GLOBAL STRATEGY AND SUSTAINABILITY
TESLA MANAGEMENT CONSULTANCY REPORT
The management consultant has prepared this study to show Tesla’s potential and challenges as it expands its global company. The report has analyzed different environmental factors for identifying the effects of those factors on its business and to identify the strength, weaknesses, opportunities, and threats of Tesla in the global environment. Moreover, the report has also discussed the strategies and corporate strategies that Tesla should implement in its operation to get more sustainability in the global market. The report has also described different corporate social responsibilities of the company that the authorities have taken up to make the operation more relevant to the society and environment.
Table of Contents
Task 1 -The External and Internal Environment 4
Task 2 – Strategy in the Global Environment 7
Task 3 – Corporate Strategy. 9
Task 4 – Strategic Purpose – Ethics and CSR.. 11
Tesla is an automobile industry that was founded in Texas, the United States of America, in 2003 by its present CEO, Elon Musk, and his other partners. Tesla, being unique with the type of its products, has created its market in the world very tactfully. But the CEO of Tesla, Elon Musk, now wants to expand its business throughout the world by establishing Gigafactories in different countries of Europe and Asia. The report would consist of the environmental analysis of the company to identify its threats and opportunities and the corporate and ethical strategic approach of the company that would help it to flourish and make an impact in the global market and economy.
Task 1 -The External and Internal Environment
Using relevant models, distinguish and fundamentally dissect Tesla’s external and internal environments.
Brand image- The brand image of Tesla is one of its core sources of competitive advantage. The sustainability business model has helped it to develop a good brand image within the automobile industry. However, there are other automobile companies that are manufacturing electric vehicles, but Tesla has acquired a very distinct image.
Innovation- The business model of Tesla is based on its innovation of technology. On that note, it can be said that Tesla has invested a lot in its research and development in technology for making the outstanding quality of Electric cars. Apart from the advanced batteries that Tesla uses, the types of technologies used inside these cars increase Tesla’s car models’ attractiveness.
Customer experience- Tesla’s premium E.V. vehicles are superior in terms of design, execution, and appearance. Tesla cars have a considerably greater ubiquity than other E.V. models as a result of this number.
Product range- Tesla has added a new item to the display that is rather enticing. Although its product range is limited in comparison to other brands such as BMW or V.W., its product range effectively caters to the higher end market that it seeks to service.
Market position- Tesla has been able to establish a prominent display position in the car industry and the electric vehicle market. The brand’s prominent position and distinct advantage over its competitors provide a source of sustainable benefit.
Figure 2: PESTEL Analysis
(Source: McCain. 2019)
To analyze the external environment for the business of Tesla in the global platform, PESTEL analysis that includes six important factors that control the base of the business in any particular place is essential.
Political factors – While thinking about the global expansion of the business by establishing individual factories in different parts of the world, the authorities of Tesla have to consider the individual business and trading rules and regulations of respective nations and governments to avoid political issues. Alignment with the political regulation of particular places helps the company to run its business more smoothly (McCain. 2019).
Economic factors – Since 2014, Tesla has grown up to a great extent, but as it is going to expand its business on a global level, it has to consider the global economy and the individual economic status of each country that it has been thinking about because the economy of the nation always creates a strong impact on the regulation of business. Therefore, the authorities of Tesla must be aware of that.
Social factors – Usually, Tesla’s potential customers belong to the elite class of the society as it sells high-definition luxurious cars and bikes that the lower and middle class cannot afford. So, the social impact on the sales of Tesla is not much significant, but if it wants to avail customers from other classes too, it must look into the social structure and current issues to sustain their businesses (Kancherla and Daim. 2018)
Technological factors – technology is an integral part of Tesla’s business. Therefore, the ups and downs of technologies create a significant impact on its business. In the context of globalization, the authorities of Tesla should analyze the technological background and efficacy of people in any particular country because not every country of the world is technologically evolved and advanced like the USA or the U.K.
Environmental factors – Environmentally, the projects and proposals of Tesla are very advanced and sustainable and provide a new dimension to the environmental conservation processes, thus gaining a great positive impact on the growth of the business. The reduction in utilization of fossil fuel helps them in their aim to save the environment and do them a favour by making public demonstrations of how effective, sustainable energy sources are (Guidone. 2021)
Legal factors – There are some legal issues with Tesla regarding the operation of its business, especially about the procedures of making and selling body parts and other essentials of their products. Therefore, the authorities of the organization should focus more on dissolving the legal issues to flourish in the global market (Lugtu. 2019)
From the analysis of the internal and external environment of Tesla in the global platform, the three factors that can be considered as the most critical ones are identified. According to this analysis, the three critical factors of Tesla in the global market are –
- The deficit in the establishment of solar charging stations
- Surging competition from the renowned and large automobile companies as they are also leaning towards sustainable energy-operated vehicles.
- The high-cost structure limits the sales of the product within a class of the society (Španihel. 2020).
Determine Tesla’s current sources of spirited improvements
Figure 1: SWOT Analysis
(Source: Mo and Wang. 2021)
Task 2 – Strategy in the Global Environment
Fundamentally evaluate the thought processes for Tesla increasing globally and define how this affects their whole company technique using significant frameworks for assessing how firms move into remote markets.
Joint Venture – Indeed, the Indian manufacturer published a statement clarifying claims concerning “Tata Motors” and its solar panel business, as well as its planned tie-ups with Tesla. “Tata Motors” has not finalized any decision on a “strategic partner” for its Photovoltaic business, read a statement to the press from the company. Any and all reports indicating the same are unequivocally denied. A “Tata-Tesla relationship” in India is untrue, according to a business official. In addition, Tesla and Panasonic have a “$5 billion Gigafactory” joint venture in the United States.
Partnerships –Tesla motor has some partnerships company such as Toyota, Lotus, Panasonic. “Tesla” is reportedly in contact with three Automotive component suppliers, according to a storey in “The Economic Times”. These are Bharat Forge, Sandhar Technologies and Sona Comstar. According to the article, these three businesses are already delivering parts to Tesla, according to people familiar with the situation.
Licensing – When asked about licencing its “Full Self-Driving” (FSD) expertise to other automakers, Tesla CEO “Elon Musk” suggested the business may do so during a speech at the company’s “A.I. Day event”. Musk then went on to discuss the company’s controversial “self-driving technology” in great detail, citing recent advances. If other automakers want Tesla’s “self-driving technology”, they can have it. Tesla’s Supercharger network will be made available to vehicles other than “Tesla models”.Other automakers could avoid the high cost of developing a “self-driving” system by purchasing Tesla’s patents for the technology. In addition to its Autopilot high-automated driving technology and neural network training, “Tesla” is willing to share its software with others. When asked about Tesla’s plans for licencing Autopilot to other automakers during the firm’s fourth-quarter earnings announcement on Wednesday, “CEO Elon Musk” said the business had already had early negotiations. The beta version of Autopilot’s “full self-driving” or FSD version was released by the firm late last year.
FDI Theory – “Foreign direct investment” is the acquisition of a stake in a firm by an entrepreneur or a corporation from outside the country’s boundaries. For the most part, the word is used in reference to a company’s choice to acquire an equity position or purchase a company in order to extend its operations into a new market. It is seldom used to denote a foreign company’s equity investment. “Foreign direct investments” (FDI) are large investments made by a corporation in a foreign firm. “FDI” In other cases, the investment may be made in the acquisition of raw resources, the expansion of a company’s portfolio, or the creation of an international presence. For businesses wishing to build an “outside coordinate venture,” contributing to a firm in an open economy with a competent staff and high development potential is the criterion (Knoerich, 2019). The value of little government regulation is likewise highly regarded. Investments in retail, entertainment, logistics, and manufacturing are examples of “foreign direct investments”. They point to an international expansion plan for the corporation. If “Tesla” continues on this trajectory, the company’s worldwide footprint is expected to grow dramatically in 2021. Tesla’s growth plan is unique in that it involves a large amount of new investment and creates a considerable number of jobs. With each new “Gigafactory”, the company’s unique plan for its massive production facilities is perfected and reproduced throughout the world. In many cases, “foreign direct investment” extends beyond capital spending. Administration, innovation, and equipment may also be provided. As a result of the “outside coordinate venture,” the outside firm is successfully managed or has a significant influence over its decisions. A “remote coordinate venture” can be formed in a variety of methods, including forming an auxiliary or associate business in another country, gaining management of an existing international organization, or merging with one.
Make well-founded suggestions for the many ways Tesla might employ to compete in the international market.
From the above-mentioned discussion, knowledge about several foreign market entry strategies is acquired. As Tesla is going to enter the global market by expanding its business establishing Giga factories in different parts of the world, the application of these strategies is important for the sustainability and growth of the company at the global level. According to the analysis of the position of Tesla in the global economy and the strategies of global business, it can be stated that the economy of Tesla is stabilized. Therefore, for global expansion, it can opt for up taking buying small businesses in foreign markets (Ingram. 2018). With this, the respective organizations would gain franchisee of Tesla, and in return, Tesla would get a pre-established set up for its business. Moreover, the employees and management of that organization would be pretty aware of the local market, so the business strategy and operation of the organization would be easier for the authority of Tesla. Direct investment can lead the business to unwanted risks of losing money (Pananond et al. 2020). Talks have begun between “Tesla” and the government over the specifics of opening wholly-owned retail locations. To be able to sell straight in India, the firm must adhere to the “foreign direct investment” (FDI) criteria for “single-brand” retail, which include local sourcing standards.
Task 3 – Corporate Strategy
Examine and assess the usage of horizontal mergers, consolidations, outsourced, and strategic partnerships.
For smooth operation of the business, some basic corporate strategies have to be maintained by any organization, and Tesla is no exception. As it’s going to expand its business globally, the area of management is increasing by many folds. Therefore, it should implement the corporate strategies very critically to make the whole procedure more effective.
Horizontal integration – horizontal integration or merging of two companies is a very common corporate strategy, especially in the automobile market. In the context of Tesla, if it can buy an already established business, the effectiveness of the procedure would be enhanced while the risk would be cut down. The merging of two companies or joint ventures helps the authorities to attract customers of two brands, and this creates a hugely positive effect on the expansion of business. Therefore, in the globalization of the company, Tesla can opt for such a strategy (Mas. 2018).
Vertical integration – while horizontal integration of companies suggests merging of two similar companies, the vertical integration of companies suggests merging two companies that are situated in different levels of a supply chain. Acquiring another organization from the supply chain reduces the complexity of the process and enhances the regulation of the entire procedure from production to delivery smoother. Vertical integration of companies enhances the satisfaction of the population by providing common services to the prevalent and abundant needs of the society more effectively. By up taking the strategy of vertical integration, Tesla would operate its business at the global level more accurately (Bouwer. 2019).
Outsourcing – outsourcing, as the term suggests, refers to the production of products or part of products in a different organization and is used by the primary organization for its final productions. Generally, most organizations operate outsource materials and parts from other companies for their products, but in Tesla, it makes each thing on its own, so if Tesla uptake the outsourcing strategy, it can check its transport cost to an extent.
Provide recommendations as to how Tesla can increase their profitability
To increase the sustainability and profitability of the company in the global market, the Tesla authority should know the above-mentioned corporate strategies and should have a clear concept of how these are to be implemented in the business. According to the analysis, it can be stated that Tesla should uptake an outsourcing strategy, at least for its foreign factories. Otherwise, it would have to bear huge transportation costs. Apart from that, Tesla should imply horizontal integration to acquire small automobile organizations in different countries that would help it to operate its business more effectively as the staff would be local and would have a clear idea about the market and audience (Corbett. 2020). The strategic alliance is always important for global business, and Tesla is no exception. Therefore, with the right incorporation of all these corporate strategies, Tesla would be able to grow more as a brand in the global market.
Task 4 – Strategic Purpose – Ethics and CSR
Using relevant theoretical models, analyze and evaluate Tesla’s CSR strategy.
The Carroll Theory – Carroll’s pyramid CSR model, provides an outline illustration of the social responsibilities of the business organization by representing them through a pyramidal structure.
Figure 4: Carroll Theory
(Source: Aybalyet al. 2017)
Philanthropic responsibility – As of the environmental responsibility of Tesla, the company’s products are already environmentally sustainable. Moreover, the organization has taken several policies about the use of environment-friendly products and raw materials and to check the emission of green gas in the environment (Tsai and Tan., 2021).
Ethical responsibility – Ethical responsibility of the company allows it to maintain a good and healthy working environment within the organization. The authorities of Tesla strictly maintain their ethical policies that include regulation of salary structure according to the status and position, women and child protection, abandonment of child labour in any process of the organization, regulation and monitoring of employee health and mental states, their educational and technological growth, etc. The ethics of the company do not allow it to perform in any unfair activity of discriminating within employees based on their sex, race, caste or religion (Tesla.com. 2021).
Legal responsibility – Tesla does not only concentrate on achieving a huge profit scale but also donates a handsome amount of financial support to various organizations all over the world which serve the underprivileged people and kids, orphans, etc. It also contributes to too many social reforming projects. All these activities of the company help it to create a favourable ground for its business on the global level.
Economic responsibility – Economic responsibility of the company allows the company to make contributions to the global economy to make it more stabilized and to help it to grow along with its own growth as a larger economy. The regulation of the economic responsibility of Tesla would help it to improvise its revenue structure while helping the global economy by regulating FDIs (Aybalyet al. 2017).
Identify and critically examine the major ethical challenges that Tesla is now facing, as well as make ideas for how they may be addressed.
The main ethical issue that Tesla is facing right now that can be grown into bigger problems for the company is mainly the dilemma about the self-driving technology. The company is still struggling to convince the population and governance about the safety of self-driving and along with it, the company is also experiencing legal problems regarding its battery production and other part production, but with the proper implication of the CSR strategy models, it can overcome the issues and set a good impact on the global market (Bouwer. 2019).
After the elaborate discussion on the globalization strategies taken by Tesla to expand its business in the global platform by introducing new models of vehicles and by establishing new factories in different countries all over the world, the analysis of external and internal environmental factors helps the management consultant of the company to identify the lacking from the company’s end to implement effective strategies and thereby set new strategies to be implemented at the global level. Hence, this report has represented important aspects of globalization for the company that would help the CEO of Tesla to make the right decisions for the growth and expansion of the company in the global platform.
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