Tesla and it's International Strategy

Assessment of Tesla’s global strategy: 1. 2. 3. 4. 5. Introduction: - Page 1 Organisational challenges: Global Strategy & organisational structure - Page 1 and 2 Managerial Challenges: Managing Multicultural Teams - Page 2 and 3 Strategic Imperatives: Global Human Resource Management - Page 3 Conclusion - Page 3 and 4 Introduction: Tesla engineers, manufacture and sell electric vehicles (EV) and systems for energy storage. It was founded in 2003 by Elon Musk and Jeffrey Straubel. Tesla’s goal is to tend to a world’s transition to sustainable energy. Tesla proposes different types of electric cars depending on the consumers purchasing power with the Tesla Roadster at $200,000, which belongs to the high-end sports car market, the Model X at $89,990 and the Model S at $79,990 suitable for the Luxury and SUV market and the Model X at $35,000 for the mainstream vehicle market. According to Reuteurs (2021), more than 60% of Tesla’s revenues are produced in the United States of America, Tesla’s domestic market. However, the firm has decided to expand internationally because it believes that Electric Cars’ demand is rising globally. Indeed, Tesla targets the Asian and European markets to increase and expand its revenues streams. The automobile industry had encountered a significant shift when Tesla grew in the last ten years and became one of the most successful car brands globally. Tesla became successful at a considerable speed. Therefore, it is interesting to understand its international strategy and understand what challenges the firm encountered. Indeed, Govindaswamy (2016) shows in its Integration Responsiveness Framework Map that Tesla uses the Global Strategy because it seeks operational efficiency but does not change the product to adapt to market differentiation. Tesla targets to enter the market globally, which means that it faces high-cost reduction pressure because such a strategy expands the number of potential new customers. In point of fact, a Tesla car is not yet accessible to most consumers even if Tesla released its Model 3 at $35,000, which is meant to be mainstream and accessible to more consumers. Plus, the local responsiveness of Tesla is low because, according to Yuing (2018), Tesla offers standardised products with low differentiation across markets. Moreover, according to Sharma (2016), Tesla’s strategy is to enter the high-end market where consumers are ready to spend more and then reduce cars’ cost as fast as possible to target any consumer globally. Therefore, this report will focus on organisational challenges Tesla faces by using the Global Strategy and assess Tesla’s structure challenges. It will then move on to managerial challenges about managing multicultural teams. Lastly, the report will determine the firm’s Global Human Resource Management and understand its challenges. organisational challenge: Global strategy: 1 As seen before, Tesla is using the Global strategy like most car companies. Other car companies usually choose to use the transnational strategy with higher local responsiveness because they prefer to adapt to different markets rather than producing the same product for every market. As an example, Toyota or Nissan opted for a transnational strategy. Nevertheless, the global strategy comes in handy for Tesla since it does not try to respond to local responsiveness, but this strategy comes with several challenges that it must face. Indeed, as said before, Tesla targets three main types of consumers depending on their purchasing power but faces cost reduction pressure. Tesla tried to solve this problem by manufacturing the Model X at $35,000, but this could not be enough. The automobile market is highly competitive, and according to Yuing (2018), price is one of the main drivers of demand, and this is disrupted by companies such as BMW or Toyota, which rose barriers-to-entry by manufacturing luxury and affordable cars at around $30,000. However, according to Zhou (2021), consumers are eligible to cost reduction when purchasing an Electric Car but do not access it when buying a car running on fuel. Furthermore, according to Amankumars (2020), Tesla has faced several strategic challenges, such as not efficiently adapting to each country. For example, Tesla wants to expand its business to the European and Asian market but also the Indian market. But, according to Saxena (2021), less than 1% of cars sold in India are electric cars. Tesla will therefore face a new market that is not used to EVs (Electric vehicles). The Indian market is dominated by vehicles running on fuels, and Tesla should perhaps consider adapting its products to the Indian market. Organisational structure: According to Meyer (2018), Tesla utilises a functional, also called U-form, organisational structure. Meyer (2018) expresses that the management process of Tesla uses operational authority, which means that each sector of the company, such as engineering, sales or services, uses a structural group of employees to control the specific industry. According to Meyer (2018), Tesla’s organisational structure is controlled by different attributes such as function-based, which gives control to functional groups that will deal with the global and local operations. Moreover, Tesla’s organisational structure uses centralisation, which provides managerial control for the firm’s headquarters. Lastly, a division process provides Tesla with a way to deal with expansion in new markets. The company can use different strategies depending on which structure the team is working on, such as the automobile or its electrical storage system and creation side. However, Meyer (2018) states that the U-form organisational structure can be a disadvantage for Tesla because of its rigidness, limiting fast adaptation across the firm. managerial challenge: Managing multicultural teams: Employees can achieve Tesla’s goals with proper competencies since they want to attain innovative and breakthrough products. Tesla’s culture wants its employees to find new electric vehicles and energy production and storage solutions. According to Meyer (2019), Tesla wants its employees to innovate and improve the companies products. This lets 2 employees with more liberty in research and development to achieve new technologies that could be implemented in future Tesla’s products. Tesla’s cultural management system encourages its employees to adopt innovative and creative habits. Such a form of management is crucial for a company wanting to be so technologically innovative. Moreover, Tesla’s becomes more competitive in the automobile industry when facing other car manufacturers such as BMW or Toyota. Meyer (2019) also states that Tesla uses an innovative problem-solving multicultural strategy that stimulates employees to create new successful solutions to issues in the automobile market. For example, Tesla uses its creative method to develop new EVs that would solve environmental problems. Moreover, according to Biz (2018), Tesla’s way to manage multicultural teams is by using the CEO, Elon Musk, as a role model and a source of motivation for hard work and working for extensive hours. As a matter of fact, and according to Furrier (2020), Elon Musk as a person is sufficient as an advertising business model, which justifies why Tesla does not spend money on advertising. The firm depends on word-to-mouth to gain fame and market power. strategic imperatives: Global Human Resource Management: Most companies provide employees with a handbook defining a company’s policies, procedures to follow, and culture. According to Bapal (2020), Tesla has written a handbook that goes beyond any expectations. Usually, a handbook is a lengthy document about legal matters; Tesla’s handbook is about its goal, culture, and spirit, but it is different from other companies for several reasons. Tesla’s handbook is only four-page long, and it expresses everything about the company’s policy. The document is not there to explain how an employee should work, but it talks to the staff like they were friends. For example, Tesla’s anti-handbook handbook (2020) shows that the company does not have any problems with employees having another job outside of Tesla and lets employees manage their own time to be productive in the company, which is unusual a company of this size. Plus, Tesla was inspired by the Apple Genius Bar, where any employee can ask questions about Apple’s products or services. Tesla decided to open an “Answer Bar” where employees can quickly meet Human Resources staff and answer any questions they have, such as potential benefits an employee could get access to or feedback about decisions an employee can make. The purpose of opening an Answer bar and writing such an unconventional Handbook is to open dialogues with anyone working at Tesla and create stronger relationships among employees. Such a strategy boosts employees morale and loyalty towards the firm. Conclusion: In conclusion, Tesla’s International Global Strategy is unconventional compared to other famous brands manufacturing cars, but it managed to adapt. Tesla uses the Global Strategy, which means that the company does not try to adapt to other markets. However, the brand image is so strong that the company does not need to spend money on advertisements. It can only rely on word-to-mouth. Plus, according to Furrier (2020), the company only uses its earned media and its website for its marketing strategy. Tesla has 3 started its business by only targeting the high-end of the market. It is now trying to drive down to a broader market by manufacturing cars that are cheaper for consumers, which are encouraging because only targeting the luxurious market was one of its main issues. In terms of managerial challenges, Tesla has shown that employees must be innovative if they want to succeed. This can be seen as an advantage because it shows that the company has solid cultural attributes, and it enables the company to develop high-technology products that attract consumers. In addition to that, Tesla has proven that they are fast to solve the firm’s problems between employees. This attracts a motivated workforce that wants to participate in Elon Musk’s project to tend to a more sustainable world. However, this type of management puts lots of pressure on employees because they are asked to innovate all the time. Innovation is a strong point for any companies. Still, it oppresses Human Resources that must face employees that are in burn-out because of too much work and pressure. Such a strategy provides the company with the ability to be respondent to competitiveness but tires the workforce. Moreover, Tesla has a practical and unconventional Human Resource management style that provides the firm with a hard-working, loyal and innovative culture that drives up employees’ performances and, therefore, the company. However, the company faces problems with putting too much pressure on its employees but has tried to solve it by proposing the Answer bar or writing their Anti-handbook Handbook. Recommendations: In terms of recommendations, Tesla uses a specific strategy that has brought the company to where it is now. It is one of the most famous companies in the world, and it is currently thriving. The company managed to face competition that has been in place for decades. However, the company could be relying too much on its CEO. Indeed, Elon Musk is the face of Tesla, and he is known to be an intelligent and eccentric person. What will happen if Musk makes a wrong move? Would it sink the company just because of one person? Maybe the company should start working on a more efficient advertisement campaign and stop relying on Elon’s Musk Twitter account or on word-to-mouth. It is an efficient but risky strategy that could not work in the long term. 4