Key Competitive Advantage of Tesla
The current business scenario, especially the automotive sector is facing challenges regarding their effect on the environment. In the present state of affairs, environmental degradation became a key issue for all the stakeholders to consider. Automotive manufacturers are facing the challenges of producing more environment friendly cars in order to reduce the environmental effect of their products (Mayyas et al. 2012). Along with that, government of different countries is also introducing different regulations to reduce the use of conventional gasoline vehicles and to opt for electric and hybrid vehicles.
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At this point of time, a group of engineers entered in the existing business scenario of automotive industry with the mission of changing the perception of the people about electric cars (Tesla.com 2017). From there, they came up with the first car from the stake of Tesla, model S and then model X. Both the cars redefined the scenario of electric automotive by being the fastest and cleanest in their respective category. Moreover, initiation of various other unique technologies and business approaches, Tesla is enhancing their competitive advantages as well as redefining the whole automotive industry.
This report will discuss about the approaches being initiated by Tesla in gaining their competitive advantages. Moreover, the market potentiality of Tesla in the market of United Kingdom will also be discussed. Necessary recommendations will be provided in order to further enhance the operational activities of Tesla.
United Kingdom is one of the fastest growing markets in Europe for the electric vehicles. The last few years saw an unprecedented growth of the market of plug-in electric cars. By the end of July, 2017, the rate of new registrations for new electric cars stands at 107000 compared to only 3500 in 2013 (Lane 2017).
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Figure: 1
Growth of electric car market in UK
Source: (Lane 2017).
Along with the change in the taste and preference pattern of the customers in United Kingdom towards electric cars, the regulations initiated by the government is also contributing in increasing the sales of electric cars. Recently the government of United Kingdom has taken the initiation of banning all the petrol and diesel cars by the year 2040 (Asthana and Taylor 2017). This will be a huge market opportunities for the electric car manufacturers such as Tesla. Thus, entering the market of United Kingdom at this present initial stage will help them to create the brand image in the long run. Specifically for Tesla, the market opportunity will be more compared to their competitors. This is due to the reason that, the approaches of the product portfolio of Tesla is quite distinctive compared to the leading electric cars in the market of United Kingdom such as Nissan Leaf.
Market Potential of Tesla in the UK
While, majority of the electric cars are oriented towards the less amount of emissions and urban commuting, Tesla is more focused in offering racier version of the electric cars with having great looks, acceleration and practicality. Moreover, the initiation of supercharging stations by Tesla will also help them to enhance the convenience to their customers and they will be more lured to have the access of cars from Tesla (Hardman, Shiu and Steinberger-Wilckens 2015). Another key market opportunity for Tesla in United Kingdom will be the providence of incentives for the customers in buying the electric cars (Gov.uk 2017). In motivating the people to opt for electric cars, government of United Kingdom is offering incentives in the price of the electric cars. Thus, customers will more opt for electric cars and the market potential for Tesla will get increased.
The marketing and promotional activities being initiated and maintained by Tesla are pone of the key reasons behind their rapidly growing popularity in the global market. Unlike their conventional competitors, Tesla adapted a less extensive marketing policy in reaching out to the potential customers. According to their marketing strategy, offering a great, value creating and unique product to the customers will automatically helps to promote the brand in the market. Rather than extensively depending on the paid mediums, they are more dependent on the earned mediums. 4p’s of marketing mix will be used to discuss the marketing strategy of Tesla.
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Product
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Tesla is having diversified product portfolio ranging from batteries to solar panels to super charger and home UPS. However, the cash cow for them is their automobile department. Their entire product portfolio is a prime medium to gain competitive advantages due to the reason that, all of their products are being positioned as devices running in renewable source of energy. Thus, Tesla is gaining competitive advantages in the market by marketing their products as environment friendly and cleaner products (Helmers and Marx 2012). Moreover, as discussed earlier, the approach of their electric vehicles is distinctive compared to other electric vehicles in the market in terms of looks, utility and performance. Thus this is also helping them in creating distinctive image as well as competitive advantages from the market. Initiation of superchargers by their own also enables them in having extra source of revenue from the market. The superchargers by Tesla are unique in providing fast charging to the cars (Rajagopalan et al. 2013). Thus, apart from the cars, these are also a good mode of having continuous rate of income from the market. This is not applicable for their competitors as they do not possess these kinds of offerings.
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Price
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In the case of pricing strategies, Tesla follows an unique strategy. At the initial stage, they first introduced the Model S, which is having extravagant price tag. Thus, it will only be accessible to the super rich customer segments. They have priced it higher to accommodate the flow of fund in research and development of this project. Thus, the money being gathered from the niche market made way for further development in introducing cheaper cars, which lead to the initiation of Model X. It is cheaper compared to the Model S, however, still out of reach of the mass market customers. Now, according to the pricing strategy of Tesla, the initiation of premium pricing and premium products in the initial stage helped them to gain an extra customer attraction and helped them in sourcing the requirement of extra fund to develop the mass market cars (Martins, Rindova and Greenbaum 2015). The capital being accumulated from the Model S and Model X are being used in development of their mass market car Model 3. Thus, due to their pricing strategy, they have entered the mass market after gaining enough goodwill from the niche market and have acquired capital for further development. In addition, with having the product portfolio containing Model S, X and 3, Tesla will now have products to cater to different customer segments.
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Place
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In the case of choosing the place or sales point, Tesla has taken a unique approach. According to them, due to the fact that, Tesla is a new entrant in the market, thus they are in the need of more customer awareness and footfalls in their showrooms. However, the showrooms of conventional car makers are situated in independent locations. On the other hand, Tesla has made their showroom in different malls having huge customer footfalls (Forbes.com 2017). The space of the showrooms is similar to an average store in any mall, where only a single car can be squeezed in. However, this helped them to present their cars to more number of people. They have got chance catch the glimpse of the cars by going for shopping or movie in the mall. Moreover, Tesla has also initiated the online shopping of their products. According to this concept, customers can book their chosen car from their official website and according to their personal specification such as color and battery capacity. Thus, in terms of offering their products, Tesla is way ahead from its competitors by offering from diversified places.
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Promotion
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As discussed earlier Tesla depends more on earned media rather than paid media. Thus, they are more focused on generating positive word of mouth from the existing customers. Viral marketing is one of the key sources of promotion for them (Schulze, Scholer and Skiera 2014). Viral marketing helps them in reaching to more number of customers effectively and it helps them in having positive impression for their products among the potential customers. They also involves sales promotion in public place but they promote their products as cleaner and sustainable option to the conventional products. Thus, it helps them in gaining positive goodwill and impression in the market. According to the promotional policy of Tesla, if the product is distinctive and can meet the customer requirement effectively, then it will automatically gather popularity in the market without having any extensive marketing activities. Thus, Tesla is more concentrated in developing more updated products than investing in marketing activities. Other promotional initiatives such as inclusion of their patents in the open source movement help to create the positive impression about the brand and convey their objective of enhancing the global sustainability. Customer referral programs are also being initiated by them to increase the customer loyalty.
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Though Tesla is going well in the present business state of affairs and having favorable and positive future potential in the market. However, there are several areas which need to be improved by them in order to gain more competitive advantages from the market and to stable their position for the coming years. The recommended steps will be discussed in the following sections.
- In the current global economy, the growth rate of developing countries is more compared to the developed economies. Thus, it is important for Tesla to tap the market in the developing countries such as India and China along with the western markets. Moreover, in the recent times, government of India and China have also initiated the regulations regarding banning the petrol and diesel vehicles. Thus, these countries will also be huge market opportunities for Tesla. Moreover, initiation of services in more countries will help them to become a truly global organization along with increased brand awareness and equity.
- Tesla has started the production of their mass market car Model 3; however, it is being priced at $35000, which may not be affordable to a large section of customers. This is due to the reason that, a car priced at $35000 may not be called as true mass market model. Thus, it is of need for Tesla to introduce cheaper models in the market to reach out to larger customer segments along with achieving their goals of sustainable world (Graham-Rowe et al. 2012).
- Future of the electric cars depends on associated infrastructure such as charging points and stations. Thus, the superchargers being initiated by Tesla should be placed in various locations in a market prior to their entry. This is due to the reason that, customers will not get motivated to buy electric cars if they do not have the access to the infrastructure.
- The battery packs being offered by Tesla are offering more range compared to their competitors. However, in order to cater to customers from different regions around the world, they have to enhance the range of their battery along with their lasting ability. Only then customers will get motivated to shift from their conventional vehicles to electric vehicles.
- As Tesla is more oriented towards earned media than paid media, thus, initiation of social media marketing will be more beneficial for them. It will help them to engage with the customers effectively and can determine the expectation and requirement of the market. Moreover, the customer feedback regarding their existing products can also be effectively generated.
Conclusion
Thus, it can be concluded that, the key competitive advantage being gathered by Tesla is from their innovative and sustainable products. Initiation of distinctive marketing approach helps them to act as complimentary to their innovative products. The business approach being discussed in this report helps to conclude that Tesla has changed the existing scenario of automotive industry and market by raising the benchmark to a new height. However, there are some recommendations being discussed in this report. Effective implementation of these recommendations will help the organization in having sustainable development n the coming years.
References
Asthana, A. and Taylor, M. (2017). Britain to ban sale of all diesel and petrol cars and vans from 2040. [online] the Guardian. Available at: https://www.theguardian.com/politics/2017/jul/25/britain-to-ban-sale-of-all-diesel-and-petrol-cars-and-vans-from-2040 [Accessed 1 Oct. 2017].
Forbes.com. (2017). Forbes Welcome. [online] Available at: https://www.forbes.com/sites/siimonreynolds/2013/09/01/why-you-should-copy-teslas-way-of-marketing/#16a2927b4e04 [Accessed 2 Oct. 2017].
Gov.uk. (2017). Low-emission vehicles eligible for a plug-in grant – GOV.UK. [online] Available at: https://www.gov.uk/plug-in-car-van-grants [Accessed 1 Oct. 2017].
Graham-Rowe, E., Gardner, B., Abraham, C., Skippon, S., Dittmar, H., Hutchins, R. and Stannard, J., 2012. Mainstream consumers driving plug-in battery-electric and plug-in hybrid electric cars: A qualitative analysis of responses and evaluations. Transportation Research Part A: Policy and Practice, 46(1), pp.140-153.
Hardman, S., Shiu, E. and Steinberger-Wilckens, R., 2015. Changing the fate of Fuel Cell Vehicles: Can lessons be learnt from Tesla Motors?. international journal of hydrogen energy, 40(4), pp.1625-1638.
Helmers, E. and Marx, P., 2012. Electric cars: technical characteristics and environmental impacts. Environmental Sciences Europe, 24(1), p.14.
Lane, B. (2017). Electric vehicle market statistics 2017 – How many electric cars in UK ?. [online] Nextgreencar.com. Available at: https://www.nextgreencar.com/electric-cars/statistics/ [Accessed 1 Oct. 2017].
Martins, L.L., Rindova, V.P. and Greenbaum, B.E., 2015. Unlocking the hidden value of concepts: a cognitive approach to business model innovation. Strategic Entrepreneurship Journal, 9(1), pp.99-117.
Mayyas, A., Qattawi, A., Omar, M. and Shan, D., 2012. Design for sustainability in automotive industry: A comprehensive review. Renewable and Sustainable Energy Reviews, 16(4), pp.1845-1862.
Rajagopalan, S., Maitra, A., Halliwell, J., Davis, M. and Duvall, M., 2013, November. Fast charging: An in-depth look at market penetration, charging characteristics, and advanced technologies. In Electric Vehicle Symposium and Exhibition (EVS27), 2013 World (pp. 1-11). IEEE.
Schulze, C., Schöler, L. and Skiera, B., 2014. Not all fun and games: Viral marketing for utilitarian products. Journal of Marketing, 78(1), pp.1-19.
Tesla.com. (2017). About Tesla | Tesla. [online] Available at: https://www.tesla.com/about [Accessed 2 Oct. 2017].
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