Chapter 1 Mastering Strategy: Art and Science
Learning Objectives
After reading this chapter, you should be able to understand and articulate answers to the following questions:
What are strategic management and strategy?
Why does strategic management matter?
What elements determine company performance?
Plugging in to Strategic Management Challenges at Tesla
Tesla’s Model X
Source: canadianPhotographer56/Shutterstock.com
2020 proved to be a critical year in the development of electric car manufacturer Tesla, Inc. On the brink of bankruptcy just over a decade earlier, Tesla announced they hit their goal of producing 500,000 cars in 2020. This production was a leap forward from just a few years ago in 2017 when tens of thousands of individuals paid a $1,000 deposit to reserve their option to purchase the automobile touted by some as, “The most important electric car ever built.”
In the coming years, Tesla’s managers face a number of challenges as they aspire to lead the charge into a gasoline-free future. While 2020 was a landmark year in Tesla’s production, the company also saw new challenges as GM CEO Mary Barra announced GM’s commitment to build electric vehicles, backed up by an announcement to hire 3,000 employees dedicated to electronic and automated vehicles. Will established automakers such as GM be able to take market share from Tesla? Will Apple make its long-rumored debut in the electric car business, and if so, how well will it do? Learning how to adapt and compete in dynamic markets such as this one is a key challenge within the strategic management process.
Tesla also faces challenges apart from its core automobile offerings. While Tesla’s new vehicle production has received favorable press, the company has also received harsh criticism for its decision to merge with SolarCity—a struggling company whose CEO is the cousin of Tesla CEO Elon Musk. This misstep led to a settlement of $60 million in 2020 based on a class-action lawsuit from shareholders angered over Musk’s actions; a trial against Musk as the sole defendant is scheduled for March 2021.
Looking toward the future, important questions surround Tesla. Will Tesla be able to continue to satisfy future customer demand? Will customers be pleased with the vehicles they have purchased from Tesla? Will competitors surpass Tesla’s early mover advantage? Will other investment decisions by Tesla’s managers hinder or help its ability to deliver on its core auto manufacturing goals? Your study of strategic management will help you to critically examine and answer the kinds of challenges faced by Tesla and other companies who compete in an ever-changing competitive environment.