Tesla Motors Company deals with the production of vehicles. Its strategy is to shift people from gasoline-powered cars to affordable electric-powered vehicles. Its plan fosters a cleaner environment. The goal of its strategy is to disrupt the automotive industry and transform it using the advanced technology. Since people were excited by the super Model Sedan referred to as Model S of Tesla Motors, the firm did not focus much on advertisements to capture customer’s attention. The company believed that since the Model S gained public’s attention, there was no need to spend funds on marketing. However, in 2016, the gasoline prices dropped, and other auto firms released competitive electric and gasoline-powered vehicles. Since then, Tesla Motors has incurred losses and its new strategy is to lower the prices of its models to gain customer’s attention. Even though Tesla Motors plans to reduce its costs to gain customers attention, it should focus more on it consumer needs by conducting market research and marketing to its target audience to retain its market position.
The first strategic issue is that as much as the company focuses on producing electric-powered vehicles to meet people’s demand in the market, it lacked consumer knowledge. Customers expect products of high quality from a public figure company. Value is defined by quality and seconded by the price of a product (Goetsch & Davis, 2014). Instead of replacing a durable battery with low-quality battery on Model 3, Tesla Motors models could have retained the power or quality of the battery because people seek durable goods including the battery pack in the Model 3. Therefore, cutting down on value to make more sales is not attractive because Tesla’s competitors are also producing competitive electric-powered designed autos to gain customers’ attention.
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Since the company seeks to apply low-cost differentiation strategy to outdo its competitors in the market, it should not omit the initial value rendered to consumers. Instead, more value should be added to customers but at a lower cost than the rivals in the market to maintain the top-seller position (Thompson, Peteraf, Gamble, & Strickland III, 2016, p. 122). The firm should focus on all types of consumers that is high-class, middle-class, and low-class consumers (Tanwar, 2013). Even though an economic class differentiates consumers in every market, there should be something for everyone from a company that targets customers from a broad spectrum. As much as underpricing of products can be attractive, high-class or premium buyers may undervalue a product that is underpriced (Tanwar, 2013). Hence, there should be different prices depending on the market niche. In other words, as Tesla Motors aims to turn at low-cost differentiation strategy, it should still render acceptable products to buyers.
Since Tesla Motors focuses on more than one state and continent, it can be considered as an international or global company. For a company to maintain a top position in the international market, it has to be aware of global leadership skills. As competitions arise, new opportunities also emerge, that can only be seized by growth-oriented corporations (Goetsch & Davis, 2014). Being an International Company, Tesla Motors can attract new customers in foreign markets to increase its revenues (Thompson, Peteraf, Gamble, & Strickland III, 2016, p. 180). In each market, there are new demands based on consumer culture. Since Tesla wants to apply low-cost differentiation in the international markets, it should be in a position to access raw materials for production at a lower cost to reduce the operations costs thus retaining the desired profits.
Above all, marketing is an essential tool for excellence in any given market. Customers need to be informed of the available products along with their features. They need to feel valued by companies offering services to them. In the international markets, stiff competition is inevitable (Cuervo-Cazurra & Ramamurti, 2014). However, if a company like Tesla Motors starts earlier to capture its target’s market attention by advertising its products in platforms that capture all markets, then the low gasoline prices and mounting competition will not challenge it (Cuervo-Cazurra & Ramamurti, 2014). It should take advantage of the social media platform that is found to be most influential in every market and use it against its rivals.
After Tesla benchmarked its activities thus identifying its strength and weaknesses, the firm opted for low-cost differentiation policy to compete against its rivals. In this case, the firm should identify and adopt optimum practices to gain low-cost leadership in the international market (Thompson, Peteraf, Gamble, & Strickland III, 2016, p. 326). First, it should gain low cost of raw materials to maintain the quality of models rendered to consumers. Afterward, the company should focus on maintaining excellence in their products by retaining its strategic mission of fostering a cleaner environment. Suppose Tesla diverts or loses its attention to its measure of supporting a more immaculate surrounding, then the company will lose its purpose for existence. Therefore, even though the company wants to gain more revenue and maintain the leading position in the automotive industry, it should stick to its purpose for existence because that is what drives the company.
In conclusion, the strategy of Tesla (low-cost differentiation) will not be defeated by low gasoline prices and mounting competition if the firm does proper market research on the target market as well as investing on marketing tools to capture consumers’ attention. The firm should not replace quality with price rendered to customers because most buyers seek value in products before making purchases. Since Tesla Motors is an international company, it should be able to access raw materials at a low cost to reduce its cost of production and operations thus maintain the value rendered to customers. The firm should not lose its purpose for existence; fostering a cleaner environment, for competition purposes.
References
Cuervo-Cazurra, A., & Ramamurti, R. (2014). Understanding multinationals from emerging markets .
Goetsch, D. L., & Davis, S. B. (2014). Quality management for organizational excellence: Introduction to total quality .
Tanwar, R. (2013). Porter’s Generic Competitive Strategies. IOSR Journal of Business and Management , 15 (1), 11-17. doi:10.9790/487x-1511117
Thompson, A. A., Peteraf, M. A., Gamble, J. E., & Strickland III, A. J. (2016). Crafting and Executing Strategy: THE QUEST FOR COMPETITIVE ADVANTAGE: Concepts and Cases [Mc Graw Hill] (21st ed.).
