Over the past decade, the business world has been positively and negatively affected by several disruptive innovations. Disruptive innovation occurs when a new or underrated company initially at the bottom of an industry’s market moves up and eventually displaces the existing competitors. It alters the industry’s competition strategies by introducing completely new approaches. The term disruptive innovation was first coined in the book, The Innovator’s Dilemma. In the 1997 best-seller, a Harvard Business School professor wrote about “why some innovations that were radical in nature reinforced the incumbent’s position in a certain industry, contrary to what previous models would predict.”
New business adopts new layouts that cannot be mimicked by competitors making it the lead in that specific industry. This subsequently affects the entire market network and processes. For that reason, businesses have been striving to shift their means of operation to keep up with this competition.
Disruptive innovation has led to business shifts from traditional approaches to modern technological approaches. Technology is continuously experiencing a revolution. Technical changes or digital innovations lead to a technology disruption (Rachinger, Korajman, Vorbach & Guggenberger, 2019). An excellent example of how companies have shifted due to the internet and digital innovation is in the competition techniques.
Companies have adapted to a digital transformation strategy in which they integrate various digital technologies in all the main business operation areas. Offering customers an exemplary digital experience at a low operation cost demands new technological business applications. In the end, the market concedes these innovations. They speed up operations and convey businesses’ outcomes more effectively.
Digital transformation means a change in a business’s culture as well as a change in thought. This transformation has created a need for organizations to change their dynamics to swiftly cater to the industry’s changing needs. Today’s management teams are working hand in hand with IT experts to meet the industry’s competition by speeding up the company’s activities, lowering operational costs, and generally improving the whole business process.
The digital transformation process positions the customer at the center of the business model (Kotarba, 2018). Businesses are taking advantage of technology to reach their customers more effectively and efficiently through mass media and advertisements. This new model shapes and changes the entire working and operations of a business. Technology has also made it easier to adapt to the changing demands of the market.
However, these technological disruptions have not been advantageous for all businesses. They are a great challenge for companies that have not been able to cope with the sudden changes followed by high paces. This has seen the disintegration of past business models and the closure of big businesses.
DisruptiveInnovation and Technological change
Technological change has influenced and pushed businesses beyond the traditional business models from the strategy to the operations. The Australian government is committed to delivering a stable, safe, and inclusive digital economy. It has seized all chances and opportunities brought about by the digital transformation. Most businesses have adapted to innovations such as remote sensors, blockchain, quantum computing, artificial intelligence, robots, and autonomous techniques into their processes, and the results are improved outputs.
More industries have been created for the production of more products and services. Endorsement of digital transformation has brought about more employment opportunities, improved life quality, better-paying jobs, and an improved ministry of industry.
Australia has laid out all the future opportunities and challenges brought about by technological changes. This has enabled businesses to maximize and augment the available opportunities. According to research, Australia’s digital technology innovations contributed to approximately 58 percent of the country’s economy in 2014, and the estimated improvement over the next ten years could be around 315 billion dollars (Fleischmann, Daniel & Welters, 2017). To ensure that all its citizens survive in the technological disruption and that no one is left behind, the government points out all work that is ongoing and analyzes more recommended efforts.
Australia’s digital future is fixated on four primary areas, which include the people, digital tools, digital services, and the regulatory system. The government focuses on people by ensuring that citizens have the right digital skills to operate on new technological innovations. It also ensures that digital tools are integrated by providing adequate infrastructure.
Regulatory systems are maintained by the government, providing an enabling environment that ensures cybersecurity. The government also focuses on better ways to deliver digital services to all citizens equally. Digital technologies have delivered benefits across the economy sectors, such as agriculture, services, health, mining, manufacturing, education, transport, tourism, and emergency services.
However, despite a significant increment in the employment rates, some jobs have definitely been lost. An example is the truck drivers in mine areas who have been taken over by automatic trucks that do not require personnel operation and are safer. The CEDA (Committee for Economic Development of Australia) has envisioned that of all the jobs that would be lost, 40 percent would be attributed to replacement by automation (Healy, Nicholson & Gahan, 2017). The benefit brought by disruption, however, oversee the disadvantages as more employment rates have been recorded since the technological advancements began.
Fleischmann, K., Daniel, R., & Welters, R. (2017). Developing a regional economy through creative industries: disruptive innovation capacity in a regional Australian city. Creative Industries Journal, 10(2), 119-138.
Healy, J., Nicholson, D., & Gahan, P. (2017). The Future of Work in Australia: Anticipating how new technologies will reshape labor markets, occupations, and skill requirements. Department of Education.
Kotarba, M. (2018). Digital transformation of business models. Foundations of Management, 10(1), 123-142.
Rachinger, M., Korajman, I., Vorbach, S., & Guggenberger, T. (2019, June). The Influence of Technological Disruptions in Business Ecosystems on Elements of Companies’ Business Models. In R&D Management Conference 2019.
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Five Forces Model Automobile Industry Case Study Analysis
Title: Five Forces Model Automobile Industry Case Study Analysis. Michael Porter’s Five Forces Model is a simple yet effective business analysis tool that is used to determine whether a strategy has the potential to be profitable in a company’s competitive environment. When carried out in the right way, with the right tools, the Five Forces Analysis can provide invaluable insight into your business’s competition and how much power you hold in the market, so you can adjust your strategy for success. As its name suggests, there are five forces which include the intensity of rivalry, power of buyers, power of suppliers, threat of substitutes and threat of potential new entrants (Porter. 1981).
Intensity of Competitive Rivalry
The key factors that influence the intensity of rivalry in the automobile industry include the number of competitors, the brand recognition of the competitors and the frequency with which new automobile products are introduced by competitors. According to Potter’s case study the global automobile industry is highly concentrated.
However, none of the companies in the industry has achieved donation of the market. The case study indicates that about seven firms have around 10 to 15 percent of the market share. The reason for this is the high acquisition levels and collaboration activities in the global automobile industry, which minimizes competition regardless the frequency of purchase or recognition of the different brands in the industry.
As a result, the intensity of competitive rivalry in the industry is moderate. The implication of the moderate competitive intensity is that automobile firms still manage to make significant profits especially since the level of competition is suppressed by the joint ventures and alliances among automobile firms in the industry.
Power of Buyers
The factors that shape the power of customers in the automobile industry include the number of buyers in the industry, frequency of purchase, and the size of purchases. According to Potter, the global demand for cars is associated to a nation’s economic performance.
The data on Worldwide Car sales in 2016 indicate that China, which is among the top best performing economies in the world had the largest had a percentage increase of 10.7 in car sales in 2016. This demand can be viewed in the context of the wider process of a country’s economic development which leads to selective ownership that causes mass market volumes of short time cycles that reduce within mass volume causing delays in purchases or consumer changing segments.
This means that buyers demand for automobiles is determined by eternal elements that they cannot control. In this regards, the intensity of the power of buyers is moderately weak, which means, firms are still able to make reasonable profits.
Power of Suppliers
The power of suppliers is influenced by the following factors, the number of suppliers, replaceability of the supplies and the exclusivity of the supplies (Porter, 1980). Potter indicates that suppliers of the global automobile industry have become solution provider and knowledge partners with the automobile firms. Moreover, technology is increasingly becoming more intelligent enabling the suppliers to gain larger economies of scale giving them the power to bargain.
However, in the global automobile industry 33% and 17% of all suppliers have their manufacturing facilities in Eastern Europe and China respectively which raises the issue of Intellectual property rights and theft of technology. These has caused a decline in the power of mot suppliers as this trend is expanding to other parts of the world. For this reasons, the intensity of the power of suppliers is moderately strong, which means that the firms are forced to collaborate and partner with suppliers to minimize most of raw material to maximize profits.
Threat of Substitutes
Threat of substitutes in the automobile industry is determined by technology advancement, affordability and availability of potential substitutes and customer’s acceptance (Porter, 1980). According to the case study, the global automobile industry threat of substitution is mainly due to environment issues and economic consideration, where people see alternatives that are cheaper and greener.
The automobile industry contributes about 70% of the emission of CO2, and consumers are ready to take up alternatives that are more environmentally friendly. However, such substitutes are mostly provided by the same automobile firms. In this case, the intensity of threat of substitutes in the industry is weak making the industry attractive and profitable.
Threat of New Entrants
The threat of new entrants is influenced by the strength of brands of existing competitors, technology and financial requirements and entry barriers (Porter 1980). Potter indicates that there are issues related to the outward and inward direct investment that firms seek to use to expand or grow into new markets affect entry strategies adopted by these companies. However, on a positive note most governments around the world are attracting investors by providing a range of grant aid and subsidised domestic rates, but the capital and cost of production and manufacturing is quite high. For this reason the intensity of treat of new entrant is weak, which makes the industry competitive ad highly profitable.
Five Forces Model Conclusion
From the case study, it is evident that competitive rivalry in the automobile industry is moderately strong, while the buyers bargaining power is moderately weak. It is also evident that the suppliers bargaining power is moderately strong, while the threat of substitutes is weak. The threat of new entrant is weak considering that the firms in the industry have gained strong market positioning that are hard to compete with and the high investment capital needed. Based on this analysis, is evident that the automobile industry is a feasible market especially for the companies that are already operating in the market.
Porter, M. E. (1980) Competitive Strategy. New York: Free Press
Potter, N.S. The Global Automotive Industry: The Turbulence Increases
Organizational ethics refers to the principles and standards upon which businesses function according to the business’s references. The principles, as well as set standards, are mostly demonstrated over the deeds of objectivity, reliability, decency, compassion and obligation. The strategy for both business venders as well as the officials is to confirm that all the workers comprehend to the set standards as well as the principles. This can be done by initially communicating the organizational ethics to the employees through the act of training the employees on the standards of the company. Based on the basis of illustrating the goals of an organizational ethics program, essentials necessary in constructing and ensuring the function of the organizational ethics program together with the ways of implementing the procedure in favor of an organization’s future will be discussed.
The Goal of the Organizational Ethics Program
Based on the different sectors that the set organizational principles and standards function, such as on uniform treatment, considerations, financial ethics as well as dealing with the social responsibility of a particular business, the connection established is used to construct a uniform organizational goal to be attained on the course of operation. To start with, the set standards and principles ensures uniform treatment amongst all employees based on the same respect regardless of their culture, race, religion or even lifestyles. The ethics program in business through this role establishes the provision of equal promotion chances to the employees whereby the issues can be addressed during sensitive training, holding seminars as well as through inviting outside experts to disclose these issues unto the employees.
Secondly, on achieving an organization’s goal, financial stability has to be met that is protected by the compliance of the organizational ethics program in the business. This is for the purpose of business owners to establish clean business operations with respect to finances, expanding as well as investing for their companies. For example, the standards and principles may be set on prohibiting and taking action to those who bribe state legislators for either tax privileges or even credits (Johnson, 2018). On the consideration basis, a company’s ethics program ensures the provision of care to the employees who are mentally challenged, with substance abuse problems including alcohol and drug dependency. The ethics of the business through the set principles as well as standards helps the employees to overcome such problems if possible, such as putting them through employee advisor programs.
Ethics are also mandated to protect the community as well as establishing and maintaining safety standards to the nearby residents. They ensure the communication of chemical dangers by the organizations steered on ethical environmental practices. Through the joint functions established by the organizational ethics program, actions, as well as company decisions, are governed on ensuring welfare amongst the employees, customers and the community at large thus establishing the organization’s ethical philosophy hence defining its reputation on efficiency and effectiveness.
Essential Elements of an Organizational Ethics Program
For corporate compliance to organizational ethics, the standards, as well as principles, should be set to align with the company’s operations as well as objective strategies. In this approach, standards and control that includes both the code of conduct, procedures as well as standards and policies are based as the foundational elements of a functional organizational ethics program (Doppelt, 2017). Another pillar is the training feature that ensures the employees are well acknowledged on the relevant company corporate policies, laws, prohibited conduct as well as the set regulations to be applied in practice. After communicating all the critical information from the management, the questions on whether the employees of the particular company are answered through an oversight approach that includes monitoring, auditing and responding to the organizational issues.
Monitoring involves both reviewing and detecting the process of ethics compliance whereas the auditing process comprises of limited review that is based on targeting particular business components, region or even a sector of the market within a specific timeframe. Both efforts, therefore, require responding from the top management for the need of adopting any change if required in compliance with the organizational standards and principles.
Implementing the Changes based on Future Organization of a Project Management
During the process of practicing to initialize, plan, execute, control as well as close the activities of a particular team to achieve certain goals as well as meeting a specific criterion over a specified time, implementation of organizational ethics program counts to be of great significance. I work in project management that involves the planning, initializing, executing, controlling and closing different works from various teams, and observing activity operation under undefined standards and principles is a challenging issue. This is because most project management work fails as a result of unification in carrying out specific activities (Hornstein, 2015). On the other hand, you find that the initializing process of a task is simple amongst a particular team group, and the work collapses upon reaching the planning as well as the execution process. This fails due to the lack of ethical procedures to unify different plans as well as execution processes that establish the concept of how to control and finalize the work.
However, implementing the ethical changes will increasingly create a foundation for the achievement of future organizational effectiveness as well as efficiency in its operations. Further, the implementation process should be based on strategies to educate and acknowledge new as well as the existing employees on the changes that have occurred regarding compliance of the company’s standards and principles. For example, implementing these changes on my expertise area, project management, ensures mutual initializing, planning and execution of different tasks, that is closed under a unified system of control thus increasingly constructing a good reputation based on the concept of effectiveness and efficiency.
Doppelt, B. (2017). Leading change toward sustainability: A change-management guide for business, government and civil society. Routledge.
Hornstein, H. A. (2015). The integration of project management and organizational change management is now a necessity. International Journal of Project Management, 33(2), 291-298.
Johnson, C. E. (2018). Organizational ethics: A practical approach. Sage Publications.
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Creating Competitive Advantage through the Application of Reverse Logistics in the Supply Chain Management
In every company, it is very important to attract new customers and retain the current customers on viable conditions. These actions cannot be accomplished in any single company without creating a competitive advantage. The main technique of creating a competitive advantage that a company can adopt is creating quality products or services than their competitors. They can also create products that the target customers would prefer than their alternatives. Many companies across the world have adopted reverse logistics as a strategy to increase competitive advantage. This is because this technique lowers supply cost in the supply chain.
Companies using reverse logistics can also reduce the opportunity cost of outdated products. Companies can also gain additional revenue and finally reduce the cost of operation. This is due to the fact that companies can be able to manage the flow of their products through the supply chain. Reverse logistics is also advantageous as it expands the global economy. Thus, reverse logistics can be defined as a process of controlling the flow of finished goods from their final destination back to the manufacturer for value addition so as to enable recycling or reuse or for proper disposal. Reverse logistics can be used to explain environmental externalities resulting from increased production and supply. The following essay will be on the theories that have been put in place in regard to creating competitive advantage through reverse logistics and evidence of the theories.
Theories in Reverse Logistics
The theory of reverse logistics has been gaining significant popularity for the organization across the world. This theory is essential for the cost-effective flow of the commodities that had been previously providing in the markets for the use by the consumers back to the organization. The theory of reverse logistics ensures that the organization can consider recycling and reuse of the previously supplied commodities as well as learn more about the market (Dowlatshahi, 2000: 1). This theory is used together with the theory of supply chain management. The theory of supply chain management ensures that the products flow from the point of production to the consumers is steady and maximized (Vural, 2015: 262). The theory of reverse logistics, therefore, can be used to ensure that the process of supply chain management is helpful to the organization. Supply Chain management theory helps the organization understand the methodologies that can be sued to maximize supply for the commodities through increase the demand and looking for new markets that have not be accessed before (Touboulic, and Walker, 2015: 3)
Reverse Logistics Concept in Supply Chain Management
The supply chain management deals with the flow of goods and services from the point of manufacturing to the point of consumers. The consumers are limited which make the organization selling a similar commodity to create a competitive advantage in order to outdo other fellow competitors (Mohamed and Omwenga, 2015: 45). The supply chain management requires an organization to apply various models in order to win the market. Some of the models that can embrace include the use of reverse logistics in the management of the supply chain and create a competitive advantage. The reverse logistics as defined in the introduction deals with the management of goods and services after they reach the market (Stănciulescu, 2011: 1). This idea means that the goods flow back to the organization for further management which ensures that the losses are minimized as well as optimizing the usages of the defective commodities (Menachof, et Al., 2009: 145).
In the market environment today, the consumers have a wide variety of goods and services providers. Therefore, the companies cannot sell all of their products at once. This means that the reverse logistics helps the company to manage the flow of goods from the flow of commodities from the manufactures to the consumers and managing those commodities that do not end up in the final consumers’ ownership. Reverse logistics can help the organization create a competitive advantage in that the commodities that are not sold will be managed for possible re-use (Stănciulescu, 2011: 2). On the other hand, the practices involved in the reverse logistics ensures that the organization minimizes the cost when some of the goods are recycled and reused in the organization’s activities (Vural, 2015: 265). This means that reverse logistics help the organization overcome the burden of surplus production wastage.
Moreover, management of the flow of goods and services enables the company to hire good and qualified staffs who are able to maintain the competitive advantages of the organization. Therefore, the reverse logistics practices can guide an organization to attract more consumers since the management of the flow of commodities from the manufacturer to the consumer is professional. Management of the surplus supply also requires professionalism hence the acquisition of qualified people in the supply chain management who can effectively apply reverse logistics can help an organization defeat the competitors in the markets.
Reverse logistics also refers to the process of ensuring the flow of raw materials is minimized. The low of these raw materials are from the consumers where they had maybe used the products of the organization and did not manage the waste properties. On the other hand, the management of the flow of goods from the consumers to the manufacturer can help the organization disposes of the waste properly hence helping the communities go green. Management of waste can be a good thing for the organization. This is because the environment which highly polluted with commodities and materials from a certain company, for example, the fast-food organization, can lead to discouragement from the potential consumers.
The efforts of keeping the environment clean can help the organization also minimize the cost wastage in dealing with problems associated with the dirty environments such as lack of clean water and raw materials due to global warming. In this regard, the consumers will not be happy with the company which is not managing the waste properly (Stănciulescu, 2011: 3). Therefore, the use of reverse logistics can help the organization acquire significant clean environment through recycling and reuse of the raw materials originating from the consumers.
Roles of Reverse Logistics
Through reverse logistic company can become efficient environmentally through recycling used products, reusing and minimization of the number of products used. Reduction of materials used in forwarding flow is one of the vital modes by which reverse logistics can work on. This reduces backflow of unused products and also reduces the damage of products as a result of over clumping when being transported (Mohamed, 2016:1). Recycling and reusing materials are very vital in the reduction of pollution it also allows products to move in reverse in the supply chain for the manufactures to reuse recycle and resells in subordinate markets. Many are the times when reverse logistic is confused with waste management but, there is a great difference between the two. In reverse logistic the materials that are recovered are revalued but waste management involves the collection of waste materials and treatment but these products are not assigned new roles. Reverse supply chain it entails all the activities that are involved in reusing, recycling, and final disposal of waste materials
Considering the entire word Europe has a waste management board which has directed all the firms to address their waste disposal in a manner that will cause little or no harm to the environment. The United States also has encouraged her firms to recover used products as this will minimize wastage and pollution in the country. In countries found in the Middle East which is an emerging market collection of waste products which is advised to be done by professionals sorting and transporting them is very much needed. In the third world countries which are also referred to as developing countries reverse logistic is known to add very low value to the recovered products this is as a result involvement of low reprocessing techniques. Reverse logistics if properly managed can lead to reduction of transport, disposal and procurement costs (Fleischmann et al, 2004:1). Due to increase in globalization and industrialization reverse logistic is expected to accelerate after some years especially in developing countries which in turn will lead to environment conservation and massive economic improvements.
Reverse Logistics and Competitive Advantage
We looked at the use of reverse logistics to ensure that the company management of the flow of goods is cost effective. This will help the company increase the wealth in the banks. As a result, the company will hence acquire an advantage over the struggling competitors. This is as a result of the reason that companies that do not use reverse logistics may be undergoing loses which could be easily avoided through the use of effective reverse logistics. The competition within the market and for the limited number of consumers is one of the determinants of how an organization functions within the market environment. Therefore, the use of reverse logistics ensures that the company is able to defeat the other companies in the same market and dealing with the same commodities and services. This can be achieved since the sue o reverse logistics enables an organization to acquire professional workers who will be able to manage the flow of commodities from the consumers as the origin and the company reuses the products or even disposes of them properly. On the other hand, reverse logistics ensures that the company is able to maintain a good relationship with the workers and the stakeholders.
One way that the stakeholders who include the customers are satisfied is through the application of reverse logistics to maintain a clean environment. If the company is able to maintain a clean environment where the consumers live, this will attract more consumers who will be willing to be associated with the organization (Aserkar, Kumthekar, and Aserkar, 2014: 228). This can only be effective if the company is able to apply the reverse logistics practices. This helps the organization to create a competitive advantage. This occurs since the consumers will have a good relationship with the company and do not refer to it as a polluter of the environment. The bottling companies which collect the used bottles for recycling have created confidence to the users of the products. Coca-Cola Company has created a competitive advantage through the application of reverse logistics. This company ensures that the used bottles are collected from the consumers and taken back to the company for reuse. This practice of reverse logistics helps this company in several ways (Lowe, 2017: 1).
To start with, the company reduces the cost of production. This is achieved since the bottles will be sued more than once hence the money which could have been used for the manufacture of other bottling equipment can be used elsewhere. Two, the company helps the environment to remain clean. This is an attraction to the end users who prefer a company that is promoting a green environment. Additionally, the company maintenance of the environment through the collection and recycling of bottling material helps to ensure that the raw material is always available. Coca-Cola Company uses a lot of water to manufacture the products (Lowe, 2017: 1). It is believed that the water to product value of 3:1. Therefore, reverse logistics enable the company to reduce environmental degradation (Mohamed and Omwenga, 2015: 45).
Another company that can apply the reverse logistics to have a competitive advantage is a fast-food company. This company can ensure that the leftovers are always collected and disposed of properly. The company in this industry can ensure that the tins and cans used to pack the fast foods are collected to ensure that the environment is not degraded. This can be achieved through the use of dustbins. The application of reverse logistics will ensure that the company installs dustbins in areas where the customers are likely to move when they purchase fast foods. Example, if a fast-food hotel is located near a beach or a people’s park, the dustbins can be distributed across the part or the beach.
Therefore, the consumers will not dispose of the packaging materials anyhow. However, they will put the materials in the dustbins which are labeled or branded to indicate which hotel has installed which dustbins. The collection of the debris in these dustbins can be of use to the organization in order to have a competitive advantage. To start with, the organization can screen the materials and see the waste products which can use again in the organization for the work they had been used for previously. That will ensure that there are cost management and minimization of production cost. As a result, the company or organization can be able to defeat the competitors through the accumulated funds which could otherwise be used for the production of new packaging materials.
On the other hand, the company can benefit through collecting the debris from the dustbin and disposing them properly. In many countries, there are set bodies that regulate pollution from the organization. Therefore, the collection of used materials and ensuring that they do of pollute the environment can be of help to help the organization adhere to the law and regulations concerning the management and maintenance of the environment (Aserkar, Kumthekar, and Aserkar, 2014: 228). Additionally, the members of the public who are the consumers will develop a close relationship with the organization that is managing the properties well. This will ensure that the company has less need to conduct intensive and aggressive advertisements in order to retain the consumers. On the other hand, the company will have a ready market for their products hence creating an advantage over the competitors (Vural, 2015: 265).
The reverse logistics also helps to maintain an agile supply chain (Elmas and Erdoğmuş, 2011: 161). This is a good way to ensure that the supply chain management id helping the organization benefit over the competitors. If the competitors are doing well in the market, an organization can be forced to either improve the services and good or exit the market. However, through the application of reverse logistics, the organization can improve its position in the market without being outplayed by the competitors. This can be achieved if the organization applies reverse logistics to acquire enough information concerning the issue of supply chain management. The return of goods initially provided or the market can be a source of useful information. The information helped the organization to understand which goods are doing well in the market. At the same time, the organization can use reverse logistics to acquire information about the commodities or services that are performing poorly in the markets (Elmas and Erdoğmuş, 2011: 164). This information is very necessary for the organization that is planning to win the competition battle among other potential competitors.
If the company realizes that certain products or service is not doing well in the market, they can either change the products and services or even abolish it can concentrate on the commodities that the company is doing extremely well. Unilever Company is one of the European based companies that was selling fast foods products. However, the application of reverse logistics helped the company identify the weakness in the market which led to massive losses due to dominance from fellow competitors such as McDonald’s. Therefore, the company stopped dealing with the consumable products and concentrated on the production and supply of dealing with product as us downy and baby products. This shows how a company can use reverse logistics to have a competitive advantage. The collection of the materials from the end users back to the company gives an overview of the market situation. The company can apply reverse logistics to ensure that the products which are not performing well in the market are removed from the manufactured commodities. This will help the company reduce the cost of operation as well as improve the performance in the market through concentrating on the good and services which are more likely to win the consumers in the limited market environment.
As a result, the company will have a competitive advantage since the cost of producing commodities that are bringing little or no returns will be eliminated. The specification is also a good way to ensure that the company’s dominance. Coca-Cola Company has dominated the beverages industry since the company has been concentrating on the sales of the soft drinks such as Coke Soda, Sprite, Fanta, among others (Coca-Cola, 2018: 1). The Coca-Cola Company had ventured into other practices such as selling fast foods and other branded commodities such as key holders, wallets, among others. Additionally, the company through the application of reverse logistics discovered that the used bottles for the coke brand are more compared to other products. Therefore, the concentration of the company developed along this line and most of the advertisements in the commercials have been focused on the major brands under this company.
However, if the company does not use reverse logistics, they cannot acquire enough information concerning the performance of the commodities in the market. This can make the organization to put more emphasis on the products that are not doing well in the market. However, acquiring enough information on the market will ensure that the company adopts supply chain management strategies that are helping to ensure that the competition is reduced and the organization has the ability to venture in the new markets through expanded revenue accumulation.
Reverse Logistics Common Practice
In order to make reverse supply management and logistics more efficient, a company has to have a deep understanding of areas of the business that is affected by recycling and returns. Measures and efforts should be employed to ensure that the component contributes to a positive stride (Govindan, and Popiuc, 2014: 3). To make the profit and ensure that the consumer attain maximum satisfaction, there are areas that the company needs to consider, and they include;
• Repairs and warranties which is a crucial area for the customer as there is need to inform them on the safety of the returned good. A company should have a number of ways to communicate with their customers such as creating a website or have a help desk as this will relieve their concern.
• Measurement of performance of goods particularly related to reverse supply chain e.g., checking on the sale of the returned goods, the percentage of returns, the growth or decline of returns year after another, the rate of asset utilization among others.
• Reason for return. The company must also find the reason for return. This will help to prevent processing of dishonest or stolen goods delivered. The company should therefore carry out analysis of the root-cause of good returned for processing. This is a key area in understanding business based on reverse logistic implication and coming up with strategies to close loop-holes for such good.
• Tractability is another key area that trace the flow of return to prevent mixing with items that are forward flowing.
• Company’s finance is another area and in order for the company to add value and profit, it should manage its finance issues to avoid causing bad relationship with customers, distributors as well as retailers. The companies should also check on taxes paid on return goods
• Optimization of logistics such as partnering with other parties that differ from them like in transporting goods makes increase logistic efficient on reverse-flow items. This makes it capable of improving its profit.
Returned goods may be disposed of through various ways and the option or choice of deposing used should not only focus the profit but should consider other factors such as the satisfaction of the consumer and the image of the brand (Prahinski, and Kocabasoglu, 2006:6 These options include
• Remanufacturing or repair. Damaged goods or items that have not lost their identity are repaired and taken back to the market. However, there are factors that should be considered such as the cost the company uses to repair the item, the cost of transporting the repaired item as well as the market price of the refurbished commodity (Blackburn, et Al., 2004: 2). However, the company should identify remanufactured items from brand image to avoid posing risk. This is because consumers consider this item inferior. To avoid this, the company can give such item an image that appear more positive.
• Recycling. Recycling helps in recovering materials that are used to produce another new product. In this part the original identity of the item is lost. Factors such as the value to be reclaimed, the cost of transportation among others are considered. Recycling of some items e.g. electronic products brings out economic sense as such product minimizes the cost of mining and extracting metals.
• Discount sale. Companies may sometime sell returned goods on heavy discount. However care should be taken to avoid poisoning the customer perception on the brand image of the item and some may feel disappointed for paying less for same item.
• Energy regeneration. There are items that are not advisable to recycle such as food products. The company may use organic waste to generate renew energy through anaerobic digestion.
Screening of Retuned Goods
As mentioned above, one of the practices involved in the management of supply chain through the application of reverse logistics is the screening of goods. This practice ensures that the company has acquired enough information concerning the defective goods which are returned to the organization although they were previously in the markets. Screening of goods also enables the organization to improve on the goods before supplying them to the markets (Menachof, et Al., 2009: 148). A good example is a company that is dealing with selling o fast foods but the application of return logistics has enabled the collection of waste foods from the customers for proper management and disposal. These products can be screened so that the organization will understand the type of foods which are being disposed of frequently.
In a mixture of different foods which are packaged and supplied as a single commodity, the screening enables the organization to have a clear and vivid image of the market consumers and their preferences (Menachof, et Al., 2009: 146). Therefore, the company will take remedies and ensure that the supply of the commodities which are highly wasted is minimized (Billington, 1998: 24). On the other hand, the company can increase the supply of the materials which are highly consumed by the customers.
That is one of the strategies that reverse logistics can help an organization develop a competitive advantage. Understanding the customer’s needs is vital if the company is looking forward to maintaining their customers and at the same time attract more consumers. If a company does not understand what consumers need and preferences, the other companies that are dealing with the same consumer might take that advantage to provide precise services and commodities preferred by the consumers (Bowersox, 1999, 553). Many organizations have lost their market dominance after the consumers are not satisfied with the products being supplied.
Other companies have incurred losses for manufacturing surplus commodities and keeping them in the warehouse after the supply chain becomes extremely slow due to lack of ready markets (Al-Mashari, and Zairi, 2000: 31). The effects of such activities have been fatal for many companies which have dropped in the ranking or even lost the consumers’ trust altogether. Reverse logistics can, therefore, aids the company to provide the commodities that are best for the particular markets. The demand and supply which defines the nature of the supply chain in the organization can be affected by diverse situations.
The company can ensure that demand for the products is maximized through the application of reverse logistics and strengthening the noted weaknesses which influenced the return of goods previously supplied to the consumers in the markets. If the company is able to learn the market and treat the diverse situations appropriately, its competitive ability will be improved.
In conclusion, each and every company needs to maintain its customers and attract new customers. This is because the customers are the main source of profit in every company. A company creates a competitive advantage which helps it to outdo their competitors. While creating a competitive advantage the company must make sure that it is customers prefer their goods more than alternative goods.
Reverse logistics is one of the strategies used by most of the companies worldwide nowadays. This involves the companies are much involved in reuse and recycling of their used products. In the collection and recycling procedures, this reduces the production cost of most of the companies as fewer resources are needed to revalue products compared to production of new products. Reverse logistics have different practices which involve remanufacturing of products retuning of defective goods recycling and reuse of products.
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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.
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 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).
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.
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.
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