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 overall approach to competing in the market. In Tesla’s case, the generic strategy reflects the company’s focus on using advanced technologies in its electric vehicles and related products. Aside from the generic strategy, a company uses intensive strategies to ensure business growth. Tesla uses a combination of intensive growth strategies that gradually evolve. Such evolution is a reflection of Tesla’s increasing popularity and improving profitability.
Tesla’s generic strategy 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 Motors, Inc. operates.
Tesla’s Generic Strategy (Porter’s Model)
Tesla’s generic competitive strategy is broad differentiation. This strategy builds competitive advantage based on the development of products that differentiate the company from other firms in the industry. For example, Tesla’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 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. 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 Motors, 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 renewable energy solutions. Another strategic objective connected to Tesla’s generic strategy is to strengthen competitive advantage by broadening its market reach to generate more sales and support brand popularity.
Tesla’s Intensive Strategies (Intensive Growth Strategies)
Market Penetration. Tesla Motors, 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, Tesla aims to rollout and sell more of its electric cars within the United States. In this way, the company maximizes 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 through aggressive marketing to increase sales revenues.
Product Development. Product development is Tesla’s secondary intensive growth strategy. In this intensive strategy, the company grows by developing new products that generate new sales. Tesla applies this strategy by developing new products that emphasize advanced technologies for minimal environmental impact. For example, the company developed the Tesla Roadster, which was the world’s first fully electric sports car. This intensive strategy supports Tesla’s differentiation generic 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 Motors, Inc. uses market development as a tertiary intensive growth strategy. This strategy involves entering new markets to generate more sales and grow the business. For example, Tesla 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 global expansion is expected. This intensive strategy supports Tesla’s mission and vision statements, which highlight global leadership in the automotive industry. The differentiation generic strategy enables market development by creating unique products that can attract customers when the company enters new markets. Based on the market development intensive strategy, a strategic objective is to grow Tesla’s 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, Tesla aims to create new stationary battery products for a variety of non-automotive applications. However, this intensive 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 business. The company can apply the differentiation generic 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 for Tesla to enter joint ventures to develop entirely new products.
- Dess, G. G., & Davis, P. S. (1984). Porter’s (1980) generic strategies as determinants of strategic group membership and organizational performance. Academy of Management Journal, 27(3), 467-488.
- Glazer, R. (1999). Competitive Advantage Through Information-Intensive Strategies. Handbook of Services Marketing and Management, 409.
- Merchant, H. (2014). Configurations of governance structure, generic strategy, and firm size. Global Strategy Journal, 4(4), 292-309.
- Miller, D. (1992). The generic strategy trap. Journal of Business Strategy, 13(1), 37-41.
- Parnell, J. A. (1997). New evidence in the generic strategy and business performance debate: A research note. British Journal of Management, 8(2), 175-181.
- Tesla Motors, Inc. Form 10-K.
- Varadarajan, P., & Dillon, W. R. (1982). Intensive growth strategies: A closer examination. Journal of Business Research, 10(4), 503-522.