Tesla: A Critical Evaluation
In order to ensure the company’s continuing growth and development, Tesla, Inc. has established a business model that fosters and enables this expansion. Despite the fact that Tesla Inc.’s global operations are expanding, the company’s organizational structure supports traits that allow the company to maintain strong managerial control over operations (Saxena & Vibhandik, 2021). Growth is accompanied with a rise in the level of complexity and difficulty. With the goal of demonstrating that driving electric vehicles does not necessitate making trade-offs, the founders of Tesla aimed at changing the automotive sector. The engineers used a business model that intended to prove that electric vehicles can be better, faster, and more pleasurable to drive than gasoline-powered vehicles. These features were meant to be available without sacrificing performance or reliability. The founders had a mission to revolutionize the automotive industry by factoring in the sustainability of the sector, profitability, gaining a competitive edge, and ensuring that the world remains a better place through environmental consideration (Zhang et al., 2014). In addition to all-electric autos, Tesla currently offers renewable energy generating and storage technologies that are capable of being scaled to virtually any size (Moritz et al., 2015). Inventor Elon Musk believes that the sooner the world moves away from fossil fuels to renewable energy and the need for a zero-emission society, the better off the world will be in the long term. The purpose of this paper is to highlight Tesla’s competitive strategy for developing their present competitive position, as well as instances of measures made to achieve this plan. The research also provides a critical assessment of Tesla’s competitive strategy in the growth of the present competitive position. In the present climate, the review highlights the benefits and constraints of Tesla’s plan. Finally, depending on the results, the report will provide suitable suggestions for the organization’s next steps.
Tesla’s Competitive Strategy for Achieving their Present Competitive Position
For Tesla, the world’s move to renewable energy sources is a top priority. To set itself apart from the competition, the company first entered the automotive business as a niche differentiator, selling disruptive items like the high-end electric cars (Mangram, 2012). Tesla’s Model X, for example, has wreaked havoc on the automotive industry with its environmentalist design, crossover feel, sporty performance, and general aggression as a global competitor. As a result, Elon Musk, CEO and key believer of Tesla’s journey, has modified the business strategy from being a specialist differentiator to a wide differentiator. Tesla, for example, has distinguished itself from its competitors in the market by utilizing a variety of battery alternatives. The following competitive approaches are mainly applied to drive Tesla towards its current position.
Differentiation Focus Approach
Tesla’s key strategy for achieving a competitive edge is to differentiate itself from the competition on a broad scale. Tesla is based on the development of innovative goods. As a result, this method provides a competitive advantage for the business. Because internal combustion engines continue to power the vast majority of automobiles on the road today, Tesla Inc.’s products, for example, are competitive because they combine cutting-edge environmentally friendly technology that is at the forefront of the industry. The products are created and marketed in a way that they remain appealing to the vast majority of automobile owners. As a consequence of the company’s overall competitive strategy, Thomas and Maine (2019) found that customers are becoming increasingly interested in environmentally friendly products. As an initial competitive advantage strategy, differentiation emphasis served as the foundation of Tesla’s success. One of the key objectives of the firm while executing its distinguishing focused method was to concentrate on early adopters in the high-end electric vehicle industry. When new products are introduced, wealthy customers are the ones who are most inclined to purchase them. Nonetheless, now that the company is well-known and production costs are declining, Tesla’s general competitive strategy has shifted to one of wide differentiation. Consequently, the company is able to access a larger spectrum of potential clients in the automobile sector as production costs continue to decline and brand awareness grows.
For Tesla, Inc.’s general strategy to be effective, the formulation of appropriate strategic objectives must be undertaken in order to sustain a competitive advantage. A strategic objective of the firm, for example, is to increase investments in research and development (R&D) in order to develop new products that match market demand for enhanced renewable energy solutions (Bilbeisi & Kesse, 2017), such as batteries for a variety of applications. Increasing Tesla’s market reach in order to raise sales and brand recognition is another strategic aim of the company’s overall competitive strategy, which is to improve competitiveness through increasing market reach.
Market Penetration Approach
As a part of its intensive strategies for growth, Tesla has employed market penetration to attain a competitive edge. Liu and Meng (2017) assert that the fundamental purpose of this aggressive strategy is to increase sales revenues in existing markets. The firm, for example, intends to expand sales of its electric autos in the United States by utilizing aggressive marketing strategies. As a result, the firm is able to maximize its revenues in the markets in which it presently operates. The establishment of a competitive advantage based on increased market share is the link that ties this aggressive growth strategy with Tesla’s overall objective. As a consequence of this thorough plan, the company’s sales revenue may be enhanced by aggressive marketing efforts on its behalf.
Product Development Tactic
Following on from its market penetration strategy, Tesla also uses a product development approach as part of its intensive growth tactic. Tesla’s expansion is powered by the development of new products that produce new income. Ahmad and Khan (2019) report that this approach is implemented by the corporation through the development of new goods that include cutting-edge technology while minimizing environmental effect. A product of the firm is solar panels, and the Tesla Roadster is the world’s first all-electric sports automobile, according to the company. In addition to a concentrated approach on distinguishing high-tech autos and related items that appeal to target clientele, Tesla Inc. has developed a differentiated generic competitive strategy. In order to retain significant R&D investment as a result of this aggressive expansion approach, one of the strategic objectives is to continue aggressive expansion.
Market Development Structure
From its gradual growth since 2003 to date, Tesla has used a market development strategy to expand and develop. Entering new markets is part of the company’s market growth strategy, which according to Stringham, Miller, and Clark (2015), is intended to increase revenue while also expanding the company’s worldwide presence. By increasing the number of offices and facilities the firm has access to around the world, it is able to gradually increase its market share. For the time being, the firm’s products are only available in a few regions, but the company intends to extend its global distribution network in the near future. As a result of this comprehensive approach, Hardman, Shiu, and Steinberger-Wilckens (2015) projected that Tesla would be able to realize its goal and mission and vision, which place a strong emphasis on worldwide competitiveness in the automotive industry, as well as renewable technologies for transportation as well as other sectors. The differentiation generic method contributes to the expansion of new markets by providing clients with distinctive items that interest them. One of the strategic aims of Tesla Inc.’s market development strategy is the establishment of partnerships with several other firms that will make it simpler for the company to penetrate new markets.
Diversification Growth Approach
While important, diversity is merely one component of Tesla’s broader aggressive development plan. In fact, there is a clear relationship between the company’s quick development and its aggressive business strategy. Research and development (R&D) activities at the firm are focused on developing non-automotive battery solutions, for example (Wang & Peng, 2020). Contrary to this, the company’s financial results have not been adversely affected by its ambitious expansion strategy. The great majority of Tesla’s resources are dedicated to market penetration and product development in order for the company to build its automotive and energy solutions businesses. Using the differentiated generic competitive approach, the business will have a better chance of achieving success with its ambitious growth plan. Tesla’s research and development investment should be raised in order to uncover new commercial opportunities. Considering that it is a strategic aim associated with diversification, it should be given top importance. Taking an aggressive strategy also includes the objective of purchasing or developing joint ventures with other businesses in order to develop whole new products from the bottom up.
Analysis of Tesla’s Competitive Strategy in Developing a Competitive Position: Advantages and Limitations of Strategy
Pros and Cons of Tesla’s Broad Differentiation Approach
Broad differentiation is a marketing approach used by organizations like Tesla to attract clients from a larger market segment. Tesla’s differentiation strategy is intended to distinguish it from its rivals. This is accomplished through the development of products or services that consumers view as superior to or distinctive from those offered by rivals (Perkins & Murmann, 2018). In this case, electric vehicles and related components that are superior to the traditional gasoline engine. Marketing strategies that target a broad spectrum of customers are known as broad differentiation strategies. They are employed in a variety of industries to attract new customers. Tesla understands that startups may not use this technique since it works best for larger enterprises, thus eliminating competition from new entrants. Particularly beneficial in the competitive automotive market and business, broad differentiation is a powerful tool. In marketplaces where there is a wide range of customer tastes, such as the automotive market, the strategy is an excellent match.
Customers’ perception of uniqueness is one of the advantages of a broad differentiation strategy (Datta, 2020), which allows you to charge higher rates for items or services that they feel are unique. In addition to generating client loyalty, a broad differentiation strategy helps to maintain it because of the unique product or service that it provides to customers (Li-JiTu, Guan, & Ying-Li, 2021). Customers are astounded by the things on display, which leads to a rise in sales. Tesla has profited from a lack of confidence among new competitors entering the market, which has benefited the company.
In terms of limitations, Tesla’s broad differentiation poses some disadvantages. By following a broad differentiation approach, consumers are more likely to shift to less expensive alternatives. As a result, buyers may be unwilling to pay a higher price in order to benefit from the unique features that Tesla includes into its vehicles, which is a significant downside of distinction. Customers have the option of opting for lower-priced alternatives (Khan, Yang, & Waheed, 2019). Customers that are price conscious may not be willing to pay a premium for something that they can have for a lesser price from another firm, and vice versa. For example, newer competitors such as Toyota have cheaper options that are attracting customers. They are more concerned with the cost of the items than they are with the quality of the product (Laari, Töyli, & Ojala, 2018). Tesla’s competitors may mimic the designs of Tesla’s cars and incorporate technology that is comparable to that present in Tesla’s cars. If this occurs, people will no longer be willing to pay premium rates for things that no longer have a distinctive appearance.
Diversification Benefits and Limitations
The scope of a company can be expanded by purchasing another business, entering a new market, or providing new goods and services to customers. Tesla has done all of the above. Diversification refers to a company’s decision to enter a new market and pursue new business opportunities (Mawdsley & Somaya, 2018). These strategies assist the firm in entering a new market sector in which it does not currently have a presence. The choice to diversify for a company may be a difficult one to make because it can offer huge rewards while also bringing big risks with it.
Diversification in a company may result in higher sales and revenue, as well as the development of an economic buffer in the case of a downturn. Increased profitability is more difficult to achieve when a business has a sizable market share, as there is less room for new client acquisition (Appio et al., 2019). It is feasible that extending your firm into a new market segment or offering new products and services may enhance sales and increase brand awareness. Additionally, diversification has a variety of disadvantages, including increased launch costs and increased overhead necessary to meet expanded sales targets (Danso et al., 2019). Entering a new market may be too expensive. As the economy changes, so do people’s spending patterns. Having a diverse selection of products and services may assist the business maintain a sense of equilibrium amid these ups and downs. Tesla also recognizes the value of variance in optimizing the exploitation of previously untapped resources. Finally, the car industry’s growth and profitability change throughout time according to economic variables. Diversification enables a shift away from diminishing activity in these instances.
However, some disadvantages arise from the use of diversification. Entities entirely involved in profit-making segments will enjoy profit maximization (Brulhart, Gherra, & Quelin, 2019). Concentrated investment in a single area will have a detrimental influence on a company with a wide portfolio of products and services. Because of this, Tesla’s long-term growth prospects have been severely impaired (Li-JiTu, Guan, & Ying-Li, 2021). Developing new skills will be necessary if you wish to break into a new industry. Because of the organization’s lack of knowledge with the new industry, it may face difficulties in the future. Poorly managed diversification or excessive desire may result in fast development in a number of directions at the same time (Duanmu, Bu, & Pittman, 2018). Due to the lack of resources and concentration in this situation, the company’s old and new divisions would both suffer unfavorable consequences. Finally, it will be difficult for a firm that offers a diverse variety of products and services to react quickly to changes in the market. This will have a negative impact on the company’s capacity to innovate, since it will be forced to concentrate on its daily operations.
Recommendations for Tesla’s Future
Tesla is the undisputed leader in the electric car market. Sustainable environmental practices, technology advancements, new product offerings, and low pricing are just a few of the company’s many competitive advantages. It is important from a strategic standpoint for Tesla to mass produce low-cost autos since it allows the company to raise its unit sales volume while simultaneously decreasing the cost of future models. Because manufacturing costs are lower in the strategic option, it is a more practical alternative. In contrast, the mass manufacturing strategy allows outsiders to copy Tesla’s procedures, decreasing the company’s competitiveness as a result. Consequently, as the company advances towards the lower end of the market, it will need to explore various marketing strategies. One of the greatest advantages and competitive strategies that Tesla has is its large R&D. It is recommended that Tesla continues to invest in R&D and sustainability in order to maintain its competitive edge, in addition to the broad differentiation and diversification apporaches. Through R&D, Tesla is concentrating on automation, material prices, and software advances in the long run. They distinguish themselves from the car industry by making significant long-term expenditures in research and development. Tesla, on the other hand, seeks to maintain its competitive edge by making its products difficult to copy. R&D investments are intended to develop more sophisticated technology for their goods, hence raising the barrier to entry into the electric car and battery sectors. Tesla has a particular advantage of being the market’s inventor and leader in the electric automobile business due to considerably larger R&D spending than those of other competitors in the area, an aspect that must be maintained.
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