“A STUDY ON BRAND MARKETING WITH REFERENCE TO TESLA”

A project Submitted to

University of Mumbai for partial completion of the degree of

Master in Commerce

Under the Faculty of Commerce

By

Ms. SEEMA.S.KHAN

B - 05

Under the Guidance of

Dr. ALPA UPADHYAY

NIRMALA MEMORIAL FOUNDATION COLLEGE OF

COMMERCE AND SCIENCE

90 FEET ROAD, ASHA NAGAR, THAKUR COMPLEX,

KANDIVALI (E), MUMBAI-400 101.

December 2020
 NIRMALA MEMORIAL FOUNDATION COLLEGE OF

COMMERCE AND SCIENCE

90 FEET ROAD, ASHA NAGAR, THAKUR COMPLEX,

KANDIVALI (E), MUMBAI-400 101.

CERTIFICATE

This is to certify that Ms. SEEMA.S.KHAN has worked & duly completed his Project Work

for the degree of Master in Commerce under the Faculty of Commerce in the subject of

BUSINESS MANAGEMENT and her/his project is entitled “A STUDY ON ENHANCING

THE SALES OF CONSUMER GOODS USING MARKETING SEGMENTATION WITH

REFERENCE TO TESLA” under my supervision.

I further certify that the entire work has been done by the learner under my guidance & that

no part of it has been submitted previously for any Degree or Diploma of any University.

It is her/his own work & facts reported by her/his personal findings & investigations.

Project Guide _______________

Program Co-ordinator _______________

External Examiner _______________

Principal: - _______________

Date of Submission _______________

 DECLARATION BY LEARNER

I the undersigned Ms. SEEMA.S.KHAN here by, declare that the work embodied in this

project work titled “A STUDY ON ENHANCING THE SALES OF CONSUMER GOODS

USING MARKETING SEGMENTATION WITH REFERENCE TO TESLA” forms my

own contribution to the research work carried out under the guidance of Dr. ALPA

UPADHYAY is a result of my own research work & has not been previously submitted to

any other University for any other Degree / Diploma to this or any other University.

Wherever reference has been made to previous works of other, it has been clearly indicated as

such and included in the bibliography.

I, here by further declare that all information of this document has been obtained and

presented in accordance with academic rules and ethical conduct.

Name & Signature of the Learner

Certified by

Name & Signature of the Guiding Teacher

 ACKNOWLEDGEMENT

To list who all have helped me in difficult because they are so numerous & depth is so
enormous.

I would like to acknowledge the following as being idealistic channels & fresh dimensions in
the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do this
project.

I would like to thank my Principal, Ms. Swiddle D’Cunha for providing the necessary
facilities required for completion of this project.

I take this opportunity to thank our Coordinator, for her moral support & guidance.

I would also like to express my sincere gratitude towards my project guide, whose guidance
and care made the project successful.

I would like to thank my College Library, for having provided various reference books and
magazines related to my project.

Lastly, I would like to thank each & every person who directly or indirectly helped me in the
completion of the project especially my Parents and Peers who supported me throughout
my project.
 TABLE OF CONTENT

Chapter Particulars Page No.

INTRODUCTION
 Brand Marketing 1
1
 Background of Study 3
 Statement of Problem 4
 Purpose of Study 5
2 REVIEW OF LITERATURE 7
RESEARCH METHODOLOGY 11
 Meaning of Research 12
3
 Research Hypothesis 14
 Test of Hypothesis 15
TESLA MOTORS
 Introduction 18
 Company History 20
 Industry Review 24
4
 Situational Analysis 28
 Customer & Competition 39
 Tesla market Analysis 40
 Tesla Product target & Positioning 41
 The 4 Ms of Advertising 46
CONCLUSION 48
BIBLIOGRAPHY 49
5 RECOMMENDATION 50
APPENDIXES 51
 CHAPTER 1

INTRODUCTION

1
 BRAND MARKETING

Brand Marketing is a business that identifies unfulfilled needs and wants defines and
measures their magnitude determines which target market, the organisation can best serve
and decide on appropriate product, services and program to serve these markets. Consumer
are the most important things to consider while operating any business environment. It must
therefore be clear that a through and constant study of the consumers is one thing and another
entirely those needs of the consumer at a profitable level, hence marketers resort to a lot of
strategies.

Many people are confusing marketing for its sub-functions such as advertising selling and
merchandising. But an authentic marketing is not the act of selling what you can make but
knowing what to make. It is art of identifying and understanding customers profit to the
producers and benefits for the stakeholders.

Market leadership is a gained by creating customer services therefore marketing can be

viewed as customer oriented philosophy. It is the creation and delivery of a standard of
living. Organization must try to identify a particular market that is more attractive and that
can be managed affectively and profitable. Brand Marketing attempts to identity significant
difference in buyer characteristic which is used to determine which target market should be
aimed at and the type of product to be given to that market.

Brand Marketing can be define as the act of dividing a market into distinct parts. A market
consists of buyer and these buyers differ in one or more respects.

They may differ in wants resources and geographical locations. Buying attitude and buying
practices. Any one of all these can be used to segment a market in order to serve the customer
more effectively and efficiently. Brand Marketing can therefore be defined as the act of
dividing a market into distinct parts, that is the process of dividing the total heterogeneous
market for a product into several submarket or segment each of which tends to be
homogeneous in all. Significant aspects, it can also be define as the act of dividing a market
into distinct and meaningful groups of buyers who might merit separate product and or
market mixes.

Segmentation strategy helps the organization to find reaction in customer trait and producing
in line with those characteristics so as to conform to those identified needs of the customers.

2
 BACKGROUND OF THE STUDY

It is obvious that companies cannot connect all customers in large broad or diverse market
and as a result of the needs to divide market in to group of consumer or segments with
distinct needs and wants. It therefore becomes paramount for a company to identify which
market segment to serve better. Before the objective can be achieved, it is required that a
keen understanding of consumer behaviour and careful strategic thinking. To develop the best
marketing planning, managers need to understand what makes each segment unique and
different. Modern marketers in their quest to study consumer behaviour and responses to
benefit offer by the product for example do people want quantity rather than low price. In an
attempt to increase benefit to consumers, this will aid marketers to know how best to satisfy
each category of these customers. It required a keen understanding of consumers behaviour
and careful strategic thinking.

The overall intent is to identify groups of similar customers and potentials customers to
prioritize the groups to address to understand their behaviour and to respond with appropriate
marketing strategic that satisfy the different performance of each chosen division and thereby
improve the company revenue. This can however be achieved through a distinct division of
groups of buyers who might requires separate product and for marketing mix known as
market segmentation.

According to Michael Porter (1970 P:37) with the right segmentation, the right list can be
purchased advertising results can be improved and customer satisfaction can be increased
leading to better reputation Nelson (1984 page 125) explain that united states in the 18
century provides a broad segmentation of the population of their country based statistical
analysis of house hold and geo-demographic data. The recent times market has been divided
based on the number of general criteria. Such as industrial or public versus private, although
industrial Brand Marketing is quite different from consumer Brand Marketing but both have
similar objectives. Regardless of which type of segmentation a marketer uses, the secret
behind the marketing programmes recognize customer differences and efficiently highlight
the differences to offer maximum satisfaction to every division.

3
 STATEMENT OF THE PROBLEM

The quest for increasing the sales of consumer goods is every organisation’s problem. Both
marketers of services and tangible seek to enhance profit and sales turnover and the objective
of profitability can only be achieved when firms properly understand and apply the marketing
segmentation strategy. Firms are also faced with the difficulty at identifying and selecting
particular market target and satisfying them by blending the marketing mix elements thus
marketing segmentation, recognize that every market is made up of distinguishable segments
consisting of buyers with different needs. The task of clearly understanding consumer needs
and wants identifying various homogeneous customer characteristic according to an outlined
dimension in order to group them together adequately and to effectively develop marketing
mix to match these characteristic and buying requirements. All posses a fundamental
marketing problem to firms.

Marketing segmentation is one among the various strategic concept that form the basic for
marketing programs. Segmenting markets into subsets with the aim of satisfying customer
groups equally sales of consumers goods and profitability for the total organization and the
stakeholders is an objective and goal of every business that practices the marketing concepts
most organisation encounter the problem of determining the appropriate pricing promotional
and distribution strategy to adopt in satisfying the numerous customers. Though some firms
fined it excruciating to marketing segmentation strategy due to their inclination of the
strategy as an expensive and time consuming exercise. This is because of inadequate
information on its importance of marketing segmentation and its impact on sales of
consumers goods has become a research problem.

4
 PURPOSE OF THE STUDY

The purpose of this research work is described below

1. To establish the relevance of Brand Marketing with reference to tesla.

2. To enumerate the importance of firms adopting the strategy of marketing in order to

achieve organizations objective of profitability and customers satisfaction.

3. To study tesla’s marketing strategy and current customer by segments.

4. To highlight the limitations of the strategy of tesla.

5. At the end of the study, it is intended to give relevant recommendation to the firm on how
to adopt market segmentations strategy.

5
 DEFINITION OF TERMS

Market: This is a set of individual; or organization that desires a product and are willing and
able to buy it

Target market: A select market to focus and develop marketing programs

Product: Anything is offered to the market for acquisition sale, attention use or consumption
that satisfied a want or need

Market mix: They are element of marketing usually referred to as the 4ps of market i.e
product, Place, or distribution, promotion and price.

Market segmentation: It is the process of dividing a large market into a smaller subset of
consumers or organization that are similar in characteristic, behaviour, wants or need.

Consumer market: It is a set of individual buyers who purchase or use product or services for
their own personal or house hold use

Marketing planning: The setting of goal and strategy for the marketing effect in an
organization

Marketing strategy: A marketing logic used by firms to achieve set objective

Product line: A group of similar products intended for essential similar use

Fashion: A currently accepted or popular style in a given field

Market aggregation: It is a market strategy where an organization treats its entire market as if
the market are similar

Industrial markets: The market for industrial goods and services

Industrial goods: A product used in the production or processing of industrial goods e.g. raw
materials Management: The process of planning, implementing and evaluating the effort of a
group of people in achieving a determined goal.

Homogenous market: A market consisting of consumers or organizations with similar needs,

wants and behavioural tendencies.

6
 CHAPTER 2

REVIEW OF LITERATURE

7
 According to Charles W. Lamb and Carl McDaniel (2003), the first step in
segmenting markets is to “select a market or product category for study”. It may be a market
in which the firm has already occupied a new but related market or product category, or a
totally new one. The second step is to “choose a basis or bases for segmenting the market”.
This step requires managerial insight, creativity and market knowledge. The marketing mix
has been described as product, distribution, promotion and price strategies which are used to
bring about mutually satisfying relationships with target markets.

Roger Best (1990) proposes a framework for implementing a Brand Marketing

strategy. He suggests a set of sequential steps to be taken in a needs-based segmentation
process the primary benefit of needs based segmentation is that segments are created around
specific customer needs. The goal is to determine what observable demographics and
behaviors differentiate one segment from another in order to make need-based Brand
Marketing actionable.

Craft, Stephen Show (2004) in his study that in general, customers are willing to pay
a premium for a product that meets their needs more specifically than does a competing
product. Thus marketers who successfully segment the overall market and adapt their
products to the needs of one or more smaller segments stand to gain in terms of increased
profit margins and reduced competitive pressures. Small businesses, in particular, may find
Brand Marketing to be a key in enabling them to compete with larger firms. Many
management consulting firms offer assistance with Brand Marketing to small businesses. But
the potential gains offered by Brand Marketing must be measured against the costs, which—
in addition to the market research required to segment a market may include increased
production and marketing expenses.

Wendell Smith (1956) suggested that segmentation, the division of a market into
groups of customers who share certain characteristics or propensities toward a product or
service, might be an effective way for an organization to manage diversity within a market.
Since that time, a rich literature has developed suggesting techniques and bases upon which a
single domestic market might be effectively broken into actionable customer segments. While
there is a large literature which focuses on the criteria that can be used for segmenting a
market, far less attention appears to have been paid to the accompanying requirements for
what Kotler (1998) terms effective segmentation. Thomas (1980) argued that any proposed
8
segmentation should pass four tests, namely with reference to measurability, accessibility,
stability and substantiality. However, there are differences in the number and types of tests.

According to Porter (1985), the fact that segments differs widely in structural
attractiveness and their requirements for competitive advantage brings about two crucial
strategic questions: the determination of (a) where in an industry to compete and (b) in which
segments would focus strategies be sustainable by building barriers between segments.

Amandeep Singh (2011) reveals in his study that earlier demographic factors were
considered as best basis of segmentation but they are no longer effective for segmentation in
FMCG sector. An investigation of 500 consumer’s purchase routine and their demographic
attribute are found non-associated in this study. This study shows that purchasing of FMCG
products specially personal care products is indifferent of age, educational level. But there is
an effect of gender and educated and non-educated consumers on the purchase routine of
personal care products. It means there is a need for developing more effecting marketing
segmentation basis. This study is related to only one industry may not be applicable to others.
But it is rightly proved that demographic which are considered as most effective attribute that
influence the purchase of consumer not powerful enough in today life.

Victoria K. Wells, Shing Wan Chang, Jorge Oliveira (2010) in their study present
an idea that benefit sought are more powerful basis of brand choice. They also reveal the idea
that demographic attributes are not very effective in case of brand choice and in price
selection. The demographic variables of interest were age, gender, household size,
occupation, education and level of income. Results of this study shows the demographic
influence on choice of retail outlet is partial with household size, education and income
having a significant effect on the choice of retail outlet selected. This study shows that some
of the demographical factors like education, income and household size effect the choice of
retail outlet and definitely the choice of brands also (Salma Mirza,2010).

In a different way Rajiv Kamineni (2009) present the idea that demographic is now
failed to effective segmentation and only psychographic is not sufficient to segment today’s
complex market in which consumers have a different type of ideology. This study gives an
idea about new basis of segmentation that can be applicable with the help of Enneagram that

9
is an ancient technique of personality indicator. This technique has a combination of psyche
and spirituality of personality. This study gave a different idea about segmentation which is
not in practice but can be proved very useful.

Michel wedel (2002) in his editorial article states that Brand Marketing has now
become a necessity of marketers. One to one marketing is no feasible because it need great
amount of money and efforts that directly affect the profit of the company. This article put
stress on an understanding of the dynamic nature of preferences and market segment
composition is essential for strategies focused on the evolution rather than the proliferation of
products and businesses.

Amandeep Singh (2010) in his study highlights the need of using a new theoretical
foundation of Brand Marketing which will help the FMCG companies to segment the market
in competition oriented marketing to gain fruitful results. This research paper proposes 5
golden rule of Brand Marketing witch are as:

1. There are “No Rules”: Getting it right isn’t simple at all. But never copy. Each successful
segmentation process is different, unique, and unrepeatable. The "me too" attitude leads to
failure. Originality could possibly break a market open.
2. “Reducing” a market? Sometimes it’s about expanding it. Some of the most successful
marketing plans have chosen a larger market by “expanding” their segmentation, not only
reducing it.
3. The “Value” of the segment: The best segments must have Potential, Lifespan,
Accessibility, and Profitability. The key is identifying which segments provide value in terms
of potential, lifespan, accessibility and profitability; because a sales strategy’s effectiveness
increases according to our capacity to size segments, identify them, and dissect them.
4. It must be “Different”: Each company requires a different Market Segmentation. Being
original and efficient with segmentation is the key to the amount of success achieved. We
create new and personalized ways of segmenting, creating Hybrid models that are easy to
interpret and explain (causes, value, behavioral, psychographic, demographic, and attitudinal)
in order to obtain the most useful results from each sectorial situation and each company.
5. Choosing “The Axes” properly: Time segmentation and spending causes, demographic but
with attitudinal axes, and Psychographic but with a behavioral aspect? Surely there is an
answer, but to find it we must investigate, test, and challenge the market.
10
 Higgs, Bronwyn and Ringer, Allison (2007) in their study discusses about the
different segmentation basis and shows that a number of specialized segmentation approaches
are emerged in the changing environment.

The author suggests some of the following specialized method of market segmentation:
 Finer and Hyper-segmentation
 Progressive Profiling
 Addressable marketing method

Finer segmentation defined as a more precise way to segment markets into narrow
clusters. Progressive profiling involves incremental data collection across sessions and
interaction points typically online. Addressable marketing exploits the potential of digital
communications devices to gather information about online behaviors including site
visitation, site engagement, and content involvement and advertising exposure.

Russell I. Haley (1968) proves that most techniques of Brand Marketing rely only on
descriptive factors pertaining to purchasers and are not efficient predictors of future buyer
behavior. The author proposes an approach whereby market segments are delineated first on
the basis of factors with a causal relationship to future purchase behavior. The belief
underlying this segmentation strategy is that the benefits which people are seeking in
consuming a given product are the basic reasons for the existence of true market segments.

Market segmentation, or the process of dividing a market into meaningful, relatively

similar, and identifiable segments or groups (Zikmund, 1999), is used in multiple industries.
In general, segmentation is useful for two major reasons+ First, it assists marketing
researchers in analyzing the needs of a specific customer segment+ Second, from the
resulting data, it allows marketing campaigns to be focused on these identified needs. In the
long run, this allows companies to spend their marketing and advertising budgets wisely
while at the same time meeting the needs of the customer. Ideally, this should result in
efficient, effective, and profitable marketing and sales efforts.

11
 CHAPTER 3

RESEARCH

METHODOLOGY

12
RESEARCH METHODOLOGY

Research methodology is considered as the nerve of the project. Without a proper well-
organized research plan, it is impossible to complete the project and reach to any conclusion.
The project was based on the survey plan. The main objective of survey was to collect
appropriate data, which work as a base for drawing conclusion and getting result.

Therefore, research methodology is the way to systematically solve the research problem.
Research methodology only talks of the methods but also the logic behind the method used in
the context of a research study and it explain why a particular method has been used in the
preference of the other methods.

MEANING OF RESEARCH

Research in common parlance refers to a search for knowledge. One can also define research
as a scientific and systematic search for pertinent information on a specific topic. In fact,
research is an art of scientific investigation. The advance learner’s dictionary of current
English lays down the meaning of research as s careful investigation or inquiry especially
through search for new facts in any branch of knowledge. Redman and Mory define research
as a “systematized effort to gain new knowledge.” Some people consider research as
movement from the known unknown. It is actually a voyage of discovery.

Research is an academic activity and such a term should be used in technical sense.

According to Clifford woody research comprises define and redefining problems,

Formulating hypothesis or suggested solution; collecting.

Primary data:

Primary data has been collected through personal interview by direct contact method. The
method which was adopted to collect the information is ‘Personal Interview’ method.

Personal interview and discussion was made with manager and other personnel in the
organization for this purpose.

13
SECONDARY DATA

For the company information I have used secondary data like brochures, Website of the
company etc. The chief sources of secondary data were magazines, newspaper, journals etc.

The data is collected from the Magazines, Annual reports, Internet, Text books.

The various sources that were used for the collection of secondary data are

o Internal files & materials

o Websites – Various sites like

https://www.tesla.com/

https://en.wikipedia.org/wiki/Tesla,_Inc.

https://www.tesla.com/about

14
 Research Hypothesis

In common term, a hypothesis is a mere assumption or some supposition to be proved or

disproved. But in a research process a hypothesis is a format question that the researcher
intends to resolve.

Every research is carried out to develop some theory, to prove or disprove some facts. To do
these things the researchers make assumption or presumption about the facts. This
assumption or presumption is known as the research hypothesis. The whole research process
is carried out to test the research hypothesis. A hypothesis helps the researcher in proceeding
further or finding solution of the problem which researcher wants to study.

The logical relationship between two or more variables in the form of testable statements is
known as hypothesis. When the relationship is tested by some scientific methods, it is termed
as research hypothesis. The research hypothesis is a predictive statement that relates an
independent variable to a dependent variable. Usually a research hypothesis must contain at
least one independent and one dependent variable that are assumed but not to be tested, are
not termed as research hypothesis.

Research hypothesis is the backbone of the research process. There is no any readymade
research hypothesis. So it should be formulated with proper care. It should be formulated on
the basis of researcher’s area of interest, subject matter, availability of resources etc.

Formulation of research hypothesis

The formulation of hypothesis is an important step which must be accomplished with due
care in accordance with the object and nature of problem under consideration. One difficulty
that the research worker usually encounters is the formulation of research hypothesis. Some
of the main difficulties or problems are given below:

15
If the research problem is too general, it is usually too vague and cannot be put in the form of
research hypothesis. A researcher must remember that narrower hypothesis is generally more
testable.

Personal judgments, preferences, value statements are difficult to put in a form of a research
hypothesis.

Scientific investigation is empirical. If the researcher believes something is so, he must

somehow or other put his belief to a test outside himself. In practical situations many
problems cannot be put in a form of research hypothesis because they are not amenable to
testing.

Some researches are concerned with the multivariate relationship of the variables. Generally
in psychological, sociological and educational research, this is the case. In such case it is
difficult to formulate a research hypothesis in univariate form.

Some of the variables under study have not any relationship and most of the formulate
research hypothesis are very difficult or impossible.

Research is carried out to develop some theory or to verify some existing facts but in some
case the researcher has not such aim. In such case it is worthless to formulate a research
hypothesis.

In some cases, time constraints also influence in formulating a research hypothesis.

Researchers have an excellent hypothesis but he has not a sufficient time to test it, then it
becomes meaningless.

Research hypothesis should be such which is accepted easily in society. It should not be such
which rules out the rules and norms of the society.

Testing of Hypothesis:-

Hi: Brand Marketing have impact on sales of consumer goods of Tesla.

Ho: Brand Marketing does not have impact on sales of consumer goods of Tesla.

16
 CHAPTER 3

BRAND MARKETING WITH REFERENCE TO

TESLA – CASE STUDY

17
18
 Tesla Motors

Tesla’s mission is to accelerate the world’s transition to sustainable energy.

Tesla was founded in 2003 by a group of engineers who wanted to prove that people didn’t
need to compromise to drive electric – that electric vehicles can be better, quicker and more
fun to drive than gasoline cars. Today, Tesla builds not only all-electric vehicles but also
infinitely scalable clean energy generation and storage products. Tesla believes the faster the
world stops relying on fossil fuels and moves towards a zero-emission future, the better.
Launched in 2008, the Roadster unveiled Tesla’s cutting-edge battery technology and electric
powertrain. From there, Tesla designed the world’s first ever premium all-electric sedan from
the ground up – Model S – which has become the best car in its class in every category.
Combining safety, performance, and efficiency, Model S has reset the world’s expectations
for the car of the 21st century with the longest range of any electric vehicle, over-the-air
software updates that make it better over time, and a record 0-60 mph acceleration time of
2.28 seconds as measured by Motor Trend. In 2015, Tesla expanded its product line
with Model X, the safest, quickest and most capable sport utility vehicle in history that holds
5-star safety ratings across every category from the National Highway Traffic Safety
Administration. Completing CEO Elon Musk’s “Secret Master Plan,” in 2016, Tesla
introduced Model 3, a low-priced, high-volume electric vehicle that began production in
2017. Soon after, Tesla unveiled the safest, most comfortable truck ever – Tesla Semi –
which is designed to save owners at least $200,000 over a million miles based on fuel costs
alone. In 2019, Tesla unveiled Model Y, a mid-size SUV, with seating for up to seven,
and Cyber truck, which will have better utility than a traditional truck and more performance
than a sports car.

Tesla vehicles are produced at its factory in Fremont, California, and Gigafactory Shanghai.
To achieve our goal of having the safest factories in the world, Tesla is taking a proactive
approach to safety, requiring production employees to participate in a multi-day training
program before ever setting foot on the factory floor. From there, Tesla continues to provide

19
on-the-job training and track performance daily so that improvements can be made quickly.
The result is that Tesla’s safety rate continues to improve while production ramps.
To create an entire sustainable energy ecosystem, Tesla also manufactures a unique set of
energy solutions, Powerwall, Powerpack and Solar Roof, enabling homeowners, businesses,
and utilities to manage renewable energy generation, storage, and consumption. Supporting
Tesla’s automotive and energy products is Gigafactory 1 – a facility designed to significantly
reduce battery cell costs. By bringing cell production in-house, Tesla manufactures batteries
at the volumes required to meet production goals, while creating thousands of jobs.
And this is just the beginning. With Tesla building its most affordable car yet, Tesla
continues to make products accessible and affordable to more and more people, ultimately
accelerating the advent of clean transport and clean energy production. Electric cars,
batteries, and renewable energy generation and storage already exist independently, but when
combined, they become even more powerful – that’s the future we want.

20
Company history

Tesla Motors is a high-end car manufacturer founded in 2003 by Palo Alto (Brenan 2). The
company focuses on the production of electric vehicles and EV power train components. The
company first EV was launched in 2008 under the Tesla Roaster. Currently, the company
sells the Model S luxury sedan in North America, China, and European markets (Tesla
Motors 13). According to consumer reports, the Tesla Model S received the highest customer
satisfaction score of any car in the world. Currently, the company has a capitalization of
27.98billion with an operating income of around 61 billion USD (Yahoo Finance, n.p).

21
Company Financial Resource

Tesla is a publicly traded company that trades at NASDAQ under TSLA. The
company total assets have continued to increase since 2012, $1,114,190 to $2,416,930 in
2013 and the $5, 849, 251 (Little 13). Equally, the company total liabilities have experience
an equal measure of increase with 2014 recorded as the highest year with high levels of
liabilities ($4,879,345). The company total stockholders’ equity has risen from $124,700 in
2012, to $667,120 in 2013, and then $911,710 in 2014 (Brenan 3). The company gross
margin for 2014 was 27.57, operating at a margin of -6.89%. While the gross margin was
high, the net margin was very low -9.19%. The return on investment has remained low at -
14.60% (Yahoo Finance, n.p.). The intensive capital nature of the company investment has
been associated with the observed figures.

22
Product Portfolio

The company products fall into three categories: electric luxury cars, automotive
components, and rechargeable energy storage systems. Under the electric luxury brand, the
company has offered various product lines. Of significant importance under this burner is the
Model S product line and the other model to be released, Model X. The company has patent
right for Electric power trains and other related products. Equally, the company has invested
significantly in the production of rechargeable power products and the establishment of
Recharging stations.

Mission

The company mission since its inception has remained unchanged: “To accelerate the
advent of sustainable transport by bringing compelling mass market electric cars to market as
soon as possible.” (http://www.teslamotors.com/blog/mission-tesla)
The company goals surround this mission statement. According to the Chairman, the
company has focused on accelerating the transition of the world from gasoline dependent
vehicles to electric mobility with increased affordability. According to the company website,
"they are catalyzing change in the automobile industry." Since the vehicles are fun to drive
and environmentally profitable, the company has won the hearts of environmentally sensitive
clientele. In making sure that the company achieves its mission, the company has developed
more stations and promises to continue this development trend across the world. The aim is to
ensure availability of battery technologies to act as competing agents for gasoline-run
vehicles.

23
Company Goals

According to the company website, the company goal remains the same “To
accelerate the advent of sustainable transport by bringing compelling mass market electric
cars to market as soon as possible” (http://www.teslamotors.com/blog/mission-tesla)

Company Core Competency and Sustainable Strategic Analysis

The company has focused on differentiation strategy as the main business level
strategy. The company offers high-quality luxurious EVs to its consumers. At the cooperate
level, the company has chosen to focus on product enhancement and customer experience.
The company focuses on expanding its international markets in the European Union, China,
and Japan. According to Price Waterhouse Coopers, the company is strategically position as a
high-end market manufacturer and dealer. The company owns its stores and service centers,
invests significantly in innovation and high-performance vehicle, and has already acquired its
manufacturing plant in Fremont. The company has departed from the traditional business
model employed by other players in the industry by exclusively focusing on Electric power
train technology and owning their stores and services stations. Unlike other players in the
market, the company has developed what most critics have described as a disruptive
technology in which owners of such technologies deploy it successfully to a specific niche.
Equally, the company has secured strategic alliances with Panasonic cooperate for the
development of more efficient and reliable batteries. The company cooperates with
companies like Toyota and Daimler in its production process.

24
 Industry Review
Industry General Outlook

The industry is one of the most competitive industries in the world. The industry has
35 players but the 10 largest companies control up to 80% of the market share (Tesla Motors
12). Tesla's current market share is estimated to be 2.6%. The industry has witnessed
significant growth rates over the past few years. 806.3 million Vehicles were sold globally in
2021 (Tesla Motors 14).
In the U.S where Tesla has its main share of market, the following facts characterize the
market:
• US Automobile Industry represents 5% of Private Sector GDP
• 76% of the market is made up of Ford, GM, and Chrysler
• 18% of sales are from Japanese car makers
• 6.6m Americans are employed directly or indirectly in the automotive industry.
• Hybrid sales was noted torepresented 1.2% of the market in 2005, 1.6% in 2006.
• Forecasts estimate 15% of car sales will be hybrids by 2022 (Yahoo Finance, n.p).

25
The High End Segment

Tesla is primarily focused on the high-end market. The main factors determining competition
in the high-end segment of the automotive industry are brand image, quality, and
environmental sensitivity. Despite the high levels of competition in the market, the market
has not been fully explored.
The Electric Vehicle Market

The Electric Vehicle market commonly denoted as EV have moved past the infant stage with
a number of companies entering the market and gainfully commercializing their electric car
products (Tovey 1). The industry has reached profitability levels and competition in the
industry is intense. Governments are increasingly recognizing the importance of regulation in
boosting the industry and a number of incentive programs have been developed with the
intention of augmenting adoption of EV vehicles as the green option of automotive products.
A green vehicle: Within the “green vehicle” market, there are four types:

• Electric Vehicles
• Flexible-Fuel Vehicles
• Hydrogen Vehicles
• Hybrid Vehicles

26
Bargaining Power of Customers

The bargaining power of consumers is often determined by the sensitivity of prices.

Tesla is operating in an industry where the buyers of the produces are households and
businesses. The company main consumers are private household consumers: this type of
consumers is highly sensitive to price changes. The sensitivity of these clientele means that
companies in the automobile industry find it difficult to offset the increasing costs of products
by increasing prices (Tovey 3). Furthermore, such an action would mean that the company
products would witness a go-slow. As such, companies have to sell at low prices in order to
reduce inventory. To counter the impact of high consumer bargaining power, companies have
to invest significantly on brand building in order to weaken the customer’s bargaining power.
However, the inverse is true in the premium segment where consumers are less sensitive to
prices. Companies operating in this section are lowly exposed to economic downturn as
evidenced by recent profits earned by premium segment players such as BMW and Audi
compared to other players (2). Since the company operates major in the premium segment,
the bargaining power of buyers is moderate and slightly lower in this section as compared to
the other segment of the automotive industry.

Bargaining Power of Suppliers

The automotive industry particularly at the premium sector is organized into suppliers of
motor parts such as exterior, power train, interior, chassis, body, and electrical, and
manufacturers of the materials. The suppliers are auto-specific and have to rely on a limited
number of clients to remain profitable. This dependency on the limited number of client
makes them limited in terms of the bargaining power. However, the bargaining power of
these suppliers largely depend on the material supplied; Price Waterhouse Cooper, (21)
observe that suppliers of chassis and power train have a relatively stronger bargaining power.
Manufactures of the high quality materials required for the production of EVs have high
bargaining power. However, this power as argued by Little (15) is high switching with cost
relative to mass-market competitors because only a few number of suppliers for the materials
are available. The fact that there are a wide number of suppliers at the equipment
manufacturing level means that the company can threaten to withdraw purchase and therefore

27
reduces the bargaining power of a single supplier. Inputs such as nickel, steel, aluminum,
copper, and lithium offer limited differentiation-making suppliers rather homogenous and
therefore less powerful. As such, the bargaining power of suppliers is moderate.

SITUATIONAL ANALYSIS
Tesla SWOT Summary
SWOT Analysis

STRENGTHS WEAKNESSES
 Good engineering and technology  Doesn’t have much brand recognition
research capability among the general public
 Able to raise large amounts of capital  A very small company with small
 First mover advantage; the first sales volume, so no economies of
company to offer a relatively practical scale
fully electric car, customers include  Possible supply problems with
high-profile figures like Arnold components, especially if demand
Schwarzenegger, George Clooney, increases
and Jay Leno  The Tesla Roadster hasn’t been on
 Designs and builds many of the the market for very long, the

28
 components in its cars, including the longevity of fully electric cars
power electronics, motor and battery remains to be proven
packs  Already high OPEX is expected to
 Vertically integrated value chain increase
allow for cost and quality control  Poor return on invested capital and
 Proprietary technology equity
 Low marketing expenses  Higher CAPEX requirements over the
 Efficient production next years
 Lower battery costs  High long-term liquidity risk

 Good brand perception

OPPORTUNITIES THREATS
 Moving towards the family sedan  Wright speed X1, a prototype high
market and making a product that is performance electric car that caters to
meant for more of the automotive the same market; the only direct
market competitor to Tesla that offers a
 Price of oil and gasoline skyrocketing, similar product
making the price premium for an  Large automobile companies entering
electric car less of an issue the market with full and hybrid
 Expanding into developing lithium- electric cars, the GM Volt and Toyota
ion batteries and other energy Prius
technologies, partnering with a  The price of oil falling dramatically
battery company to improve battery in the short run
technology  A competitor having a breakthrough
 Economic growth in key markets and in related energy technologies, like
especially in China hydrogen powered cars, natural gas,
 Stricter emission policies or ethanol
 Currently low interest rates  Higher raw material prices
 EV incentives phase out
 Lithium supply constraint
 Lower oil prices short term

29
 Description of SWOT analysis
Strengths

Tesla has a number of strengths that give it competitive advantage when compared
with the other players in the industry. To begin with, the company has a vertically integrated
value chain, which allows cost reduction and promotes quality control. Cost is one of the
main challenges facing companies operating in the premium segment of automotive industry,
with an integrated and watertight value chain, the company is able to control cost and quality
of the products at the same time. A perfect example of the company dedication to cost is the
Model S design (Tesla Motors 15). The car is designed to be the best in the world offering
industry-leading technology, in performance, safety, and practicality. Consequently, the
company has an established and loyal customer base. The ability of the company to offer high
quality products has seen it win the hearts of most of the premium car consumers in the
industry. Innovation is also another key strength for the company. Tesla has thrived to be the
best innovator in the industry since its inception. The company has continued to update its
Model S product and the promise for better innovation in to the to be launched Model X.
other facts such as low marketing expenses, efficient production, low battery costs and good
brand perception have worked to the advantage of the company. Furthermore, with good

30
brand perception, the company is poised to win more customers. Efficient products lower
battery costs, and low marketing expensive all contribute towards improved profitability.
Weaknesses

The company has a very small sales volume, which means that there are reduced
economies of scale. The company small volume of salves means that there is small return on
investment. Higher CAPEX requirements are also another weakness for the company. The
company also faces the risk of long-term liquidity (Tesla Motors 16). The nature of Tesla
investment demands significant amount of investment in the company infrastructure, which
runs the risk of liquidity in the future. The company brand is not well known to the public.
The company has small brand equity and the company can easily be overshadowed by other
large automakers.

Opportunities

The company is operating in a new market where there are immense opportunities.
Model S according to the company is the only true luxurious electric car. Considering that the
company market is new and fully unexplored, the company can capitalize on the opportunity
that currently exists. There is also projected economic growth in key markets and especially
in China, since there is always a positive correlation between automotive demand and
economic growth the company should anticipate increased demand (Tovey 2). Stricter
emission policies are also in favor of the company. This means that consumers will continue
to be influenced by government incentives towards turning to EVs as the viable option for
sustainable development. The current low interest rates coupled with high availability of
credit is good news for the company.
Threats

The first significant threat to the company is the incumbent automakers. These
companies have established themselves in the industry and have very strong brand equity and
resources. If these brands were to release EVs that may be different at a technical level with
Model S and Model X, the company brand names will weight in significantly in the
customer’s decision making process. News that companies such as Renault, Volkswagen,
Fiat, Audi, Lexus, Daimler, and BMW some of the most established players in the premium
segment of the automobile industry are involved in the production of EVs is a major threat to
31
the existence and profitability to Tesla. Consequently, the company faces a major threat
financially. The company has limited resources and very low margin of error. Any mistake
can have a significant cost implication on the company finances. High cost for raw materials,
EV incentives phase-outs, and lithium supply constraints are some of the threats that face the
company. EV incentives are not permanent and will out phased with time, this means that the
company will have to bear the full cost of production and innovation. Raw materials for EV
production are very expensive. Increased demand for these materials might affect their
availability and force the prices to go up. Equally, lithium is the main lifeblood for EVs. This
commodity is not abundantly available and therefore the risk of reduced supply will have a
negative effect on the company profitability. Finally, low oil process is likely going to affect
the consumption of EVs. Most of the companies in the ICE segment of the automotive
industry have invested significantly on energy efficient automotive. This means that most of
the consumers will prefer highly energy efficient ICEs due to the low costs of maintenance as
compared to EVs (Tovey 4). Competition from related energy breakthrough such as natural
gas and ethanol.

32
 Assessing Competitors Viability
Toyota Motor Company
Toyota Motor Company SWOT Summary

STRENGTHS WEAKNESSES
 Strong market position and brand  Product recalls could affect brand
recognition image
 Strong focus on Research and  Declining sales in key geographic
Development segments
 Extensive production and distribution  Poor allocation of resources compared
networks to peers
 Brand loyalty  High interest rates and low
 Working in Both High end and low availability of credit
ender user segments of the  High oil prices
automotive industry
OPPORTUNITIES THREATS
 Growing global automotive industry  Intense competition
 Growing partnership with BMW  Appreciation of Japanese Yen
 Strong outlook in the EV market  Natural disasters could have an
impact on the company production
structure.

33
Toyota’s Competitiveness in the EV industry

Toyota is the oldest company to venture into the hybrid/EV segment. Before the
introduction of Toyota Prius the first hybrid model of EV in the U.S in 2000, the car had
received wide popularity in Japan by 1997 (Tovey 2). As of September 2010, over half a
million Prius version of EV had been sold in the U.S market alone. The car is cheap fetching
around $21,000 and has been applied to the Lexus LS600h, which goes for $104,000 (Tovey
3). The LS600h a large luxury care is in the same category as the Tesla Roadster, which is
less specious and less luxurious. Tesla should be very concern about Toyota ambitious plan
to offer a larger battery pack and a home charging station as options for the Prius. By
providing this option, the company will be well poised to launch a full EV product line,
which will definitely have significant success in the market. The plan by Toyota to offer
larger battery packs and home charging options will be direct competition to Tesla’s plans to
offer fully electric sedans at different prince points. Equally, the planned Tesla sedans priced
at $50,000 to $70,000 Whitestar and $30,000 Bluestar are very high compared to Toyota,
which can offer fully electric sedans for Lexus for under (Tovay 2) which will be direct
competition to the company product. Another Fully electric version of the Toyota Camry is
already available in the market. The company has also released the Toyota iQ EV in response
of Tesla Model S version of the EV generation.

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 GM
GM SWOT Summary

STRENGTHS WEAKNESSES
 Global presence  High cost structure
 New vision and strategy  Brand dilution
 Strong brand portfolio  Bureaucratic culture
 Strong presence in China  Car recalls
 Knowledge of home market
 4 well performing brands
OPPORTUNITIES THREATS
 Positive attitude towards “green”  Fluctuating fuel prices
vehicles  New emission standards
 Increasing fuel prices  Rising raw material prices
 Changing customer needs  Intense competition
 Growth through acquisitions  Exchange rates
GM’s Competitiveness in the EV industry

General Motors is a significantly formidable force in the industry that poses a major
challenge to Tesla. The company has invested a large amount of its capital in the
development of alternative vehicles for EVs. The current development of Volt, which is not
true EV, indicates that GM is highly interested in hybrid care market and will continue to
pursue the goal to achieve EV capabilities in the future. A preorder of 20,000 Volt as the care
got into product indicates that the market for Volt is formidable (IEDC 6). The car is

35
designed approximately forty miles on battery power and then the care engages 1.0L
turbocharged gas engine automatically to recharge the battery solves that main challenges
facing EV vehicles. Furthermore, the main challenge facing purely EVs is battery recharge.
Consequently, the option provided by GM can run on both biodiesel and gasoline. The
company E-Flex system adopted in the production of Volt represents a significant force in
standardizing EV components making it an added advantage for the company. The
company’s alternative model for Model S is relatively cheap. It will definitely attract more
client base compare to the current Tesla Product. If the company were to choose the lower
end market, it would face significant competition from GM.

36
 BMW
BMW SWOT analysis

STRENGTHS WEAKNESSES
 Brand reputation  High cost structure
 Environment friendly vehicles  Weak brand portfolio
 Quality products  Perception of high prices
 Highly skilled workforce  Too few acquisitions and strategic
 Corporate Social Responsibility partnerships
(CSR)
 Strong brand presence in China
OPPORTUNITIES THREATS
 Increasing fuel prices  Intense competition
 Positive attitude towards “green”  Rising raw material prices
vehicles  Decreasing fuel prices
 Expand brand portfolio  Growing euro exchange rate
 Changing customer needs

37
BMW’s Competitiveness in the EV industry
BMW has been an established player in the luxury market. The company has
continued to innovate and produce low consumption automobiles, high performance luxury
products. BMW has major advantages due to its ability to its ability to manufacture efficient
Dynamics, such as Mild hybrid technologies. The company has sole patents in start-stop
systems which shuts engine off when not needed, regenerative breaking system, and small 4-
cylinder gas and diesel engine. The company has established hybrid technology model
options particularly the BMW X5 model. Coupled with its BMW vision efficient dynamics,
the company has prototypes for solar powered hybrid technologies and BMW hydrogen 7-
powered version of the Luxury 7 series. The company is the world fist hydrogen-drive
luxury. The i series model of BMW EV has performed exemplary well with the latest model
i8 selling around 10,000 units immediately after its production. Considering its technological
capabilities, the company is a significant competitor to Tesla (Brenan, n.p).

Intensity of Existing Competition

Competition in the automobile industry is intense. Material costs are always high,
price wars and strict regulations by the government reduce profitability. While the
automotive industry is at a mature stage in the developed nations, the only way for

38
manufacturers to capture new markets is through innovation. At the world stage, 35
automobile products companies exist in the market, 22 of these companies are based on Asia
(IEDC 4). However, only the ICE segment of the automobile industry has reached a maturity
stage. The EV segment has high potential and most of the automakers are increasingly
investing a significant amount of their resources on production of EVs. Companies are
increasingly being forced to innovate and any company that seeks to remain competitive in
the automobile industry must be innovative. As such, the intensity of rivalry in existing
automakers is very high. Furthermore, automakers are being forced to go with contemporary
changes in environmental sensitivity, which demand for fewer ICEs and more of EVs.

Customers and Competitors

Tesla is a niche car manufacturer. It is the only all-electric, commercial luxury sports
vehicle, which makes Tesla’s customers and competitors very unique. While exploring
Tesla’s customers and competitors, we can simultaneously look at its 4 M’s of
advertising. This consists of to whom Tesla markets and who the market consists of,
what motivates customers to buy, what message Tesla is relaying to consumers, and
how Tesla communicates to its consumers through media.
Tesla’s market consists of early adopters, consumers that are seen as affluent,
educated, and motivated by social prestige. Consumers are also viewed as highly
technologically literate. Model S owners typically have an income of over $100,000, and
they consist of mostly men (Tesla Motors 13). Tesla is a status symbol and customers see
owning one as part of defining their personal brand. The social prestige of owning a
sleek, sophisticated, luxurious vehicle that is also environmentally friendly is the main, but
not the only motivator. The vehicles safety also influences buyers. In fact, Tesla’s model
S received the highest safety ratings out of any car ever manufactured. Tesla sells so
well because the message it relays is the the driving force for
customers,but it’s not all about.the look. Musk says, “It is more than just a company, it
is more than just a product. There is a cause there that really matters”, and this is
something that all consumers know. The Model S is often compared to the Chevy
Volt and Nissan LEAF because they are the top three selling all-electric or
extended-range electric cars (IEDC 3). However, it attracts a completely different type

39
of buyer. On average, Tesla owner are younger and wealthier than owners of the Volt
or LEAF. Customers are not particularly price-sensitive and seem to typically place a
premium on service and design, making Tesla’s main competition luxury vehicles
rather than electric.

Tesla Market Analysis

Market Segmentation

The company has adopted a geographical segmentation approach. The company has
three geographic markets, North America, Europe, and Asia. North America has remained the
largest segment of the company sales accounting to 77% of the total revenues generated by
the company (IEDC 4). Europe is the second leading in terms of sales generated by the
company. The company has focused on countries such as Switzerland, Denmark, and other
Scandinavian countries. In Asia, the company has started rolling out some of its products in
Japan and China. The diagram below captures Tesla Market Segmentation.

40
 Tesla Product Targeting and Positioning

The company targets high-end users in the luxury segment of the automotive industry.
By differentiating itself from the existing brands, the company has proved that electric
vehicles are possible by offering models of electric vehicles that are fun to ride and
comfortable to the user. To control the market, the company has segmented its target market
into four sections: the BlueStar, the WhiteStar, the Roadster, and Future models (IEDC 2).
The segment values are represented as follows:

Adopted from, Price Waterhouse Cooper, 21.

The company has positioned itself in the market through the zero emission and
environmental friendly tag. By embarking on environmental awareness, the company
products use 100% renewable energy, and are better for the world economy. Some of the
benefits associated with company products include, zero gas price, tax incentives in selected
states, single-occupancy access to car pool lanes, discounted electrical rates, free parking at
LAX and other airports, no parking meter fees, and the reduction of oil dependency in the
world.

41
New Markets

China offers one of the most reliable markets for the company. Contemporary
statistics indicate that china is the largest automotive consumer in the world. Equally, it is the
largest world green house gases emitter. Consequently, statistics show that it is the largest
growing luxury vehicle market across the globe (IEDC 4). China therefore offers a great
opportunity for Tesla. Recognizing this opportunity, the company has already began
establishing its presence in China. However, the company faces major challenges in the
Chinese market because of import duties imposed on foreign vehicles. For example, the
current model S is priced at $120,000 approximately 50% more than the prices in the U.S
(Price Waterhouse Cooper 12). These prices position Tesla at the middle in the luxury brands
in China.

New Products

To capture the low-end consumer market, the company has announced that it will be
releasing a third generation model of EV by 2017. The car is estimated to cost an estimated
$35,000. The new model comes as a response to the current gap on the low-end market. The
company has also announced that it would be releasing its Model X cross over by 17 but
commercial production will commence on 2018 after the estimated launch and full operation
of Gig factory. Consequently, the company has announced release of new domestic power
batteries costing $3,500 and $2,000. The entry into the new domestic market as explained by
the CEO is in tandem with the company goals of transitioning the world into green energy
(Tovay 3).
However, to have an advantage in the market, with other companies that have
stronger brands and are good at utilizing the current technology to produce cheap yet
competitive products as well, Tesla would have opted for a model that costs even lesser than
the proposed new car of $35,000 (Tesla Motors 14). The low-end consumer market does not

42
prefer extravagant and leisurely components of a car, and the company can reduce the
leisurely components of the new product, which will subsequently reduce the costs of
production, and allow the company to introduce in the market, a product much cheaper than
the $35,000 car announced.

Tesla’s Marketing Strategy and Current Customers by Segments

Tesla Motors Company is often attracting much fanfare among the customers and the
investors as well. It has long-term fundamentals hence EVs are here to stay and the company
holds an enviable position in this market. It has never disappointed investors and has been
outperforming the legacy carmakers’ stock by a huge margin. However, the prices for EVs
have continued to be prohibitive in spite of the increased technological innovations as well as
the massive government dole outs. A section of the market has been having reservations on
the long-term utility that can be obtained from the EVs. It has been argued that they are not
environmentally friendly as the deadly fossil fuels always go into the electric generators used
to run the vehicles. Others do question its soaring valuations although Tesla may not be
valued with the same metrics used for many automobile companies such as Ford and General
Motors. EVs are not a new concept and most companies have it on their portfolio. Nissan’s
Leaf was the best selling electric vehicle in 2014, where the automaker managed to sell
60,000 units (Little 14).
Tesla is striving to deal with challenges surrounding the EV industry including range
anxiety. No one wants to purchase a vehicle that runs out of power or energy faster with no
place to recharge the battery. The company has been able to address the issue by providing a
driving range of more than 250 miles in excess (Bloomberg News 3). It has been on the verge
developing superchargers that will be of help to those driving over long distances. The
company has made this possible by choosing strategic places for the charging program. Busy
places have been chosen to reach out to several clients and in a way market the new items
being introduced by the firm. Tesla has adopted a differentiated strategy in selling its cars
whereby the customer books the car online hence does not need to visit a dealer. It also offers
its potential customers a drive test, which acts as a contact point with the customer.

43
Adopted from Little (13)
Tesla is experiencing competition in the area it has chosen as its major segment.
Several models from the traditional automobile manufacturers offer viable alternatives to the
current Tesla models in the market. Their competitors are expected to introduce EVs as well
as the Plug-in hybrids that will compete with Tesla Model 3 in the mid-price segment (Little
14). It should thus take caution while coming up with the new designs that will compete
effectively in the market.

44
 Product Mix and Marketing Activities

Tesla’s current product mix is comprised of vehicles and accessories. At present, the
only car in their lineup is the Model S sedan.

The Model X crossover will be released within the next year, and Tesla is
currently planning a smaller, less expensive car expected the next few years.

The Tesla Roadster, which is no longer produced, is available for purchase in

pre-owned form (Little 14). Accessories include vehicle accessories and apparel. Tesla’s
largest source of advertising comes from its brick-and-mortar showrooms, not
advertising and media campaigns.

Tesla strategically places its “dealer” showrooms in large areas of shopping such as
malls and high-endretail clusters. It causes a lot more foot traffic simply walking by,
and actually going in and checking out the showroom than typical car dealerships.

This in itself is a key marketing tool that helps Tesla gain brand awareness.
Tesla’s marketing team is currently comprised of only seven people. As of late, Tesla does
not have any plans to run any traditional or new media advertising campaigns in the
near future.

45
 The 4 Ms of Advertising

Market: The target market for Tesla is middle aged affluent consumers who tend to
balance high end luxury goods with social responsibility, or being green. The
demographics of this market segment do not affect how Tesla conducts business as who
is driving the car is not so much important as whether or not they can afford to
drive the car. Geographically some consumers may not be as interested in Tesla’s
products because a lack of charging stations. Yes, you can charge the car at home
but some may wish to charge on the go.
Motivation: Consumers are interested in buying Tesla’s products because of the
brand image and reputation. Tesla is known as a prestigious and luxuries brand that
comes with a life style and has a high perceived value from consumers. With that being
said, what motivates them is the image they will posses when driving their vehicles.
In that consumer’s social group they will be seen as environmentally friendly with very
good taste as the cars look very sleek, sophisticated and modern. Lastly, another
motivating factor is the safety behind the vehicles. The Tesla Model S has received the
highest safety rating of any car ever manufactured in the world!
Message: The company’s marketing communications should really follow the
way the brand has been positioned. How your message comes across with what you’re
saying, how your saying it and where your saying it should all coincide with the
portrayed lifestyle that consumers see as engrained in the brand.
Media: We believe that Tesla does need to work on its marketing a little bit. It is a
very small department and Tesla could use more employees to help out with their
marketing and rely less on customer advocacy (Bloomberg News 2). To do this we
would suggest they start doing more commercial advertisements on channels their
target market is most likely to be watching, like major news stations. Also we
believe it would be a good idea for Tesla to do more with print and
digital marketing. They should be placing ads in for example, Forbes magazine, Wall
Street Journal, and maybe even National Geographic. With their digital ads we believe
they would have success not only on these companies websites mentioned above, but
also maybe advertise on major search engines like Google.

46
 CONCLUSION

Tesla is arguably the leading green energy automotive manufacturer in the world. The
company has previously focused on the high-end segment of the automotive industry.
However, the company has diversified to domestic and low-end segment of the market. A
few weeks ago, the company launched the first lithium battery options for domestic

47
customers. Additionally, the company has planned to release the first low end EV by 2017,
which will compete with other green vehicles in the low-end segment of the automotive
industry. One of the main success factors in the market is its vertically integrated value chain.
This allows cost reduction and promotes quality control. Cost is one of the main challenges
facing companies operating in the premium segment of automotive industry; with an
integrated and water tight value chain, the company is able to control cost and quality of the
products at the same time. However, the company faces major strategic challenges. Key
among them is the ability to guarantee sufficient battery supply as customer demand balloons.
The huge shortage of lithium-ion cells is a major challenge to the company production. While
the company has the merits of strategic partnership, the sustainability of lithium-ion batteries
remains a major challenge to the company.

BIBLIOGRAPHY

48
Bloomberg News, Goldman Sees Tesla Consuming Up to 17% of Lithium Output.” Web.

Accessed from, http://www.bloomberg.com/news/2014-02-28/goldman-sees-tesla-

consuming-up-to-17-of-lithium-output.html

Brenan, Morgan. Tesla and Elon Musk's 'major new product line'—is it a battery? CNBC

News, 2015. Accessed from, http://www.cnbc.com/2015/03/31/tesla-and-elon-musks-

major-new-product-line-is-it-a-battery.html

International Economic Development Council. Creating the Clean Energy Economy:

Analysis of the Electric Vehicle Industry. International Economic Development

Council 2013. Print. 2-36

Little, Dan. Battle for Sales in the Premium Segment: Six Key Levers Impacting Current

Automotive Sales Models”. Automotive Viewpoint, 2015. Print. 2-15

Price Waterhouse Cooper. State of the Plug-in Electric Vehicle Market. EV Market Outlook.

Pw|C, 2014. Print. 1-40

Tesla Motors – Annual Report 2009, 2010, 2011, 2012, 2013, 2014. Tesla Motors, 2014.

Print.

Tovey, Alan. Tesla's economy Model 3 electric car to hit the road in 2017. The Telegraph,

2015. Accessed from,

http://www.telegraph.co.uk/finance/newsbysector/industry/engineering/11841624/

Teslas-economy-Model-3-electric-car-to-hit-the-road-in-2017.html

Yahoo Finance. TSLA. Accessed from, http://finance.yahoo.com/q?s=TSLA

Recommendations

49
Within Bowman’s Strategy Clock it is recommended to shift the company strategy from
Focus Differentiation to Differentiation, providing benefits that are different from those of
rivals and widely valued by customers at the same prices. This in turn will increase market
share and long-term profitability.

In order to achieve differentiation strategy, it is recommended to widen the range of models

within premium and small premium vehicle segments that allow competing with other
companies. They should aim to be affordable and available for different markets segments
and not just for premium segment alone.

Figure 3. Positioning of Tesla Motors’ cars within automobile market (Tesla Motors, 2014)

Furthermore, despite Tesla’s products have technological advancement, it must continue to

stay on the cutting edge of innovation and quality, and accelerate new product development.
For example, they may reduce the time of recharging the car to the point that it will be a 1:1
comparison to gasoline models, and improving battery types and modularity, to increase the
travel distance on a single charge.

Pursuing differentiation the company’s cost structure must be carefully managed to keep
lower cost in areas not related to differentiation and higher costs in main processes with a
distinctive edge (Akroyomare, et al, 2012), such R&D and Marketing. Advertising is very
important for the company, because they relatively new brand, and through media
applications, Tesla can build brand identity and become well known all over the world.

Word count 3,280

Appendixes

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Appendix – Bowman’s Strategic Clock Routes

Route 1 is defined as “the ‘no frills’ strategy, which combines a low price with low perceived
product/service benefits and a focus on a price-sensitive market segment”. (Johnson, G.,
Scholes, K. And Whittington, R., 2008)

Route 2 is defined as “the low-price strategy, seeks to achieve a lower price than competitors
whilst maintaining similar perceived product or service benefits to those offered by
competitors.” (Johnson, G., Scholes, K. And Whittington, R., 2008)

Route 3 is defined as “A hybrid strategy seeks simultaneously to achieve differentiation and

low price relative to competitors. The success of this strategy depends on the ability to
deliver enhanced benefits to customers together with low prices whilst achieving
sufficient margins for reinvestment to maintain and develop bases of differentiation.”
(Johnson, G., Scholes, K. And Whittington, R., 2008)

Route 4 is defined as “is a broad differentiation strategy providing products or services that
offer benefits different from those of competitors and that are widely valued by buyers.
The aim is to achieve competitive advantage by offering better products or services at
the same price or enhancing margins by pricing slightly higher.” (Johnson, G., Scholes,
K. And Whittington, R., 2008)

Route 5 is defined as “A focused differentiation strategy provides high perceived

product/service benefits, typically justifying a substantial price premium, usually to a
selected market segment (or niche)”. (Johnson, G., Scholes, K. And Whittington, R.,
2008)

Appendix B - Historical Financial Data

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Source: Tesla Motors, Inc., (2020). Form 10-K Annual Report. Palo Alto, California. [online]

https://tesla-cdn.thron.com/static/HZTKGL_TSLA_Update_Letter_2020-
1Q_VGVL6F.pdf

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Appendix C - Tesla Model S and Roadster Images

Roadster

(Image source: Tesla Motors, 2014)

(Image source: Tesla Motors, 2014)

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The Tesla Model S

(Image source: Tesla Motors, 2014)

(Image source: Tesla Motors, 2014)

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THANK YOU

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