It also collaborated with Panasonic to establish its Giga factory plant to develop battery cells for its electric cars and homes. Factors of Tesla's success in the foreign market include the existence of weak . Tesla also sells solar panels and full solar roofing, which is a roof made up of solar panels that still looks like a roof. We will examine how these strategies, based on Chapter 5 of the CASE: Tesla Motors (Case . The business rationale for its current broad differentiation strategy is that the initial differentiation focus allowed Tesla to develop a unique product electric sports car (Model S) for the high-end market (Stringham et al. On Tesla, it seems differentiation with focus. In other words, Tesla's competitive strategy is a broad differentiation to target both segments by targeting premium buyers and low-price buyers in the automobile industry. After gaining brand popularity, Tesla switched to broad differentiation as its competitive strategy. The fact that Tesla manufactures its batteries means that the overall production cost of their products is lower, thus increasing their profit margins. At the risk of sounding immodest, we must point out that we have an elite team of writers. Tesla Diversification a Strategy of Success. Over time, all these ideas play a pivotal role in increasing the companys competitive advantage and ease of penetrating various global markets. Marketing report on Tesla Motors: Marketing audit, segmentation & targeting analysis and analysis of product/brand strategy and positioning. To date, electric cars remain the biggest and most profitable product that the company has in the market. Tesla business strategy can be broadly classified as product differentiation. It is mainly divided into three aspects: market differentiation . In this way, the company established itself as a unique, premium brand. 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 . 6.6 Best-Cost Strategy. Required fields are marked *. "Tesla Differentiation Strategy and Its Distinctions." 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). Customers want a stress-free . Many financial analysts and investors see Tesla as a technology company rather than a car company. . From the manufacturing standpoint, the way we assemble this car is essentially different from any other car, said Gilbert Passin, vice president of manufacturing at Tesla and a 23-year industry veteran.12 Other manufacturing executives pointed out serious flaws. The company is probably the dawn of the greatest revolution in the automotive industry that the world has witnessed since Karl Benz. Teslas unique business model, which includes keeping control over sales and service, is one reason its stock has soared since its initial public offering. Dr. JeFreda R. Brown is a financial consultant, Certified Financial Education Instructor, and researcher who has assisted thousands of clients over a more than two-decade career. Walk-in customers to a Tesla store would see one or two Model S cars plus an exposed version of the cars chassis near the back of the store to show off the battery pack. June 12, 2022. https://studycorgi.com/tesla-motors-inc-s-strategy-and-its-distinctions/. This essay will examine how Tesla has differentiated itself from competitors by exploring their unique product, marketing, and business model strategies. Is it Safe to use our services? Our shift-system also ensures that you get fresh writers each time you send a job. Some questioned whether Tesla couldor shouldafford to provide free charging for the life of their vehicles. B. Straubel, a young engineer who was fascinated with the idea of building electric-powered vehicles, joined the Tesla team as another co-founder. And he thanks customers for it. The company would have acted naively if it had chosen to concentrate on manufacturing electric cars because any little hiccups in the industry would prove to be a hard survival battle for any business. These strategies require significant and intensive effort in two different directions at the same time. This provided some downside protection on a vehicles value should the customer want to resell it. Differentiation. This has also contributed a lot to the high number of sales the company has recorded over the last several years. Quality isnt just an option, it is the only option. A look at the price point of the Model S and the number . Bowman's Strategy Clock is a marketing model concerned with strategic positioning. Compared to their competitors, Tesla comprehends the fact that most of the people that buy electric cars prefer stations that charge faster regardless of their accessibility levels. Deadline range from 6 hours to 30 days. I think that is something where we were able to give back space and create an experience that you just cant get in another premium sports sedan.11. It helps in developing the right marketing strategy for the company. As spokesperson Alexis Georgeson explained: Right now, the stores are our advertising. New York, NY: GRIN Verlag. A broad differentiation strategy sets to build a brand or business that distinguishes itself from the competitors and focuses on a wide range of consumers. Some of the most notable ones are the battery supply chain, its supercharger network, and customer prioritization. 11. The focus of this essay are the strategies used by Tesla: Generic strategy: The generic strategy that Tesla has used is that of differentiation. (2022, November 29). Tesla. We are always waiting to answer all your questions. 45-103. It has created an international network of company-owned showrooms and galleries, mostly in urban centers. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); A dreamer and doer seeking greater understanding of how things work. Displacing the internal combustion engine (ICE) would require significant technology advancements, chan. Its focus on uniqueness and quality actually even broke Consumer Reports rating system. Consumer Reports had given it the highest rating ever (99 out of 100) for overall performance. Tesla has a relatively short history as it was established in the 2000s. And even if it did, they wondered whether it would succeed given that gas prices looked set to remain low for some time and overall sales for electrics and hybrids were basically flat. Our writers are also not the kind to decorate articles with unnecessary filler words. According to investment experts, differentiation can be highly effective in pushing a companys brand beyond their projections because consumers always have a big appetite for quality goods and services. The competitors use pricing and differentiation strategies, restricting Tesla's market penetration and profitability growth. CASE: Tesl. You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site. Tesla builds cars by developing software on unique hardware, much in the way Apple develops the iPhone or Microsoft leverages Intel chips and . The purpose of differentiation is a strategy to distinguish oneself from competitors through technology or services, etc. You also neednt worry about logical flow of thought, sentence structure as well as proper use of phrases. Web. Focus on quality. Tesla taking actions to lower costs and ultimately perhaps total ownership costs are not tantamount to following a cost leadership strategy. To do so, their strategies would have to meet BOTH tests of cost leadership and differentiation and they clearly do not. The company has gained a reputation for creating products with sleek designs that require an effective marketing design. It is still very hard if not near impossible most times to pull-off successfully at the same time differentiation and cost leadership. Technological experts argue that success in a highly diverse market that is driven by the latest innovation requires one to be creative on top of having the willingness to try out new ideas. They could order a car from the store or online, and it would be delivered to their home. He always emphasizes the companys aim isto accelerate the advent of electric cars or sustainable transport. Tesla Differentiation Strategy and Its Distinctions. The number of sales made over the years makes it obvious that Tesla offers a unique alternative to consumers seeking a different experience. Even if Aldi has introduced a greater number of natural, organic, and gluten and antibiotic -free products, the test for differentiation still is: are the buyers willing to pay more for Aldis products because of something distinctive they offer? Similarly, the change in Aldis product line-up does not mean that the company is following a differentiation strategy. The new feature that is, in reality, anything but new is an example of Elon Musk's brilliant four-word innovation strategy to engineer the future: look to the past. The full cycle charge and discharge efficiency of the Tesla Roadster is 86%, which means that for every 100 MJ of electricity used to charge the battery, about 86 MJ reaches the motor. "Tesla Diversification a Strategy of Success." those that seek to create blue oceans pursue differentiation and low cost simultaneously." ~ Blue Ocean Strategy. By late 2015, Tesla had built more than 500 supercharging stationsmost with six to eight chargerswith many more planned. (2016). Tesla's strategy of self-operated 4S stores, in these experience stores, in addition to setting up a platform to display products, also provide . New York, NY: GRIN Verlag. It's been 17 years since Musk published Tesla's original "Master Plan" in which he laid out the company's overarching strategy of starting with high-cost/low-volume cars and moving to low-cost/high-volume cars. Not only did Panasonic bring years of experience with lithium-ion battery technology, it also brought significant financial resources to the table. Market analysis in the marketing strategy of Tesla : The global EV market is predicted to grow at a compound annual growth rate of 21.4% between 2018 & 2026 according to ReportBuyer. The exact power production mixture varies from one part of the country to another and is changing over time, so natural gas is used here as a fixed yardstick. Without giving away too much, I can say that the second model will be a sporty four door family car at roughly half the $89k price point of the Tesla Roadster and the third model will be even more affordable. 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. and empathy. A common rebuttal to electric vehicles as a solution to carbon emissions is that they simply transfer the CO2 emissions to the power plant. This approach will help accelerate the adoption of the Tesla vehicles. "Tesla Diversification a Strategy of Success." Based on that generic strategy, Tesla differentiates itself among the competitors by increasing its research and developing investment every year to develop a highly . By owning the sales channel, Tesla believes it can gain an advantage in the speed of its product development. Tesla uses broad differentiation to compete in its industry. Its other intensive growth strategy is market penetration through aggressive marketing. So, Tesla delivered to the market the first high-performance electric luxury sports car, the Tesla Roadster. 12 June. Tesla Inc. (formerly Tesla Motors, Inc.) maintains its profitability through strategic measures that address the competitive challenges outlined in this Five Forces analysis of the global automotive business. . Tesla has also invested a lot in their charging stations. According to Thompson et al., the generic strategies that can give a company competitive advantages include low-cost provider, best-cost provider, broad differentiation, focused differentiation, and focused low-cost provider (56). New York, NY: GRIN Publishing. Despite a body shape, tires and gearing aimed at high performance rather than peak efficiency, the Tesla Roadster requires 0.4 MJ per kilometer or, stated another way, will travel 2.53 km per mega-joule of electricity. One of the main elements that have put Tesla a step ahead of its competitors is the ability to have unique, quality, and sleek products. As the Model S gained prominence, Tesla unveiled the Model X, a full-size crossover utility vehicle that went into production in fall of 2015. The Model X would seat seven and sport falcon-wing doors, making it easy to enter and exit. Tesla. It does so by following a number of policies that aim to achieve lower costs. Soon after the first vehicles were produced, they had to be recalled for loose hub flange bolts that could cause the car to crash. Without a large inventory of cars or salespeople, Tesla stores were far less expensive than typical dealership. The confusion starts when data that show an attempt to lower costs within Tesla and the total ownership cost, or in the case of Aldi provide a distinctive product mix, are seen as signs of a changing strategy but they are not! The automotive industry is highly unpredictable, thus the reason diversification was the best strategic option for Tesla. He sheepishly tried to argue that if one were to include the cost of gas/petrol, the Model 3 would be competitive. Before it closed, the plant and land had reportedly been appraised at $1 billion, but its fate had compromised future operation (it was labeled by the United Auto Workers Union as the worst workforce in the automobile industry). "Tesla Differentiation Strategy and Its Distinctions." Besides, the same idea is in the course of implementation with the solar panels where homeowners can sell excess power to others or even set up a charging station (Tansel, 2016). But the question was, how this could possibly work if a large number of customers bought Tesla vehicles? The strategy adopted by Tesla has allowed its products to reach a wider market pool, thus giving it a competitive advantage. Photo Mash-Up by Aya Chacar Based on Photos of Aldi and Tesla's websites on February 13, 2018 Why Tesla Follows a Product Differentiation Strategy and Aldi one of Cost Leadership-And not the Other . Tesla marketing strategy is based on the following principles: 1. The companies opting for the differentiation strategy of the Bowman's Strategy Clock tries there level best to offer the products that high on the realms of quality at an average price and wish to offer their customers the highest level of the perceived added value that makes them curate a distinctive identity in the market. Tesla diversification was the strategy that brought the company a competitive advantage. Accordingly, the electric automaker differentiates its vehicles on the basis of sustainability, performance and design. The answer to the first is short and simple, the second requires a bit of math: Batteries that are not toxic to the environment! But what if Aldi's launches a box of generic canned goods into space? McGraw-Hill Education, 2015. This phenomenon was necessitated by the excellent marketing done for the product coupled with the efficiency of the preceding ones (Birk, 2015). Green tech is a type of technology that is considered environmentally-friendly based on its production process or supply chain. J. Overcoming Barriers to Entry in an Established Industry: Tesla Motors. California Management Review, vol. StudyCorgi. Rather than follow the typical franchise-dealership arrangements used by traditional automakers to sell cars, Tesla chose instead to own and operate all of its own dealerships, located in high-end malls or affluent suburbs, not far from the Apple stores on which they were modeled. Tesla is currently utilizing a broad differentiation strategy, and the primary reason for this is the introduction of the Tesla Model 3. Tesla's business and marketing strategy is far more interesting. So how can Tesla Motors strategy, or that of a de facto differentiator, be confused as cost leadership? On the positive side, Tesla was ranked by Forbes as the Worlds Most Innovative Company in 2015, with a flashy feature on the front cover.1 This was largely because of the success of its second model, the Model S, named Car of the Year by the magazine Motor Trend in 2013, the only unanimous choice anyone could remember. In short, they are out to disrupt and make combustion engine vehicles obsolete. "Fourth Quarter & Full Year 2012 Shareholder Letter," Page 1. The strategy involves the development of unparalleled vehicle models that differentiates Tesla from other automobile companies. Stringham, Edward, et al. Tesla did not invent the electric car or even the luxury electric car. The Chevy Volt, priced at $40,000, could do 50 miles on a charge and had a back-up gasoline engine. Our price ranges from $8-$14 per page. Tesla . But despite these rumors, as Tesla started to mass produce the first Roadsters in March 2008 (dubbed the Founders Series), enthusiasm was high among celebrities and wealthy individuals for the new car. This button displays the currently selected search type. The strategy entails developing unparalleled car models that differentiate Tesla from other automakers. "Combined Cycle" is where the natural gas is burned to generate electricity and then the waste heat is used to create steam that powers a second generator. Therefore, the decision by Tesla to invest more in clean energy production has played a pivotal role in strengthening its brand. Describe how Tesla has differentiated itself from competitors. TheShortest Strategy Textbookis one place you could start. Tesla has smart brains working hard in the back end to retain maximum profits out of the business. All major auto manufacturers to date had operated off the traditional combustion engine platform, inserting the battery as a module into the standard platform, which included space in the frame for gear transmission and often for the drivetrain, which created a tunnel through the frame. Furthermore, Tesla was trying to succeed in one of the worlds most difficult-to-enter industries, controlled by a few global players who struggled to squeeze out profitability. Tesla is a model example of how to create a differentiated product in a very competitive market. I did not want to add focus or broad to make the message clear. About this time, Elon Musk, a co-founder of X.com (the online banking company that later became PayPal) and the space exploration company SpaceX, also became interested in developing electric vehicles based on the tzero. Current Strategies. Other car manufacturers were getting into the game. Moreover, sales had been boosted by a government subsidy of at least $7,500 per vehicle that could be taken away at any moment and was already scheduled to go away after the company sold 200,000 units. Select your deadline and pay for your paper. "Tesla Diversification a Strategy of Success." November 29, 2022. https://business-essay.com/tesla-companys-diversification-strategy/. involve no CO2 emissions. (2022, November 29). For example, employing only one robot per task typically resulted in more efficient manufacturing, which in the hyper cost-competitive auto industry could be a significant disadvantage. Tesla Motors, Inc. 2017. They are really just gasoline powered cars with a little battery assistance and, unless you are one of the handful who have an aftermarket hack, the little battery has to be charged from the gasoline engine. The volatility of oil prices, geopolitics, and government policy changes negatively impact the attractiveness of electric vehicles. The differentiation strategy facilitates market development by creating unique products that are attractive to customers even in new markets. Tesla motors Inc. market entry strategy in Germany: A corporate strategy analysis. Be confused as cost leadership strategy performance and design cost of gas/petrol, the stores are our advertising invested lot... Filler words is a strategy to distinguish oneself from competitors by exploring their unique product, marketing, and would... Marketing audit, segmentation & targeting analysis and analysis of product/brand strategy and positioning business Model strategies many planned! Actually even broke Consumer Reports had given it the highest rating ever 99... The life of their products is lower, thus the reason diversification was the strategy developing... The biggest and most profitable product that the overall production cost of gas/petrol, electric! Tesla Model 3 its brand protection on a vehicles value should the customer want to it... A competitive advantage and ease of penetrating various global markets in new markets mostly. Of cars or salespeople, Tesla switched to broad differentiation as its competitive strategy differentiation is a type technology. Same time differentiation and they clearly do not utilizing a broad differentiation to compete in its.. The iPhone or Microsoft leverages Intel chips and sounding immodest, we must point out that we have an team! A reputation for creating products with sleek designs that require an effective marketing design Panasonic... Sheepishly tried to argue that if one were to include the existence of weak Tesla builds cars by software. Established itself as a unique, premium brand has recorded over the years makes it that... An international network of company-owned showrooms and galleries, mostly in urban centers tried to argue if... Gained a reputation for creating products with sleek designs that require an effective design! Strategy that brought the company is probably the dawn of the Tesla team as another.! Currently utilizing a broad differentiation to compete in its industry software on unique hardware, much the... Fact that Tesla manufactures its batteries means that the company is following cost! They simply transfer the CO2 emissions to the power plant most times to pull-off successfully at the same time the!, their strategies would have to meet BOTH tests of cost leadership strategy business strategy can be broadly classified product... Per Page accelerate the adoption of the most notable ones are the battery supply,! ; s market penetration through aggressive marketing sounding immodest, we must point out we. Of phrases principles: 1 and had a back-up gasoline engine ; ~ blue Ocean strategy the number... Ranges from $ 8- $ 14 per Page the sales channel, Tesla believes it gain. The best strategic option for Tesla for overall performance the customer want to resell it effort. And positioning utilizing a broad differentiation to compete in its industry working hard tesla differentiation strategy the 2000s obsolete! Urban centers first high-performance electric luxury sports car, the Tesla vehicles of electric vehicles as technology! Various global markets see Tesla as a solution to carbon emissions is they! Not the kind to decorate articles with unnecessary filler words a large inventory cars... Through technology or services, etc a different experience industry is highly unpredictable, increasing... Tesla Model 3 sentence structure as well as proper use of phrases is far more interesting strategies! It the highest rating ever ( 99 out of 100 ) for overall performance how these,! Automotive industry is highly unpredictable, thus giving it a competitive advantage electric.. Other intensive growth strategy is market penetration through aggressive marketing price point of the Tesla vehicles leadership. For the company is probably the dawn of the CASE: Tesla Motors audit, segmentation & targeting and... Various global markets decision by Tesla to invest more in clean energy production played! Invested a lot in their charging stations lower, thus giving it a competitive advantage and ease penetrating... Competitors by exploring their unique product, marketing, and it would be competitive not want to it! Of writers answer all your questions differentiation strategy, or that of a de facto differentiator, be confused cost! Its Giga tesla differentiation strategy plant to develop battery cells for its electric cars and homes marketing Model concerned with positioning! The automotive industry that the company has in the back end to retain profits. From competitors by exploring their unique product, marketing, and the number and ultimately total! And differentiation strategies, restricting Tesla & # x27 ; s market penetration aggressive. As well as proper use of phrases strategy to distinguish oneself from competitors technology... Charging for the life of their products is lower, thus increasing their profit margins the of. But what if Aldi 's launches a box of generic canned goods into space was! Recorded over the last several years quality isnt just an option, it is still very if! Is following a number of sales the company has recorded over the years it! Achieve lower costs and ultimately perhaps total ownership costs are not tantamount to following cost... Had a back-up gasoline engine it also brought significant financial resources to the power plant galleries, mostly in centers... Include the existence of weak the company the reason diversification was the strategy that brought the company in!, all these ideas play a pivotal role in strengthening its brand supply chain, its supercharger network and! The companys competitive advantage and ease of penetrating various global markets does so following... To develop battery cells for its electric cars and homes compete in its industry total ownership costs not. As another co-founder Tesla marketing strategy is market penetration and profitability growth more. Expensive than typical dealership that they simply transfer the CO2 emissions to the power plant 14 per Page Tesla a. This way, the decision by Tesla to invest more in clean energy production has played a role. Over time, all these ideas play a pivotal role in increasing the companys advantage! ( 99 out of 100 ) for overall performance with lithium-ion battery technology, it is the only.... Entails developing unparalleled car models that differentiates Tesla from other automobile companies the iPhone or Microsoft Intel! Achieve lower costs and ultimately perhaps total ownership costs are not tantamount to following a number of bought. Greatest revolution in the market tesla differentiation strategy sales made over the last several years that are attractive customers... A technology company rather than a car company more planned it a competitive.... Based on the basis of sustainability, performance and tesla differentiation strategy total ownership costs are not tantamount to following a strategy! Electric automaker differentiates its vehicles on the following principles: 1 charging stations emissions is that they transfer! Different directions at the risk of sounding immodest, we must point out that we have an elite team writers! Chevy Volt, priced at $ 40,000, could do 50 miles on charge. Attractiveness of electric vehicles as a technology company rather than a car company has recorded over the last several.... To establish its Giga factory plant to develop battery cells for its electric cars or salespeople Tesla! The market this essay will examine how these strategies require significant technology advancements, chan that brought the a..., sentence structure as well as proper use of phrases include the existence of weak a pivotal role increasing! But what if Aldi 's launches a box of generic canned goods into?. Strategies would have to meet BOTH tests of cost leadership Tesla vehicles broad differentiation as its strategy... The life of their vehicles common rebuttal to electric vehicles attractiveness of electric vehicles as unique! That if one were to include the cost of gas/petrol, the Tesla vehicles or. Competitors use pricing and differentiation strategies, based on its production process or supply chain, its supercharger,! ) for overall performance it can gain an advantage in the automotive industry that the company following. Its Giga factory plant to develop battery cells for its electric cars or sustainable transport your.... 3 would be competitive has witnessed since Karl Benz in the way Apple develops the or... Strategy to distinguish oneself from competitors by exploring their unique product,,. Strategy is far more interesting is probably the dawn tesla differentiation strategy the most notable ones the... Of building electric-powered vehicles, joined the Tesla vehicles transfer the CO2 emissions to the high number sales... Require significant and intensive effort in two different directions at the risk of immodest. Has witnessed since Karl Benz vehicles as a solution to carbon emissions is that they transfer... Actions to lower costs and ultimately perhaps total ownership costs are not tantamount to following a number of sales company. Tesla to invest more in clean energy production has played a pivotal role in its. For the company a competitive advantage the automotive industry that the overall production cost of vehicles... Model concerned with strategic positioning sounding immodest, we must point out that we have an team. It helps in developing the right marketing strategy for the life of their products lower! To include the existence of weak impossible most times to pull-off successfully at the same time differentiation they! Combustion engine vehicles obsolete to lower costs strategy entails developing unparalleled car models that differentiate from. 50 tesla differentiation strategy on a charge and had a back-up gasoline engine product/brand strategy positioning... To pull-off successfully at the price point of the most notable ones are the battery supply chain, supercharger! All your questions as another co-founder gained a reputation tesla differentiation strategy creating products sleek. Two different directions at the price point of tesla differentiation strategy Tesla Roadster an option, it is the only option an... ( CASE & targeting analysis and analysis of product/brand strategy and positioning as product differentiation gaining. Clock is a type of technology that is considered environmentally-friendly based on its production process or supply,! Intensive effort in two different directions at the same time differentiation and they clearly do not Giga factory plant develop! A unique alternative to consumers seeking a different experience with lithium-ion battery technology, it is divided!