Tesla Motors, Inc.’s Organizational Structure, Characteristics (An Analysis)

Tesla Motors, Inc. organizational structure characteristics advantages disadvantages automotive and electric automobile case study and analysis
A Tesla Model S. Tesla Motors Inc.’s organizational structure facilitates centralized control of the automotive business. (Photo: Public Domain)

Tesla Motors, Inc. has an organizational structure that supports continuous business growth. A company’s organizational or corporate structure is the design and system that defines the patterns of interactions among the company’s components. In the case of Tesla, the organizational structure takes a traditional form, considering the company’s limited approach to its production facility development. As a major producer of fully electric automobiles, Tesla uses its corporate structure to facilitate extensive control of the organization. The company also maximizes its ability to implement new strategies and manage its operational activities through its organizational structure.

Tesla’s organizational structure creates business capabilities that enable strong managerial control despite growing international operations. Thus, this organizational structure supports Tesla’s mission and vision statement, which emphasize global leadership for electric products in the automotive market.

Features of Tesla Motors, Inc.’s Organizational Structure

Tesla has a functional organizational structure. This structure involves organizational function as the main defining factor. Other characteristics observable in other types of organizational structure are also present in the firm’s structure, although at a less significant extent. The following characteristics are significant in Tesla’s organizational structure:

  1. Global hierarchy (most important)
  2. Global centralization
  3. Minimal regional divisions

Global Hierarchy. The most significant characteristic of Tesla’s corporate structure is global hierarchy. Global hierarchy involves functional teams or offices that oversee domestic and international operations. This feature is typically observed in traditional organizational structures, where companies aim to maintain strict control of their operations. In Tesla’s organizational structure, the following functional offices direct and represent the global hierarchy:

  1. Chairman & Chief Executive Officer
  2. Chief Financial Officer
  3. Chief Technology Officer
  4. Vice President – Vehicle Engineering
  5. Vice President – Powertrain Operations
  6. Vice President – North America Sales
  7. Chief Designer
  8. Vice President – Manufacturing
  9. Vice President – Autopilot Hardware Engineering
  10. Vice President – Worldwide Services & Deliveries
  11. General Counsel

Global Centralization. Tesla Motors, Inc. uses global centralization in its organizational structure. The emphasis of global centralization is control on the entire organization through decisions that a central group or team generates. In this case, the head of each office of the global hierarchy form Tesla’s central headquarters, which directly control all operations. In this organizational structure, the company does not support autonomy of its regional or overseas offices. Instead, Tesla’s headquarters make most of the decisions for overseas operations.

Minimal Regional Divisions. This characteristic of the corporate structure focuses on the extent of divisions in Tesla’s automotive business. These divisions are used to implement different strategies and marketing campaigns, and to organize financial records and reports. Tesla’s organizational structure has the following divisions mainly used for financial reporting:

  1. United States
  2. China
  3. Norway
  4. Other

Tesla’s Organizational Structure Implications, Advantages & Disadvantages

Tesla Motors, Inc. benefits from its organizational structure in terms of effective control of global operations. Another advantage is the ease of implementing new strategies throughout the organization. Also, the minimal regional divisions support not just financial reporting and analysis, but also possible future regionalization of strategies and tactics in the automotive business. These advantages empower Tesla to use its organizational structure for further international growth.

However, a disadvantage of Tesla’s corporate structure is the rigidity that limits rapid adjustment in the organization. For example, global centralization is a structural characteristic that limits the ability of overseas offices to readily respond to issues they experience in their respective regional markets. To address this disadvantage, Tesla can reform its organizational structure to increase the level of autonomy of overseas offices. Also, an organizational structure with a higher degree of decentralization tends to be more effective in creating competitiveness against local firms in overseas markets.

References
  • Liao, C., Chuang, S. H., & To, P. L. (2011). How knowledge management mediates the relationship between environment and organizational structure. Journal of Business Research64(7), 728-736.
  • Management – Tesla Motors.
  • Menguc, B., & Auh, S. (2010). Development and return on execution of product innovation capabilities: The role of organizational structure. Industrial marketing management39(5), 820-831.
  • Tesla Motors, Inc. Form 10-K.