Competitive Strategy Report: Microsoft Inc. and Tesla Company

This report provides a competitive strategy analysis of two major companies: Microsoft and Tesla. The analysis of Microsoft focuses on its use of the razor and blade business model, where the company sells complementary goods at different margins to maximize profit. The report highlights how Microsoft uses this model with its Xbox gaming console and software. The analysis of Tesla examines the company's innovative approach to the automotive industry, particularly its focus on electric vehicles and eco-friendly characteristics. It also discusses Tesla's strategies for gaining market share through innovation, low-cost batteries, and customer service. The report references various sources to support the analysis, providing a comprehensive overview of the competitive strategies employed by both companies.

Running Head: Competitive Strategy
Competitive Strategy

Competitive Strategy 1
Contents
Microsoft Inc...............................................................................................................................................2
Tesla Company............................................................................................................................................3
References...................................................................................................................................................6

Competitive Strategy 2
Microsoft Inc.
Microsoft is world’s largest software and hardware producing company. It is an American
multinational technological corporation having the headquarter in Washington. The company
was found by Bill Gates and Paul Allen in the year 1975. Initially the company used to sell basic
interpreters for the Altair 8800. Further, the company emerged in selling software for increasing
efficiency of computer system.
The reason for choosing Microsoft for the analysis is that the company emerged into a
multinational corporation within a short period of time. This transformation led a change to the
whole technological environment. Also it led to innovation by increasing the efficiency of
computers and cellphones (Teece 2010).
(Source: Thurrott 2014)
In the current scenario Microsoft generate $85.3 billion of profit with its core business activities.
Thus it is clearly known that the company is growing with a great speed. The growth of any
company is due to its strategic management of internal process. So, the internal process of the
company is really strong due to which the company is constantly gaining profits in the
international markets. The company Microsoft applies the razor and blade technique to increase
its sale volume. Razor and blade refers to innovative business model used by the companies to

Competitive Strategy 3
increase its sales. Under this model the company sells one of the complementary good at a lower
margin to the customer and the other good at a very high margin to gain profit. Like the company
Microsoft uses this model to upgrade its sales. It sells Xbox at a lower margin and gains less
profit in it. But the complementary good of Xbox which are the gaming software, are sold at a
very high margin. Such software incurs low cost and sold at a high margin to gain profit. Thus in
this way the customer gets the benefit to receive the product (which is Xbox) at a lower price and
the producer gets the advantage to gain high margin (DaSilva, & Trkman 2014).
So with the aid of the razor and blade technique the company ears market capitalization and trust
of the customers. When the customers receives the products at relatively lower rate from the
market, then instantly buys the product. Further to make use of products they need to buy
software’s from the company as well, so these software have low manufacturing cost and high
selling cost due to which the company earns the profit of two products from one product only.
Also the company provides hardware services to its customers; initially the software is pre-
installed in the system. But it expiries the customer need to install it by purchasing. The cost of
software is not very high and is easily affordable by all, thus the customer also don’t hesitate in
buying the software. Till now it is one of the best business model used by the business to earn
profit. Also this system is hard to operate as interdependence of every department is required in
this model, and then only the process will work. Also it is not mandatory for all the departments
to earn profit, but the organization should be in surplus. Thus it is difficult for other companies to
imitate the model and gain profit (Koen, Bertels, & Elsum 2011).

Competitive Strategy 4
Tesla Company
Tesla Inc., formerly known as Tesla motors is energy storage and automotive manufacturing
company specialized in creating electric cars and other automobiles using natural energy. The
company was originated in the year 2003 by Elon Musk, JB Straubel, Martin Eberhard, Marc
Tarpenning and Ian Wright. The company focuses on selling efficient automotive models at an
inexpensive rate. The company crossed the limit of selling 200,000 cars in March 2017 and
became second largest e-car producer company worldwide.
(Source: Zach 2015)
The purpose of choosing tesla motors for the competitive analysis is that the company has
creatively changed the automobile industry by using models having eco-friendly characteristics
and low price points as well. The fact shall also be noted that the company is repeatedly growing
terms of sales which shows that the organization structure of the company is efficient due to
which the company is gaining the competitive edge in the market (Zach 2015). Further the
strategy used by the company to achieve market capitalization is discussed below:
The strategy which helped the company in gaining the share in the market is creative innovation.
As it is known that tesla strategically used the natural resources available and innovated them to

Competitive Strategy 5
recreate the products desired by the customers. This led the company to gain goodwill in the
market in a short span of time; leading them differentiates from other competitors present in the
market (Kelty, Tarpenning, and Kohn, Tesla Motors, Inc. 2010).
The company specifically focused on providing cars with low cost batteries. As it is known that
purchasing car is one time expense whereas using batteries to charge the cars is the expense
which the customers have to incur till the life of automobile expires. Concerning the issue the
company initiated to sell batteries at a very low rate in comparison to other companies prevailing
in the market. Like, the Panasonic sold the batteries at higher prices due to which the tesla
batteries were highly demanded (Paryani, Tesla Motors, Inc. 2013).
Adding to it the company also provided service to the customers on their footstep which gained
the faith of employee on the company leading them increase the sales. The company initiated
efficient supercharger network stations which helped the customers in better optimization of the
product. The company used all the resources available to them and drives them in generating
sales for the company (Zach 2015)
Due to increasing competition in the market the company in company also stepped into
ecommerce business by providing software to the prospective customers with the help of which
they can analyses all the specifications of the product and compare them with other company’s
products as well. As the mission of the company suggest that they believe in disclosing all the
relevant information the customers along with gaining their satisfaction in direct and honest way.
This approach helped the company in achieving success in long run (Mangram 2012). Thus
summarizing the above statements it can be said that company stepped into the field of

Competitive Strategy 6
technology and efficiently used all the resources available to them in order to drive maximum
satisfaction of the customers.

Competitive Strategy 7
References
DaSilva, C.M. & Trkman, P., 2014. Business model: what it is and what it is not. Long range
planning, 47(6), pp.379-389.
Kelty, K., Tarpenning, M. and Kohn, S., Tesla Motors, Inc., 2010. Electric vehicle
communication interface. U.S. Patent 7,698,078.
Koen, P.A., Bertels, H.M. & Elsum, I.R., 2011. The three faces of business model innovation:
Challenges for established firms. Research-Technology Management, 54(3), pp.52-59.
Mangram, M.E., 2012. The globalization of Tesla Motors: a strategic marketing plan analysis.
Journal of Strategic Marketing, 20(4), pp.289-312.
Paryani, A., Tesla Motors, Inc., 2013. Low temperature charging of Li-ion cells. U.S. Patent
8,552,693.
Teece, D.J., 2010. Business models, business strategy and innovation. Long range planning,
43(2), pp.172-194.
Thurrott, P., 2014, Looking for Strategy as Microsoft Enters FY15, Viewed on August 13, 2017
from http://winsupersite.com/windows/looking-strategy-microsoft-enters-fy15
Zach, 2015, Tesla’s Competitive Advantages — 5 Big Ones, Viewed on august 24, 2017 from
https://evobsession.com/tesla-competitive-advantage-5-big-ones/

Competitive Strategy 8

Competitive Strategy 9