Tesla is one of the world’s leading electric vehicle and energy storage companies. Its cutting-edge technology, appealing design and innovation, and excellent customer service have revolutionized the industry. On the other hand, Tesla needs to develop and implement business strategies that will set it apart from its competitors to remain competitive and succeed in the highly competitive market. This paper will discuss how Tesla uses differentiation, core competencies, and corporate strategies to stay competitive and gain a market share in the electric vehicle market. The study will also examine how Tesla’s methods fare in slow-cycle and fast-cycle markets.
Business-Level Strategies
Tesla is a well-known electric vehicle (EV) manufacturer and energy storage company. It is at the forefront of the EV industry and the global leader in EV research, development, and manufacturing. Tesla has transformed the transportation industry by making EVs more affordable and accessible to the general public. As a result, Tesla has become one of the world’s most valuable and well-known companies. Tesla operates in a highly competitive industry. Hence, it must develop and implement effective business-level strategies to stay competitive and achieve long-term success. After careful consideration, Tesla’s most appropriate business-level strategy is differentiation. Differentiation is a business strategy that distinguishes a company’s products or services from its competitors by providing distinctive features, benefits, and services (Michael, 1). By distinguishing its products and services from competitors, Tesla can provide customers with unique and innovative products and services and capture a larger market share.
Tesla has differentiated its products and services by emphasizing cutting-edge technology, appealing design and innovation, and an outstanding customer experience. Tesla has also distinguished itself by providing exclusive features such as Autopilot, Supercharging, and Autopark that are unavailable on competing EVs. Tesla has also distinguished itself by providing a comprehensive suite of energy storage solutions, such as the Powerwall and Powerpack, as well as unique services, such as its concierge delivery service. Tesla successfully differentiating its products and services has captured a significant market share. As of February 2023, the company had the highest market capitalization of any automaker at $685.43 billion, and its global market share of EVs is estimated to be around 70% (Tesla (TSLA) – Market Capitalization, 3). Tesla is also the industry leader in terms of customer satisfaction and loyalty.
Tesla’s core competencies are required to implement its business-level strategies effectively. Tesla has prioritized R&D, design and innovation, and the customer experience. Tesla has created and sold competitively priced and innovative EVs while providing a superior customer experience thanks to these core competencies. Tesla’s core competencies have also been used to differentiate its products and services, such as Autopilot, Supercharging, and Autopark, as well as to provide comprehensive energy storage solutions, such as Powerwall and Powerpack.
Tesla has prioritized innovation and quality to compete in the EV market, developing a comprehensive suite of products and services tailored to their customer’s needs and expectations. Tesla has prioritized providing an excellent customer experience by providing concierge delivery services, charging station access, and over-the-air software updates. Overall, Tesla has effectively implemented its business-level differentiation strategy and remained competitive in the EV industry by leveraging its core competencies. The company has successfully differentiated its products and services, captured a significant market share, achieved the highest market capitalization of any automaker, and led the industry in customer satisfaction and loyalty.
Corporate-Level Strategies
Tesla’s corporate-level strategy is value-creating diversification, which includes related constrained and related linked diversification. Expanding operations into new, related areas with growth and return possibilities is a strategy known as “diversification for value” (Michael, 1). This diversification is best demonstrated by Tesla’s foray into new industries, including solar power, energy storage, and automobiles. An excellent long-term strategy for Tesla is its pursuit of related limited and related linked diversification. By distributing its risk across several industries, this approach enables the business to broaden its clientele and improve its prospects of success. Tesla can also gain access to new markets, technologies, and resources by diversifying into related industries, allowing the company to increase its market share and customer base while lowering costs.
Tesla’s diversification strategy is helping the company increase its market share and customer base in the energy storage sector. Tesla expanded its energy storage business and provided customers with a comprehensive package of products and services by acquiring SolarCity, enabling the company to become more competitive in the energy storage market while providing more options to customers (Manufacturing.net, 2). Furthermore, the company’s diversification has enabled it to leverage technologies, resources, and expertise from its other businesses to develop innovative solutions for its customers.
Tesla’s decision to pursue related constrained and related linked diversification is also assisting the company in cost-cutting. Tesla can spread its cost structure across multiple markets by diversifying into related industries, allowing it to reduce costs in each market. Lowering production costs enables the company to charge competitive prices for its products and services. Furthermore, leveraging technologies, resources, and expertise from other businesses can reduce the cost of R&D.
Finally, the corporate-level strategy of value-creating diversification: related constrained and related linked diversification chosen by Tesla is a good choice for the company’s long-term success. This strategy allows the company to diversify its customer base and increase its chances of success by spreading its risk across multiple industries. Furthermore, it allows the company to increase its market share and customer base while lowering costs by leveraging technologies, resources, and expertise from its other businesses.
Competitive Environment Analysis
Traditional automakers such as Ford, General Motors, and Volkswagen are among Tesla’s most significant competitors in the automotive industry. These companies have been in the automotive industry for decades and have a strong domestic and international presence (Manufacturing.net, 2). These traditional automakers have business strategies that focus on producing various models at various price points and offering a wide range of features and options. In addition, they have sophisticated marketing strategies in place to promote their products.
These corporations have expanded into other industries like finance and insurance and product categories like trucks and SUVs. They have also attempted to expand into international markets to take advantage of new opportunities and gain access to new technologies and resources. On the other hand, Tesla has a business strategy focusing on producing high-end electric vehicles that use advanced technologies such as Autopilot and Supercharging. Tesla has also implemented a high-end marketing strategy to differentiate its products and establish a strong brand image. Tesla has a value-creating diversification strategy at the corporate level, which has allowed the company to expand into other sectors such as energy storage, automotive, and solar power.
Competitive Environment Conclusion
According to the analysis above, Tesla is more likely to be successful in the long run due to its focus on value-creating diversification and advanced technologies. This strategy has allowed the company to expand into related markets while gaining access to new technologies and resources. Furthermore, Tesla’s emphasis on high-end electric vehicles, Autopilot, and Supercharging gives the company a competitive advantage over traditional automakers. Tesla’s rising stock price, growing market share, and growing presence in the automotive industry are all evidence of the company’s long-term success. The recent sharp increase in Tesla’s stock price suggests that investors have faith in the company’s long-term prospects. Additionally, both Tesla’s presence in the automotive business and its market share in the electric car industry have grown steadily. These patterns indicate that Tesla’s approach is effective and that the business will probably see long-term success.
Market Cycles
The slow-cycle market refers to a market in which products have long-term durability and replacements are uncommon. This market is distinguished by slow, steady growth and long-term customer loyalty (Michael, 1). Furniture, appliances, and automobiles are examples of slow-cycle markets. A fast-cycle market is one in which products have short lifespans and frequent replacements are required. This market is distinguished by rapid growth and frequent product updates (Michael, 1). Computers, cell phones, and software are examples of fast-cycle markets.
Based on the preceding analysis, Tesla’s corporate-level strategy would be the same in slow-cycle and fast-cycle markets. Diversification for value is a strategy that involves expanding the company’s business into new, related markets with the potential for growth and returns (Michael, 1). Tesla’s expansion into other sectors, such as energy storage, automotive, and solar power, which are all slow-cycle markets, exemplifies this type of diversification. Furthermore, Tesla’s emphasis on producing high-end electric vehicles that use advanced technologies like Autopilot and Supercharging applies to both slow-cycle and fast-cycle markets.
Tesla’s rising stock price, growing market share, and growing presence in the automotive industry all support this position. Tesla’s stock price has risen significantly in recent years, indicating that investors believe in the company’s long-term success. Furthermore, Tesla has steadily increased its market share in the electric vehicle industry, as has its presence in the automotive industry. These trends show that Tesla’s strategy is practical and applicable to slow and fast-cycle markets.
Sources
Michael A. Hitt. 2020. Strategic Management: Concepts and Cases: Competitiveness and Globalization. 13th ed. Cengage Learning.
Manufacturing.net. (2021). Who Are Tesla’s Biggest Competitors? Manufacturing.net. Web.
Tesla (TSLA) – Market Capitalization. (n.d.). Companiesmarketcap.com. Web.