money for their
owners while they are not in use.
Building the company with competency, capabilities and resource strength, creating strategy
supportive policies and procedures, Instituting best practises and a commitment to continuous
improvement in unique way of so that no rival imitate it, installing support system and value
added services and maintain low cost. As Tesla tries to position itself in the business of
sustainable and decentralized energy, the relationship with Panasonic is significant. Tesla'sability
to attract and manage leading companies in the automotive and other key industries as strategic
alliance partners is an important part of its formula for success.
Tesla should focus on improving its manufacturing efficiency. Tesla should work on diversity of
supply chain as their current supplier is single source. The production process become slow in
Tesla so for that reason, it should provide training to their workers or need to hire more skilled
workers to keep up with the planned production growth and introduction of new electric semi.
The company currently has single battery cell supplier and this is the one reason that cause
delays in production process in order to overcome this, Tesla need to have multiple battery cell
supplier to safeguard against production delays.
Implementation, Evaluation and Control:
The Tesla is a unique company and it has unique culture as well. The company stricture is in U-
Form or in other words it has divisional structure which comprised of number of divisions such
as energy, engineering, legal, production, HR, communication, finance, sales and software. The
benefits of having this structure as it has less bureaucracy compared to other companies. This
structure also help to increase the communication among different layer of management with
positive implication of decision making and flexibility of business.

Appendixes
References
http://thespherepress.com/tesla-motors-external-analysis-pestle/
https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1060&context=honorstheses
https://research-methodology.net/tesla-organizational-structure-divisional-and-flexible/

http://panmore.com/tesla-motors-inc-generic-strategy-intensive-growth-strategies-analysis
https://www.feedough.com/tesla-business-strategy-and-business-model/
https://brainsandbliss.files.wordpress.com/2018/05/tesla-strategic-analysis.pdf

https://www.bloomberg.com/research/stocks/private/board.asp?privcapId=27444752
https://www.cbsnews.com/news/experts-say-tesla-board-may-have-too-many-ties-to-ceo-musk/
https://www.businessinsider.com/tesla-board-of-directors-full-list-elon-musk-chairman-
replacement-2018-8