The organization that has been selected to conduct the study is Tesla Inc. The company is headed by the dynamic leader Elon Musk as the CEO of the company (Rains, 2018). The focus of the company as pointed out in Assignment 1 is to accelerate and power the world by the use of eco-friendly and sustainable energy. Over the years of operation the company has faced a number of ups and downs however; with strategic planning and organisation of the policies according to the business environments the company has successfully established itself in the market. With some of the ground breaking achievements in innovation Tesla Inc is making some ground breaking development in the mobility and energy industry (Tesla.com, 2018).
The company has been focusing on the issue of increasing price of oil and thus developing electric cars and marketing it in the mainstream market. This has enabled the company to gather the attention of the target market on an international scale (Tesla.com, 2018). The main competition of the company is are Ford motor company and Honda Motors Company. From assignment it can be summarized that the factors that add to the success of the company are the innovation in technology, correct timing and having dedicated and experienced team. Tesla has two customers segments: environmentalists and people who are looking for investing in technology that will help them save money in the future, therefore the income group is in between medium and upper medium.
This report will focus on three parts: Sustainable Competitive Advantage strategies that are taken by the company, analysis of the resources and capabilities of the company and the marketing plan that the company employees in order to reach out and gather the attention of the target market.
PART 1: Sustainable Competitive Advantage
Schilke (2014), state that competitive advantage is the strategy that an organisation employees in order to gain an edge over the other players in the market. The management of the company analyses the micro and macro environmental factors in order to determine the strategies which will make the company stand out from the rest of the competition in the market (Saeidi, Sofian, Saeidi, Saeidi & Saaeidi, 2015). Sustainable competitive advantage is the long term strategies that will help the company maintain the position at the top of the market (Liu, 2013).
The first competitive advantage that the company has over the other players in the market is that the company focuses in sustainable growth and development and in doing so the strategy is to concentrate on developing products and services which serve as a solution to some of the major environmental issues that the world is facing in today’s time (Sperling, 2018). The company is a forerunner in the renewable energy department. This strategy adds to the value and supports the mission to accelerate and power the world by the use of eco-friendly and sustainable energy. This is in sync with target market of the company as well.
It has been established in assignment 1 that one of the target market of the company are environmentalists, thus it is appropriate for the company to invest in technology and research for sustainable future. The strategy of sustainability of Tesla Inc goes beyond automobile, rather the recently release corporate strategy of the company indicate towards additional business ventures (Tesla.com, 2018). The CEO has announced to come up with a pickup truck, battery-SUV, an electric semi-truck and commercial battery bus. Furthermore the focus will also be on sharing of vehicles and will also merge with solar panel maker SolarCity in order to broaden the sustainability horizon (Eisenstein, 2016).
Tesla is an organisation that is focused on the big picture with the visionary leadership of Elon Musk the company concentrates on long term objectives as that is what is required to ensure that the company is true to its value of sustainability. There are two main environmental factors that the company is focusing the strategies upon, these are: the change to a carbon neutral economy and the urgent need for a new sustainable business model for the transportation industry based on zero emissions (Tesla.com, 2018).
The second competitive strategy of the company is to invest in research and development and to come up with disruptive innovations. Innovation is the process of developing an idea, an innovation is called disruptive when the idea is one of a kind in the market and challenges the similar services already existing (Christensen, Raynor & McDonald, 2015). With the help of disruptive innovations the company is not only capturing the attention of the target market but is also attracting the media and the press (Nagy, Schuessler & Dubinsky, 2016).
The breakthrough innovations that are incorporated by Tesla are a threat to some of the most established organisations in the industry (Sperling, 2018). With their mainstream electric car the company has gathered a lot of goodwill and reputation among the stakeholders (Sperling, 2018). Following are some of the disruptive strategies that the company has been incorporating the business:
Thus, it can be said that the company has its competitive advantage aligned with the target market that has been indicated as well as increase the value of the organisation among the stakeholders.
With the help of Porter’s generic framework the strategies that the company has undertaken can be analyzed. Michel porter has explained three strategies with which a company can ensure competitive advantage (Tansey, Spillane & Meng, 2014). The strategies that Porter has described are: cost leadership, differentiation and focus; and by examining the two competitive advantages of Tesla it can be said that the company has undertaken the strategy of differentiation focus (Tanwar, 2013).
The strategies of Tesla are focused on a particular market and the company has developed the products based on the understanding of the dynamics of that market (Tanwar, 2013). By recognizing the needs and trends among the customers Tesla has successfully developed a technologically advanced products and services for the market. Furthermore, the company has also successfully aligned the objective of the business with the requirements of the target market.
Innovations of Tesla
Innovation plays an important role in the competitive advantage of the company as the Electric car technology innovations and the energy technologies developed by the company are the ones which set the products and the services of the company aside. The establishment of the company was on the basis of innovating on the idea of making electric car not only a concept but a fun and mainstream vehicle (Urbancova, 2013). Being energy efficient is one of the major objectives of the company and in order to do so a large part of investment is focused on innovation as most of the companies are focusing on profitability by providing the customers with what they want.
However, Tesla is a company that makes the customer realize the future of transportation and the responsibility the company has towards the environment and society (Hardman, Shiu & Steinberger-Wilckens, 2015). The company does not have a large number car models rather they focus on the improving and developing the models that are existing. There are four cars models: MODEL S, MODEL X, MODEL 3 and ROADSTER (Tesla.com, 2018).
Apart from the vehicles being eco-friendly and running on electricity, there are also other advance technologies used to serve a number of purposes. One of the major aspects that a customer looks forward to while buying an automobile is security. Model S and Model X of Tesla are claimed by the company to be the safest car; Model S is a sedan whereas Model X is an SUV and is the safest car in the category. Model S has received the highest safety rating of any car ever tested. Side collision warning and emergency braking are some of the innovation that is installed in the security system. Front and side impact protection along with lowest rollover risks are some of the added advantage of the car.
Safety innovation is taken to another level with the Model 3 car where the body is built combination of aluminum and steel, for maximum strength. The glass roof of the car has been tested positive with a mass which is four times its own. Furthermore all the above stated features are also present in this model. The Model 3 is marketed by the company as a low-priced, high-volume electric car.
Tesla Roadster is said to be the quickest car in the world with the record of 0-60 mph in 1.9 sec.
|
Base Specs |
|
|
Acceleration 0-60 mph |
1.9 sec |
|
Acceleration 0-100 mph |
4.2 sec |
|
Acceleration 1/4 mile |
8.8 sec |
|
Top Speed |
Over 250 mph |
|
Wheel Torque |
10,000 Nm |
|
Mile Range |
620 Miles |
|
Seating |
4 |
|
Drive |
All-Wheel Drive |
|
Base Price |
$200,000 |
|
Base Reservation |
$50,000 |
|
Founders Series Price |
$250,000 |
|
Founders Series Reservation (1,000 reservations available) |
$250,000 |
Roadster is marketed by the company as an all-electric supercar; the company is segmented in the sport car genre ensuring a breakthrough innovation by its all around performance efficiency. The car maximizes the potential of aerodynamic engineering—with record-setting performance and efficiency the car has a highway range of 620 miles which is again a record for any electric car. According to the CEO of the company the idea of building the new roadster is to leave the idea of gasoline cars behind. The car is packed with features which are technological innovations like the battery pack of 200 kWh and 3 motors combination. The company unveiled the car on November 2017 and is set to be available in the market in 2020 (Tesla.com/roadster, 2018).
Tesla Semi is claimed by the company to be the safest and the most comfortable truck. The truck features four independent motors which provide maximum power and acceleration. From the design of the vehicle to the fact that it has the lowest energy cost, Semi is another ground breaking innovation in the pickup truck segment. This would be one of a kind vehicle that runs on battery (Nykvist & Nilsson, 2015).
|
Base Specs |
|
|
Acceleration 0-60 mph with 80k lb |
20 sec |
|
Speed up a 5% Grade |
60 mph |
|
Mile Range |
300 or 500 miles |
|
Powertrain |
4 Independent Motors on Rear Axles |
|
Energy Consumption |
Less than 2 kWh per mile |
|
Fuel Savings |
$200,000+ |
|
Expected Base Price (300 mile range) |
$150,000 |
|
Expected Base Price (500 mile range) |
$180,000 |
|
Base Reservation |
$20,000 |
|
Expected Founders Series Price |
$20 0,000 |
|
Founders Series Reservation |
$200,000 |
Tesla with the technological innovation in the electric car category has made some of the prominent automobile industry change their perspective and their competitive advantage strategy. Tesla is focusing on pioneering in the technology of energy efficiency in automobiles, the company has also improved and developed the solar conservation technology in household (Meihami & Meihami, 2014). Tesla is a company that allows the employees to have a creative space in order to come up with ideas and innovations which make the company stand out from the rest. The leaders of the organisation agree that the employees are the back bone of the success of the company.
Offensive and defensive strategy
Competitive advantage strategy can be divided in to two segments offensive and defensive. The strategy is said to be offensive when it is directly targeted to the competitors in the market (Harrison & John, 2013). On the other hand, Morden (2016), defensive strategy is when the company counters an offensive strategy of a competitor.
One offensive strategy that the company can incorporate in the strategies is focusing on the Asian market which is one of the major aspects of the global market for Honda Motors as well as ford. Thought Tesla has its operation and distribution to a number of countries however, there is a significant scope in countries like India and Singapore etc. The competitors of Tesla have a wider reach to the target market and the company needs to broaden the spectrum. As the company is coming up with a new vehicle this can be the right opportunity for the company to set foot in these countries. Furthermore, this is an opportunity for the company to grow and reach out to a greater target market (Stringham, Miller & Clark, 2015).
The defensive strategy that the company can take is in the form of promotion, Tesla is a company that promotes the electric car and the features that the cars have in terms of innovation and technological aspects. However, the company should also focus on the fact that they are serving the environment and is working towards developing a sustainable future (Hennig-Thurau & Hansen, 2013).
The company can come up with a campaign focusing on the mission of the organisation and reach out to the customers and ask them to be a part of the revolutionary approach in the automobile as well as energy industry (Leonidou, Leonidou, Fotiadis & Zeriti, 2013). This will give the company an advantage as the competitors of Tesla focus their promotional strategy on the products and product development, their message for their customers are regarding the features and the innovation that they have included in the product. However, this is where Tesla can come up with a defensive strategy of sending across the customers their mission for the company.
PART 2: Resource analysis/allocation
Resources Allocation for the strategies
As discussed above the internal environment factors of the organisation can be managed and controlled by the organisation (Kuratko, Hornsby & Covin, 2014). Some of the aspects of the internal environment are: the organisation culture, the structure of the company, the management strategies etc. All these factors make up for the resource and capabilities of the company.
A major part of the strategic planning of a company is allocating the resource efficiently (Chen et al., 2014). Tesla is a company that believes in sustainable development and thus responsible use of resources is also one of the main objectives of the company (Tesla.com, 2018). Resources can be divided in two sections: tangible resources, these are the resources that can be physically quantified and measured for example: office building, stationery items, raw materials etc. On the other hand, the resource which cannot be quantified or measured in terms of units is called intangible assets copyrights, franchises, goodwill etc.
The resources which are required by the management of Tesla to fulfill the strategies that have been stated above are:
Offensive strategy:
For a company to expand the business to a new market requires a number of resource and capabilities. Not only that there are also several factors that have to be kept in mind while devising a plan for expansion like: firstly choosing the country, if Tesla wants to set up distribution channels in India then the company will need to understand the dynamics of the Indian automobile market along with other external factors like the political condition of the country, the economic prospect of the country, the societal condition as well as the technological advancement and acceptance etc (Verbeke, 2013). According to Hutzschenreuter and Horstkotte (2013), another important decision that the company has to make is find the mode of entry in the market. These are all a part of the strategic management of the company and in order to implement these strategies the company will need to effectively allocate the resources.
Defensive strategy:
The strategy that has been derived is based on the marketing mix, specifically promotion. The company has to arrive at a message which will be an identity for the brand. Tesla is an organisation that has built its unique identity among the stakeholders and the industry and the idea is to focus on the uniqueness and set the company apart from others with the help of promotional strategies.
Some of the common resources which are required for both the strategies are:
Most Critical Resources
The two most important resources that the company requires to fulfill the strategies are: the financial resource and the human resource. Without these two resources any organisation cannot perform their function. Financial back up of the company in terms of its revenue gives an idea to the management the amount they can spend on a strategy. At the beginning of a financial year budget allocation takes place this is based on the revenue of the past year. Any organisation cannot operate without strong financial support. The money is required to buy or rent the office and showroom premises, pay the remuneration of the employees who are involved in ensuring that the strategy is implemented successfully. Pay all the possible bills including the electricity and communication (Purce, 2014).
For the promotion strategy the company has to invest in availing the services of the third party organisation that will assist the marketing team with the promotional tools like the advertisement and the message of the promotion etc. It is important for the company to ensure that the message of promotion is clear to the target market as it would help in establishing the unique principle of the company and the motivation that helps the management and the organisation operate.
Human resource is required to run all the functions of the business and thus it is important for the strategies as well. With all the other resources that are enlisted above it is not possible to run a business without the support of the human resource. Tesla operates on the innovation model and in order to achieve the objectives of providing the people with sustainability mobility options the company has to bank on the HR for research and development as well as the other functions. In order to achieve the competitive advantage over the stiff competition in the market Tesla uses the financial resource to invest in latest technologies and the materials that are required by the employees to assist in innovation (Sterner & Coria, 2013).
The innovations that the company has developed over the years in the electric car technology are largely dependent on these resources. When the company was not making enough revenue in 2010, the organisation was made public and the reported sale in that financial year was reported to be $204 million. Based on these figures the company invested in the research team and the Human resource in order to maintain a differentiation focus strategy that has been discussed above (Sterner & Coria, 2013).
Assets are an economic resource which has a positive impact on the company. Assets are reflected on the final accounts of the company in the balance sheet. Marketing assets on the other hand are promotional factors or items that are used by the company in order to reach out to the target market (Pucci, Simoni & Zanni, 2015).
Customer based asset: The marketing assets that the company requires in attaining the sustainable competitive advantage are: Promotional video, this video can be used by the company as a television advertisement as well as a part of the social media campaign. The focus will be on the message that the company wants to share across the international target market.
The defensive strategy that has been developed previously indicates the objective of the promotion strategy to establish the mission of the company as the brand image for Tesla. This will be in contrast with the other competitors in the market. As the competitors of Tesla focus on the features of the products that they are selling, however the strategy of Tesla is focused on informing the customers what the company stands for, what the principles and values are and the mission and vision of the organisation. Therefore, the video or the series of videos will help in enforcing the idea in the minds of the people and thus help in maintaining a sustainable competitive advantage.
Alliance based asset: Another marketing asset that the company has is the official website of the company. The Website of Tesla is a source of authentic secondary information about the company. Tesla has a very compact and an informative yet graphical website which provides all the necessary information about the cars and the energy services the company provides. The specifications, unique characteristics, the variations etc are all mentioned in the website. Furthermore, the website also gives out other relevant information regarding the company and its leaders there are blog posts from the leaders of Tesla which helps the customer understanding the principles of the company as well as determine the uniqueness of the values which are further reflected on the products and services offered by Tesla.
PART 3: Strategic marketing plan Success factor of Tesla
Tesla is an organisation that has been focused on the mission and objective that was initially established. The company has gone through ups and downs throughout the years of operations which are much less than many of its direct competitors like Ford motors, Honda Motors etc. During the initial time of establishment the company has gone through loss as they could not align the products with the requirement of the customers and the claims. However it was the introduction of the Model S car in the automobile portfolio that contributed to the popularity of the company. The company earned revenue of $14.7 million in 2008, which soared up to $111.9 million in the next financial year; the rise in the revenue was 661% (Statista.com, 2018).
Some of the features that set the original Model S version from the other vehicles in the market are as follows:
The batter pack of the car was excellent and way ahead of what any other company was offering in the electric car segment. This was revolutionary and set a new benchmark for the other companies who were targeting this segment. The EPA-rated range of the original Tesla Model S P85 was 426 km. this aspect of the original version was further upgraded in 2013 where 120 kW DC fast-charging was enable which was initially limited to 90 kW (Tesla.com, 2018)
The original version of the car was introduced with the instant torque which enabled the driver to accelerate from 0 to 60 mph in approx 4 seconds. Apart from this the overall experience with the car used by a number of users has been positive.
Therefore it can be said that the investment in research and development and the focus on innovation is the main reason of success of the company. The focus of Tesla on providing an energy efficient mobility solution to the global market is the motivation for the management as well as the employees to concentrate the resources on innovation and development of the idea which the company was established. Since the success of Model S the company had to allocate resources in mass production due to the huge demand for the car (Rains, 2018). The company sold over 100,000 units of the flagship all-electric car Model S sedans and Model X SUV in the last financial year resulting in the revenue of $11.76 billion (Statista.com, 2018). As discussed above the company has come a long way in achieving the current status where the focus of the company is to develop the products and to reach out to newer markets.
Future challenges and solutions
Mass production of the Model 3 car is one of the major challenges that the company has been facing, this has also made the investors skeptical. With the Roadster and the Tesla Semi in the pipeline the company is in pressure to roll out the preordered Model 3 vehicles (Debord, 2018). This issue has given rise to a number of unsatisfied customers as the company is failing to fill the orders (Rains, 2018).
There are certain expectations that a consumer has while booking a product or service and if that is not even delivered then chances are that the customers will not return for the second time (Debord, 2018). The manufacturing unit of the company has not produced car for the mass, with the Model S and Model X the company delivered the expected, but then the leaders of the organisation claimed that Model 3 is designed for the mass yet the production and manufacturing units of the company are not capable in fulfilling the claims (Matousek, 2018).
The solution to this issue can be in investing on the manufacturing process this would involve the company in ensuring that innovation is not only used for product development rather it is also used for the process of business as well. All the other competitors of the company have large scale production units with technologically advanced systems to manufacture vehicles in least amount of time. Tesla has to step up the manufacturing game in order to fulfill the expectation of the customers.
The company has been earning revenue in leaps and bounces however; the objective of the company is least on the financial security of the company (Matousek, 2018). This can pose as a challenge in the future based on the plans that the company has and the claims that the company has established among the stakeholders. In order to face this challenge the company has to establish profit objectives and accordingly work on the strategy of sales. The challenge that has been discussed above are aligned with this, the company has to improve the production in order to accelerate the sales process which further more will help in earning revenue (Matousek, 2018).
Conclusion
It can be concluded form the above discussion that Tesla Inc is a company that undertakes the strategy of differentiation focus in order to device competitive strategy. The target market of the company is primarily environmentalist and in order to deliver the customers with products which are highly efficient as well as sustainable the company employee significant amount of financial resources in the research and development. The company runs on the innovation business model and in order to gain competitive advantage the company has developed fully functional and ground breaking technology in the electric-car segment.
Tesla is an organisation that has been significantly growing in the market and with its disruptive innovations is capturing new market as well. The challenge for the company in the future is to fulfill the requirement of the orders that has been pre-booked as well as increase the revenue, the two challenges are interconnected. The solution to this problem is investment in innovation of business process by developing efficient manufacturing units in order to compete with the other players in the market.
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