Case Study 1 - Tesla PDF

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Cross-Cultural Management2020 – 2021Assignment: ​ Case Study 1 - TeslaGroup number: ​ 12Team number: ​ 03Tutorial lecturer: ​ Dr Hammad Ul HaqStudent: ​ M. Brafly Bintang Dipapraja Student number: ​ SStudent: ​ Radho Jordan Kurnia Student number: ​ SStudent: ​ Eileen Graciela Chan Student number: ​ ...

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Cross-Cultural Management

2020 – 2021

Assignment: Case Study 1 - Tesla Group number: 12 Team number: 03 Tutorial lecturer: Dr Hammad Ul Haq

Student: M. Brafly Bintang Dipapraja Student: Radho Jordan Kurnia

Student number: S4419960 Student number: S4419979

Student: Eileen Graciela Chan

Student number: S4508319

Student: Karina Yasmine C. Bustomi

Student number: S4420780

Date: November 23, 2020

“By uploading this document to the Student Portal / Nestor, we certify: -

that our team is the author of this document;

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that nothing was taken from other sources without proper references;

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that this document is the result of the discussions and preparations in our team, including all members of our team and with the exclusion of those who are not a member of your team.

Introduction Tesla’s has been leading the market in the electric vehicle’s segment for over a decade now. Moreover, its first mover advantage in the market supports Tesla’s success in differentiating their product among other electrical car sections. To further expand its market, Tesla is currently entering European market that can be perceived by its entrance to Germany. Knowing the differences between America and Germany, there might be several backlashes for the company entering the market. The most visible challenge for Elon Musk as the CEO is that there is significant cultural difference in the working environment. It can be represented simply as the difference in both countries’ communication styles including the language barrier that comes along with it. Tesla’s cutting edge technology and innovation also came from a culture that is fast moving and ambitious, very different from Germany’s traditional approach towards engineering. Furthermore, Tesla also needs to overcome environmental concerns of the site of the Brandenburg plant, and also exceed the new EU climate goals. On top of that, Chrysler (American automotive company) once experienced failure when they merged with Daimler (Germany automotive company) caused by lack of understanding between Germany’s and American’s staff, further strengthening the argument of how important it is to address cultural differences to build chemistry. However, Tesla’s operation in Germany can be profitable in the long run as long as existing cultural backlash can be overcome. This argument is further strengthened by the clear enthusiasm of the German people for Tesla's entrance to Germany. Not to mention, the rapid development in the legal section of Tesla’s permit by the Government so that Tesla can start manufacturing immediately not long from the opening of their first manufacturing plant in Germany. This was also on Tesla’s part to connect frequently with local environmental organizations in an effort to address and dispel their environmental concerns. All in all, Tesla’s entrance to Germany can be viewed as a maverick in an established automotive industry that is no longer immune to disruptions that are caused by Tesla.

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Analysis Question 1) What is an organizational culture, what is national culture, and how are they interrelated? How would you describe the corporate culture of Tesla? How is Tesla’s organizational culture related to the national culture of the U.S.? Use Meyer’s cultural map and concepts from the lectures and readings for your analysis. Organisational culture is the collection of value, practices and expectations shared inside an organisation (Wong, 2020). On the other hand, national culture is the norm, beliefs and customs shared by a population of a sovereign nation (IGI Global, n.d.). According to Hofstede, national culture usually projects itself in the form of values held by individuals of a certain nation while organisational culture may translate these values into practices. Since national culture may be reflected in the culture of a domestic company, thus, internationalization would promote these cultures to be reflected in foreign subsidiaries of a national company. In the case of Tesla, the company has innovative culture in a sense that they are fast-paced and agile. This also means that they are not hesitant to take risks, like when they built the factory in Germany despite the extensive preliminary law. At that moment, Tesla addressed any criticism by dispelling any concerns and immediately making change to its construction plan. For instance, after speaking with the environmental organizations, Tesla managed to change their water consumption from 3 million cubic per year to 1.4 million (Dettmer, et al, 2020). This way of negotiating is similar to Meyer’s Cultural Map for the US, in which the US approach is applications-first logic. Meaning, their approach is practical and in a concrete manner, just like Tesla's approach to its problem is immediate application. In addition, the fact that Tesla is really on-set with the deadline for their factory construction also indicates that their approach is similar to the US, being linear-time bound. Meaning, the project steps are in sequential order, completing one task before beginning the next. Furthermore, Tesla's leadership style is bottom-line and communication tends to skip hierarchical lines, as Elon Musk, the CEO of Tesla, in his emails stressed the importance of open communication between employees and managers (Bariso, 2017). This fact inline with US national culture as egalitarian leadership. In other terms, the encouragement of clear communication means that Tesla communication style is precise, simple, and clear. In relation to US national culture, it also means low-context communication. Overall, Tesla organizational culture can be seen to be related with US national culture.

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Question 2) As Tesla has started to build a new factory in Germany, is it wise to replicate its organizational culture in this environment? What are potential benefits and pitfalls of such an attempt? In your view, will Tesla’s organizational culture succeed in Germany? Analyze and explain and use Meyer’s cultural map for your analysis. Referring to Meyer’s Cultural Map, it can be seen that there is a moderate cultural gap between Germany and the United States. A total of 8 dimensions make up the cultural map, which consists of communicating, persuading, trusting, evaluating, disagreeing, deciding, leading, and scheduling. These differences can be seen in many dimensions, most especially when it comes to persuading and evaluating. Germans tend to lean towards being principles-first when persuading others—developing a concept and providing concrete arguments before further executing it, while Americans are more towards applications-first. Evaluations are also given very differently in the two countries, where honest and direct negative feedback are very common in Germany, where in the United States, negative feedback is often given in a very subtle way. These differences are further strengthened by a significantly different approach in decision making whereas the US (specifically Tesla) although adopts an egalitarian culture, still makes decisions based on a top-down approach, as opposed to Germany which prefers a more consensual approach.

Figure 1.1 The comparison between US and other countries including Germany Given the cultural gaps present between the two countries, along with our analysis based off of Meyer’s cultural map, we believe that it would not be wise for Tesla to entirely replicate their organizational culture in Germany’s environment, without necessary adjustments, potential conflicts may arise and in consequence may cause monetary loss as well as bad reputation which has been proven by previous companies that had failed internationalizing to Germany such as Walmart and Amazon (Ankel, 2019).

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However, we see a potential in further assimilation of both Germany’s culture and Tesla’s organisational culture that would foster success. One of it being Tesla’s agility in decision making, following their task-based approach in trusting others. Tesla’s fast paced decision making resulted in 12,000 job openings for newly hired employees (Dettmer, Kroger, 2020, page 8) which would attract a large number of workforce ready for further cultural development. With an entirely new workforce involved, the formerly task-based approach used to hire employees can now be adjusted into a more consensual, relationship-based approach where mid-level managers may assimilate Germany’s traditional approach in engineering into Tesla’s innovative yet sometimes unrealistic approach (Dettmer, Kroger, 2020, page 8). With a more realistic take towards the research and development area, Tesla can execute their ideas with more precision and quality, with the consequence of slowing down production. Other factors would be to encourage the German’s approach of having direct negative feedback into having a more positive approach in delivering feedback. Not only that, but to exhibit a more open mindset towards differences between both parties. According to Burcu Subasi, the Effect of Dissimilarity on Performance , where it is argued that the presence of differences can improve decision making quality, creativity, as well as overall performance. Subasi further argued that negative situations in international collaboration can be avoided through three ways, namely to keep employees accountable for their actions , increase team diversity, and encourage employees to learn about each others’ expertise (Subasi, 2017). In conclusion Tesla’s efforts in internationalizing in Germany can be successful through efforts of assimilating their current company culture to Germany’s national culture as well as exhibiting an open mindset in the workforce.

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was it that they failed to adapt? or did they failed to have a strong organisational culture? > problem : they failed to comply to german’s legal environment > prob 2 : they failed to adjust with german’s regulations for the employee’s wellbeing

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Question 3) How difficult would it be to establish one of Tesla’s factories in the Netherlands without changing the corporate culture? If Tesla would adapt its corporate culture to the specific national culture, what would happen? Analyze and explain based on Meyer’s cultural map. The Netherlands has similarities in several cultural characteristics that have been described in the Meyer's Cultural Map with Germany, with an exception in the persuading and leading dimensions. In context of communicating, both countries are classified as low context, meaning that simple, clear, and precise communication. Both countries also constantly build trust from business related activities, thus being classified as task-based. Furthermore, both Germany and the Netherlands tend to give blunt and direct negative feedback when evaluating others, as well as being confrontational and perceiving disagreement as a positive aspect for an organisation. When making decisions, both countries seek consensual agreements and make decisions in groups. They are both also very similar in terms of scheduling, being time-linear, where they try to stick to the schedule and deadlines as much as possible. However, when looking at the dimensions of persuading, Germany is classified as principles-first, with the Netherlands being applications-first. Germans tend to develop a theory before presenting opinions, statements or facts, while the Netherlands does vice versa. The countries are also somewhat different in terms of way of leading, where the Netherlands are very much egalitarian—where there is a very low presence of distance between a boss and a subordinate—while Germany leans towards being hierarchical. This shows similarities in six out of eight Meyer’s Cultural Map dimensions in both countries. Therefore, the adjustments made when planning to establish a factory in the Netherlands should not be very much different from those made in Germany. Considering the number of competitors in car manufacturing industry, Tesla has a much larger change of cultivating the workforce since the country itself focuses more on their food and agriculture industry as their leading sector (Atitwa, 2018) as opposed to Germany which has a more sophisticated automotive industry and is already famous for several brands such as Porsche, Mercedes-Benz, BMW, making the workforce smaller and rigid due to its already established knowledge in automotives. Given that the automotive industry in the Netherlands in the is not as advanced as Germany in terms of technology and labor skills,Tesla wouldn’t have to adjust much of their company culture. Tesla can implement their own culture due to their first mover advantage in electric cars in the Netherlands, adding it as their strength. In conclusion, we are positive that Tesla would have a much bigger advantage in establishing their company if their aim is to benefit from the first mover advantage as an electric car manufacturer in the Netherlands. Not only that but culture-wise the Netherlands may have much more similarities with American culture, making cultural assimilation easier. The language barrier is also much lower in the Netherlands as opposed to Germany. However, 6

considering that Dutch people are more relationship oriented than their American counterparts - similar like the Germans, may cause issues in decision making. Tesla would need to take this into consideration, to prevent disasters like Amazon and Walmart’s failure in penetrating the German workforce.

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Question 4) Based on Meyer’s culture map, explain whether and to what degree a specific blend of dimensions in a national culture exists that can foster an organizational culture that in turn can facilitate the international development and international success of a firm. Identify and briefly explain a real world example of such a blend and firm. According to a book by Mats Alvesson and Stevan Svenningson, there is no predictable way to address blend of dimensions that can foster international development, assuming that the term ‘cultural change’ here is addressed as the change of ‘deep structure’ (Alvesson, Svenningson, 2008). Deep structure means that rites that are associated with basic assumptions (Schein, 1985) or sacred values and beliefs (Gagliardi, 1986). Therefore, international development and success can be highly attributed to not the specific blend itself but the methods taken to change the culture or as the book addresses, “the intervention made by management and it’s organisational response”. In this case, we would like to highlight that what works for a company may not work for another company. This is especially relevant to companies coming from different cultural backgrounds internationalizing to different countries with different cultural settings, say, Eastern companies like Nissan expanding to the US as opposed to Western companies like Chrysler expanding to Changsha, China. In one example, Nissan did face some challenges regarding deterioration in labor-management issues in their world-wide subsidiaries. As a world-leading car manufacturer with a distinct Japanese style management system, the newly reigning CEO, Ghosn felt that he needed to make a reformation to it’s organisational culture. He proceeded to downplay Nissan’s originally hierarchical system to a more egalitarian one where everybody had to address their counterparts as “Mr” or “Ms” despite their ranks. Ghosn also proceeded to dispose of pattern-maintaining symbols like uniforms worn solely by female employees and introduced flexible working hours (Alvesson, Svenningson, 2008). By adjusting the new culture based on Ghosn ’s wisdom, the new CEO gained the confidence to execute “Nissan Revival Plan”, where he cut down the number of workforce, cost of production and revamp dealer assets by a brute amount. The operation was a huge success, considering that Nissan reported for FY2000 a net income of ¥ 331.1 billion and operating income of ¥ 290 billion, increasing its operating margin by 4.75% and increased their share price by 46% from the year 1998 to the year 2000 (Nakae, 2002,page 38). It can be concluded that in Nissan’s case (as an eastern company), the adjustment made when internationalizing was to become more egalitarian, dropping formalities and gender related roles, become more task-based where layoffs were made based on performance rather than relationships and, becoming more flexible in terms of scheduling. However, Nissan maintained its top-down approach where the CEO holds the most valuable voice in the company and maintained a principle approach when planning and executing the ‘NRP’ where consideration of cost reduction and sustainable long term growth were carefully considered before taken into action (Nakae,2002, page 32).

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Another example is Chrysler, who faced terrible customer service and lagging technology. By the year 1990, 30 years after its expansion to Europe, Chrysler has to adjust its organisational culture yet again. However, contrary to Nissan’s approach, Chrysler decided to not eliminate their current workforce, instead they decided that it’s best to change their initial practices rather than having unnecessary elimination (Zats, 1994). Chrysler’s sales improved as they increased the involvement of people - in this case, adopting 60% of ideas solicited by suppliers, saving up to $235 million. They decided to change their upstream ideation process from a small number of people working solely in RnD into having planners to set out customer’s needs and have a focused group to work on the product - which made the processes more advisory and relationship-based. Aside from that, since a large amount of time is needed to see results in cultural changes (mainly caused by it’s slow gradual execution between divisions in the company), more involved employees are shown to have decreased lag time in perceiving these changes. Chrysler also changed their focus into more linear-time based where they eliminate possible last minute changes that would cause expensive disasters. Since, Chrysler promotes a consensual approach in their work process, determining key objectives is now a group activity which would increase accountability for pre-determined goals. Chrysler also encouraged its employees to have a more egalitarian approach, eliminating distance between management and employees, which shown positive feedback of increased productivity (Zats, 1994) By comparing the two automotives companies, Nissan and Chrysler - which came from two distinctly different backgrounds, we can conclude that both companies needed to adjust from having a strict either western/eastern culture to being more moderate, adjusting with their counterpart’s culture. However, it is shown in both settings that egalitarian culture is highly linked to higher productivity where people are given comfort to express their opinions to their management position as innovation is fostered in this setting.

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Main Takeaways for Managerial Practices From the case study, managers can learn a number of takeaways. The first one is, by aligning corporate culture with national culture might minimize further risk, such as bad reputation. Adjustment is needed to provide mutual understanding between local employees and middle to higher management without eliminating the values derived from the initial culture of the company. The safest blend of cultural dimensions is to establish a “moderate” culture in a foreign subsidiary, not leaning extremely towards one spectrum or the other. We can learn from both Nissan’s and Chrysler’s case that their success in internationalizing can be traced back to the way they manage to assimilate the culture that is opposing to their own culture. This suggests that in order to achieve success in cultural assimilation, there needs to be an awareness of the need to change before a crisis can further concur. The second takeaway is by taking into account the cultural differences that may be present between different places as well as the problems it may cause, managers sho...