IS & IT Management In Tesla Model For Strategic IS

Organisation’s Overview

Discuss about the IS & IT Management in Tesla Model for Strategic IS.

Information System (IS) has emerged as one of the most preferred choice for the organisations in the current era. The adoption is based on the advantage that the IS offers to the organisations that includes efficiency, accuracy, fast operations and others (Pearlson, Saunders & Galletta, 2016). The discussed advantages are offered by means of automation and hence, it becomes necessary to evaluate the organisational IS. Another notable term that is establishing itself is the “Strategic IS (SIS)”. SIS are also IS system but are designed to offer competitive advantage to the organisation by enhancing the organisational operations and processes (Arvidsson, Holmström & Lyytinen, 2014). The discussed paper offers an insight in the SIS and management structure of the Tesla INC, a global leader in sustainable vehicles and power solutions. The paper will discuss the governance structure along with the processes & policies of the subject (Tesla) and measure their compatibility with the regulatory requirements. Special attention will also be offered to the corporate officials and the role they play. Additionally, the focus will also be given to the risk management strategies of the deemed organisation and the report will be concluded with potential recommendations (if needed) for change management after discussing its impact. 

Tesla Motor Inc., was established in the 2003 (later changed to Tesla Inc.) and since then has emerged as one of the most prominent leaders in the automotive industry, technically speaking sustainable automotive industry (About, 2013). The organisation started its journey with Tesla Roadster, a luxury car that was powered by electricity and broke all the myths that quoted ‘electric cars lack the power, speed, pickup and other crucial factors of a vehicle’. The discussed model offered all of the above-mentioned factors associated with the cars while offering a very cost-efficient fuels for it. The subject has earned a name for itself through innovative practices, however, another notable quality of Tesla is its dependency on the technology. The considered organisation believes in automation and the efficiency and accuracy they offer in the organisational processes. The organisation believes in disruptive technology and can be understood by the fact that it houses one of the world’s largest 3D printing machine along with over 200 robots for their organisational operations (Vance, 2017). The dependency of Tesla on the IS & IT along with the output it is receiving from their use is the reason for selecting Tesla as the subject of the paper and will be evaluated to determine the best suited results.

Governance structure/ Processes/ Policies

“Implicit in this philosophy is the importance of sound corporate governance”

(Source: “Corporate Governance | Tesla, Inc.”, 2018) 

The organisational system and design that decides the method by which the interaction will take place among the organisational resources is known as organisational structure. It is one of the core factors that decides the future of the organisation and hence is cited special attention by the corporate leaders. The scholars and corporate leaders themselves have identified different types of organisational structures form hierarchical to matrix and scalar and a lot of other. The subject of the paper is also well aware of the crucial need of organisational structure and hence follows a structure that it seems fit for its mode of operations. The discussed organisation operates on the functional (U-form) corporate structure taking in aspect of the managerial control and focus (Ibos, Duhamel & Hamed, 2013). However, it should be noted that other organisational structures have also been identified at Tesla but they are significantly less visible and dominant. Another notable part of their corporate structured is the limited expansion of the operations in global market.

Discussing about the organisational structure of the subject, U-form abbreviation for unitary-form main defining factor is the organisational functions. The key feature of the deemed organisational structure are function-based hierarchy, divisions and centralisation. They have been discussed as follows:

Function-based hierarchy: It is one of the most popular hierarchy where the functional offices or teams are designated to look after a specified function on a global or a domestic scale. The deemed hierarchy is adopted to maintain a strict managerial control over the operations and controls over the operations and functions of an organisation (Ramchand & Svenonius, 2014). In case of the Selected organisation, the hierarchical graph starts from the Chairman & CEO (in Tesla it is Elon Musk) followed by the finance head, technological head, sales & services team, engineering team and the legal team (Cosh, Fu & Hughes, 2012).

Centralisation: Another notable feature of the Tesla’s organisational structure is that it maintains a managerial control over its entire organisation and its operations which vests the decision-making powers in an individual or to a core group of governing authorities (Ibos, Duhamel & Hamed, 2013). The heads of the corporate branches of the deemed organisation forms the organisation’s central headquarter that directly controls, monitors and supervises over all the organisational operations (Christensen, 2015). In the discussed scenario, minimum authority is being provided to the branches over the decision-making as most of the decisions are made on central level at the Tesla’s headquarter.

Processes

Divisions: Tesla Inc. has not limited its services to automobile only but also offer power solutions like solar powered batteries and other. Hence, it has two operational divisions one for the automobile processes and other for the power solutions. It even has sub-divisions of its automobile division such as gigafactory and megafactory which are used for the production of its different models. The benefits of having divisions in an organisation are mostly rested on the extended geographical domain it enjoys (Harper, 2015). Additionally, it also assists in developing a larger consumer base because a user is more comfortable with a product that has been developed close to him/her than something that is imported from another continent or geographical distant location (Boumgarden, Nickerson & Zenger, 2012). 

Tesla is one of the organisations that believes that technology can earn them significant advantages and it has proved to be true for the organisational till date. The governance process of the subject includes the decision making rested on the senior officials such as the CEO, CFO, CTO and others. The processes of the overall organisation is personally monitored by the CEO, Elon Musk who is also responsible for the product architecting (“Corporate Governance | Tesla, Inc.”, 2018). He finalises all the corporate and product related decisions based on the support and suggestions from CFO or CTO depending on the task at hand. After the decision is made then the responsibility is passed on to the CTO (Chief Technical Officer) JB Straubel if it is a technical decision regarding the product they are offering who made the necessary changes or enhance the organisational IS accordingly to meet up with the requirements (“Corporate Governance | Tesla, Inc.”, 2018). The next process for the CTO is to conduct a meeting with the CFO (Chief Financial Officer) Deepak Ahuja and propose the financial requirement (“Corporate Governance | Tesla, Inc.”, 2018). The CFO of the organisation then measures the need and outcome of the process and fulfils the necessary demands. On the contrary, if there is a need for marketing & sales or establishment of a new division the CEO and the CFO have a meeting and the decisions are made accordingly. The role of IS in all of this is to provide the discussed officials with appropriate data that can assist them in concluding the data (De Haes et al., 2013). Another notable role that the IS plays is that it enables the CTO and CFO to select the most suitable team leader for the proposed task based on their availability and performance who further decides the necessary action to be taken regarding to the team (Flores, Antonsen & Ekstedt, 2014). This is how the governance process of the subject operates and is proving to very efficient for the organisation.

Risk Management

Governance policies of an organisation guides while defining the relation among the owner of the organisation, CEO and the Board of Directors. The subject of the paper is a private organisation who have sold its share making the shareholder’s the owners of the organisation. The governance policy of the subject cannot be called a strong one because recently there have been demands to give more authorities control to the board of directors (“Investor group calls on Tesla to fix ‘flawed’ board in wake of SolarCity bid”, 2016). The reason for failure of the governance policies are attached to the CEO, Elon Musk (Hull & Chasan, 2017).

The table following shows the name of the corporate officers along with their roles at Tesla Inc.

Officer	Role
Elon Musk	CEO, Product architect, Board Chairman
Jeffrey B. Straubel	CTO
Deepak Ahuja	CFO
Doug Field	Vice-President (Engineering)
Kimbal Musk	Director
James Murdoch	Director
Linda Rice	Director
Antonio Gracias	Independent Director (Lead)
Ira Ehrenpreis	Independent Director
Stephen Jurvetson	Independent Director
Bradley Buss	Independent Director
Robyn Denholm	Independent Director

Table 1: LIST OF THE SENIOR OFFICIAL ALON WITH DESIGNATION AT TESLA

(Source: Created by Author)

(Inspirational Source: “Management | Tesla, Inc.”, 2018)

Tesla Inc. maintains a strict policy of not disclosing its sales number making it difficult to earn its figures however, an article by Business Insider (Australia), the country owns over 600 Model S in 2016 (Tucker, 2016). While, another article claims that in the months April, May & June of last year, a total of 142 new Tesla cars where registered in the NSW alone (McCowen, 2017). This shows the major impact and the popularity that the Tesla cars are having in the Australian market. The above-stated figures are shown to cite the fact that Australia has emerged as one of the most profitable market for the organisation and surely, it does not wish to let go of such desirable situation. Hence, it must abide by the regulatory requirements of the Australia to sustain in the market. Additionally, there have been instances when vehicles have been banned because of regulatory violations by them such as the case of Volkswagen (Dowling, 2018). The organisation also does not own a manufacturing plant in Australia so, it does not have to abide by the regulatory requirement of Australia. The offerings by the subject abide by the requirements stated in “Motor Vehicle Standards Act 1989” in all the sales, vehicle features, import of the vehicle and others (“Motor Vehicle Standards Act 1989”, 2018). It is not just the case of Australia; no cases of regulatory violations have been identified about Tesla’s offering globally.

However, a notable claim of regulatory violation was filled by an employee of the Michigan Tesla plant in the September. The employee claimed that the organisation is violating safety regulations at the Plant. The investigation is still underway which raises the question over the governance structure and policies and how they take consideration of the human resources at the lower levels. Additionally, what are the flaws in the IS of the organisation that are the cause for such safety violations. However, recent claims have been made by the subject and the Cal/OSHA (“California’s Occupational Safety and Health Administration”) that the ratio of safety risk has reduced by great extent in the recent years (della Cava, 2018). In another, scenario, Salt Lake City banned the Tesla by citing that the subject does not take consideration of account dealer protection (Kane, 2015).   

Conclusion

The above-discussed cases, reveal that there have been violations of the regulatory requirements by the Tesla. Though, it is notable that the claims of violation have not been proved and are still under the justification period and a final decision is yet to arrive on the cases. However, the official website of the organisation suggests that the organisation does abide by the regulatory requirements. Additionally, on evaluation of the governance structure, processes & policies of the subject it is found to be justiciable and the satisfactory results of its offering also supports the claim made by the website. Hence, in conclusion it can be stated that Tesla Inc.’s corporate governance is compatible with the regulatory requirements. However, in certain situations it fails to sustain the necessary standards.

Risk is one of the most crucial factor for any organisation because it challenges the sustainability of an organisation and should be addressed before it does any significant damage to the organisation. The risks that are associated with an automotive company are market & sector risks, financial risks, firm-specific risks and legal risks. Out of all the above discussed risk, the subject of the paper faces legal risks, financial risks and firm-specific risks (Cardona, 2013).

This risks are associated with the legal factors such as the contracts with the external stakeholders, structural changes and others. It also includes the risk associated with the regulations and the subject has faced such scenarios which is evident from the discussions above.

The legal risks are managed by the organisation through a framework that measures the firm and the risk’s tolerance level and responds accordingly. If, the risk is identified above the tolerance level then they brought down to the tolerable level before treating them adequately (Smith et al., 2017). After, the risks are neutralised, the case is registered in the risk register that are included as part of the organisational IS to avoid any similar situations from developing in future.

The deemed risks are associated with the capital of the organisation. In case, the products are not offering appropriate ROI (Return on Investment), or the threats due to the liquidity of the organisational assets and currency of operation and similar others.

Tesla has one of the best financial risk management plan in place. It takes consideration of the exchange & interest rate risk, liquidity and other financial risk in account. To manage the exchange rate risk, the organisation uses derivative instruments and the interest rate risks are managed by the hedging process. Liquidity risk refers to the risk of not having enough cash to run the operations for which the subject maintains a limited inventory size and resource utilisation plans. 

The risks that fall under the deemed category are production risks that includes risks associated with the product launches, expenditure, plant failure, production stalls and others. Another risk that falls under this category are warranty & goodwill claims. Technological and personal risks are also categorised under the same category.

The subject addresses the production risk by maintaining a quality plan for the organisational assets. As stated earlier the organisation is very much dependent on the organisational IS and so it maintains it in proper health. However, it does not omit the error chances and so, the organisation have contingency equipment in place. Another notable fact is that the subject believes in disruptive technologies and hence only buys the best product reducing the risk of failure. The warranty & goodwill claims are managed by maintaining a sound relation with the customers and providing them a platform (Tesla Forum) to voice the opinion.

Tesla Inc. has been considered as one of the most innovative organisations and the procedure by which it addresses and mitigates the risk supports the earned reputation. The exponential rate at which the subject is growing in the competitive market supports its risk managing strategy.

Tesla Inc. recently has undergone a major change and that is related to its production. 50,000 units per year to 500,000 units per year the production ratio of the organisation has changed significantly and assisting the organisation in its objective is the organisational IS. After, Elon Musk announced that they are jumping into mass production of Tesla Model 3, the concerns about excessive workload over the IS of the organisation was building. However, to rest that the organisation introduced their gigafactory which was more capable both technological and geographically, to maintain the workload offered by the mass production of its cost-efficient car. The IT capability of the gigafactory could be understood by the fact that the discussed factory is the largest building in the world that extends up to “5.5 million square feet” and is connected by means of IT and IS (Anderman, 2015). The gigafactory has one of the largest 3D printing machine installed within it along with multiple other robotic machinery for integrating the car components together. However, delay in the delivery of the Model 3 can be concussed to state that the load on the IT is proving to be challenging for the organisation. The organisation can enhance their IT capability by employing more skilled employees to assist the system in fulfilling its objectives. The employees will maintain the health of the systems and will also ensure that the workload on the systems do not extend to such a limit that the system breakdown. Tesla is offering sustainable product so the external factors are also supporting it (Lane, 2013). The external factors here are referred to the low interest loan offered by the government along with the incentives that are offered to the customers for buying electric cars (which market is leaded by the Tesla).

Conclusion:

The report can be emphasised to state that Tesla is emerging as one of the sustainable leader in the car making industry and the most support tool for this achievement of the subject has proved to be its choice of IT. The report has discussed various aspects of the organisation and on evaluation various factors have been identified and they all have proved to be somewhat dependent on the IT and IS of the organisation. However, the report has also identified some errors that the IT system has offered to the organisation which needs to been managed to earn a competitive advantage in the automobile industry. Hence, in conclusion, it can be stated that IS plays a significant role in the operations and other relevant needs of the organisation and maintaining it appropriately can offer sustainability and competitive advantage to Tesla Inc. 

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