Economic subjects | Management » International Business Strategy, TESLA

INTERNATIONAL BUSINESS STRATEGY GEST-S470-2016/2017 GROUP 26. ART Charlotte – DUCHESNE Amandine – HAMIDOUCH Philippe – HARAKAT Camélia – PIREAUX Alice Table of Content Introduction . 3 Company’s Description . 3 Competitors’ Analysis . 3 Global Drivers’ Analysis . 4 International Business Strategy Analysis . 5 Ambition . 5 Positioning. 6 Capabilities Building . 8 Organization . 10 Recommendations . 11 Appendix . 13 Exhibit 1: Tesla Motor’s Electric Vehicle Market Competition Summary . 13 Exhibit 2: Tesla Global Sales 2012-2016 . 14 Exhibit 3: EV Market Attractiveness Result Matrix . 14 Exhibit 4: Renewable Energy Country Attractiveness Index . 15 Exhibit 5: Renault-Nissan Alliance I . 16 Exhibit 6: Renault-Nissan Alliance II . 16 Exhibit 7: Top 10 Alliance Countries . 17 Exhibit 8: Tesla Value Chain . 17 Exhibit 9: Tesla Value Configuration . 17 Exhibit 10: Nissan Human Resource Management Structure . 18 References . 19 2 Introduction Company’s Description

Tesla Motor, whose head office is located at Palo Alto, in the Silicon Valley, is a car manufacturer which has been founded in 2003 by Martin Eberhard and Marc Tarpenning. One year later, three investors joined the board: Ian Wright, JB Straubel and Elon Musk, who is currently the CEO and principal investor of the company. In a few figures, Tesla is currently worth $47,416 million with $7 billion revenues, 155 shares outstanding and 10,161 employees. The company has grown from a single retail store in 2008 to at least 79 stores worldwide in North America, Europe, Asia and Australia. Tesla is the main actor of the electric car industry and inspires both innovation and ethical values. In addition to selling electric vehicles and innovating, Tesla provides full electric powertrain components and systems, which are sold to car manufacturers. However, this analysis will only focus on the electric vehicles’ business of Tesla. The company waited five years before selling its first model,

the Roadster, the first world’s premium zero emission sedan, which became the third best-selling electric car in the USA and Europe. The excitement followed in the public with the Model S in 2012, the Model 3 in 2014 and the last one is the Model X in 2015. Tesla also diversified itself in energy solutions: the Powerwall for the residential sector and the Powerpack for the industry sector. Finally, in 2016, Tesla bought Solarcity and added to its products portfolio the panels and photovoltaic tiles. Competitors’ Analysis The competition is harsh within the automobile industry. During the previous years, many changes have been observed: regulatory requirements for vehicles emissions, shift of the consumers needs as well as increasing environmental awareness, making the industry evolving in the direction of electric based vehicles. Within this market segment, there are three different categories: battery electric vehicles, only powered by energy storage system via on-board

batteries, hybrid vehicles, powered by both a battery pack and an internal combustion engine and plug-in hybrid electric vehicles, owning similar characteristics than conventional hybrids but unlike the latter, PHEVs can be plugged in and recharged into an outlet. Since the market is very attractive and fast expanding, many companies are trying to develop environmentally friendly alternatives. Companies such as GM, Audi as well as Volkswagen and Mitsubishi have therefore entered the industry with hybrid models, while Daimler, Lexus, Audi and so on are developing electric vehicles. Main models competing with those of Tesla are the Nissan Leaf, Ford Focus BEV, Renault Zoé and Fiat 500e. Some start-ups have also planned to enter the electric vehicle market even if they haven’t been seen yet. As electric cars’ number has grown around the world, those car manufacturers are expected to enter the same markets as Tesla. To put in a nutshell, exhibit 1 describes Tesla Motor’s electric

vehicle market competition. 3 Global Drivers’ Analysis In order to highlight the motives for Tesla’s internationalization, a PESTEL analysis will be carried out. This framework evaluates the environment variables with the aim of identifying the importance of external changes within the industry. Political. Tesla started by selling cars in North America and then expanded itself in Western Europe and Asia, implying that its business might be influenced by distinctive political patterns. A major factor affecting the industry is the environmental regulation, which aims at reducing emissions levels by encouraging the production of environmentally friendly cars. Governmental subsidies and other incentives are also pushing customers towards greener vehicles. In the US, the government set up energy loan programs, encouraging R&D of new vehicle technologies and attracting car manufacturers in the market. As regards to Europe, Norway is a good illustration of government driving the

market with its measures like nationwide access to bus lanes or free parking for electric vehicles. In the same time, the Chinese government offers credits at purchase and intends to develop the charging network by building additional stations. Those political decisions represent opportunities for Tesla to find new investments that could help the company’s growth. Economic. Sustainable cars demand is increasing worldwide since the industry is growing and the costs of fuel-engine cars are rising, with the increase of fuel prices. In addition, after the 2008-2009 crisis, the GDP and inflation rate recovery in most developed countries has a significant impact on the customer purchasing power, leading to a potential increase of electric cars sales and an incentive for Tesla to enter other markets. Social. As people pay more attention to what they are buying, environmental awareness has increased and attitudes towards products have changed. Indeed, people currently prefer eco-friendly

products than pollutants ones. Moreover, the society still judges people on the car they own Thus, an additional reason to buy an electric vehicle is the improvement of the social status. Although all people do not have enough money to buy these expensive cars, since the population is becoming older, with more wealth and savings, people would be more likely to spend money on environmentally friendly cars. As people tend to be convinced of the benefits of electric cars, it creates a great opportunity for Tesla to generate demand globally and satisfy the needs of a greater base of customers. Technological. Electric cars saw the light thanks to technological progress, rapid globalization and the Internet’s emergence. Over the years, technological progress has enabled offering a wider choice of cars, leveraging safety as well as improving efficiencies and reducing costs within the car industry. Since 2006, worldwide R&D expenditures have also increased, leading to partnerships with

companies in other countries as Tesla is a highly technological company. Environmental. All over the world, individuals are getting more aware of environmental concern. Over the last years, car manufacturers have therefore faced the competitive pressure to produce eco-friendly vehicles. This contributes to change the car industry since manufacturers are quite a bit obliged to follow the new modern air. This trend toward environmental protection stimulates the demand for Teslas cars at a global scale. 4 Legal. Green movements are taking place, from which energy loan programs are emanating, and are leading manufacturers to produce eco-friendly cars. Regulations such as an increased taxation to incorporate new methods of green business, the “carbon tax” and other green policies were established. These laws are opportunities for Tesla as they could boost the global electric cars’ demand. International Business Strategy Analysis The internationalization strategy that Tesla

follows may be qualified as a global strategy. In order to assess choices the company made and the way it intended to build, sustain and organize a competitive business system, four elements will be analyzed: ambition, positioning, capabilities building and organization. Each of those elements will be compared to Nissan Indeed, as the market in which Tesla is playing is the 100% electric cars market, the choice of the main competitor has been made among companies that also produce fully electric cars. The world best-sold model and the only one present across similar market segments is the Nissan Leaf, making Nissan the more relevant competitor of Tesla in order to conduct this analysis. Just like Tesla, the strategy of this company can be defined as a global strategy since Nissan competes in the world’s key markets and its business system is made of integrated and coordinated activities across borders. Ambition By developing, manufacturing and selling fully electric vehicles and

energy storage systems, as well as installing, operating and maintaining solar and energy storage products, the business in which Tesla operates may be qualified as the one of automotive, and energy generation and storage. The vision and mission followed by the company are respectively “to create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles” and “to accelerate the world’s transition to sustainable energy”, while the long-term objectives are global expansion, strategic partnerships, technological innovation and shift from ‘High Price Low Volume’ to ‘Low Price High Volume’. Tesla’s ambitions are therefore market-driven because the company is trying to develop its offer in foreign countries in order to expand global sales. Exhibit 2 shows the increase of Tesla’s sales in different countries from 2012 to 2016. Following the same strategy, it can be said that Nissan is market driven as well. Indeed,

especially in 2012, Nissan noticed that emerging markets might gather opportunities as there were clear signs of expansion. Nissan identified China, India, Russia, Brazil and ASEAN 5 as emerging markets and planed for most of these countries to establish local alliances and partnerships, and production facilities expansion. Concerning the type of player, Tesla can be qualified as a regional player because the electric car company has only succeeded in establishing a strong competitive advantage in the United States and not yet in other markets such as Europe and China. Indeed, in the USA, Tesla Model S and Model X are, for the beginning of 2017, the best-sold electric cars, while most popular electric cars are Renault 5 Zoe in Europe and BAIC EC180 in China. Despite its current role, Tesla ambitions to become a global player. In terms of relative importance of key regions and countries, both companies compete more or less in the same markets. While Nissan delivers its products in

over 160 countries with Japan, North America, Europe and China as main markets, Tesla’s major countries are similar, with the exception of Japan where the presence of the company is currently limited. About Tesla, even if the company is the leader in the US, this market still offers a lot of opportunities as seen with the tremendous 68% of sales’ growth from February 2016 to the same month in 2017. This market, combined with the Canadian one, is especially important because it is where 80% of its cars are sold. The remaining sales occur mainly in Europe and then in China, Hong Kong, the United Kingdoms and Australia. The European market is also very important for Tesla because the number of electric cars sold there is increasing and it thus represents a huge growth opportunity. In fact, demand has increased of 20% in 2017 relative to the previous year The same trend is happening in China but the growth potential is even bigger thanks to the middle-class effect and the GDP growth

rate which is equal to 6,9%, in 2015, much higher than the worldwide average of 2,6%. In 2016, such favorable economic conditions enabled to import five times more Tesla cars than the previous year. As regards to Hong Kong, while the country knows a fast growth in EV adoption with Tesla owning 80% market share, the situation is about to change with the new massive first registration tax. Despite this constraint, the region remains attractive as it is considered as the worlds freest and most services-oriented economy, with its economy forecasts to grow by 2 to 3% in 2017. Finally, a recent entrance in the United Arab Emirates makes the country a potentially important market. When looking at Nissan’s sales, Japan, Europe, and North America accounted for approximately 62% of global sales in terms of units in 2015. Nissan’s sales in Japan, its domestic market, have known an 8.1% decrease compared to 2014 However, Nissan still holds a key position on the Japanese automotive market.

Contrarily to Japan, North America is the market where Nissan sold the most in 2015 and has known a spectacular increase of 9.9% compared to 2014 China is another important market since the company already has a strong position as sales represented approximately 23% of global sales in terms of units in 2015 and increased by 6.3% compared to 2014 As of 2013, Nissan was the leading Japanese brand on the Chinese market. The European and other markets, that include Australia, South America Middle East and so on, knew a slight decrease in sales in 2015. Indeed, sales respectively dropped by 02% and by 59% Positioning Positioning concerns the choice of products and customer segments and of a value proposition to those customers. As regards to the choice of countries, companies must first assess the electric vehicle market’s attractiveness of the region. According to Accenture, which conducted a study to identify and classify 14 markets with respect to their EV attractiveness (Exhibit 3),

the USA and China are considered as “Best-in-Class” markets and lots of European countries as “High Potentials” markets. This remark is 6 relevant since, with their strategy, Tesla and Nissan have established or are trying to do so in key markets such as the United States, Europe and Japan, where the rating in the ease of doing business is respectively, 8, 30 and 34 but also in emerging countries such as China. All the areas described have tremendous markets size and incentives for EV expansion, with most of them ranking at a good place in “Renewable Energy Country Attractiveness Index” of May 2016 (Exhibit 4). Next to that, Tesla has launched its activities in the United Arab Emirates in February and has also entered in Portugal, Taiwan, South Korea and New Zealand. In addition, the company is hoping to develop its activities in other emerging countries such India. More than a simple country, India may even become a platform country in the future if Tesla decides to

build its second “Gigafactory” there. Concerning Nissan, the company also acknowledges the importance of being present in other emerging markets such Latin America, Russia and the ASEAN regions. In order to expand and consolidate its position in those emerging countries, the car company has a facility expansion plan, which consists in either building new plants (Mexico, 2013) or increasing production capacity in already established plants (Indonesia, 2014). Moreover, the alliance with Renault is a great business lever in emerging markets. Indeed, the largest Alliance plant, where two types of Renault and the Nissan Torrano are manufactured, is located in India. About value proposition, while Tesla has positioned itself as a highly technological, reliable, environmentally friendly and attractive company that offers high-end cars, Nissan is mainly viewed as a company which delivers relatively affordable and highly technological automobiles of quality. Concerning Tesla, its main

competitive advantages are its superior technologies, including its lithium battery and its impressive Superchargers’ network, and superior brand perception, enabling the company to provide customers design and experience but also convenience and range. All of these make Tesla’s value based on differentiation. Then, the typical first Tesla’s customer can be qualified as a high-end customer and early adopter, willing to buy a premium luxury car. As being part of the upper middle class, he is wealthy and is either a successful entrepreneur or an executive, who lives in an environmentally friendly and technological city. At the beginning, the positioning could thus be qualified as focused. However, thanks to declining production costs and increasing brand popularity, Tesla’s generic competitive strategy has shifted to broad differentiation and the company currently tries to attract mainstream customers in the automobile market by selling more but at a lower price. By making itself

the universal standard for EVs and since its production is quite homogeneous across countries, Tesla follows a standardization strategy. However, little adaptation is also possible For example, in China, thanks to customers’ feedbacks, Tesla has adapted its Model S by making available a $2,000 option with an “executive rear seat”. As a conclusion and following the elements mentioned above, Tesla may be considered as a broad standardized differentiator. On its side, Nissan used to not have a particular type of customers and had therefore a broad approach. However, in 2011, the company narrowed its scope by portraying its average customer: a young baby boomer, aged around 45 with an average annual income of 125,000$ and his own home with garage. He is at least graduated from college and drives less than 50 miles a day Regarding the buyer of the Nissan Leaf, he has already got experience with ecologically responsible cars. In terms of the value offered to customers, it can be said

that Nissan is following a cost leadership strategy. Indeed the Nissan Leaf is most commonly known as the most affordable electrical vehicle. This position is also clearly reflected in its mission; to deliver to its customers the most highly technologically advanced car 7 at an affordable price. Finally, Nissan can also be seen as a company that uses standardization Indeed, vehicles proposed by the company are generally identical on different markets. Finally, in terms of corporate strategy, Tesla has focused its intensive growth strategy on both market penetration and product development. The former makes sales revenue risen in current markets and the latter enables the development of highly technological and environmentally friendly products. Then, the marketing mix of Tesla is tightly monitored in order to optimize revenues and customer’s satisfaction. Tesla’s products are electric cars but also batteries and powertrain components. The company has set up a premium pricing

strategy, where prices are high but evoke the uniqueness of the offer. Concerning the place of its cars, Tesla makes them available in the company’s own small luxury stores, which are located in luxury centers or fashion streets, but their ordering is made through the website. In terms of promotion, the company heavily relies on viral marketing and also uses personal selling techniques in its stores. Direct marketing, public relations and sales promotion are also used in Tesla’s promotion strategy. During its process of internationalization, Tesla has adopted a pure global strategy as the cars as well as the price range, the distribution and all the other elements of a marketing strategy remain the same across markets. Capabilities Building Capabilities building is about configuring the various activities a firm is carrying out internally or externally in order to create a business system able to deliver the value to customers and ultimately to capture value for itself. To do so,

a company first has to build competitive advantages and learn how to transfer them. Concerning Tesla, the automotive company is currently leading the electric vehicle market thanks to its differentiation and innovative advantages. Indeed, as already mentioned above, Tesla products are different on one hand, leading to an enhancement of customer value and innovative on the other hand, leading to being ahead in developing new products or services. Although, Tesla proudly ranks at the first place in the ‘World’s Most Innovative Companies List’ by Forbes 2015 ranking. Especially, Tesla has been successfully innovating by implementing a blue ocean strategy. The aim is to solve the environment and energy concerns from combustion engines depending on oil and to create a sustainable technology for transport. Tesla has created a new market space, called ‘Green Performance Automobiles’. Across time, the firm may also develop a cost leadership advantage Indeed, rapid improvements in

technology and the increase in scale have already helped the company to bring down the production. If it can continue on this way, the chance of disruptive success goes way up. In order to build those advantages, the mode used by the company is called the first mover advantage. Indeed, Tesla was one of the first to enter the green automotive market by offering customers new concepts and products. For the sustainability of those advantages, Tesla can rely on its strong brand, the unique value it offers to customer and its competencies, costly and difficult to imitate by competitors. Even though the company begins opening its patents to other organizations, allowing the competitors to take example, the activities carrying out by Tesla are still too complex to be perfectly imitated. 8 The advantages of Nissan are quite similar to those of Tesla. Indeed, since the company positions itself as a pioneer, by making history with the introduction of its Nissan Leaf, the first massmarket,

affordable pure-electric vehicle, it also uses a first-mover advantage. The Japanese company has also been acclaimed for its personalization of products and its innovative new ownership schemes for Leaf buyers, which clearly shows the Nissan is a “modern” company, with affordable latest technological innovations, and which is using relevant ways to connect with today’s consumer. Concerning the relationships with other companies, Tesla has not yet merged or acquired other firms, instead, the company is well known for its strategic alliances. Indeed, in order to facilitate its growth, Tesla has been following three main strategic alliance types (Holmberg, 2011): Supplier alliances, R&D alliances and OEM alliances with other automobile manufacturers. Tesla has set up partnerships with many firms mainly by co-specialization and learning in order to create better innovations at a faster pace and achieve industry dominance. Firstly, Lotus Cars and Panasonic are some of its supplier

alliances. Then, in 2009, Tesla cooperates with OEM manufacturer Daimler, which provided the company with access to superior engineering expertise and a cash infusion necessary to escape from potential bankruptcy. The following year, Tesla signed the alliance with Toyota, which enabled to buy the former NUMMI factory in Fremont (California) and to learn large-scale, high-quality manufacturing from a pioneer of lean manufacturing. In 2014, Tesla Motors signed another strategic alliance with Osaka, based in Japan and owned by Panasonic Corporation. Together, the companies jointly invested in the development of more efficient batteries. Finally, in 2015, Tesla collaborated with Solar Edge to offer PV storage solutions to the global market. As regards to the Japanese car manufacturer, in order to deal with its financial troubles that occurred in the 90s, Nissan has engaged in its main strategic alliance, the one with Renault. More details about the Renault-Nissan alliance are given in

Exhibit 5 and 6. This alliance aims at protecting each other during regional slowdowns and enables Renault-Nissan to know a continuous growth. It also led to the disappearance of an historic rivalry between both companies. The alliance ranks in the top four of carmakers groups. This successful partnership enabled Nissan to increase its net income and captured 10% of the market share in 2015. Historically, Nissan was well established in Japan and Renault strongly present in Europe and countries under French influence (Maghreb, Sub-Saharan Africa) but thanks to the alliance, Nissan could extend its influence zone and today, the group is highly present in leading and emerging car markets. In 2015, the group got 30% of the market share in France, 32,3% in Russia, 27,6% in Mexico or 8,5% in the USA (Exhibit 7). In 2010, the group announced collaboration with Daimler and acquired a majority stake in AVTOVAZ in 2012. Finally, the business system of Tesla is also influenced by the composition

of its value chain, which is highly integrated and summarized in Exhibit 8. Just like Tesla, Nissan also holds control over its supply chain. Besides its own production sites (50 in the entire world), the car manufacturer owns stake in four other companies only in Japan. Technologies such as engines or batteries are produced in Japan or in Mexico for the North American market. In Europe, the production sites are assembly sites, due to the alliance since Renault produces the engines or batteries thanks to the co-development program. 9 Organization The final key part concerns the design of the organization, built with the aim of supporting and implementing all the elements of the global strategy mentioned above. On one hand, the organizational structure of Tesla may be qualified as functional. Indeed, with a global hierarchy, a global centralization and minimal regional divisions, the company put the emphasis on managerial control. Headquarters in Palo Alto play an important role in

Tesla’s structure as they monitor most of the decisions. This centralization enables a tight control and is the reason why overseas offices have no autonomy. The R&D function is also managed in the headquarters Then, despite its growing international operations, Tesla is only calling on its overseas factory, which is located in the Netherlands, for final assembly functions while all of the other plants are situated in the United States. Concerning its stores, Tesla has showrooms in the USA, Asia, Australia, Europe, Canada and many others. Different strategies and marketing campaigns are implemented and financial records and reports are organized depending on these divisions. However, Tesla only has the following divisions used for financial reporting: United States, China, Norway and Others, meaning that division’s strategy is minimal. In order to enter markets by keeping that control, the car manufacturer therefore uses wholly-owned subsidiaries. Indeed, there is one in most

Tesla’s markets and they are located almost in each continent, except the South American one. This can be justified because Tesla has not yet considered selling its cars there. Even if such mode of entry implies investments of resources and competences and is time-consuming as it requires to understand local contexts, it enables Tesla to have a tight control over the operations. On the other hand, Nissan has implemented a regional organizational structure as each region has its own headquarters. For instance, in Europe, they are established in Switzerland and control the strategy of the region relative to the management of the sales and the manufacturing operations. Nissan also has production sites all over the world in order to decrease the cost of transportation. Regional headquarters enable to adapt to local markets and gives local managers more freedom. Concerning the mode of entry used to enter international markets such as India, China or Russia, Nissan usually makes strategic

alliances with local car producers. In Russia, for example, the company signed a partnership with Avtovaz. As regards to the degree of autonomy and integration, opposite to the norm in the automotive industry, Tesla is vertically integrating 80% of its supply chain. In terms of R&D, the company is continuously improving the core element of its cars: the battery. Keeping the batteries’ development in-house enables reducing costs and being sure it disposes of the required amount of battery cells. About manufacturing, Tesla owns five facilities The biggest one is a 55 million-squarefoot factory in Fremont, California, following with a facility for metal casting and another for assembling seats. The assembly function is ensured in the Netherlands Finally, Tesla has recently built the Gigafactory, in Nevada, allowing building batteries for a larger volume than the one that is currently possible to provide and enabling reducing costs. The company also expects to expand its functions

further in the next future. In terms of retailing, Tesla directly sells to its consumers by enabling them to order cars by phone or Internet. This sale strategy allows managing a low inventory, as customers are thus put on a waiting list, and reducing risks. Collaborations with other car manufacturers such as Daimler and Toyota but also with companies not familiar with the automotive industry are reducing 10 the autonomy of Tesla. The Exhibit 9 illustrates the value configuration of the company, elements drawn in blue representing what is outsourced from suppliers and in yellow the vertically integrated parts. Finally, in terms of human resource management, Tesla pays a great attention to the recruitment and engagement of its employees. In fact, it is a key requirement to attract and keep talented individuals in the company and translates into a better customer experience. The CEO of the organization, Elon Musk, plans to keep recruiting and developing a high number of new talents

from countries around the world to sustain growth and ensure the success of the business. About the organizational value and culture, Tesla encourages its workforce to continuously look for ideal solutions and innovative products that put the company ahead of the competition by rapidly responding to trends and changes in the market. Through its organizational culture, Tesla partly maintains the human resource capabilities important in its continuing success in the global market for electric automobiles and related products. From the point of view of Nissan and its human resources organization, the company maintains the focus on three approaches: a Specialized Centre of Expertise, Human resources by function and Human resources by region (Exhibit 10). In 2014, Nissan chose four priorities regarding human resources: respect for diversity, career development and learning opportunities, safer workplaces and dialogue with employees. Recommendations Since Tesla is not the major actor in

each market where it is currently established, there is still room for improvements. As previously exposed, Tesla’s organizational structure is currently characterized as functional. Although this kind of structure enables the company to tightly monitor its global activities and facilitates the implementation of new strategies, it prevents overseas offices to be autonomous and reduces their ability to respond efficiently to local concerns. To tackle this issue, Tesla should adapt its structure in such a way that the centralization would be mitigated. Thus, a more appropriate structure would be a geographical structure, where regional offices would have a role of facilitator across the different offices as well as for the business development. This structure would ensure flexibility and adaptation to the local requirements. Moreover, since Tesla is intending to expand its business on an international scale, regional offices that would look after and adapt the strategy locally would be

a requirement. It is crucial if Tesla wants to be effective on a global scale in the future This change of structure seems important to operate. Indeed, for instance in the European markets, European car manufacturers have a strong presence and Renault Zoe is the best-sold electric car there. The new structure would give more power to the Amsterdam office, which would then be better able to adapt its strategy to the European market. China can be cited as a second example In this market, Tesla is far from being on the top three of the best-sold electric cars. A geographical structure with the establishment of an Asian office would ensure a better flexibility to the Chinese markets, which might result in a sales’ increase. However, such a structural change might imply many negative consequences 11 such as employees’ resentment. In such “important” structural modification, cautious and progressive change might thus be implemented. Mainly present in China, Europe and North

America, expansion opportunities still offer to the electric car manufacturer. The main country where Tesla could establish its production activities is India, which is an emerging economy. First, expanding manufacturing activities there would enable benefiting from costs savings. Indeed, as the production would be achieved in India, it would be close to surrounding Asian markets, thus reducing shipping costs. The Indian government makes the market even more attractive by investing in infrastructures and setting up regulations to appeal foreign investors. Establishing a manufacturing plant in another low labor costs country such as China might also allow benefiting from costs advantage but India has a British heritage. Indian people are thus more likely to speak English, easing the collaboration with Tesla. Moreover, as the middle-class effect contributes to making the Indian market attractive, developing production there might boost the demand for Tesla’s cars. India might therefore

be the perfect place to establish the second Gigafactory that Tesla is hoping to open in a near future. Another aspect that Tesla could improve is its Marketing strategy. Tesla has a great name recognition within the middle and upper class, and has a lot of good press. As Tesla doesn’t spend a lot on advertising, such great reputation is achieved thanks to polished products release information, online quality mentions and a famous CEO. However, such strategy might not last forever and back orders will slow down, requiring to switch from a pure global to an adaptive usage strategy. Indeed, such strategy, already used by Volvo, enables to adapt the different elements of the marketing mix to the local context, with the exception of the product. Tesla is already popular in Europe and in the USA, but not especially in the rest of the world. This adaptation might stimulate the attractiveness of Tesla’s products and thus, boost sales worldwide. 12 Appendix Exhibit 1: Tesla Motor’s

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