Global Strategy - Tesla
Global Strategy - Tesla
Global Strategy - Tesla
Student Name
Course
Professor Name
Introduction................................................................................................................................3
Factor Conditions...................................................................................................................5
Demand Conditions................................................................................................................5
Government............................................................................................................................6
Chance....................................................................................................................................6
Internationalization Strategy......................................................................................................6
Country Analysis........................................................................................................................7
Mode of Entry..........................................................................................................................10
Managerial/Organizational Issues............................................................................................11
Solutions...................................................................................................................................12
References................................................................................................................................14
GLOBAL STRATEGY FOR TESLA
Introduction
Tesla Inc. is an American multinational company that is known for its advanced
technology in clean energy introduction for automotive industry. The headquarter of the
company is based in Austin, United States and it is founded by Elon Musk, Martin Eberhard,
Ian Wright, and Marc Tarpenning. Tesla designs and manufactures electric vehicles that are
environmentally friendly as well as battery energy storage, solar panels, and roof tiles. Tesla
operate in the automotive industry with its operations spread across United States, Canada,
London, Germany, Japan, China, Hong Kong. Australia, Dubai, and Jordan. The turnover of
the company in the latest FY 2021 amounted to $53.8 billion and the number of employees as
of April 2022 were 11,000 (TeslaInc. 2021). This report aims to cover the expansion of the
Tesla set out to create reliable electric cars with the goal of expediting the global
switch to renewable energy. Tesla's market worth reached $568.99 billion by November 2022
making the company 7th most valuable company globally (Nasdaq, 2022). Despite having
such strong valuation of the company, Tesla has not yet spread its wings across the globe and
holds significant opportunities for expansion and growth. By middle of November 2022, the
stock was trading at $194 (Nasdaq, 2022). The stock price of the company has hit 2-year low
amidst the Tesla founder, Elon Musk, acquisition of Twitter which has sparked concerns for
investors whether Musk would be able to handle two large firms at the same time (Rees,
The market for electric vehicles is growing rapidly with a valuation of $123 billion in
2020 and is expected to reach $869 billion by 2027 (Statista, 2022). This shows that the
demand for Tesla cars would be increasing in the future leading to greater sales and revenue.
Hence, tapping into new markets would allow the company to cache the growing demand and
normally outsource about 80% of their parts through vendors. Tesla is able to cut its expenses
significantly because of its vertically integrated business model as it allows the firm to take
on innovation rapidly and be more reactive to customers. The removal of third-party is the
key component of Tesla's vertically integrated value chain (Ahmad and Khan, 2019).
advantage on a national level in order to expand and diversify into international markets.
For several years, Tesla was leading as second to none manufacturer and distributor in
the EV market. However, now Tesla has big competitors such as Mercedes-Benz, Ford,
Nissan, and Honda to disrupt the market dominance of the company (Popli, 2022). Strong
competition allows Tesla to become more cost competitive and introduce novice technology
to attract customers. Furthermore, the organizational structure at Tesla is flatter which allows
leadership to closely manage the employees and workflow of the company that would further
Factor Conditions
The capital resources of the company are available through both equity and debt
financing. Tesla’s expenditure amounted to $20 billion on its most important function, R&D
whereas its rival, Ford declared that it spent $11.5 billion on electrification (Chen, 2022).
Furthermore, Tesla uses renewable energy resources that are infinite and will not go scarce
thus allowing the company to have long-term prospects for their future.
The supporting industries of Tesla provide the ground for the company to excel and
expand. Especially the supplier of Tesla is CATL which is the world’s largest vehicle battery
maker. Having such strong ties and connection with world’s largest battery maker gives a
competitive advantage to Tesla as the company can rely on their supplier for timely supplies,
Demand Conditions
Tesla faces a huge demand in the United States for the electric vehicles as people are
becoming more environmental conscious and want to switch to renewable options compared
to gas. Furthermore, recently the surge in prices of gas led to an unprecedented spike in the
demand of electric vehicles in the country due to which Tesla had to stop taking orders to
clear the backlog (Lambert, 2022). Growing demand conditions give a push to companies to
expand and grow into international markets, as is the case with Tesla.
Government
The U.S. government supports the manufacturing and usage of electric vehicles by
providing subsidies and relaxing policies to support. There have been a number of measures
to support the growth of battery manufacturing plants in the United States. As each carmaker
approaches its limit of 200,000 qualified electric cars, the utilization of federal U.S. tax
credits is projected to gradually decrease between 2018 and 2025 (Lutsey, 2018). At least five
states engaged in a competitive effort to win the Tesla Panasonic facility by extending
subsidies and tax breaks based on the likelihood of job development. When complete, the
Chance
Chance includes natural disasters and other external factors that can affect the
performance, growth and expansion of the company. In the case of Tesla, the global
pandemic is the biggest factor to consider under this category. Due to surge of Covid-19, the
company had to close its plants and halt delivery of cars which impacted the sale and income
of the company. In Q2 of 2022, the sales of Tesla were still impacted, and shares of the
company also faced drop by 38% due to investors seeing the fortune as a seesaw (Novet,
2022).
Internationalization Strategy
Multidomestic
making to the local business units in each country which results in maximum local
responsiveness.
Global/International
This is the most used internationalization strategy when businesses choose global
expansion. This approach involves exporting and importing goods while maintaining the head
Transnational
scale. A transnational strategy is the one where the company has centralized operations in one
country with its operations and assets spread overseas. This strategy will allow the firm to
leverage local responsiveness and high level of global expansion and operations. Tesla can
use the strategy to adjust their sales and customize their products as per needs of the local
transnational organization responds to regional demands and has the capacity to recognize
and assess market changes and developments (Ahrens and Guetz, 2015). This is seen as
having a competitive advantage since businesses can respond and comprehend a nation's
between uniformity and uniqueness. According to Barlett et al. (2011), a variety of pressure
factors are forcing businesses to change their tactics and lean more heavily toward a
Tesla would be able to keep its management centralized while availing the resources, assts,
Country Analysis
PESL Framework
Political: Doha, the capital of Qatar, is located in the Middle Eastern region and is quite
small. Though, its impact is seen well beyond the borders of the country. In the Middle East
and beyond, it often serves to reduce tensions between competing groups. United States,
China and Turkey countries are among of its closest allies. Additionally, it has an agreement
of cooperation with Iran. The political conditions of Qatar remained quite unstable because
Saudi Arabia, the UAE, Bahrain, and Egypt and all other Middle Eastern countries decided to
boycott Qatar in 2017 (BTI, 2022). In early 2021, however, the boycotting parties changed
their tone to one of normalcy and began taking concrete moves to restore land, sea, and air
transport to and from Qatar. The attitude of government towards FDI makes Qatar one of the
most attractive places for foreign investors. Foreign investors in Qatar may take advantage of
investors from outside of Qatar are protected from expropriation and are allowed to send
funds abroad in connection with their investments without interference from the government.
Furthermore, foreign investors may sign leases for a maximum of 50 years (Keane, 2022).
Economical: Although the country is small in size and population, but it is the richest
countries in the world with Gross National Income of $116,699 per capita (Suneson, 2021).
Furthermore, the unemployment rate in the country remains the lowest in the world of just
0.2% in 2021 (Statista, 2021). Qatar is significantly reliant on the petroleum industry despite
having the world's third-largest known natural gas reserves (after Russia and Iran) (BTI,
2022). The inflation rate of Qatar for 2021 was calculated to be 2.3% (Worlddata, 2022). The
GDP growth in 2021 was 1.52% which was 5.2% increase as compared to 2020
(Macrotrends, 2022b).
Social: Qatar is a small country with a total population of 2.9 million as of 2021
(Worldometer, 2021). 25% of the Qatar population is female while the rest is male. The
country has diversity in its population as only 15% of the country’s residents are Qataris
while the rest are form other countries such as other Arabs, Indians, Bangladeshi, Chinese
(Kemp, 2022). Arabic is the officially spoken language in the country while people also
understand and speak English. The country has relaxed work culture with crime rate being
quite minimum. The educational and literacy rate in Qatar is increasing yearly with 93.46%
apart, Qataris have the legislative, the judicial, and the executive. Lacking the envisaged
elected parliament, it is difficult to discuss the legislative process, much alone the separation
of powers, in Qatar. The emir's privileged status and widespread regard and admiration make
the court's authority more symbolic than actual. According to Article 35 of the constitution,
all citizens of Qatar are treated equally and cannot be treated differently because of their
religion, nationality, gender, or skin colour (BTI, 2022). The rule of Qatar ensures that the
country citizens abide by the law and has no place for corruption by individuals.
Porter’s 5 Forces
Bargaining power of buyers: the bargaining power of buyers in the electric vehicle industry
is uncertain. There are fewer electric vehicles manufacturers thus the undifferentiation of
products is high which results in a higher price being charged by the company for electric
vehicles (Chen, 2022). The number of customers is also increasing for Tesla as more people
Bargaining power of suppliers: the bargaining power of suppliers in the automotive industry
is low. This is because the number of suppliers of electric vehicles battery and other materials
are low. Furthermore, the cost of switching to other suppliers for big giant like Tesla is
minimum (Chen, 2022). Both these factors result in low bargaining power of suppliers.
Industry rivalry: The industry rivalry is low but increasing rapidly as more market leaders are
entering and disrupting the monopoly of Tesla in the electric vehicle industry (Chen, 2022).
Although the competition is not fierce in the electric vehicle industry, but with growing
technology and energy consumption there will be more firms entering the industry in future.
From the above analysis, it can be concluded that Qatar is the right country for Tesla’s
next expansion. This is because Qatar has a growing economy, stable political conditions,
Mode of Entry
Joint Venture
that decided to share ownership, risk and return and governance for a period of time. The
purpose of forming a joint venture can be numerous from producing a new product to
generating more sales etc. For instance, Sony Ericsson was a joint venture owned and
controlled by two large separate entities, Sony Group and Ericsson in 2000 in order to be the
Mergers and acquisitions are a business transaction which involves joining two
companies or business entities into one. M&A involves consolidating the financial
transactions between companies which allows them to enjoy the benefits of synergy. One of
The mode of entry that will be chosen by Tesla to enter Qatar is licensing. Licensing
is when the business provides the right to another person by providing business know-how,
proprietary assets, and the right to carry out business activities and operations in return for a
fee called royalty fee. The licensor, Tesla, may provide the license for a certain period of time
after which the license will end, and the licensee will no longer produce the electric vehicles.
However, the rights are limited in licensing as compared to franchising. Thus, instead of
manufacturing electric vehicles and exporting them to Qatar, Tesla can extend its license to a
manufacturer in Qatar where the electric vehicles will be produced and sold in the country
The main benefit of licensing for Tesla is to reach new markets for a period of time
without having to incur the cost of exportation. Furthermore, licensing will allow Tesla to
capture a new market and increase its sales. Through licensing for a period, Tesla can also
evaluate its market demand in Qatar and find out if the company should expand into the
country permanently through different mode of entry (Harris, 2021). Another major
advantage for Tesla would be that it will not face risk of large capital investment in a new
country as the operations of Tesla would be carried out by licensee. However, Tesla will have
less of a need to adjust to these variations as it can get into a technology license arrangement
with a local firm in Qatar. This will allow Tesla to expand without going through the issues
of cultural differences as the local licensee will have the cultural knowledge and
understanding of business environment that would enable the licensee to carry out Tesla’s
Managerial/Organizational Issues
The three types of managerial/organizational issues that can be faced by Tesla during
manage the employees and workflow of the company. The consequences of this ultra-
lean strategy include overcrowded workspaces and prolonged turnaround times for
maintenance and repair work. In the future, Tesla will need to concentrate on raising
its in-house body repairs, expanding its mobile services, and encouraging greater
2. Cultural differences between United States and Qatar can serve as an issue for the
expansion of Tesla in Qatar. The corporate culture will also be affected as Tesla will
hire Qatari local workforce. English is the de facto business language for many
significant than the words being used. For instance, American culture involves getting
right into the business during meetings whereas Qatari corporate culture places more
while expanding globally. There was a need for quick reactions and adaptability at the
environment changes, so are the costs associated with maintaining order and control.
Govindarajan (1991), the degree of reliance, the direction of information flows, and
the function of the subunit all can serve as an issue and deviate the business from
pose an issue during expansion in Qatar. Another type of communication issue that
Tesla can face is the language barrier in Qatar and communicating with the locals.
Solutions
where individuals have the autonomy to make their own decisions supervised by few
leaders. This can be solved by introducing a hierarchical structure with layers of roles
and responsibilities. This will allow Tesla to appoint different managers, set up teams
and have roles defined for each team and its manager. This will also result in less
crowded workplace as each team would stay in their part of workplace unless
2. When expanding into new markets, many successful companies are realising the
successfully, Tesla’s expansion leader must take into account the cultural norms of
the target nation, Qatar. Tesla should appoint a person in Qatar who is fluent in the
local language and familiar with Tesla’s value proposition and product positioning
which will make a huge impact. Customers are more comfortable when they know
they can reach a person in the same nation, who can communicate with them in their
native tongue and provide the service at a convenient time for them.
3. Communication is the key and solution to coordination issues that Tesla might face
while expanding. While there may be fewer middle managers between employees and
encouraged workers to bring up any issues or concerns, and facilitating chances for
teamwork. Furthermore, Tesla should appoint a person in Qatar who is fluent in the
local language and familiar with Tesla’s value proposition and product positioning
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