I have uploaded the the file: Material you need to read, case requirements,and a Sample’s for you.

The Sample is for Tesla, and you are going to write the case is Mc Donald’s

Please read the material first, because everything you write include financial analysis base on the Material, not Google.

You can create chart for Sales Growth, Earning Growth, or Market share etc if you want.

Please Everything you write base on MATERIAL!!!!!

If you have any questions, just let me know.

(P.S the material include three companies : Tesla, Mc Donalds, and Amazon, you just need to read Mc Donald’s corporation which around 20 pages )

Please No plagiriasm!

Tesla Motors, Inc. Me Graw Hill Education MHE-FTR-032 1259420477 REV: MARCH 12, 2015 FRANK T. ROTHAERMEL DAVID R. KING Tesla Motors, Inc. January 1,2015. Elon Musk, chief executive officer (CEO) of Tesla is taking it easy on this New Year’s Day. While having his coffee, he scrolls through some recent issues of The Wall Street Journal on his iPad. A headline from one current story jumps out at him, “Gasoline prices have declined for 88 consecutive days, the longest streak of falling prices on record.”^ The slide in gas prices, which began in September 2014, also happened to coincide with the slide in Tesla Motors (TSLA) stock. With increasing oil, and therefore gas, prices, people had an incentive for purchasing electric cars. Now with gas prices drop­ ping, the incentive to buy would start to become less of one, and the demand for the product would probably drop. This was one of the challenges facing Musk on this New Year’s Day. In addition to hav­ ing to contend with lower selling costs due to rising production, Tesla was also confronting increasing competition and economic headwinds that were likely going to lower the demand for electric cars. Musk is a serial entrepreneur longing to leave a legacy, and he believes that Tesla just might be the company that will help him leave his mark. He has a large profile already and has been described as “Henry Ford and Robert Oppenheimer in one person,” as well as “Tony Stark, the eccentric inventor better known as Iron Man.”^’^ (In fact. Musk made a cameo appearance in Iron Man 2.) But, with sev­ eral pressing issues and the additional demands of running SolarCity and SpaceX, can he find a way to make it all work? As Musk attempts to prioritize all of the critical information that must be reviewed, he contemplates the many obstacles in his path at Tesla Motors. Is Tesla the next great American car company? Can it disrupt the market with electric vehicles just as Japanese and Korean car companies did in the past with their high-quality, low-fuel-consumption combustion vehicles? What is the competition doing to compete with Tesla, and how will Tesla need to change or adjust its strategy accordingly? Can an electric-car company really gain a competitive advantage with a limited infrastructure? Is Tesla’s busi­ ness model sustainable? Most importantly, can Tesla scale production to meet demand for the Model S and its upcoming Model X, while also maintaining the same high quality and simultaneously driving down costs? Should Musk consider instead selling to an established car company or partnering even more closely with one that already has an equity stake in fesla? As Musk reads The Wall Street Journal article, he reaches for his cup of coffee and wonders, “What will the next few years bring for this company, and what should I do to ensure its success?” Professors Frank T. Rothaermel and David R. King prepared this case from public sources. We gratefully acknowledge Professor Erin Zimmer’s contribution to an earlier version of this case, and Research Associate Michael McKay’s assistance in data collection. This case is developed for the purpose of class discussion. It is not intended to be used for any kind of endorsement, source of data, or depiction of efficient or inefficient manage­ ment. All opinions expressed, and all errors and omissions, are entirely the authors’. © by Rothaermel and King, 2015. Rothaermel, Strategic Management:Concepts and Cases Tesla Motors, Inc. Elon Musk: Engineer Entrepreneur Extraordinaire In 1989, Elon Musk left his native South Africa at age 17 to avoid being conscripted into the army. Says Musk, “I don’t have an issue with serving in the military per se, but serving in the South African army suppressing black people just didn’t seem like a really good way to spend time.'”^ He went to Canada and subsequently enrolled in Queen’s University in 1990. After receiving a scholarship. Musk transferred to the University of Pennsylvania. He graduated in 1995 with bachelor’s degrees in both economics and physics and then moved to California to pursue a PhD in applied physics and material sciences at Stanford University.® After only two days. Musk left graduate school to foimd Zip2, an online provider of content pub­ lishing software for news organizations, with his brother, Kimbal Musk. Four years later, in 1999, com­ puter-maker Compaq acquired Zip2 for $341 million (and was in turn acquired by HP in 2002). Not one to stand still, Elon Musk moved on to co-foimd PayPal, an online payment processor. In 2002, eBay acquired PayPal for $1.5 billion, netting Musk $175.5 million for his 11.7 percent share of the company. Although it was financially lucrative. Musk still harbors resentment about this deal. He feels that letting eBay acquire PayPal sold short the company’s potential, dooming it to a futme as a niche tool rather than a laxmch pad for a full-fledged, online financial institution. Musk describes himself as an “engineer and entrepreneur who builds and operates companies to solve environmental, social, and economic challenges.”® He is now leading firms on three different fronts: electric cars, renewable energy, and space exploration. Two of his three ventures—^SolarCity and SpaceX—seem to be doing well. SolarCity’s goal is to become the Walmart of solar-panel installations, and in 2014 it installed 34 percent of solar panels in the United States.^ SpaceX aims to send satellites into orbit at a quarter of the current cost. Since Musk took over engineering responsibilities, he has managed to laimch rockets that reach outer space successfully. In May 2012, SpaceX’s Dragon space­ craft attached to the International Space Station, exchanged cargo payloads, and returned safely to Earth. Until then, only governments had accomplished this technically challenging feat. More recently, SpaceX has taken over resupply missions to the International Space Station, has begim collaborating with NASA on a mission to Mars, and is working with Boeing to develop a market for commercial space passengers.® Although crowned “2007 Entrepreneur of the Year” by Inc. magazine. Musk feels that his personal ambitions have not yet been fulfilled. Many in California’s venture-capital and high-tech community view Elon Musk as someone who has good ideas and breathes life into risky ventures but then fizzles out on them. He aims to prove them wrong. As a result. Musk’s dreams for Tesla Motors, the Californiabased designer and manufacturer of electric vehicles, are big; he wants to leave a legacy through this company. Thus, after firing three CEOs in the last few years. Musk is now leading the company himself. A Brief History of Tesla Motors Tesla Motors (TSLA) was founded in 2003 in San Carlos, California, as an automobile company dedi­ cated to developing electric vehicles. Co-founder Elon Musk was also one of the first investors, putting up $7 million initially, and later an additional $30 million. 2 Tesla Motors, Inc. Tesla Motors, Inc. Tesla Motors held a design contest for the styling of its first product: the Roadster, code-named “Dark Star.” Lotus Cars, a British manufacturer, won the contest and jointly engineered and manufac­ tured the new vehicle. Lotus was a natural partner for this project because of its experience and exper­ tise in building its own line of sports and racing cars. In fact, the Tesla Roadster was modeled using the Lotus Elise as a template. The partners designed the Roadster’s chassis using Lotus software tools and had it was manufactured by the same Norwegian company that built the EUse. In December 2006, Time magazine hailed the Tesla Roadster as the best invention of the year in the transportation category. In 2007, however, it became clear that sales were not enough to sustain busi­ ness; the company was bleeding money. After combing through Tesla’s financial situation. Musk foxmd that Tesla was losing $50,000 on each car sold. As CEO, Martin Eberhard had led investors to believe that the manufacturing of the Roadster cost only $65,000 per car, which appeared to justify the $92,000 sticker price. In reality. Musk foimd that it cost Tesla $140,000 just for the parts, subassemblies, and supplies to make each vehicle, and that the Roadster could not even be built with Tesla’s current tools. He also discovered major safety issues with the existing design. Completely taken aback by the messy state of affairs. Musk commented, “We should have just sent a $50,000 check to each customer and not bothered making the car.”® Consequently, Musk fired Martin Eberhard and took over the engineering himself. Almost every important system on the car, including the body, motor, power electronics, transmission, battery pack, and HVAC, had to be redesigned, retooled, or switched to a new supplier. Such dramatic changes were necessary to get the Roadster on the road at something close to the published performance and safety specifications, as well as to cut costs to make the Roadster profitable.^® Tesla Motors launched a completely redesigned Roadster in 2008 at a base price of $109,000.^^ By December 31,2009, Tesla had 514 employees and had sold 937 Roadster models in 18 coimtries aroimd the world. More than 1,200 additional people had put in deposits to reserve a Roadster, giving the com­ pany $70 million in interest-free loans. Three years later, on December 31, 2012, Tesla had sold more than 2,450 Roadsters.^^ The 2008 version of the Tesla Roadster had been discontinued and replaced with a new model, the Tesla Roadster 2, with an improved electric powertrain performance and lower production costs. The Roadster Sport, which accelerates from zero to 60 miles per hour in 3.7 seconds (faster than a Porsche 911 GT), was the next vehicle added to the pipeline. By end 2012, Tesla Motors discontinued production of the Roadster altogether. In March 2009, Tesla introduced to the public an early prototype of the Model S family sedan. By year-end, Tesla had received approximately 2,000 customer reservations for the car, with a minimum down payment of $5,000 each. The prototype had turned into a premium sedan and garnered approxi­ mately 12,000 reservations by June 2012.^® Tesla manufactures the Model S in the Fremont, California, factory that it purchased from Toyota for $42 million in May 2010.’^ The car seats five adults, goes from zero to 60 in 4.4 seconds, and has a per-charge range of over 300 miles for the high-end version. As Musk described the electric car’s efficiency and range on Tesla’s blog, “With the 85 kWh Model S bat­ tery we set a goal of delivering a range greater than 300 miles using the 2-cycle EPA test procedure that we used with the Roadster. This is a goal that no electric vehicle (EV) in history had ever achieved. We are thrilled to say that we exceeded this goal.”^® One University of Central Florida senior researcher traveled more than 423 miles on a single charge in his Model S Signature model, which boasts the larger 85-kilowatt-hour battery.^® Rothaermel, Strategic ManagementrConcepts and Cases Tesla Motors, Inc. Deliveries of the Model S began on June 22,2012, and positive feedback followed. As of December 2012, there were over 20,000 reservations for the vehicle, and Tesla was producing some 500 cars a week by the summer of 2013.^’’ The base price of the Model S has been $52,400 (after a $7,500 tax deduction) since January 1, 2013.^® The automobile magazine Motor Trend gave the Model S glowing endorse­ ments, stating, “By any measure, the Tesla Model S is a truly remarkable automobile.”^® In an attempt to build on its success with the Model S, Tesla has begim work on a newly designed seven-seat electric vehicle, the Model X, which will combine the best features of an SUV with the ben­ efits of a minivan. Following several delays, Tesla plans to deliver the first Model X in late 2015.^® In 2014, Telsa annovmced that after the Model S and Model S, the next car it will produce is the Model 3.^^ With this new model, Tesla attempts to enter the mass market with a smaller vehicle that will cost aroxmd $35,000 and has a range of 200 miles per battery charge. The Model is slated to go sale in 2017. Tesla completed its IPO on June 29, 2010, the first IPO by an American automaker since Ford in 1956. On the first day of trading, Tesla’s shares closed at $23.89 and generated $226.1 million for the company.^^ Despite Ihis, in its first annual report, Tesla reported an operating loss of $146.8 million.^ Losses continued until the first quarter of 2013, when Tesla aimoimced its first profitable quarter in 10 years, with a GAAP profit of $11 million (see Exhibit 1). Investors responded in kind to the black ink in Tesla’s ledger, causing a surge in the stock price, and pushing Tesla’s stock up over $280 per share in early September 2014 before starting to slide (see Exhibit 2). A compotmding problem is that Tesla has depended on $3 billion in convertible debt to finance capital investments, and Tesla stock needs to appreciate around 160 percent over the next six years to avoid repa3unent or refinancing at higher interest rates.^’^ The U.S. Automotive Industry The Big Three automakers—GM, Ford, and Chrysler—^have dominated the U.S. automotive indus­ try for decades (see Exhibit 3). GM was once the leading U.S. carmaker, with a market share of over 50 percent in 1962. By 2009, GM’s market share had eroded to less than 20 percent, while the market share of the Big Three combined dropped below 50 percent for the first time ever.^ GM and Chrysler filed for bankruptcy, while Ford was fighting hard to become profitable again. What had caused their decline? In the 1990s, the Big Three shifted resources away from mid-size and compact cars to lead the “SUV craze.” They built their business models around the assumptions that gas prices would remain low for the foreseeable future and that Americans would continue to prefer big trucks and SUVs. For as long as these assumptions held true, the strategy was quite profitable; pickup trucks and SUVs provided the highest margins of any vehicle class. In fact, the Ford F-150 pickup truck remains the most-sold vehicle in the United States of all time. For a while, the Hummer 1 (with gas mileage of 7 mpg) was one of GM’s most profitable vehicles. However, when SUV sales peaked in 2004 and started to decline, the Big Three were slow to detect and adapt to the shift in customer purchase patterns. Then, in the wake of the 2008 financial crisis, U.S. car sales hit a historic low of some 11 million vehicles, down from 18 million in 2000; While the price of a gallon of gas rose to over $4 in the summer of 2008, up from about $2 in 2005, there was a dra­ matic reduction in demand for new vehicles with trucks and SUVs particularly hit hard. However, by December 2014, gas prices had fallen to below $2 a gallon on average in the United States (see Exhibit 4) contributing to people buying trucks again.^® Tesla Motors, Inc. Tesla Motors, Inc. GM woes. ,*„„,^« could .«.« T™dSeffiS?c2. wSoSr, “ go7™” subsidies tteough «x inceudves – Ve. becau^ mW S oCSm’s late force, GM could uo. take app»pri,te acdous to urduca its £b<^ex[am»s, either by brying off workers or by negotiating more competitwe wages. Bankruptcy was inevitable. The GM that reemereed 60 days after the bankruptcy filing had a significantly restructured balance iESs’;z7=:s^^~°s=ssr^.^ $5.ti billion to buy odc^ a migc ^ om T Overall the U.S. government lost about $10 S^S^’^MtsSs^ilh^rdolla? investment in GM.^^ Meanwhile, in 2014, GM ™ui^“d a record number or automobUe recalls, including ignition switches attributed to several deaths. CHRYSLER In 1998 German car manufacturer Daimler paid $36 billion to acquire a troubled Chrysler arniiisition gave Chrysler entry into European markets, created a larger, complementary product Ime cSrjd SlSSv.n?,ud msss-Lcke. cte while Daimle, specialised in luxury sedans and sports cars), and provided both companies with increased market power. However the management cultures of the two companies clashed, and DaimlerChrysler never declared Chapter 11 bankruptcy on Apnl 30,2009. Rothaermel, Strategic ManagementConcepts and Cases Tesla Motors, Inc. At this point, the federal government intervened, paying $6.6 billion to finance the company s restructuring into the “New Chrysler.” Of that amount, 55 percent was owned by a pension fund and 25 percent by the Italian carmaker Fiat, with the U.S. and Canadian governments holding mmority stakes.^-^ Subsequent restructuring reached an important milestone with Fiat Chrysler beginning trading on the New York Stock Exchange on 13 October, 2014.^ Fiat provided Chrysler with a platform for smaller, more fuel-efficient cars and access to Fiat’s global distribution network. Chrysler hoped to realize cost savings in design, engineering, manufacturing, purchasing, and marketing, while Fiat gained significant access to the U.S. auto market. FORD Ford, on the other hand, had raised $24.5 biUion in capital by mortgaging almost all of its assets dur­ ing the height of the financial bubble, giving it access to a large line of credit.^® This included Ford s trademark blue oval that it did not regain control over until May 2012.^^ While supporting GM’s and Chrysler’s requests for a government bailout. Ford did not request, nor did it receive, any government funding. With attractive new models, such as the Ford Focus and the redesigned Ford Explorer, the company is currently experiencing a renaissance. In October 2012, Ford posted a $1.6 billion third-quarter profit, a consequence of the successful implementation of its strategy of charging more for its vehicles while spending less to develop them. According to its chief financial officer, Robert Shanks, “If you go back 5 or 10 years ago, we had very good margins on our trucks … we did OK on larger SUVs … we didn t do particularly well on the large cars and we just lost massive amoimts of money on the other cars.” Now, Shanks noted. Ford makes money on its small cars as well as its large vehicles. “That is a huge change from where we were.”^ Ford has developed eco-boost technology that is improving fuel economy in its larger cars, as well as considering a move into electric vehicles.^^ FOREIGN COMPETITION Since the first oil price shock in 1973-1974, foreign car manufacturers have made steady inroads into the U.S. market. Investing more in research and development, compared with the Big Three, German, Japanese, and Korean carmakers were perceived to offer vehicles of higher quality, more advanced engineering, and better fuel efficiency. Because they were not burdened with health care and pen­ sion costs, the foreign companies could also make and sell their vehicles at lower prices (leading to increased sales and/or higher margins). By November 2012, Japanese automakers Toyota and Honda were number three and five in sales volume in the United States, respectively. Nissan Qapan), Hyundai (Korea), and Kia (Korea) have also become strong competitors in the U.S. market.^® Japanese carmakers Toyota and Honda have long been considered the leaders in producing highquality, fuel-efficient cars. Toyota has always been Japan’s largest automaker, and in early 2009, it overtook perennial world leader GM in both production and sales. Since then, GM and Toyota have exchanged positions several times for the top spot in total worldwide sales. Honda is Japan s secondlargest automaker and ranks fifth in the world, behind GM, Toyota, Volkswagen, and Ford. Due to Voluntary Export Restraints (VERs) enacted by the Reagan administration in 1981, Japanese companies have invested heavily in U.S. production facilities. Japanese plants are typically non-unionized and Tesla Motors, Inc. Tesla Motors, Inc. are located in the southern United States, where the costs of living are lower, away from their no …
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