MSc Management Global Strategy and Sustainability Assignment Sample
Introduction
Global strategy can be defined as a strategic approach utilised by organisations for gaining a competitive edge in the market. Sustainability can be defined as societal goals with three dimensions: economic, social and environmental. Organisations adopt global strategies for gaining sustainability and competitive edge in the market.
The study highlights overall strategic review of Tesla in order to provide further growth opportunities to its management and CEO. The study highlights internal and external environments, corporate strategy and CSR aspects of Tesla.
Task 1– The External and Internal Environment
External Environmental Analysis
PESTLE Analysis
| Political | ● Political instability imposed by Brexit has a significant risk for market expansion in UK.
● UK government’s role in promoting incentives for electric automobiles has an opportunity (Pickett et al. 2022).http://MSc Management Global Strategy and Sustainability Assignment Sample ● Alterations in trade agreements and taxation policies have a significant risk. |
| Economic | ● A rise in inflation rate of UK by 7.8% as of April 2022 tends to be a concerning aspect (ONS, 2022).http://MSc Management Global Strategy and Sustainability Assignment Sample
● A hike in UK’s interest rate by 1% as of May 2022 has a considerable impact (TRADING ECONOMICS, 2022).http://MSc Management Global Strategy and Sustainability Assignment Sample ● An average cost of battery accounting for £87/kWh has a potential impact on electric vehicle market (BOOK MY GARAGE, 2022).http://MSc Management Global Strategy and Sustainability Assignment Sample ● Decrease in costs of renewable energy poses a considerable opportunity (Grubb, 2022).http://MSc Management Global Strategy and Sustainability Assignment Sample
● An increase in UK’s employment rate by 0.5% along with a similar increase in economic rate as of December 2021 serves as an opportunity. |
| Social | ● A spike in electric vehicle sales by 140% in UK as per forecasts for 2020 highlights an opportunity (Carlier, 2022).
● Additionally, customer demands for electric vehicles witnessed a 40% rise in UK with 10% new registration fostering a positive scope (Carlier, 2022).MSc Management Global Strategy and Sustainability Assignment Sample ● Forecasts of 2021 show a high preference among UK people towards low-carbon lifestyles with 75% showing concerns for climate change and another 43% being anxious about future environmental poses opportunities (ONS, 2021). http://MSc Management Global Strategy and Sustainability Assignment Sample |
| Technological | ● A considerable rise in automation with 10.05% CAGR and an estimated market size of $10.83 billion as of 202o in UK market has promising scope (Placek, 2022).
● A rise in e-commerce revenue in UK to £693 billion as of 2019 has a positive effect (Coppola, 2022).http://MSc Management Global Strategy and Sustainability Assignment Sample ● High technological advancements garner scope for both opportunities and threats. |
| Legal | ● Compliance with UK-based legal standards that are subject to patent protection, data protection, energy consumption regulations, workplace safety, and environmental protection and consumer rights among others can impose opportunities (LEGISLATION, 2022). http://MSc Management Global Strategy and Sustainability Assignment Sample |
| Environmental | ● Addressing climate change, expansion of environmental programs and accounting for waste disposal and hygienic operations can have a positive impact. |
Table 1: PESTLE Analysis for Tesla
(Source: ONS, 2022)
Internal Environmental Analysis
VRIO Analysis
| Resources | Valuable | Rare | Inimitable | Organised | Advantages |
| Innovation | Yes | Yes | Yes | Yes | Competitive |
| Brand Image | Yes | Yes | Yes | Yes | Competitive |
| Customer Experience | Yes | Yes | Yes | Yes | Competitive |
| Market Position | Yes | Yes | Yes | Yes | Competitive |
| HRM | Yes | No | No | Yes | Competitive |
| Product Range | Yes | No | Yes | Yes | Temporary |
Table 2: VRIO Analysis for Tesla
(Source: Influenced by Sypko, 2022)
Based on the VRIO analysis, Tesla is identified to have its brand image as a potential competitive edge. This serves as a crucial differentiator for Tesla in comparison to other global automobile brands. It is also followed by extensive technological innovation through research and development that helps the brand maintain its market position.
Sypko (2022) asserted that Tesla’s modern approach of operating as a tech firm rather than an automaker leverages an edge in the automobile market. This also involves a vastly different and superior riding experience facilitated that satisfies its customers. However, a potential challenge incurred is its limited product range in comparison to market competitors like Volkswagen or BMW among others.
Critical Environmental Factors
SWOT Analysis
| Strengths
● Powerpack applications that result in relatable diversification. ● Improved customer base and strong marketing strategies. ● Integrated battery manufacturing. |
Weaknesses
● Limited product range and manufacturing capacity. ● Inadequate experience in development of new products and handling multiple mode ranges. ● High debt and asset liability with little profitability. |
| Opportunities
● Rising attention towards reduction in consumption of fossil fuels. ● Increased penetration in international markets. ● Ecosystem expansion for exploring market opportunities. |
Threats
● High competition in automation markets on grounds of HRM strategies and product range. ● Limited availability of supplier bases. ● International market expansion. |
Table 3: SWOT Analysis for Tesla
(Source: TESLA, 2022)
Current Sources of Competitive Advantage
Figure 1: Battery Supply Chain
(Source: Zach, 2016)
Competitive market edge of Tesla is attributed to a host of factors with the leading one being its battery supply chain. Tesla’s Gigafactory production of its batteries makes it significantly cheaper compared to other EV batteries, thereby boosting sales concerning its battery production (Zach, 2016).http://MSc Management Global Strategy and Sustainability Assignment Sample
Its competitive strategy also involves a supercharger network ranging between 72-250 kW. Constant software updates like improved traffic lighting, improvements in a backup camera, walkaway door locks and dash cam viewers are promising (Fortuna, 2020). http://MSc Management Global Strategy and Sustainability Assignment SampleLikewise, branding and artificial intelligence are other prominent features serving opportunities for Tesla.
Task 2 – Strategy in the Global Environment
International Expansion and Impact on Organisational Strategy
Figure 2: Transnational Strategy
(Source: Chong, 2020)
Tesla has been renowned for adopting efficient strategies while pursuing business in international countries. They have sincerely laid their focus upon different consumer needs and global expansion while trading in international markets.
Both determinants seeking maximum importance in case of Tesla have sought them to appropriate transnational strategy for commercial application. This strategy seeks to centralise management while companies operate in different countries (Chong, 2020). http://MSc Management Global Strategy and Sustainability Assignment Sample
Although there will be flexibility in terms of asset maintenance and business operations, every decision will be subject to clearance by its headquarters. Musk has efficiently driven this implementation to expand into global forums by running their manufacturing units in countries like China, Canada, and Germany.
Previously, Tesla was operating only from the US factories to comprehend the entire market demand. Rising needs of global consumers and their limited production facilities had curbed them from ascertaining substantial profits during each period.
This sought Elon Musk to expand his company’s manufacturing units to other countries to meet increased market demand. It allowed him to inculcate foreign culture in this company to enable greater scopes of innovation. Since it is completely based on creating new avenues for customer satisfaction, ideas from different employees are appreciated by them.
Moreover, by expanding in global markets, it has also become necessary on their part to learn various needs of consumers. Research and development unit of this company has to extend their focus upon different types of customers and legal apprehensions in diverse countries. Labour force was previously concentrated to US citizens only but with such expansion of operations other employees from diverse countries were integrated in this company.
Adoption of transnational strategy has helped Tesla to enter global markets with greater emphasis on meeting customer needs and creating brand awareness. It must be understood that global demand also comprises diverse tastes and preferences of consumers.
This requires critical understanding of various needs of different groups of people. According to McElwee et al. (2020), native citizens have a greater scope of identifying such requirements. It shall add value to their research unit for developing appropriate vehicles.
There will be subtle scope for catering to major needs that can enhance their brand image in foreign countries. Recruiting localities in managerial positions has given Tesla sufficient scope for complying with local legislations by foiling their ethics and principles as per that land.
Similarly, transnational strategy is an effective way to manage various operational expenses. Acquiring raw materials from foreign suppliers could cost larger proportions of their profits. However, local suppliers can mitigate their gap of potential profitability for Tesla.
Recommend Strategies for Competing in a Global Environment
- Firstly, Tesla should implement economical vehicles in different countries. This implies that new electric vehicles should be designed for middle income earners to increase their scope of sales in foreign countries.
Low priced vehicles are more likely to create a greater market since high income groups are limited in number.
- Secondly, this company should look forward to establishing more manufacturing hubs in other countries. As suggested by Kovacs (2018), such countries are expected to possess highly skilled workers but at cheaper rates. Availability of such resources will help Tesla to integrate sufficient quality into their operating regime but at a sound cost. South-Asian countries are an effective choice for this purpose.
- Thirdly, product developers should have sound knowledge of consumer needs in different counties. Features added to each vehicle should comply with local allowances and legislations. Identification of critical needs for local people will help them attract more consumers to them.
Task 3 – Corporate Strategy
Application of Horizontal Integration, Vertical Integration, Outsourcing or Strategic Alliances
Figure 3: Vertical Integration strategy
(Source: Hogan et al., 2018)
Supply chain operations are an important phenomenon for consideration before planning production and distribution of final goods. It is very important for a company to manage their suppliers and other resources to appropriate their manufacturing process. Such assimilation could be managed through horizontal or vertical integration. Horizon integration seeks a company to manage their manufacturing by merging with suppliers.
Contrastingly, vertical integration will involve that company completely taking over its supplying entity (Hogan et al., 2018).http://MSc Management Global Strategy and Sustainability Assignment Sample
Tesla has configured their supply chain activity through vertical integration. It genuinely has managed to accommodate its suppliers under one hood. Tesla’ main aim was to maintain their quality of goods while pursuing this business. This made them strategically align with such suppliers which were lately taken over by them.
Different parts of Tesla’s vehicles are supplied by diverse companies. Each supplier is sought to lead in their particular scope of operation.
Tesla seeks to integrate all those supplying entities under one roof to appropriate best outputs possible. It is very important for them to assemble all suppliers at one place to ensure maximum production with the best quality of final goods. Their management finds this integration as an effective policy for appropriating different operational activities.
As opined by Bulturbayevich (2021), it will be beneficial for them due to sound reduction in complexities throughout the supply chain. Moreover, this company also seeks to eliminate dealers from the market structure. It particularly aims to come in direct contact with customers.
Tesla has been supplied with various components by their suppliers while manufacturing electric vehicles. Components like electric motors, battery chillers, brakes windshields and power steering are supplied by different companies. Most of them have been taken over by Tesla to concentrate their entire focus on production of quality items.
This implies each component is prepared and processed in the GIGAfactory by these professional companies and supplied to Tesla immediately. Their assembly is monitored to produce final goods for sales in the market. Companies like BYD, Lucid Group Inc, and Nidec Corp. supply electric motors to Tesla (Thomas and Maine, 2019). http://MSc Management Global Strategy and Sustainability Assignment Sample
Yahua, Gangfeng, Albemarle, and Livent supply batteries to this company. Similarly, ZF Lenksysteme supplies power steering and Brembo produces brakes for them. Windshields are supplied by AGP and Modine Manufacturing Company produces battery chillers for them. These companies are referred to as their strategic alliances in this operating regime.
Recommendations for Increased Profitability
For increasing profitability, below are the recommendations to Tesla:
- Currently, the company is focusing on offering electric vehicles to customers with autopilot facilities. To gain a competitive edge in market, the company has to offer such products at cost-effective prices. For instance, Tesla can research technologies, software and resources that can help in reducing production costs of such vehicles. Then, the company can offer electric vehicles at cost-effective prices and still can earn reasonable profits. However, the company has to identify target customer base for such offerings and make the vehicle secure enough for attracting target customers.
- Tesla is mainly known for luxury cars that have higher prices. Hence, such cars are mainly purchased by high income group individuals. However, the company should start range of cars at reasonable prices for catering needs to medium income group individuals. It will help Tesla in acquiring higher market share in global automotive market and at the same time would help in increasing customer base.
- To boost profitability, Tesla has to increase revenue and reduce expenditures without harming quality of its offerings. By increasing the scale of operations, the company can increase revenue and by reducing waste of resources, expenses can be declined. Use of faulty materials and resources needed to be avoided for reducing maintenance, repair and replacement expenses. As a result, profitability of this company could be improved.
Task 4 – Strategic Purpose – Ethics and CSR
CSR Strategies
CSR strategies can be assessed as comprehensive plans utilised by organisations for designing, execution and evaluation of their overall “corporate social responsibility” initiatives. As opined by Paul et al. (2019), key aspects of CSR includes “environmental”, “philanthropic”, “ethical”, and “economic” responsibility.
Tesla uses CSR strategies while fulfilling stakeholders’ interests. In case of Tesla, Carroll’s model can be used as an effective way for complying with “environmental”, “philanthropic”, “ethical”, and “economic” responsibilities. Evaluation of Tesla CSR strategy as per Carroll’s model is as under:
Figure 4: Carroll’s model
(Source: Paul et al. 2019)
Environmental: While operating in global automotive market, Tesla helps in the transition of sustainable energy by avoiding 5m metric tons Co2e emission (Tesla, 2022). http://MSc Management Global Strategy and Sustainability Assignment SamplePhilanthropic: The Company has donated more than 5m shares of electric-car market which has $6bn worth. This acted as one of biggest philanthropic actions of the company.
Ethical: The Company is committed to maintaining all supply chain practises safe, secure and ethical, workers are treated with respect & dignity and manufacturing processes of this company are environmentally friendly. As a result, the company operates ethically in the market which aids in its profitability.
Economic: As Tesla is one of the leading automotive companies in o\world, it has a significant impact on economic development of the countries. It creates massive job opportunities in countries, increases production and facilitates development of advanced technologies. For instance, “Tesla has created more than 1,500 jobs at its ATVM-supported facilities” (Energy.gov, 2022). http://MSc Management Global Strategy and Sustainability Assignment SampleThus, it facilitates economic development in countries.
While operating in global automotive industry, the company aims to provide good quality and value for money services to customers. As opined by Sobirovna et al. (2019), incorporation of appropriate government regulations and safety standards are necessary for operating viable in market. Tesla aims to incorporate adequate rules and regulations which aids into its sound image in the market.
Ethical Issues being Faced
Ethical issues take place when a decision or activity of organisation creates conflicts with society’s moral principles. As per Wang et al. (2021), both businesses and individuals can be involved in ethical issues. In the case of Tesla, some of the ethical issues have been found.
For instance, the company was alleged for accounting grand in 2017 as it had prepared materially false and misleading statements for producing model 3 cars. Further, the company was pence alleged for discriminating against black worker and ignored years of complaints from black workers (Time, 2022).http://MSc Management Global Strategy and Sustainability Assignment Sample
However, as a global leader in the automotive market, the company needs to maintain equality in its workforce in order to motivate them and keep them satisfied. Further, the company once sold vehicles with batteries in China which could cause fire. In addition, the company was alleged for selling faulty vehicles in China. The company has a mission to emphasise on social responsibility, but occurrence of such issues act as a hurdle in CSR approaches of this company.
Recommendations for CSR Practice
For maintaining sound CSR practices, below are the recommendations to Tesla:
- The company should maintain ethical staff members at all levels, so that discrimination is avoided in the workplace. Besides, sound anti-discrimination policies should be followed By Tesla and its implementation should be ensured by higher executives.
- The company should arrange press-meets with leading media companies and reports in order to put the perspective in front of key stakeholders. This will help Tesla in dealing with particular issues that can harm its image in the market.
- The company should maintain adequate proofs for its innocence about a particular issue. For instance, if it has not conducted any discrimination against black workers, it should have adequate evidence for proving it.
Conclusion
Incorporation of global strategies along with sustainable approaches is efficient for organisations in order to operate well in market. Tesla is one of the leading automotive companies which operate all over the world. Considering both internal and external aspects of this company, sound business performance can be influenced. The company maintain appropriate CSR strategies which aids into its performance in market. However, there exist some ethical issues which harm Tesla’s image. Thus, adequate mitigation of such issues should be made by management of Tesla.
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