Case Study: Tesla’s Global Expansion – Choosing the Right Entry Mode

Background

Tesla, the electric vehicle (EV) giant, has rapidly expanded across the globe, aiming to dominate
the EV market. With sustainability and innovation at its core, Tesla has adopted different modes
of entry into various markets. However, each new market presents unique challenges, from
regulatory hurdles to competition and consumer preferences.

The Challenge

Tesla is planning to enter the Indian automobile market, one of the largest and fastest-growing in
the world. However, India’s automobile sector is characterized by price-sensitive consumers,
high import duties, and a competitive landscape dominated by well-established players like Tata
Motors, Maruti Suzuki, and Hyundai.

The company must decide the best mode of entry into India. Should Tesla opt for exporting,
licensing, franchising, joint ventures, strategic alliances, or wholly owned subsidiaries? Each
mode presents its advantages and challenges.

Key Considerations

1. Government Regulations & Policies: India has high import duties on completely built-
up (CBU) cars, making direct exports costly. The government encourages local
manufacturing through initiatives like "Make in India."
2. Market Demand & Consumer Behavior: Indian consumers are price-sensitive and
expect affordable yet efficient vehicles.
3. Competition: Local players have strong distribution networks, brand loyalty, and price
competitiveness.
4. Infrastructure: India’s EV charging infrastructure is underdeveloped compared to
markets like the U.S. and Europe.
5. Investment Costs & Risks: Setting up manufacturing plants requires high capital
investment and long-term commitment.

Possible Entry Strategies

1. Exporting – Tesla could initially export its cars to India. This minimizes investment risk
but increases product prices due to import tariffs.
2. Joint Venture (JV) – Tesla could partner with an established Indian automobile
company (e.g., Tata Motors) to share resources and market knowledge.
3. Licensing or Franchising – Tesla could license its technology to Indian automakers to
produce and sell under the Tesla brand.
4. Wholly Owned Subsidiary – Tesla could establish its own manufacturing facility in
India, leveraging government incentives.

Discussion Questions
1. What are the pros and cons of each entry mode for Tesla in India?
2. Considering India’s policies and market conditions, which entry strategy would be most
suitable for Tesla and why?
3. How should Tesla address infrastructure challenges such as charging stations to enhance
EV adoption in India?
4. What lessons can Tesla learn from its previous global expansions in China and Europe?
Case Study: The Impact of Geopolitical Tensions on Global Business – The Huawei
Dilemma

Background

Huawei, a Chinese multinational technology company, has been at the center of global trade
tensions due to allegations of cybersecurity threats and intellectual property concerns. The
company has faced bans, restrictions, and intense scrutiny from major global markets,
particularly the United States and some European countries. Despite this, Huawei continues to be
a leader in 5G technology and telecommunications equipment worldwide.

The Challenge

Huawei seeks to expand its market share in Western countries while navigating trade restrictions,
political opposition, and concerns over national security. The company must decide how to
approach international expansion amid an increasingly complex business environment.

Key Considerations

1. Regulatory Barriers & Trade Policies: Several Western nations have banned Huawei
from participating in their 5G infrastructure due to security concerns.
2. Reputation & Trust Issues: Accusations of government ties have led to skepticism
regarding Huawei's technology and data privacy policies.
3. Competitive Landscape: Rival companies such as Ericsson and Nokia have capitalized
on Huawei’s difficulties by securing contracts in major markets.
4. Geopolitical Uncertainty: US-China trade tensions influence global business operations,
affecting Huawei’s access to suppliers and customers.
5. Technology Leadership: Huawei remains a pioneer in 5G and AI, providing it with a
competitive edge in emerging markets.

Possible Strategies for Huawei

1. Diversification of Markets – Focus on emerging markets such as Africa, Latin America,

and parts of Asia, where regulatory resistance is lower.
2. Strategic Alliances & Partnerships – Collaborate with non-Western firms to maintain
supply chain stability and secure new market opportunities.
3. Localization Strategy – Establish more regional subsidiaries and adapt business models
to align with local regulations.
4. Legal & Diplomatic Engagement – Work with policymakers and regulators to ease
restrictions through transparency and compliance measures.
5. Technology Investments – Double down on R&D to create proprietary alternatives to
Western technologies, reducing dependency on suppliers facing trade restrictions.

Discussion Questions
1. How should Huawei respond to regulatory and political barriers in Western markets?
2. What alternative markets or strategies should Huawei explore to sustain growth?
3. How can Huawei rebuild trust with global stakeholders and consumers?
4. What lessons can be drawn from other companies that have faced geopolitical business
challenges?
Case Study: IKEA’s Journey in India – Navigating the International Business
Environment

Case Background

IKEA, the Swedish home furnishings giant, is known for its affordable, stylish, and DIY (do-it-
yourself) furniture. With a presence in over 50 countries, the company has successfully adapted
to diverse international markets. However, its entry into India posed unique challenges due to
regulatory barriers, cultural differences, and complex supply chain dynamics.

After nearly a decade of planning and overcoming strict foreign direct investment (FDI) rules,
IKEA opened its first store in Hyderabad, India, in 2018. The company had to adapt its business
model, product offerings, and supply chain to cater to Indian consumers.

This case study will explore IKEA’s journey in India and the international business environment
factors that shaped its strategy.

Key Challenges IKEA Faced in India

1. Regulatory Environment & Foreign Direct Investment (FDI) Restrictions

o India had strict FDI rules requiring foreign retailers to source at least 30% of their
products from local suppliers.
o IKEA had to modify its supply chain and partner with Indian suppliers to meet this
requirement.

2. Consumer Preferences & Cultural Differences

o Indian customers preferred fully assembled furniture rather than the DIY model.
o Home sizes and furniture needs in India were different from Western markets.

3. Price Sensitivity
o Indian consumers were highly price-conscious, and IKEA’s pricing strategy had to be
competitive.

4. Logistics & Infrastructure Challenges

o Poor logistics infrastructure increased supply chain costs.
o IKEA needed large retail spaces, which were difficult to acquire in metro cities.

5. Competition from Local Players

o Indian furniture retailers, including both organized and unorganized sectors, posed stiff
competition.

IKEA’s Strategy to Overcome Challenges

 1. Adaptation to the Local Market
o IKEA offered services to assemble furniture at an affordable cost, addressing the DIY
challenge.
o The company introduced products specifically designed for Indian households, such as
compact and multi-functional furniture.

2. Local Sourcing & Supply Chain Management

o IKEA partnered with local suppliers and artisans to meet the 30% sourcing requirement.
o It invested in a long-term supply chain infrastructure, including warehousing and
logistics.

3. Pricing Strategy
o The company adopted a competitive pricing model while maintaining quality.
o It introduced a mix of premium and budget-friendly products to appeal to different
income groups.

4. Retail Expansion Plan

o IKEA chose a hybrid model, opening both large-format stores and small city-center
stores.
o It invested in e-commerce and digital platforms to reach a wider audience.

Discussion Questions

1. Regulatory Challenges: How did India’s FDI policies impact IKEA’s market entry, and what
strategies did the company use to comply?
2. Cultural Adaptation: What were the key cultural challenges IKEA faced in India, and how did it
modify its business model to adapt?
3. Competitive Strategy: How did IKEA differentiate itself from local competitors in India’s
furniture market?
4. Supply Chain & Logistics: What logistical and infrastructural barriers did IKEA face, and how did
it address them?
5. Future Growth: Given the competitive landscape and economic conditions in India, what future
strategies should IKEA adopt to strengthen its presence?