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TESLA Accounting Behavior and Organisations Major Report

Jessica Isola s3784159 RMIT University

JESSICA ISOLA: S3784159 Executive Summary: This report provides an analysis and evaluation of Tesla and their strategies and balanced scorecard. The findings of this report were gathered from journal articles and other reports in order to illustrate and discuss the business operations of Tesla and to help develop a strategy map and balanced scorecard. As well as this this report, more specifically identifies and describes Tesla’s competitive strategy of differentiation and goes into detail about their mission and vision statements which interrelate to being an environmentally conscious company and providing for a cleaner energy generation. In order to accurately and descriptively create a report that outlines all of this things, thorough research was needed as well as a proper and useful understanding of the business operations within Tesla and their industry. Introduction The report begins with an introduction of Tesla and their values and then delves into the competitive strategy of differentiation within the company and how it is implemented and achieved through key success factors. This report pays particular attention to The Balanced Scorecard and each of its perspectives, being financial, customer, internal and learning/growth. Through thorough research, this report highlights each perspective and their strategic goals which in turn contribute to Tesla’s success in the automotive and Technology industry. This report addresses Tesla in two parts, part one being their company strategy of differentiation and all it entails and part two being The Balanced Scorecard of the company. PART 1: Section 1: Tesla was founded in 2003 by engineers that wanted to prove to the world that there wasn’t a need to comprise in order to have an electric car. Tesla’s mission is to “Accelerate the worlds transition to sustainable energy”, by being an electric vehicles company, producing a cleaner energy generation and creating storage products. Founded in 2008, Tesla was on a mission and still is to move towards a zero-emission future that doesn’t rely on fossil fuels, through battery technology and electric powertrains. Another major goal to their company is having the safest factories in the world, they work towards this by requiring production employees to have a multi-day training program on safety in the factories before they begin to work. As well as this on-the-job training is provided for all employees, in order to maximise manufacture and productivity. Through manufacturing a unique set of energy solutions, Tesla aims to enable renewable energy for future generations and provide clean transport and energy production. Tesla’s current competitive strategy is differentiation, differentiation is whereby a company has a distinct product or service from what its competitors offer, however customers need to understand what sets the company apart from its competitors for this

JESSICA ISOLA: S3784159 strategy to be successful. Tesla uses the strategy of differentiation as they provide customers with an alternative to the generic petrol cars, whilst still offering a competitive price. As well as this, Tesla sells directly to their customers, they don’t use franchises or car dealerships like most automotive businesses, as they want to be connected to the customer and have no conflicts of interest. Tesla provides customers with cutting edge technology that’s built in, a unique design and easy buying, as well as this they were the first to introduce and offer semi-autonomous driving. Elon Musk the co-founder and CEO of Tesla connects to customers directly and responds to their requests for product redesigns almost immediately, giving a customer experience that excels other businesses. Part of the reason stock has soared since Tesla’s initial public offering is because they keep on top of sales and service, all of which helps them in differentiating them from their competitors.

Section 2: According to RMIT, 2021, Key Success Factors represent the most important areas on which a MAS should focus its procedures, routines and techniques for:  Planning  Monitoring plans  Evaluating performance  Comparing performance against competitors  Directing and motivating behaviour  Providing feedback  Rewarding performance

As Tesla’s current strategy is differentiation, the three Key Success Factors linked to this strategy that we are focusing on are, Product Quality, Marketing and Buyer Loyalty. Product Quality means zero defects, and products with the upmost quality that ensure customers are gaining the most value they can from the product. In the case of Tesla, product quality assists them in achieving differentiation as if they continue having such high quality in their products then they are contrasted to other company’s whose quality may not be as enhanced and respected. Through always creating new ideas and having updates on their products, the quality for customers is increased and therefore they may have a better experience with Tesla as companies, which helps them advance their differentiation strategy. The second key success factor that can assist Tesla in achieving differentiation is Marketing. In order for Tesla customers to perceive the high quality and uniqueness of Tesla great marketing is needed so that it is outlined to the customers clearly and therefore the chances of them buying the product are likely to increase as they are made aware of just how well Tesla differentiates and how they can gain such a unique product. Buyer Loyalty entails maximising repeat customers and creating values similar to those of your customers. This Key Success Factor can help Tesla in achieving differentiation as Tesla connects with their customers and as stated above tries to meet their requests in

JESSICA ISOLA: S3784159 order to produce a product for them that not only aligns with environmental values but also creates an experience for customers like no other as they connect with them so well, that it makes them want to come back and continue purchasing with Tesla. The differentiation strategy is very suitable for Tesla as they are a technology company always looking for new ways to improve their products and create unique products, that are superior and different to their competitors as they are not just a generic automotive company, they have a high involvement in technology as well. As well as this Tesla automobiles are highly distinctive as customers are able to customize their cars, there is regular software updates to improve the technology, there is solar panel and supercharging compatibility which is rare in the automobile industry and there are selfdriving features. All of which explain just how well Tesla differentiates and how this strategy works so well for them in engaging and gaining customers to increase sales. PART 2: Section 1: The strategy map below includes strategic objectives that will be seen in the balanced scorecard. Each perspective being financial, customer, internal and learning and growth, have three or more strategic objectives linked to them in order for the balanced scorecard to be made. Each perspective and its strategic objectives can be seen below. The Learning and Growth Perspective includes the strategic objectives of aligning employees and organisational goals, staying current with automotive and technology trends, training employees and empowering workers. These strategic objectives will help Tesla achieve their vision and mission statements as through achieving these objectives Tesla will be able to produce more electric cars through keeping up to date with new technology as well as training their employees effectively. As well as this their vision can be achieved because through aligning employees and organisational goals, it will be made easier for Tesla to create this compelling company that they envision. The Learning and Growth Perspective connects the core of the strategy map for Tesla, this is because through initiating these strategic objectives, a domino effect can be created creating the Internal Perspective strategic objectives which then leads to the Customer and Financial Perspectives also. An example of this is the strategic objective of empowering workers, this objective leads to improved manufacturing and quality for Tesla, which then effects customer satisfaction and retention, which ultimately results in increased revenues, profits and firm value for Tesla (seen through the arrows in the strategy map). Three recommended measures that would be included in the balanced scorecard for the Learning and Growth Perspective strategic objectives are, staff productivity levels, staff motivation levels and the percentage increase of staff trained within the business. Through these measures, progress of these strategic objectives can be assessed as they measure the effect of these objectives and how well they are being implemented within Tesla. The Internal Perspective has two strategic objectives that will help Tesla achieve its mission and vision statements are improving quality and improving manufacturing. This is because through improving product quality and manufacturing Tesla will be able to mass produce their products as well as create a business that allows for huge success. This perspective links to each other perspective as firstly, it cannot be achieved well

JESSICA ISOLA: S3784159 without the success of the learning and growth objectives, and through achieving this perspective, the financial and customer perspective objectives can be achieved also. An example of this which can be seen below in the strategy map, is the link between the strategic objective of improved quality that leads to increased customers, and therefore increased sales leading to revenue, as explained previously. Recommended measures for this perspective are percentage of defects and overall operating efficiency, these measures assist in assessing the achievement of these objectives as they show if Tesla is improving periodically in their percentages. The Customer Perspective includes the three strategic objectives of increasing customer satisfaction, increasing overall customers and improving customer retention. These strategic objectives will assist Tesla in achieving their vision and mission statements as through improving the customer experience Tesla is able to increase their market share and become one of the top competitors within the industry, through satisfying their customers and gaining new ones. The effect of achieving these objectives is profound, as not only does it link to great financial success, but this also links to increased motivation in staff and better manufacturing and quality. Some measures that can exhibit Teslas success in these objectives are, customer satisfaction survey ratings and the percentage of new customers as well as returning customers., these contribute to the assessment of these objectives as they capture how well Tesla is communicating and achieving their customer needs. In the Financial Perspective, the three strategic objectives are increasing firm value, growing revenues and growing profits and operating income. These strategic objectives will help Tesla achieve their vision and mission statements as through increasing their profit margins and revenues as well as firm value. The strategic objectives of the Financial Perspective link to each other and create a cause-and-effect relationship between them, for example through increased revenue, more profitability for the business can be gained. Tesla is able to better achieve their desires through increased funds within the business. Tesla’s market value, as well as their percentage increase in revenues and gross profit margin, are all measures of how well they are achieving these strategic objectives, and therefore help assess their success in these objectives. Section 2: An aspect of the balanced scorecard that needs to be incorporated is the social and environmental responsibility of Tesla. Through research it was discovered that the integration of the environmental issues in the BSC perspectives is appropriate for environmentally orientated organisations and provides opportunities to increase financial outcomes (i.e., the organisation’s success within markets) (Figgeet al., 2002). Due to Tesla being an environmentally orientated company, it is therefore important for there to be social and environmental responsibility ideas incorporated into the balanced scorecard. It was found that there is four ways to incorporate this, by adding a sustainability perspective only (additional perspective); partial integration into existing perspectives; or full integration into existing perspectives and integration across existing perspectives whilst simultaneously adding a dedicated perspective (extended model) (Hanson and Schaltegger, 2016), however, in this report the partial integration method was used. It

JESSICA ISOLA: S3784159 was found by (S. Khalid, C. Beattie, J. Sands & V. Hampson, 2019) that the integration of the environmental issues within two of the existing perspectives is more practical, rather than under just one of the existing perspectives. Therefore, the environmental and social responsibility of Tesla was incorporated into the financial and internal perspectives in this balanced scorecard. The balanced scorecard creates value for Tesla as it allows them to understand how they can achieve their objectives in all aspects of their business and create targets to better understand exactly how they achieve these objectives. Through having targets, Tesla is able to see whether or not they are achieving these objectives sufficiently enough and also compare their performance periodically to notice and understand trends within the business and industry and ultimately how well they are performing against their competitors and within their industry. STRATEGY MAP: Mission: “To accelerate the advent of sustainable transport by bringing compelling mass-market electric cars to market as soon as possible” Vision: “To create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles”

FINANCIAL

CUSTOMER

INTERNAL

LEARNING & GROWTH

JESSICA ISOLA: S3784159

FINANCIAL

CUSTOMER

BALANCED SCORECARD: OBJECTIVES MEASURES  Increasing firm  Market value value  Percentage increase in  Grow Revenues revenues  Grow profits and  Gross profit margin operating income Social and  Amount of costs spent Environmental: in clinical wastage - Reducing costs in clinical wastage  Increase customer  Customer satisfaction satisfaction survey ratings  Increase overall  Percentage of new customers customers  Improve customer  Percentage of existing retention customers Improved quality Improved manufacturing Social and Environmental: - Reducing carbon footprint in manufacturing  Aligning employees and organisational goals  Staying current with automotive and technology trends  Training employees  Empowering workers  

INTERNAL

LEARNING & GROWTH

 

     

Percentage of defects Overall operating efficiency

How well the whole life cycle of a product is used Increased recycling Staff productivity levels Amount of time spent researching new technology Percentage increase of staff trained within the business Staff motivation levels

TARGETS  + 10% increase 

+ 10% increase



+ 12% increase



15% reduce



Between 8-10 /10 on survey



80% increase



85% increase



0



25% increase



15% increase



INITIATIVES  Increase marketing



Customer loyalty scheme



Quality management system

80% increase





10 hours more



More on the job training Technology workshops



80% increase



90% increase

Conclusion: Its concluded that Tesla strives to reduce their carbon footprint and be a competitive business within the automotive and technology industry whilst doing so, through moving future generations towards cleaner energy.

JESSICA ISOLA: S3784159 Through the Balanced Scorecard Tesla can achieve this and monitor how well they are achieving their mission and visions, as well as continue to grow and better the environmental future of many generations to come. References: RMIT 2021, ‘Accounting Behaviour and Organisations’ PowerPoint slides, ACCT1014, RMIT University, Melbourne. Eldenburg, L., Brooks, A., Oliver, J., Vesty, G., Dormer, R., Murthy, V., & Pawsey, N. (2020). Management accounting(4th edition). Milton: John Wiley & Sons Australia. Salim Khalid & Claire Beattie & John Sands & Veronica Hampson, 2019. "Incorporating the environmental dimension into the balanced scorecard: A case study in health care," Meditari Accountancy Research, Emerald Group Publishing, vol. 27(4), pages 652-674, Hansen, E.G. and Schaltegger, S. (2016), “The sustainability balanced scorecard: a systematic review of architectures”, Journal of Business Ethics, Vol. 133 No. 2, pp. 193221. Figget, F., Hahn, T., Schaltegger, S. and Wagner, M. (2002), “The sustainability balanced scorecard–linking sustainability management to business strategy”, Business Strategy and the Environment, Vol. 11 No. 5, pp. 269-284....