Tesla, Inc.

’s Generic
Strategy & Intensive
Growth Strategies (Analysis)
A Tesla Roadster in 2011. Tesla, Inc.’s (formerly Tesla
Motors, Inc.) generic competitive strategy (Porter’s model)
and intensive growth strategies emphasize the significance of
product development and expansion in the automotive
industry.
Tesla, Inc. (formerly Tesla Motors, Inc.) applies its generic
strategy to achieve competitive advantage against other firms
in the global automotive industry. In Michael Porter’s model,
a generic competitive strategy represents the company’s
approach to competing in the market. In this business analysis
case of Tesla, the generic strategy reflects the company’s
focus on using advanced technologies in its electric vehicles
and related products, as a way of competing against General
Motors Company, Toyota Motor Corporation, Honda Motor
Company, Nissan Motor Company, Bavarian Motor Works
(BMW), and Volkswagen, among other automobile
manufacturers. Aside from the generic competitive strategy, a
company uses intensive strategies to ensure business growth.
This company analysis case shows that Tesla Inc.’s intensive
growth strategies gradually evolve. Such an evolution is a
reflection of the company’s increasing popularity and
improving profitability, along with the business strengths
identified in the SWOT analysis of Tesla Inc. Strategic
adjustments, over time, ensure the corporation’s resilience in
the face of technological advancement and changing customer
preferences.
Tesla’s generic strategy (Porter’s model) enables the company
to maintain competitive advantage, and attract early adopters
in the global automotive market. The corresponding intensive
strategies support organizational growth based on increasing
sales revenues from current markets where Tesla, Inc.
operates. The matching of the intensive growth strategies with
the generic competitive strategy contributes to the company’s
operational effectiveness.

Tesla’s Generic Strategy (Porter’s Model)

Tesla’s generic competitive strategy is broad differentiation.
This generic strategy builds competitive advantage based on
the development of products that differentiate the company
from other firms in the industry. For example, Tesla Inc.’s
products are competitive because they integrate advanced
environmentally friendly technology, considering that the vast
majority of automobiles today use internal combustion
engines. In using this generic competitive strategy, the
company broadly attracts all potential customers, who are
now increasingly interested in environmentally friendly
products. Initially, Tesla used differentiation focus as its
generic strategy for competitive advantage. In applying the
differentiation focus strategy, the company emphasized the
uniqueness of its products, but also focused mainly on early
adopters in the high-end market for electric vehicles. These
early adopters are affluent customers who have a high
tendency to purchase newly introduced products. However,
now that the company is already popular and production costs
are declining, Tesla’s generic competitive strategy has shifted
to broad differentiation. The declining production costs and
increasing brand popularity enables the company to broadly
target customers in the automobile market.
The generic strategy of Tesla, Inc. requires suitable strategic
objectives to ensure competitive advantage. For example, one
of the company’s strategic objectives is to increase investment
in research and development (R&D) to develop new products
that satisfy market demand for enhanced renewable energy
solutions, such as batteries for various purposes. Another
strategic objective connected to Tesla’s generic competitive
strategy is to strengthen competitiveness by broadening its
market reach to generate more sales and support brand
popularity.

Tesla’s Intensive Strategies (Intensive Growth Strategies)

Market Penetration (Primary Strategy). Tesla, Inc. uses
market penetration as its current primary intensive growth
strategy. This intensive strategy enables business growth by
increasing sales revenues in current markets.For example,
with aggressive marketing, the company aims to rollout and
sell more of its electric cars in the United States. In this way,
the corporation maximizes its revenues from the markets
where it currently operates. This intensive growth strategy
relates with Tesla’s generic strategy by developing
competitive advantage based on increased market share. A
strategic objective based on this intensive strategy is to grow
the company’s sales revenues through aggressive marketing.

Product Development (Secondary Strategy). Product

development is Tesla Inc.’s secondary intensive growth
strategy. In this intensive strategy, the company grows by
developing new products that generate new sales. The
company applies this strategy by developing new products
with advanced technologies for minimal environmental
impact. For example, the company offers solar panels, and
developed the Tesla Roadster, which was the world’s first
fully electric sports car. This intensive strategy supports Tesla
Inc.’s differentiation generic competitive strategy by focusing
on unique high-technology automobiles and related products
that attract target customers. In relation, a strategic objective
for this intensive growth strategy is to maintain extensive
investments in research and development (R&D).

Market Development. Tesla, Inc. uses market development

as a tertiary intensive growth strategy. This strategy involves
entering new markets to generate more sales and grow the
global business. For example, the company gradually expands
its market reach worldwide by establishing new offices and
facilities. At present, the company sells in only a handful of
countries, but further international expansion is expected. This
intensive strategy supports Tesla’s mission and vision
statements, which highlight global leadership in the
automotive industry, with energy solutions for the
transportation and other sectors. The differentiation generic
strategy enables market development by creating unique
products that attract customers when the company enters new
markets. Based on the market development intensive strategy,
a strategic objective is to grow Tesla Inc.’s multinational
business by establishing alliances with other companies that
make it easier to enter new markets.

Diversification. Tesla applies diversification, but only as a

minimally significant intensive growth strategy. This
intensive strategy helps grow the company through new
business creation. For example, the firm aims to create new
battery products for a variety of non-automotive applications.
However, this intensive growth strategy currently has
insignificant effects on the company’s financial performance.
Tesla focuses most of its efforts on market penetration and
product development to grow its automotive and energy
solutions businesses. The company can apply the
differentiation generic competitive strategy to increase the
likelihood of success in using this intensive growth strategy.
A strategic objective linked to diversification is to increase
Tesla’s R&D investment to identify new business
opportunities. Another strategic objective based on this
intensive strategy is to acquire other firms or enter joint
ventures to develop entirely new products.

Tesla, Inc.’s Operations

Management, 10 Decision
Areas
1. Design of Goods and Services. In this strategic decision
area, operations managers focus on how the organization’s
products influence costs, quality objectives and resources. In
this company analysis case, Tesla Inc. addresses this concern
through concurrent innovation, which involves simultaneous
innovation in various parts of the automotive, battery, and
solar panel business. For example, to ensure productivity in
manufacturing advanced electric vehicles, the company
continuously innovates its products and supply chain systems.
This decision area of OM links to Tesla Inc.’s generic strategy
and intensive strategies, which emphasize product
differentiation and product development as approaches to
grow the global business. It is notable that the company
focuses on electric vehicles. As a result, Tesla’s operations
management is also focused on the innovation and
manufacture of electric automobiles, such as through
optimization of organizational capacity for innovating electric
cars and car parts.

2. Quality Management. Satisfying customers’ quality

expectations is the main objective in this strategic decision
area of operations management. Tesla Inc. addresses this
strategic objective through regular quality checks, quality
improvement initiatives, and research on the
automotive/transportation and energy solutions market. In
addition, the company continues to enhance its products and
processes to satisfy high standards for quality and
productivity. For example, Tesla’s operations managers
regularly conduct quality reviews of, and implement
enhancements to manufacturing processes. Moreover, in
response to quality issues with suppliers of automobile parts,
Elon Musk shifted the company toward manufacturing more
of its own vehicle parts instead of sourcing from parts
manufacturers. This shift increases managerial workload, but
improves quality control and overall product quality. Such
control is among the strengths shown in the SWOT analysis of
Tesla Inc.

3. Process and Capacity Design. This operations

management decision area focuses on business processes,
along with related investments, resources, and standards.
Tesla, Inc. integrates automation for this concern. For
example, the company automates manufacturing processes
combined with human intervention. This condition helps
Tesla achieve high productivity through operational efficiency
in the automotive and energy solutions business. Also, Tesla
Inc.’s organizational structure influence and is influenced by
this area of operations management. For instance, some parts
of the corporate structure depend on relevant process and
capacity requirements in the business.

4. Location Strategy. Logistics and nearness to markets,

resources and suppliers are considered in this strategic
decision area of operations management. In terms of
resources, Tesla’s operations managers utilize its global reach.
For example, suppliers in the United States, Europe, and Asia
provide some of the basic components for the company’s
electric automobiles and other products. Tesla Inc.’s
marketing mix or 4Ps also involves company-owned stores
and galleries in malls and other key locations to maximize
sales personnel productivity and access to the target market.
This OM approach involves high-density areas for displays
and sales transactions, considering the company’s relatively
high prices and specialization in electric vehicles and energy
products.

5. Layout Design and Strategy. In this strategic decision

area, operations management is concerned with achieving
optimal flow of resources and information. In Tesla’s case,
layouts are designed to maximize capacity utilization of
facilities, especially buildings used for manufacturing electric
vehicles. Also, the company employs advanced computing
and networking technologies for internal communications.
These approaches increase productivity in Tesla’s operations.
The company also minimizes distances among intermediary
processes in its manufacturing operations. An example of
such minimization is the Nevada Gigafactory, which helps
reduce production costs along with vertical integration.

6. Job Design and Human Resources. Adequacy of effective

human resources is the objective in this strategic decision area
of operations management. Tesla, Inc. satisfies this objective
through a competitive compensation strategy to attract
effective and competent workers. This approach is especially
important in the market, where many companies compete for
high quality human resources. Tesla’s corporate culture’s
focus on innovation and problem solving contributes to the
definition of this OM decision area. Also, the company’s
operations management ensures effectiveness and high
productivity of personnel through regular training, as well as
leadership development programs. For example, leadership
development is used to fulfill Tesla’s leadership needs to
grow its automotive business.

7. Supply Chain Management. In this strategic decision

area, operations managers focus on adequate supply and an
effective and efficient supply chain. Tesla has a global supply
chain aimed at supporting its manufacturing processes. For
example, high productivity of the company’s manufacturing
plants in the U.S. benefits from timely shipment of materials
from overseas. Tesla’s social responsibility and corporate
citizenship ideals are applied in this OM area, in considering
the effects of the business on suppliers and associated
communities. As an automaker that focuses on manufacturing
in the United States, Tesla’s operations management
automates major areas of the supply chain, while constantly
looking for strategic partners in the industry.

8. Inventory Management. Inventory decisions, costs and

support for production are considered in this strategic decision
area. At Tesla, inventory decisions are based on operations
management principles that emphasize quality. For example,
managers require that inventory holding does not affect the
quality of materials used for the company’s electric vehicles.
On the other hand, for high productivity and minimized
inventory costs, Tesla’s operations management approach
involves just-in-time inventory for some materials. For
instance, some materials for automobile production are used
as soon as they arrive at the company’s manufacturing
facilities. Automation is also applied, partly in response to the
trends shown in the PESTEL/PESTLE analysis of Tesla, Inc.
This approach helps minimize the company’s inventory costs.

9. Scheduling. This strategic decision area focuses on short-

term and intermediate schedules for resource utilization.
Operations managers at Tesla, Inc. address these concerns
through market-based scheduling, combined with automated
processes for maximum efficiency. In market-based
scheduling, the company monitors actual market demand and
uses the resulting data as basis for scheduling automobile
production. On the other hand, Tesla’s operations
management supports scheduling activities with automation to
minimize errors and delays, thereby enhancing productivity.

10. Maintenance. Adequacy of resources and production

capacity are the objectives in this strategic decision area of
operations management. Tesla ensures resource adequacy
through regular inventory monitoring that readily responds to
shifts in market demand. The company addresses the
objective of adequate production capacity through a small but
significant degree of redundant processes and production
resources. For example, Tesla maintains excess production
capacity in some of its facilities. Such redundancy allows the
company to rapidly increase its production in response to
spikes in market demand for electric vehicles. These
operations management approaches create resilience and
responsiveness in Tesla’s productivity.

Tesla’s Measures of Productivity

 Tesla, Inc. uses measures of productivity based on the
production of automobiles, batteries, and solar panels. The
company also uses productivity criteria for its services and
corporate office operations management. In managing the
multinational business, these criteria or measures are used to
evaluate performance and strategic effectiveness. The
following are some of these measures used to determine
Tesla’s productivity:

1. Powertrain units per day (Automotive production plant

facility productivity)
2. Automobiles per day (Tesla car production plant facility
productivity)
3. Inquiries addressed per day (Customer service productivity)

Marketing Strategy
of Tesla
Tesla, Inc. which was formerly known as Tesla Motors was
founded in the year 2003 and it only started being profitable in
2013. It is based on Palo Alto, California and specializes in
solar panel manufacturing, lithium-ion battery energy, and
electric vehicles. Elon Musk who is the CEO of the company
envisions Tesla as a technology company and an independent
automaker which aims to provide affordable electric vehicles
to average consumers.

Segmentation, targeting, positioning in the Marketing

strategy of Tesla :
While segmenting the market Tesla didn’t ask which segment
is the most fuel-conscious but which segment enabled the
company to build long-term and innovative model vehicles. It
didn’t choose the small car segment. The segment of choice
was the lower volume, the price-insensitive performance-car
segment which enabled them to create a brand identity,
establish premium pricing and earn significant unit gross
margins by targeting the rich and affluent who are willing to
spend more compared to their vehicles.

Since 2015, Tesla has been selling an all-electric luxury SUV,

which has done relatively well in the market and has delivered
the record of 100,000 vehicles for 2017. Tesla’s
unique positioning in the car market is one of its biggest
strengths. Tesla not only sells cars but also sells technology. It
positioning statement was “the only stylish car that can go from
0 to 100 in 3 seconds without a drop of oil”.

Marketing mix – Here is the Marketing Mix of Tesla

SWOT analysis – Here is the SWOT Analysis of Tesla.

Mission and Vision :

The vision and mission statement of Tesla reflect the
company’s aim for dominance in the global electric vehicles
and battery market.

Tesla’s mission statement: “to accelerate the world’s

transition to sustainable energy”.

It believes that the faster the world stops relying on fossil fuels
and moves towards a zero-emission future, the better it will be
for the world.
The vision statement: “to create the most compelling car
company of the 21st century by driving the world’s
transition to electric vehicles”.

Tesla wants to accelerate the advent of sustainable transport by

making products accessible and affordable to more and
more people ultimately leading to clean transport and clean
energy production. Tesla focuses on bringing compelling mass
market electric cars to market as soon as possible.

Competitive advantage in the marketing strategy of Tesla :

1) Driven by Technology:

More than an automotive company, Tesla is a technology

company building technology platforms. Betting on Tesla
technology is betting on new technology. The company not
only sells cars but has also built the infrastructure necessary to
support the operation of those cars. It has built the network of
superchargers, battery swap stations, and service stations.
Tesla is on track to deliver full autonomous driving capability
earlier than many cars manufactures by leveraging the billions
of miles’ worth of driving data that Tesla has been gathering.

2) Tesla’s reputation:

This can be considered as one of the intangible strengths of the

company.

Tesla’s Roadster transformed the image of electronic vehicles

from small slow vehicles, into blindingly fast vehicles of desire.
It provided an acceleration with a 0 to 60 mph that could beat
superior cars. Tesla then produced the cheaper Model S sedan
that ended up winning just about every big auto award. With
the reputation for excellence, it has created an impressive brand
image.

3) Diversifying its business:

Tesla seems to be diversifying its business and entering into the

market of Solar roof tiles as it complements with the business
of rechargeable lithium-ion battery which provides homes with
the storage of solar captured energy.

BCG Matrix in the marketing strategy of Tesla :

Model 3 is the combination of design, style, convenience, and
moreover safety. It has been priced as the least expensive model
developed. The official launch and delivery of the first 30 cars
said to be on July 28, 2018. So the Model 3 belongs to the
question mark category of the BCG matrix.

Model S is a beautiful model which is packed with

functionality, convenience, and safety along with style and
energy. It is said that it has crushed large luxury car competition
in the USA. Out of 10 large luxury car models, the Tesla Model
S gobbled up a notable 34% of sales. Thus it belongs to the star
category of the BCG Matrix.

Model X is a long-range SUV. It has unique designs with falcon

wings that give the vehicle a unique and luxurious look and
feel. Tesla is said to be pushing back its production schedule
for the Model 3. The sales for Model X and Model S sales are
soaring but Tesla is still struggling with Model 3 production.
This puts the Model 3 in the Dog category of the BCG matrix.

The ZEV credits or Zero Emission Vehicle credits can belong

to the cash cow for Tesla. It is required for automakers that a
certain proportion of vehicles sold emit no greenhouse. Tesla
only makes vehicles that run on battery and emit nothing, it
usually has a surplus of sale. So by selling this, Tesla earned
100 million in revenue in 2017. The profit margin on this is
95%. Thus the ZEV credits are the cash cow.

Distribution strategy in the marketing strategy of Tesla :

Tesla mostly uses online sales model coupled with company-
owned stores to sell its cars and doesn’t use the conventional
dealer network. The company owned distribution is fraught
with several challenges. The substantial amount of money is set
up for a distribution channel.

Other manufacturers including Ford and general motors team

up with the third party to sell their vehicles. For Tesla, the
brick-and-mortar store serves as a channel to sell the concept
of EV as well. Selling the vehicles online has reduced the
company’s selling cost. The physical stores only serve as a
showroom for Tesla. It has around 17 stores worldwide to sell
its cars which according to Tesla helps to interact with potential
customers.

Brand equity in the marketing strategy of Tesla :

Tesla has a market cap of nearly 60 billion even though it
consistently failed to meet production targets and spends
billions of dollars a year.

Tesla as a brand is more than just a car manufacturer, it is a

vision of the future. The face of the brand for Tesla is the CEO
himself, Elon Musk, who is a noted entrepreneur and an
influencer. Part of a reason why it is impossible to separate
Elon Musk’s brand from Tesla is that of how responsive he is
to the Tesla users who reach out to him and his presence is
largely felt on the social media.

Tesla has consistently proven to care about user experience

which has helped shape a public perception about the brand.
Word of mouth has been a powerful driver for Tesla’s growth
with fervent supporters who don’t even own a Tesla but support
the idea and vision of Tesla.

Market analysis in the marketing strategy of Tesla :

The global EV market is predicted to grow at a compound
annual growth rate of 21.4% between 2018 & 2026 according
to ReportBuyer.

Tesla still rules the EV market in the USA, Tesla sold three of
the country’s five best-selling EV’s first four months of 2018.
Tesla’s competitors are Toyota’s Prius Prime plug-in hybrid
and General Motors’ Chevy Volt. Both lack Tesla’s brand
appeal, however, Tesla is struggling with a production
bottleneck.

According to McKinsey Research, China has increased its lead

in EV production and the country has the largest fleet of EV on
the road and has overtaken US market for the first time. China
now accounts for half of the EV sold worldwide. Even though
Tesla is not able to meet its production goals it is predicted to
account for over 605 of all EV sales in the US.

Customer analysis in the marketing strategy of Tesla :

The typical customers of the brand are business executives and
entrepreneurs who are tech-savvy, green-friendly and wealthy.
The customers are mostly males looking for luxury cars.
According to Investopedia, the buyer’s profile are around
83.9% male and 16.1% female. 77% of the buyers have
income over $100,000. According to the registration data of
Model X, it tells that wealthy and younger customers are
buying Tesla’s crossover SUV. It is predicted that the Model
X, will have even wider consumer reach due to its affordability
factor.

Promotional strategy in the marketing strategy of Tesla :

Tesla is very much fond of the social media and it’s the CEO
who is the face of the brand. On social media, compared to
other auto giants Tesla is in the top 3,
outperforming Volkswagen, Ford, and Toyota. Tesla doesn’t
need paid advertisements to make sales. Word of mouth and the
free media coverage is enough to fuel demand for the brand.
Tesla is said to have built a strong brand identity that requires
less promotion and advertising. Tesla’s website is also an
effective channel for sales and marketing, it has also
used Twitter to successfully connect with the large base of fans
and followers.

HUMAN RESOURCE
Qualtrics recently gathered HR leaders for a weeklong series
of webinars focused on recruiting, employee engagement,
talent development, and leadership.
In one of the first TalentWeek webinars, Employee
Engagement to Accelerate Business Results, Louis Efron and
Juliana Bednarski of Tesla spoke about how their organization
is incorporating employee engagement into its core business
strategy.
Tesla was recently named Forbes’ most innovative company.
According to Efron and Bednarski, the key drivers of Tesla’s
innovation and industry leadership have been Tesla’s purpose,
exceptional people and leaders, and active engagement of
each individual in the organization.
Tesla views engagement as more than a ‘nice to have’. Efron
and Bednarski argue that that in today’s uber-competitive
market for top talent, engagement is a ‘must’ in order to
attract and keep the best employees. Additionally, higher
employee engagement directly correlates to better customer
experience.
Put into metrics, Tesla has found that engaged teams have:
 15% more profitability

 30% more productivity

 12% higher customer engagement

 30% less turnover

 62% less safety issues

 37% less absenteeism (i.e., calling in sick)

Efron and Bednarski shared their recent success measuring

employee engagement and leveraging that engagement to
empower employees and strengthen Tesla as a whole through
their Tesla360 survey. This survey was distributed to every
employee at Tesla and yielded a participation rate of 91%!
Based on their experience, Efron and Bednarski provided the
following tips to better understand employee engagement in
your company and use that as a platform to improve your own
workplace:
1. Get people on board using a top-down approach
Enthusiasm from leadership goes a long way in garnering
support at every level of the organization.
2. Communicate about your engagement survey using the
same channels that you normally would
Tesla did not use a one-size-fits-all communication strategy to
announce Tesla360 to employees. The HR team went to pre-
shift meetings at the manufacturing plants and engineers’ all-
hands meetings, in addition to communication to corporate
employees through typical channels, like email.
3. Eliminate barriers to participation
Tesla360 had 18 questions (16 with a 1-5 scale answer, 2
open-ended answers). It took an average of 3 minutes to
complete and was mobile enabled so people could take the
survey anywhere.
4. Design the survey to reflect your organization’s brand
Tesla360 was clean and sleek to match its brand aesthetic.
5. Keep it anonymous
Anonymity is critical for employees to feel like they can be
honest. Tesla communicated upfront that surveys would be
anonymous and carried this through later data presentation
and analysis.

6. Be timely and transparent

Tesla sent participation updates while the survey was active in
order to drive participation. It then released results
organization-wide within 2 weeks of closing the survey along
with guidance as to how to interpret the data.
7. Make the data accessible
Tesla created a dashboard to present the data in an easily
digestible format (e.g., mean answer, response rate, score
distribution, and delta from company average), which allowed
employees to take a surface view or a deep dive into the data.
8. Be Flexible
Tesla had planned for designated HR Business Partners to
moderate team conversations regarding the data, but managers
were so enthusiastic to lead follow-up action planning
sessions that the original plan was not feasible. Efron and
Bednarski’s team pivoted and developed training documents
and videos that enabled managers to facilitate their own action
planning sessions.
9. Discuss the Data
Instead of reporting results to team members, managers
facilitated discussion amongst their teams by asking questions
of their employees like, “What surprised you about the data?”
and, for the scaled questions, “What would a 5-out-of-5 look
like to you?”
10. Use the Data
Tesla required every action planning session to finish with
one ‘action’ – one change that the team would make based on
its analysis and discussion of the Tesla360 results. Each
manager recorded their team’s ‘action’ so that they could
track progress toward their stated goal and so Tesla could
assess where similar ‘actions’ were concentrated or if there
were any particular ‘actions’ trending throughout the
company.
Moving forward, Tesla plans to continue building on its first
round of Tesla360 surveys. Tesla will look to leverage the
resulting longitudinal data to better engage its employees,
because as Efron said, “Caring for people is the right thing to
do, but caring for people also translates into business results.”