Tesla’s Corporate Strategy

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Vertical Integration and Outsourcing

Tesla is leveraging capacity in research and software development to improve as well as increase productivity level (Fialka, 2015). Technology giants (Apple, Google/Alphabet and Samsung) have no history in auto manufacturing, but each, like Tesla, is a multiple-business firm capable of competing in two or more industries. Moreover, each of the tech-based companies is a crucial partner to the auto manufacturing industry through the provision of gadgets such as in-console software applications—CarPlay (Apple) and Android Auto (Google) etc. Samsung is also producing core automobile technology for EV batteries, parking sensors, parking cameras etc. With a joint venture agreement, Ford, Google and Uber are jointly producing self-driving cars; and Uber’s main challenger in the ride sharing business, Lyft, has also signed an agreement with Volvo on the same technology. But even without more investments in ride-sharing services, Uber and Lyft are indirectly competing with Tesla as ‘alternative industry providers’—with respect to Michael Porter’s 5 Forces Matrix because sharing rides reduces the need for individuals to purchase cars. In summary, these partnerships between automakers and tech companies are the foundation of what we know as an ‘ecosystem’ in the business domain (Varadarajan & Dillon, 1982; Mangram, 2012; Stolze, 2015).

Tesla should therefore leverage the ‘ecosystem’ to achieve competitive advantage by maximizing: its capacity and frontline position in global markets. Apple tapped into the ecosystem to create powerful new competitive advantage while exploring then-established smartphone space, and the company eventually became a game-changer (Ditlev-Simonsen & Wenstop, 2013).

Horizontal Integration and Strategic Alliance

Horizontal integration refers to a business strategy that improves organizational productivity, profitability and competitiveness through alliances with market competitors (Gast et al, 2017). It can be an effective growth strategy if it enables organizations to achieve their objectives under legal provisions and regulatory guidelines (Freeman, 1984; Fialka 2015). Tesla should therefore apply the following three strategies that align with the company’s Growth and Reward model in order to transform its ecosystem:

  • Use horizontal integration to improve and grow autopilot technology
  • Focus on developing integrated, cross-functional products across its business lines

Further, Musk’s “Part Deux” mission emphasized on ‘enabling cars to make money for their owners when not in use.’ This underscores the relevance of vertical integration. Thus, leveraging safer autopilot technology from the complex technologies developed by Google, Uber, Lyft, Volvo, and Ford engineers is certain to improve customer satisfaction and ESG impact.

While vertical integration benefits Uber and Lyft, both competitors today require car owners to drive/work and make money (Fialka, 2015). But ecosystems are created for mutual benefits that cannot be achieved by individual capabilities—as is the case with societal problems. Although Musk asserts that Tesla is capable of delivering safe and reliable autopilot technology (Matt, 2020), the author of this paper recommends horizontal integration with the company’s stakeholders before they back out for any reason (Ditlev-Simonsen & Wenstop, 2013).


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