Strategic Management: Analysis of Tesla's Porter's Generic Strategy

This report analyzes Tesla's use of Porter's generic strategy in strategic management, focusing on cost leadership, differentiation, and focus strategies. It examines how Tesla's innovative approach to electric vehicles has helped it gain a competitive edge in the automobile industry.

Strategic Management
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Table of Content
Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
Main Analysis..................................................................................................................................3
CONCLUSION................................................................................................................................9
Recommendations..........................................................................................................................10
REFERENCES..............................................................................................................................11
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INTRODUCTION
Strategic management involve proper allocation of resources by management as it has to
carry and managed all activities in a coordinated manner so that it could accomplish its
objectives successfully (Adner, Ruiz-Aliseda and Zemsky, 2016). In relation to this, this assist in
forming an evaluation of strategy as it helps in facilitating changes in an organisation by
reaching the targets in a proper time period. The reviewing and implementation of strategy
would aid the management to make proper coordination by eradicating duplication of activities.
This report is based on Tesla which deal with manufacturing of cars and provide it services
across the worldwide. It has approximately 48000 employees that create maximum brand value
in the worldwide. This report comprises of Porter’s generic strategy which included different
aspects such as cost leadership, differentiation and focus strategy which is done on the basis of
Tesla.
Main Analysis
Porter’s generic strategic is a broader scope in a management which assist the company
to gain a strong rivalry edge over a marketplace as it provides several options such as cost
leadership, differentiation or focus strategy (Ansoff and et.al., 2018). A firm has alternatives that
is such as either it could provide its offerings at a low cost or it could differentiate itself from the
market conditions by creating a unique strategy. This theory was propounded by Michael Porter
in the year 1980 which involve allocation of resources in a predetermined manner which aids in
achievement of goal and creating a significant positioning within a market.
If the business entity would consider a targeting approach by focussing on all segments of
customers by making the availability of merchandise at a low cost which is described as cost
leadership approach. If the customers acquire goods or services on the basis of their attributes
such as their uniqueness or quality that provide a prominent edge over a marketplace. This create
a favourable image of the company in the eyes of customers and provide them a greater chance
to become a prominent leader in a marketplace (Bettis, Ethiraj, Gambardella, Helfat, and
Mitchell, 2016). The main aim of this model is to create value proposition amongst their clients
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on the basis of several factors such as operational excellence and by judicious usage of resources.
It promotes rationalism which provide assistance to corporation to determine a vast growth and
extensive opportunities in future. This generate success and facilitate proper coordination which
is only possible by applying all strategies in an appropriate manner. This improve the overall
effectiveness of a firm and determine prosperity of success in an effective and efficient manner.
It is considered as the fundamental basis of an organisation which determine firm’s profitability
and sustainability for a long term and also it determine the level of attractiveness and growth
which ensure a sustainable development. This approach aids the firm in facilitating an
appropriate decision so that they could achieve their sales targets by reaching their potential
targets.
This aspect is more important in a modern era as it provides the firm to make profit
margin as it determines both positive and negative aspects and makes best use of opportunities
by combatting the threats of a firm in a proper and efficient manner. Globalisation has promoted
great competition among the industry so they emphasise on deciding an appropriate course of
action among the various alternatives available as it promote superior returns (Bryce, 2017). In
addition to this, Porter’s Generis strategy is a most suitable framework that is adopted by a firm
so as to enhance the efficiency and productivity over a marketplace. This provide advantage
among their customers by focusing on minimising the cost of operations and maximising the
profit margin. It can be determined that there is risk associated with every strategy so it
necessary that firm could take certain measures that provide protection and help in gaining cost
advantage which provide growth and generate maximum returns which provide greater value to a
business.
Tesla is one of the most popular automobile company as it is founded in the year 2003
and gained immense level po popularity due to innovative and excellent ideas promoted by the
founder of a company. Elon Musk is regarded as the CEO of the company and this company is
headquartered in United Kingdom as it deals with manufacturing of several varieties of cars. The
respective firm is highly specialised in producing electric vehicle which help in achieving
sustainable development for a long term (Chen and et.al., 2016). It uses renewable sources of
energy in its vehicle by looking awareness towards environmental concern. Moreover, the firm
acquire solar energy panel solar roof title as it is one of biggest revolutionise in automobile
sector. The changes are taken place at a very fast pace so the manager would also have to be
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prepared by bringing new and uniqueness in their technology so that they could achieve
competitive advancement across the globe. The aim of a firm is to provide advanced technology
among their customers by providing it at cost efficient so as to generate wide access of clients at
a global level.
One of the biggest facts about this company is that it is an independent company that is
engaged with manufacturing of its automobile parts and batteries which help in getting
advantage of cost benefit in a marketplace. The concerned firm has become the world’s largest
battery selling as it deal with manufacturer of electric cars. Tesla is a renowned brand that
generate an excellent turnover which maximise the profit margins and also it improves the share
of a company within the confines of automobile industry (Danso and et.al., 2019). The senior
authority engages in research and development so that they could identify the nature of
competitors, taste and preference of customers and many more which allow them to think
differently by taking several factors into consideration. This ensure maximum productivity and
also it supervise the overall activities by judging the accuracy of standards which light a
deviation and thus provide a competitive gain in a technological market. It also has become the
most valuable company that reach superior market capitalisation across the globe. In relation to
this, Elon Musk always tends to take active participate in overall operations of a firm which
provide the overall effectiveness and efficiency and ensure best decision and he consistently
focus on long term goals so that it could gain mass market coverage.
The motive of Tesla is to develop premium sports cars which moves with very high speed
which takes millions of investments and therefore it achieves a maximum success in case of
automobile sector as it generates maximum revenue in case of automobile sector. Elon musk
always tends to think innovative and more advanced and like to explore things which make him
more successful entrepreneur at a young age. Its risk-taking capability and enthusiastic nature
allow it to run operations smoothly and fairly which ensure greater transparency and
accountability which in turn depict a true and sound picture of the company. Elon Musk is
determined as Iron man who raise the share of company and takes business to ultimate level as
emphasise on learning from mistakes rather than just regretting over it and its dedication towards
its work and spending hours and hours on accomplishment of goals and this provide a greater
height of success in its career. This help in contributing towards more success in a corporate
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world as it laid several efforts and take quick decisions and think differently from ordinary
people which make it more innovative and youngest and successful entrepreneur.
Elon Musk is fascination for learning new things and are extrovert in nature as it creates
strong distribution of network and maintain good acquaintances (Firoz Suleman, Rashidirad and
Firoz Suleman, 2019). The founder of Tesla brings enormous growth as it could work 120 hours
in a week so that it could meet its production targets within a respective time period. What makes
it more successful and stronger is that it creates whole e-vehicle and keep on tracking its goals
which help it to ensure greater market share in case of automobile sector. Its determination and
quick learning ability help in creating a peaceful and harmonious environment in a workplace
and also it renders an effective solution by solving complicated issues.
The founder of Tesla would use Porter Generic model in order to achieve competitive
advancement and to generate a significant position at a global level in automobile industry. It has
made a distinct image and emphasise on excellent features which reflect a great success. This
model or framework consist of various strategies such as cost leadership, differentiation and
focus so that provide an opportunity to Tesla to gain strong rivalry edge. The strategy of
advanced technology such as electronic vehicle by Tesla would provide them to beat its
competitors such as Toyota, General Motors company, BMW, Volkswagen and many more.
Such an evolution would create a history of a company by bringing new and modern technology
which help in enhancing the sales and profit margin in case of automobile industry (Gao and
Hafsi, 2019). In a dynamic environment, the concerned firm is focussing on constant new and
advanced innovations and also it satisfies the demand of younger generations who are more
technical in nature as help them to gain maximum exposure around the worldwide. Furthermore,
it emphasises on providing value proposition among their clients and win their hearts by
providing advanced innovations.
The Porter’s Strategy is used by Tesla which help in meeting current market trends and
accelerate greater sales revenue that provide an intensive growth of a company in case of
automobile sector. Furthermore, the CEO of company tried their level best to create
differentiation in their strategies that contribute greatly on performance and effectiveness of a
firm in such a competitive era. One of the main reasons that makes Tesla’s most successful and
competitive company is that it provides environment friendly products by considering that other
companies uses internal combustion engines in their products. The main emphasise of the top
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management of Tesla is that is capture large market share by attracting on early adapters which
provide a great market coverage and result in abundance sales. Elon Musk prepare an effective
strategy so that it could always be ahead of competitors by achieving a strong presence over the
worldwide. In the context of Tesla, the strategies of Porter’s generic model are presented as
follows:
Cost leadership: This strategy encompasses the firm to lower their cost to gain
competition edge in a marketplace. The manager of Tesla would preserve more share of market
by creating efficient chain management as it could target middle class buyers as they are more
particular about prices in such a manner so as to enhance more sales. Moreover, it could provide
easy accessibility that create an awareness towards brand which in turn increase the consumption
and accelerate greater productivity (Hales and Mclarney, 2017). This would outline several
benefits to a company such as expansion of clients base and would focus on productivity within
the confines of automobile company. They also maintain mutual relation with its suppliers as it
acquires quantities in bulk so that it could minimise the cost of production which decrease the
overall cost of operation and thus maximise more efficiency. The firm also focus on strong
campaigns so that it could reach maximum potentiality and thus gain intensive competitive
market.
Differentiation: This strategy emphasises more on creating a unique and different brand
image which ensure long term growth and sustainability of a firm in a competitive market. In
addition to this, the manager of Tesla creates unique features in their cars as they achieve
strategic objectives which lead an innovative and advanced innovation in a marketplace.
Additionally, the firm would focus on different attributes of merchandise like producing
electronic vehicles that provide protection towards environmental measures and also it could
focus more on creating large product line and could gain customer loyalty (Hill, 2017). Also, the
firm would focus on providing different offerings so as to enhance maximum buyer’s satisfaction
and also extensive and unique experience would help the firm to gain sustainability. The distinct
logo and slogan help in easy identification of brand which stick to the minds of customers and
build trust among them. The concerned firm also create a strong positioning of merchandise that
enrich a better experience of clients through new and sophisticated innovations which develop
more sales and improve the overall operations of a company in case of automobile sector. Elon
Musk would create a different experience amongst their clients by effective communication
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process and creating a strong team would develop positivity which create healthy environment in
a company like Tesla. Its advanced innovation such as electric vehicle would provide core value
among their clients and thus maximise the overall profitability in automobile industry.
Focus: This is a narrow strategy of Porter generic model which is considered as sum of
both differentiation as well as cost leadership strategy as the main emphasis is on niche
marketing which provide a large competitive base in a marketplace. The CEO of Tesla would
consider this strategy in order to reach its target segments and also it could concentrate on its
resources by gaining the maximum exposure of market which provide a firm to gain an intense
level of competition in automobile sector. The respective firm would provide both greater value
and low-cost strategy among their buyers which generate more customers from different parts of
the country as it matches the requirements of clients in an effective and efficient manner (Hitt,
Ireland and Hoskisson, 2016). On the one hand, the senior authority of Tesla would focus on
providing low cost products by manufacturing every parts and components which are used in
automobile on their own which reduce dependent on others and thus saves cost. On the other
hand, Tesla would create differentiation as a generic strategy which help them to grab the
attention of buyers and help them in facing competitive environment in automobile sector. Also,
the firm would prepare a unique strategy and logo which create brand recognition all over the
world. This strategy has a broad meaning in this model as it emphasises more on creating wide
varieties of merchandise which help the firm in accomplishing their objectives within a
respective time period.
Therefore, it has been analysed that differentiation strategy would be opted by the firm
such as Tesla as it prepares a unique strategy of forming electric vehicles which proves to be
beneficial especially for high- and middle-class segments. The business case reflects more
success of a firm by making ahead its competitors through manufacturing of automobile parts
and features. The respective firm would analyse the growth by evolving its technology in a
marketplace that gain immense level of popularity and make best use of opportunities by
combatting the threats and weakness that aids in contributing a significant position at an
international level (Morden, 2016). This strategy helps in achieving a strong competitive
advancement and provide more concern towards an environmental aspect and help in gaining
more productivity. Also, the firm incur huge investment on research and development so that it
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could identify needs and priorities and develop a new car in such a manner that it provides an
effective renewable energy solution.
Tesla is considered as a first company which produce electric cars and provide high tech
solutions that enhance the greater level of customer satisfaction as it attracts its targeted
audience. The mission of Tesla is to use environment friendly products in their automobile sector
in order to achieve sustainable energy and provide unique solution among their clients. There are
several attributes and features which makes Tesla different from others such as compatibility, its
super charging features, solar panels and many more that help in achieving long term
sustainability and attractive positioning in case of automobile industry. They make customised
and unique cars and maintain cordial relation with its suppliers that help it in beating its
competitors. In addition to this, the firm is also engaged in providing premium quality of
products that make it unique in comparison to other automobile manufacturers
The CEO of firm constantly provide high tech solution that enable it to enjoy greater
economy of scale by generating maximum returns that boost the sales. Furthermore, it has
rendered several different kinds of products such as Model S, Model Y and so on within a range
of 250 miles to 370 miles that provide a better alignment of differentiation strategy. It also comes
with different battery performance that makes it niche differentiator as it enters into the market
and provides comfortable seats and engage on selling solar panels and solar roof solutions to
other deals that builds a super balance between ecosystem. The drive force of strategic objectives
formed by Tesla would help the firm to capture a large market share that provide a vast growth
of a firm in an era of technological market (Moutinho and Vargas-Sanchez, 2018). Through an
increasing awareness towards environmental aspects, Tesla emphasise on using renewable
source of energy as it does not create air and noise pollution and help in gaining sustainability as
it makes its product in such a manner that it could not be imitated by others. Automation system
such as self-driving features itself provide to be more advanced in an era of technological era
which make it unique and different from others such as BMW, Ford, General Motors as it
emphasises on conserving nature that prove to be a major drastic change in a company like
Tesla. Sophisticated machines and robots are used in production of Tesla cars that help in
conducting fast operations of a business and maintain proper hierarchy in their manufacturing
unit. Their acquisition of solar city by Elon Musk is one of the challenging steps that make it
more successful and drive a huge growth in an innovation era as which in turn making a strong
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cash flow position. Therefore, these strategies would make Tesla to create product differentiation
while achieving a great success in a marketplace.
Application of Porter generic strategy by Tesla
Porter generic model describes the way in which how the company could gain
competitive advancement by choosing an appropriate strategy (Anneke Kuijk. 2018). Tesco is a
global brand as it has greater target segments as the intense competition would challenge a
company to maintain sustainability and accelerating market share. The business environment is
compelling Tesla to make continuous innovation so that it could gain maximum sustainability as
it could ensure an intense growth by attaining of targets that cover market penetration,
development of product as well as diversification in a market.
Criticism of Porter’s generic strategy
There are several limitations that are faced by this model as it hampers the growth of an
organisation as this model lead to confusion. It results in lack of understanding as cost leadership
strategy that are applied in respect of competitors would be stimulated by them (Brandon Gaille.
2018). Also, another strategy that is differentiation would incur greater cost so it would not
satisfy the middle class customers. Business enterprise that apply focus strategy would result in
an elimination of competition as it foregoes the economy of scale and result in decline in the
growth of a company.
CONCLUSION
From the above information, it can be summarised that the role of strategic management
is vital in an organisation as it identify several opportunities and assist the firm in taking best
decisions which allow them to enjoy greater degree of success. This help in providing proper
direction of action so that it could drive prospects of growth within a marketplace. The business
environment is regarded as dynamic so the management of firm has to make radical
improvements in their operations which raises productivity. It has been analysed that Porter’s
generic strategy would help the firm to gain competitive achievement which help in gaining
sustainability and reliability in future. Also, this model would assist firm in developing a strategy
which prove to be advantageous and ensure sustainable growth by improving the overall
performance which shape a better picture of company in future. The senior executive would
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emphasise on judicious utilisation of resources and make proper ecological balance which help
in ensuring a distinct image and positioning within automobile industry.
Recommendations
It has been recommended that differentiation strategy would be more appropriate for
Tesla as it is one of the innovative and advanced company that emphasise on uniqueness. This
strategy provides greater value amongst buyers and help in competing with other companies in
terms of quality, style, product features and reliability and so on. It uses different tactics and
measures which make it unique and provide greater concern towards environmental aspects by
creating electric vehicles in a stylish and innovative approach. Porter’s generic is a fundamental
approach that provide several ways to Tesla to make innovative decision that ensure a bright and
success future. The respective company must focus on increasing their approach towards
research and development so that it could sustain in such a competitive market. By increasing
their investments, it has the potential to grow at a global automotive market which provide an
enormous opportunity. Another most crucial aspect that it should keep remember is that it should
maintain a strong distribution of supply network with the motive of minimising the supply side
risk. One of the failure that Tesco faced due to the reason of breakdown of machines so the
manager emphasise on monitoring the bottleneck so that it could have profit in future years.
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