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Tesla Motors, Inc. is an American company that was established in 2003. The driving concept behind the venture was proving electric cars could be a feasible replacement of the gas powered automobiles without compromising convenience, performance or high-end. Apart from the core function of developing and producing electric vehicles, Tesla also supplies advance electric automobile powertrain elements and knowledge to other automakers, which are checking out venturing in the EV (electric automobiles) market, such as Daimler, Toyota and others. The company's head offices are situated in Palo Alto, California.
Due to their particular company and marketing model, particularly, no middle-man and little-to-no mass scale marketing projects, Tesla has wholly-owned subsidiaries in The United States and Canada, Europe and Asia. At present, there are more than 2000 workers worldwide working for the company in the production, design and in the 31 shops and service locations spread out worldwide.
Although not the only producer of completely electrically powered vehicles, Tesla is renowned as the vanguard of the market.
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Tesla is the only one to offer high-performance EVs at a highly competitive price. In 2008 Tesla launched the Tesla Roadster, the very first entirely electrical sports vehicle which ended up being a worldwide experience, exhibiting high-end efficiency similar, if not much better, with premium sports cars and trucks. Following the trickledown marketing plan, Tesla broadened its technological advantage to the high-end sedan market and launched Model S in 2012.
Mission Declaration and Current position
Tesla's goal is to speed up the world's shift to electrical vehicles with budget friendly and enticing electrical vehicles.
Tesla's CEO, Elon Musk, declares on the website that "we're catalysing change in the industry. Tesla automobiles ... are fun to drive and environmentally responsible" (Musk, 2013). To make this occur, TESLA is also establishing a network of charging stations, powered by solar power to make long journeys easier for the EVs users. Tesla Motors designs and sells high-performance; highly efficient electrical sports automobiles-- without any compromises.
Finance
Tesla Motors is a public company that trades on the NASDAQ stock exchange under the symbol TSLA. From the figures below, it showed that Tesla had a net loss in 2012. It was until the first quarter of 2013 that Tesla finally posted profits for the first time in its ten year history. Tesla suffered significant losses and invested approximately $709.2 million of cash in operations through December 31, 2012. They reported $201.9 million in cash and cash equivalents at the end of year 2012 (Tesla, 2013)
Marketing
In order to achieve their goal of revolutionising the automobile industry, Tesla follows a trickle-down marketing and business plan. Simply put, they couldn't start with an inexpensive electric car - it would have been too expensive to build up. Instead they began with creating a “legend” of a brand - an expensive sports car - the Roadster, generating interest and a sound foundation of renown and fans, upon which they could build-up later. The financial idea behind this decision was that the profits from the Roadster would pay for a less expensive car - the Model S, and profits from the Model S would pay for an even cheaper car.
The Roadster sold quickly sold 2500 units, after which production was stopped to launch the next model. About 2,650 Model S cars were sold in the U.S. in 2012, and 4,900 units during the first quarter of 2013. This allowed Model S to become the top selling plug-in EV in North America during the first quarter of 2013, ahead of the Chevrolet Volt and the Nissan Leaf. Model S won the 2013 "Motor Trend Car of the Year", "World Green Car", Automobile Magazine's 2013 "Car of the Year" and Time Magazine Best 25 Inventions of the Year 2012 award.
Capabilities
1. Developed ability to apply commoditized small cylindrical lithium cells, which are generally used in consumer electronics, to cars through good proprietary power management. 2. Empowering and self-driven employee that promotes company’s development. 3. Great partnerships with Toyota, Daimler AG, and Panasonic supported Tesla battery technology research and development, as well as future innovations.
Core competences
1. The low cost of Tesla’s battery pack, allowing Tesla to sell the Model S at a reasonable price with a 300 mile range when it is still a combination that other electric vehicles in the industry have yet to deliver; this is provided by Tesla's superior battery technology which gives it an advantage over other manufacturers 2. Having 40 patents awarded and over 200 patent application pending technology to supply all its future models. This will aid them in complying with their emphasis on zero emissions, the performance and aesthetics of their cars.
Industry report
Global EV sales in 2012 have been strong, with over 110,000 vehicles, more than double the sales of preceding 2011 - 45,000). This, of course is a small number when compared to the overall sales of conventional vehicles - 82 million in 2012. Among the top countries the USA is the largest market in absolute terms, with approximately 53,000 sales. In terms of absolute sales, Europe is the smallest regional market, but the European Union is the host of six out of the top 10 countries for absolute EV sales. Europe also hosts the market with the highest percentage of EVs sold compared to cars sold, with Norway where EVs captured 3.3% of car sales in 2012.
The trends for the first two quarters of 2013 confirm the dynamics of the EV market in the US and Europe. By the middle of May 2013, the US had sold 24,550 units, bringing the total sold in the US to 100,000 to date. In the Netherlands there have been more than 10,000 pre-orders of one new model.
Based on existing OEM announcements, the annual global production capacity of EVs, currently standing at approx. 500,000 units, is projected to increase to 1.5 million by 2015 (representing a 50% annual growth from 2012). To meet the aggregated EV targets set by at least fourteen key countries, the analysis finds EV annual production capacity will need to increase by an additional 30% per annum post-2015 to reach 5.6 million units by 2020. Such a growth rate is credible as OEMs have the capability to scale up production (existing factories do not run at full capacity and some EV models are based on existing non-EV models). Even at this level, EV production capacity in 2020 would represent less than 7% of the current total light-duty vehicle production.
Potential limitations and risks:
Due to the unique position of Tesla, namely it is ahead of the market by practically being a revolutionising agent in a vanguard industry, Tesla do face several key threats and weaknesses. First, EVs suffer from short mileage which makes long travel impossible in the absence of an establish network of charging stations. Although such one exists, a lot more work is needed to expand its coverage. Second, Tesla doesn’t have the massive adoption rate of petrol vehicles and cannot compete currently with their price and production costs. This means that Tesla has to fight for market share and practically establish one by itself. Third, Tesla is dependent of the export of high-tech natural resources from China, a weakness inherent in the hardware electronics industry, with which the company has to compete against. Worth mentioning is also the fact that there aren’t that many experienced experts in the area, thus the human resource pool is not as big as the one of the petrol vehicle industry.
BCG Analysis
The BCG matrix is a framework created by the Boston Consulting Group to evaluate the strategic position of a business. It uses four categories (COWS, STARS, QUESTION MARKS and DOGS) based on industry attractiveness (growth rate) and competitive position (relative market share). The purpose of the analysis is, on one hand, to identify investment opportunities or successful business practices, and on the other, underline a need to divest. Currently, due to the success of 2013, Tesla moved from a Question Mark to a Star, as the earning and profits were growing but the cash flow was negative, following a strategy to invest.
In the next part of this report we will examine the company using the PESTLE framework
Political/Legal Segment
The political/legal environment is generally favourable. Countries worldwide have a positive outlook and encourage EV adoption as an alternative transportation (Mangram, 2012). Government subsidies for EV manufacturers and consumer price incentives (tax breaks, free parking, etc) are the usual adoptee policies. These policies motivate interest and demand in the public. Worth mentioning is that many states look into setting vehicle carbon emissions standards, something which although aimed at petrol based transport, indirectly creates even more adoption incentives for EVs.
Economic Segment
The global economic crisis of 2007 however has left a fingerprint on the industry - people are more cautious on spending during the last few years, especially on high-end luxury goods. On the other hand, the increasing price of oil during the recession and the limited nature of the resources make electric power more appealing. It is also worth mentioning that since 2014 the economy is showing some general signs of recuperation, which is favourable on the long run.
Social-cultural Segment
Global warming has been one of the biggest movements in 20th century. From the everyday people to politicians, famous individuals and even corporations are trying to implement, (not always voluntarily) certain eco-friendly policies and ride the green wave. EVs are, especially in the 0-emmission class of Tesla, the vanguard of the movement. Looking from a more marketing perspective, Tesla is successfully targeting and penetrating, very similar to the initial iPhone strategies, the market of change-makers and influencers, the 21 century young successful entrepreneurs.
Technological Segment
Electric vehicle charging station infrastructure came into the market around 2011. A major electric vehicle rental business with charging infrastructure and associated amenities is headquartered in Naha, Okinawa, Japan. The operation has 220 Nissan Leaf rental cars and a charging infrastructure consisting of 27 chargers in 18 locations (Electric Vehicle Rental Application, 2012). The availability of recharging stations has provided a unique market environment for the development of Tesla.
SWOT
Internal Factors
External Factors
Strengths
Weaknesses
1. Strong Management
2. Developed the 1st fully electric sports car
3. Supplier to other manufacturers
4. Strong R&D
5. Ability to develop vehicles completely in-house
6. Their current platform developed for Model S can used for their future models
1. More expensive then fuel alternatives
2. No established supporting infrastructure
3. Low battery range
4. Slow charging process
5. No reliable fan base
Opportunities
SO recommendation
WO recommendation
1.The world is running out of oil, electricity is renewable
2. People increasingly care more about the environment
3. Growing support from governments globally
4. Large global market
1. Focus on new product development
2. New technology to stay ahead of the market
3. Expand on new markets – Asia
4. Diversify in other vehicle segments (long term)
1. Outsource non-key operations to reduce costs
2. Promote awareness of EV as attractive alternative
Threats
ST recommendation
WT recommendation
1.Very strong competition with low costs
2. Economic slowdown
3. Limited supply of resources
4. Limited experienced expert pool
5. Public awareness of EV as viable alternative is low
1. Develop new product to target a different buyer segment
2. Reduce costs, focus on attracting a more general and mass public
3. Attempt to limit reliance on natural resources through new technology - graphene
1.Follow cost reduction strategies
2. Due to the favourable market position and the many threats, possibility to sell the company at a very high profitability should be considered.
New Marketing Campaign
With the launch of Model X (an EV SUV) in 2015, Tesla is expanding to penetrate into new markets. However, Model X will be, based on SUV popularity trends, far more popular choice in the US than in the space cautious Europe and especially Asia. This is why we are going to focus on the marketing of the codenamed “BlueStar” project, expected to be announced in 2017. It will be a smaller, 2 or 4 door model similar to the BMW 3 series.
An effective idea for growth is entering new markets. This can be achieved by opening additional retail locations, selling internationally or reaching new types of customers. For our campaign, we should focus on simultaneously increasing market share in new markets and reaching a new type of customer.
Let us explore the market segmentation.
Geography – the marketing campaign will target 3 continents – North America, Europe and Asia, focusing heavily on the last two. This is because the demand there is highest (China recently announced a plan to have 5 million EVs on the road by 2020) and there is already developed charging station infrastructure. China is already the world's largest auto market and it's set to grow even bigger in coming years. Moreover, many of the production and parts assembly plants are located in Asia and parts of Europe, thus an even more competitive price/added value can be achieved by focusing on those markets as well.
This will lead to an increase in global brand recognition, help recruit new employees, increase competition for new distributors and give the opportunity to market with local media specialists in the region as part of the global marketing efforts. Disadvantages of this approach is vulnerability to industry and other external local environmental shifts – policy, intellectual property and security in the region are not a given. Furthermore, a large capital injection will be needed to start the expansion.
On the Demographic level – the campaign will follow the trend established so far of targeting rich and upper-middle class individuals and young trend setters. However, it will build upon it and cautiously, given that by that time the popularity of EVs has increased and the reduced price of the product, start approaching other demographic segments as well – first time buyers, young professionals and families, etc.
Behavioural Segmentation – it is also important to mention that the reduced price will lead to a direct competition with the cheaper options of hybrids and EVs on the market now, which will open the door to the market of the environmentally cautious.
Psychographic Segmentation – As we have already established, the campaign should focus on the upper-middle class and the wealthy, which in combination with the reduced price of the product, will incentivise the other segments to seek the affordable exclusivity of the product as well. It is important not to forget that in the case of EVs, Tesla is a brand with already established renown, thus compromises with status of the product itself should not be made in order to expand markets, otherwise the cheaper alternatives will overcome the gap. What Tesla could offer as an alternative to the Prius clients for example is the comfort and the status with a slight up-tick in price, something which currently is lacking on the market.
To conclude, the new marketing campaign will aim to build upon the already existing market, but also expand the market share through targeting another group of customers, who weren’t previously capable of affording the high-end products of Tesla. In addition, the marketing campaign will be focusing on satisfying the growing needs of Europe and Asia, which currently are in a process of actively promoting and building both the social acceptance and the infrastructure required for the project. The initial marketing should begin in the end of 2015 with an introduction of a prototype, followed by the first preorders available in mid-2016. This will give a solid 6-12 months of time to produce the first line of vehicles. As a budget, we conclude that the trend of setting similar numbers for the consecutive launches should be kept, with a slight increase of around 5% to cover the more active promotion through previously unused channels.
Question 02
What differences are there if you market your products and services to an organisation?
The difference originates in the feature-vs-benefits debate. Features can be "Open 24 hours," "Batteries included," "Newest model" and "Largest database," to give a few examples from different industries. This kind of advertising focuses on what the product already has established. Benefits, on the other hand explain what's in it for the customer, a broader but also deeper answer to their needs. Such benefits based on the list of features of Tesla could be "We're there when you need us – lifelong support and updates", "We will give you the tools to lead an environmentally responsible life" or "We will reduce your expenses greatly". Notice that in this case the focus in on providing a solution, on making their lives better, on adding value. This shift from your organization's offerings to the buyer's needs creates customer-cantered marketing.
When you are marketing to an organisation you will want to focus on the logic of the product. This can be done by focusing on the features of the product and the value they bring on the financial plane. There is no emotion involved in the purchasing decision of the organisation. The marketing should focus on understanding how the organisation operates within the confines of their procedures and target exactly this. This is because organisations are information seekers, which constantly try to self-improve through streamlining. Thus, in theory, the most effective marketing message to an organisation will focus on how the product or service saves time, money and resources. Let us see how this can apply to Tesla. Apart from the EVs, Tesla offers an entire back-end line of services, including hardware and know-how to other manufacturers.
So instead of targeting a certain market segment based on region, demographic, psychology, etc, the client will be another manufacturer seeking entry either in the EV or Hybrid markets. What Tesla can offer is the know-how of a leading producer (which is probably the most expensive option), brand and hardware. Thus, the purchase decision will be focused on technology specifications, price, or eventually, support. A reversed case, but still really useful would be the way Tesla and Lotus work on the chassis. Both of the producers are competitors in the segment of luxury vehicles, however, the partnership is mutually beneficial since on one side Tesla doesn’t have to develop the technology in-house and thus can pursue a competitive advantage, and on the other Lotus, who already has the know-how and the manufacturing capabilities, thus not taking advantage from it will result in safe-harming.
What is the difference from international marketing to domestic marketing?
International and domestic marketing can be equalized to the same thing when it comes to the fundamental principle of marketing and its purpose. Marketing is a vital part of the business operation, and it is responsible for transferring the adopted plans and policies, as well as product, to the potential customers. A web definition defines marketing as a process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services. With the rapid expansion and the global reach of the globalised economy, the boundaries between nations are melting. This has led to an unprecedented level of ease with which small and medium companies can transcend the limitations of the local market and reach out to a global customer base. This is also why many of the marketing campaigns of big corporations are relatively identical globally. One may argue that the practice and essence of marketing is a ploy that is used to attract, satisfy and retain customers. Whether done at a local level or at the global level, the fundamental concepts of marketing remain the same.
Domestic Marketing
However, let us examine more closely both arenas. The marketing strategies that are employed to attract customers at a local level within the political boundaries of a state/region are known as Domestic marketing. When a company
caters only to local markets and customers, despite may be competing against foreign companies operating within the same region and focus, we can safely say that it is involved in domestic marketing. The focus of companies is on the local customer and market only and no thought is given to overseas markets. All the product and services are produced keeping in mind local customers only, their needs, preferences and purchasing power.
International Marketing
When no geographical boundaries are present for a company and, as a consequence it targets customers overseas or in another country, it is said to be engaged in international marketing. As such, and in a simplified way, it is nothing but application of marketing principles across countries. It is worth mentioning that the techniques used in international marketing are primarily those used to target the home country market. According to another definition, international marketing can be defined as the principle of business activities that direct the flow of goods and services of a company to consumers in more than one country for profit purposes only.
Difference between domestic marketing and international marketing As we have already seen there are some fundamental similarities between the two markets. However, there are some really drastic differences as well, which we will analyse briefly in the following part.
Scope – The scope of domestic marketing is finite and will eventually dry up. On the other end, international marketing has, if not endless, then vastly greater opportunities and width. Let us put Tesla into perspective. If Tesla was to target the US market alone, it would be swallowed by the competition of the hybrids, which are cheaper and more readily available. Let us say they survive and thrive though, the niche market for environmentally friendly luxurious sports cars in the US is not enough to actually sustain a company, such as Tesla, and will eventually lead to either suffocation for clients on one side, or oversaturation of the market on the other.
Benefits – As is obvious, the benefits in domestic marketing are less than in international marketing. Furthermore, there is an added incentive of foreign currency that is important from the point of view of the home country as well. From a more financial perspective, the exporting of a product, especially a luxurious one, can be an opportunity to charge extra premium for the product and the following services.
Sharing of technology – Domestic marketing is limited by the use and suppliers of technology whereas international marketing allows greater transfer of technology and know-how. In the case of Tesla, an American firm, international marketing and connection has led to the partnership with Lotus, a British manufacturer, Toyota – a Japanese producer and countless others. In addition to increasing the worth of the company through gaining new technologies, it allows the company to specialise and pursue competitive advantage and in the same time maximise profits by ensuring the most suitable suppliers in the price/quality ratio.
Political relations – If we are to follow the classical capitalist doctrine, domestic marketing should have and has little to do with political relations whereas international marketing leads to the establishment of political relations between countries and countries, but also, and more importantly, between companies and countries. As we have already mentioned previously, China has a very ambitious plan for the future expansion of the EV usage in order to combat the ever-growing hunger for oil and urban/air pollution. As such, Tesla, alongside other producers, can and does receive numerous benefits, tax breaks and other incentives to do business on the territory of the country. As a result the effectiveness and the profitability of the marketing, and in general the company itself, increases.
Barriers – On a more challenging note, in the domestic marketing there are no barriers to trade/business but in international marketing there could be many. Examples of such are cross cultural differences, language, currency, traditions and customs. In the case of Tesla however, it is fortunate that the message, idea and essence of the company are easily transferable globally. The benefits, as well as the features are commonly sought after on the global market despite regional position, and the luxurious nature of the product itself, create the demand for it. The only actual barrier that the international marketing may face when moving through the geographical regions is the establishment of the supporting infrastructure of charging stations.
Bibliography
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02
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