Summary
Tesla is a multinational automotive company based in the USA. The firm is transforming the world by providing electric cars, solar, and integrated renewable energy solutions to the global market. It is one of the world’s most valuable companies in the automotive industry, with a market capitalization of more than $40 billion. In 2021, Tesla recorded an increase in sales, making it the world’s champion in selling battery electric and plug-in electric vehicles, with an increase of 87% in sales.
The company has a good brand reputation in the global market, hence gaining a large market share. The brand specializes in providing luxury products that fit people from the highest social class. With its reputable brand,Tesla has experienced significant growth in the USA and globally. The new brand, Model Y, enabled the company to be ranked the best in 2021, meeting the objectives of the macro environment factors.
This report will focus on the impact that the external environment factors (macro) have on the marketing strategies of Tesla Inc. This will involve an evaluation of the company’s competitive advantage, as well asits market segmentation, positioning, targeting, and branding strategies. Alongside the adverse macro-environmental factors facing the company, the report will further analyze the opportunities available for growth within the company’s operations. This will help improve future opportunities that companies can utilize as an advantage for gaining competition in the external environment.
Sustainable Competitive Advantage
Tesla can realize its sustainable competitive advantage by applying Porter’s marketing strategies, which consist of focus and differentiation strategies. Differentiation strategy, also known as a generic strategy, involves offering distinct products and services to the marketplace. The key objective of this strategy is to help the organization gain a competitive advantage. Tesla is known as one of the most competitive companies in the automotive industry because it effectively applies the differentiation strategy.
The company has been using a differentiation strategy, and its incorporation has helped it make more sales. For instance, in 2013, Tesla applied a differentiation strategy to produce the Model S and Tesla Roadster (sports car), which were unique in the market. The research and development element has always helped Tesla produce differentiated products. This has boosted the company’s design of high-performance products and market development through alliances with players in the global market. Through a differentiation strategy, Tesla was able to design a unique car model, Model Y, which has been used as a brand for aggressive marketing in 2021.
Tesla also used a differentiation focus strategy as a generic strategy to secure a market edge over competitors. In applying the differentiation focus strategy, the management focused on the early adopters of high-end electric vehicles. The high-end customers for the companies consist of the old, with whom the company has created good relationships. The company adopted the strategy when it was still developing, as this could help it create goodwill and a good standing in the international marketplace. However, after gaining popularity, the company fully adopted a product differentiation strategy since the company had already gained brand popularity in the automobile market.
Segmentation, Targeting, and Positioning
Tesla has effectively applied segmentation, targeting, and positioning (STP) as part of its marketing strategy to promote its products. The STP is a three-stage process considered to be the most effective marketing technique for analyzing the macro environment to gain a competitive advantage. When segmenting the market, the market is divided into broad categories comprising a specific group of customers.
Market segmentation is the process of categorizing customers into groups which are based on their characteristics, such as age, ethnic group, culture, and geographic location. Targeting involves the act of selling a product to a specific group of customers, which is identified from the segmentation process. Positioning involves implementing the market mix by providing services and products to a specified and targeted segment.
Tesla’s Market Segmentation
The market segment for Tesla is made up of quite rich people who have steady incomes. The company’s products are too expensive, hence suiting its choice of market, which comprises people with high social standards. The company had a mono-segment market with individuals who like luxury things, such as buying sports cars. Based on the mono-segment market of Tesla, the potential customers of the products are made up of wealthy people. The company switched to a multi-segment approach by producing affordable cars that people could buy from the middle class.
After gaining popularity in the global market, Tesla started to group its customers based on their demographic, behavioral, geographic, and psychological characteristics. Concerning demographic factors, most of Tesla’s customers are men between 45 and 50. This is the age bracket where people have accumulated a lot of funds and are willing to use them to live a luxurious life. The geographic segment comprises customers from Europe, North America, and Asia, where the company managed to make more than 627,000 deliveries of cars in 2021 to the three regions. In Tesla’s consumer behavior, social status is a big consideration when selling cars to people who can comfortably own electric vehicles.
Targeting
Targeting involves providing a product to a given market segment, which is recognized as being made up of the best customers. Tesla’s targeted market approach includes behavioral and psychological market segments. The company is dedicated to middle—and upper-age customers who are passionate about living a luxurious life.
With reference to Tesla’s strategic goal of reaching the mass market, the marketing team should target customers who have characteristics of a mass market. This would involve the production of cost-effective and environmentally responsible products. Other target markets for the company are based on geographical segmentation, such as Asia, North America, and Europe.
Positioning
The intense competition in the automobile industry makes it hard for the company to position its products for the targeted customers in the market segment. The strategic position of Tesla is based on intensive research and the use of technology to analyze and evaluate external factors for the sake of quality enhancement. With the recent digitization, it is important for organizations to embrace technology when positioning their products to the market. Tesla gained a competitive advantage in the global market by efficiently applying current technology to the positioning of its products. This involves the effective use of brand identity by producing electric vehicles that follow current trends.
Branding
Branding is a distinctive product offering created by the user name, design, symbol, and packaging with the intention of differentiating from competitors. Being the brand leader in the market helps the company gain loyalty from customers and penetrate new market segments. A brand leader in a given industry helps gain a competitive advantage over other rivals. Tesla has been able to penetrate the global market through the effective application of branding strategies.
The name ‘Tesla’ itself is a brand for the company since no other Automotive company has such a name. The quality and outstanding products provided by the company have greatly contributed to building the brand name. The company has also been designing classic and unique models that position itself high in the market. For instance, the production of Model Y in 2021 made the company make more sales with the new brand in the market.
Tesla has been using five strategies to establish a good brand. The first strategy is investing in making great products. Instead of advertising and marketing campaigns, Tesla uses this money to improve the quality of outstanding cars. Another strategy that Tesla has used to build its brand is having a riveting dream. The company has been advancing its products to produce electric cars that could help solve environmental pollution with zero emissions.
Tesla’s brand has also been established by appealing to a good customer experience. The company ensures the customers are well served and gain a positive experience. This has also been enhanced by giving them free charging stations and other gifts.
Tesla’s management has also invested in its logo branding. The Logo communicates a lot to customers, and through it, the company can gain a competitive advantage. The Logo is made up of the letter ‘T’ in bold red, which is unique and can be easily identified by customers.
The Two Growth Opportunities- Macro–Environment (PESTLE)
The macro-environment comprises the external factors that can be used by the company to identify opportunities that can contribute to growth. The external factors for an organization, also called PESTEL, comprise political, economic, social, technological, environmental, and legal factors. The recommended factors from the external environment comprise the economic and technological factors.
Economic Factors
The impact of the economic environment is one of the economic effects of the operations of Tesla Inc. in terms of market growth, trade rules and levels, currencies, and other variables relating to the automotive industry. For example, the recent increase in the use of solar energy can be leveraged by Tesla to expand its operations through the production of solar panels. The major economic factors that Tesla needs to address and utilize as market loopholes include a decrease in battery costs, a reduction in renewable energy prices, and issues relating to economic stability.
The marketing analysis showed that Tesla does not use a cost leadership strategy to promote its products. Therefore, it is recommended that the company utilize a cost leadership strategy to maximize the recent decrease in battery costs in the automotive industry. This can be used as an opportunity to improve the efficiency of the batteries being produced by the company.
Furthermore, according to the PESTEL analysis, the company may also consider decreasing the cost of renewable energy as one of the external factors making Tesla’s products more attractive to the market. Arguably, economic instability has been an issue for the company’s growth in areas like Asia and Europe. The company can manage this threat by distributing its products to economically stabilized regions.
Technological Factors
One of the PESTEL elements, technology, presents Tesla with a chance to expand its business operations. The advancement in the products produced by the company will rely on the technological trends in the automotive industry. For instance, in the automotive industry, the efficiency of the product greatly depends on the level of technology used in material engineering. Advanced technology will result in the production of good-quality products that meet the needs and preferences of the customers. The major technological factors that Tesla can utilize as an opportunity include the increase in technological trends, the increase in the automotive business, and the popularity of online mobile systems.
The company can use the increase in technological growth trends to produce electric cars that are consistent with current technology. Providing products incorporating recent technologies will help the organization achieve a strategic edge within the industry in the market, hence the growth of the company’s business.
Another technological factor that the company can use as an opportunity is the growth and advancements in the automation business. Tesla has been at the forefront of producing high-tech automotive products. Therefore, growth in the automotive business will help the company make more sales, as customers will be more interested in the new products.
Some actions that could be taken to promote advancements in the automotive business include producing electronic and automatic cars. Since the market is also advanced in using automated products, Tesla will gain an advantage in providing products that meet their demand. In addition, the company should use an increase in the online system’s popularity by integrating it with automobiles.