Successful organizations have found that a strategic management process helps them achieve their goals within a dynamic and competitive environment. Strategic management is a comprehensive process designed for firms to best use their resources and capabilities to provide superior firm performance. Analysis of the external, competitive, and internal environments help shape the strategies that a firm pursues to be successful. Strategies are broad goals that, as accomplished, help the organization move forward toward its vision.
Strategy formation goes back to ancient times, particularly used in warfare. Although not perfect, the strategic management process creates a framework for an organization to look outside of itself and set a course for success. The remaining chapters in this textbook walk students through this framework, providing tools for diagnosing the external, competitive, and internal environments to the development and implementation of strategies. The process should always be performed with a framework of corporate ethics and values to limit the temptation to cross the line where an organization should not go.
Will Tesla Make It?
On January 7, 2020, Tesla Inc. became the most valuable US automaker in history. Valued at $81.39 billion, Tesla passed Ford Motor Company as most valuable. Approximately two weeks later, Tesla passed Volkswagen to become the second most valuable car company worldwide. Still well behind Toyota, which has a $233 billion market capitalization, Tesla’s growth is unprecedented in the automotive industry. Can Tesla become number one worldwide?
Despite tremendous growth, Tesla has its share of problems as well. Its founder, Elon Musk, tweeted that the company’s stock price was too high; sending the stock tumbling, the Model 3 lost Consumer Reports recommendations, and COVID-19 shutdowns of factories slowed production. These problems raise serious questions. Will Elon’s Twitter use continue to cause problems? Are the quality problems going to tank Tesla’s growth? Can Tesla emerge from the COVID-19 shutdown successfully?
The company faces stiff competition from automakers attempting to regain their footholds in a highly aggressive market. Competitors are attempting to compete in the same areas as Tesla. Porsche’s Taycan, a Tesla competitor, got a huge win with a purchase from Bill Gates. As competitors continue to develop autonomous capabilities and better electric batteries, will Tesla continue to dominate US auto markets?
Langley, K. (2020, January 7). Tesla is now the most valuable US car maker of all time. Wall Street Journal. https://www.wsj.com/articles/tesla-is-now-the-most-valuable-u-s-car-maker-of-all-time-11578427858.
Johnson, M. (2020 January 24). Tesla becomes world’s second most valuable carmaker. The Hill. https://thehill.com/policy/transportation/automobiles/479712-tesla-becomes-worlds-second-most-valuable-carmaker.
Olsen, P. (2019, November 14). Tesla Model 3 loses CR recommendation over reliability issues. Consumer Reports. https://www.consumerreports.org/car-reliability-owner-satisfaction/tesla-model-3-loses-cr-recommendation-over-reliability-issues.
Siddiqui, F. (2020, May 1). Tesla stock plummets more than 10 percent after Elon Musk tweets valuation is ‘too high.’ Washington Post. https://www.washingtonpost.com/technology/2020/05/01/musk-tesla-stock.
Matousek, M. (2020, February 18). Elon Musk took a shot at Bill Gates after the Microsoft founder said he bought Porsche’s electric sports car instead of a Tesla — here are the details on Gates’ new car. Business Insider. https://www.businessinsider.com/porsche-reveals-taycan-turbo-and-taycan-turbo-s-production-model-2019-9.
Figure 1.1: Maurizio Pesce. Elon Musk at Tesla Factory Fremont CA. CC BY 2.0. Retrieved from https://flic.kr/p/emx5tu.