Tesla, Inc. (formerly Tesla Motors, Inc.) applies its generic strategy to achieve competitive advantages over other firms in the global automotive and renewable energy industries. In Michael Porter’s model, a generic competitive strategy represents the company’s approach to competing in the market. In this business case of Tesla, the generic competitive strategy reflects the company’s focus on using advanced technologies in its electric vehicles and related products, as a way of competing with General Motors, Ford, Toyota, Honda, Nissan, Hyundai, BMW, Mercedes-Benz, and Volkswagen. Aside from its generic competitive strategy, the company uses intensive growth strategies to ensure business growth. Tesla’s intensive growth strategies are gradually evolving. These strategies reflect the company’s popularity, improving profitability, and 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 a competitive advantage and attract early adopters in the global automotive market. The corresponding intensive growth strategies support organizational growth based on increasing sales revenues from current markets where Tesla operates. The matching of the intensive growth strategies with the generic competitive strategy contributes to the company’s operational effectiveness.
Tesla’s Generic Competitive Strategy
Tesla’s generic competitive strategy is differentiation. According to Michael Porter’s model, this generic strategy builds competitive advantage based on the development of products that differentiate the company from other automakers and energy firms. For example, Tesla’s products are competitive because they integrate advanced environmentally friendly technology, considering that many competing automobiles 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 enable the company to broadly target customers in the automobile market.
The generic strategy of Tesla requires strategic objectives that support competitive advantages. 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. Through this R&D objective, the generic competitive strategy of differentiation influences decisions in Tesla’s operations management, such as decisions in product design and quality management. Also connected to Tesla’s generic competitive strategy is the strategic objective to strengthen competitiveness by broadening the company’s market reach to generate more sales and support brand popularity.
Tesla’s Intensive Growth Strategies
Market Penetration (Primary Strategy). Tesla uses market penetration as its current primary intensive growth strategy. According to Igor Ansoff’s matrix, 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 to Tesla’s generic competitive strategy by developing competitive advantage through a bigger market share. A strategic objective based on this intensive strategy is to grow sales revenues using an aggressive marketing strategy and an enhanced version of Tesla’s marketing mix (4P).
Product Development (Secondary Strategy). Product development is Tesla’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 differentiation as Tesla’s generic competitive strategy by focusing on unique high-technology automobiles and related products that attract target customers. A strategic objective for this intensive growth strategy is to maintain major investments in research and development (R&D).
Market Development. Tesla 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 statement and vision statement, which highlight global leadership in the automotive industry, with energy solutions for transportation and other sectors. Differentiation, as a generic competitive strategy, enables market development by creating unique products that attract customers when the company enters new markets. Based on market development as an intensive growth strategy, a strategic objective is to grow Tesla’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 applies differentiation as a 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 create new business opportunities. Another strategic objective based on this intensive growth strategy is to acquire other firms or enter joint ventures to develop entirely new products.
References
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- Tesla, Inc. – Form 10-K.
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- Tesla, Inc. – Solar Panels.
- U.S. Department of Commerce – International Trade Administration – Automotive Industry.