Tesla’s raw material shortage

The major school of thought behind the theory of Constraints, as proposed by Goldratt (1990), is that all businesses have a constraint that prevents them from achieving a goal that would make them profitable, and that improving on this constraint is the easiest way for the business to make a profit (Goldratt, 1990). This essay identifies a news article about a company that is facing constraints. The essay then weighs in on how much attention is given to customers’ desires and how much attention is given to the company’s internal concerns.

The article by Denton (2021) talks about the increase in prices of Tesla vehicles, to which the CEO, Elon Musk, responded that there is a shortage of raw materials that causes supply chain price pressure. The major constraint here is the shortage of raw materials. Attention has been given to the customer’s concerns about the relatively high costs of securing Tesla vehicles. However, relatively more attention has been given to the internal concerns of the organization. The rare metals including, cobalt, lithium and nickel, are expensive, which causes the high prices of batteries, resulting in higher prices of the vehicles (Denton, 2021). To conclude, the information presented in the article illustrates that more weight has been given to the organization’s production costs than to the customers’ price concerns.