2.1.4 Brand Development Capability
Another distinctive capability is associated with building up a unique brand. One of
the unique characteristics of the brand is how differently the company operates
compared to other car manufacturers. For example, TM has no aggressive selling
process because its sales staff works on a salary basis with no sales commissions;
all the sales are direct because the company does not have dealers to sell its cars.
This allows TM to control the quality of customers’ experiencethe company does
not have cars in inventory, so all cars are produced on order (D'Arcy, 2014).
It is important to mention that TM focusses on a niche market (buyers with high
income). So, the whole process is different and is intended to make a buyer feel
special (something that the niche market needs). TM’s models are getting different
kinds of awards. Receiving a Euro NCAP 5-star rating for safety and being named
Motor Trend’s prestigious 2013 Car of the Year have positively contributed to the
brand (Tesla Motors, 2014).
Another uniqueness of the brand is how TM promotes itself as an environmentally
friendly company. This is one of TM’s main operational ideas of business, as it
produces EVs that are emission free. The brand TM has developed gives a
competitive advantage (focusses on long-term profitability) over the other EV
manufacturers and, as a result, increases sales. This capability is considered to be a
core because it is essential for the main activity of the business to sell EVs.
Moreover, it is considered to be a competence because TM showed great
professionalism in doing that (Tesla Motors, 2015).
3.0 Q3 – Analysis of PR Crises
3.1 Incident One
The incident happened in the United States in November 2013 with a Tesla Model S
EV. While on the road, the car started to burn; however, that was not caused by an
internal malfunction of the car (McCarthy, 2013, and Tesla Motors, 2013). It is called
an incident because it is an event with potential serious consequences (Black, 2014).
The way that TM managed the PR crisis was professional. Incidents on the road are
not unusual, but because it happened with TM the media paid extra attention to it.
However, TM’s PR team contacted the victim of that incident straight away in order
to make sure that the driver was safe and to provide any necessary support. The
spokeswoman for TM’s PR team said, ‘We have been in contact with the driver, who
was not injured and believes the car saved his life’ (Tesla Motors, 2013). It was
essential to make a public statement and to speak to the media regarding the
incident in order to take control of the situation. TM adopted a positive approach via
telling the public about the incident and that company personnel had been in contact
with the driver. Moreover, TM’s brand was complimented because the driver
mentioned that he believes that the car saved his life (Black, 2014). Although the
incident happened not because of the car and the media were informed as soon as
possible, it still had a negative impact on TM’s reputation. As a result, the share price
of TM dropped but not as dramatically as it could have (McCarthy, 2013).
3.2 Issue Two
Tesla Motors (2015) announced that all its technological patents are now openly
available to the public (thus inviting potential external contributions in research and
development from other companies and organisations) (Grant, 2013, and Hill, 2007).
This can be classified as a philanthropic gesture expressing the company’s CSR and
constitutes a direct intellectual investment in the development of the EV industry,
which contributes to reduction of car emissions and reduction of negative
environmental impacts. However, Crowther and Capaldi (2008) mentioned that
philanthropy as a part of CSR can be focussed on getting direct business benefits
rather than being inspired by altruism.
By sharing patents on technology, TM is winning in all ways. The CEO of TM, Elon
Musk, mentioned that he wants to develop the EV industry because it will lead to
more EVs in use and less emissions. So the gesture was derived more from
environmental concerns rather than the personal interests of TM. However, Musk did
not mention that the development of the EV industry would open new prospects for
TM’s further development. In other words, the competition from big players will be
beneficial for TM. Moreover, TM gained a strong image of a company that cares
more about environment and society than it does about business. However, this
response could have been devised not to blame the company but to show how SCR
was used in a strategic perspective.
4.0 Q4 – Strategic Analysis
4.1 Business-level Strategy
TM is implementing different strategic tools (associated with differentiation and cost
leadership strategies). From one side, we can suggest that TM is focussing on a
differentiation strategy. TM offers a unique and expensive product using sales
methods that are different from those of competitor, thus addressing a special need
of the niche market which is not sensitive to the price (Porter, 1985). Moreover, as
described before, TM has a unique selling process, and the car is better in certain
aspects than are its competitors. However, according to Tesla Motors (2015), the
company plans to introduce a more affordable EV model (the quality of production
will be lower). Most likely, TM is not going to compete aggressively with other car
manufacturers in terms of price because the product remains unique (with better
performance characteristics comparing to the competitors described above). At this
stage, TM is not focused on the mass market. It might be that TM is moving towards
a hybrid of differentiation and cost leadership strategies where differentiation could
remain a foundation of strategy and cost leadership would be a supportive strategy
(Porter, 1985).
4.2 Corporate Strategy
4.2.1 Market Penetration
TM implements its market penetration strategy through a number of activities. First,
TM developed a battery for EV with higher capacity, and now the company plans to
reduce the production costs of the batteries. The reduction of production costs will
lead to higher revenue (from the same product and same market). In order to
achieve that, the company does it in two ways. First, it invests a significant amount of
money each year in research and development. For example, it spent $464,700,000
in 2014, a large increase over 2013’s $231,976,000. TM doubled investments in
research and development. Second, it intends to have a merger with a battery
producer company such as Panasonic (Grant, 2013, and Tesla Motors, 2012).
According to the agreement, Panasonic will supply TM with batteries at break-even
costs. That will allow TM to reduce production costs (Ansoff, 1954).
4.2.2 Product Development
TM adopts a product development strategy through focusing on developing the
corporate brand through getting various prestigious awards for safety, performance
and others. TM’s Model S has various technical advantages over the competitors’
EVs. TM is promoting itself as an environmentally friendly company, through
producing a 100% EV vehicle which does not have emissions. It also is promoting
itself through its CSR strategy, when TM shared the patents of technology (Open
Innovation strategy) publically (Tesla Motors, 2014). Moreover, by sharing innovation
with others, TM has opened prospects for external research and development
(because other companies and organisations can contribute as well to the
development of EV). That will be supportive to TM’s market penetration strategy
(Ansoff, 1954, Grant, 2013, and Hill, 2007).
4.2.3 Market Development
TM implements its market development strategy through a number of activities
(Ansoff, 1954). First, according to Tesla Motors (2014), the company plans to
expand in the British market and open a store in Birmingham together with six
supercharger stations in West Midlands. Compared to the U.S. market, the British
market is still in its introduction stage, so TM is continuing to penetrate a relatively
new market. Second, the vision statement of TM says that it wants to transform the
car industry into EVs in the future, so there will be significantly more EVs on roads.
However, the company cannot realise that vision if the company focusses only on
niche markets (sports and luxury cars). That is why TM is going to penetrate a mass
market (which is new for the company) via introducing a new EV Model X which is
more affordable in terms of price (Ansoff, 1954, and Tesla Motors, 2014).
4.2.4 Horizontal Integration
TM adopted a related diversification strategy through the following activities. First,
Tesla Motors (2015) announced its plans to provide a new service to customers. As
one of the leading battery producers for EVs, TM decided to expand its business and
provide power for homes. Moreover, since 2009 TM has been selling powertrains
(the essential part of the car’s working mechanism) to other car manufacturers. TM
has significant deals for providing powertrains to such companies as Toyota (the
expectations were to generate $100 million from 2012 to 2014) and Daimler (the deal
is expected to be worth $300 million) (Ansoff, 1954, and Tesla Motors, 2014).
Horizontal integration is important for the profitability and operation of TM (Ansoff,
1954).
4.3 Strategies Suggested for Future
Based on the information provided above, TM has adopted many good modes and
activities of corporate- and business-level strategies in order to achieve the
ambitious results in development of the EV industry, product and brand development
of TM, market development, consolidation of TM’s position in the industry and
increasing profitability. The recommendations are to sustain the existing strategies
with extra focus on market penetration and market development. TM has a clear
competitive advantage in technology, so it is able to cut production costs even more
and invest money in opening new stores and building more supercharger stations.
Market development is extremely important because the EV industry has only started
to grow. TM has a lot of potential to realise in new and existing markets, especially
after introducing the Model X. TM has built a great brand and has a great PR crisis
team that will sustain the company on the top for a long time.
END OF SAMPLE
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