Tesla is the future of Electric Vehicles, and Panasonic is providing the battery life. However, their strained relationship is affecting their overall objective and Panasonic has seen a 50% stock fall since January 2018. Will these cultural clashes be enough to end their relationship, or will they work together to better understand their differences?
Can two undeniably different organizations, with conflicting values and strategic objectives, merge to better growth prospects and improve their bottom line? From a strictly numbers standpoint, the odds are pretty slim. According to a KPMG study, 83% of international mergers do not deliver their promises on shareholder returns. What’s fascinating about this statistic is that while there are many reasons why any international business transaction can go sideways, most if not all, have something to do with corporate culture. And interestingly enough, the greatest source of friction in the relationship between Tesla and Panasonic – who are not merging but are rather closely intertwined – is the same: culture clash.
Defining Culture Clash
On the surface, two companies can agree on an overall objective. But as differences in values, traditions, and organizational structure emerge, there can be an erosion of the overarching synergies and economies of scale that had once made the partnership an attractive prospect. The term clashing describes the inefficiencies which stem from an incompatibility of two cultures. International business transactions sometimes deal with two cultures that do not see eye to eye on anything from meeting deadlines to leadership styles. The partnership between Tesla and Panasonic is one such example.
But culture clash doesn’t necessarily need to be attributed to international business. Using the Harvard Business Review’s example of “tight” and “loose” cultures, there can also be culture clashes close to home. HBR uses examples of two companies that are on opposite sides of the cultural spectrum, but still operate in the same country. Tight company cultures are defined as “valuing consistency and routine.” They are characterized by a more heavy reliance on orderly independence and top-down decision making. Comparatively, loose cultures, “tend to be open and creative but disorganized”. They differ from tight cultures in that they have a fluid environment which puts a lot of emphasis on collaborative leaders who remain humble and encourage change.
At the start of a partnership, the unique offerings each company brings to the table – often through differing corporate cultures – can actually be a net good. However, in order to achieve a cohesive blend of the distinct cultures, each party must give up certain aspects of their own culture to make room for new changes. If a loose culture is faced with a tight leader, they could feel a loss of trust and empowerment due to their sudden lack of independence in decision making. If a tight culture is met with a loose leader, they could become disengaged due to their lack of direction.
Panasonic vs Tesla’s Corporate Cultures:
So, how does this all relate to Tesla’s strained relationship with its Japanese battery supplier? Here are two examples: Elon Musk smoking a joint during a podcast in 2018, and his decision to fast-track production. Both of these actions by Mr. Musk go against core Japanese business values.
Panasonic’s executives were less than thrilled with Musk puffing blunts on live television, but their main concern was how that would reflect on their shareholders. According to Dr. Lieh-Ching Chang, an associate professor at Hsuan Chuang University in Taiwan, Japanese cultures feature the idea of “shame”, which refers to doing something which loses a person’s ‘face’. They put a high level of emphasis on relationship building and how that relationship builds trust and a positive image.
Coming from Panasonic’s point of view, Mr. Musk didn’t take into account how his public persona would affect his relationship with Panasonic shareholders, regardless of the monetary impact. According to the Wall Street Journal, Chief Executive Kazuhiro Tsuga stated that he regretted the shared investment in the Gigafactory (the factory in Nevada that supplies the lithium-ion battery packs for Tesla’s electric vehicles). Mr. Tsuga sent an email to Tesla’s CEO stating “it is not an easy business environment for both of us, but I strongly believe we have to strengthen our partnership even more.”
North American business culture is also highly concentrated in maximizing profits in the least amount of time. Tesla pushed through their EV manufacturing with tight timelines and aggressive output goals, leading Panasonic to scramble by increasing costs to sustain extra production, slumping their stock value into the red zone. As a general norm, Japanese businesses take longer to make decisions as their concept of time is not centered around profit output but more on group decision-making to ensure shareholder satisfaction is maximized and agreed upon as a whole. Their decisions tend to be dealt under calm control and looser deadlines.
Currently, Tesla sources most of its batteries from Panasonic. For both companies it’s a profitable match: Tesla gets the world’s best in terms of battery components, and Panasonic gets to tap into the future of the automotive industry. University of Dalhousie’s very own research team, published a paper in the journal of The Electrochemical Society,on Tesla’s “million mile battery”, claiming that they will “be able to power an electric vehicle for over 1 million miles”. The report was led by Physicist Jeff Dahn, and it provided a high level of detail for other teams to recreate the batteries they invented.
All in all, the future of electric vehicles is bright, and Tesla as well as Panasonic are at the core of it. However, as a result of these cultural clashes, Panasonic has seen a 50% stock fall since January 2018, and relationships between the companies’ executives are strained; Its executives blame Elon Musk’s behaviour and his business processes for their unrealized gains. The only thing left to ask at this point is: Will both parties learn to work together, or will their partnership come to a sputtering end?