Question 1 (a): Ownership advantage
The overall electric vehicle market has grown significantly over the years. For this reason, Tesla has had a continued commitment to the manufacture of electric vehicles. To achieve the company has invested in the production capacity with a strong differentiation strategy. The founders and CEO of Tesla, Elson Musk, have launched the mission of the company to accelerate the advent of sustainable transport through compelling and investing in the market for electric cars (Liu et al., 2014).
When it comes to the electric cars brand awareness, Tesla has been able to surpass all other players in the market. Much of its brand image has been seen through its charismatic CEO, Elson Musk. Ideally, the brand power of a company is seen through the real influence of the brand to generate more capital. Tesla started 15 years ago with a small market share, but with time, it has been able to build a power market with high expectations of the customers proving the power of the brand. Tesla has been able to create a point of difference, which has made the company one of the most prominent players in the electric vehicle markets.
The company has been able to adjust their technology to meet consumer needs as well as develop sustainable models for the future of their business. Tesla has remained a leading player of the electric vehicle and is now one of the most recognizable car brands (Van den Steen, 2015). Most of the recent challenges for electric vehicle companies are building a loyal clientele. However, this has been one of the competitive advantages for the company since they have been able to create a sharp brand image that has attracted more customers. Tesla’s brand image has become strong enough such that it can overcome the frustrations that are caused by the competition in the market.
The first-mover advantage considered as the benefit that is acquired by the important initial occupant in the market sector. This is gained through technology and innovation leadership of a company. Tesla has earned a first-mover benefit in the electric vehicle market (Teece, 2018). This is because the company has been able to focus on the electric vehicle market, which is a brand new market. The company has unveiled model 3, which has enabled the company to gain a more competitive advantage in the electric vehicle industry. Considerably, it is the pioneer in the market and has been primarily engaged in the electric vehicle field since the company was founded. The company workforce has gained valuable experience that is linked to manufacturing electric vehicles, thus enabling the company to build outstanding electric cars without having to rely on technology that is utilized by the fossil fuel cars (Chen and Perez, 2018). For instance, Tesla cars have been improved in terms of batter performance, weight distribution, as well as software abilities.
Tesla is the leading automotive company with unparalleled innovation as well as a luxury leaving behind some exclusive companies such as BMW and Mercedes. Tesla has been able to build a futuristic and innovative impression to the public through its innovation. The current public impression is generally positive due to the advanced technology utilized in building electric cars (Bilbeisi and Kesse, 2017). Tesla has a very high rate of innovation that has enabled the company to develop sustainable financial gains as well as competitive products in the market.
One of the greatest physical assets that Tesla owns is its three major factories. The factories take up some substantial amount of assets due to the equipment and employees that play an important role in the strategic decisions of the company. The first company has been used to produce the power pack, the power wall, and the battery modules for all the models of Tesla vehicles. The other factor is being used to build and assemble the three models while the third factory is being used in the production of solar roof tiles and solar panels. Another essential asset for the company is the supercharging stations that have been built all over the world. This has been essential since it has offered tesla more options to control the market.
The main advantage is their electric battery and charging infrastructure that is largely different from other electric cars. What Tesla has done is not only to invent electric cars but to invent a business ideal with advanced technology bringing substantial electric cars to the market. Part of the technology approach was to bring a network of charging stations that would address the biggest challenge in the adoption of electric vehicles.
Tesla has created human resource competency which is essential for its innovative products in the automotive business. The organization’s culture present values and customs that define the worker’s decisions and behaviors. Through this, its workforce is empowered to search for effective and ideal solutions that ensure the business stands out in the automotive industry (Hoelzlhammer, 2018). The company pays much attention to motivating and encouraging the employees to innovate and continue supporting the business through innovation. For instance, through its organizational culture it has maintained human resource capabilities that are essential for the growth of the business.
Question 1 (b): Location Advantage
Locating in China, particularly in Shanghai, is the best possible decision for Tesla in terms of location since the region is rapidly developing, and the living standards of people within China are improving. The benefits of investing in China include the country’s economic growth. Considerably, China has faced India and many emerging countries when it comes to nurturing elements that are essential for the success and growth of the business. Tesla in shanghai will promote the success of the business since Shanghai is a large and prominent city as well. The economic success and the resulting increase in the purchasing power of its population, the country has become of the largest consumer markets in the world.
The Chinese government has considered electric vehicle technology as a vital economic development finding electrification as the future of China’s economic growth (Ou et al., 2017). Concerning this, the Chinese government has placed electrification as one of its priorities and offered several subsidies to boost the growth of the electric vehicle market. The Chinese government has aimed at reducing greenhouse gas emissions and air pollution. Thus, the government has developed effective and supportive policies which it hopes will boost the market for electric vehicle cars. The long government push has facilitated the success of electric car manufactures in China (Wang, Pan, and Zheng, 2017). The stimulus from the government has two major aims, which are to boost the adaptation of the technology as well as put Chinese electric vehicles in the market. The government has highly pushed the demand for electric vehicles in the country. The local and central governments of China are greatly investing in the development of electric cars. Governments and businesses all over the world are looking for technological innovations that will lower their costs as well as boost the usage of environmentally friendly cars.
Supply and demand chain network
China has been ranked as both the largest buyer and manufacturer of electric vehicles in the world, accounting for more than half the number of electric vehicles that are manufactured and bought in the world (Masiero et al., 2016). There several major electric car manufacturing companies within the Chinese market. There is a quickly growing demand within the Chinese market since the living standards for people are going higher, and thus, more people can afford to purchase these cars. The purchasing power of many Chinese middle class has increased thus boosting the market for products and services within the Chinese market. China has attracted a number of countries due to its huge potential market, which is an important argument alongside being a strong economic powerhouse. China is at the forefront of the electric vehicle revolution. Many Chinese consumers of electric vehicles admire the brand and Elson Musk. As a result, they will be able to get a premium market, thus boosting the growth of the brand in the Chinese market. Low prices have boosted the demand for electric vehicles in China as the government continues to push the car industry to move from fossil fuels to new energy vehicles (Lin and Wu, 2018).
Access to the growing market
China is one of the most attractive economies, has attracted multinational companies. Through steady growth for years, foreign direct investment has increased within the country. Liberalization plans have facilitated this growth, the establishment of free trade zones as well as the high tech sector in the country (Datamonitor, 2011). Many multinational companies have been relocating to developing countries such as China and India to remain competitive and generate efficiencies in the marketplace. Relatively, the companies have been able to access the growing markets since the vast customer base in China and India are lowering trade barriers, which have allowed multinational corporations to sell and manufacture in these countries at premium prices. Chinas has demonstrated reform agendas that have aimed at improving the business regulatory environment for foreign investors. The reforms have mainly focused on the efficiency of the business processes. For the country to attract more foreign direct investors, they have introduced ways of improving the delivery of the key foreign investment projects, streamlining customer clears, and reducing import tariffs.
Question 1 (c): Ownership specific advantages
Tesla is known for its technological advancements and efficient system of production. Tesla is a strong brand all over the world. Any consumers of electric vehicles have been interested in the design innovation and features of their vehicles, the cost-effectiveness of the company as well as the high safety standards. Tesla is one of the world’s largest electric vehicle companies. The company has specialized in the manufacture of an electric vehicle with a great differentiation strategy as compared to its competitors in the market (Hoelzlhammer, 2018). Tesla’s business strategy has emulated typically technological product life cycles and then moved into large electric vehicle markers with low price points. The electric and battery technology has boosted the production strategy for the company, which includes the production component and the proprietary charging infrastructure. The technology strategy for the company has focused on pure electric vehicles, including electric motors, sensors, batteries, and artificial intelligence.
Tesla has created its own charging Supercharger stations, where the drivers can charge Tesla vehicles (Hoelzlhammer, 2018). The main reason why Tesla has invented its supercharger stations is to speed up the utilization and adaptation of electric vehicles in the market. For instance, in China, unreliable batteries, as well as quality issues, have been the main challenge causing the consumers to withdraw from electric vehicles technology. Therefore, with an effective supercharging station, Tesla will be able to beat its competitors in the Chinese market.
Tesla’s business model has been one of the greatest advantages for the business. The business model for the company is based on differentiation in selling and servicing (Chen and Perez, 2018). They have created unique products that have improved the profitability of the business. For instance, electric cars are competitive since they have environmentally friendly technology but have still emphasized the uniqueness of the product. They have been able to target the customers by offering a high-end product with renewable energy solutions that have satisfied the demand of the customers.
Unlike other companies, Tesla has sold its products through direct sales (Hoelzlhammer, 2018). This has greatly boosted the growth of the company in the international market with a network of company-owned galleries and showrooms. Considerably, this has been used in the product development of the company. Tesla has also combined several sales centers with service centers. The service centers have been considered essential in increasing customer demand. Customers can service or charge their vehicles at the centers. More specifically, they have invested the supercharging stations in building a charging network that will support the growth of their electric vehicle brands as well as develop battery technology that will support the electric vehicles to have shorter charging time and a longer range (Zhou et al., 2015).
Question 2: Cross-cultural differences
The cross-cultural differences between China and the US may affect the competitive advantage of Tesla in China. Considerably, through comparing U.S and China through their cultural dimensions, some variations may affect the operation of Tesla in China. The United States and China have significantly differed concerning the political system, laws, and social values. Some differences are found in terms of their power distance, whereby china has a higher power distance as compared to the U.S, which indicates that China is centralized. At the same time, the United States is highly decentralized Shi and Wang, 2011). The U.S has a solid individualism while China has strong collectivism. The U.S has a high value of masculinity as compared to China. Cultural differences influence human conduct and thinking, thus organizations where people interrelate based on shared norms and beliefs. Since Tesla will mature within the social context of the Chinese, the attitudes of the cooperation will be influenced by the fundamental values of the Chinese culture. For instance, the Chinese highly depends on teams and groups to avoid risks while U.S entrepreneurs are reluctant to cooperate since they place a high value on control and independence. This may greatly influence harmony among the members, thus affecting cooperative strategies within Tesla. The cultural differences will lead to problems in the workplace environment. Ideally, national differences can lead to a lack of shared values and norms. The lack of shared values and norms means that there is reduced trust, ineffective communication as well as lack of knowledge sharing within the Tesla.
Communication plays a vital role in failing or succeeding in a business in a new market. Language barriers may hinder the success of Tesla in the Chinese market. Language barriers do not only pay attention to the language people are speaking bust also the tone used in delivering the message. For instance, in the United States, it is collective for individuals to communicate loudly as well as more self-confident while sharing ideas while in China, they typically speak softly with a more passive tone while making suggestions. The formality of addressing staff and customers can ruin the chances with a potential client. The fact that Tesla is going alone into the Chinese market, there may be more challenges related to cultural differences since the company is foreign and have a different approach to clients and staff within the organization.
Accepting cultural variations will enable Tesla to benefit from a wide range of expertise within the business. The diverse cultural perspectives in the workforce will inspire more innovation and creativity. Diversity of thought in Tesla will breed innovation and drive creativity. This will help Tesla in solving issues and meeting consumer demands in more novel and exciting ways. Considerably, having local market insight and knowledge will make the business more profitable and competitive. Through a multicultural workforce, Tesla will have an important edge in expanding their business in the new market. Cultural understanding, local connections, and native language skills will boost the development of Tesla in China. Cultural differences will allow Tesla to offer broader as well as an adaptable range of products due to the culturally diverse talent pool leveraging experience and skills that Chinese employees will bring. Broader skills and potentially diverse products will help Tesla to have a competitive advantage. Diverse teams will perform better and more productive in the business.
Cross-cultural management approach
Getting to understand the cultural differences is one of the major strategies in fostering the success of Tesla in the new market (Bird and Mendenhall, 2016). This will enable the business to focus on the consumer values and norms as well as retain an effective cultural team in the factory. Adaptation is one of the most effective strategies. It is essential to acknowledge cultural differences that may exist, and Effective cross-cultural management begins with building trust as well as meaningful relationships among the employees. To maintain success in the multicultural team, Tesla should create clear norms and uphold them. This is because a multicultural team will have varying working styles. Thus it is important to establish standard norms and implement practices that will work best for the organization. For the success of Tesla, there is a need to create conditions that will bring members together. This is trough a clear and compelling direction. Tesla needs to create a structure for success, such as offering access to information and resource to complete tasks efficiently.
Question 3: Tesla innovation strategy
Innovation has become most significant in the achievement of success in the current business world. There has been a growing need for creative problem solving to find appropriate solutions that will satisfy customer needs. Innovation has led to the constant improvement of products as well as the development of new products that offer better value to customers. Tesla has led in terms of innovation in the electric vehicle market by utilizing the latest technologies into their EVs.
Tesla has focused on a policy of relentless innovation. They have fueled innovation and mobilized competitors, Expanding the market for electric vehicles. Tesla is known for both open innovation and pro-active innovation. Ideally, proactive innovation entails keeping an organization competitive through preparing it for changes with innovation and constantly seeking great ideas. Proactive innovation means that the company is continuously defining new challenges and opportunities and using these ideas to create new products based on these challenges. Tesla is one of the companies attempting to create alternative cars to lower the impact of greenhouse gas emissions. For instance, Tesla has been able to identify and solve the challenges of charging batteries.
Tesla has continued to be the leading in the electric vehicle market since it has a more powered battery technology. Tesla has remained committed to changing technology, such as its fast charging and sustainable batteries (Karamitsios, 2013). The innovations in Tesla stem from their organizational culture. Engineers inside Tesla push continuously and relentlessly for better products. Tesla has also allowed open innovation, which has accelerated the growth of the company among electric vehicle producers. Ideally, an open innovation strategy is aimed at collaboration between the management of firms that play a role in developing the innovation (Chiaroni, Chiesa, and Frattini, 2010). This can be seen from how the management builds a strategy that could address the challenges through collaboration. Tesla’s open innovation has been crucial in addressing company and industry-wide challenges within the development of electric vehicles.
local innovation network in China
Many industries have now engaged in building bridges across cultural and social situations, information sharing, thus the benefits of exploiting and sharing other’s resources. The local innovation networks will support the management of ideas, continuous improvement, as well as the establishment of varying points of view (Bilbeisi and Kesse, 2017). Ideally, different perspectives will influence idea evaluation and idea generation. The innovation network will enable Tesla to meet the current innovation issues and challenges, such as battery challenges. This will also promote innovation culture through current trends and knowledge that will be introduced by members of the local innovation network (Ebersberger et al., 2010). Therefore, the establishment of an innovative network will have a correspondingly positive impact on the capabilities of Tesla. This is because the company will effectively implement the existing as well as develop novel ideas. Another key motivation in setting up a local innovation network is based on the simple fact that knowledge and innovations are within the employees and external parties. Establishing a local innovation network will play a major role in bringing knowledge as well as potential insights from external sources.
The greatest challenge will be managing the local innovation network due to issues such as varying perceptions, communication issues, beliefs, intellectual property rights, as well as the crisis of ownership and control. For instance, due to the cultural differences between Tesla and other Chinese EV companies, there may be challenges in the management of the network. The hostility of new products can be stronger where the players are interconnected. Managing innovation in such a network will bring new challenges as they require to adapt their novel way of working. However, Tesla can build an effective local innovation network to achieve their innovation as well as research and development.