May 8, 2016

Tesla Motors: A Review Part 2

Tesla uses socio-economic factors as its main assumption in its mission statement. Buyers are losing faith in gasoline fuel and the world is beginning to make quantum leaps in solar and lithium ion technology. Undoubtedly, society judges people by the type of cars they own. Having an electrical car automatically improves social standing in this day and age—especially if that money is spent on a premium electrical car.  Many car companies feel this pressure, but their angle is to make the cars affordable, whereas Tesla is selling its cars directly to more affluent customers. No car dealers or dealerships, just custom-made, luxury electric cars.

The demand for these cars is very high, but there’s a credible threat of substitution. For instance, mass transportation, walking and biking are also more environmentally friendly. However, most people prefer to have their own vehicle. it’s no secret the automotive industry is competitive. Tesla faces competition namely the luxury sports cars like Ferrari and Porsche and electric cars like the Prius, Ford Focus BEV and the Chevrolet Volt. Many companies want to make their mark in this alternative market, each changing the formula just a little bit to offer a differential advantage.

Unlike most automotive companies, Tesla does not employ an ad agency. They spend none of their budget on traditional marketing. Instead, they’ve developed a network of stores in wealthy areas to interact with people, however, no cars are sold in these stores.

Their supplier relations plays a key role in their external growth strategy as well. They’ve developed a solid relationship with Panasonic, Google, Daimler, Toyota and others. These well-established companies bring mutual benefits to both companies, providing a basis of trust for Tesla’s future customer base while enhancing their brand recognition.

III.  STABILITY (No-Growth) STRATEGIES

Tesla’s greatest weakness is their lack of resources. They’re currently not set to meet a high demand of manufacturing. In order to keep their heads above water, they must continue to stay on the cutting edge and develop new products that are available to a broader market. Their biggest technological issue is the car battery. Yes, it can travel 265 miles on a single charge, but that’s it They must be careful to pursue differentiation and lower cost while bulking up their advertising. If people don’t know about Tesla, they cannot make an informed decision about purchasing one of the cars in the first place. If Tesla were to enhance their marketing strategy, their financial position would become increasingly more stable and they could maintain current operations.

 

GENERIC COMPETITIVE STRATEGIES

Tesla’s generic approach is very unique. There are no Tesla dealers or commissioned sales people. They don’t aggressively market because all their transactions are conducted online. The prices are non-negotiable and only basic. They keep zero inventory, because every car is built-to-order. Their customers have to wait months—sometimes years—in order to get their car. In short, Tesla is upsetting the auto industry’s usual business model. So how are they successful at all? After all, they’re building a luxury brand essentially from scratch and its not even a model people are familiar with.  They’ve started with a great product. Tesla produced an electric car with a combustion engine that is fast, aerodynamic and seats seven. They’ve started high and are working their way down. With the Model S, their production begins at $100,000. But as their volume increases, their prices drop. It won’t be long until Tesla is selling cars that anyone can afford. They also eliminated what most people hate about buying a car—the process of buying it. Nobody likes going to the car dealership to haggle with a sleazy salesman for six hours. With Tesla, it’s all done online. After a $5,000 deposit, one can test drive the Tesla and place their order. This luxuriates the buying experience and eventual ownership, raising the bar for prospective buyers.