Strategic Management in the Automotive Industry: A Tesla Case Study

Desklib offers solved assignments and past papers to help students succeed.

Strategic management

Essay
Strategic management is one of the aspects that has become an important for organisations to
implement properly. If this is done is an efficient and effective manner then can only the
organisation expects to grow. Tesla is such an organisation which has used strategic management
to make it-self well known in the market and grown to such heights that were not expected by it.
Also, strategic management helps the organisation in meeting its goals by assessing every aspect
of the market and the organisation it-self.
Tesla is energy as well as automation company that is situated in California, America. The
organisation mainly focuses on the manufacturing of electric cars. Tesla Motors was started in
2003 and has made itself known to the public through its electric vehicles. It also deals with
adding solar panels to houses so energy can be conserved. This innovative idea was started by
seeing that the rise of global warming was on the rise. Elon Musk, the co-founder of the
organisation, was the person who helped to uplift the reputation and made sure it was recognised
in the market. One of its most profound and prized cars is the Roadster which is an electric
vehicle. It must be noted that the prices are different for each social class as there are prices for
such vehicles that range to only $35,000 and there are other that have the range of millions. So
the organisation has kept in mind to target every single audience in the market. The organisation
has used strategies from which it has gained such awareness in the market (Tesla, 2019).
Strategy Statement for Tesla
‘The strategy for the electric and energy-saving products is that the products will be launched
at an affordable price for all. This would increase the capturing of the market hence showing
that the products are business and family efficient.’
This strategy statement was inspired by the General Motors electric car. The electric car which
the organisation had developed had cost a lot hence the price was also high. Tesla saw this and
made some changes in its electric car. They changed the type of batter that was required in the
car which made the whole production and manufacturing processes less costly. The price of the
first production model was price a little above the average but later on, as each unit was
produced the price of the car went down. This helped to capture the market at a quicker and
easier pace.
This product of Tesla was probably one of the best electric cars that could be bought by mostly
everyone. The price of the car was probably about 50% cheaper than the rest of the electric
vehicles present in the market. From this Tesla had started to produce more products for home
appliances and even office uses that would help provide zero-emission of pollution in the
environment. The main motive of the organisation was to move the whole economy toward and
solar electric economy. The strategy statement supports this as the organisation aims to sell each
of its products to everyone at a reasonable price. By doing this the organisation will be able to
create more and more awareness not only in its country but also in different parts of the world.

All of its products are for energy consumption and most people are against the climate change
that is happening.
The Sixteen Fundamental question in Strategy can be used to see what the position of Tesla is
in the market. But only three questions will be analysed as they will help in answering the
question of how Tesla is performing in the market. These three questions will be based on the
strategic position of the organisation, what were the strategic choices of the organisation and
what is the current strategy that the organisation is using currently to increase its growth in the
market. One of the biggest strengths that can be regarded for Tesla is that of its unique position
in the market. The organisation is not only known for its production of electric vehicles but also
for giving the world new and innovative technologies. One of the things that need to be
understood by Tesla is that it does not worry that much about the competition. One of its high-
end luxury cars is the Model S which is probably the best electrical SUV running in the market.
There are other car manufacturers in the market that want to enter into this segment but cannot
do so because they are afraid to see such a high investment fail. It will also pose as a threat in the
market cause the position in the market that the competitor organisation may have gained could
be lost.
The strategic choices that are followed by Tesla for gaining more of the market share are that it
will produce cars for every segment of the market. What it does is it takes one product and
introduces it into the market and only supplies a limited amount of the product. Then when more
of the unit is produced the price will being to fall because the excitement and hype of owing that
product will also be down. When the price is lowered it will also help in targeting new audiences
who would want to also acquire such a product. This strategy is one of the most prominent
strategies used by the organisation in order to make its presence felt in the market. The current
strategy for Tesla is that it is now moving more toward the green car market segment. It
specialises in both short ranged vehicles and long range vehicles which are both electric. It is to
be seen that the organisation is trying to make different batteries used in both of such cars so that
it will help in capturing more of the market. Tesla, unlike other car manufacturers, believes in
direct sales. It will sell its own cars to the customers from its own showrooms. This is done so
that the customers can have their cars customised the way that they like and more of relationship
building or customer satisfaction will be achieved (Marketing91, 2019).
The strategy that was used by Tesla for capturing the market was a successful one as it had not
seen that much of profits for a long time. One part of the strategy is that it was successfully able
to differentiate the market segments. In 2015, the organisation came up with luxurious high-
end SUVs. These cars were also electric. The market segment chosen for this product was the
high class people as they would be the ones that could afford it. Surprisingly the organisation
saw a record of sales that none of its other products had achieved. Due to this the organisations

brand image started to increase thus making it-self known in the market (Perkins, & Murmann,
2018).
From the looking at the share market, it can be seen that Tesla has increased its growth in the
market share. In the second quarter of 2019, Tesla experienced sales that encouraged it to make
more of that product. The electric Sedan was one of the products that were introduced this year
and has gained a lot of attention. This product was made only available in Europe and it still
made the market share rise by a lot. Due to such increases that Tesla has experienced it is the
third most recognised car brand across the world. According to CNBC news, it was seen that
Tesla's share prices have risen by a lot of percentages in this year only. The organisation’s
automotive chairman, Jerome, has said that it output efficiency has not seen a rise like this in
years. The quality of such products is also high even though production is high. The stock rose
about 4% in one day which is considered to be a lot in the share market (CNBC, 2019). One of
the things that Tesla needs to take care of in the future is that the competition is no longer being
lazy but has seen the potential of electric vehicles. This could affect the market growth as well as
the share price and being such a large organisation this would be a huge setback.
From all of this it can be said that strategic management plays a crucial role in the growth for an
organisation. There are many factors that Tesla had to consider before it launched its products
into the market. The strategies used by the organisation are mainly done so that all of the public
can be targeted. Its strategy has left the competition hanging in the low because there are
probably very low competitors left in the market that can produce such qualitative products like
Tesla. IN conclusion it can be said that having a good strategic management plan often would
lead to high success and profits.

References
1. CNBC, 2019. Tesla shares rise on report that the company is preparing to increase
production in California. [Online] CNBC. Available at:
https://www.cnbc.com/2019/07/10/tesla-shares-rise-report-preparing-to-increase-
california-production.html [Accessed on: 31 July 2017]
2. Tesla, 2019. Power Everything. [Online] Tesla. Available at: https://www.tesla.com/
[Accessed on: 31 July 2019]
3. Marketing91, 2019. Marketing Strategy of Tesla. [Online] Marketing91. Available at:
https://www.marketing91.com/marketing-strategy-of-tesla/ [Accessed on: 31 July 2017]
4. Perkins, G. and Murmann, J.P., 2018. What does the success of Tesla mean for the future
dynamics in the global automobile sector?. Management and Organization
Review, 14(3), pp.471-480.
5. Cheong, T., Song, S.H. and Hu, C., 2016. Strategic alliance with competitors in the
electric vehicle market: tesla motor’s case. Mathematical Problems in Engineering, 2016.