UBT Tesla Keep its Partnership with Panasonic Case
Case Study 01 Blendtec Goes Global ... AgainHarvey Scott, vice president of international development, was in charge of Blendtec’s global expansion effort. He and his team had been gathering data and meeting with international partners and contacts for months to help determine which global markets to enter, when to enter them, and how. Scott had to decide how to leverage Blendtec’s existing network of international partners and distribution channels, or whether to scrap them and start over. He understood that in many international markets, if Blendtec didn’t get things right, it wouldn’t get a second chance.Blendtec began in 1975 when founder Tom Dickson created a revolutionary wheat mill. Dickson next turned his attention to commercial kitchen appliances, and his blenders were an unqualified success, reducing average blending times from around fifty seconds to just thirteen.Product performance made Blendtec the primary appliance supplier to big-name companies like Starbucks and Jamba Juice. The company also partnered with Costco to sell Blendtec blenders directly to consumers. These relationships initially stayed domestic, and Blendtec was positioned to service a predominantly U.S. market. Starbucks and Costco, however, had plans for global expansion.Going GlobalWhen Starbucks and Costco moved international in the early 1990s, Blendtec wasn’t an international company, so it had no network in place to provide service and support to its big customers. It promised to build a global supply and support network, but it faced new and different problems in each market, which required additional innovation. For example, in Australia, the power grid could fluctuate widely in terms of voltage. Most U.S. appliances would burn up under that kind of power variation. Blendtec had to find a partner to explain how to build a power regulation system that would protect appliances from those fluctuations.Mixing Things UpAfter a few years abroad, the company wanted to enter other foreign markets using a more strategic focus, not just in reaction to customers’ demands. To ensure its future, Harvey Scott needed to determine Blendtec’s strategy. Future growth depended on his decision, and he wouldn’t get a second chance to make a first impression on new markets and consumers.Case Discussion QuestionsWhich markets are most likely to be most receptive to a greater presence from Blendtec? Why? What differentiates those markets from other markets?Should Blendtec sell to local retail stores or rely on global retailers such as Costco?Should Blendtec set up production facilities in foreign countries? For example, would it be better to manufacture units in Brazil for that market or better to ship product there and pay applicable import tariffs? Does that determination vary from market to market?._______________________________________________________________________________________________Case Study 02Should Tesla Keep its Partnership with Panasonic?Tesla is a company that has made a name for itself. Led by the famous CEO and co-founder Elon Musk, who also designed the American aerospace manufacturer SpaceX, Tesla has received public attention for what the company’s future endeavors are. But what does Tesla actually specialize in? Tesla is a company that specializes in electric car manufacturing.In 2018, Tesla announced plans to build a $5 billion manufacturing factory in Shanghai, China, in order to build about 500,000 electric vehicles every year by the 2022–2023 fiscal year. The plans for this factory are grandiose, in fact, it will be built on an 864,885 square-meter plot that, according to Musk, will be the size of Tesla’s Fremont factory and the current Reno, Nevada, Gigafactory1 combined. Due to the massive undertaking of this project and the ongoing Sino-American Trade War tariffs, this plan had to be discussed in great length with the local government in Shanghai. But, nonetheless, the project was approved.Tesla and PanasonicIt is important to note that Tesla relies heavily on lithium batteries to power their vehicles. For all of their American cars, Tesla has partnered with the consumer electronics company, Panasonic, for the electric batteries in the cars. This relationship, established in 2013, has seen great strides in North America since both companies relocated to the Nevada Gigafactory1. This collaboration seemed to be symbiotic and well-received. However, since entering China, this collaboration has sailed into rough waters.As a result, Tesla settled with the South Korean company, LG Chem, to be their battery supplier for the gigafactory in Shanghai. The South Korean mega-corporation focuses on technology and chemical production for the batteries. Since entering the Chinese market in 2017, LG Chem is a fairly new supplier of batteries in China and partnering with Tesla is turning out to be their Chinese cash cow.The LG Chem battery-making factory for Tesla will be located about 200 miles away from Shanghai itself, which means there needs to be coordination between LG Chem and Tesla to get the correct auto parts to the right places.To add more salt to the wound of the Tesla–Panasonic situation, Tesla also announced that they would partner with other localized entities in supplying other parts for cars, excluding Panasonic from these opportunities in China.What are the reasons for this strained relationship that is pushing Tesla away from Panasonic and possibly seeking new collaborations in China? One reason came from Musk himself, who claimed that Panasonic has recently had a slow-down in production, particularly on a certain model of battery, the Model 3. Apparently, the battery cell production rate had slowed drastically, which in turn slowed the production of vehicles in Tesla’s Nevada Gigafactory1. Musk reported, in many interviews, that Panasonic had promised a much faster production rate, and this was a wrench in their relationship.Another reason for Panasonic losing favor in the eyes of Tesla is due to the inside reports that Panasonic employees were ignoring crucial procedures while manufacturing Tesla products in the Nevada Gigafactory1. These actions normally went without notice and, if they were, did not attract punishment or negative repercussions.Yet another reason is that the amount of waste material Panasonic is generating is quite alarming. According to reports, over half a million pieces of shrapnel and scrappage are tossed out each day. This waste is due to the procedures not being followed (as mentioned above), according to one employee. For a company that is collaborating with an electric car company whose overarching goal is to go green, Panasonic must understand Tesla’s core values as a company.Due to these reasons, Tesla, in fact, halted future spending on Gigafactory1 in Reno, Nevada, where it actually saw stock prices go down. The investors and stockholders knew that this was not a positive outcome in regards to the strategic partnership of Panasonic and Tesla.Resolution: Is There One?Is there a way to mend the strained relationship between the two large companies? It is tough to say, but as was already noted, Tesla seems to be looking in another direction, since they are looking to other sources for lithium batteries in China.Apart from the reasons mentioned previously, Tesla might be trying to curry favor with the Chinese government and local suppliers to boost name recognition and brand awareness in China. This new direction is largely due to the fact that the electric vehicle industry is booming right now, and China has a growing middle class, which in turn has a growing need for vehicles.Case Discussion QuestionsAsk yourself this: If you were Elon Musk, would you abandon Panasonic and look for other collaborative opportunities or find ways to work past differences?What is the best way to structure these relationships with outside partners?