Tesla Inc.’s Organizational Structure & Its Characteristics (Analysis)

Tesla Inc. (Tesla Motors, Inc.) organizational structure characteristics, advantages, disadvantages, electric automobile and battery business analysis
A Tesla Model S sedan. Tesla Inc.’s (formerly Tesla Motors, Inc.) organizational structure and its characteristics facilitate centralized management of the global automotive and energy solutions business. (Photo: Public Domain)

Tesla, Inc. (formerly 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 this business analysis case of Tesla, the organizational structure takes a traditional form, considering the company’s managerial focus and control, along with limited operational expansion in the global market. For example, as a manufacturer of electric automobiles, batteries, solar panels, and related transportation and energy solutions, Tesla Inc. uses its corporate structure to facilitate extensive control of the organization. Elon Musk’s leadership effectiveness depends on the corporate structure’s ability to disseminate and support the implementation of new strategies for business growth and improvement. The company maximizes its ability to implement new strategies and manage its operational activities and objectives through its organizational structure. Tesla’s operations management is dependent on the effectiveness of the business structure in supporting strategic changes and implementations.

Tesla Inc.’s organizational structure creates capabilities that enable strong managerial control of the business despite its growing international operations. Growth increases complexity and challenges. For example, global expansion requires a broader set of considerations to succeed in implementing Tesla’s generic strategy for competitive advantage and intensive strategies for growth. The corporation’s structural characteristics help maximize top-level managers’ information regarding these challenges, empowering them to respond accordingly. Thus, this corporate structure supports Tesla’s corporate mission and vision statements, which emphasize global leadership in the automotive and energy solutions markets.

Tesla Inc.’s Organizational Structure Type & Features

Tesla has a functional or U-form organizational structure. The unitary-form (U-form) structure uses organizational function as the main defining factor. For example, the company has a structural group of employees for engineering, and another for sales and service. Some structural characteristics of other types of corporate structure are also present in Tesla, although at a less significant extent. In this company analysis case, grouping based on business function stands as the most significant feature. The following characteristics are significant in Tesla’s organizational structure:

  1. Function-based hierarchy (most important)
  2. Centralization
  3. Divisions

Function-Based Hierarchy. The most significant characteristic of Tesla’s corporate structure is the function-based hierarchy in its global organization. This hierarchy involves functional teams or offices that oversee domestic and international operations. This feature is typically observed in traditional corporate structures, where companies aim to maintain strict managerial control of their operations. In this business analysis case of Tesla’s organizational structure, the following functional offices direct and represent the global hierarchy:

  1. Chairman & Chief Executive Officer
  2. Finance
  3. Technology
  4. Global Sales and Service
  5. Engineering
  6. Legal

Centralization. Tesla, Inc. uses centralization in its corporate structure. The emphasis of centralization is managerial control on the entire organization through decisions that a central group or team generates. In this case, the heads of the offices of the global hierarchy form the corporation’s central headquarters, which directly control all operations. In this organizational structure, Tesla minimally supports the autonomy of its regional or overseas offices. The company’s headquarters make most of the decisions for overseas operations.

Divisions. This characteristic of the corporate structure focuses on the extent of geographical or other types of divisions in Tesla Inc.’s automotive business. These divisions are used to implement different strategies and marketing campaigns, and to organize financial records and reports. The company’s main divisions in its corporate structure are (1) Automotive and (2) Energy Generation and Storage. These divisions are less significant compared to the function-based hierarchy of the organization. Also, Tesla’s organizational structure has the following geographical divisions mainly used for financial reporting: (1) United States, (2) China, (3) Norway, and (4) Other.

Tesla’s Corporate Structure: Implications, Advantages & Disadvantages

Tesla, Inc. benefits from its corporate structure in terms of effective managerial control of multinational operations. Another advantage is the ease of implementing new strategies throughout the organization. Also, the regional divisions support financial reporting and analysis, and provide the foundation for future regionalization of strategies and tactics in the international automotive market. These advantages empower Tesla to use its organizational structure for further international growth and to build competitiveness against Toyota Motor Corporation, Honda Motor Company, Nissan Motor Company, General Motors Company, Volkswagen, Bavarian Motor Works (BMW), and other car manufacturers. The organizational structure enables the company to centrally control the development of competitive advantages.

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 autonomous ability of overseas offices to readily respond to issues they experience in their respective regional markets. To address this disadvantage, it is recommended that Tesla Inc. reform its organizational structure to increase the level of autonomy of overseas offices. A corporate structure with a higher degree of decentralization tends to be more effective in creating competitiveness against local firms in overseas markets.

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