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To enter foreign markets, the MNE must possess some sort of ownership-specific advantages. What ownership advantages can give Tesla Motors a competitive advantage over local electric carmakers in China?

International Business and Innovation

Instructions on Assessment:

Tesla was ranked by Forbes as the World’s most innovative company in 2015.Tesla Motors is an automotive company, which was established in 2003 by a group of Silicon Valley engineers, including Elon Musk (founder of PayPal). On 7th March, 2019, Tesla Motors signed an agreement with Chinese authorities to build a factory in Shanghai, this factory would be Tesla’s first outside of the US (BBC, 2019).

Based on the case of ‘Electric carmaker Tesla entering China’, students are required to produce a 3000 words (+10%) academic report to address the questions below by using relevant academic theory and concepts. Answers MUST be adjusted and supported by sufficient self-collected research data.

Reference

BBC News (2019), ‘Electric carmaker Tesla has signed an agreement with Chinese authorities to build a factory in Shanghai’. Retrieved from: https://www.bbc.co.uk/news/business-44789823

*Additional suggested resources covering aspects of the case have been posted on Blackboard as a start

QUESTIONS

  1. Professor Dunning (1977) proposed the well-known ‘eclectic paradigm’, including ownership-specific advantages (O); Location advantages (L) and Internalisation advantages (I).  Applying OLI framework, and using appropriate analytical tools, critically discuss and answer the following questions:

a)      To enter foreign markets, the MNE must possess some sort of ownership-specific advantages. What ownership advantages can give Tesla Motors a competitive advantage over local electric carmakers in China? How can these contribute to Tesla’s success in China? (20 marks)

b)      What location-specific advantages is Tesla motivated to exploit from China, and why has Tesla Motors decided to build a factory in Shanghai?  (15 marks)

c)      How could Tesla Motors effectively internalize their ownership-specific advantages (identified in part a) in China (e.g. protect and use its ownership advantages in the host country)? (15 marks)

  1. Considering the importance of informal institutions (e.g. cultures, value and norms) for international business, critically discuss how national cultural differences can bring both barriers and competitive advantages for Tesla Motors operating in China? What cross-cultural management approach should be taken by Tesla to acquire cross-cultural competence when operating in China? (25 marks)
  2. Drawing upon relevant academic literature, critically discuss what type(s) of innovation strategy Tesla Motors adapted. What are the benefits and challenges of building a local innovation network in China for Tesla Motors?  (25 marks)

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