Corporate Governance

The Board of Directors of Tesla Motors (the "Company") sets high standards for the Company's
employees, officers and directors. Implicit in this philosophy is the importance of sound corporate
governance. It is the duty of the Board of Directors to serve as a prudent fiduciary for shareholders and
to oversee the management of the Company's business. To fulfill its responsibilities and to discharge its
duty, the Board of Directors follows the procedures and standards that are set forth in these guidelines.
These guidelines are subject to modification from time to time as the Board of Directors deems
appropriate in the best interests of the Company or as required by applicable laws and regulations.

Board Structure and Composition

1. Size of the Board. The authorized number of directors will be determined from time to time by
resolution of the Board.

2. Board Membership Criteria. Tesla’s Nominating and Corporate Governance Committee reviews
and makes recommendations to the Board regarding the composition and size of the Board, determines
the relevant criteria (including any minimum qualifications), and recommends to the Board the slate of
nominees for election at the Annual Meeting of Stockholders or nominees for election to fill interim
vacancies on the Board.

3. Director Independence. A majority of directors on the Board will be independent as required by

the NASDAQ Stock Market. The Board also believes that it is often in the best interest of Tesla and its
stockholders to have non-independent directors, including current and (in some cases) former members
of management, serve as directors. Each independent director who experiences a change in
circumstances that could affect such director’s independence should deliver a notice of such change to
Tesla’s General Counsel.

4. Director Tenure. Directors are reelected every three years and the Board does not believe it
should establish term limits because directors who have developed increasing insight into Tesla and its
operations over time provide an increasing contribution to the Board as a whole.
5. Lead Independent Director. An important component of the Board’s leadership structure is
having a Lead Independent Director in place with broad authority to direct the actions of the
independent directors and regularly communicate with the Chief Executive Officer.

Tesla organizational Structure: Divisional and flexible

Tesla is a unique company in many ways and this uniqueness also extends to its organizational
culture. Specifically, “Tesla, unlike most companies its size, doesn’t have any known
management structure. There’s no organizational chart or public list of senior leaders.”[1]
Nevertheless, Tesla organizational structure can be characterized as divisional.

As it is illustrated in figure below, Tesla organizational structure comprises a number of

divisions such as energy, engineering and production, HR and communications, legal and
finance, sales, service, marketing, business development and software. Each division is led by
several vice presidents, except software division, which is led by 1 vice president and Director of
Artificial Intelligence. Tesla benefits from divisional organizational structure through less
bureaucracy compared to many other companies of similar sizes. Divisional organizational
structure also helps the electric automaker to increase the speed of communication among
different layers of management with positive implications on decision making and flexibility of
the business.

Picture here

Organizational Structure
The current pattern of Tesla organizational structure illustrated above is a result of recent
management changes in the company. Specifically, following the departure of Jon McNeill,
Tesla’s president of global sales, marketing and delivery and service to join ride-hailing service
Lyft Inc. in February 2018, Tesla’s sales division started directly reporting to CEO Elon
Musk.[2]

Tesla organizational structure is going through further considerable changes. CEO Elon Musk is
“flattening the management structure to improve communication, combining functions where
sensible and trimming activities that are not vital to the success”[3] of Tesla mission.

Tesla Inc. Report contains a full analysis of Tesla organizational structure. The report illustrates
the application of the major analytical strategic frameworks in business studies such as SWOT,
PESTEL, Porter’s Five Forces, value chain etc

Tesla’s SWOT Analysis

Strengths

1. First mover advantage

2. Increasing numbers of vehicles sales

3. Expertise in innovation

4. Brand recognition
Weaknesses

1. Expensive price tags of Tesla vehicles

2. Burning though cash with no profit in view

3. Huge amount of debt (USD 10 billion)

4. History of overpromising and under-delivering

Threats

1. Manufacturing delays risks

2. Crashes and fires in Tesla cars

3. Threat of new competition

4. Decrease in the price of oil

Tesla Porter’s Five Forces

The threat of new entrants into alternative fuel vehicles manufacturing industry is moderate. One
of the major challenges for electric vehicles is the bargain or compromise between their
performance and cost. On one hand, almost all major automakers such as General Motors, Ford,
Toyota, BMW and others have built electric cars that are not very expensive, but performance
ofthese cars are compromised.

Tesla Porter’s Five Forces Analysis

Posted on October 15, 2018 by John Dudovskiy

Porter’s Five Forces analytical framework developed by Michael Porter (1979) represents five
individual forces that shape an overall extent of competition in the industry. Tesla Porter’s Five
Forces Analysis below contains the application of these factors to analyse the competitive
environment for the alternative fuel vehicles manufacturer.

Tesla Porter’s Five Forces

Firms in the international automotive industry environment experience a variety of external

factors, including raw material availability and technology-based firm competitiveness. Tesla’s
resilience is a reflection of strategic effectiveness. This company analysis shows that the business
manages to grow in spite of competitive challenges. However, Tesla must ensure that it
addresses external factors according to the intensity of the forces impacting the business, as
shown in this Five Forces analysis:

1. Competitive rivalry or competition (Strong Force)

2. Bargaining power of buyers or customers (Moderate Force)
3. Bargaining power of suppliers (Moderate Force)
4. Threat of substitutes or substitution (Moderate Force)
5. Threat of new entrants or new entry (Weak Force)

Tesla PESTEL Analysis

There is a wide range of political factors that can potentially affect automobile manufacturers.
Specifically, political factors for Tesla include freedom of press, corruption and bureaucracy in
local markets and trade unions activities.

ales for electric cars have risen as the global economy increased. In 2017, it was projected that
the world economy would grow by 3.5 percent. These rises, in Asia and Europe as well as the
United States, led to more electric developments. In fact, the sales of electric cars jumped over
30 percent between 2016 and 2017.

Technology is both a friend and foe to Tesla.

As a friend, it helps the company maintain a competitive edge on the competition. It allows Tesla
to be fuel efficient, and paves the way for future sustainability and usability. The cars are made
to adopt newer technology, unlike traditional options in the automotive industry.

It doesn’t take much for technology to become obsolete. We, as people, are constantly creating,
developing, and advancing what we already have. In a year’s time, the newest gadgets and apps can be
absolutely useless thanks to upgrades and updates. Since Tesla relies on technology for their vehicles,
this is both a positive and negative point for the vehicles.

Legally tesla is expanding into other markets. They’ll need to keep up-to-date on their
international patents. If not, expanding will take longer. It may also be intercepted by legality
issues.
Also, since the car focuses on eco-friendliness, they can promote their cars as energy efficient
and ensure it abides by international environmental regulations.

Environmentally , his is where Tesla’s biggest strength lies. The cars are marketed as environmentally
friendly because it uses electricity more than gas. Tesla vehicles abide by many environmental
regulations and barely impact carbon emissions (compared to traditional cars). By focusing on the
environment, Tesla has made a name for itself where few can compare.

Tesla, Inc. benefits from its corporate structure in terms of effective managerial control of
multinational operations. Another advantage is the ease of implementing new strategies
throughout the organization. Also, the regional divisions support financial reporting and analysis,
and provide the foundation for future regionalization of strategies and tactics in the international
automotive market. These advantages empower Tesla to use its organizational structure for
further international growth and to build competitiveness against its competitors.

A disadvantage of Tesla’s corporate structure is the rigidity that limits rapid adjustment in the
organization. For example, global centralization is a structural characteristic that limits the
autonomous ability of overseas offices to readily respond to issues they experience in their
respective regional markets. To address this disadvantage, it is recommended that Tesla Inc.
reform its organizational structure to increase the level of autonomy of overseas offices.

.
Mission and Vision :
The vision and mission statement of Tesla reflect the company’s aim for dominance in the global
electric vehicles and battery market.

Tesla’s mission statement: “to accelerate the world’s transition to sustainable energy”.

It believes that the faster the world stops relying on fossil fuels and moves towards a zero-
emission future, the better it will be for the world.

The vision statement: “to create the most compelling car company of the 21st century by
driving the world’s transition to electric vehicles”.

Tesla, Inc. which was formerly known as Tesla Motors was founded in the year 2003 and it only started
being profitable in 2013. It is based on Palo Alto, California and specializes in solar panel manufacturing,
lithium-ion battery energy, and electric vehicles. Elon Musk who is the CEO of the company envisions
Tesla as a technology company and an independent automaker which aims to provide affordable electric
vehicles to average consumers.

Segmentation, targeting, positioning in the Marketing strategy of Tesla :

While segmenting the market Tesla didn’t ask which segment is the most fuel-conscious but which
segment enabled the company to build long-term and innovative model vehicles. It didn’t choose the
small car segment. The segment of choice was the lower volume, the price-insensitive performance-car
segment which enabled them to create a brand identity, establish premium pricing and earn significant
unit gross margins by targeting the rich and affluent who are willing to spend more

since 2015, Tesla has been selling an all-electric luxury SUV, which has done relatively well in the market
and has delivered the record of 100,000 vehicles for 2017. Tesla’s unique positioning in the car market is
one of its biggest strengths. Tesla not only sells cars but also sells technology. It positioning statement
was “the only stylish car that can go from 0 to 100 in 3 seconds without a drop of oil”.

Competitive advantage in the marketing strategy of Tesla :

1) Driven by Technology:

More than an automotive company, Tesla is a technology company building technology

platforms. Betting on Tesla technology is betting on new technology. The company not only sells
cars but has also built the infrastructure necessary to support the operation of those cars. It has
built the network of superchargers, battery swap stations, and service stations.

Tesla is on track to deliver full autonomous driving capability earlier than many cars
manufactures by leveraging the billions of miles’ worth of driving data that Tesla has been
gathering.

2) Tesla’s reputation:

This can be considered as one of the intangible strengths of the company.

Tesla’s Roadster transformed the image of electronic vehicles from small slow vehicles, into
blindingly fast vehicles of desire. It provided an acceleration with a 0 to 60 mph that could beat
superior cars. Tesla then produced the cheaper Model S sedan that ended up winning just about
every big auto award. With the reputation for excellence, it has created an impressive brand
image.

3) Diversifying its business:

Tesla seems to be diversifying its business and entering into the market of Solar roof tiles as it
complements with the business of rechargeable lithium-ion battery which provides homes with
the storage of solar captured energy.

Distribution strategy in the marketing strategy of Tesla :

Tesla mostly uses online sales model coupled with company-owned stores to sell its cars and
doesn’t use the conventional dealer network. The company owned distribution is fraught with
several challenges. The substantial amount of money is set up for a distribution channel.

Other manufacturers including Ford and general motors team up with the third party to sell their
vehicles. For Tesla, the brick-and-mortar store serves as a channel to sell the concept of EV as
well. Selling the vehicles online has reduced the company’s selling cost. The physical stores only
serve as a showroom for Tesla. It has around 17 stores worldwide to sell its cars which according
to Tesla helps to interact with potential customers.

Brand equity in the marketing strategy of Tesla :

Tesla has a market cap of nearly 60 billion even though it consistently failed to meet production
targets and spends billions of dollars a year.

Tesla as a brand is more than just a car manufacturer, it is a vision of the future. The face of the
brand for Tesla is the CEO himself, Elon Musk, who is a noted entrepreneur and an influencer.
Part of a reason why it is impossible to separate Elon Musk’s brand from Tesla is that of how
responsive he is to the Tesla users who reach out to him and his presence is largely felt on the
social media.
Tesla has consistently proven to care about user experience which has helped shape a public
perception about the brand. Word of mouth has been a powerful driver for Tesla’s growth with
fervent supporters who don’t even own a Tesla but support the idea and vision of Tesla.