Tesla's Competitive Strategy

STRATEGIES IN A COMPETITIVE MARKET:

Tesla’s Competitive Strategies

Christopher Landin

Thomas Edison State University

Abstract

Tesla hit the open market in 2010, which made them the first American car company to do so since Ford. In fact, many similarities have been made between Tesla and Ford, one of them being Tesla’s CEO and co-founder Elon Musk. He has been highly related to the ingenious and innovation of Henry Ford. A visionary through and through, Musk employes one of today’s top innovative companies and allows others to see his work and patents by open sourcing all of them. Musk believes that by sharing the incredible advancement of technology of his company, this will help today and tomorrow’s market improve for the good of all. While being a rather different approach to business, many other strategies break the status quo. In this case report, several strategies of Tesla will be more closely scrutinized.

Business Strategy

        Tesla is an American auto maker, as well as dabbling in energy efficient technology in various products. Founded in 2003, CEO Elon musk is considered one of the top innovators of the 21st century. Tesla utilizes a focused differentiation business strategy, by offering very niche high scale automobiles. These automobiles are incredibly innovative by being one of the first 100% gas-free vehicles. Over the first ten years of operation, wealthy eco-friendly customers were Tesla’s target market. Musk used this model to achieve a new goal now fifteen years later. In fact he stated, “Build a sports car. Use that money to build an affordable car. Use that money to build an even more affordable car. While doing above, also provide zero emission electric power generation options. Don’t tell anyone.” (Golson, 2016.) By taking a risk and selling incredibly pricey products and making a profit from this unique innovation, Musk is now able to continue a long-term goal - breaking out of upscale vehicles and create a product line more affordable to middle class consumers.

Long-Term Goals

        One of Tesla’s long-term goals is to have sold a half a million vehicles by 2020 (Winton, 2017). Currently, the manufacturer is just over 250 thousand units sold. However, with the new line of affordable vehicles being sold, numbers are more rapidly rising. They are projected to be at 400 thousand units sold in just six months, in March 2018.

        One peice of competition that Tesla faces is the drop in gas prices. After seeing gas prices incredibly high just five years ago, the US has been experiencing lower prices around $2.50 a gallon as of late. The recent hurricanes in Texas have raised prices slightly, but crude oil remains at an affordable price. While this creates competition for Tesla’s gas-free vehicles, market trends to be more eco-friendly boast optimism for achieving their sales goal by 2020.

“First Mover”

        A first mover is a company who is considered a leader in technology (Staff, 2015). When comparing the definition of a first mover to Tesla, one could say they fit the criteria. One way this is done is through innovation. Recently, Tesla has started to revolutionize travel. First by being the leader in developing self-driving vehicles. By being a first mover, Tesla releases new products new to the market. Another example is through the development of their “bullet train” the Hyperloop. This solar powered, travel tube will allow travelers to travel from New York to Los Angeles in just over an hour. Tesla continues to move new technology to various markets in travel.

        Other aspects of first moving that Tesla attributes are having a strong brand loyalty and reputation. They have also set technical standards in their field. Because of their work with self-driving cars, other car manufacturers are using the same technology to create their own. Tesla has also contributed to creating the best technology in solar energy.

Standing Alone

        Tesla rarely partners with other large corporations. Elon Musk believes instead of doing business themselves and be a competitor to others within various markets. For instance, Uber’s CEO Travis Kalanick pitched the idea of partnering with Musk to start developing self-driving cars for the ride-share company. However, Musk politely declined. This is because months later, Musk announced that Tesla would soon be entering the ride-share market, with an extension of their own.