Gender Stratification Dissertation

Gender Stratification

Gender stratification is the unequal distribution of power, wealth and privileges across genders. It is usually characterized by sexism, sex roles, patriarchy, feminism, the glass ceiling, and institutionalized sexism. Gender and sex are two unmistakable words that have been misjudged and abused in the community today. Gender means the social and cultural behaviors whereas sex refers to the biological characteristics of men and women. Stratification by gender is exchanged starting with one age then onto the next as these practices are acquired. This paper focuses on the social construction of gender, evidence of gender inequality and the implication of how we see gender.

Gender impacts control dispersion of power distribution and how we organize our society. Roles according to gender determine how women and men should speak, think and interact with society. These roles are adopted during the early growth of babies, they spread until adulthood and influence people in every aspect of life (Ridgeway, 2011). Home is where children are ensnared to gender values, standards and esteems.  At the moment a child is born he or she is assigned sex immediately and thus shapes how they should be treated, the opportunities they should be given and how they should behave. Girls have their own colors, toys, and interests as compared to boys. For example, in the summary, we see that Harry did like pink shading as well as drew himself as a young lady and also trusted that he was a girl. This is contrary to how boys are expected to behave and hence it’s against the norms of society.

Gender Stratification Dissertation
Gender Stratification Dissertation

Patriarchy is commonly practiced among many societies where men have more power in regard to other genders. Patriarchy contributes a lot to rise in gender inequality as women are seen as the minority. In some developing countries, ladies are denied the privilege to cast a vote and leadership positions. Notwithstanding when there is no boundary for the female to take the position of leaders, the community cannot vote for them as they are seen as week and inferior (Christopher , Mendelberg, & Shaker 2012). Developed governments have put in place regulations that ensure that 3% of the leaders must be women. There are also leadership positions secured for women only and men are not allowed to participate. Families which do not have a man or a boy are considered as weak and needy in the society hence showing the extent of gender inequality as a result of patriarchist.

Gender Stratification in the Workplace

Gender stratification is also evident in the work environment where there is a lot of inequality between men and women. Normally employed women end up doing a ‘second shift’ as they do housework and take care of the children after returning from work. There is a great disadvantage as women don’t have time to concentrate on their carrier a compared to men due to pregnancies and marriage.  There is also a high salary gap between men and women due to several factors such as education choices, distinct job preferences, and skills required on the job (Greene, Marie & Smith, 2015). Many technical companies tend to prefer men during employment as men seem fitter than women. Currently, women have tried and re willing to take male occupations such as doctors, mechanics, and engineers. Contrary, there are very few men that are willing to take female occupations such as nursing as such jobs are vied to be light and only women can take them.

The glass ceiling is another contributor to gender stratification. This alludes as an undetectable hindrance in the general public that keeps the feeble gender from acquiring high-level positions. Despite women having achievements and qualifications higher than men, they cannot be promoted as those barriers always exist when factors such as experience, education, and ability are considered (Beeghley, 2015). The effects of glass ceiling are more evident with higher income occupations and high-powered jobs hence there are very few women holding these positions. As a result of women being denied these positions, the effects of gender inequality increase as men get more superior than women.

At last, education imbalance is a typical factor in establishments and the community. In many upcoming nations, ladies are denied the rights to education since they are considered for marriage and dealing with the youngsters (Williams & Christine, 2013). This is clear as there is a low populace of young ladies in the instruction institutions because of early pregnancies and early marriages. There are causes that require time and commitment hence it is hard for women to per sue them. A boy in a family is expected to choose a cause that is said to be that of men while a girl is expected to choose the one said to be that of women (Hacker, 2017). Currently, there is an availability of birth pills hence can avoid pregnancies and can give themselves time to chase their careers.

In conclusion, it is observed that gender stratification is an enemy to the development and should be avoided at all costs. The society should be educated on gender inequality and its effects through social protection programs and how it should be avoided. Women should fight for equality to be given the same opportunities as men. Furthermore, men should acknowledge the power of women, skills and treat them with fairness. The world cannot move forward without gender equity hence women should be empowered in society.

References

Ridgeway, C. L. (2011). Framed by gender: How gender inequality persists in the modern world. Oxford University Press.

Williams, C. L. (2013). The glass escalator, revisited: Gender inequality in neoliberal times, SWS feminist lecturer. Gender & Society, 27(5), 609-629.

Karpowitz, C. F., Mendelberg, T., & Shaker, L. (2012). Gender inequality in deliberative participation. American Political Science Review, 106(3), 533-547.

Beeghley, L. (2015). The Structure of Social Stratification in the United States, The, CourseSmart eTextbook. Routledge.

Greene, B. M., & Smith, R. A. (2015). Gender Inequality in the Workplace.

Hacker, S. (2017). Pleasure, power and technology: Some tales of gender, engineering, and the cooperative workplace. Routledge.

Relevant Posts

Gender Differences Social Media Dissertation

Feminist Movement

HRM Dissertations

If you enjoyed reading this post on gender stratification, I would be very grateful if you could help spread this knowledge by emailing this post to a friend, or sharing it on Twitter or Facebook. Thank you.

Globalization and Outsourcing

Globalization and Outsourcing

Globalization is a phenomenon that has swept across most sectors of the globe leaving firms to adjust to the changes that are occurring. The rise of competition Is one example of an aspect that has emerged within the twenty-first century, especially due to a dissolution in trade barrier that marked numerous markets as impenetrable. With globalization escalating gradually, businesses have gained an exposure opportunity to learn more as well as share tips on better ways of approaching futuristic growth. The following report will expound on globalization as a phenomenon, as well as its associated impacts within the modern day era. 

From an entrepreneurship perspective, the duties and functions that defined the modern-day capitalist or businessperson, have significantly complicated with time. Ideally, the 21st century, unlike its predecessors, has been defined by a revolutionary economic, educational, political, and social landscapes, elements that have emerged as a result of globalization.

Interestingly, the emergence of the phenomenon has transformed the manner in which man does business, given that it has erased the limitations that were nurtured by geographical borders as well as trade barriers, an aspect that has resulted in man embracing new synergies that will offer him or her competitive advantage over other similar players in the same market niche. The following report will further expand on wise investment moves as well as tactics such as outsourcing and offshoring that managers can apply to realize a wider economy of scale as well as achieve a greater competitive advantage. By utilizing the Case study of Telstra Call center services Outsourcing and offshoring, this report will expound on the impact, opportunities, as well as challenges, Globalization, and its associated strategies, have imposed on business operations especially on the global scale.

The World as we know it is currently evolving at unprecedented levels, an aspect that is reconfiguring and transforming the manner in which business, as well as trade, is conducted. As a result of the rampant transformation, goods and services have become easily accessible for most people across diverse regions of the globe. In addition to this, the international business community has continuously expanded as a result of favorable influences that have been nurtured by the economic reconfiguration and transformation. But, what is all this economic reconfiguration and transformation? The 21st century, unlike its predecessors, has been defined by a revolutionary economic, educational, political, and social landscapes, elements that have emerged as a result of globalization. The emergence of globalization as a phenomenon has transformed the manner in which man does business, given that it has erased the limitations that were nurtured by geographical borders as well as trade barriers (Beck, U. 2018, P. 35).

From an entrepreneurship perspective, the duties and functions that defined the modern-day capitalist or businessperson, have significantly complicated with time. Why and How? With factors such as competition escalating as a result of the globalization aspect, most entrepreneurs have embarked on redefining the rules of trade and business engagement provoked by the need to craft and embrace new synergies that will offer them competitive advantage over other similar players in the same market niche (Hay, C. and Marsh, D. eds. 2016, p. 52). As a result of the shift in momentum, it is crucial to note that today’s economic environment has shifted its dependency from the public sector to the public sector, given that the later has emerged to be the global powerhouse, while the former segment has continuously shrunk in size, cumulatively losing its prior influence and relevance in the economy setting.

Globalization and Expansion

In spite of Globalization nurturing numerous advantages from an economic growth perspective, it is crucial to note that the phenomenon has also escalated the rate of competition present across all trade sectors. The given aspect has manifested as a result of numerous entities across diverse regions entering the market, with each unit producing a similar commodity, to an already existing product. The escalation of competition has provoked most organizations to invest heavily in expanding their operations onto a global scale, efforts that have emerged based on the need to grow and expand the market niche that each organization claims and controls (Beck, U. 2018, P. 27). As an approach, the expansion to international markets has provided firms with an opening to increase their returns, realize other potential economic opportunities, as well as improve their image perception and brand loyalty. Although there are also challenges associated with the entry into foreign markets, the manner in which a venture tackles the emerging challenges significantly determines its survival chance in the new territory.

Outsourcing and Offshoring

Outsourcing is a strategy that has been employed by numerous institutions, which have pursued the global expansion route, based on its cost-cutting approach. When entering new markets, firms have always been primarily challenged by their ability to adopt, embrace, and conform to new customs, cultures as well as language that define the new market (Solli-Sæther, H. and Gottschalk, P. 2015, p.90).

Outsourcing as a platform provides a solution to such challenges among others, by utilizing the local manpower within the new economic niche as the organization’s workforce. The following report will expound on globalization and its impact on today’s businesses as its foremost agenda. Furthermore, this paper elucidates on tactics that managers pursuing expansion into the international market should observe if they wish to remain ahead of the game. In the second segment, the publication will analyze outsourcing and offshoring, coupled with their contribution to globalization, based on an Australian firm Case study.

Globalization and Today’s International Managers

Globalization as a concept is not new as one may perceive it to be, given that the concept has existed for centuries, only evolving with time to its present state. By definition, Globalization is a term that refers to the gradual but global integration of the numerous states economies, through the production of goods and services, trade escalation, as well as investment flows (Hay, C. and Marsh, D. eds. 2016, p. 11). From a phenomenon perspective, globalization emerged as a result of the global outreach fever that swept most nations, transgressing through each of the states military economic, trade and geopolitical niches. The cumulative impact of the global outreach manifested in the erosion of national economic borders, an element that embraced the emergence and growth of integrated international economies.

From a profile perspective, globalization has been defined by; the emergence of global corporations, robust internalization of production related economic activities, growth in the level of specialization, and escalating disaggregation of production. How has this been possible? Globalization as a phenomenon has consistently relied on policy changes as well as technological growth as catalyst platforms (Teece, D. Peteraf, M. and Leih, S. 2016, p. 19).

From a policy perspective, the creation and amendment of numerous trade policies has resulted in the dissolution of trade tariffs and barriers, an element that has opened up and exposed the local markets to international products, while also local products from different nations have been able to trade on the global market platform (Beck, U. 2018, P. 42). Evidently, nations such as Australia, China, and Dubai, all of which opened up their markets to trade and embraced international brands, have gained immensely from Globalization, an aspect that is visible in each state’s current market situation. 

Technology as the second catalyst factor propelled the evolution of globalization to what it is today. How So? As a result of its rampant evolution, technology has been integrated into man’s life as a crucial platform in his civilization. The emergence of a technology-based lifestyle, shifted the manner in which consumers’ access, shop, and order for their products, as well as the strategy in which manufacturers, industrialists, and producers advertise, retail, and distribute their products (Hay, C. and Marsh, D. eds. 2016, p. 52). Given that the dependency on technology is still expected to escalate with time, the business world has realized of its importance in globalization and the influence it imposes in the productivity, of goods and services as well as the consumption of the products.

Impact of Globalization: A Business Perspective

Globalization as an economic exposure platform has brought along with numerous advantages as well as implications both from the producer as well as consumer’s perspectives. When focusing on the producer side, which primarily made up of entrepreneurial organizations within the private sector, it is crucial to note that globalization has exposed the sector to competition, fluctuation in prices, as well as the substandard quality of products (Kraidy, M. 2017, p. 31). The following segment will offer an in-depth view of Globalization from a business perspective.

It is crucial to note that from the consumer’s end, globalization has been perceived to bear numerous benefits over time. However, that may not be necessarily the case when the aspect is perceived from a business perspective. The increased exposure of markets has also escalated the vulnerability of ventures both in local and international economies to a myriad of unforeseen risks, aspects that will be expounded on below.

Globalization and Outsourcing Dissertation
Globalization and Outsourcing Dissertation

Intense Competition

Competition as the first impact of globalization emerges from the opening up of local markets as well as the integration of economies. It is crucial to note that exportation and importation, as well as outsourcing of product and services are crucial aspects of globalization. Unfortunately, the given elements have created an influx of substitute commodities to most products in diverse markets (Donati, P. 2017, p. 15). The cited aspect which has emerged as the entry of new players into the market culminated in the escalation of competition between existing firms and the new entrants. Cumulatively, although the approach has compelled previously existing firms to improve their quality of products and services, it is unfortunate to note that the cost of competition has been overwhelming for firms in markets that are defined by numerous players.

Price Fluctuations

Fluctuation of prices as the second impact of globalization is highly associated with competition and market saturation. It is crucial to note that although globalization opened up local and international markets, the platform also led to the saturation of various markets that were already defined by a presence of numerous existing local players. Most of the international entrants into local markets were able to supply the consumers with alternative or substitute commodities, to local options at a lower price and even a better quality (Teece, D. Peteraf, M. and Leih, S. 2016, p. 27). Case in point, China’s products are renowned for their cheap price, although inconsistent quality. The given aspect nurtures price fluctuation of commodities because local producers will always be compelled to adjust their prices in a bid to compete with foreign producers, and the cost of their commodities, an aspect that culminates in the unsteady prices of goods.

Substandard Quality of Goods

The quality of a product as well as the brand it has crafted for itself, are aspects that significantly shape customer loyalty and satisfaction. Globalization as a phenomenon has compelled most firms operating in the international platform to outsource their products to developing nations, in a bid to realize a wider competitive advantage, margin when compared to other firms operating in the same niche (Kraidy, M. 2017, p. 22).

The downside of outsourcing is that for most organizations, the ability to observe a given set of quality standards becomes impossible especially when the firm focuses on offering services, or manufactured goods. Cumulatively, although globalization is inevitable, its impacts can be positive as well as be overwhelming for organizations without adequate control structures. The following segment will expound on strategies that international managers can adopt in a bid to remain afloat if not advance in the face of stiff and harsh globalization-induced changes.

Today’s International Managers: Winning tips amidst fierce competition

Drawing from the above analysis of globalization, it is evident that the phenomenon has significantly reshaped the manner in which organizations functions, and conduct business, especially within the international market platform. In spite of the prevalent changes, there are several tactics that wise international managers can utilize to continuously attain growth in returns, and market share. In addition to this, the tactics will enable an organization to establish a reputable image that retains a wide base of loyal customers.

Globalization, Identifying and analyzing the existing and potential Competition

For an organization to stay ahead of its competitors within any market niche, the firm should be aware of the existing threats, an aspect that can only be realized by conducting a thorough competitor’s analysis. It is crucial to note that any industry with new players and startups joining every day is considered to aggressively active, and as such, any firm operating within such a niche should consistently update its analysis in a periodical manner (McLean, M. 2018, p. 35). When analyzing the potential threats, it is crucial to identify the primary and secondary competitors as well as the level of threat each player imposes on your particular firm. By doing so, a manager can analyze the strengths and weaknesses of potential and existing competitors, in addition to making strategic moves that will consistently position the organization ahead of the competition. 

Assessing and Understanding the Target Market

In any business competition, it is crucial to note that the clients or consumers always represent the judges, as their choice embodies their final opinion about their desired product. In any market niche, a wise international manager will always assess the audience, its expectation, and needs, as well as demands. It is crucial to note that consumer behaviors keep on changing depending on the influence of macro factors such as economic conditions (McLean, M. 2018, p. 54). In such an instance, an astute director establishes constant communication with the organization’s existing and prospective clients, as an approach to remain informed and update on consumer concern, predictions as well as desires. By doing so, a firm can adjust its product pricing, market strategies, product packaging, and promotional campaigns in a manner that will attract potential clients and retain the existing ones.

Outsourcing and Offshoring, Telstra Case study

Outsourcing, when defined, refers to the process whereby a firm subcontracts the organization’s tasks and mandates to various external organizations that have specialized in providing the desired service. In other cases, outsourcing also involves a practice whereby an organization acquires a smaller firm with adequate resources and employees to run its tasks. Cumulatively, outsourcing revolves around the breaking down of a given function, and it’s subsequent assigning to third parties (Oshri, I. Kotlarsky, J. and Willcocks, L. 2015, p. 15).

Offshoring, on the other hand, refers to the purposeful relocation of a specific or cumulative business procedure to another new location, such as a country. A good example of offshoring would be when an industrial firm physically relocates its manufacturing process to a new state. The main difference between offshoring and outsourcing is that the former focuses on establishing an operation in a new state as a result of repositioning, while the latter primarily refers to the subcontracting of a firms’ task or duty to a third party which in most cases is usually an external organization (Solli-Sæther, H. and Gottschalk, P. 2015, p.90).

 The fierce aspect of globalization has compelled firms’ overtime to search for innovative and alternative approaches to getting the work done efficiently. Outsourcing and Offshoring have emerged to be promising alternatives means of meeting the production needs of any company. By employing the two approaches, numerous international firms have been able to regulate and cut down operational costs, free up internal resources to support other crucial sectors, and streamline time-consuming functions (Oshri, I. Kotlarsky, J. and Willcocks, L. 2015, p. 48). 

Telstra Outsourcing

Telstra within Australia is presently recognized as the largest media and Telecommunications Company, offering services that include; operating telecommunication network, as well as a vast range of entertainment and communication product and services. As a firm, Telstra prides its purpose to be creating a brilliant and connected future for everyone, a vision it has managed to achieve over time through the expansion of its products and services towards the international telecommunications market.

Expanding into the international market is a move that Telstra implemented provoked by the need to grow the company’s portfolio onto the next level, in addition to embracing the global market platform (CX Central. 2018b, p1). In its expansion operations, the firm has gradually relied on outsourcing and offshoring as approaches to realize its economies of scale and competitive advantage over other players present in the telecommunications industry. One particular and crucial department that the firm has constantly outsourced and offshored to India, Manila, and Perth is its call center operations (CX Central. 2018, p1).

Essentially, under the firm’s international operations plan, Call centers are usually overwhelming departments that are defined by large volumes of low severity type of work. If the firm was to house most of call center operations within its main headquarters back in Australia, evidently quite extensive resources would be committed to the department, to the extent of overwhelming significance performance targets of the institution. Thus by outsourcing and offshoring call center services, the firm is primarily able to focus its resources on dealing with challenging and more severe issues affecting its product portfolio, brand depiction, and customer market base (CX Central. 2018, p1).

Challenges of Outsourcing and Offshoring

Two of the major challenges that Telstra has realized in its international expansion conquest, are cultural and language barriers. As a telecommunication firm, Telstra is constantly in touch with its customer base compelled by the need to introduce and sell new products, as well as offer supportive services (CX Central. 2018b, p1). Given that the firm opts to outsource and offshore its call center operations, most of its customer base across the western world have been complaining of an ineffective call center support base, as in most situations their needs and demands have often been unmet (CX Central. 2018b, p1).

One good example was a recent scenario, where an American customer received poor call center support services that were perceived to be abusive and culturally insensitive, especially after the firm had withdrawn its support for same-sex relationships (CX Central. 2018, p1). It is unfortunate to note that the given aspect resulted from a conflict in cultural and linguistic customs between the firm’s support staff and a worried client, an aspect that could have been deterred if the firm offered locally based call support from America or Australia.

Globalization, Outsourcing and Offshoring Opportunities

From an opportunity perspective, Telstra was able to run its call center support services at a lower cost especially given that the standard labor wage of employees in most of the countries that the firm outsourced its operations are way below what Telstra was offering its initial employees. Additionally, the firm, thanks to outsourcing and offshoring was able to free up more resources back at home and commit them to more severe and demanding issues associated with the firm’s growth and future projections.

In conclusion, it is evident that Globalization is a phenomenon that is here to stay. More so, firm’s that do not embrace this occurrence will gradually become outdated in our ever-changing and first paced world. As economies integrate, there is a crucial need for managers to begin “thinking out of their market niche, and across the globe.” Customer preferences change from time to time, and with that being a significant determining factor of choice, firms should consistently lay down moves that will secure more potential customers besides retaining the existing ones. Additionally, with competition emerging to be a significant defining factor of today’s markets, there is a pressing need for firms to adopt positive elements of outsourcing and offshoring, besides other competition analysis schemes, all in a bid to remain ahead of the curve that is a saturated market full of numerous existing and emerging start-up players. 

References

Beck, U., 2018. What is globalization?. John Wiley & Sons.

CX Central. 2018. Telstra call centre staff in Perth have language problems – CEO | CX Central.

CX Central. 2018b. Telstra’s offshore call centre has a cultural alignment shocker– CEO | CX Central.

Donati, P., 2017. Globalization of Markets, Distant Harms and the Need for a Relational Ethics. Rivista internazionale di scienze sociali, 1(1), pp.13-42.

McLean, M., 2018. Understanding your economy: Using analysis to guide local strategic planning. Routledge.

Oshri, I., Kotlarsky, J. and Willcocks, L.P., 2015. The Handbook of Global Outsourcing and Offshoring 3rd Edition. Springer.

Solli-Sæther, H. and Gottschalk, P., 2015. Stages-of-growth in outsourcing, offshoring and backsourcing: Back to the future? Journal of Computer Information Systems, 55(2), pp.88-94.

Teece, D., Peteraf, M. and Leih, S., 2016. Dynamic capabilities and organizational agility: Risk, uncertainty, and strategy in the innovation economy. California Management Review, 58(4), pp.13-35.

Kraidy, M., 2017. Hybridity, or the cultural logic of globalization. Temple University Press.

Hay, C. and Marsh, D. eds., 2016. Demystifying globalization. Springer.

Relevant Posts

Global Development China Dissertations

MBA Dissertation Topics

Did you find any useful knowledge relating to globalization and outsourcing in this post? What are the key facts that grabbed your attention? Let us know in the comments. Thank you.

Falling Oil Prices Dissertation

Falling Oil Prices and their Long-term and Short-term Impact on Ordinary Investors

Falling Oil Prices – Oil prices for the better of human history have been subject to various factors like economic recessions and booms. All one has to do is to use history as a reference to ascertain whether these prices are likely to change when taking into account the prevailing global aspects like the change in the United Stated presidency. On the same note, it is undeniable that OPEC has acted to influence oil prices and hence the global economic setup. Bottom line, the crude oil industry experiences ups and downs and can only be treated as volatile.

It is for this reason that the effects of falling and low prices on investors ought to be interrogated in the sense that it is only prudent to assume that oil prices eventually influence investment decision makers. After all, oil prices have been found to have a tendency of affecting almost every aspect of the economy and hence both future and current investments. At the current global age, oil prices have experienced a dip and stand to remain so for a considerable time into the future according to economists and other stakeholders (Degiannakis, Filis & Kizys, 2014).

It is for this reason that OPEC, with its powers, has concentrated their efforts on ways and mechanisms to use in raising these oil prices including lowering production and hence prices. When there is a shift in oil prices, in this case, a downward shift, it means that they are losers and gainers. Thus, from a critical analysis point of view, there needs to be a careful and clear interrogation of the concept.

The purpose of this study paper is to investigate the impact of long term and short term implications of falling oil prices on the ordinary investor. The objectives of the study were to have a deeper understanding how this affects both energy dependent and independent investors. The study established that as oil prices continue to decline, it is crucial for ordinary investors to be long sighted in making their decisions. Though falling and low prices are a temporary phenomenon, it so happens that their effects can never be overlooked.

For example, low prices mean that oil and oil products consumers have a greater disposable income to spend on other products. This means that retail outlets experience a sense of business boom (Bohi & Montgomery, 2015). The same case applies for motor vehicle manufacturing industry whereby low oil prices induce prospective customers and consumers to indulge in buying more vehicles. Taking into account that the motor vehicle industry is rather a crucial sector of the global economy, it is only evident that oil prices have a causal effect on quite a large chunk of the economy.

The study further established that low oil prices have both macro and microeconomic effects which equate into more fiscal and monetary policies by stakeholders. For example, federal governments have to come up with such policies like increased tax rates due to the low revenue they get from low oil prices. Increased tax rates automatically affect ordinary investors. It is for this reason that such countries have to perform macroeconomic adjustments to cushion for these impacts. In so doing, falling or declining oil prices effects must be remedied by running substantial and rising fiscal deficits.

Additionally, falling oil prices results in reduced commercial activities around oil producing regions or areas in that such companies like truck retail and construction companies often reduce their investments due to low returns. This paper employed qualitative research methodology. Data was collected by reviewing relevant peer-reviewed economic literature on oil prices and the economy. Data was presented as a narrative essay and utilized convenience sampling method.

Statement of Problem

Though there have been numerous efforts geared towards understanding oil prices in the economy, the process has not been impressive so far. This is particularly so because ordinary investors may not be able to comprehend the underlying economic jargons, models and policies. More so, history have acted to teach investors lessons on investments in such cases where they are not sufficiently equipped to adapt to these oil changes. It has become increasingly important to have a better understanding and hence this study paper.

Thesis

This study paper investigates and establishes the long-term and short-term impacts of falling oil prices on ordinary investors. The paper seeks to help have a better understanding of oil prices impacts on the economy by reviewing both fiscal and monetary policies that are taken in accommodating these oil price changes.

Significance of the study

Findings of this paper may be used by relevant stakeholders to help curb negative effects of falling oil prices and encourage ordinary investors to enjoy the benefits that come with the same.

Review of Literature

Effects of Falling Oil Prices on Currency Devaluation and Investments

Currency exchange rate is the value which one currency is measured against another currency. With low and falling oil prices, there tends to be push-up domestic inflation due to high import prices. It is undeniable that investors require higher returns to compensate for the inflation. It the follows to compensate for inflation; the federal bank has to raise interest rates to curb inflation. With the government attempting to curb inflation, various steps are followed including Open Market Operations and Cash to Liquidity Ratio for banks (Nazlioglu, Soytas, & Gupta, 2015). The effect of raising the interest rate on loanable funds can be explained by the following economic model:

Falling Oil Prices - High Interest Rates
Falling Oil Prices – High Interest Rates

From the above analysis, it is evident that an increase in interest rate leads to a reduced supply of loanable funds and hence low investment from ordinary investors.

 The aggressive measures are aimed at reducing the supply of currency in the economy by making its supply low thus increasing its value. In so doing, the interest rate in the economy automatically increases meaning that the government is in a bid to discourage banks to lend loans and funds to the consumers and discourage investors from accessing such loans and finances. Consequently, it results to reduced investments. On the same note, it is important to note that currency value is a crucial factor in attracting foreign investments (Sadorsky, 2014). Thus a low currency caused by inflation acts towards discouraging ordinary investors from investing in such countries with low currency.

In the bond market, there is an inverse relationship between bond prices and interest rates such that if a currency crash was to happen, there is a likely hood of the bond market crash. High-interest rates caused by low or falling oil prices usually results into low bond values making it unattractive to ordinary investors including foreign investors who may be willing to invest in international government bonds.

The effects of declining oil prices in the economy have never been clearer. Falling oil prices mean that countries have to cut public budgets. This, in turn, has resulted into serious social and political ramifications that have been found to have a direct relation with investments. For example, in Russia, the ruble suffered significant devaluation with falling oil prices. Consequently, the stock-market prices tend to fall. The effects of declining oil are better understood when such factors like federal or central banks reserves shrinking, capital flight, low exports and low foreign investors are taken into account (Brown,Chan, Hu & Zhang, 2017).

Furthermore, when falling oil prices are significant enough, they tend to downgrade a country’s bond value to almost junk levels which are mainly done by credit rating agencies thus acting to discourage ordinary investors. Due to oil price weakness, Consumer Price Index has shown inflation might be incumbent in the long-run if oil prices are to continue into the foreseeable future. However, falling oil prices act like a tax cut for consumers such that they can spend other than oil and energy.

Currency devaluation in some cases may be a voluntary concept whereby a country may devalue its currency to make its exports competitive in the world market. In the recent past, China devalued its Yuen currency reaching an almost six year low (Basher & Sadorsky, 2016). Consequently, it resulted into the low crude oil. As the oil market is characterized by the dollar currency and hence dollar peg, countries have to act within and beyond their limits to maintain currency levels competitive against the dollar. As of the year 2016, the IMF urged Nigeria to devalue its currency as low prices hit the economy. Being an aggressive strategy, it was a viable option in attracting investments after the currency stabilized in the long-run.

In the Nigerian case study, the government sought to restrict access to foreign currency and ban quite a wide range of imports. Though this was viewed as being detrimental by the IMF, it was a measure to curb the effects of low oil prices and inflation (Alfaro, Bloom, & Lin,2016). The effects of the same were also felt by the common consumers and ordinary investors.

The Nigerian government was of the view that it was better to restrict access to foreign currency and limit certain imports into the country rather than devaluing their currency. This, of course, had a negative effect or impact on investors who dealt with this line of imports. Similarly, restricting access to foreign currency meant that local and international investors would not transact in certain currencies limiting their diversification both in stock and currency trading. Furthermore, in such a country which is import dependent in terms of food, it meant that investors had to get less for their money (investment returns) or had to charge consumers for their products.

In choosing not to devalue the naira, the Nigerian decision makers risked severe foreign exchange that could potentially lead to decreased foreign investment and hence an increase or surge in the black-market sector (D’Ecclesia, Magrini, Montalbano & Triulzi, 2014). Thus, this is a direct attack on the business sector especially considering that oil is just but one commodity affecting all other range of consumable products and services.

Falling Oil Prices and Increased Tax Rates

In a bid to recover tax revenues lost through falling oil prices, the federal or central banks usually takes upon increasing tax rates in the economy. Changes in the top marginal tax rates influence peoples’ decision especially in terms of consumption trends. From the argument of libertarians and economists at large, tax increase dissuades ordinary investors from economically viable projects. An increase in tax caused by falling oil prices automatically reduces the amount of disposable income for consumers meaning that they will spend less or forego certain products and services meaning such investors who had invested in those product lines experience a dip and form and revenue accruing from their operations. Additionally, when corporate taxes are high, it acts to derail additional investments. High tax rates mean that there is the low after-tax rate of return on investment hence low investment esteem.

High taxes in the economy results into low personal and house hold savings. Such savings would have otherwise been used for investment purposes in the long-run or even spent on goods or services at a future date (Brunetti, Büyükşahin, & Harris, 2016). When tax rates are increased, it means that there is a strong correlation between tax, interest rate, saving and hence investment. Taking into account that increased tax rates go hand in hand with high-interest rates, the effect of the same can be explained by the model below.

Falling Oil Prices - High Tax Rates
Falling Oil Prices – High Tax Rates

In increasing taxes, it has become a common phenomenon for federal and central banks to allow for tax credits. They have been found to be more favorable than tax deductions whereby the latter rarely occurs with falling oil prices. The value of a tax credit depends on the type of credit either given to individuals or individuals. In such cases where the government offers tax credits, it enables investors to continue investing in certain sectors of the economy to balance between high taxes effects and increased investment all the same. On the other hand, non-refundable tax credits are directly deductible from the tax liability (Enriquez, Smit & Ablett, 2015). Any excess of the same potentially reduces tax liability further. This has been found to negatively affect low-income earners because they are not able to enjoy and utilize the entire credit amount. Refundable tax credit is favorable and tends to promote expenditure and investment which is a good thing for ordinary investors all the same.

Falling Oil Prices, Local Investments and the Stock Market

With falling oil prices, it is a common phenomenon that business activities in oil producing regions tend to decrease. For example, construction companies benefit less from these low prices as oil mining and refinery companies have to cut and lower their production capacity in a bid to maintain high prices. The powers that OPEC has in dictating and influencing oil prices are quite shocking. According to the author, OPEC members’ oil production account for almost forty percent of the global oil supply which puts a considerable amount of power in their hands.

By acting as a united front, they would act to shape the future of the oil industry and more so regarding influencing oil prices to their advantage (Diaz, Molero, de Gracia, 2016). The underlying question is what would happen if these countries were to hold on and stop their oil exports for some time.

As of last year, oil producing countries including Russia and Saudi Arabia acted towards ensuring high oil prices. This was meant to reduce cut-throat competition and price under cutting proving that OPEC has the ability and power to increase prices. However, this was done by reducing the production levels and hence low supply into the market (Heitner, K. L., & Sherman, 2014). It is important to note that such countries like Venezuela have a binding agreement not to increase production significantly making the agreement even more strong in pushing the oil prices high.

With reduced supply and operations, local business suffers significantly. Ordinary investors in the housing sector feel the impact whereby the demand for housing units ultimately takes a deep. With reduced operations, there will be reduced workforce and hence a low demand for housing units. It is practical that with the opening of oil companies in a certain region, local businesses and investments sprout up. Thus, such investors like shareholders have to make a careful decision on the type of portfolio they are to invest in.

For companies being quoted in the stock market, it means that their shows trade less as they are less attractive to invest in. It has been established that there is a correlation between oil prices and the stock market (Javan & Vallejo, 2016). Such factor prices in the economy like wages and interest rates tend to offset energy costs. In reading future trends of the market, investors have to factor in factor prices. With increased consumption of oil product, prices in the market might rise.

With falling oil prices, the motor vehicle and other related oil energy industries experience a surge in their revenues and hence their share prices. The same case applied to the transport sector. However, there has not been an explicit correlational explanation as to the relationship between oil prices and overall stock market. It has been identified that in surprising cases, stock markets may fall with falling oil prices. In such cases where oil and stock prices go hand in hand, it is as a result of softening global aggregate demand. The relationship between stocks and oil is rather volatile. Prices may move in the same or opposite direction. As it stands, both prices seem to move in the same direction.

Time Value of Money and Falling Oil Prices

Time of value is an accounting concept that deals with what monetary benefit one would rather enjoy now rather than later. This concept has been so far been used in valuing investments and more so in the field of oil and accounting when such factors like interest rate and rate of return are put into account. Thus, the underlying question is, should one invest now or later in the oil industry as according to time value of money.

As previous research has shown, it is advisable to invest when oil prices are high because the interest rate is low and so is the tax rate. Thus, it can only be held that with the changing oil prices, investors should invest when oil prices are high to increase the returns in terms of present and future value of money.

Methodology

The research methodology used in this dissertation was qualitative, Triangulation/Mixed Review study utilizing convenience sampling research methodology. This research method involves data integration in that illustration, triangulation (convergent validation) and deep analysis are undeniable in this study paper. Mixed method of research involves combining aspects of both quantitative and qualitative research methods through triangulation whereby data from different sources are compared and analyzed to come up with the most reliable and appropriate conclusion and recommendation.

Triangulation, in this case, involves the use of diverse data and combining various research methods. This would go hand in hand with convenience sampling where convenient and pertinent data to the study will be analyzed. It is the most applicable method in studying real life scenarios through a detailed contextual analysis of a limited number of conditions or relationships.

The study design involved went hand in hand with the triangulation of different data sources in relations to a specific issue, phenomenon or situation with an aim to deeply understand and explain it of characteristics and other aspects like rationale and distribution. It combines the strengths and reduces weaknesses of using a single method. Through triangulation, convergence and divergence of data can be established thereof.

Discussion, Conclusion, and Recommendation

From the above analysis, it is only true to hold that falling prices have both short-term and long-term impacts on ordinary investors. Falling prices tend to result in high taxes, high-interest rates and more so a change in the stock market. It is thus important for investors to have a clear understanding of oil prices changes and the corresponding effects in that it ultimately affects the general economy in various ways. This paper should prove useful for ordinary investors and other stakeholders who are willing to seek information on oil industry and investments.

References

Javan, A., & Vallejo, C. (2016). Fundamentals, non‐fundamentals and the oil price changes in 2007–2009 and 2014–2015. OPEC Energy Review40(2), 125-154.

Nieh, C. C., & Yeh, C. Y. (2016). Relationship of Threshold Effect among Gold, Oil, and Exchange Rate.

Enriquez, L., Smit, S., & Ablett, J. (2015). Shifting tides: Global economic scenarios for 2015–25. McKinsey & Company.

Brunetti, C., Büyükşahin, B., & Harris, J. H. (2016). Speculators, prices, and market volatility. Journal of Financial and Quantitative Analysis51(5), 1545-1574.

D’Ecclesia, R. L., Magrini, E., Montalbano, P., & Triulzi, U. (2014). Understanding recent oil price dynamics: A novel empirical approach. Energy Economics46, S11-S17.

Alfaro, I., Bloom, N., & Lin, X. (2016). The Real and Financial Impact of Uncertainty Shocks.

Coudert, V., Couharde, C., & Mignon, V. (2015). On the impact of volatility on the real exchange rate–terms of trade nexus: Revisiting commodity currencies. Journal of International Money and Finance58, 110-127.

Brown, G., Chan, R., Hu, W. Y., & Zhang, J. (2017). Oil Price Movements and Risks of Energy Investments. The Journal of Alternative Investments19(4), 24-38.

Bohi, D. R., & Montgomery, W. D. (2015). Oil prices, energy security, and import policy. Routledge.

Sadorsky, P. (2014). Modeling volatility and correlations between emerging market stock prices and the prices of copper, oil and wheat. Energy Economics43, 72-81.

Basher, S. A., & Sadorsky, P. (2016). Hedging emerging market stock prices with oil, gold, VIX, and bonds: A comparison between DCC, ADCC and GO-GARCH. Energy Economics54, 235-247.

Nazlioglu, S., Soytas, U., & Gupta, R. (2015). Oil prices and financial stress: A volatility spillover analysis. Energy Policy82, 278-288.

Degiannakis, S., Filis, G., & Kizys, R. (2014). The effects of oil price shocks on stock market volatility: Evidence from European data. The Energy Journal35(1), 35-56.

Diaz, E. M., Molero, J. C., & de Gracia, F. P. (2016). Oil price volatility and stock returns in the G7 economies. Energy Economics54, 417-430.

Relevant Posts

Economics Dissertations

Circular Flow Model Economics Report

If you enjoyed reading this post on falling oil prices, I would be very grateful if you could help spread this knowledge by emailing this post to a friend, or sharing it on Twitter or Facebook. Thank you.

Marketing Budget Ethical Considerations

The Marketing Budget and Ethical Considerations

Marketing activities, like all other parts of starting up a fast-food restaurant, take money. However, unlike most other investments in a restaurant, restaurant marketing has several directions although the abundance of the choices leads to difficulties in planning a decent restaurant marketing budget with it main directed at ensuring the effectiveness of the enterprise through avoiding wasteful mistakes (Cannon, et al, 2014). Hence, planning for the marketing budget requires precise and wise marketing priorities since it should be 3% to 6% of the sales. This is a general rule that requires which is mostly regarded as guidelines for a good reason for marketing (Cannon, et al, 2014). In spite of this notion, successful and struggling restaurants spending under 3% of their sales are mostly related to under investment while those above 6% are desperate hence put their eggs in one basket. In this regard, the restaurant marketing budget will embrace the moderate value between 3% and 6%.

Secondly, the marketing activity will be undertaken in two phases on a monthly basis thus adhering to the rule of timely marketing. For example, the marketing business will spend less on marketing in offseason and more during the peak seasons (Cannon, et al, 2014). This because one cannot change winter into summer without a proper and a genius marketing idea. As earlier stated, marketing approaches will be made through advertising through various internet platforms such as social media as well as through promotion.

Marketing-Budget-Dissertation
Marketing-Budget-Dissertation

Other than marketing in the social media platform, the marketing department will establish a suitable location to promote the products and services effectively (Cannon, et al, 2014). For example, in learning institutions, social gathering such as weddings as well as other prospective locations with the ability to purchase the products. In this regard, marketing advertising on the website is estimated at $18,000 while the ordinary promotion is valued at $7,500. However, in order to examine the Return On investment (ROI) on each approach, a survey as well as web transactional data and traffic data in the internet assessment on its contribution and also administer task-completion rates in assessing promotion related marketing strategy.

Marketing Budget and Enterprise

Every business enterprise is subjected to promoting its products and services especially to the vulnerable populations who comprise of the economically, mentally, and physically challenged as well as minority, underage and the elderly residents (Biere, 2020). In this regard, the fast food joints will have special places for people with disability from the ordinary citizens to accommodate their conditions. Similarly, the restaurant’s products will strictly adhere to health nutrition value of the foods for the elderly and the minority through including special meals (Cannon, et al, 2014).

Lastly, the restaurants will organize special days to cater for the community development such as offering free meals to the orphanages during celebrations. In observing the Corporate Social Responsibility, the enterprise will employ qualified chefs from the locale will also be adhered to improve life conditions of the local community (Gil, 2019).

References

Biere, N. (2020). Branding on a Budget: Marketing in the Nonprofit Sector.

Cannon, J. N., Cannon, H. M., Friesen, D. P., & Feinstein, A. H. (2014). Would You Take a Marketing Man to a Quick Service Restaurant? Modeling Corporate Social Responsibility in a Food Service Menu-Management Simulation. Developments in Business Simulation and Experiential Learning38.

Gil, E. L. (2019). Introducing information literacy into a marketing budget class assignment: A case study. Journal of Business & Finance Librarianship, 24(1-2), 1-16.

Relevant Marketing Budget Links

Marketing Dissertation Topics

Marketing Concepts Research Dissertations

If you enjoyed reading this post on marketing budget and ethical considerations, I would be very grateful if you could help spread this knowledge by emailing this post to a friend, or sharing it on Twitter or Facebook. Thank you.

Tesla Strategic Management

Strategic management

It is true to consider strategic management as an evolutionary and a destination because it plays a significant role in ensuring that a corporation such as Tesla is successive in its endeavors. The success of the firm largely depends on the management that has the key role in making key decisions that will dictate the way forward by facilitating the achievement of organizational mission, goals, and objectives. By definition, strategic management covers all the company’s stakeholders interest by relying on the management to make decisions that safeguard each stakeholder’s interest by considering the available resources, how well they can be utilized and at the same time keep in mind both internal and external forces acting on the firm (Sekhar, 2009).

Among key roles that the management of a corporation is required to play is ensuring that the company chooses the best strategies that will give the company an advantage over its competitors to ensure that maximum profitability is achieved and maintained. Therefore, it is important for a company to be competent by ensuring that products offered are able to meet the customer’s expectations and also balance the needs of other stakeholder’s such as suppliers, the government and employees among others.

Examples of Strategic Management

Recently, there has been rising concern about climate change and the negative impact that the situation has on the environment with regard to environmental pollution which poses a threat to all existing life forms. Among the cause of environmental pollution include emission of greenhouse gases such as carbon dioxide as a result of human activities and depletion of natural resources such as oil. Consequently, Tesla Inc. being a strategic company, Elon Musk who is the company’s CEO has opted for the company to explore alternative renewable energy to ensure that sustainable development is achieved.

One of the ways that the company is practicing strategic management is through environmental preservation by manufacturing electric powered automobiles to get rid of carbon emissions in the atmosphere (Doeden, 2015). The company employs a supply chain management strategy whereby unlike most automobile manufacturers, the company owns that whole supply chain from the points of manufacture to distribution. It also facilitates a growth strategy whereby the corporation invests significantly on Research and Development so that it can be able to come up with new inventions such as the Model X and Model 3. Autonomous cars are among the latest inventions whereby vehicles will not only be able to drive themselves, but also will be powered by electricity instead of gasoline (Bilbeisi & Kesse, 2017).

Tesla Goals and Objectives

Among the companies goals are to have as many electric-powered cars as possible on the road after it launched the first semi-autonomous autopilot system back in 2016. Musk had the objective of having 500,000 cars on the road by this year depending on governments’ efforts to pass laws that will allow consumers to possess and drive the cars. This kind of technology is referred to as “level 4 autonomy.”

Another goal is to put in place the necessary charging infrastructure that will be able to supercharge the vehicles in 30 minutes or so. This will ensure that drivers will be able to add a range of 200 miles in their cars in half an hour. This makes the corporation the only manufacturer to offer drivers such a range in the shortest recharging time. In addition, the company has partnered with Panasonic to provide customers with lithium batteries (Bilbeisi & Kesse, 2017). This will not only ensure that the company cuts back on battery cost but also ensure that the same are available to customers at a reasonable price. To facilitate battery production, the company opened a Gigafactory in Nevada. The batteries are not meant for use by cars only but also supply alternative energy to residences and factories.

Corporate Governance

Traditional Roles of Board of Governors

The success of every business organization relies on the competency of the management which is why the Board of governors plays a significant role in corporations such as Tesla Inc. One of the roles is corporate governance. The board is responsible for overseeing the governance practices and structures to ensure that work ethics are adhered by seeing to it that corporate responsibility is followed to the latter. The board facilitates evaluation by conducting annual assessments which are meant to identify areas that need change or modification so that the firm can be able to improve its performance (Magliacani, 2014). Compliance is another issue of concern especially to companies that deal with emissions such as Tesla Inc. it is the duty of the board to ensure that the company complies with the relevant laws as stipulated in the constitution of the relevant government where the business is located.

Organizations are required to have a compliance and risk framework whose activities are monitored by the Risk and Ethics Officer and the Chief Compliance. These managers are required to report to the CEO and the Board of Governors to ensure that the company does not incur unnecessary costs such as lawsuits. Another role played by the board is strategic oversight. The company’s management is charged with the responsibility of the firm’s strategic planning to ensure that proper planning is facilitated.

As a result of strategic planning, the company is able to come up with strategies that improve performance by maximizing output thus making the organization effective, efficient and profitable. After the management has formulated and proposed new strategies, it is the duty of the board of governors to assess and evaluate the proposal and determine whether it is a viable option or not. Therefore, it is the responsibility of the board to oversee the company’s strategy and ensure that the most effective measures are undertaken in the firm’s activities (Ferlie & Ongaro, 2015).

Major Philanthropic Initiative/Program

Companies have a responsibility of ensuring that the practice corporate responsibility by giving back to society and also ensuring that they promote the growth of their employers apart from making a profit. In the case of Tesla Inc., the American company is involved in designing, manufacturing and selling electric power train parts and electric cars. The company was founded by Elon Musk, Ian Wright, Martin Eberhard, JB Straubel and Marc Tarpenning in 2003. The company realizes that environmental pollution is a major concern accompanied by negative impacts such as the depletion of natural resources.

In its initiative to safeguard mankind from the devastating effects of climate change, the company manufactures electric cars to eliminate the emission of greenhouse gases by automobiles (Doeden, 2015). By so doing, the company will reduce overreliance on oil to provide electricity and offer alternative renewable energy sources. According to Musk, the global population will be able to access electricity through harnessing wind and solar power which can be stored in batteries for later use.

Not only is the use of renewable energy conserve the environment, but it will also be accompanied by increasing the standards of living since people can access luxurious electric cars at affordable prices. The firm adopts a corporate social responsibility strategy that protects the interests of its various stakeholders through the design and nature of its products which are concerned with the ecological benefits of the aforementioned. The corporation has a lot of opportunities that will enable it to contribute to the global community. Its products for generating electricity and storing energy are all environmentally friendly and therefore makes it possible to achieve sustainability and environmental preservation (Blue, 2016). The organization’s management practices and products are designed to integrate corporate citizenship and also boost their brand and corporate image. Consequently, the company manages to balance both profitability and also consider the welfare of the society.

Porter’s Five Forces

Tesla Competitive Advantage and Core Competency

Tesla Inc. stands a good chance of maintaining the leading position in the electric car market segment given that it has a comprehensive leadership headed by competent managers led by the visionary CEO Elon Musk. As a result, the firm has a competitive advantage over its rivals some of which include the battery supply chain (Kauerhof, 2017). The factory in Nevada manufactures lithium batteries thanks to its collaboration with the electronics giant Panasonic. Tesla has included in its processes a supercharge network that will enable electric car owners to charge their automobiles incredibly fast. Unlike its rivals that have slow charging stations that are scattered, Tesla had approximately 3000 stations and intended to increase the number significantly.

Due to the numerous stations, the company has managed to build its customized supercharger network (Grant, 2016). In addition, the company has a software and electronics culture that ensures it keeps up with technological advancement which takes place on a daily basis. The company employs software that outperforms its competitors and ensures enhanced customer service and therefore customer experience. Among the software used by Tesla include Mobile App, Traction and Stability Control, Motor Control, Battery Voltage Management, and Core focus and Tesla DNA. Another boosting factor is that all these software are updated over the air.

Five Forces Including the Sixth Force

Like all other firms, Tesla is not immune to Porter’s five forces which means that its performance is affected by both internal and external factors. These forces can be categorized into two groups namely that which is beneficial (opportunities) and the other which might have negative implications (threats). The company is affected by the bargaining power of customers and through its cheaper electric cars compared to its rival companies, the firm stands a chance of commanding market presence. Furthermore, customers prefer energy efficiency since it saves their money and also there has been increasing awareness in the global arena on the negative impact of environmental pollution.

Although the company has rivals, the threat of new entrants is not a major concern since entering into the disruptive technology is an expensive venture and therefore most companies lack the required capital (Krippendorff, 2011). On the other hand, there are negative forces such as the bargaining power of suppliers. Most parts required by the company are manufactured by a few specific suppliers who are in a position to determine the prices according to what is in their best interest. Tesla faces competition from rival firms that manufacture cheaper combustion engines that are also efficient. Also, the companies can innovatively produce hybrids and low-end electric cars and parts.

Diesel engines are also a threat to the company since they are cheaper while some are capable of using hydrogen which is environmentally friendly. Another factor that threatens the existence of the firm is rivalry whereby the company competes with large firms that have already established good relations with suppliers. In addition, competitors also produce brands that are internationally recognized. According to Wheelen and Hunger, there exists a sixth Porter’s force which they call complementary and it involves other companies that compete with a firm by producing products that are complementary to the one being offered by the firm in question. Considering this aspect, it may not be always necessary for Tesla customers to recharge their vehicles only at the company’s outlet. They have the option of going to other recharging stations to charge their cars although they may not necessarily provide fast charge.

Blue Ocean Metaphor

To make the company relevant and successful at the same time, the company incorporates four elements in its strategy to increase its value innovation potential. These elements are illustrated in the figure below.

Tesla's Blue Ocean Strategy
Figure 1: Tesla’s Blue Ocean Strategy (Source: Frontier Strategy LLC)

Value Chain

Tesla’s Business Model

Tesla has used creativity and innovation to ensure that it provides consumers with an alternative renewable energy source thus making its business model different from other companies. To begin with, the company has a comprehensive supply chain management whereby it has reduced the number of middlemen by owning the whole chain from manufacturing to distribution. This supply chain has enabled Tesla to reduce the costs of doing business significantly.

A reduction in product costs and manufacturing costs has ensured that the company is able to achieve sustainability. In addition, the company has digitized its supply chain by using the latest software to ensure that its products are up to date (O’Marah, 2016). Tesla’s vehicles are a hybrid of both digital and mechanical technologies which enables the firm to ensure that it has products that offer customer satisfaction. To expand its supply chain and add value, Tesla has put in place supercharger stations in different parts of America and intends to put more in other countries once the relevant governments enforce regulations that will allow the use of electric cars and also have the necessary technology compatible with the automobiles’ (Adam, 2016).

Supercharger Stations Tesla
Figure 2: 613 Supercharger Stations that are equipped with 3,628 Superchargers (Source: Tesla)

Tesla Inc.’s supply chain ensures that the company maximizes its profitability through cost reduction and eventually keep minimal inventory. In its production process, the company has an order-production strategy that enables customers to wait for their car to be produced and therefore it is possible to customize the automobiles according to their preferences. Furthermore, order-production avoids storage of excess inventory and therefore risk associated with inventory can be mitigated. Considering the growth, inventory and supply chain management strategies, Tesla’s business model can be said to be unconventional.

Areas That Need Improvement and the Profit Margin/Goal

When Tesla was venturing into the electric cars market segment, the company had anticipated producing 55,000 units in 2015 but was faced by challenges especially since the company had projected that it would stock sales worth $500 million but this was not so and the management had to adjust the value to $640 million. The reason for the necessity of the change was a decrease in cash reserve accompanied by increased feasibility costs (Crawford, 2016). The company had also opted to invest in assembly robots to reduce the overall production cost and the robots incurred additional costs exceeding the anticipated value. As a result, the robots required reprogramming and therefore the company was forced to delay the anticipated time to complete installation and setting up the production plant (Young, 2015).

The increased usage of assembly robots leads to a reduction in the number of human workers required since the option is perceived to be more economical. Consequently, job opportunities become less which means that the company hires fewer people than it would if it relied more on human labor. Therefore, the company needs to find ways of ensuring that it provides more job opportunities for the sake of corporate responsibility. According to a report released by Tesla, the company recorded an increase in production of Model 3 with the number of units reaching 2,270 on a weekly basis. In the first quarter, the gross margin for the Auto GAAP went up by 80 bp and also the non-GAAP rose by 500 bp. At the end of the first quarter, the cash balance was $2.7 billion and the amount was expected to rise in the following third and fourth quarter. The company’s financial position is indicated in the figure below.

Tesla Consolidated Statements
Figure 3: Unaudited Condensed Consolidated Statements of Operations in thousands except per share data (Source: Tesla Inc., 2018)

Central Pillars Of Elon Musk’s Corporate Theory And Tesla’s Unique Assets And Activities

The key to the success of Tesla is the company’s CEO and co-founder Elon Musk. Elon is known to be a person who makes decisions based on values. Often than not he disagrees with others but always has reasonable explanations as to why he does not concur with the ideas he disputes. He is also known to be respectful as he allows others to be themselves and values everybody to the extent of interacting personally with all workers regardless of their status. He has also offered employment opportunities to people who do not have a college education by simply looking at the individual’s interest in engineering and considering whether that person has built anything in their life. He is humane as he deems others as human beings and does not elevate himself to levels that he is unreachable to his junior workers. Elon is of service to others and does not leave others to do everything for him. Instead, he is always active and works long hours to achieve organizational goals and visions.

Elon practices justice as he treats all his followers equally. From the sentiments of his workers, working around Elon is very hard as all of them are expected to work equally hard due to the high expectations that he has not only from himself but also his workers (Northouse, 2013). Elon practices honesty with his workers and is not afraid to speak out his mind regarding organizational matters. Musk’s honestyenables him to win the trust of his fellow investors and even governments as he is predictable and also reliable. He has been known to fund Tesla ‘through financial difficulty with his own money by investing approximately $100 when the company was manufacturing the electronic car (Jacoby, 2011). The company’s unique assets are its management and employees that apply creativity and innovation to design and manufacture remarkable products such as its Sedan, Model X, Model 3, software and its supercharge network among others.

Tesla General Strategy

Current Business and Corporate Strategies

After the release of the first quarter report, the management adjusted its goals and among the corporate strategies is to increase production. The company intends to do this by reducing bottlenecks experienced across lines and the plan is to shut down production for approximately 10 days. However, the company did not change its 25% gross margin target for model 3. Tesla intends to increase Model 3 production to 5,000 units weekly. The corporation plans to advance sustainable energy by increasing its energy storage products up to three times. It intends to achieve this by enhancing its solar power harnessing (Tesla, 2018).

Strengths and Weaknesses of Current Strategies

The major strength of the current corporate strategy is the increased production of Model 3 and one of the reasons is that the model is very energy efficient which means that customers will be exposed to a unique organizational experience. Also, the model will enable the achievement of sustainable development goals while at the same time remaining profitable. The major weakness of the strategy is that the decision is based on a crucial assumption. The performance of Model 3 is assumed which may be affected by external factors such as competing models from rival firms (Tesla, 2018).

Tesla – The Most Urgent Decision Required

Tesla Inc. registered a decline in its solar deployment in the previous quarters which means that the firm had not reached its profit maximization potential. Therefore, the most urgent decision that the company ought to make is maximum tapping of solar power. The main area of concern is the Buffalo Solar Roof facility. As a result, the company should come up with a manufacturing and design process that will increase the quality of electricity and also reduce the cost of manufacturing. Consequently, it will lead to improved customer experience.

References

Adam, M. (2016). Accelerating E-mobility in Germany: A Case for Regulation. Springer.

Bilbeisi, K. M., & Kesse, M. (2017). Tesla: A Successful Entrepreneurship StrategyB> Quest.

Crawford, A. (2016). Tesla Lowers Production Forecast, Sells US$500m-plus in Stock.

Doeden, M. (2015). SpaceX and Tesla Motors engineer Elon Musk. Minneapolis: Lerner Publications.

Ferlie, E., & Ongaro, E. (2015). Strategic management in public services organizations: Concepts, schools and contemporary issues. Routledge.

Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Jacoby, O. (Producer & Director), (2011). Bloomberg Risk Takers: Elon Musk [Television Broadcast]. United States: Bloomberg Television.

Kauerhof, A. (2017). Strategies for Autonomous, Connected and Smart Mobility in the Automotive Industry. A Comparative Analysis of BMW Group and Tesla Motors Inc. GRIN Verlag.

Kim, W. C., & Mauborgne, R. A. (2014). Blue ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant. Harvard business review Press.

Krippendorff, K. (2011). Outthink the Competition: How a New Generation of Strategists Sees Options Others Ignore. John Wiley & Sons.

Magliacani, M. (2014). Managing Cultural Heritage: Ecomuseums, Community Governance, Social Accountability. Springer.

Northouse, P.G. (2013). Leadership: Theory and Practice. Los Angeles: Sage Publications.

O’Marah, K. (2016). Tesla and the 21st Century Supply Chain.

Sekhar, G. S. (2009). Business policy and strategic management. IK International Pvt Ltd.

Tesla. (2018). Tesla First Quarter 2018 Update.

Young, A. (2015). Tesla Motors Inc. (TSLA) Says Robots Are Holding Up Its 2015 Sales Growth.

Related Tesla Blog Posts

Strategic Management Dissertations

Tesla Motors Case Study

Did you find any useful knowledge relating to Tesla and strategic management in this post? What are the key facts that grabbed your attention? Let us know in the comments. Thank you.