Question

The producer of electric cars Tesla has recently announced its plans to build a large production plant in Germany. Discuss potential ownership, location and internalization advantages of this investment according to the OLI approach. Based on the Integration-Response Framework, which internationalization strategy and which organizational structure would you recommend for Tesla? Answer in max. 300 words

Answer 1

Potential Ownership, location and internationalization advantage plans of Tesla for building a large plant in Germany according to OLI approach: The founder of Tesla is Elon Musk. Tesla is making a significant investment by establishing a giga factory battery production plant and an automated manufacturing research centre in Germany. The first consideration ownership advantage which includes proprietary information and various ownership rights of the company which consists of branding, copy right, trademark, patent rights and skilled management. Ownership is intangible which includes reputation for reliability. Keeping this point in view the expansion of electric car will take place on the purchase of German firm Grogmann Engineering which will be renamed as Tesla Gromann Automation which will be dealing with automated assembly systems, telecommunications, consumer electronics and biotechnology industry. Location advantage can refer to natural or created resources which are immobile requiring a partnership with a foreign investor. For this they have to assess a comparative advantage of performing a function with a particular nation. The cost is often fixed which relates to the availability and cost resources. Tesla's main base of operations and factory are situated in California, a giga factory which is called a battery production plant near Reno in Nevada. It also has showrooms around the world and Amsterdam is its headquarter. The initial headquarter will be at Grohmann for the company's new advanced automation plant. Internalization advantages refers to an organization to produce a particular product in- house rather than contracting with a third party.

Based on the Integration - Response framework, internationalization strategy followed by Tesla are

(1) Global marketting - Tesla offers clean energy generation, storage and consumption technology with a mission to accelerate the world's transition to sustainable energy.

(2) Global standardization - Tesla's global standardization is strategic response to high pressures for cost reduction.

  The organizational structure- Tesla's organizational structure has a functional or U-form. The unitary form or U-form structure helps the organizational function as the main defining factor. e.g. structutral group of employee for engineering, sale, services etc. This organizational structure are of three types:

1. The most important is function based hierarchy

2. Centralization

3. Division