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Focused Differentiation Strategy

Question:

Discuss about the Strategic Management for Business Level Strategy.

  • Electronic vehicle infrastructure structure acted as biggest for the company to gain appreciation in the target market.
  • High level of confidentiality helped organization in implementing their action plan easily. Also confidentiality decreased the problem of data theft and other crimes as well.
  • Low cost of marketing helped the company invests their funds in other resourceful activities (Birk 2015).
  • In today’s era, Tesla Motors faces the difficulty in arranging funds due to which they face difficulty in expanding their business.
  • Also Tesla faces high debt load which cuts the earnings of the organization.
  • Due to emergence of electronic vehicles in the society, the governments also support the customers to purchase such vehicles from the company and earn rewards.
  • Increment in the prices of oil and gas will give a push to the demand of electric vehicles due to which the company will also increase the supply of them in the market (Radius 2017).
  • Lack of adequate knowledge about EV in the minds of customers is the biggest threat to the organization Tesla. People are inefficient in analyzing the benefits of such vehicles and its use due to which the demand of the product decrease. Also it dissatisfies them as they do not know how to use them (Tansel 2015).

Business Level Strategy: the business level strategy which is currently used by Tesla is focused differentiation. Focused differentiation refers to the strategy which combines elements of two or more generic business strategies of Porter. Cost leadership, differentiation and focus are the three main strategies with the blend of which the focus differentiation strategy is formed. Under this strategy the organization Tesla focused on small groups of customers present in the target market and provides them differentiated products so as to meet their demand present in the market. Tesla targeted the early adopters present in the market who hold high income and have the potential to purchase the electric vehicles supplied by the company. Understanding the above statements, it was seen that the organization identified and picked the customers who have keen interest in buying the technological innovative products present in the market and have the serious mindset to buy the product. This method helped the company to accurately analyze the prospective buyers and serve the product to them and create identification in the market (Tansel 2015).

Corporate Strategy: The corporate strategy which Tesla used is its business functions is the mixture of product development and vertical integration in the manufacturing process. With the use of product development strategy the organization aimed to become the leading market innovator in the field of automotive. The company also invested in the field of research and development so as to make their vehicles more affordable and attractive in the market. The main aim of the organization the initiation of this strategy was to enter in the high end target market under which the customer only requires the quality product for which they are willing to premium amount as well. Later after receiving satisfactory results from the customers they aimed to drive to increase the sales, for this purpose the company reduced the prices of their vehicles due to which more products were sold in high volume. This strategy helped Tesla to substantially gain the customers in the market (Hill 2013).

Co-operative Strategy: under the co-operative strategy, the organization developed a strategic alliance with other profound companies present in the target market. This process helped the organization to make use of fame of other companies and initiate he sale of their organization as well. Tesla formed their alliance with many company like Mercedes Benz, Toyota, Daimler, with the initiation of this process the company also eliminated the competition as these are those companies which are present in same target market and serve same kind of products. So, co-operative strategy gives advantage to both the company and cuts competition. Further this type of strategy helped the company to equalize their skills which lacking in their organization’s process. The company made use of resources present with other company with the help of which they developed their core competencies in the market. Also international expansion program was also initiated in the company with the implementation of co-operative strategy (Nykvist, and Nilsson 2015).

International Level Strategy: this strategy refers to the plan that directs the international transaction happening between the companies of different countries. In order to initiate the international transaction the company needs to take care of the language, belief and culture of the other so as to initiate the transaction without any hindrance. The international strategy of Tesla played an important role in helping the company to grow in the international market of automobile. Transactional international business strategy was initiated by Tesla which helped the electric vehicles to increase the sales worldwide (Hoang, and Rothaermel 2016). Under this process the company co-operated and co-ordinated the business between the head office and other operational divisions of the organization. This strategy of the company helped them to circulate their business actins worldwide but keep the profits centralized only. Also this strategy helped the organization to gain the satisfaction of local customers by spreading their business in different part of the world. The area where Tesla is most prominent in serving their products is US, Australia, Asia, Canada and Europe. Also the company headquartered in California (Rothaermel 2015).

  • Long Production Cycle: long process of production cycle leads to increasing demand of the product in the competitive market and decrease in the supply of them. Resulting to which the customers get agitated while waiting due to which their level of satisfaction decreases and the customers switches to products of competitors brands. Tesla needs to speed up their production process otherwise it can act as a major threat for the organization. Due to this issue the company is also unable to meet up to the demand of the product forecasted in the target market. One of the reason due to which the organization faces this issue is the lack of adequate human resource, lack of human resources leads to increase in the production and manufacturing process and substantially the customers receives the products late. Thus, such complication shall be resolved by the organization on the highest priority so as to increase the sales volume of the product currently present in the market (Martin 2014).
  • Rise in price of raw material: the company Tesla spends billions of dollars on the purchasing the massive batteries and sub-parts of the vehicles. supposing if the company produces around 500,000 cars then they need to purchase a large amount of lithium ion batteries which cost a huge expense to the company due to which the prices of the product also increases. Also the company faces the dilemma that if they sell the product at high prices, very few customers gets interested in actually buying it, and if they lowers the prices then they are unable to compensate with the expenses of raw material. Also it shall be noted that the company cannot even replace the raw material expense of lithium with that of some other cheap material like silicon because with the use of silicon the products are not made according to the expectations. Thus, the high prices of raw material acts as a major concern for the company (Chen, and Perez 2015).
  • Cut-throat competition: although currently the company is gaining competitive edge in the target market but this situation will not survive for a long time as there is cut throat competition present in the market of electric cars. Companies like, Honda, Toyota, Ford etc. have also now gained the competence of producing the electric vehicles, so this gives the power to the customers as they can easily switch between many other companies products present in the market. Electric vehicles are the sole product with the help of which the company is sustaining in the target market and if the customer will find alternative for this product then will become difficult for the company to survive their current growth in the target market. Due to which competition acts as a major issue of concern in the target market (Mosey, and Kirkham 2017).

Conclusion and Recommendations

Thus in the limelight of above-mentioned events it shall be noted that the company Tesla has the competence to ace the target market they just need to analyze and eliminate their strategic issues. Further the recommendation to Tesla Motors is discussed below:

  • The company should make use of upgraded technology and employ adequate human resource who can match up to the product and create them without any issues. Qualified human resource will also help the company to acknowledge new and innovative technology and make use of it in the production process to increase its pace.
  • Tesla should find supplier of raw material who sell the product at feasible rates. This will help the company to decrease the cost of production.
  • Lastly, in order to eliminate competition the company should focus on their core competencies and effective work on them so as to gain competitive edge in the target market (Wieland, Hartmann, and Vargo 2017).

References

Birk, D., 2015. Tesla Motors, Inc. Market Analysis and Definition.

Chen, Y. and Perez, Y., 2015. Business model design: lessons learned from Tesla Motors. In GERPISA International Conference.

Hill, J, 2013. electronic vehicle sale expected to grow globally to 1.8 miilion by 2023. Viewed on November 6, 2017 from https://cleantechnica.com/2014/08/12/electric-vehicle-sales-expected-grow-globally-1-8-million-2023/

Hoang, H. and Rothaermel, F.T., 2016. How to Manage Alliances Strategically. MIT Sloan Management Review, 58(1), p.69.

Martin, C., 2014. Driving change in the battery industry(Doctoral dissertation, Nature Research).

Mosey, S. and Kirkham, P., 2017. 2 Entrepreneurial strategy. Building an Entrepreneurial Organisation, p.21.

Nykvist, B. and Nilsson, M., 2015. Rapidly falling costs of battery packs for electric vehicles. Nature Climate Change, 5(4), pp.329-332.

Radius, 2017. Tesla Motors: achieving excellence and innovation overseas. Viewed on November 6, 2017 from < https://www.radiusworldwide.com/knowledge/case-studies/case-study-tesla-motors>

Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.

Tansel, A.K., 2015. Analysis of Tesla Motors’ Marketing Communications Strategy.

Tansel, A.K., 2015. Marketing Report on" Tesla Motors".

Wieland, H., Hartmann, N.N. and Vargo, S.L., 2017. Business models as service strategy. Journal of the Academy of Marketing Science, pp.1-19.

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