Tesla Motors Foreign Entry Analysis Research Paper

Foreign Entry Analysis – Developed Country

Introduction

In recent years, Tesla has grown to become one of the most renowned and successful companies in the US and across the globe. Tesla, Inc. is a clean company and a pioneer in electric vehicles with its headquarters in Palo Alto. It is a publicly-traded firm listed on the Nasdaq with the symbols TSLA (Agence France-Presse, 2010). The company is involved in the designing, developing, manufacturing, and retailing electric vehicles and designing, manufacturing, installing, and retailing solar energy products. Tesla's business operation comprises of three key divisions. First, there is the automotive division, which encompasses the process of how electric vehicles are designed until they are leased or retailed. The storage and energy generation divisions encompass generating solar energy and products for energy storage (Reuters, 2021).

The company was formed in 2003 by several engineers with the aspiration to validate that persons did not have to make any compromise when driving electric vehicles. They endeavored to substantiate that electric vehicles can be better, faster, and more enjoyable to drive than gasoline vehicles. In the present day, Tesla manufactures electronic cars and interminably scalable products for generating and storing clean energy. Tesla believes that the quicker society ceases to be dependent on fossil fuels and shifts towards a future of zero emissions, the better it will be for the world (Tesla Inc., 2021).

Products and Market Position

The company was founded on 1 July 2003 by JB Straubel, Martin Eberhard, Ian Wright, and Marc Tarpenning (Vance & Musk, 2015). The founders were inspired to start up the company after General Motors Company recalled its electric vehicles (EV1) in 2003 and got rid of them. Tesla Inc. founders believed that battery-electric cars had a higher-efficiency and viewed it as an opportunity to change the usual connection between high performance and low mileage. At present, the firm has more than 30,000 employees and over 200 stores worldwide. In June 2010, the company went public, and as a result, it generated over $200 million in its IPO (Vance & Musk, 2015).

Tesla Roadster was the pioneering electric vehicle to be manufactured by Tesla Inc. It was released in 2008, and about 2000 vehicles were sold to over thirty countries. This was possible after the company entered into a contract with Lotus to manufacture 2,500 Elise Gliders. In March 2009, the company released a prototype of the Model S at a public exhibition. This was the first fully electric, luxurious, and high-performance vehicle. There was positive feedback, great reviews, and thousands of pre-orders for the vehicle. Thus, in 2012, the company officially released its first electric vehicle. By 2013, the Model S managed to penetrate a bigger market share due to its significantly greater capabilities and affordability compared to the first electric sports car, Roadster (Vance & Musk, 2015). Tesla, Inc.'s additional product offerings include solar panels and solar roofs. The solar panels and roofs are intended to enable consumers to control the energy production of their homes and achieve cost savings on their monthly utility bills. Besides, these product offerings facilitate increased usage of renewable sources of energy, which implies a heightened inclination towards reducing greenhouse gas emissions. This improves the status of the environment (Tesla Inc., 2020).

At the present moment, Tesla's shares have a market value of $841.92. Besides, the market capitalization of the company is valued at $795.63 billion. Concerning the company's market position, worldwide, Tesla's vehicle deliveries got to virtually 500,000 units in 2020. In the contemporary market, Tesla continues to be the top manufacturer of electric vehicles. Simultaneously, Tesla's Model 3 has come to be the world's best-selling plug-in electric vehicle model (Statista, 2020). Tesla is distinctive because it is not simply retaining vehicles but also retailing new technologies. Fundamentally, wagering on Tesla Motors takes into account wagering on new technology. In other words, Tesla has fashioned and presently dominates the market for luxury, distant electric vehicles, and a market that is unique from both the market for less costly electric vehicles and the market for luxury gas-powered cars (Forbes, 2015).

The industry of Operation and Competition in Targeted Country

Tesla's purpose of attaining continued market growth. On top of the firm's endeavor for financial prosperity, the firm and CEO are interested in sustaining the greatest level of ethical standards and becoming a force for the advancement of humanity, society, and the planet as a whole. The company is considering expanding its business operations to France. Owing to major renowned automotive companies such as Renault, Peugeot, and Citroen, the French economy is significantly boosted by the automotive industry. On an annual basis, six million vehicles are manufactured by French automakers. Currently, France holds the topmost position in Europe concerning the electric vehicle market. In recent years, the sales of electric vehicles have increased by 63 percent. This is tied to the fact that the country continues to act towards the fight against climate change, reduce greenhouse gas emissions, and the increased use of renewable sources of energy (French Gouvernement, 2020).

In fact, in the past year, France boasts of having the electric vehicle with the highest sales in the form of Renault's Zoe models. Specifically, the French auto manufacturing company's all-electric vehicle, Zoe, surpassed Tesla's Model 3 to become the highest-selling full-electric vehicle in the European region (Bloomberg, 2020). The automotive electric vehicle industry is prime in France, considering the incentives that the French government is providing to consumers willing to purchase electric vehicles. Specifically, the French government is offering citizens as high as 7,000 euros for shifting to electric and an additional 5,000 euros in the form of subsidies tied to the cash-for-clunkers program (Bloomberg, 2020). The table below illustrates the demand for electric vehicles in the European market:

The French electronic vehicle is expected to grow and experience intense competition in the coming years significantly. Notably, Renault is expected to make an even more considerable impact in the growing electronic vehicle market when it unveils two cost-effective E.V. models. These comprise the Spring small crossover model and the Renault Twingo Z.E model. Moreover, there is mounting competition in the market with Volkswagen unveiling the ID3 Model. Furthermore, two additional models in Opel Corsa-e and Peugeot e-208 will rival other plays in the market after being unveiled by the PSA Group (Patel, 2020).

Environmental Opportunities and Threats

There are various environmental opportunities and threats that Tesla will face concerning its proposed expansion to France regarding sustainability and country-distinct natural resources.

Opportunities

One of the fundamental opportunities is the sanctioning of carbon-neutral law. In the past year, France passed a new bill endeavored to diminish the country's level of emissions. Due to mounting severe impacts of climate change, France is…

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…will sustain the firm's profitability.

For instance, with the electric vehicle market in the United States experiencing a slow-down due to COVID-19 and challenges within the economy, expansion into the French market will allow the company to sustain its revenue generation and profitability. Similarly, the wholly-owned subsidiary will be a way for Tesla to diversify the firm's risk of loss. This is because a firm can diminish its risk in its market entry to a new market through subsidiaries, which aids in minimizing the exposure faced by the parent company (Elsner, 2013).

Disadvantages

There are shortcomings tied to utilizing wholly-owned subsidiaries as entry modes in foreign markets. First, the establishment of a wholly-owned subsidiary can be deemed the most expensive approach to entering an international market. For the most part, companies that opt for this approach are forced to bear the risks and total costs of setting up foreign operations. The risks tied to learning to undertake business within a new setting and culture are minimal if the firms acquire an enterprise established in the host nation.

Nonetheless, acquisitions increase an entire set of extra problems and difficulties, encompassing those tied to attempting to amalgamate divergent organizational cultures (Rugman, Collinson, and Hodgetts, 2006). The second shortcoming of this entry mode is that wholly-owned subsidiaries usually face substantial scrutiny and inspection by the foreign country's government administration. As a result, even genuine activities like sending home profits generated and additional assets can be a delicate matter and may give rise to corruption accusations (Root, 1994).

There might also be a concern in using this entry mode concerning conflict of interest. It is imperative to note that the parent companies are legally obligated to promote and advocate their different subsidiaries' corporate interests. However, a conflict of interest might come about between the two entities. For example, since Tesla is an electronic vehicle manufacturing company, it might aspire to get car parts supplied by the French subsidiary below the market price.

However, this would be in contrast to the entity's corporate interest in France (Elsner, 2013). An additional problem linked to this entry mode is that diversification can result in the parent company losing its concentration on the different areas of expertise. For example, there might be a concern that Tesla's expansion of the automotive segment into France could lose focus on the solar generation and storage segment (Elsner, 2013).

Relationship between the IMF and the ability to attract foreign investment

Research shows that there is a correlation amid the IMF and the capacity to attract foreign investment. In accordance to Biglaiser and DeRouen Jr (2010), taking into consideration the widely held perception that the United States government influences IMF policies and tends to support the business community, it may be anticipated that IMF programs benefit United States companies overseas and as a result borrower countries are attractive destinations for United States foreign direct investment (FDI).

The majority of the Macroeconomic frameworks under the International Monetary Fund (IMF)-supported programs make the projection bound to be a recovery or rise in Foreign Direct Investment (FDI) inflows. The fundamental supposition is that IMF-supported programs aid in the restoration of macroeconomic stability and consider structural restraints to growth, in that way renewing self-assurance and reassuring foreign investors to accept long-standing investment projects (Bal-Gunduz and Crystallin, 2014).

Research undertaken by Al-Sadiq (2015) ascertains a constructive…