Strategic Recommendations for Managing Future Costs

Tesla, an American automobile manufacturer based in California, has hired you as a business strategy consultant. Tesla is the leader in electric luxury cars across the world. Over the last five years, their sales have increased due to consumer and political concerns over the environmental impact from combustion based automobiles. Increased demand worldwide has resulted in increased competition from established companies (Ford; GM; Mercedes; Toyota; etc.), as well as smaller start-ups. Because of the Covid-19 pandemic, lags in the supply chain, and a doubling of fuel prices, recent costs have skyrocketed. Consider the following question:

On Tuesday morning, a major international news organization broke a story that the company who manufactures six critical custom Tesla parts is treating their employees as slave-labor. To compound problems, a terrorist organization launched an attack in a Middle Eastern country where the back-up supplier is located. The back-up supplier’s factory was badly damaged by a bomb and will be out of commission for at least 12 months.

The “good news” is that they will sell you one-month of parts at 500% the normal price. The final challenge is that the US government in January 2023 will require tracking and auditing on manufacturing inputs purchased abroad, which means that Tesla will have to devote extra company resources to maintaining compliance. Discuss options for addressing this situation in the short-term and long-term. Put together detailed strategic recommendations for managing future costs and risks over the next 5 years (Branding; Production; Sales; etc.)

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