Introduction
The automotive industry presents a variety of challenges and opportunities for companies. Tesla chose to become a technology developer focused on solving specific car-related challenges. The company implemented a strategy aimed at expanding the market, spurring innovation, and ensuring future growth. Its enviable position as an electric vehicle market leader has led to an increase in value, seeing as it offers a sustainable alternative to the internal combustion engine. Tesla’s dominance as an innovative giant has cemented its position as a global leader in the automotive industry.
The Internal Combustion Industry versus the Electric Vehicle Industry
The automotive industry is experiencing a transformation in drive train technology. Internal combustion engine vehicles have dominated the market over the last few decades. This is, however, bound to change because electric vehicles (EV) are gaining popularity. In 2017 over a million EVs were registered globally, with over 60% of the vehicles being operated in China (Casper & Sundin, 2020). The similarities between the electric vehicle market and the internal combustion market are numerous. First, they both cater to consumer preferences in terms of mobility solutions. In addition, manufacturers from both industries must partner with energy producers to facilitate fueling and charging options.
There are some essential differences to consider when assessing the automotive industry. While internal combustion engines are dependent on fossil fuels, electric vehicles use renewable energy sources that have a limited environmental impact. The latter are often expensive to acquire compared to the former because the cost of research and development is extremely high. Finally, the electric vehicle industry requires immense infrastructural investment compared to its rival in terms of charging stations and support systems.
Tesla’s Open Patents
The decision to allow free access to Tesla’s patents was met with shock in the automotive industry. In 2014, Elon Musk announced that the company would not initiate patent lawsuits against individuals that intended to use its technology for legitimate applications (Grijalva, 2017). The declaration was an opportunity cost the organization was willing to take to facilitate the expansion of the electric vehicle market. Tesla held the view that patents stifle progress and enrich individuals in the legal profession as opposed to actual inventors (Grijalva, 2017). The company had few competitors because the market was in its infancy.
The firm made the right decision when it allowed manufacturers to make use of its technology. The open-source philosophy facilitated market expansion. In addition, it allowed Tesla to form strategic alliances, which improved its stock price and led to the development of more efficient vehicles. The cost of enforcing patents was counterproductive for the institution since it limited growth. It should be noted that allowing unfettered access to proprietary material encourages innovation in the industry.
Tesla’s Strategy
Tesla has achieved a significant level of success thanks to its application of well-researched policies in the automotive industry. Its stock market capitalization reached 55 billion dollars in August 2018, edging out the Ford Motor Company, which was valued at 39 billion dollars (Grant, 2018). The company’s strategy involves gaining access to the high-end market where consumers are willing to pay a premium then driving down the market to encourage high unit volumes and lower prices (Furrier, 2020). Therefore, the competitive strategy is aimed at targeting both premium and low-price buyers by increasing research and development allocations every year. The variety of products on offer allows access to varied clients and facilitates market penetration.
Innovation is an important aspect of the company’s strategic plans. The company’s funding for its research and development department has grown from 0.7 billion dollars in 2015 to 1.5 billion dollars in 2018 (Furrier, 2020). The other players in the industry are bureaucratic, big, and unprepared to compete in a software-based world. Unlike Tesla, they are slow to respond to consumers, are focused on offering customer financing for growth in unit sales, and ignore the elements that define software companies (Shipley, 2020).
Focusing on materials, automation, and software development is intended to meet consumer needs and facilitate the delivery of quality products to its clientele. The premium market demands refined products such as extended range, customizable seats, and bespoke interiors. The company must stay ahead f its competition by solving problems and applying broad differentiation initiatives aimed at securing its market share.
The Sustainability of Tesla’s Competitive Advantage
Tesla has gained a significant competitive advantage by leveraging innovation. Even though the company is involved in the manufacture of vehicles, it is primarily a technological company (Azmi & Ahmed, 2019). The organization’s competitive advantage is sustainable because it has embraced the green initiative. It is focused on reducing carbon emissions and promoting habitat protection. This is an important principle that global economies are adopting to save the earth from the devastating effects associated with the changing climate. The market for sustainable energy and environmentally-friendly vehicles is constantly growing.
Tesla is a market leader in this segment because it is approximately five years ahead of its competitors (Azmi & Ahmed, 2019). The company has transformed the automotive industry by focusing on innovation. The company’s business model presents an existential threat to the entire automotive industry (Shipley, 2020). Its strategies are sustainable because they address important energy problems that affect the global economy and provide solutions to a variety of environmental challenges.
Changes to Tesla’s Strategy
Even though Tesla’s current strategy has brought innovation to the world, specific changes must be made to facilitate effective production and global growth. In the first half of 2018, the organization faced operation difficulties in terms of production and serious cash flow problems (Grant, 2018). The company’s objectives must consider the factors necessary to facilitate worldwide expansion. For instance, it needs to focus on talent optimization to ensure that challenges such as reliability and product quality are overcome. The organization must also assess potential leadership gaps in its management process. The use of personality-based behavioral assessment tools will help identify individuals suited for specific positions within the organization. This will facilitate the internalization and implementation of critical strategic plans and initiatives.
Finally, the organization needs to dedicate more effort to finding the right talent. Identifying people who are behaviorally wired to fast-track the company’s goals is essential. Conducting a formal needs evaluation facilitates the identification of specific traits, values, and experiences required for the specific roles being advertised. The application of the aforementioned changes will allow the company to achieve high levels of success in the automotive industry.
Conclusion
Traditional combustion engines, unlike electric vehicles, depend on fossil fuels which pose a threat to environmental conservation. Tesla has leveraged this opportunity by offering emission-free alternatives to customers willing to pay a premium. Its strategy involves the promotion of higher unit sales at a lower price by driving down the market. The company’s open-source policy has led to collaborative alliances that have spurred growth. The use of innovation as a competitive advantage is sustainable, seeing as the firm is focused on the green initiative, which impacts every aspect of the global economy. Tesla leads the way in electric vehicle development at a time when the world demands the application of environmentally friendly technologies in all aspects of life.
References
Azmi, K. M., & Ahmed, D. S. (2019). Can innovation in sustainability be a sustainable competitive advantage?Perspectiva – A Case Research Journal, 5, 18–28. Web.
Casper, R., & Sundin, E. (2020). Electrification in the automotive industry: Effects in remanufacturing. Journal of Remanufacturing. Web.
Furrier, A. (2020). Tesla: Business Model and Strategic Analysis. Medium. Web.
Grant, R. M. (2018). Contemporary strategy analysis (10th ed.). Wiley.
Grijalva, M. P. (2017). Tesla Motors: Planteando estrategias originales. Iuris Dictio, 19, 55–60. Web.
Shipley, L. (2020). How Tesla sets itself apart. Harvard Business Review. Web.