Ford vertical integration 2013 - Article Example

Strategic Management: Vertical Integration The Chief Executive of Telsa Motors Inc Elon Musk recently announced a plan by the giant electric automakers to erect its own a lithium-ion battery factory. The plan to build what is termed as “giga factory” is an ambitious project that the company plans to undertake in order to meet its projected high volume production of “Generation III” electric cars (White, 2013). The highly sophisticated automobiles are expected to hit the market by around 2017 and according to the company’s head, the world currently does not have the capacity to meet the high demand for lithium-ion battery which is one of the key raw materials required in the production of its automobiles.

The California based Automakers feels that it is an inevitable necessity for the company to supply its own batteries if it has to remain on track with its much aggressive long-term strategic objectives. Mr. Musk told the analysts about the company’s ambitious plans of selling approximately 500000 units annually when it begins selling Generation III cars (White, 2013). However their biggest concern was lack of steady supply of batteries which could meet this demand. There is no doubt that Mr.

Musk’s idea emulates the one time vertical integration idea of Henry Ford which saw the birth of Ford Rouge factory complex which ensured steady supply of steal which was one of the raw materials for the giant automaker in the 20th century. White (2013) assert that Despites its current ebb state the Rouge complex has been instrumental to the company for several years. If Telsa will realize its dream of backward vertical integration whereby it could convert raw materials into finished battery packs for its automobiles then the company will be in a position to compete effectively through cost control and scheduled production.

ReferenceWhite, J. (2013). An Idea Henry Ford Would Be Proud Of: Tesla’s ‘Giga Factory’. The Wall Street Journal. Retrieved December 11, 2013 from: http://blogs.wsj.com/corporate-intelligence/2013/11/05/an-idea-henry-ford-would-be-proud-of-teslas-giga-factory/?KEYWORDS=Ford+Rouge+