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 charging at a superstation in California.
Source: © Editorial credit: Aleksei Potov / Shutterstock.com
2017 proved to be a critical year in the development of electric car manufacturer Tesla, Inc. On the brink of bankruptcy just a decade earlier, Tesla announced on July 28th the official arrival of the first batch of its highly-anticipated Model 3 electric car. The day marked an especially auspicious occasion for a fraction of the tens of thousands of individuals who 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. First and foremost, they must prove their ability to fulfill the orders made by more than 400,000 people who pre-ordered the Model 3. Furthermore, they must show the ability to anticipate and adapt to changing market dynamics. Will demand for fully electric cars intensify or wane in an era where U.S. government officials have signaled a reduced emphasis on encouraging alternative energies? Will established automakers 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. As of April 20, 2017, Tesla seemed to be slowing its commitment to the recently acquired solar energy business and, thus, the promise of integrating solar power technologies into Tesla’s vehicles remains uncertain.
Looking toward the future, important questions surround Tesla. Will Tesla be able to satisfy future customer demand? Will customers be pleased with the vehicles they have purchased from Tesla sight unseen? Will other investment decisions by Tesla’s managers hinder or help their ability to deliver on their 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.