Competitive Advantage Analysis: Tesla Model 3 and Strategies

This report analyzes the competitive advantage of Tesla Model 3, examining the circumstances surrounding its launch, particularly its focus on affordability to reach a wider market. It utilizes Porter's generic strategies, specifically highlighting Tesla's broad differentiation strategy through advanced technology in electric vehicles. The report discusses the success of the Model 3, referencing its high reservation numbers as evidence of its competitive edge and customer appeal. The analysis considers Tesla's strong production control, innovation, brand strength, and the business strategies of Elon Musk as key factors contributing to its market advantage over competitors like Toyota and General Motors. The study concludes that Tesla's product differentiation strategy has been instrumental in gaining a competitive advantage in the automotive market.

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Tesla Model 3
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Table of Contents
Introduction......................................................................................................................................2
Circumstances that led to the launch of Model 3............................................................................2
Explanation/justification of the generic strategies...........................................................................2
Success or failure of Tesla...............................................................................................................4
Conclusion.......................................................................................................................................4
Reference.........................................................................................................................................5

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Introduction
Tesla Model 3 is an electric car which is manufactured by a company named Tesla. This
is a sedan car with a range of 220 miles. The model has unveiled in the year 2016 and within a
week around 325,000 people reserved the car. This model also has a self-driving hardware which
the company plans to enable it in future. This study focuses on the identification of the
circumstances that led to the launch of Model 3, explanation of the generic strategy, analysis of
whether the company succeeded or failed in gaining the competitive advantage due to the launch
of the new product (Lambert 2018).
Circumstances that led to the launch of Model 3
Electric cars were never cheap to buy and it was not affordable so that the masses can
buy it. Previously the Model S was the flagship product of the company that was providing more
customization options, displays, acceleration, range. Model S was the safest car in its segment
with an option for unlimited supercharging. Whereas, the company Tesla was unable to sell the
product to the masses due to its cost. This resulted in the launching of the Model 3 which is
simpler, smaller and more affordable electric care. Like the Model 3 is not the third iteration of
the Tesla car line-up. Model 3 is more focused on the affordability and reach to the masses.
Whereas, the Model S was designed to make it the safest electric vehicle (Tesla.com 2018a).
Explanation/justification of the generic strategies
For the justification or the explanation of the generic strategies, Porter's generic strategies
are used for the study.
The generic strategy formulated by Porter include the Cost leadership, differentiation and focus.
Cost leadership includes the no-frills, differentiation is the creation of the desired services and

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products, and focus is the offering the specialized service in a niche market. Porter then divided
the focus strategy into two different parts: differentiation focus and cost focus. The cost
leadership strategy focusses on the gaining competitive advantage. In simple words, it can be
said that development of an edge which will soar the sale in comparison to its competitors. this
means increasing the profits by reduction of the costs, at the same time charging the industry
average prices (Argyres and McGahan 2017). This strategy includes that the market share can be
increased by charging low prices, this will make a reasonable profit out of reduced costs. The
differentiation strategy focusses on the development of the services and the products that will be
more competitive and attractive than the market competitors. this can be done through the
innovation, development and good research; the ability of the company to deliver high-quality
services and products; effective marketing and sales so that the market can get the insight about
the benefits that are being offered by the differentiated offerings (Tanwar 2013).
Considering the Tesla company, the company itself applies the generic strategies in order
to achieve or gain the competitive advantage against the other companies in the automotive
industry globally. With respect to the porter’s generic strategies, the Tesla company focus on the
usage of the advanced technologies in its related products and electric vehicles. It employs the
advanced technology in its electric cars so to gain market advantage over the other companies
like the Toyota Motor Corporation and General Motor Company, BMW, Nissan Motor
Company, Honda Motor Company and Volkswagen. The company evolved strongly with respect
other companies due to its strengths like strong control on the process of the production, highly
innovative process, and strong brand (Tesla.com 2018b). The business strategies of the Tesla
company and the strategies of the company CEO Elon Musk also gives it a competitive edge
over other companies. The generic strategies of the company have enabled Tesla to attract the

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customers from all over the world along with gaining a competitive advantage in the automotive
market (Sec.gov 2018).
The strategy employed by Tesla can be broadly described as broad differentiation. Tesla
gains the competitive edge over the other companies through the integration of the advanced
environment-friendly technologies in its products. It can be understood from the fact thee the
market is filled up with the combustion engines. Tesla emphasizes the uniqueness of its products
with the focus mainly on the customers that would like to adopt the technology. Thus, Tesla only
uses the product differentiation strategy (Tesla.com 2018b).
Success or failure of Tesla
The Tesla Model 3 is already a success because looking at the huge number of
reservation which is around 373,000 and the CEO Elon Musk has also revealed that there is more
advance reservation from 500,000 customers. The huge number of customer piling up their
reservations for this electric vehicle is unprecedented and this goes to the credit of the company
(Holley 2018).
Conclusion
From the above study, it can be concluded that the Tesla Model 3 is one of the biggest
achievement of the Tesla company in terms of gaining the market advantage over its
competitors. The Tesla company uses the product differentiation strategy to gain the edge over
its market competitors.

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Reference
Argyres, N. and McGahan, A.M., 2017. Introduction: Michael Porter's competitive strategy.
Academy of Management Perspectives. 16(2).
Holley, P., 2018. Here’s what we know about Tesla’s Model 3. [online] Washington Post.
Available at: https://www.washingtonpost.com/news/innovations/wp/2017/07/29/heres-what-we-
know-about-teslas-model-3/?utm_term=.53cd0cc4d010 [Accessed 8 Apr. 2018].
Lambert, F., 2018. Tesla Model 3 | Electrek. [online] Electrek.co. Available at:
https://electrek.co/guides/tesla-model-3/ [Accessed 8 Apr. 2018].
Sec.gov, 2018. tsla-10k_20161231.htm. [online] Sec.gov. Available at:
https://www.sec.gov/Archives/edgar/data/1318605/000156459017003118/tsla-
10k_20161231.htm#Item_1 [Accessed 8 Apr. 2018].
Tanwar, R., 2013. Porter’s generic competitive strategies. Journal of business and management,
15(1), pp.11-17.
Tesla.com, 2018a. Model 3. [online] Tesla.com. Available at: https://www.tesla.com/model3
[Accessed 8 Apr. 2018].
Tesla.com, 2018b. Master Plan, Part Deux. [online] Tesla.com. Available at:
https://www.tesla.com/blog/master-plan-part-deux [Accessed 8 Apr. 2018].

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