Strategic Management
Introduction
Tesla, Inc., is a car manufacturer with a global market that specializes in the manufacturing of electric vehicles (EVs). In terms of strategic management of the company there are several factors to consider, especially how globalization and technology have impacted the company. This paper will discuss the vision, mission, stakeholders, impact of globalization and technology on the company as well as how the industrial organization model and resource based model can be applied.
Globalization
Globalization refers to the concept that all things around the world are connectedeconomies, industries, cultures, markets, governments and so on. Nothing is isolated from any other sector: what is seen in China for instance is likely to have an impact on markets in Europe and vice versa. In the global economy, goods move freely from nation to nation. However, globalization does have its drawbacks and those are becoming more and more apparent today with the rise of populism and nationalism both in the East and in the West. For Tesla, which is trying to expand throughout Europe and China, the rise of nationalism could not have come at a worse time. Globalization has allowed for goods to move freely (Hitt, Ireland & Hoskisson, 2013)but it has also led companies like Tesla to try to expand quickly in order to be globally relevant. Most of Teslas revenue comes from the domestic market in the U.S. (Yuying & Qingrun, 2018). Tesla is the only all-American manufacturer in the U.S. and also leads the EV market. Yet, as information now spreads quickly in the globalized world, competitors in Europe and Asia are getting involved in the EV spaceand this is why it was important for Tesla to get market share in Europe and Asia before competitors began manufacturing EVs in imitation of Tesla. Globalization has led to fiercer competition, especially in China where there are now 486 EV manufacturers all competing directly with Tesla (Durden, 2019). Thanks to the trade war with the U.S., China is more than ever attempting to take care of its by buying Chinese, just as Americans promote the concept of buying American. Thus, globalization has presented a serious challenge to Teslas global market dominance.
Technology
Tesla has been hugely impacted by technology. It has made a name for itself by being a forerunner of autonomous vehicles using AI and it also uses the Internet of Things to provide updates to software, connections between the car and the drivers phone, and much more. The Tesla EV is not just a carit is also a giant computer on wheels. However, while it uses advanced AI technology in its auto pilot function, the technology is by no means perfect yet and there have been several stories published about accidents that have happened while driving (Reuters, 2019). Some celebrities have had their cars spontaneously combust and others, like Sheryl Crow, have been locked inside their cars with no way of getting outand of course they tweeted about the experience all over social media. Thus, technology has been both a major help to Tesla and in other ways a major roadblock as it still struggles to make use of advanced technology in positive ways. The CEO of Tesla, Elon Musk, moreover, is a master social media user and his social media presence has helped to pump the stock price up over the past few yearsbut he has also made some mistakes on social media that have brought criticism and negative attention to the companysuch as his claim to take the company private at $420 a share and that he had the funding to do so, even though in reality he did not. This has landed him in trouble with the SEC and now Tesla may lose the CEO generally seen as the visionary behind the companys success (Langlois, 2019).
Industrial Organizational Model
The IO model looks at the external environment to find an attractive industry in which it can formulate a strategy to develop assets and skills, implement strategic actions and achieve superior returns (Hitt et al., 2013). For Tesla, the IO model would mean the company should consider political, legal, social and economic issues in the external environment. Tesla has already identified an attractive industrythe EV industrysensing that there is a high demand for EVs as a result of consumers who are eco-friendly and conscious of the need to shift away from fossil fuels. The assets that Tesla has developed are its engineering and design as well as the marketing skills that Musk has brought to the table. Musk is regularly regarded as a genius at marketing. Thus, combining Musks ability to build Teslas brand via social media and to get consumers interested in the Tesla EV products, Tesla can achieve superior returns.
Resource-Based Model
Teslas most unique resource is its CEO Elon Musk. Musk has a celebrity type of personality and the innovative instincts of a revolutionary scientist. He is able to market the brand to the young generation using social media and he promotes the vision of a fossil-fuel free society, which many green consumers want to embrace. His mission to bring sustainability to the car market is what has put Tesla on the map, and his unique penchant for style and design has made the Tesla EV a thing of beauty among many car connoisseurs.
The battery technology that Tesla uses is another resource that no other company has. It has signed an agreement with Panasonic to produce the batteries in its Giga factory in the U.S. and it has plans to expand into China (Yuying & Qingrun, 2018). However, the Panasonic deal may be coming to an end (Lopez, 2019), and Tesla may also end up losing its one-of-a-kind CEO in the wake of the SEC investigation of Musks funding secured comments on Twitter, which were viewed by many as a blatant attempt at stock manipulation.
Vision
The vision of Tesla was to bring sustainability to the world through the use of green technology and battery-powered cars. Sustainability has always been at the heart of Teslas corporate vision, which is why so many followers have flocked to Tesla: they see Musk as the visionary who is bringing an eco-friendly concept to the luxury and affordable car markets. Musks vision for Tesla has always been to lead the pack in the EV market and to set the standard by which all other automakers will be forced to be judged in the future. This vision has enabled the company to distance itself from other status quo car manufacturers and to bring innovation, excitement and a following to the company that no other car company has ever had before.
Mission
The mission of Tesla is to be the worlds most dominant EV manufacturer and to be the leader in the world in terms of producing a luxury or affordable EV better than any other in the market. Its mission has also been to embrace and maintain the sustainability concept and apply it to manufacturing and production. Teslas goal is to rid the world of its dependence on fossil fuel energy, which is why it also invested in SolarCity to help harness solar power and sell it residentially to consumers. This mission is thoroughly influencing Teslas success by defining the pathway by which Tesla will distinguish itself from its competitors, which is what Trout and Rivkin (2006) say a business must do to survivedifferentiate or die. By setting itself up as the car company of the future and by appealing to domestic consumers as the only all-American car company, it has enabled itself to fulfill its mission in short order. Still, the mission is not quite complete because the future of sustainability still hangs in the balance and Tesla is determined to reshape the future into one where EVs are the norm and Tesla is the leader of the car manufacturing market.
Stakeholders
Stakeholders in Tesla include shareholders, the Board of Directors, consumers, employees, and managers. Shareholders are one of the most important stakeholders for Tesla as they are the ones who allow Tesla to take on more debt so as to scale and increase production. Without investors, Tesla would not be anywhere near the size it is today. However, without consumers, the investors have no reason to investso the consumers are also important stakeholders in the company. The Board of Directors is another important stakeholder, as it makes decisions about the companys direction, such as how it will conserve money, expand, and reign in its CEO when that becomes necessary. Employees and managers are also important stakeholders because without them the products that Tesla produces could not be manufactured. All of these stakeholders contribute to Teslas success and without them the company would not be able to achieve superior returns.
References
Durden, T. (2019). With 486 Manufacturers, China’s Electric Vehicle Bubble Is Set To
Burst. Retrieved from https://www.zerohedge.com/news/2019-04-15/486-manufacturers-chinas-electric-vehicle-bubble-set-burst
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic management: Concepts
and cases: Competiveness and globalization (10th ed.). Mason, OH: South-Western Cengage Learning.
Langlois, S. (2019). Tesla will shed more than 66% this year, predicts former hedge-
fund manager. Retrieved from https://www.marketwatch.com/story/tesla-will-shed-more-than-66-this-year-predicts-former-hedge-fund-manager-2019-03-04
Lopez, L. (2019). Insiders describe a world of chaos and waste at Panasonic’s massive
battery-making operation for Tesla Retrieved from
https://www.businessinsider.com/panasonic-battery-cell-operations-tesla-gigafactory-chaotic-2019-4
Reuters. (2019). US safety agencies to investigate fatal Tesla crash in Florida.
Retrieved from https://www.cnbc.com/2019/03/02/us-safety-agencies-to-investigate-fatal-tesla-crash-in-florida.html
Trout, J. & Rivkin, S. (2006). Differentiate or die. In The marketing Gurus (ed.
Murray). NY: Penguin.
Yuying, A. & Qingrun, R. (2018). Teslas international expansion strategy. Retrieved
from https://globalmarketingprofessor.com/teslas-international-expansion-strategy/
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