Global Strategic Management: Assignment 1

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University

Course

Instructor

February 9, 2024
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Introduction

Tesla, Inc. is one of the front-running companies with prime interest in the automotive

and energy industries, working to drive the world into the sustainable future of energy. Its

foundations stem from Silicon Valley, 2003, becoming the global icon in electric vehicles (EV),

including battery storage and renewable energy solutions. Indeed, “accelerating the world’s

transition to sustainable energy” is not merely a tagline for Tesla but rather its driving spirit in

creating innovative products and ambitious strategies for growth. With a presence felt across

continents and even more than that, Tesla has been able to challenge the norms of traditional

automotive and energy industries, putting its steps firmly into technology, sustainability, and

consumer adoption of electric vehicles.

International Presence

Tesla’s global footprint is a testimony of its vision of accelerating the world towards

sustainable energy use. Operating in North America, Europe, and Asia with a penetration far and

beyond, the diversification of Tesla’s geographical is both strategic and immense. The company

has built significant manufacturing centers, notably in the United States, more specifically

California and Nevada, China in Shanghai, and Germany in Berlin. Such facilities are

fundamental not only for what is produced there but also as windows to large automotive

markets (Shipley, 2020). Tesla Gigafactories are designed to serve the scaling needs of the

company, using the best technology to optimize production capacity for electric vehicles and

battery storage products. This global network of gigafactories represents the dedication of Tesla

to catering to the growing global demand as well as to facing the challenges of global supply

chain logistics.
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The revenue distribution further shows Tesla’s international appeal. The American

market remains a stronghold that contributes greatly to its revenues. However, the financial

reports of Tesla indicate that a growing international revenue stream is more apparent, especially

in China and Europe. These regions are marked by solid sales growth driven by consumers’

increasing demands for electric vehicles and government policies supporting green energy. The

Gigafactory in Shanghai is Tesla’s first plant outside the United States, a move considered

strategic in tapping into the burgeoning Chinese EV market; hence, Tesla’s international

operations are key to the company’s diversified revenue strategy. Leveraging talent worldwide,

Tesla’s employees bring a breadth of cultural backgrounds, expertise, and perspectives to bear

for the realization of its mission. This diversity is not a by-product of its international operations

but is its distinct strategic asset. It fosters innovations, agility, and the ability to adapt, which are

critical in overcoming the complexity of global markets. Highlighting inclusivity and diversity

within its ranks at Tesla indicates that the company recognizes diversity in the workforce as a

competitive advantage within the global market.

Internationalization Strategy

Market Entry Modes

Tesla’s mode of entry into the market has been both unconventional and creative. What is

unusual with Tesla among traditional automakers is that instead of entering into partnerships or

joint ventures, it mainly resorts to expanding its presence on foreign soil through wholly owned

subsidiaries (Furr & Dyer, 2020). This direct investment approach gives Tesla more power over

the company, the name, and the customer experience. Arguably, that approach is exemplified by

establishing gigafactories in strategic locations like Shanghai in China and Berlin in Germany.
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These are massive production and assembly facilities not merely serving local demand but also

satisfying the international markets hence showing Tesla’s commitment to such markets.

Strategic Rationale

The critical strategic rationale underlying international market selection by Tesla and

entry mode selection involves issues like market potential for electric vehicles prompted by

environmental concerns and policies of the government supportive of such vehicles (Morgan,

2020). For example, when the world’s largest market for electric mobility, China, entered the

picture, it was strongly supported by the country’s aggressive push. Much strength could be seen

in the European markets due to their environmental regulations, with consideration of

considerable incentives for purchases of electric mobility. In this sense, wholly-owned

subsidiaries, thus, are Tesla’s intention of operating by controlling operations and changing

directions in the shortest time and with no restrictions as seen normally in joint ventures or

partnerships.

Challenges and Adaptations

As for regulatory barriers, cultural differences, and operational difficulties, all were

connected to enormous difficulties. Tesla faced all three of these associated with complicated

regulations in China, plus a trade tussle between the United States and China. The company

responded by setting up a Gigafactory in Shanghai, being the first car manufacturer that is 100%

foreign-owned in China. This minimized not only its trade risk but also made Tesla privileged in

local manufacturing incentives.

Culturally, Tesla has adapted its brand and product offering to fit local tastes and

preferences. For instance, in China, Tesla has included features targeting Chinese consumers,
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such as the integration of WeChat with the car and localized software updates (Agatie, 2023).

However, even the most immense process of innovation and management does not exempt Tesla

from the operational challenges, with the supply chain logistics and the local competition being

the primary drivers of an adaptive model. In Europe, the company has adapted to the diverse

regulatory environments and consumer expectations in the different countries, harmonizing

operations to safeguard compliance and competitiveness.

Advantages

The most significant benefit of Tesla’s internationalization is related to market

diversification. By entering markets around North America, Europe, and Asia, it reduced its

dependence on any one market, spreading its risk across different economic landscapes. The

diversification has been more than crucial, particularly in the automotive industry with highly

volatile consumer preferences and regulatory environments.

Another positive from the international operations is how Tesla has achieved economies

of scale. The presence of production facilities at strategic locations such as Shanghai and Berlin

has efficiently served local markets and optimized global supply chains (Perkins & Murmann,

2018). The question of scalability has been key to reducing costs per unit and consequent

competitive pricing of Tesla vehicles in the international market.

Increased brand recognition will be another tangible advantage Tesla will reap with its

global expansion. The company’s sustainability commitment, together with its technology,

appealed to a worldwide audience, making Tesla one of the world’s leading names. Such a

comprehensive coverage increased demand for Tesla products worldwide.

Potential Advantages
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The opportunity for an international presence for Tesla can provide potential advantages

in terms of making the company even stronger globally in the segment of electric vehicles and

sustainable energy. A significant advantage is the possibility of accessing emerging markets.

Countries such as India and Brazil are vast, untapped markets for electric vehicles that would

open an opportunity for Tesla to enlarge its reach and influence in the globe.

Strategic positioning in the global supply chain of electric vehicle components like

batteries is another potential advantage. The internationalization of Tesla can work closer with

local suppliers or lead to the creation of entirely new supply chains for building more resilient

and cheaper ways of sourcing.

This is further enhanced by its global presence, which presents it with more bargaining

power to influence and benefit from policy shifters on the international scene that may favor

sustainable energies. As more pledges are made by countries for reduced carbon emissions, Tesla

could find its international operations, allowing it to be the partner of choice in national

electrification efforts. This would expand the growth and market opportunities for the company.

Disadvantages

Operational Challenges

On the top of the list of operational challenges is logistical complexities. Running a

global supply chain - especially for the sort of high-tech components electric vehicles require - is

fraught with perils, from delays to rising costs. Besides, there exist regulation challenges in

different countries. Every market has different rules that govern vehicle emissions, safety

requirements, and the relevant tariffs that must be adhered to for importation. This calls for the

customization of the vehicles and approach to the business. Another aspect is competitive
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challenges with Tesla’s entry into the markets where traditional automakers and local electric

vehicle startups are already positioned, which demands the differentiation of its offerings and

brand strategies (Shipley, 2020).

Cultural and Communication Barriers

Cultural and communication barriers have also been an enormous concern for Tesla

regarding its global expansion. Therefore, the challenges are the same in an operation that

embraces a diverse workforce spread across several countries—cohesive communication and a

united company culture. Cultural differences might impact anything from marketing strategies

and employee management to customer services, therefore requiring adaptability and sensitivity

to local norms and expectations in everything that Tesla does. The direct sales model that Tesla

wanted to follow required adjustment for many markets where dealership networks are strong,

and the buying behaviors of consumers have been different from those in the U.S. (Macri, 2018).

While significant, these challenges have also been opportunities for Tesla to learn, adapt, and

innovate.

Milestones in Internationalization

Among the key stages of internationalization in Tesla’s strategic development, the

opening of the Gigafactory in Shanghai, China, in 2019, stands out. A few of them covered the

event that represented the very first Tesla production facility outside the United States and a big

step into the world’s biggest electric vehicle (EV) market. The Shanghai Gigafactory, or

Gigafactory 3, not only stood for Tesla’s global ambitions but also represented a strategic move

reflective of the adaptability that the company has honed throughout the years—where

sustainability and innovation mark its course across the globe (Cooke, 2020).
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The Shanghai Gigafactory is an important one because it was set up quickly and could

affect Tesla’s strategy on the continent. Through this, Tesla has shown its ability to adapt quickly

to a new environment, including regulatory and operational challenges peculiar to foreign

countries. This was made possible by the strong support the Chinese government gives,

emphasizing mutual interest in sustainable solutions for moving people and goods.

The launch of the Gigafactory in Shanghai has helped Tesla to reduce the cost of

producing their vehicles and to exclude paying duties for the import of their cars, which makes

their cars cheaper for the Chinese market. The Gjson will additionally support Tesla’s operations

in the Asia-Pacific region as a hub, improving the supply chain and achieving greater penetration

into the market. As a result, the success of this facility was not only in boosting Tesla’s

international sales but also in setting a new precedent for further expansion, thus realizing the

innovative approach of the company to globalization and its capacity to bring a tectonic shift to

the global automotive landscape.

Conclusion

Tesla’s internationalization strategy aided the company’s growth to become a worldwide

figure in electric vehicles and sustainable energy. Tesla expanded globally by strategically

entering markets, overcoming operational and cultural challenges, and capitalizing on tangible

and potential benefits to solidify its pledge to move the world of a fossil-fuel economy, thus

solidifying its international stature.

References

Agatie, C. (2023). Tesla Rolls Out 2022.44.30.8 Update for China With WeChat Support,

Handwriting Recognition. Retrieved from https://www.autoevolution.com/news/tesla-

rolls-out-202244308-update-for-china-with-wechat-support-handwriting-recognition-

208563.html

Cooke, P. (2020). Gigafactory logistics in space and time: Tesla’s fourth gigafactory and its

rivals. Sustainability, 12(5), 2044.

Furr, N., & Dyer, J. (2020). Lessons from Tesla’s approach to innovation. Harvard Business

Review, available at: https://hbr. org/2020/02/lessons-from-teslas-approach-to-

innovation.

Macri, K. P. (2018). Case Study: How Tesla Changed the Auto Industry. SupplyChainDive.

Morgan, J. (2020). Electric vehicles: the future we made and the problem of unmaking

it. Cambridge Journal of Economics, 44(4), 953-977.

Perkins, G., & Murmann, J. P. (2018). What does the success of Tesla mean for the future

dynamics in the global automobile sector?. Management and Organization

Review, 14(3), 471-480.

Shipley, L. (2020). How Tesla sets itself apart. Harvard Business Review, 28.