Tesla Motors Scenario Planning

Human Resource Planning – HRM5504

Dated: May 30, 2018

Scenario Planning on TESLA MOTORS

Company Brief

TESLA Motors Inc. is an American automotive and energy Storage Company which was created by group of engineers in Silicon Valley in 2003.The mission of this company is to enhance the world transportation into ecological, affordable and clean transportation.

General environment factors

Economic Factors:

1. Consumer Purchasing Power Parity (Canada): From 1990 to 2015, the average of the PPP and the market exchange rate were $0.84 US and $0.82 US, respectively. This trend reinforces the notion that Canadian purchasing power, which captures both traded and non-traded goods and services, is less impacted by short-term fluctuations in the market exchange rate. And the fact that Canadian market is relatively stable for the company.

1. Increasing fuel prices: The increasing fuel prices makes it difficult for the people to stay put with their vehicles consuming gas, which in turn gives TESLA the increased chances to penetrate into the market since their vehicles would not consume fuel.

1. Global Inflation Rate: The increasing global inflation rate (2015 – 2.79%, 2016 – 2.8%, 2017-3.15%) poses a threat to the company since this would increase the cost and have effect on consumers’ purchasing power.

Social Factors:

1. Increase in the popularity of low carbon emission cars: The consumers are getting sensitive towards environment which gives the company a room to penetrate into markets better by offering vehicles that would emit low carbon and also run on renewable source of energy.

Technological Factors:

1. High rate for change in technology: Changing or adopting new technology can be a costly affair for any company. Since TESLA is highly dependent on technology hence improvements in their vehicles would increase cost for the company.

Environmental Factors:

1. Natural Disasters: TESLA’s factory in California and Nevada is an earthquake zone. Such natural disasters can devastate auto-making and loose large amount of market share.
2. Sources of energy: Driving vehicles without consuming and burning gasoline is great, but using electricity derived from coal plants defeats the purpose.

Legal Factors:

1. US Government’s Energy Loan Programs for research and development of new technologies may interest new players entering the market
2. The Franchise Laws in the US which does not allow TESLA to sell cars directly to consumers affects the company’s sales.

Business Environmental Factors

• Delays in project timelines, cost and volume targets for production, launch, etc.
• TESLA is not as experienced with high volumes as the company anticipates that its Model 3 shall be successful. Thus the company needs to develop efficient, automated, low cost manufacturing capabilities, processes and supply chains necessary to accommodate the volumes.
• If the company’s vehicles or other products that contain vehicle powertrains or battery packs fail to perform as expected, the company to develop, market and sell its electric vehicles could be harmed.
• The company does not maintain long term agreement with a number of suppliers. This limited supply chain exposes the company to potential sources of delivery failure or component shortages for production.
• The company’s growth is highly dependent upon consumers’ willingness to adopt electric vehicles.
• Since the business is quite capital intensive hence the industry decreases potential threat of new entrants.
• Given the fact that company is highly dependent on innovation, there is a continuous need of being innovative and thinking out of the box
• Great Organizational capabilities: TESLA Motors is a company that succeeds on revolving insubstantial assets into creative yields. According to Motor Trend, their Model S has around 250 copyrights alone
• TESLA Motors have their own stores across 18 countries where consumers can easily access and take benefit of the electric cars. They manufacture vehicles based in the demand, and the orders personalised online. This only works because of their approach to the industry and customers are willing to wait. But since the company had to struggle with the demand hence it poses a red alert for the company.

Business Scenarios

Most Desirable

• Efficient and effective scale of production accompanied with economies of scale
• Other products/offerings discovered that could decrease dependency on innovation
• Increased opportunities at B2B platform and market places that could increase efficiencies and reduce costs
• Franchise laws in US which protects cars dealers and creates challenges for TESLA from selling cars directly to its customers are being eased out

Most Likely

• Increased strictness in carbon emission laws
• Increased efficiencies in operation
• Stable inflation rate which would to lead to healthy competition and market conditions

Least Desirable

• Decreasing fuel cost hence the consumer bending towards buying fuel run cars
• Dent on brand image/reputation which hampers TESLA’s goodwill in the eyes of the stakeholders
• No government support in any form what so ever.
• Double digit inflation rate which would mean increased cost and decreased consumer purchasing power
• Suppliers gaining high bargaining power thus increasing cost for the company
• Possibility of substitutes vehicles/mode of transportation which could be easier on the pockets of the consumer would pose a threat to company’s sales

TESLA’s readiness and HR’s strengths and Weaknesses

HR Initiatives and Programs suggested