Paper Example. Tesla Gigafactory Case

Published: 2023-03-14
Paper Example. Tesla Gigafactory Case
Type of paper:  Case study
Categories:  Tesla Strategic marketing Leadership style Leadership management
Pages: 7
Wordcount: 1829 words
16 min read

Any business enterprise, the experience, size, or monetary capability, entry into new markets has always been a point of contention or milestone. In this regard, it is not surprising then that Tesla has not already entered the Chinese market despite its perks in terms of the cheaper skilled labor that is available in China and the broad market that its population will provide for the company's electric cars. Moreover, China will also present a launching pad for the company to conquer its next frontier, Asia, and the Asia Pacific. However, on second thought, one would never know what Elon Musk, Tesla's CEO is thinking. Considering the tremendous growth and success that Musk and his company have achieved over the last decade, it is impossible to tell what next the business genius has in mind after all controversy and trivia continue to surround his person and the radical business decisions he has been known for lately.

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One of the critical questions that many business experts tend to consider is the strategic approach that Tesla will adopt for the Chinese market. Given the lack of traction in sales and other revenue-related factors, the automotive electric manufacturer failed in its attempts to enter the Chinese market in a significant way as it had expected in the years 2014 and 2015. During its attempts to enter the biggest market in the world, the company failed to make impressive turnovers. However, the company's growth improved by more than a third in the year 2016, registering a whopping $ 1 billion in sales (Stolze, 2014). After the success in, the financial year, the company's ambitions for the Chinese market increased, but to their disappointment, the company failed to close the $2billion mark in the year 2017. By this time, skepticism was rising on the fate of the company in Asia. It is difficult to understand how a company that is arguably the best electric automotive manufacturer failed to flourish in the world's largest electric car market. Despite these challenges, the company never wavered in its pursuit of the Chinese market. Tesla even acquired an 864,885 square meter plot in Shanghai to set up its gigafactory 3.

Inferring to Tesla's business model, which stresses the need to focus on sustainable energy solutions to cater to a global market, it is therefore not ill-informed for Musk to remain relentless in his pursuit of the Chinese market (Liu & Meng, 2017). Following the model, the company not only focused on the manufacture of high-end electric cars for the affluent, but it also considered serving the rest of the population of the world in the same regard. Due to this fact, its focus not only remained in America where it could manufacture its cars and the rich and wealthy would import them from any part of the globe, but it also wanted the ability and the middle class who make a significant population of the world have a taste of the Tesla.

Another driving factor that indicates a bright future for the company in China is the many opportunities available in China. The question as to whether Tesla will establish a fully-fledged subsidiary in China is not a question of if but a questioning atmosphere the company will have a subsidiary in china on its own in no later than three years. Even from an outsider's perspective, for a company like Tesla to give up on its efforts after coming a long way. From a business standpoint, China is awash with skilled and affordable labor. Since the onset of the century, the Chinese have been recognized in the manufacturing world for their excellent work ethic, resilience, and hard work, making them thrive in the many assembly lines that the manufacturing business is characterized (Stolze, 2014).

Moreover, the availability of natural resources necessary in the manufacture of car batteries is abundant in the country. Evident as it is, the single most crucial aspect of any portable electric utility, is the battery. From portable electronics to heavy-duty electrical equipment, batteries are an essential aspect of the entire system. In this regard, especially from a business perspective, the first strategy for any business entity entering into the manufacture of portable electric equipment would be the sourcing of good batteries. While many bargains can hold concerning such issues, it is even better and shrewd businesswise to eliminate the intermediary to obtain the commodity from the source. Some businesspersons even go as far as taking over the source of the business themselves, eliminating any costs that may be incurred concerning such a product.

In the electromotive manufacturing industry, a car's battery is an essential aspect of the car, both from a technical and financial view. The car battery accounts for almost a third of the price of a car. It is, therefore, important for car manufacturers like Tesla to source their lithium on the best possible rates. Accordingly, Tesla should take advantage of the Chinese market, especially considering the country's proximity to the world's biggest manufacturers of Batteries. By the end of the year 2018, the major Lithium-ion battery makers included Panasonic, Contemporary Amperex Technology Co Limited LG Chem Ltd, and Samsung. All of these companies are predominantly located in Asia (Mangram, 2012).

It is not surprising then that Tesla came to a partnership with Panasonic to develop the company's Nevada Gigafactory 1. They are living by its model second statute of growth through strategic partnerships. It would, therefore, be a great business strategy for Tesla to enter the Chinese market (Liu & Meng, 2017). Despite its corporate sovereignty to a right of autonomy, the company should extend its partnership with Panasonic and create Gigafactory 3 in liaison (Mangram, 2012). Nonetheless, that does not allude that the company is not in its independent self-capable of opening up the factory on its own. A solo deal would free the company of its ethical business responsibilities and open it to a competitive list of potential suppliers primarily made of the world's leading producers of batteries. Even BYD Auto Co. LTD, for example, is more than qualified for a partnership with Tesla. Even though the companies have ideologically clashed in the recent past considering the different batteries, neither party believes in it is never too late for mergers to occur.

Arguably, the future of Tesla in China is undeniable. The reason behind this assertion being the factors discussed above. Additionally, it is worth noting that even though the company is originally American, the Chinese government has been known to offer incentives and laxer regulations since the entry into the market. To spark an influx of new technologies from abroad, the Chinese government had foreign companies partner with local companies on a cap 50% equity, thus returning us to the issue of Tesla partnering up with BYD (Liu & Meng, 2017).

As Tesla's Shanghai Gigafactory kicks into creation, financial specialists are warming to the conceivably gigantic overall revenues it could yield. The Gigafactory 3 is Tesla's first outside the U.S., and CEO Elon Musk has hailed it as key to the fate of the organization, as interest for Tesla vehicles increments in China. The production line is relied upon to lessen work expenses to as low as one-tenth what the electric vehicle maker as of now pays in compensation at its California manufacturing plant, which Tesla says utilizes over 10,000 specialists. With such a decrease in costs, Tesla could sell its vehicles at an overall revenue in the low-to mid-30% territory, practically identical to that of extravagance car producer Porsche, as per examine from Morgan Stanley.

Importance of Lining Up Strategy With Implementation

The linkage between organization structures and various strategic orientations

Organizational structure is a system through which a company or an organization outlines its operations and activities. Such structures, therefore, enable the organization to fulfill its responsibilities and goals. Typically, organizational structures include rules, company policies, and responsibilities. Additionally, organizational structures also determine the flow of information and commands between the different levels of a company. For instance, in centralized structures, the information flows from the top levels of governance of the company to the lower levels of governance. On the other hand, information flow in decentralized structures involves the lateral movement of information across the different levels of the organization since power is distributed across the levels of the organization (Olson & Slater, 2002).

Businesses of all shapes and sizes usually adopt organizational structures slowly since it allows for the smooth running of the company with minimal repercussions concerning disorganization within the system. A successful structure is one, which breaks down the responsibilities of each department down to the employees and the staff. Compared to decentralized organizational structures, centralized ones tend to perform better since the channel of power is linear and allows for little to no confusion due to power struggles within the organization. Moreover, the direction of the company comes from a single focused entity, making it easier for decisions to be made, especially during hard times.

While it is crucial for companies to adopt robust organizational structures, it is also equally crucial for the company to align the structure with the best strategic orientations, especially concerning the type of market sector or industry that the company operates. The business scene contains several strategic orientations that guide businesses in their enterprising endeavors. The three main orientations, however, are customer, competitor, and technology. Depending on the type of industry and the significant revenue-earning a component of an enterprise, it is imperative to align a firm's organizational structure with its strategic orientation (Olson & Slater, 2002). If, for example, a company is a retail and distribution franchise, then a decentralized organizational structure will suit its customer-oriented strategy, thus making the business run smoothly across different geographical locations.

Nonetheless, just like with many decentralized organizations, such a business in the retail and distribution industry will encounter challenges and limitations. One of the significant limitations of decentralized organizational structures is the loss of control of the entire business day to day operations. Each store and distribution unit runs independently, meaning that the major shareholders may never be aware of what happens daily across the entire network of the organization (Olson & Slater, 2002).

Strategic Plan for Technological Sector.

In the hospitality business, the reputation of an establishment is by far the most critical aspect that ensures the success of a business. To achieve an excellent reputation with five-star ratings, hotels, and other businesses in the industry have to come up with the best marketing plans that will expose the business to its potential customers. Such a plan should, therefore, highlight the best characteristics of the hotel, including its strategic location, adherence to laws, and customer service. This project is a marketing plan for a beach hotel to be established along the Californian coast. The development process of the plan involved the exploration of the hospitality industry with a particular focus on beach hotels.

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