Tesla Motors

Presented to: Dr. Saneya El. Galaly

Presented By: Karim Amir El Deeb Omar Rashed Omar Nadine Khattab

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Table of Contents

History of Tesla Motors ..................................................................................................................... 2

Current situation................................................................................................................................... 3

Board of Directors ................................................................................................................................ 4

Organization .......................................................................................................................................... 4

Stock market information ............................................................................................................................. 5

Financial situation ................................................................................................................................. 5

BCG .............................................................................................................................................................. 6

Environmental Scanning ................................................................................................................... 7

Internal factor analysis ......................................................................................................................... 7

External factor analysis ......................................................................................................................... 8

Internal Factor Analysis Summary (IFAS) ................................................................................ 10

External Factor Analysis Summary (EFAS) .............................................................................. 12

TOWS Matrix ........................................................................................................................................ 13

Corporate Strategies ......................................................................................................................... 14

Cascading Business Functions among departments ........................................................... 18

Evaluation and KPIs measurements .......................................................................................... 20

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History

Tesla Motors, Inc. is an American company that designs, manufactures and sells electric cars and electric

vehiclepowertrain components. Named after the scientist Nikola Tesla, Tesla Motors ($TSLA) was

founded in 2003. Exactly who founded Tesla Motors can be discussed, but it was probably by a group of

intrepid Silicon Valley engineers Martin Eberhard, Marc Tarpenning, and Ian Wright. Their goal was to

build an electric vehicle with the same performance as a Porsche and more environmental friendly than

a Toyota Prius. The problem was that the founders didn't have the money needed to realize their idea,

so they contacted Elon Musk, who decided to invest in the company. Elon Musk had earlier founded the

companies Zip2, PayPal, and SpaceX. The difference between Elon Musk and the founders was that Elon

Musk wanted Tesla Motors to become an improved General Motors with several car models, while the

original founders wanted to design only a sports car.Elon Musk became interested in electric cars

because he is well aware of peak oil. The idea behind peak oil is that oil is a finite resource we will run

out of. Elon Musk believes the production of oil will begin to decrease after year 2020. As the production

of oil decreases, the price of oil will increase and more people will buy electric cars.

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Current Situation

Tesla Motors headquarters is in Palo Alto, California. Its goal is to speed up this transition from gasoline

cars to electric cars, thus their vision is

"Create the most compelling car company of the 21st century by driving the world's transition to electric

vehicles."

To create this improved car, they couldn't begin with an inexpensive electric car - it would have been

too expensive. So they had to begin with an expensive sports car: the Roadster. The idea behind this

decision was that the profits from the Roadster would pay for a less expensive car: the Model S, and

profits from the Model S would pay for an even cheaper car. Tesla Motors had produced the Roadster,

only 2500 were sold and you can no longer purchase a new one. Afterwards they produced the model S,

About 2,650 Model S cars were sold in the U.S. during 2012, and 4,900 units during the first quarter of

2013, allowing the Model S to become the top selling plug-in electric car in North America during the

first quarter of 2013, ahead of the Chevrolet Volt with 4,421 units, and the Nissan Leaf with

3,695.Among other awards, the Model S won the 2013 "Motor Trend Car of the Year", the 2013 "World

Green Car", Automobile Magazine's 2013 "Car of the Year" and Time Magazine Best 25 Inventions of the

Year 2012 award.

Tesla Motors has over than 2,000 employees

Current Mission:

Tesla Motors designs and sells high-performance; highly efficient electric sports cars — with no

compromises. Tesla Motors cars combine style, acceleration, and handling with advanced technologies

that make them among the quickest and the most energy-efficient cars on the road.

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Board of Directors

ELON MUSK Chairman, Product Architect and CEO

Brad W.Buus Director

IRA Ethrenpreis Director

Antonio J. Gracias Director

Steve Jurveston Director

Harald Kroeger Director

Kimbel Musk Director

Organization

ELON MUSKCEO

JB STRAUBEL Chief Technical Officer

DEEBAK AHUJAChief Financial Officer

FRANZ VON HOLZAUSENChief Designer

JAY VIJAYANChief Information Officer

JEROME GUILLENVice President, World Wide Sales and Services

GILBERT PASSINVice President, Manufacturing

DIARMUID O’ CONNELVice President, Business Development

ARNNON GESHURI Vice President, Human Resources

PETER CARLSSONVice President, Supply Chain.

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Stock Market Information

Tesla's initial public offering was on June 29, 2010. The IPO was priced at $17 per share

Financial Situation

Income Statement

Item Details (Q1-Q3) 2013 2012 2011 2010 2009

Total revenues 1,398,277 413,256 204,242 116,744 111,943

Cost of Selling 1,098,604 383,189 142,647 86,013 102,408

Gross profit 299,673 30,067 61,595 30,731 9,535

Research and development 163,523 273,978 208,981 92,996 19,282

administrative 184,080 150,372 104,102 84,573 42,150

Total operating expenses 347,603 424,350 313,083 177,569 61,432

Loss from operations (47,930) (394,283) (251,488) (146,838) (51,897)

Interest income 97 288 255 258 159

Interest expense (26,705) (254) (43) (992) (2,531)

Other expense 18,018 (1,828) (2,646) (6,583) (1,445)

Loss before income taxes (56,520) (396,077) (253,922) (154,155) (55,714)

Provision for income taxes 1,230 136 489 173 26

Net loss (57,750) (396,213) (254,411) (154,328) (55,740)

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BCG

BCG matrix is a framework created by and named after Boston Consulting Group to evaluate the

strategic position of the business brand portfolio and its potential. It classifies business portfolio into

four categories based on industry attractiveness (growth rate of that industry) and competitive position

(relative market share). These two dimensions reveal likely profitability of the business portfolio in

terms of cash needed to support that unit and cash generated by it. The general purpose of the analysis

is to help understand, which brands the firm should invest in and which ones should be divested. The four main categories are as follows:

In our case Tesla Company current case is Question Marks as the earning and profits are growing but

the cash flow is currently negative and its strategy is to invest.

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Environmental Scanning

Internal Factors Analysis

o Strengths:

Very Good Calibers, Strong R&D department, Innovation According to the CEO Elon Musk, Tesla

Motors is like the Special Forces, such as the Navy Seals. Since the Special Forces are only

recruiting the best, so does Tesla Motors.

Strong technological expertise in the area of electric transmissions & drive train

Experienced CEO,Strong management team; The CEO Elon Musk has earlier founded companies

like PayPal and SpaceX, so he has a good track record.

Tesla Motors can design really good cars. The Model S won the 2013 Motor Trend's Car of the

Year award, which is a competition that began in 1949, and the Model S might be the safest car

ever according to crash tests.

Great Location near the best talents. They are building their cars in California - not in Detroit. An

electric vehicle is like a hybrid between a computer and a gasoline car, so they can find many

computer- and electrical engineers in California. The area is also more innovative than Detroit.

Large Production Capacity; Only 20 percent of Tesla Motors factory is used to produce Model S,

so as new models from Tesla Motors arrives, the company doesn't need to build a new factory.

Ability to develop vehicles completely in house including the sub-assemblies required

The Tesla Stores are similar to the Apple Stores and are an innovative way to market the Tesla

cars. (Innovative Marketing idea, stores)Innovative Sales Channel Model.

Unlike combustible engines, electric engines have less moving parts and are much cleaner to

work with.

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o Weaknesses:

Tesla Motors are only selling electric cars, and people are still suspicious of electric cars.

Few Supercharges. The infrastructure around electric cars does not exist. Tesla Motors are doing

their best to change this by building Superchargers, which are like gas stations but for electric

vehicles only.

Low battery range. The batteries have to improve. Historically, the batteries have improved by

eight percent a year, but there's no guarantee that they will improve in the future.

Limited operating history - the company is just ten years old.

Lack of Brand Name Recognition: Compared to most of its competitors, Tesla is a not a well-

known brand in the auto industry.

External Factors Analysis

o Opportunities:

The world is running out of oil. As the price of oil increases because of the limited supply, more

people will buy electric cars. Resources are renewable and more available, most efficient

vehicle.

People care more and more about environmental issues.

Can use their battery technology in other areas, such as storing power from solar panels.

Large International Market Potential, Sales outside of the U.S., particularly Europe, Asia, and

Canada: Tesla has been very successful in European markets, particularly Germany, and the

company sees great potential in Asian and Canadian markets.

The growing support by governments across the globe for environmentally friendly vehicles in

form of exemptions from duties & other support. Government regulations and economic

incentives: Since 2008, the DOE has invested $5B in EV/PHEV technologies. The DOE objectives

include reducing battery pack costs 70% by 2015 (this estimate assumes average battery pack

cost of $600 - $700/kWh around 2008/2009), improving the public charging infrastructure from

550 level 2 or level 3 charging stations (of which 426 are in California) to 20,550 nationwide by

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December 2011, and reducing the retail price to consumers by offering a $7,500 subsidy to

consumers purchasing EV/PHEV s. The government intends to accelerate consumer adoption of

EVs/PHEVs by reducing prices and making owning EVs/PHEVs more convenient to consumers.

o Threats:

Very Strong Competition. More and more auto manufacturers are releasing their own

environmental friendly cars. Since these companies are larger than Tesla Motors, they (not all)

have more financial resources, thus they can survive longer if the price of oil doesn't increase in

the near future. Lower cost competitors or imports.Competition in the field; established luxury

auto heavyweights like BMW, Mercedes, and Lexus expected to join the fray soon.

Electric vehicle related accidents may scare away customers. For example, a fire in one of the

batteries is generally front-page news. On the other hand, there are more than 750 accidents

per day related to combustion engines - and that's not front-page news.

Economic slowdown. Electric cars are still expensive and a new recession, like the one in 2008,

may limit the demand.

Consumer behavior changes required for EV purchase: EVs require greater consumer behavior

changes than hybrid or plug-in hybrid vehicles. For instance, it can take several hours to

recharge an EV battery, whereas it only takes a few minutes to fill a car with gas.

Limited supply for raw materials

Limited Experienced resource pool

Awareness of importance of EV is not well propagated

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Internal Factor Analysis Summary (IFAS)

Strengths (3.7)

Internal Factors Wgt. Rating Wgt. Score

Comment

Strong R&D department Calibers

0.45 4 1.8

Strong Management Team

0.3 4 1.2 The CEO Elon Musk has earlier founded companies like PayPal and SpaceX, so he has a good track record

Excellent Designs 0.1 3 0.3 The Model S won the 2013 Motor Trend's Car of the Year award

Great Location, close to best calibers in the US

0.05 3 0.1 They are building their cars in California . They can find many computer- and electrical engineers in California

Large Production Capacity

0.1 2 0.3 Ability to develop vehicles completely in house including the sub-assemblies required

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Weaknesses (2.2)

Internal Factors Wgt. Rating Wgt. Score

Comment

Relatively High Priced compared to fuel cars

0.25 3 0.75

Few Charging stations 0.2 2 0.4 Tesla Motors are doing their best to change this by building Superchargers, which are like gas stations but for electric vehicles only.

Low Battery Range 0.3 2 0.6

Slow Charging Process 0.3 1 0.3 Battery Charging could take around 30 mins/170 mile

Lack of Brand Recognition &Limited operating history

0.05 3 0.15 The company is just ten years old ,Compared to fuel cars manufacturers

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External Factor Analysis Summary (EFAS):

Opportunities (4.1)

External Factors Wgt. Rating Wgt. Score Comment

The world is running out of oil. Electricity is a renewable energy.

0.35 5 2

People care more about environmental issues.

0.05 2 0.2

Can use their battery technology in other areas, such as storing power from solar panels.

0.1 4 0.6

The growing support by governments across the globe for environmentally friendly vehicles

0.1 3 0.3

Large International Market Potential Particularly Europe, Asia, and Canada.

0.2 4 1

Threats (2.4)

External Factors Wgt. Rating Wgt. Score Comment

Very Strong competition with less operating Costs

0.3 2 0.6 Like BMW, Mercedes, and Lexus expected to join the market soon

Economic slowdown 0.15 2 0.3 Electric cars are still expensive and a new recession, like the one in 2008, may limit the demand

Limited supply for raw materials

0.3 2 0.6

Limited Experienced resource pool

0.15 4 0.6

Awareness of importance of EV is not well propagated

0.1 3 0.3 Large Segment of the market is not aware of the importance of the EV

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TOWS Matrix

External Factors EFAS

Internal Factors IFAS

Strengths Weaknesses

S1: Strong R&D department Calibers S2: Strong Management Team S3: Excellent Designs S4: Great Location, close to best calibers in the US S5: Large Production Capacity

W1:Relatively High Priced compared to fuel cars W2: Few Charging stations W3: Low Battery Range W4: Slow Charging Process W5: Limited operating history

Opportunities SO Strategies: -Focus on new product development with new

technologies and be ahead of the market (S1,3,5+O1,2)

-Expand in new markets(S1,3,5+O5)

-Develop new products in an industry different than the company's core operation

(S1,S5+O3)

WO Strategies:

-Outsourcing some operational activities to a low Cost (O5,W1)

-Promote the awareness of

environmental friendly cars(O1,O4,W1)

O1: The world is running out of oil. Electricity is a renewable energy. O2: People care more about environmental issues O3: Can use their battery technology in other areas, such as storing power from solar panels. O4: The growing support by governments across the globe for environmentally friendly vehicles O5: Large International Market Potential. Particularly Europe, Asia, and Canada.

Threats ST Strategies: -Develop new products

attracting the different segments (S1,5+T5)

-Develop new technologies to decrease overall operating costs

(S1,5+T1)

WT Strategies: -Follow Cost reduction strategy to

decrease costs(T1,W3) -Sell the company with a good

bargain (T1,T2+W3,W2,W1)

T1: Very Strong competition with less operating Costs T2: Economic slowdown T3: Limited supply for raw materials T4: Limited Experienced resource pool T5: Awareness of importance of EV is not well propagated

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Corporate Strategies

1- Growth Strategy: Market Development (Horizontal Growth):

An effective idea for growth is entering new markets. If you have access to more customers, you can sell

more products and at the same time concentrating on its primary line of business. You can target new

markets by opening additional retail locations, adding an online presence, selling internationally or

reaching new types of customers.

Tesla should keep focusing on its Niche segment as the current status but expand in different markets

such as Europe & Asia in order to increase revenues. Expansion in new markets avoids the fierce

competition in USA.

As an example, in 2012, the Chinese bought over 19 million vehicles, while the U.S. market only bought

14 million. China is already the world's largest auto market and it's set to grow even bigger in coming

years. Chinese central planners have said that they want to have 5 million electric cars on the road there

by 2020. That's only seven years away.

It currently has facilities in the United States and throughout Europe where parts are being

manufactured and assembled. Since they have limited resources, you must be very selective of the

location for its expansion

o Advantages

Organization becomes pioneer at its specialization

Build Brand Name Globally

This not only affects sales through name recognition, but also helps recruit local employees,

sign on new distributors and work with media in each country as part of the overall

marketing efforts.

Increase sales and thus revenues.

Risk diversification.

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o Disadvantages

Organization is vulnerable to industry and other external environmental shifts

Needs good monitoring globally to efficiently manage crises.

Large capital needed to start the expansion.

2- Growth Strategy: Product Development (Horizontal Growth):

Tesla could benefit from its strong R&D department and focus on innovating new cars to target a wider

range of customers. If the strategy is properly implemented, Tesla can gain a reputation as a company

that is on the leading edge of EV industry. This can help capture more market share and create an

expectation of exciting ideas among its customers.

In details, tesla motors should produce different types of electric cars like 4x4, hutch back or sports cars

not only the existing type, as tesla is currently suffering from number of units sold and sales so we have

to diversify the products just to increase the sales and brand recognition as it will get to more customers

which have different tastes. So it can be named with different names like model X which will be

introduced in late 2014.

Advantages:

Creates Value. When a company uses a differentiation strategy that focuses on the cost

value of the product versus other similar products on the market, it creates a perceived

value among consumers and potential customers.

Increase Brand Awareness.

Increase number of customers and accordingly Consumer Loyalty.

Provide a competitive advantage especially in the automotive market which dominated by

larger companies.

Having multiple product lines may allow a growing business to diversify risk and capitalize

on its established reputation

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can attract buyers with different preferences, increase profitability thanks to market

segmentation and, for some businesses, even out seasonal sales patterns

Compete more broadly in your industry.

Disadvantages:

Different Competitors will be added to current competition.

Company’s focus might be dispersed after adding new products.

Risk of changing consumer tastes or preferences

resources may be disproportionately siphoned off for slower-moving products

Older models with fewer features become less desirable and eventually obsolete.

3- Stability strategy: Pause/Proceed with caution

Tesla is now doing fine by introducing the Model S by end of 2012, to introduce and develop new

products we will need a huge investment in R&D but instead we could test the ground before moving

ahead with a full-fledged grand strategy, trying to overcome previous losses as a result Tesla will be able

to move on with growth strategies. So it is just a temporary strategy.

o Advantages:

Enables the company to focus on its new product the Model S

Gain Some Profit to overcome previous losses

Focus on internal issues and enhancing internal processes

o Disadvantages

Possible loss of market share

Loose opportunity for potential investments for a growing industry

Delayed to cope with the rapid technology changes

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4- Growth diversification strategy (Conglomerate growth)

Diversifying into a different industry that the current company’s operation; producing EV cars.Use its

battery technology for other uses such as storing power from solar panels.Leveraging the use of

common brand name and combining resources to create new competitive strengths and capabilities.

o Advantages

Transferring skills & capabilities from one business to another

Sharing facilities or resources to reduce costs

Opportunities to achieve economies of scale and scope through skill transfers, lower costs,

common brand name, technology, etc.

Opportunities to expand product or service offerings and preserve unity in businesses

fully utilize existing resources and capabilities like the Skills in sales & marketing, general

management skills & knowledge, distribution channels, etc

o Disadvantages

Complexity and difficulty of coordinating different, but related businesses (e.g. Philip Morris’

General Food and Kraft subsidiaries)

Choosing the appropriate strategy

According to the above corporate strategies we will go with the Product development strategy

as our main goal is toincrease profits to recover from the negative balance since the company

started until last quarter&increase brand awareness for Tesla Motors in order to be able to

compete against strong and well known competitors like Ford & as Tesla Motors is relatively a

new company in the business and started with electric cars directly unlike its competitors whom

started with cars running on gas and a long time ago building brand name and recognition

through these years. These goals can only be reached if all the departments work together as a

one team to achieve this goal, so below is how are we going to cascade the business functions

among all the departments.

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New Mission:

Tesla Motors designs and sells high-performance, highly efficient electric all kind of cars — with no

compromises. Tesla Motors cars combine style, acceleration, and handling with advanced technologies

that make them among the quickest and the most energy-efficient cars on the road.

Cascading Business Functions among departments

Marketing:

Follow product development marketing strategy by:

Dividing market into segments and target each segment separately, different distribution

channels.

Doing marketing researches to identify customer’s needs and best areas to penetrate.

Building brand equity.

Promotions.

Broad Price ranges.

Research & Development:

Pioneer new products that increase buyer value.

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Human Resources:

Recruit new talents with diverse backgrounds with low pay.

Provide sufficient trainings

Information Systems:

Implement strong information system connected globally to create connection with suppliers,

retailers and customers.

Logistics:

Create & maintain strong, reliable & fast supply chain to react conveniently to customers

demand

Finance:

Prepare sufficient cash and assets needed for investments

Purchasing:

Hold good deals with new suppliers needed for the new products providing

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Evaluation and KPIs measurements

Evaluate the R&D performance

Peer benchmarking

Compare your own intelligence function against industry peers using GIA (Global Market Intelligence)

Survey results in terms of

Annual budget

Level of development

Number of employees within the intelligence team

An example is from an industrial company that invited GIA to help run a megatrends workshop to

identify new business opportunities from trends that were identified beforehand. The workshop

resulted in 41 new business ideas, which was later counted as part of their KPIs for their market

intelligence activities. So the business opportunities or new ideas generated can be one set of KPIs, even

if they will not show up as revenues immediately.

Evaluate the Marketing performance:

Social Media fan growth rates, engagement rates, and response rates

Having a large number of fans is a solid measurement of your company’s social marketing success.

Fan growth helps track the increase in the number of fans or followers of your page, but it does

not necessarily determine whether your social efforts are effectively engaging your target

audience

The engagement rate for Facebook is calculated as the sum of likes, comments, and shares on a

given day divided by the number of posts that a page made on that day. That number is then

divided by the total number of fans that like that page

The Response Rate is a percentage calculated as the number of times the page responds to user

posts or questions on their page, divided by the total number of posts or questions. Your goal is to

have a high RR in order to show customers that you are actively listening and responding

Onsite market interviews

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Evaluate the Operating & Financial performance:

Speed-to-market—putting the right product in the right market segment faster than a competitor,

measuring time from idea formulation to delivering product in market

Gross Profit Margin = (Sales-COGS) / Sales

Product margin

Product adoption—driving the uptake rate in a market at a lower cost and shorter time than a

competitor

Product launch—improving the response rate from target buyers with fewer impressions

Operational

Drive Financial Outcome

Speed-to-

market

Increase product

revenue

Product

adoption

Increase product

margin

Product launch Lower cost of sales