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Internal Environment Analysis of Tesla Inc.
List and describe the major functional areas of your company
Primary Areas
Raw Materials
For a company like Tesla Motors, the manufacturing process typically makes use of hundreds if not thousands of outsourced parts. According to Tesla Motors (2015), “the Model S uses over 3,000 purchased parts which we source globally from over 350 suppliers, the majority of whom are currently our single source supplier for these components.” Like any international organization, Tesla has had to work on its reputation while building relationships with suppliers all over the world. The norm by a majority of automobile manufacturers is to acquire the raw materials from multiple sources while looking for the best prices or the right kind of materials. For a company in the process of making or leaving a mark in the world, Tesla is indeed pushed towards perfection and always aims at maintaining its trajectory.
Tesla Motors (2015) notes that the company makes use of a variety of raw materials “including aluminum, steel, cobalt, nickel, and copper.” As is always the case in any market in the world, “the prices for these raw materials fluctuate depending on market conditions and global demand for these materials.” Therefore, the company could be asked to pay more if the demand for these raw materials is high and vice versa. Every company has its manufacturing and supply requirements, and these often go hand in hand with the availability of raw materials. Therefore, the company always runs the risk of not meeting their set objectives. However, with careful planning and execution of the same plans, it has also become incredibly possible for the organization to not only surpass expectations but also venture into newer and greener zones of growth.
Research and Development
For a company which looks towards setting the stage and pace for other companies, Tesla is indeed well-invested in its research and development field. According to Ross (2014), the company used or spent $81.5 million “on research and development in the first quarter” of 2014, and this accounted for “about half again as much as in the same period last year (2013).” Ross continues to explain that this amount of cash was “a little over half the company’s $50 million operating loss.” However, while one would be alarmed at the amount of money Tesla is spending on its research and development branch, it is fair to recognize that it does cost more “to make expensive technology cheap” (Ross, 2014). For a company which is aiming to make revolutionary contributions to the motor industry, Tesla is indeed spending a lot of money to make its technology accessible and readily available for the common citizen. For example, the company announced that its Model X will retail for $30,000 which would be a “$40,000 to $50,000 reduction from its Model S.” The company aimed to maintain the same technology for both models while working to reduce the cost incurred.
The image below from statista.com helps to paint a clear picture of how much Tesla has been spending on its research and development as it seeks to continue revolutionizing the motor industry. According to Ross (2014), motor companies spend between $1 billion to $3 billion in developing a new car model. Looking at the entire motor industry and the big players, it remains to be seen what or who will influence the trajectory or direction the industry is taking. For a company like Tesla, R&D remains chief of its primary areas, and it would indeed mean anything but normal if the company opts to cut on its expenditure on R&D.
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Production/ Manufacturing Operations
One of the ways in which Tesla is making a mark for itself is in its innovative manufacturing. Production/manufacturing forms one of the company’s core competencies, and it is in this area that the company seems to be excelling. Tesla Motors is currently trying to match up to the major motor companies in the industry, and while this is not an easy feat, the company has proven on more than one occasion that it indeed more than capable. However, according to Arnold (2017), Tesla currently produces a meagre 1% of each of the big three’s (GM, Toyota, and VW) total production. Apparently, each of these companies produces more than ten million cars every year while Tesla was projected to ship around 100,000 cars the whole of 2017. This shows that Tesla still has a long way to go to be considered to be close or even at the same level with these companies.
Looking at Tesla’s production operations, one cannot fail to note it quality control aspect which always maintains the high levels of reliability the company has come to be known for. By investing in more quality engineers, Tesla has managed to ensure that its products are always efficient and of the guaranteed quality.
It is expected that the company’s quality and efficiency levels will increase and improve with time. However, it remains to be seen, but according to Arnold (2017), if the few Model 3s shipment are any indication, the company still has a long way to go. Production in the coming months and years should be expected to increase, and in 2018 it was projected that Tesla would be producing 10,000 cars every week to help meet the Model 3 sale projections. However, while the company could be focused on meeting these projections, Arnold notes that the company could be facing or could be faced with another production problem. “Tesla is subject to the same constraints and vulnerabilities as any niche manufacturer,” and this could influence the production operations of the company. However, with ...