Case Study
Overview of Organization
Tesla, Inc., initially Tesla Motors, frequently referred to as Tesla, is a world-famous American corporation that operates in the sphere of so-called clean energy, that is, eco-friendly and accumulable. According to the company’s official website, its “mission is to accelerate the world’s transition to sustainable energy” (About Tesla, para. 1). Simply stated, Tesla, Inc. seeks to substitute fossil fuels, which the world is still dependent on, with zero-emission technologies as soon as possible.
The most important market of the corporation under review is the United States, where it is headquartered. There, Tesla’s market share reaches approximately 3.66%, making it a market leader (Carlier, 2021). Additionally, the company continues expanding its presence in China, which is also relevant to mention among its key markets. European countries are a target as well so that it is possible to promote clean energy technologies worldwide.
The best-known product Tesla, Inc. manufactures is several models of electric cars. Actually, the name of the company is probably the first association with this category of vehicles. In 2020, the corporation delivered almost 500,000 cars around the globe, predominantly the Model 3 that served to bring electric transport to the mass market (Carlier, 2021). In addition, Tesla offers solutions for generating and accumulating clean energy, such as solar battery storage systems, within the Tesla Energy project. The company presents the “infinitely scalable” devices as an effective and efficient way to keep buildings powered during outages (About Tesla, para. 1). Both categories of products are promoted actively as the shortest way to sustainable energy.
In 2003, a group of engineers who were willing to demonstrate the strengths of electric vehicles in comparison with traditional gasoline engines founded their own business. In no longer than five years, the entire humanity learned about their creation as a manufacturer of the “first ever premium all-electric sedan” (About Tesla, para. 2). That was the Tesla Model S, which soon became the world’s best electric car in terms of safety, efficiency, and performance.
The following models, at least the most famous among them, were substantial achievements as well. Notably, the Model X that began production in 2015 received 5-star safety ratings from the National Highway Traffic Safety Administration (About Tesla). The Model 3, which the company introduced two years later, is a brilliant example of a higher volume for a lower price. Since 2017, the products by Tesla, Inc. continue to become accessible to bigger and bigger amounts of people around the globe.
SWOT Analysis
Strengths
One of the key strong points Tesla has at the current stage of its development is apparently innovativeness. The company focuses on the newest, the most advanced technologies and has been investing in research on them for several years. Thus, in 2018, the investments reached $1.8 billion, due to which the corporation outbalanced the majority of its competitors (Tesla SWOT analysis – Strategic analysis of Tesla Motors, 2021). The values of that kind help to attract conscious, future-oriented customers, for whom both technical progress and environmental friendliness are paramount priorities.
The employment rate is another strength of the corporation under review; particularly, it is in the list of the most favorable workplaces for young employees. The “innovative and diversified” corporate culture encourages the youth to invest their energy and talent in the company (Tesla SWOT analysis – Strategic analysis of Tesla Motors, 2021, para. 6). Due to that, Forbes mentioned Tesla, Inc. among the best employers of 2019.
Weaknesses
Utilizing the most recent technologies, which is, in one respect, Tesla’s major strength, represents several drawbacks by contrast. First, mechanical complications, as well as production risks, grow together with technological standards. Therefore, the company faces constant manufacturing challenges that may lead to delays in distribution (Tesla SWOT analysis, 2020). Launching new products contributes the most substantially to the seriousness of the problem, apparently, due to the need for further technological advancement of assembly lines.
Another source of manufacturing complications is the limitedness of force that aggravates the existing problems with delivery. The number of functioning plants, hence that of cars possible to produce at once, is dramatically small (Tesla SWOT analysis – Strategic analysis of Tesla Motors, 2021). Although Tesla, Inc. plans to open more factories, low production volumes remain to be one of the key weaknesses of the company.
Opportunities
The greatest opportunity Tesla currently has is that of a market and, consequently, sales expansion. Notably, the company is extending its presence in Asian markets that are “the world’s fastest-growing,” which can boost its profitability (Tesla SWOT analysis – Strategic analysis of Tesla Motors, 2021, para. 24). In addition, the global demand for electric vehicles among other eco-friendly goods has grown considerably in recent years. Meanwhile, Tesla, Inc. is one of the earliest businesses in the given field, which favors the growth of its popularity around the globe. It would be reasonable for the corporation at the current stage to focus more closely on European market, as the countries of this region are highly environmentally conscious.
Threats
Although being a pioneer in electric car production is a strong point, the corporation under review is relatively young. Therefore, if its more experienced rivals adopt the relevant technologies as well, that will “put Tesla in a very contentious competition” (Tesla SWOT analysis – Strategic analysis of Tesla Motors, 2021, para. 31). The threat will grow especially serious in case other companies begin to manufacture high-end vehicles as well. In the mass-market segment, Tesla cars remain comparatively expensive, which may make a considerable amount of both existing and potential customers search for more affordable alternatives.
PESTLE Analysis
Political Factors
The political aspects that Tesla needs to consider at the current stage of its development predominantly determine additional opportunities. Thus, the company has a chance to improve its financial performance with the help of governmental incentives for a contribution to minimizing carbon emissions (Kissinger, 2019). Expanding free trade agreements may factor into the prospects of the corporation as well, providing it with a possibility to broaden its presence and intensify its activity at a global scale.
Economic Factors
The economic conditions that influence the entire market of electric cars, hence the business performance of the company under review, are as follows. In one respect, Tesla, Inc. can benefit from decreasing the costs of batteries as well as renewable energy solutions since the reduction will expectedly boost the popularity of such products (Kissinger, 2019). Along with that, there always exists a threat of economic instability, which may put the company’s financial productivity at risk.
Sociocultural factors
The modern social and cultural megatrends include the so-called low-carbon lifestyle that, in turn, involves an increasingly higher demand for renewable energy. Consequently, “electric vehicles and related products” remain among the most profitable categories of goods (Kissinger, 2019, para. 8). Considering that the tendency for improving eco-friendliness is global, Tesla, Inc. has broad prospects in literally any market, primarily, a range of European countries that focus on lowering the emissions of carbon.
Technological Factors
The high intensity of technological advancement in the automotive sphere is the key parameter to influence Tesla’s business performance. Notably, the “high rate of technological change” provides additional opportunities for further development and, subsequently, attracting new customers (Kissinger, 2019, para. 10). By contrast, the given factor bears a threat of rapid obsolescence of the vehicles produced in case the manufacturer is unable to react immediately to recent innovations. That may lead to a reduction in demand and, eventually, a bankruptcy unless the company succeeds in adapting to the new conditions.
Environmental Factors
As mentioned in previous sections, the modern civilization seeks to grow eco-friendlier, which results in a variety of so-called environmental programs. Those involve, particularly, control over carbon emissions, development and implementation of waste disposal standards, and other (Kissinger, 2019). In the context of that, electric cars, batteries, and solar panels Tesla produces become a necessity, as they allow for generating, storing, and using clean energy. The amount of new customers, consequently, is likely to grow together with that of future-oriented people across the world.
Legal Factors
Several legal issues can influence the business as well as financial performance of Tesla, Inc. both in the United States and abroad. Kissinger (2019) mentions international patent protection among those, which would provide the company with a chance for a safe expansion in foreign markets. Another issue to factor into the growth prospects of the corporation is direct sales that are legal in a range of states in the USA. Several other states prohibit them, however, which bears a potential threat of a less intensive further promotion of Tesla at the federal level.
Identification of Innovation Possibilities and Innovation Selection
The majority of the threats that Tesla, Inc. may face derive apparently from the comparatively high prices for its products that can make potential customers opt for less expensive brands. A situation of that kind may require such innovations as a target audience change, a price policy reconsideration, or cheapening the production process. According to Etherington (2020), the major determinant of the prices for the company’s final products is the expensiveness of the materials as well as technologies utilized in manufacturing batteries. Considering that, a concept of a both sustainable and affordable battery for electric vehicles would doubtlessly be the most relevant innovation.
Marketing Plan
Organisation Mission
As mentioned above, Tesla, Inc. sees its mission as accelerating the world’s transition to clean energy. This formulation presupposes maximal accessibility, so that more people are able to replace gas-engine vehicles with electric alternatives. Hence, the purpose of the corporation at the given stage of its business performance lies apparently in improving the affordability of its products without losing the quality. A successful implementation of the innovation would allow for both preserving the existing loyal customers and attracting new purchasers from a broader variety of social groups than high-end products do.
Organisation Objectives
The primary objective within the framework of a price reduction is to identify and realize the necessary technological and manufacturing changes. In addition, it is essential to estimate and analyze the probable broadening of the target audience after the company expands in the mass market. Finally, the innovative batteries, as well as the cars bearing them, will probably need additional promotion, which is another point in the list of objectives.
Marketing Audit
The mass market of electric vehicles, which Tesla, Inc. is planning to enter, is currently at the stage of active development. The popularity of such goods grows year after year, following the megatrend of environmental friendliness, in particular, carbon emission reduction. Due to that, the global sales of electric cars have been rising throughout the recent decade. Even the COVID-19 pandemic had no negative impact on the demand, notwithstanding “the overall downturn of the automotive sector” (The global electric vehicle market overview in 2021: Statistics & forecasts, 2021, para. 7). Specifically, the global amount of light battery vehicles reached 3,250,000 in 2020, which is 43% higher in comparison to the previous year.
Despite the growth, it is worth noting that the market remains at the beginning of its expansion, as electric cars still make the minority. This is, however, a positive rather than negative factor since, along with the stable increase in demand, the initial stage of development means broad prospects. The most substantial share of new battery car registrations in recent years belongs to Europe. This is derivable from the stimulus measures a range of European governments are currently taking (The global electric vehicle market overview in 2021: Statistics & forecasts, 2021). China and the USA occupy, respectively, the second and the third positions.
The analysis of the electric vehicle market allows assuming that the dominant mode of competition in it is combined, as it involves both comparative and competitive advancement. Although the latter concept “is rapidly disappearing in the context of today’s digital economy,” it continues to factor into the promotion of recent technological advancement and innovations (Chin, 2020, para. 3). Simply stated, competitive advancement occurs when a certain corporation has the given technology, while its rivals do not.
Regarding comparative advancement, its key parameter is the price; notably, the company that manages to provide the same item at a lower cost than its competitors do gains benefits. In mass-market products, financial aspect is of considerable importance by definition. Meanwhile, an effective way to reduce the price for the final product lies in modifying the technology of its manufacturing, which Tesla, Inc. is actually planning to do. This is the role comparative advancement plays in the modern market of electric vehicles.
Currently, the majority of countries, both developed and developing, focus on distributing battery cars as a promising solution for the upcoming energy shortage as well as air pollution. The further strengthening of the trend presupposes an intensive use of all possible distribution channels. Among those, indirect channels are traditionally dominant, notably, various countries have representative companies of a particular brand that are responsible for all transactions as well as services (Sales channel, 2021). However, direct sales take place as well since they have a range of reliability-related benefits. Regarding communication, the vast majority of the progressive population that makes the target audience of battery cars are active Internet users. Therefore, the World Wide Web becomes the most promising channel for interaction between manufacturers and consumers.
There are several most common reasons for purchasing an electric car that may serve to categorize the customers. Thus, one group consists of so-called early adopters, that is, the enthusiasts who “crave originality and newness” (Who buys an electric car? 2017, para. 3). For such people, possession of a battery vehicle means freshness, innovativeness, and being different. However, this category will most probably dwindle over time since such transport is becoming more common, hence less outstanding, year after year.
In addition to the temporary sense of uniqueness, driving an electric automobile is considerably cheaper as compared to a car with an internal combustion engine. This aspect is of special importance to multi-child families that are bound to make numerous short journeys throughout the day. For this group of customers, affordability is an essential parameter as well, which drives to a conclusion that large families with many children will be among the purchasers of the mass-market Tesla model.
The third reason why the demand for electric vehicles continues to grow is, naturally, eco-awareness. More and more people concern themselves about minimizing emissions and, consequently, air pollution in parallel with the global temperature rise. In addition, it is worth noting that pollutants from both petrol and diesel vehicles have been proved to aggravate cardiovascular and respiratory illnesses (Who buys an electric car? 2017). The customers of this category see replacing gas-engine cars with electric alternatives as a suitable solution to the given problems.
Marketing Objectives
The key objective of promoting the innovative technology, which would allow for a price reduction, doubtlessly lies in targeting new customers. From the perspective of the existing purchasers, it is essential to retain them, so that the overall customer base continues to expand. Another desirable consequence of growth, hence another marketing objective, is improving brand affinity that would strengthen the position of Tesla, Inc. in the market.
Marketing Mix of 4Ps
The so-called four Ps the marketing mix comprises are as follows: product, price, place, and promotion. The product, ideally, has to fulfill the current customer demand completely or, if possibly, create it, therefore “stand above the competition” (Manthei, 2017, para. 9). Tesla is on the list of the first brands to start selling electric vehicles, and the innovative model will meet the requirement for additional affordability. The latter is actually how the parameter of price is to work in the case under review so that the brand attracts more consumers.
The notion of place involves the locations where the company expects to sell its product along with the delivery channels. As it has already been mentioned, Tesla is currently planning to enter European markets, which may require different types of product placement to enable a maximal representation. This is, however, not crucial for Tesla, Inc. due to the comparatively high level of brand awareness derivable from the innovativeness (DeBord, 2020). In practice, it would most probably be enough to announce the new model. Further promotion will doubtlessly occur online, which is apparently the most effective way to reach both the core audience of the given brand and potential purchasers of electric vehicles in general.
Marketing Budget
Tesla, Inc. shows to spend considerably less on marketing in comparison to its rivals. Its CEO, Elon Musk, is “very outspoken on how he hates advertising” (Macdonell, 2021, para. 5). Instead, the company applies marketing strategies that require a minimal cost, focusing on consumer feedback, satisfaction ratings, and even meme culture that is an effective channel for spreading information. Thus, in 2015, Tesla’s marketing budget equaled $58.3 million, which was several times less compared to the competitors (Macdonell, 2021). Social media, including Musk’s personal Twitter account above all, are apparently the primary source of promotion for the brand.
It is doubtful, however, that Tesla continues to operate successfully without advertising, as to maintain a market leadership may be substantially more difficult than gain it. Therefore, Musk admits the necessity to start doing advertising at a certain point (Macdonell, 2021). Nevertheless, the moment when it becomes crucial is hardly close at the current stage of the corporation’s business performance. The electric vehicle industry continues to grow rapidly, and the new model will minimize the key advantage Tesla’s competitors may have over it, notably, the factor of price. Considering that, the promotion of the model is not likely to increase the overall marketing budget of the company.
Implementation Plan
Considering the absence of any specially designed advertising campaigns, there can hardly be any implementation plan. Tesla, Inc. will simply have to monitor the desires as well as preferences of potential consumers and adapt to them, which they actually do within the framework of so-called customization (Macdonell, 2021). As the company currently sells vehicles faster than produces, the level of consumer satisfaction is relatively easy to measure with a reliance upon the amount of recent orders.
Reference List
About Tesla (no date). Web.
Carlier, M. (2021) Tesla’s U.S. market share – December 2020. Web.
Chin, K. (2020) Competitive advantage vs. comparative advantage. Web.
DeBord, M. (2020) Tesla has a huge lead over other automakers. See how the electric-car company’s brand became so mighty. Web.
Etherington, D. (2020) Tesla says its battery innovations will deliver its goal of a $25,000 mass market electric car. Web.
Kissinger, D. (2019) Tesla, Inc. PESTEL/PESTLE analysis & recommendations. Web.
Manthei, L. (2017) The 4 Ps of marketing: Understanding the marketing mix. Web.
Macdonell, A. (2021) How Tesla spends $0 on advertising. Web.
Sales Channel (2021). Web.
Tesla SWOT Analysis (2020). Web.
Tesla SWOT Analysis – Strategic Analysis of Tesla Motors (2021). Web.
The Global Electric Vehicle Market Overview in 2021: Statistics & Forecasts (2021). Web.
Who buys an electric car? (2017). Web.
Appendix 1
Complete SWOT Analysis of Tesla, Inc. (Tesla SWOT analysis – Strategic analysis of Tesla Motors, 2021).
Appendix 2
Complete PESTEL Analysis of Tesla, Inc. (Kissinger, 2019).
Political Factors
- Governmental incentives for battery vehicles.
- Expanding free trade agreements around the globe that enable an intensification of international business performance.
- Few to no political conflicts in the biggest markets.
Economic Factors
- A decrease in battery costs.
- A decrease in the costs of renewable energy.
- The threat of economic instability, primarily, in Asian markets.
Sociocultural Factors
- Further spreading of the trend for lowering carbon emissions.
- The global tendency for a transmission to renewable energy.
- Increasing distribution of wealth in developing markets, hence a higher demand.
Technological Factors
- High changeability, hence rapid obsolescence, of technologies.
- Additional automation of the key business processes.
- A growth in the popularity of online mobile systems that are possible to integrate into cars.
Environmental Factors
- Global warming and the subsequent request for low-carbon vehicles.
- Spread of environmental programs.
- Rising waste disposal standards, to which Tesla’s products do correspond.
Legal Factors
- Intensification of international patent protection.
- Additional regulations related to energy consumption.
- Dealership sales regulations in the USA that remain Tesla’s biggest market.