In Chapter 13 of Gaining and Sustaining a Competitive Advantage, Jay B. Barney covers the different kinds of strategic alliances a firm can enter with other firms, the reasons why a firm would enter such an alliance, and the forms that such an alliance can take. Over the last decade, Tesla has entered into two notable strategic alliances with automakers: Daimler AG, which produces Mercedes Benz, and Toyota. Of these alliances, Tesla’s partnership with Daimler has been regarded as the more significant alliance.
In 2010, Tesla entered into a strategic alliance with Daimler AG, whereby Daimler acquired a 10 percent interest in Tesla. In return, Tesla agreed to work with Daimler to integrate its lithium-ion battery packs and charging electronics into Daimler’s EVs. This type of alliance is one that Jay B. Barney characterizes in Chapter 13 of Gaining and Sustaining a Competitive Advantage as an equity alliance. The reason for this type of alliance, as opposed to a nonequity alliance, is that the equity investments made by Daimler reduces the firms’ incentives to cheat on their partnership because they rely on, and are to some extent dependent upon, the economic performance of each firm.
While this alliance allowed each automaker to enjoy substantial benefits, the partners have abandoned the alliance in recent years. In 2016, Daimler announced that it would no longer be working with Tesla to produce its newest EV model, the B-Class electric car. Since 2010, both firms have grown in ways that rendered the equity alliance less valuable. Specifically, the growth in the EV industry led Daimler to take its production of electric cars much more seriously than it had in 2010. Additionally, Tesla’s has grown at an unprecedented rate in the last seven years. In fact, the California-based company sold nearly 100 thousand vehicles annually by 2015. Because the alliance no longer provided the economy of scope that it once had in the alliance’s 2010 conception, the value this equity alliance provided for each firm was not as great as what each automaker could enjoy on its own. With the absence of this once exploited competitive advantage, it was time for the two companies to end their alliance and for Daimler to divest its equity in Tesla.
Tesla 