Question

Hello,

I have a question from Tesla Study Case:

Explain the rationale for Tesla’s strategy. To what extent does this represent an optimal response to Tesla’s strengths and weaknesses relative to the established auto makers ?

Thank you

Answer 1

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Tesla has been pursuing the correct price-based balance and the plan for product differentiation. With an entirely new product line originating from market research and a top-down approach, where conceptualization is turned into a product to create a niche and generate consumer demand.

• Build sports car
• Use that money to build an affordable car
• Use that money to build an even more affordable car
• While doing above, also provide zero emission electric power generation options

The rationale behind the current strategy is to use money made off of higher end products to help bring a semi affordable electric car to the auto market.

Strengths Over Other Auto Makers:

(i) Innovative processes.

(ii) Strong brand name: Tesla has been able to attract and retain new customers, which is impressive as a relatively new addition to the auto industry.

(iii) Strong control on the production process: Minimizes the need for third party involvement.

Weaknesses Over Other Auto Makers:

(i) Limited Market Presence: Most of its revenue is generated within the United States, whereas competitors such as Toyota has a very broad presence in foreign countries.

(ii) High Price Point (limited customer base): Such high prices prevent the company from rapidly growing its customer base and market share.