MSc Management Global Strategy and Sustainability Sample
Part A: Business Report
Introduction
The research will examine Tesla’s business tactics and highlight potential future chances for success in the competitive global sector. Tesco is focused on several creative techniques to keep up with the competitive world of today’s global market. Elon Musk, Martin Eberhard, JB Straubel, Marc Tarpenning, and Ian Wright founded the business in 2003.
With a market value of more than US$600 billion, Tesla is one of the most valuable companies and the most coveted automaker internationally. The primary goal of the company is to supply high-quality electric vehicles to global consumers while preserving the environment.
Task 1: External and Internal Environment
PESTLE analysis
Political
Every country’s political environment both directly and indirectly influences the commercial environment (Stanislavscaia, 2021). Utilizing a variety of government benefits could allow Tesla Inc. to reduce the number of securities it offers.
Economical
The expansion of electric cars, which are becoming increasingly widespread, is largely attributable to the general state of the economy. The economy is anticipated to expand at a rate of 3% annually in 2019 and 2020 (Chehertma, 2022). By 2025, it is predicted that the electric vehicle market will increase from $39.8 billion to $2 trillion.
Social
Pleasant circumstances and behaviours have a significant impact on representatives, clients, and affluent allies. As crucial as other factors, certain circumstances may have an impact on society’s influence on interest in and provision of express objects. These factors affect how different things are perceived and the amount of confirmation they may receive in clear social orders.
Technological
The creation of Tesla’s vehicle and recent game plans depends on cutting-edge technologies. It has an impact on many different parts of the business. Every part of the business is anticipated to significantly benefit from improvement.
Legal
A guideline’s capacity to have an impact on associations all over the world is one of its greatest strengths. As the twenty-first century begins, legal exams are becoming more and more significant. Businesses may be directly impacted by the law in several ways, including through work administration, the board, and various company laws.
Environmental
As environmental deterioration worsens, more focus is being placed on cars and how they contribute to global warming. Gasoline subsidiaries are less well-known and have come under close examination when it comes to air pollution and other prevalent issues. The electric vehicles of Tesla are more reliable and effective considering the factor of being environmentally friendly.
SWOT analysis
| Strengths
● Tesla’s most valuable asset is its cutting-edge technology. ● Tesla’s convenient fast charging locations. |
Weakness
● Competitors might quickly copy the fast charging stations.
|
| Opportunities
● Tesla has the potential to dominate the global market for electric vehicles. ● Tesla has the chance to produce affordable electric vehicles for the general public using cutting-edge new technologies. |
Threats
● Political unrest may prevent the company from benefiting from competitive advantages in both home and international markets. ● Tesla’s brand value could be lowered by legal difficulties and customer concerns. |
Table 1: SWOT Analysis
(Source: Created by the learner)
Three Most critical factors
Power of buyers- Moderate
This component of the five forces analysis looks at how customers affect businesses as well as how battery, solar, and battery-powered group activities affect them. There is little doubt that Tesla’s consumers have an impact on the association’s conclusions. The outside portions’ general strength and the project’s light client organising influence are monitored.
Power of suppliers- Moderate
The opinions of Tesla Inc.’s suppliers have a significant impact on whether the company succeeds or fails. Vendors directly affect an organisation’s capacity to satisfy demand by altering the supply of goods they have on hand. The following external components improve the small organisational power of Tesla’s suppliers.
Competitive rivalry- High
In a highly competitive climate, Tesla, Inc. and its rivals are always at odds with one another. This section of the five forces model describes how disputes affect business strategies and power dynamics.
Competitive Strength/advantage
Figure 2: Tesla’s revenue from 2008 to 2021
(Source: Statista, 2022)
Applying Porter’s generic competitive strategy appears useful for analysing the sources of Tesla’s competitive advantage.
Cost leadership: With this tactic, businesses concentrate on putting into practice a low-cost plan to boost their competitiveness. For example, Amazon competes with major rivals by using a cost-leadership strategy (Jiang, 2021).
Focus strategies: They are a type of competitive tactic that concentrate on a particular geographic market or consumer base. For the targeted segment, the company would only use a differentiation or cost leadership strategy. For instance, Home Depot uses broad differentiation and cost leadership strategies to stand out at a low cost to maintain its dominance throughout a highly competitive sector (Vergassola, 2019).
Differentiation: Organisations use differentiation as a method to maintain their uniqueness by differentiating their goods and services. An enterprise such as Apple introduces new items to markets using a differentiation approach (Hsiao and Hsu, 2018).
Tesla has utilised the cost-leadership strategy to acquire competitive advantages based on these general business tactics. For example, the building of the Gigafactory and the creation of powerful batteries such as the Powerwall and Powerpack resulted in a 30% decrease in the cost of battery cells compared to its rivals (Cooke, 2021). Based on this cost-cutting strategy, Tesla’s competitive advantages currently come from an upgraded battery distribution system, connectivity to superchargers, and the use of cutting-edge equipment to create new products. Many people believe that Tesla’s car batteries are far less expensive than those made by competitors.
Task 2: Strategy in the Global Environment
Tesla motors manufacture and sell fully electric vehicles along with energy storage solutions. The company was incorporated in 2003 and founded by CEO Elon Musk. Tesla offers energy storage and consumer technology as well as clean electricity generation with a mission to accelerate the transition of the automobile sector to sustainable energy. However, the United States is the largest sales market for Tesla. The company in 2021 generated revenue of around $53.8 billion which is a 71% increase from the previous years. More than $47 billion of the revenue has been generated by Tesla Inc from its automotive segment (Statista, 2022).
Despite that expanding into the international market is always effective for organisations with such a growth rate and motive towards sustainability. There are different entry modes organisations follow to enter the international market that includes, including licensing, direct export, joint venture, franchising, foreign direct investment, subsidiaries etc. Previously Tesla opened subsidiaries in different countries as a mode of entering the international market. These market entry strategies for Tesla Inc are as follows:
Tesla market entry strategy
- Market Penetration- Market penetration strategy helps to expand products into new markets aiming towards increasing sales by flooding the products into the market to increase the familiarity of the product to the customer as well as establishing relationships with vendors.
- Licensing- Licensing is referred to the process where a particular corporation or business organisation grants permission to sell or utilise its product by another company. For example, Tesla supports full self-driving by other manufacturers (Thomas and Maine, 2019).
- Export- Exporting strategy is effective when the product is very much popular with worldwide customers and the demand for the product is very high. It involves promoting the products or items in new locations to sell the product to new customers. Although, exporting can be done in different ways including direct exporting and indirect exporting (Businessinsider, 2021). Direct exporting allows companies to sell products directly to the customer in overseas countries whereas indirect exporting involves hiring third-party agents from the foreign market to sell products. For example, Ford motor uses a direct export strategy to promote its product to international clients.
- Strategic alliance- The strategic alliance or joint venture utilises the strength of both companies to achieve global competitiveness. Previously Tesla has formed strategic alliances with various companies including DTN, Catalyst commodities limited, EPSI platform, Maxar, green service consulting and various other companies. In this marketing strategy, two or more companies collaborate which is also known as a joint venture (Businessinsider, 2021). For example, Tesla formed a joint venture with Panasonic to take advantage of the battery technology as well as the intellectual property of the Japanese company. Tesla and Panasonic joint venture helped to form a $5 billion Giga factory in Nevada.
- Market development- That market development strategy can be followed by Tesla in expanding the market development by targeting more customers. In developing markets it requires the least research and development, as well as the risk for the company, is also low (Vig, Suta and Toth, 2022). To boost the sales performance of Tesla the company can target customers under different segments using the market development strategy. Therefore this strategy allows Tesla to present various products under different segments to these customers which can further increase their sales performance.
Justification for the recommended strategy
It has been observed that the motive of Tesla Inc is towards making Tesla the largest automobile and Technology Company with its sustainable approach throughout production. The Tesla Company’s motives are inlined with the company’s strategy towards achieving sustainability by expanding its business and products globally. Hence, the following market entry strategy has some advantages as well as some limitations (Ding and He, 2022).
But selecting the appropriate market entry strategy is very much essential as well as challenging. Amazing the different foreign market entry strategies for Tesla Company forming a strategic alliance as a market entry mode can be the most suitable option. With the increasing demand for automobile batteries and electric vehicles, Tesla company has a huge scope to expand the products into the foreign market this will not only help the company to increase its production but also enhance its consumption rate.
For example, Tesla has already font a strategic partnership with ‘Tencent’ which is a technology firm in China and the second largest Asian take company. As the company develops various technologies related to artificial intelligence for driverless cars, this strategic alliance with Tesla Company to utilise the advancement area in AI technology of the alliance partner (Zhou, 2022).
With this strategic alliance, Tesla Company can effectively make unique electric cars and the research and development of automobiles will also become faster. Along with that the strategic alliance also helps Tesla to reduce the import tax rate in China by 25%. A study previously discussed that Tesla Company has a font partnership with the Japanese brand Panasonic that helps Tesla to receive efficient batteries. Therefore the foreign expansion of Tesla can help to gather highly skilled experts as well as innovative technologies from other companies or countries.
Task 3: Corporate Strategy
Supply chain analysis-
To understand the Tesla Company’s corporate strategy the supply chain network is also significant. Tesla creates, distributes and maintains its products with the existing sales and support infrastructure the supply chain of Tesla includes raw materials, automobile parts, distribution and transportation. The Supply chain process of Tesla involves recycling automobile parts, batteries and many other products.
This involves Market penetration used by Tesla for selling its all products such as electric cars, Model S, Model X as well as Model 3 along with its power pack and other products to the global market (Du and Li, 2021). On the other hand, product development is also a core value of the Tesla company in manufacturing electric cars and power supplies. Currently, Tesla is looking to enter the Indian and other Asian markets because of the huge growth in demand for vehicles.
Figure 3: Tesla Ansoff Matrix for corporate strategy
(Source: created by the learner)
Evaluation of different corporate strategies
Vertical Integration- Vertical integration strategy enables an organisation to make its process simple and gain complete control over the different phases of the manufacturing cycle. Through vertical integration, Tesla can make efficient investments, gain more control over the quality, and production planning, reduce shipping costs, less dependence on suppliers and many other benefits. For example, Tesla may follow a vertical integration strategy by categorising its products under different sections (Economictimes, 2022).
Figure 4: Tesla Vertical integration in different sectors
(Source: Benzinga, 2021)
Horizontal Integration- It is the business strategy where one company grows its different operations at the same level within an industry. This strategy helps to grow in size, and revenue and expand into the international market by offering diversified products. Tesla follows vertical integration instead of Horizontal integration in almost 80% of its operations (Lew et al. 2019). Hence, the scope for vertical integration in Tesla is limited.
Outsourcing- Through outsourcing companies outsource some of the operations or resources that are less important activities where it involves third-party organisations. The advantage of outsourcing is, it enables organisations to be concentrated on their core activities. According to a news report, Tesla is going to outsource their HW 4.0 Tesla’s second-generation self-driving chip from Samsung Electronics (Economictimes, 2021).
Recommendations for profitability
- To increase the profitability of Tesla corporation, the study recommended incorporating a fully vertical integration strategy at Tesla in their business process. Tesla has a manufacturing facility and distribution facility that allows them to sell products directly to its customers. Hence, vertical integration helps to get full control and authority over the activities at Tesla Inc. This vertical integration also helps to manage its supply chain more efficiently along with reducing the operational cost with increasing revenue and profit margins.
- Although Tesla has not yet outsourced any activity throughout the business process. However, the recent motive of Tesla towards utilising outsourcing from Samsung Electronics can be an effective option for eliminating production-related issues as well as allowing the workforce to focus on core business activities including the manufacturing process, marketing and promotion (Wang and Peng, 2020).
Therefore, this outsourcing with Samsung Electronics may help Tesla to be more focused on developing the design and other processes of self-driving cars except for the chip that is to be outsourced from Samsung Electronics as well as it will close down the product launching date.
Task 4: Strategic Purpose- Ethics and CSR
CSR strategy of Tesla
The fundamental idea behind most human achievements is that rules by themselves are insufficient. No matter how much weight laws and regulations give them, society expects enterprises to execute their duties in a morally upright manner. Even if they don’t intend to implement them, organisations that embrace moral obligations demonstrate their willingness to engage in activities that are assumed in any case providing a task and things that satisfy genuine non-material needs.
Most charitable organisations that administer convictions follow these standards, which are important but unsatisfactory. Society expects associations to behave ethically, regardless of the rules and guidelines in existence (Wei, and Zhou, 2022). Moral responsibilities imply that connections will accept the normal behaviours, norms, policies, and systems of a particular example regardless of how they are not resolved in a supervisory capacity.
Economic responsibility
Tesla has performed its economic duties by bringing down fuel costs by producing electric vehicles. This emphasises the need to use more electrical resources produced domestically. Such fuel savings result in greater discretionary income, which might be invested domestically, creating additional job prospects.
Ethical responsibility
Tesla strives to create products that benefit society and the economy to maintain its moral integrity. The company makes sure that workers are valued and that production methods are environmentally sustainable.
Legal responsibility
Regarding legal accountability, Tesla would not accuse anyone of violating their patents if they seek to use their technologies and inventions for constructive purposes (NDTV.com. 2022).
Philanthropic responsibility
Tesla gave St. Jude’s Children’s Research Hospital over $50 million to improve the environment (Moore, 2021). Via Inspiration for a space mission, which will launch an extensive campaign with more than $200 million in goals, this will support research into children’s cancer.
Ethical issues in Tesla
The CEO’s negative effects on production quantities, which totalled 500,000 cars in 2018, an increase of severe per cent over 2016 are mostly felt by workers (Taylor and Bouazzaoui, 2018). To roughly estimate the efficiency of delegates in an office context, researchers can use the total rate of filming. This illustrates the extent to which accidents happen at work.
Another method for calculating the number of days a specialist is away due to injuries that have already been fixed is the minimal commit or move frequency. The Tesla specialist claimed that his companions weren’t considering a battle at this point because they were continually hurt and despondent. In contrast to the normal time-sensitive pay of $25.58 for a car, most Tesla employees receive reimbursements between $17 and $21 (Gonen et al. 2020).
Several issues, such as high injury rates, a lack of compensation, a loss of purpose, and a variety of worries, have combined to make the current situation more severe than at any other time in recent memory.
The Department of Fair Employment and Housing (DFEH) has issued a lawsuit against Tesla, alleging that the corporation is biased towards black employees by segregating them and does not pay attention to their complaints. This presented an ethical dilemma for Tesla (Dfeh.ca.gov, 2022). In addition to that, the lithium-ion batteries used in Tesla’s electric vehicles, which have another negative environmental impact in addition to causing air pollution, are another ethical problem of the company.
Recommendations
It is advised that Tesla hold racial training for staff members every two months to help reduce the problem of racial discrimination. The campaign will raise awareness of subliminal preconceptions, foster empathy, and strengthen interpersonal bonds. To stop racial prejudice, Starbucks, for example, also employed this tactic (Time, 2022).
Along with this, it is advised to utilise an alternative source, such as sodium-ion batteries in cars, to reduce the problems associated with lithium-ion batteries. The low environmental impact will result from this. For instance, CATL created sodium-ion batteries that would enable faster-charging options for electric vehicles (CATL.com, 2021).
Conclusion
The study discusses the importance of sustainable business operations and the internationalisation strategy formation in response to the Tesla company. The study highlights the growth opportunities for Tesla by describing various strategic management of the organisation.
The study also found that to be effective and competitive in the international market Tesla needs to follow a strategic partnership or joint venture that will allow it to manage operations more effectively and also helps to get a competitive advantage.
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