Tesla, Inc. (formerly Tesla Motors, Inc.) applies its generic strategy to achieve competitive advantage against other firms in the global automotive industry. In Michael Porter’s model, a generic competitive strategy represents the company’s approach to competing in the market. 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. Aside from the generic competitive strategy, a company uses intensive strategies to ensure business growth. This company analysis case shows that Tesla Inc.’s intensive growth strategies gradually evolve. 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 generic strategy (Porter’s model) enables the company to maintain competitive advantage, and attract early adopters in the global automotive market. The corresponding intensive strategies support organizational growth based on increasing sales revenues from current markets where Tesla, Inc. operates. The matching of the intensive growth strategies with the generic competitive strategy contributes to the company’s operational effectiveness.
Tesla’s Generic Strategy (Porter’s Model)
Tesla’s generic competitive strategy is broad differentiation. This generic strategy builds competitive advantage based on the development of products that differentiate the company from other firms in the industry. 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. In using this generic competitive strategy, the company broadly attracts all potential customers, who are now increasingly interested in environmentally friendly products. Initially, Tesla used differentiation focus as its generic strategy for competitive advantage. 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. These early adopters are affluent customers who have a high tendency to purchase newly introduced products. However, now that the company is already popular and production costs are declining, Tesla’s generic competitive strategy has shifted to broad differentiation. The declining production costs and increasing brand popularity enables the company to broadly target customers in the automobile market.
The generic strategy of Tesla, Inc. requires suitable strategic objectives to ensure competitive advantage. 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. Another strategic objective connected to Tesla’s generic competitive strategy is to strengthen competitiveness by broadening its market reach to generate more sales and support brand popularity.
Tesla’s Intensive Strategies (Intensive Growth Strategies)
Market Penetration (Primary Strategy). Tesla, Inc. uses market penetration as its current primary intensive growth strategy. This intensive strategy enables business growth by increasing sales revenues in current markets. For example, with aggressive marketing, the company aims to rollout and sell more of its electric cars in the United States. In this way, the corporation maximizes its revenues from the markets where it currently operates. This intensive growth strategy relates with Tesla’s generic strategy by developing competitive advantage based on increased market share. A strategic objective based on this intensive strategy is to grow the company’s sales revenues through aggressive marketing.
Product Development (Secondary Strategy). Product development is Tesla Inc.’s secondary intensive growth strategy. In this intensive strategy, the company grows by developing new products that generate new sales. The company applies this strategy by developing new products with advanced technologies for minimal environmental impact. For example, the company offers solar panels, and developed the Tesla Roadster, which was the world’s first fully electric sports car. This intensive strategy supports Tesla Inc.’s differentiation generic competitive strategy by focusing on unique high-technology automobiles and related products that attract target customers. In relation, a strategic objective for this intensive growth strategy is to maintain extensive investments in research and development (R&D).
Market Development. Tesla, Inc. uses market development as a tertiary intensive growth strategy. This strategy involves entering new markets to generate more sales and grow the global business. For example, the company gradually expands its market reach worldwide by establishing new offices and facilities. At present, the company sells in only a handful of countries, but further international expansion is expected. 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. The differentiation generic strategy enables market development by creating unique products that attract customers when the company enters new markets. 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.
Diversification. Tesla applies diversification, but only as a minimally significant intensive growth strategy. This intensive strategy helps grow the company through new business creation. For example, the firm aims to create new battery products for a variety of non-automotive applications. However, this intensive growth strategy currently has insignificant effects on the company’s financial performance. Tesla focuses most of its efforts on market penetration and product development to grow its automotive and energy solutions businesses. The company can apply the differentiation generic competitive strategy to increase the likelihood of success in using this intensive growth strategy. A strategic objective linked to diversification is to increase Tesla’s R&D investment to identify new business opportunities. Another strategic objective based on this intensive strategy is to acquire other firms or enter joint ventures to develop entirely new products.
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