Tesla’s recent breakout market performance is proving some of its skeptics wrong. For example, the company offers solar panels, and developed the Tesla Roadster, which was the world’s first fully electric sports car. Initially, Tesla used differentiation focus as its generic strategy for competitive advantage. CEO Elon Musk nevertheless predicted the energy business will one day rival its car division in scale. The company aims to begin producing its cars in a new factory in the country. Its cars are outstanding in terms of utility and luxury both. However, Tesla’s bottom line is all about electric vehicles, and the temporary halt of activity at Tesla’s Fremont factory due to local health orders didn’t put much of a dent in vehicle production and delivery. So let’s take a closer look at Tesla. DeepScale appears to be mostly what people call ‘acqui-hire,’ and the people who join Tesla probably got a bunch of shares. The company is headquartered in Palo Alto, California. After the company has established robust production of all available models, Tesla will begin developing new models that should be even more affordable. This intensive strategy helps grow the company through new business creation. The segment of choice was the lower volume, the price-insensitive performance-car … The higher CO 2 content of coal compared to natural gas is offset by the negligible CO 2 content of hydro, nuclear, geothermal, wind, solar, etc. A. [Full disclosure: I’m long TSLA… for obvious reasons.] Tesla focuses most of its efforts on market penetration and product development to grow its automotive and energy solutions businesses. Another acquisition in 2016 was Germany’s Grohmann Engineering, which develops automated manufacturing systems for batteries and fuel-cells. Tesla Business Strategy. The two models of EVs that it makes are Model S and Model X. The generic strategy of Tesla, Inc. requires suitable strategic objectives to ensure competitive advantage. The company’s Research & Development expenses grew from US$0.7 billion in 2015 to about US$1.5 billion in 2018. The company’s R&D revenues focus to enhance battery quality and range for electronic vehicles. However, the electric carmaker looked at entering the Indian market in 2017 but plans were pushed forward. With Tesla sales in China up to more than 175% on last year, it looks as if Musk is in a good position to shore up the company’s status in the much-sought-after market of China. New evidence in the generic strategy and business performance debate: A research note. The previous notable acquisition by Tesla was on SolarCity in 2016. Tesla is actively demonstrating what relevant differentiation means in a category that has become increasingly commoditized. Once it is more established and widely known as a successful idea, it would venture into a more competitive market of lower-level priced models. The factory is expected to crank out roughly 150,000 models per year. Tesla Roadster was designed to beat a gasoline sports car like a Porsche or Ferrari. Tesla had a successful year in 2019 with a significant increase in production and several new product launches. This strategy involves entering new markets to generate more sales and grow the global business. Their focus was on a very small demographic of wealthy, environmentally conscious people, who would want a stylish car for short distance travel, The reason behind this strategy can be broken down to the following reasons; Forward vision, production capacity limitations, and an undeveloped charging network. This intensive strategy enables business growth by increasing sales revenues in current markets. Tesla started out as a concept with a vision, having the best alternate fueled car that can be used practically. The company’s domestic market has renewed efforts to expand internationally, aiming to tap rising transnational demand for electric vehicles (EVs). China is the largest automobile market on the planet, despite growing fears of a slow-down in the industry. All Rights Reserved. To achieve that, the company is committed to invest heavily in its production capacity and model line-up, most recently with the introduction of Model 3. Tesla started 2017 with about 5,000 superchargers around the world which spiked to 7,000 by September the same year. Why Tesla Follows a Product Differentiation Strategy and Aldi one of Cost Leadership-And not the Other Way Around! 46). Such an evolution is a reflection of the company’s increasing popularity and improving profitability, along with the business strengths identified in the SWOT analysis of Tesla Inc. Strategic adjustments, over time, ensure the corporation’s resilience in the face of technological advancement and changing customer preferences. Tesla’s strategy were based on product line, technology and product development strategy, vehicle design and engineering, manufacturing strategy, distribution strategy: a company owned and operated network of retail stores and service centers and marketing strategy. Your e-mail address will not be published. But somehow, the lockdown and global economic backlash have pushed Tesla’s plan for the future. The exact power production mixture varies from one part of the country to another and is changing over time, so natural gas is … Porter’s (1980) generic strategies as determinants of strategic group membership and organizational performance. andwas expected to close in the second quarter of 2019. That application could give Tesla a boost in an increasingly competitive electric vehicle market. The differentiation generic strategy enables market development by creating unique products that attract customers when the company enters new markets. With a base MSRP of $35,000, the Model 3 competes with other cars in the mid-size sedan market, meaning Tesla is attempting to provide an appeal to the car buying public at large (Muoio, 2014). Tesla’s business strategy is clearly differentiation. It has been selling premium differentiated cars so far, but has clearly define its final goal which is to reach the low-end market. Recently, Tesla has confirmed several acquisitions worth US$96 million in a nine-month period. Your data will be safe!Your e-mail address will not be published. Product development is Tesla Inc.’s secondary intensive growth strategy. Tesla started out as a concept with a vision, having the best alternate fueled car that can be used practically. The differentiation strategy is defined as a strategy where the company seeks to compete on the basis of having a unique brand, product or product attributes. In applying the differentiation focus strategy, the company emphasized the uniqueness of its products, but also focused mainly on early adopters in the high-end market for electric vehicles. Tesla Model Y- The unveiling of Model Y took place in March 2019. Tesla’s generic strategy (Porter’s model) enables the company to maintain competitive advantage, and attract early adopters in the global automotive market. Earlier reports suggest that Tesla acquired Hibar Systems, a small Canadian engineering company specializing in battery manufacturing and DeepScale, an Artificial Intelligence (AI) start-up. Distribution strategy in the marketing strategy of Tesla : Tesla mostly uses online sales model coupled with company-owned stores to sell its cars and doesn’t use the conventional dealer network. Tesla's marketing strategy on social media. Tesla doesn’t adopt the approach of franchise dealerships, unlike most manufacturers. The high operational costs associated with the product to consumer process lead to low profit margins. Underlying the Tesla cars is another technology platform that it is commercializing: the battery. Save my name, email, and website in this browser for the next time I comment. Parnell, J. Intensive growth strategies: A closer examination. Tesla targets European and Asian markets, to diversify its revenue streams. Tesla, Inc. uses market development as a tertiary intensive growth strategy. Competitive Advantage Through Information-Intensive Strategies. Tesla’s generic competitive strategy is broad differentiation. Direct Sales. However, once its built from scratch car … For example, Tesla Inc.’s products are competitive because they integrate advanced environmentally friendly technology, considering that the vast majority of automobiles today use internal combustion engines. This generic strategy builds competitive advantage based on the development of products that differentiate the company from other firms in the industry. Tanwar, R. (2013). Beyond the flagship Model S sedan and the falcon-winged door Model X sports utility vehicle, Tesla offers a smaller, simpler and more affordable mid-sized sedan, Model 3, which the company expects will truly propel electric vehicles into the mainstream. Founded in 2003, Tesla has broken new barriers in developing high-performance automobiles that the world’s best and highest-selling pure electric vehicles with long-range and absolutely no tailpipe emissions. Tesla is focusing on differentiation strategy and developing their brand awareness for customers. Tesla’s mission is to accelerate the world’s transition to sustainable energy. Tesla CEO Elon Musk had announced a two-year plan for the company. 15  … The ‘Future Energy Reliability Lab’ was planned at a smaller 8,500 square feet space with test chambers, a workshop and solar energy product testing equipments. In using this generic competitive strategy, the company broadly attracts all potential customers, who are now increasingly interested in environmentally friendly products. Glazer, R. (1999). Tesla, Inc. (formerly Tesla Motors, Inc.) applies its generic strategy to achieve competitive advantage against other firms in the global automotive industry. Tesla Inc Marketing Strategy should focus on identifying unique selling propositions (USPs). The company says this dry electrode technology, which can be applied to batteries of varying chemistries, boosts performance and is more cost-effective than the more commonly used wet electrode technology. For GDPR compliance, we do not use personally identifiable information to serve ads in the EU and the EEA. T esla s aw i ts g reatest t otal r evenue i ncrease i n He had remarkable achievements in Radio technology and electrical engineering of Serbian descent. Branding is key to successful customer loyalty. Everything has to … Based on the market development intensive strategy, a strategic objective is to grow Tesla Inc.’s multinational business by establishing alliances with other companies that make it easier to enter new markets. Tesla’s broad differentiation strategy is a long term play, with a focus on electric automobile automation, battery technology, and environmentally friendly products such as solar roof tiles. Product Development (Secondary Strategy). Tesla has compounded major bet upon major bet by having a multi-level strategy that targets components, products and systems. … Differentiation strategy is one of the most important marketing strategy in today’s business environment.With so many brands and so many varieties of products and so much advertising noise, it becomes very difficult but ultimately very necessary to differentiate your brand from competition. Is The UAE Tech Market Ready to Conquer Digital Age? Merchant, H. (2014). A strategic objective based on this intensive strategy is to grow the company’s sales revenues through aggressive marketing. The vehicle testing facility was to take a bulk space of 165,500 square feet with a crash track, a crash sledge, test chamber, vehicle lifts and labs. Tesla also planned to shift production of its solar roof to its new Gigafactory 2 plant in Buffalo, New York, during the fourth quarter of 2017, which will help the company increase installations significantly in 2018. After gaining brand popularity, Tesla switched to broad differentiation as its competitive strategy. In 2013, the firm built sleek premium Model S and sports car (Tesla Roadster) based on its pioneering technology to target early adopters in the affluent market (Stringham et al. These early adopters are affluent customers who have a high tendency to purchase newly introduced products. The company ended up focusing on the Model 3 ramp-up and bringing Model Y to production. This article may not be reproduced, distributed, or mirrored without written permission from Panmore Institute and its author/s. Porter’s generic competitive strategies. However, this intensive growth strategy currently has insignificant effects on the company’s financial performance. The generic strategy used by Tesla is that of differentiation. These early adopters are affluent customers who have a high tendency to purchase newly introduced products. It is also the safest, highest-rated cars on the road in the world. Tesla constructed a factory in Germany. Reactions to Tesla’s ‘Insane Mode’ However, Tesla’s differentiation from its competitors is twofold; style and price set the Roadster aside from other EVs, and that they are electric sets them apart from fuel-guzzling sports cars. It's differentiating itself from the competition by incorporating public relation strategy, the brand name Tesla only propagates by mouth talk, internet and presentations from Elon Musk. Tesla was named after Nikola Tesla, who was a very successful inventor and scientist of his time. Constructing a mega factory in Shanghai, China was planned in 2017. To resonate with your customer, you have to speak their language. Very few brands sell fully electric vehicles and Tesla has further differentiated its brand by adding luxury to its cars. The declining production costs and increasing brand popularity enables the company to broadly target customers in the automobile market. Aside from the generic competitive strategy, a company uses intensive strategies to ensure business growth. Recently, analysts at NVIDIA declared MegatronLM, a huge transformer model, A brief overview of how UAE is preparing its citizen, Throughout the past few years, eWallets have become a go-to. How Have eWallets Changed Online Casinos? Tesla uses the differentiation strategy in its production by concentrating on a highly focused niche market. This intensive strategy supports Tesla’s mission and vision statements, which highlight global leadership in the automotive industry, with energy solutions for the transportation and other sectors. Another reason behind the purchase is Maxwell’s dry electrode technology which is used to make the ultracapacitors. A majority of Tesla’s revenues are generated in the United States (up to 60% in 2016, according to Thomson Reuters). See our Privacy Policy page to find out more about cookies or to switch them off. However, let us look at the places where Tesla has made acquisitions and mergers in the last few years. Tesla survived the exponential crisis unscratched that shook the whole world. News Summary: Guavus-IQ analytics on AWS are designed to allow, Baylor University is inviting application for the position of McCollum, AI can boost the customer experience, but there is opportunity. In applying the differentiation focus strategy, the company emphasized the uniqueness of its products, but also focused mainly on early adopters in the high-end market for electric vehicles. One of many reasons for that was the introduction of Tesla`s first electric vehicle in 2009 with a strong differentiation strategy. Notably, Tesla didn’t disclose the company names that it has acquired. Tesla is already diversifying its businesses so that it doesn’t sink with the automotive industry when this happens. Indian customers reportedly made bookings for the Tesla Model 3 when it was announced. Their focus was on a very small demographic of wealthy, environmentally conscious people, who would want a stylish car for short distance travel, The reason behind this strategy can be broken down to the following reasons; Forward vision, production capacity limitations, and an undeveloped charging network. Diversification. (1997). Tesla is starting from the top of the car industry as green technologies remain too expensive today for the low income consumer market. It would make your average CEO nervous, but Musk isn't your average CEO. Besides, with the launch of the Gigafactory and the acquisition of SolarCity, Tesla now offers a full suite of energy products that incorporates solar, storage, and grid services. Tesla is offering the Model 3 in two versions, differentiated by the range, and this strategy could prove crucial to boosting overall margins. Tesla’s core competency on electric power storage has helped its automobile as well as its battery pack thereby making the diversification strategy as a source of competitive advantage. The corresponding intensive strategies support organizational growth based on increasing sales revenues from current markets where Tesla, Inc. operates. Ormanidhi, O., & Stringa, O. New Tesla Battery- Elon Musk has announced that Tesla has a new battery coming up next year, that will last a million miles. The survival in the increasingly competitive market requires Tesla Inc to set the clear differentiation basis that could provide an edge against rivals. Competitive Strategy Analysis: Broad differentiation Tesla Motors Inc. has a very unique business strategy, it follows a focused differentiation strategy. Why only 4? It didn’t choose the small car segment. On top of this, China announced back in August that it would exempt Tesla Model 3, Model S and Model X cars from its proposed auto tariffs, which will resume in December if a trade deal is not met between the U.S. and China. The high operational costs associated with the product to consumer process lead to low profit margins. Until 2019, China required foreign carmakers to link up with domestic ones to manufacture in the country, making Tesla the first company to take advantage of this, while also avoiding a 25% import duty. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on Tesla. 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Tesla CEO Elon Musk in August 2020 announced that the company will focus on new product development and product scaling and not Formula E racing. It's differentiating itself from the competition by incorporating public relation strategy, the brand name Tesla only propagates by mouth talk, internet and presentations from Elon Musk. But since then, the company has delayed all-electric trucks despite having taken thousands of reservations with deposits worth between US$5,000 and US$20,000 each. 1. In that sense, Tesla has sought to have the best cars, to build its brand from the ground up as a premium brand, and employ a skimming strategy by targeting the high end buyer who will pay a premium for the best (Musk, 2006). Tesla, Inc.’s Mission Statement & Vision Statement (An Analysis), Tesla Inc.’s Organizational Structure & Its Characteristics (Analysis), Tesla Inc. 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SWOT Analysis & Recommendations, Tesla, Inc.’s Corporate Social Responsibility & Citizenship, Stakeholders, Tesla, Inc.’s Operations Management: 10 Decisions, Productivity, Toyota External Analysis: Opportunities & Threats, Ford Motor Company: Generic & Intensive Growth Strategies, Ford Motor Company’s Mission Statement & Vision Statement: An Analysis, Toyota’s Mission Statement & Vision Statement: An Analysis, General Motors Company SWOT Analysis & Recommendations, Toyota’s Generic Strategy & Intensive Growth Strategies, General Motors’ Generic Strategy & Intensive Growth Strategies, General Motors’ Organizational Structure for Flexibility in Regional Markets, Toyota’s Five Forces Analysis (Porter’s Model), Burger King’s Generic & Intensive Growth Strategies, Musk, E. (2016). Business Strategy Tesla’s business strategy is clearly differentiation. The company plans to scale the production of affordable models such as Model 3 and Model Y. The company owned distribution is fraught with several challenges. The Tesla Roadster still wins by a hefty margin if you assume the average CO 2 per joule of US power production. Tesla’s new Shanghai Gigafactory was constructed in just 168 days. Also other data will not be shared with third person. Tesla Inc. Report contains a full analysis of Tesla segmentation, targeting and positioning and Tesla marketing strategy in general. Essentially, betting on Tesla Motors involves betting on a … Differentiation Strategy Definition: Differentiation strategy, as the name suggests, is the strategy that aims to distinguish a product or service, from other similar products, offered by the competitors in the market.It entails development of a product or service, that is unique for the customers, in terms of product design, features, brand image, quality, or customer service. Corsten, H., & Will, T. (1994). For example, one of the company’s strategic objectives is to increase investment in research and development (R&D) to develop new products that satisfy market demand for enhanced renewable energy solutions, such as batteries for various purposes. However, now that the company is already popular and production costs are declining, Tesla’s generic competitive strategy has shifted to broad differentiation. However, once its built from scratch car was released, it has sold 1,00,000 units of its Model… The tried and tested guidelines that state - tweet this much, avoid saying this, include videos, etc. Top 20 B.Tech in Artificial Intelligence Institutes in India, Top 10 Data Science Books You Must Read to Boost Your Career. We use cookies for website functionality and to combat advertising fraud. For example, the firm aims to create new battery products for a variety of non-automotive applications. Everything has to … It didn't need to do more. Tesla saw a strong price soaring by close to 35% in 2019 driven by the growing revenues and better cost management. The idea that Tesla is a technology company gained credibility in 2013, when its stock price shot up by more than 300% within a single year. At present, the company sells in only a handful of countries, but further international expansion is expected. Currently, the automaker is working on introducing its new ‘Plaid tri-motor powertrain,’ as the company might be planning to release both the performance improvements and the new interior at the same time. Also other data will not be shared with third person. In this business analysis case of Tesla, the generic strategy reflects the company’s focus on using advanced technologies in its electric vehicles and related products, as a way of competing against General Motors Company, Toyota Motor Corporation, Honda Motor Company, Nissan Motor Company, Bavarian Motor Works (BMW), and Volkswagen, among other automobile manufacturers. 1. Miller, D. (1992). With government incentives and investments from a lot of interested parties, Tesla hung about the first 5 years. This is because Tesla’s primary goal is to help accelerate the transition from a mine-and-burn hydrocarbon economy towards a solar-electric one. The US$2.6 billion deal unites two of Elon Musk’s companies, enabling the billionaires to sell both electric cars and solar roofs to his customers under one corporate brand. The company applies this strategy by developing new products with advanced technologies for minimal environmental impact. Tesla launched with a differentiation strategy. In relation, a strategic objective for this intensive growth strategy is to maintain extensive investments in research and development (R&D). Its focus on uniqueness and quality actually even broke Consumer Reports rating system. Tesla’s international-level strategy is the transnational strategy. Configurations of governance structure, generic strategy, and firm size. Tesla Model S and X refresh- It was in the summer of 2018 that Tesla announced the refresh of Model S and Model X interior. With government incentives and investments from a lot of interested parties, Tesla hung about the first 5 years. Tesla has compounded major bet upon major bet by having a multi-level strategy that targets components, products and systems. Tesla obtained the energy storage company in an all-stock deal valued at US$218 million. The company can apply the differentiation generic competitive strategy to increase the likelihood of success in using this intensive growth strategy. The first one is an electric sedan while the second is a sports utility vehicle. All Tesla needed was to make a name for their brand to get its concept widely accepted. Other than these two companies, another acquisition that made headlines in news was Maxwell Technologies. A strategic objective linked to diversification is to increase Tesla’s R&D investment to identify new business opportunities. This intensive growth strategy relates with Tesla’s generic strategy by developing competitive advantage based on increased market share. Tesla has always focused on differentiating its products with unique features, unprecedented complexity (that translates seamlessly to elegance and utility for the end-user), and timing of product introduction (maintaining a first-mover appearance). Tesla’s Powerwall is a rechargeable lithium-ion battery that provides homes with the storage of solar-captured energy for use at night or during power outages. 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