Group 2 - Analysis of Elon Musk’s leadership and its effect on Tesla Motors PDF

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FOREIGN TRADE UNIVERSITY Faculty of International Business Administration --------***--------

SCIENTIFIC RESEARCH “Analysis of Elon Musk’s leadership and its effect on Tesla Motors” SUPERVISOR: Dr. Nguyễn Thị Minh Hà

Submitted by: 1912255432 - Lê Minh Tâm 1912255433 - Nguyễn Quốc Thái 1912255437 - Nguyễn Trí Thông 1912215179 – Nguyễn Thị Hàn Hương 1912255426 – Đoàn Thị Bảo Ngọc 1912215578 – Nguyễn Thanh Tùng 1912215615 – Huỳnh Nguyễn Nhật Vy 1912215137 – Trương Thị Mỹ Hằng 1912215565 – Võ Mai Trúc Ho Chi Minh City August 27th, 2021

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Abstract This research is conducted with a view to find out how Elon Musk got to be so successful and what his leadership style is. It starts with Elon Musk's early achievements and then moves to examine his leadership style. This research will also present some of the characteristics that define Elon Musk as a leader. Elon Musk is a visionary leader who was able to predict the future and venture into developing technology in the next decade. Despite Elon Musk's successes, he still has challenges to face like any other leader with regard to a variety of factors in a fast changing world, which leads to quite a bit of controversy surrounding Musk’s leadership. Therefore, in the end, the study will summarize the main findings through financial performance and other key observations, as well as offer some recommendations for him.

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Table of Contents 1. Introduction ........................................................................................................ 5 2. Methodology ....................................................................................................... 6 3. Literature review ............................................................................................... 7 3.1. Leadership styles ...................................................................................................... 7 3.1.1. Authoritarian leadership (Autocratic leadership) .............................................. 7 3.1.2. The Democratic or Participative Leader ............................................................ 8 3.1.3. The Laissez-faire or Delegative Leader .............................................................. 8 3.1.4. Charismatic leadership ....................................................................................... 8 3.1.5. The Servant Leader ............................................................................................. 9 3.2. The story of Elon Musk ............................................................................................. 9 3.3. The history of Tesla Motors .................................................................................... 10

4. Analysis of Elon Musk’s leadership ............................................................... 11 4.1. A short analysis of Tesla under Elon Musk ............................................................. 11 4.1.1. Tesla’s innovative business strategy ................................................................. 12 4.1.2. Organizational structure of Tesla ..................................................................... 13 4.1.3. Vision of Tesla ................................................................................................... 14 4.2. Elon Musk’s leadership ........................................................................................... 15 4.2.1. Transformational leadership ............................................................................. 15 4.2.2. Intelligence leadership ...................................................................................... 16 4.2.3. Charismatic leadership ..................................................................................... 17 4.2.3. Supportive and participate ................................................................................ 17 4.2.4. Change leadership............................................................................................. 18 4.2.5. Pedagogical Leadership .................................................................................... 18 4.3. Elon Musk’s controversy as a leader ....................................................................... 19

5. Results ............................................................................................................... 20 6. Recommendations ............................................................................................ 21 7. Conclusion ........................................................................................................ 22 A. Reference ............................................................................................................ 23

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1. Introduction Globalization has led to increasing demand for leadership. This is not only evident in the professional world, but also in the rise of small-scale entrepreneurship. Developing a strong set of leadership skills not only aids you on your path but also helps you advance in your career, whether that may be as a manager or entrepreneur. Leadership is hardly a new topic, but it's becoming increasingly more important with each passing day - something that organizations are realizing as well. There are many people who follow Elon Musk’s leadership style because he has made them successful, but there are also a few people who disagree with what he does. Some believe that having an open dialogue is important to the success of a company, while others believe that going with his gut instinct is more beneficial. Elon Musk is known for having a strong leadership style that focuses on keeping employees and investors happy while always trying to improve his work product. He has proven that he is not afraid to invest money late in the game, as his company has matured and become more successful. He has never been shy about investing with low returns for a long period of time, even if it means turning down big offers from other companies just to keep Tesla as a unique company. In addition to making big decisions like that, Elon Musk also likes innovative solutions for problems. He thinks that new ideas are always better than old ones, even when they might cost more money. That is why he will ask other companies how they are going to do things instead of trying to figure it out on his own. In short, he is not afraid to do things differently from what has been done before, for the sake of new ideas and innovation. He is also willing to make sacrifices in order to achieve bigger objectives like Tesla Motors — an example of his risk-taking. In examining Elon Musk's leadership style, we can see how it shapes his company culture at Tesla Motors.

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2. Methodology The study is based on observation research methods and its purpose is to establish the cause-and-effect relationship between two variables, which are usually qualitative. Observation research is based on the principle that causation can be established if one or more variables change in a systematic way over time, and that those changes can be observed in real-world settings. Observation research is qualitative because it looks at data from all angles rather than relying on quantitative data. Many hypotheses are created through observation research, and by using different methods to collect data, such as surveys, interviews, physical observations of people or events. Observation research is particularly useful when other techniques are impractical. In an observation research project, data gathered through observation are incorporated into the research process. Data can be collected through experiments, and from samples gathered through surveys and interviews. The data collected by qualitative researchers is one of the most important aspects of their study and it directly affects the conclusions. The quality of the data determines the quality of work produced by an observation research method. Observation research can be applied to any situation where there are human beings interacting with one another in a social structure. Traditionally, observational research methods have primarily been used in social and behavioral sciences, where they have been used extensively, most notably in anthropology, medicine, and sociology. Since the 1990s, scholars who apply these methods for the study of politics have been at the forefront of political science’s quantitative revolution; however, those who apply these methods to study society and culture continue to dominate social science journals. In contrast to many other research methods, the observation research method is not restricted to any specific area of study. This is because there are so many different areas of study. The above mentioned fields often use this method, but it can also be applied in the study of business, humanities, environmental studies and macroeconomics. It can be used when studying public policy or private companies.

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Observation research method is the most common means of gathering data, and can be applied to any situation that does not involve conducting experiments. The most crucial step in an observation research study is correctly specifying how the different variables are related. This task often entails identifying important causal mechanisms and determining when and how they occur. The goal of an observation research project is to determine what happens under different conditions. 3. Literature review In order to research further into how Elon Musk leads his company, we should first understand the different leadership styles there are, along with information about Elon Musk and his company Tesla. 3.1. Leadership styles 3.1.1. Authoritarian leadership (Autocratic leadership) Authoritarian leaders tend to give structure and directive to their group without other opinions, they usually do not use any outside information but their own beliefs to make decisions (The Economic Times, 2019). They expect their group to follow exactly what they want them to do and achieve goals from their instruction (Lorinkova, Pearsall and Sims, 2013). Kanter (2004) finds that directive leaders by concontrolling, monitoring, instructing, and using hierarchical influence, they can monitor the innovation process. This style of leadership can be effective in the environment which has the following features: the nature of work needs clear and quick decisions (The Economic Times, 2019) or the work itself does not require any innovation). Nowadays, in the world progressing with innovation, this leadership style is falling off due to its rigged feature and slow speed to change.

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3.1.2. The Democratic or Participative Leader In the participative leadership style, the decision can be influenced by the members of the group but the final decision still be with the leader, it can shortly be defined as ―shared influence in decision making‖ (Somech, 2006). The democratic leader, through the process of voting or sharing ideas with their employees, can increase the admiration and collaboration from their group to the leader (Dirks and Ferrin, 2002). Let alone the final decision is still in the leader's hand, there is a problem arising from the democratic leadership that may occur between group members during the innovation phase (Yan, 2011). We still can not deny that group discussion and debate, which sometime can lead to group conflict, can increase the creativity and the development of new ideas (Frischer, 1993; Nijstad and De Dreu, 2002). 3.1.3. The Laissez-faire or Delegative Leader Laissez-faire, which means ―let do‖ in French, is a leadership style that allows people to freely exchange ideas and make their own decisions with the minimum responsibility for the leader. This leading style can be explained as ―Abdicates responsibilities to avoid making decisions‖ (Chelte et al., 2007). The leader tends to be involved in the making decision process and avoiding feedback (Zareen, Razzaq and Mujtaba, 2014).

This leadership style requires their members to be experts in a

specific field or they can be an extremely competent group, otherwise this style of leadership can lead to the less competitive and motivative environments for the group compared to other leadership styles (Zareen, Razzaq and Mujtaba, 2014). 3.1.4. Charismatic leadership In essence, charismatic leadership can be defined as those who are essentially very skilled communicators and verbally eloquent, but also able to communicate to followers on a deep, emotional level (Drevitch, 2012).

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Compared to other leadership styles, Charismatic leadership is considered to be more focused on the leaders themselves rather than the method or the procedure (STU Online, 2014). Charismatic leaders tend to provide their employees through emotional methodology rather than point out which tasks should they do. Therefore, the charismatic leader should have a great deal of influence to his or her audience (STU Online, 2014). 3.1.5. The Servant Leader Servant leadership is a style that must mainly meet the demands of others Greenleaf’s (1977). This leadership style tasks included the process of empowering and developing people by ―expressing humility, authenticity, interpersonal acceptance, and stewardship; and by providing direction‖ (van Dierendonck, 2010). Therefore the role of leadership is to fulfill the needs and conditions for every member of the group to develop with their maximum potential. 3.2. The story of Elon Musk Elon Musk, a South African entrepreneur born in 1971, is the world-renowned founder of Tesla Motors and SpaceX, the latter of which launched a historic commercial spacecraft in 2012. As the CEOs of such popular companies, he is often considered one of our generation's greatest entrepreneurial innovators. He traveled to Canada to attend Queen's University in 1989, when he was 17 years old. He graduated from the University of Pennsylvania in 1992 with a bachelor's degree in business and physics. He earned an undergraduate and graduate degree in economics, in addition to another bachelor's degree in physics. Elon Musk began his career as a PhD student in energy physics at Stanford University in California after finishing his study in the University of Pennsylvania.

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Elon Musk is an American entrepreneur and businessman of South African descent who started his business in 1999 and was popular after a short time by his contribution to the X.com website (which is now known as PayPal), SpaceX in 2002, and Tesla Motors in 2003. After that, it was no surprise that Musk became a multimillionaire right away when he had just sold his start-up company Zip2 to a division of Compaq Computers in his late twenties. In May 2012, Musk made headlines on the news when he officially launched the SpaceX, the first private spacecraft in order to reach the International Space Station. He extended his portfolio and established his status as an industry leader by working as an adviser to President Donald Trump in the early days of his term after purchasing SolarCity in 2016. He is predicted to obtain a total net worth of $151 billion as of 2021. Only Jeff Bezos has surpassed him as the world's richest person. 3.3. The history of Tesla Motors Tesla Motors is an American electric vehicle company named after a Serbian American inventor Nikola Tesla and was launched in 2003 by American entrepreneurs Martin Eberhard and Marc Tarpenning who intended to show that driving electric vehicles does not have to be a reconciliation - that they can become better, faster, and more fun to drive compared to traditional gasoline cars. At the very first time, Tesla's chief executive officer (CEO) was Eberhard and Tarpenning was it's chief financial officer (CFO). The company’s funds come from a variety of sources, including PayPal co-founder Elon Musk, who in 2004 committed more than $30 million in the new venture and after that served as chairman of the board of directors in Tesla. Musk in Tesla is the co-founder, CEO, he also works as a product architect, a product designer and development, engineering department.

in charge of the company's product

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Tesla currently focuses on producing renewable energy generating and storage solutions that are infinitely scalable beside maintaining developing automobiles . Tesla strongly believes that ―The faster the world stops relying on fossil fuels and moves towards a zero-emission future, the better‖. The Roadster, which is Tesla's first electric sports automobile, was first released in 2008. It was the first serial production all-electric automobile to employ lithium-ion battery cells, with roughly 2,500 units sold. In 2012, Tesla began shipping its four-door called Model S car, followed by the Model X crossover in 2015. In 2017, The Model 3 is a mass market car that was released with over 500,000 units shipped as of March 2020, it is the world's best-selling electric car at that time. In 2019, the Cybertruck, an all-electric pickup truck, was introduced and next in 2020, their fifth car, the Model Y crossover, was introduced to the world. Tesla has also built additional lithium-ion batteries besides electric car sub assembly factories, including Gigafactory 1 in Nevada and Gigafactory 3 in China, under Elon Musk's leadership. Tesla’s stock has gained dramatically since its initial public offering in 2010 and after a long ride recently it became the most valuable carmaker in the summer of 2020. Tesla manufactures all of its vehicles and the bulk of its components in its own factory in Fremont, California. Tesla has captivated the public with its proactive attitude to safety. As a result, the company requires all workers who work in production to participate in a multi-day training session prior to their first day on the factory floor, in order to accomplish the company's goal of having the safest factories on the planet. Tesla had a total full-time employees amount up to 70.757 until December 31, 2020 and higher about seventy times compared to ten years ago. 4. Analysis of Elon Musk’s leadership 4.1. A short analysis of Tesla under Elon Musk As the CEO of the company, Elon Musk has played a certain role in how Tesla functions and operates, making it one of the unique companies in the world and in the

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automobile industry specifically. Thus, in order to understand Elon Musk’s style of leadership, we should first look at what Tesla excels at under his control. 4.1.1. Tesla’s innovative business strategy Tesla has a rather unique business strategy. It can be separated into two primary elements (Dyer,J. & Furr,N., 2016) as follows: the ways to gain resources and the way Tesla operates. First of all, the first part of the strategy is Tesla’s efforts to win over support and resources in order to fund its production and operation. This effort can be seen in instances such as Tesla’s disastrous introduction of the Cybertruck, the self-acclaimed ―faster than any other production car ever made‖ Roadster 2.0. The researchers proposed that not only Elon Musk is able to use his fame and success as the one among the richest people in the world, founder of SpaceX and Tesla, etc to his advantage to gain leverage and support for his company’s projects, he is also utilizing a method named ―impression amplifiers‖ by the researchers. ―Impresion amplifiers‖ can be understood as whenever Musk is presenting a new idea, he would use other methods in order to ―materialize‖ it to demonstrate and convince others of his capability and ambition. For instance, when Elon Musk was talking about Cybertruck and its capability, he actually brought a prototype on stage to give the audience a more materialized visual of it. Even though it failed to demonstrate what Musk claimed, this action actually generated a large amount of communication and interest on many platforms, gaining almost 200.000 orders of the Cybertruck just within a month (CNBC, 2019). As a result, we can view this as Elon Musk’s finesse in the techniques to build up himself and Tesla Motors and win more support from investors, customers and Tesla’s own employees to keep Tesla operating its best. On the other hand, the other part of...