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Assignment

Digital Marketing

Tesla Motors
Blue Ocean Strategy
How Tesla Motors Use Blue Ocean
Strategy?
Tesla Motors, Inc. designs, manufactures, and sells
electric cars and it is the first companythat
combined the features of the green vehicles that
generate zero emissions with that of a premium
sports vehicle, basically it provided an electric car
that is not only environmentally friendly but also fast
and powerful. Till Tesla Roadster, the company’s
first vehicle that used lithium-ion battery cells as
fuel, it was believed electric cars were small, slow,
not suitable to travel long distances and expensive
to fuel. The Roadster had a sports car
look, accelerates from 0-60 mph in 4 seconds with a
top speed of over 130 mph, can be charged
anywhere and has a much wider range of over 200
miles per charge which was first for any electric
vehicle at that time. Tesla created an uncontested
market space in terms of high performance electric
cars that are high speed but with zero emissions
targeting the environmentally conscious customers
who are ready to pay top buck for cars that are
extremely environmentally friendly. Tesla eliminated
the traditional fossil fuel gasoline usage that emits
carbon emissions that harm the environment and
also maintenance costs related to motor oils and
filters and also reduced the service maintenance
costs and also the charge time for its battery fuel
cells. Tesla also raised energy efficiency of the cars,
driving range per charge, acceleration speed and
created stylish and performing electric car that can be
charged anywhere with its built in battery charging
system that plugs into commonly used outlets. The
current size of the electric car market is just 1% of the
overall car market size and Tesla Motors is planning
to increase the market share.
Instead of withholding to its highly patented
technologies, Tesla Motors granted access to its
competitors all its intellectual property so that the
competitors can also use these technologies to
develop innovative electric cars and expand and
grow the market size. Tesla Motors in order to
increase its sales and market has to work with the
traditional automakers that are also looking to
manufacture new hybrid vehicles that run both on
electric and gasoline. With more charging stations
and other infrastructure in place more electric cars
will be sold leading to economies of scale that reduce
the cost of production which ultimately lead to low
price of the cars. Currently electric cars are priced
very high and are not affordable to most of the
customers only the affluent customers can buy
them. The company has announced to build a $5
billion battery factory in partnership with Panasonic
that manufactures batteries for cars in quantities
that exceed Tesla’s needs but also supply to other
electric car manufacturers too. Tesla is also working
with other industry layers to build common
industry standards for charging stations and plugs
so that all the electric cars can use same charging
stations and also building the battery fuel
cell standards too. Tesla wasn’t first with an electric
vehicle but it pioneered the concept of electric cars
and combined with superior design and strong
technical leadership, it offered an innovative high
performance car that attracted the customers. Tesla
Motors beat the competition with a superior car with
innovative features and created a new “green
performance vehicle” market space. With the
market expansion, Tesla Motors is expected to
profit significantly as it has a significant advantage
in terms of first mover advantage and access to key
resources and technologies like the battery fuel
cells. After creating a new market space, tesla
Motors current mission is to increase the number
and variety of electric cars available to the
mainstream consumers.

• Classify
• Characterise
Input •

Coordinate
Customize

• Penetration into
the market
• Execution
Output • Acquire the
customers
• Retaintion
Input
 Classify: Identification of problem
 Characterise: Kind of problem
 Coordinate: Strategy implementation
 Customize: Best possible solution

Output

 Penetration: This strategy involves selling


existing products to existing markets. Tesla
uses market penetration strategy
extensively. The company is focused on
selling its Model S, Model X and Model 3
electric vehicles, Powerwall 2 and
Powerpack 2 energy storage products, as
well as, solar panels, inverters, racking,
electrical hardware and monitoring
devices in the US and 29 other
countries
 Execution
 Acquire the customers
 Retaintion

Blue Ocean Strategy:


Blue Ocean Strategy is a method of
creating business strategy of the
enterprise, which was described in a book
by W. Chan Kim and Renee Mauborgne.
Blue Ocean Strategy is based on the idea
that every enterprise can achieve higher
profit by creating new demand in non-
competitive market (so called blue ocean).
The profit is much easier than the rivalry
with the competition on existing markets.
1. The first part presents key concepts of blue
ocean strategy, including Value Innovation –
the simultaneous pursuit of differentiation and
low cost – and key analytical tools and
frameworks such as the strategy canvas and
the four actions framework. The four actions
framework aids in eliminating the trade-off
between differentiation and low cost within a
company. The four actions framework consists
of the following:
 Raise: This question which factors must be
raised within an industry in terms of product,
pricing or service standards.
 Eliminate: This question which areas of a
company or industry could be completely
eliminated to reduce costs and to create an
entirely new market.
 Reduce: This question which areas of a
company’s product or service are not entirely
necessary but play a significant role in your
industry, for example, the cost of
manufacturing a certain material for a
product could be reduced. Therefore, it can
be reduced without completely eliminating it.
 Create: This prompts companies to be
innovative with their products. By creating an
entirely new product or service, a company
can create their own market through
differentiation from the competition.

Eliminate Raise
 Gasoline usage.  Energy efficiency
 Carbon emissions. compared to gasoline
 Messy maintenance- and hybrid vehicles.
no need to motor oil,  Driving range
oil filter, air filter etc. compared to previous
electric vehicles.
 Acceleration rate
compared to other
cars.
Reduce Create
 Vehicle options.  A beautiful, stylish and
 Servicing requirement. high-performance
 Battery charge time electric sports car that
compared to previous is fun to drive.
electric vehicles.  Built-in battery
charging system that
can plug into any
outlet.

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