Narrative of Strategies
Tesla is the largest automotive company in the world, specializing in the manufacturing of electric vehicles (EVs) and associated parts. Despite being relatively young, the company’s specialization in brand differentiation, innovation, and global expansion has led to exponential growth over the past decade. One of the key strategies that the Austin-based corporation has adopted is heavy investment in research and development, a commitment that has enabled Tesla to achieve technological leadership. Indeed, the investment in R&D has enabled the leading car manufacturer to be a distributor of essential vehicle parts and technologies to other vehicle manufacturing companies, gaining billions of dollars in revenue in return. By emphasizing technological superiority, Tesla has been able to enjoy product differentiation, thus becoming one of the most valuable companies in the world.
Tesla has effectively established itself as a premium car brand, and it is now compared with other renowned global brands such as Mercedes and BMW. The company’s CEO, Elon Musk, has spearheaded this seemingly mainstream car maker into a premium brand by effectively showcasing its innovative features, thus enabling the company to price its products in line with other premium car brands. The car is now associated with high performance, luxurious drive, and is 100% environmentally friendly. The focus on the environment and comfort has enabled the company to attract affluent and wealthy members who want to be associated with environmental conservation and a high social standing. The premium branding has also made people crave being associated with the company, thus promoting brand loyalty.
Today, most car companies, such as Toyota, launch strategic collaborations with independent dealers to distribute their cars to different parts of the world. However, Tesla has adopted a differentiated distribution strategy, preferring to own its entire distribution chain. By selling its products directly to clients, Tesla has enhanced its customer experience, fostered strong relationships with its clients, and gathered valuable data about its customers, which can inform segmented and targeted marketing efforts. Through owning the entire distribution chain, Tesla has offered better customer service and provided more immediate feedback and response to its clients than its competitors.
The current strategies employed by Tesla are likely to enable the company to succeed both in the short and long term. The prioritization of R&D is expected to make Tesla the distributor of EV parts, and its patents on these innovations will boost the car manufacturer’s revenues in the foreseeable future. However, the success of the strategies employed will depend on how flexible the company is in a changing technological landscape, as well as in response to governmental regulations, the strategies used by competitors, and customers’ choices and preferences.
Proposed Strategies
Corporate: Tesla and Renown Renewable Energy Company
Diversification
Tesla should consider merging with a reputable and trustworthy renewable energy company to expand its production of renewable energy sources, such as solar and wind. This corporate-level strategy falls under the diversification category of the Ansoff matrix, as the company will now seek to introduce new products into its existing product line. Energy can be converted from one form to another, and this knowledge should guide engineers at Tesla and those at renewable energy companies in their efforts to discover new forms of renewable energy.
This strategy is supported by market predictions, which indicate that as the world strives for greater sustainability, its demand for new clean energy sources will continue to rise. Tesla could leverage its team of well-skilled engineers, its large capital base, and its ability to form partnerships with experienced renewable energy-producing companies to discover new ways of producing sustainable power. Once a new form of patentable generating power is discovered, Tesla could enjoy long-term profits with its latest product development strategy.
This cooperative strategy by Tesla for developing new renewable energy options presents several issues and opportunities. One issue with the proposed new technology is its possible lack of feasibility. For a long time, engineers have been seeking ways to develop new renewable energy technologies, such as the dynamo, many of which have yet to prove effective.
There is also an issue with the technologies that Tesla designs not being protected by patents; thus, the company fails to enjoy the maximum benefits of its innovation. Additionally, collaborating with the renewable energy company to design new types of renewable energy could result in misalignment of values. Nevertheless, the company should still be incentivized to pursue this collaboration with a clear goal, as it successfully enables Tesla to enjoy a monopoly in a significant and untapped market segment.
Strategic Business Unit (SBU): Autonomous EVs for Ride-Hailing Services
Product/Market Development
Many start-ups are striving to launch autonomous electric vehicles (EVs) for ride-hailing services, which will displace the standard of traditional human ride-hailing services and be associated with companies such as Uber and Lyft. However, the technology has yet to be fully integrated, and Tesla needs to strive to leverage its vast capital to establish a dedicated business unit for this objective. This strategy falls under the product development category of the Ansoff matrix, where the organization has clients due to its brand loyalty but lacks a product. Tesla has an enormous amount of data and a team of highly skilled machine learning experts who can be utilized in creating autonomous cars for hailing services.
This proposed autonomous EV is likely to become highly profitable as a successful implementation would result in faster, safer, and more sustainable transportation. In the past, Tesla has had favorable dealings with regulatory bodies, and a successful implementation could easily result in its vehicles being approved for use. Tesla could displace the leading AV start-ups like Waymo, Zoox, Cruise, and Argo AI by focusing on this risky but highly rewarding market segment of the transportation industry. The company will, however, have to deal with the issue of safety, as no organization has yet been able to manufacture a reliable and safe autonomous vehicle.
However, for Tesla, this is a reality as the Texas-based organization prides itself on having one of the most advanced semi-autonomous cars in the world. Once the technology of an autonomous ride-hailing service is successfully designed, Tesla and the organizations that adopt it will enjoy reduced costs, thereby gaining a competitive advantage over human-driven ride-hailing companies.
Feasibility and Acceptability
Table 1 – Feasibility of Proposed Strategies
Table 2 – Acceptability of Proposed Strategies
Winning Strategy
Selected Strategy – Corporate
Based on the feasibility and acceptability analysis, the winning strategy is to form a strategic partnership with a renewable energy company to diversify into renewable energy solutions. The merger will expose the company to a largely untapped market, and Tesla could conduct its R&D in the field without bearing all the risk.
Key Issues
- Shared costs of R&D into alternative renewable energy solutions.
- The shared expertise of two different teams in a relatively complex field.
- Diversified portfolio for Tesla.
Table 3 – Risk Assessment
Managing Change
- Tesla needs to be restructured to have a department of renewable energy sources that will effectively align with that of the renewable energy company.
- Tesla and the renewable energy company must regularly hold meetings to ensure activities are well aligned.
- Management of the two companies to clarify their expectations for the collaboration.