Tesla Motors designs, develops, manufactures, and sells high performance fully electric vehicles and energy storage products. It has established its own network of vehicle sales and service centers, as well as supercharger stations around the world to accelerate the widespread implementation of electric vehicles. Academic research shows that as of December 31, 2015, it operated 208 locations, along with 585 supercharger stations in North America, Europe, and Asia. The company currently produces and sells to fully electric vehicles, the model S sedan in the model X sport utility vehicle.
The purpose of the competitor analysis and strategy is to implement a strategy for Tesla Motors as it seeks to enter the market of South Korea while at the same time maximizing its competitive strengths and mitigating its competitive weaknesses locally with competitors and globally. The competitive advantage is viewed as any activity that create superior value above its rivals. This is also known as differentiation strategy. This type of strategy is described as a company differentiating a product or service that is created or perceived to be unique throughout the industry. It was noted in research the differentiation does not allow a firm to ignore costs; it makes a firm’s products less susceptible to cost pressures from competitors because customers see the product as unique and are willing to pay extra to have the product with the less desirable features. In regards to market opportunity, the research shows that South Korea has a good market opportunity and therefore would be fortunate to set the business within that country. Finally, although there are many opportunities in South Korea, Tesla will need to alleviate most of their risk by scaling their business to manufacture and deliver automobiles more quickly to their customers. Research also shares that they need to implement a regional market plan or campaign that will educate their South Korean consumer on why the Tesla’s electric cars are better value than the traditional fossil fuel burning vehicle. But most importantly, the government should be involved and provide incentives which in turn will create an environment friendly vehicle.
Table of Contents
Executive Summary 2
Company Overview 5
Comparing Strengths 7
Comparing Weaknesses 8
Tesla’s Competitive Advantage Relative to Competitors 9
Recommended Competitive Strategy for Tesla 10
The purpose of this assignment is to conduct a competitor analysis and develop a competitive strategy for how Tesla Motors can win customers in South Korea. In doing so, I will try to accomplish three objectives. First, I will do research on one global and one local competitor that may pose a threat to the Tesla motor Corporation. The local competitor that I have chosen to do research on is Hyundai Motors and the foreign competitor to Tesla is Volkswagen. Secondly, I will reveal the competitive strengths and competitive weaknesses of my chosen competitors and then compare those strengths and weaknesses to Tesla Motors. As stated in class lecture notes, not all of Tesla’s strengths are competitive advantages, since competitors may have similar strengths. As a result, this assignment dictates that the Tesla organization should look for those very few competitive strengths that will give Tesla a differentiator or cost advantage. Lastly, the application of Porter’s Generic strategies will be used to recommend and explain a competitive strategy that will attract new customers by leveraging Tesla’s firm’s competitive strengths and/or mitigate its competitive weaknesses a relatively low brand recognition by creating businesses in a niche market.
The internal combustion engine revolutionized human travel, migration, and urbanization that had been largely shaped by the rail industry. Prior to market domination, competing technologies challenge the early auto industry; steam powered and electric. Personal vehicle transport through electricity dates back to the mid-18th century. By the 1900’s, both electric vehicles and combustion engines controlled the market. Henry Ford put the race to an end with the introduction of the first mass-market internal combustion engine vehicle at less than half the cost of an equivalent electric engine. The automobile industry requires an entire supporting network infrastructure that can challenge in alternative fuel source. The cost of entry in new fuel transportation stifled many attempts over the last hundred years until the emergence of the Tesla Motors Company.
Founded in 2003, Tesla sought out to realize a vision of a high-performing all electric vehicle. Pioneer and innovator, Elon Musk joined as chairman in 2004 and was instrumental in achieving his vision. Elon Musk had a simple strategy to enter a challenging market, start with a high cost low production electric vehicle then moved to mass market. When deciding a rollout strategy, Tesla decided to enter in the premium luxury market to enable sales at a price that could sustain development (Bibbeisi, 2017). The roaster was launched in 2008 and field Tesla’s cutting edge battery technology and electric powertrain. From there, Tesla designed the world’s first ever premium all electric sedan from the ground up. Tesla’s vehicles are produced at its Fremont factory in California, where the vast majority of the vehicles components are also may as Tesla continues to expand its product line. Tesla’s production plant is also set to increase to a rate of 500,000 vehicles a year by 2018 (Tesla's Motors, 2017). Supporting Tesla’s automotive and energy products is a Gigafactory. The facility is designed to significantly reduce battery cell calls and by 2018 produce more lithium ion batteries annually then were produce worldwide in 2013. Tesla is able to create thousands of jobs largely because they are able to bring cell production in-house and manufacture batteries at the volumes required to meet production goals. Tesla is excited about its future largely because of being able to make their cars more accessible and affordable, accelerating the advent of clean transport, and clean energy production. The company states that electric cars, batteries, and renewable energy generation and storage already exists independently, but when combined they become even more powerful which is what they are striving for in the future (Tesla's Motors, 2017).
In previous research, it was recommended that Tesla expand its global awareness in South Korea. It was revealed that in order to be successful in a new market, Tesla will need significant resources within the country to be successful. South Korea would be able to provide a workforce that are skilled in electrical engineering and the craftsmanship required to manufacture and maintain Tesla’s fleet of electric automobiles. It was also noted that the region will also have the infrastructure in place to allow customers to charge and properly utilize their vehicles. Because the economy of South Korea has experienced less inflation and most citizens of South Korea have a high level of disposable income, purchasing a Tesla vehicle should create a financial hardship for the average citizen. Moreover, South Korea offers a free zone for trade which will make entry into the region a simpler process in comparison to other regions. It was pointed out in previous research, in order for Tesla’s to take advantage of the opportunities in South Korea, it will need to alleviate risk by scaling their business to manufacture and deliver automobiles more quickly to their customers. In addition to that, they wouldn’t also need to devise a regional marketing campaign that will help their South Korean consumer understand why Tesla’s electric cars are a better value than the traditional, fossil fuel burning vehicle.
Tesla (Kissinger, 2017)
Highly innovative processes
High control on vehicle production
Hyundia (Analysis, 2017)
Broad product portfolio
Robust research and development capabilities
Geographic these diversification
Volkswagen (Jurevicius, 2016)
The widest brand portfolio among all automotive companies
New “Together-2025” strategy by introducing 30 new electric vehicles by 2025.
Tesla (Kissinger, 2017)
Limited market presence
Limited supply chain
Hyundai (Analysis, 2017)
Frequent recalls might impact brand image
Labor issues disruption operations
Volkswagen (Jurevicius, 2016)
Negative publicity weakening the whole Volkswagen brand
The highest recall rate in the US market
Little expertise and no competence in making battery driven vehicles
Tesla’s Competitive Advantage Relative to Competitors
This week’s lecture material teaches us that many firms strive for a competitive advantage, but few truly understand what it is or how to achieve and keep it. By definition, a competitive advantage can be gained by offering the consumer a greater value than the competitors, such as by offering lower prices or providing quality services or other benefits that justify a higher price (Competitive Advantage, 2009). The author emphasizes that the strongest competitive advantage is a strategy that cannot be imitated by other companies. Listed below are the competitive advantages by Tesla that have proven to be noteworthy in their strategy to provide the services and financial stability that would allow them to dominate the future of automobiles. Those competitive advantages include (Shahan, 2015):
The battery supply chain is building for itself (and maybe some friends)
Its wonderful supercharger network
Software that is several leagues above the competition
A reputation for building superb products that “wow” people
A reputation for wanting to serve customers in a direct, honest way-not just take their money and have.
Recommended Competitive Strategy for Tesla
My recommendation for the type of competitive strategy that Tesla should continue to employ would be that of Differentiation Strategy. Differentiation strategy is described as a company differentiating a product or service that is created or perceived to be unique throughout the industry. According to academic literature, differentiation does not allow a firm to ignore costs; it makes a firm’s products less susceptible to cost pressures from competitors because customers see the product is unique in are willing to pay extra to have the product with the desirable features (Competitive Advantage, 2009). It was pointed out that customers see the product is different from the competing products and they like the product features, customers are willing to pay a premium for these features. The Tesla motor Corporation is confident utilizing the strategy that can grow in a global automotive market despite aggressive competition.
Analysis, H. M. (2017). Hyundai Motor Company SWOT Analysis. Market Line, 1-9. Retrieved from Hyundai Motor Company SWOT Analysis.
Bibbeisi, K. (2017, October 11). Quest. Retrieved from Tesla.
Competitive Advantage. (2009). In Encyclopedia of Management 6th edition (pp. 90-94). Detroit: Cengage Learning.
Jurevicius. (2016, December 10). SWOT Analysis of Volkswagen. Retrieved from Strategic Management Insight: http://strategic management insight.com/swot-analysis/Volkswagen-swot analysis.HTML
Kissinger, D. (2017, February 21). Tesla Motors Incorporated SWOT Analysis and Recommendations. Retrieved from Panmore Institute: http://panmore.com/Tesla-motors-Inc.-swot-analysis-recommendations
Shahan, Z. (2015, October 10). Tesla's Competitive Advantages. Retrieved from EV Obsession: http://EV Obsession.com/Tesla-competitive advantage-five-big-ones/
Tesla's Motors. (2017, October 11). Retrieved from Tesla: http://www.Tesla.com
Business level strategy and Porter's Generic strategies: https://saylordotorg.github.io/text_mastering-strategic-management/s09-selecting-business-level-strat.html
Porter’s Generic competitive strategies: http://ezproxy.umuc.edu/login?url=http://go.galegroup.com.ezproxy.umuc.edu/ps/i.do?id=GALE|CX3273100118&v=2.1&u=umd_umuc&it=r&p=GVRL&sw=w&asid=6464bf8e2b3156986083c5e7b7d03dfd
Sources of Competitive advantage
1. Competitive advantage: http://ezproxy.umuc.edu/login?url=http://go.galegroup.com.ezproxy.umuc.edu/ps/i.do?id=GALE|CX3273100043&v=2.1&u=umd_umuc&it=r&p=GVRL&sw=w&asid=2881dc28e9af842b30b8f17756a19da2
2. differentiation: http://sk.sagepub.com.ezproxy.umuc.edu/reference/publicrelations/n119.xml