TESLA: INNOVATION WITH INFORMATION TECHNOLOGY.

• Author: Alghalith, Nabil
• Position: Abstract

INTRODUCTION

Tesla Inc. is an innovative company that is changing the automotive industry every day. The innovative and farfetched idea of CEO Elon Musk combined with the incomparable support from the public has caused this young company to grow in popularity and in funding since its start in 2003. Although Tesla aims to produce a fully electric automobile, their values resonate with many people. Unfortunately, they're suffering from more internal issues than a young company would like. If they can't discover a new way to drastically overhaul a lot of their operations, Tesla may be going under sooner than they, and their potential customers, would like.

Because electric cars require cutting edge technology and the most skilled workers, Tesla has incurred a lot of debt in a short amount of time. Their most popular car right now, the Model S 90D, sells for nearly $87,000 which makes turning a profit difficult. There has been speculation about whether Tesla will be able to make their operations profitable in the long run, and it's easy to tell why. Despite the mass of public interest in their product, if Tesla can't decrease costs in a way that will allow them to also decrease the price of their product, sales will never grow.

Another issue that Tesla needs to quickly combat is that the work environment has been alleged to be hindering productivity. Although it's true that all individuals perform differently, the reports of stress experienced at Tesla comes as a concern. It's no surprise that such a new, innovative company is under stress to prove themselves as a worthy component in such an already established industry. And yet, a positive work environment is critical for a cohesive brand to succeed.

Tesla is certainly proving themselves a force to be reckoned with in the automobile industry. However, they have plenty of divots to take care of before they will compete on the caliber of other established automobile companies. Quickly overcoming these obstacles financially, culturally, and competitively, will determine if Tesla will succeed in the long run.

Tesla is known for manufacturing the most advanced electric cars in the world. Marc Tarpenning and Martin Eberhard were the masterminds behind the business. They first met around 1990, and from then on their relationship continued to grow, transitioning from friends to business partners before they knew it. Their working relationship began with consulting for disk drive companies, working with mobile computing (early cell phones, laptops, and Palm Pilots), and making the first electronic book; but before long, they expanded to electric cars.

Soon after landing on the idea of making an electric car company, they started their research on car hobbyists. They stumbled across AC Propulsion, a boutique electric-car maker. AC Propulsion had already made an electric sports car called the "tzero." After riding in the tzero, they realized just how great an electric car could be. However, they decided they did not want to join forces with the company due to their clash in cultures and beliefs. Fortunately for Tarpenning and Eberhard, this class made them more determined to figure out how to start their own electric car company. They knew this would not be an easy task--after all, the last American startup car was Ford, and that was over 100 years ago. Additionally, the idea of an electric car was still so new to the world, with other car companies having already tried and failed at the venture, such as GM with the EV-1. According to GM, the major problem is getting a large enough customer base to make it worth their time and money to make electric cars.

After they decided they wanted to found an electric car company, the first big step was coming up with the name of it. Eberhard threw a lot of names around with his wife, but none of them really quite fit the image they were going for. The idea of "Tesla" came about when Eberhard was thinking about somehow wanting to give credit to the Nikola Tesla, the man who invented the AC induction motor they would be using in the car. This idea led him to eventually name the company Tesla Motors. By the end of April 2003, Eberhard bought the domain name Teslamotors.com and by July 2003 they were incorporated.

When fall 2003 rolled around it was time to start pitching the idea to investors and raising some money to help fund the business. Eberhard and Tarpenning first pitched the idea to VC's that were only interested in optical routing and website design. They did this as a practice run to make sure they were prepared for the real deal. After the trail pitch, they realized there were multiple issues they had never considered, a major one being how hard it would be to build the car from scratch. They decided that the best way to go about this would be to find an already existing car and alter or add on to it. After a lot of searching and consideration, they settled on Elise, a Lotus sports car. In December 2003, Eberhard and Tarpenning went to a car show in LA and found the Lotus booth where they pitched their idea. Now that they had found the base car they wanted to work with, the next step was figuring out how to get rights to the technology they wanted to implement in their new car. They thought AC Propulsion's technology, implemented in the t zero, was not only outstanding but also just what they were looking to bring to Tesla. Eberhard's first thought was to try and acquire AC Propulsion; however, AC Propulsion was not keen to this idea. Instead, Tesla ended up drafting a License and proposing that to AC Propulsion. AC Propulsion agreed to the license, which ultimately gave Tesla legal rights to use the technology.

Still in search of funding, Eberhard got in contact with Elon Musk, a PayPal cofounder, in 2004. Musk had already denied AC Propulsion's request for investment, but Eberhard thought Tesla had a better business model that might appeal to Musk as a businessman. Musk agreed to meet with Eberhard and Ian Wright, a new business partner that joined in 2003. On April 23rd 2004, Musk agreed to be an investor in Tesla, which effectively made him Chairman of the Board.

Now that Tesla had a base car, the technology, and the funding, it was time to start producing cars. A big challenge for Eberhard was explaining to his designers exactly what his vision was. In fall of 2004, Eberhard went and talked to his good friend and design genius Bill Moggridge, who helped Eberhard articulate exactly what he was wanting in this car. Now that Eberhard's ideas were clearer, he got four potential designs for the car and had his co-workers vote on their favorite. The winner was designed by a man named Barney Hatt, a principle designer for Lotus Design Studio. In November 2004, the first rough design of the car was created. This design was proof that it is possible to make an electric car in the capacity they had been expressing, which helped bring in more funding. In July of 2006, shortly after word had gotten around about Tesla making electric cars, Tesla's first 2 door sports car, the Roadster, had its debutante's ball. At the ball, Tesla took what they called the "Signature 100" or 100 preorders of the car for $100,000 each.

As all companies do, Tesla hit some bumps in the road. Expected release dates continued to get pushed back and operations were not running as smoothly as they would have liked. On August 8th, 2007 Eberhard was forced to step down as CEO of the company as he instead became president of technology. Musk, a large investor in the company, decided to replace Eberhard with Michael Marks, former CEO of Flextronics. However, Marks was only a temporary replacement until they found someone better suited for the job. Ze'ev Drori replaced Marks as CEO in November 2007 until October 2008 when he also got fired, along with one fourth of Tesla's staff. By this point, Musk had invested over $55 million into Tesla and he was calling the shots. In February 2008, the Roadster was finally released, followed by the Model S in 2013.

ORGANIZATIONAL STRUCTURE

Tesla Motor's organizational structure is highly focused on business growth. Tesla has a somewhat traditional organizational structure that tries to maximize the implementation of new strategies while also managing operational activities. Tesla has a functional organizational structure, meaning a structure where the organization is divided into smaller groups based on specialized functional areas. Tesla follows a centralized organizational structure. In centralized organizational structures, the company relies on one specific individual to make all the executive decisions for the company. In Tesla's case, Elon Musk is the main decision maker.

In Tesla's organizational structure, there is something called global centralization. Each department in Tesla has a head of...