Marketing Plan for Electric Vehicle Manufacturer and Designer, Tesla Motors Inc.

Executive Summary

This is a strategic marketing plan for electric vehicle manufacturer and designer, Tesla Motors Inc. This marketing plan has been developed with the aim of informing company’s stakeholders about company’s current conditions and direction. In addition, it aims to help a company achieve its vision which is to “create the most compelling car company of the 21st century by driving the world’s transition towards electric cars”. Therefore, this marketing plan is meant to facilitate an increase in the number of electronic cars on the roads by helping manufacture cars that are affordable and available to the customers. Given that Tesla plans to attract new customers and increase the distribution of its electronic cars in the course of the next several years, this marketing plan has been developed to serve the company for a period of five years.

Given marketing plan consists of six main sections. The first section is environmental analysis, which aims to identify the internal and external factors affecting the electronic vehicle manufacturer’s performance in the market. This analysis will focus on both internal and external environments in the context of micro and macro levels respectively. SWOT analysis, the second section of the marketing plan, will highlight either favorable or unfavorable internal and external factors that influence the achievement of company’s marketing objectives. The next two sections will cover company’s marketing objectives and strategies, which Tesla is pursuing and planning to utilize to stay ahead of its competitors. Two final sections of the report overview marketing implementation, evaluation and control. Marketing implementation explains how the company will adapt this plan to its marketing activities while evaluation and control refer to checking whether the plan has been a success or a failure.

1. Environmental Analysis

Through the process of environmental analysis, Tesla will gather information concerning the events and relationships in its environment. This will help a company plan its future marketing strategies.

1.1 Macro Environmental Analysis- PESTEL

Macro-environment represents events and conditions over which a company has no control. Therefore, this section seeks to identify and discuss external factors affecting the automotive industry with the goal of providing a bigger picture of the Tesla Motor Inc. external environment.

Political

At the macro level, automotive industry is affected by a number of political factors. Among the most visible factors affecting Tesla Motors Inc. are foreign trade restrictions, government stability and taxation. With operations in more than 17 countries, it is company’s imperative to take into account all political factors that are typical in those regions. In countries like the US, Tesla has been able to secure government support through lobbying activities. Therefore, US government has established supportive policies for the investors in the motor industry, subsidized research and development of the alternative car technology, which is Tesla’s main area of business operations. On the other hand, in many countries governments impose limitations on energy, a factor that disrupts automotive companies’ sales growth.

Economic

There is a number of economic features of the motor industry, which inhibit Tesla’s growth. Some of these features include rates of disposable income and business cycles. Such feature as a decrease in global fuel prices challenges the need for electronic cars. The motor industry is composed of companies with high selling prices, which are not tailored to all of their customers. Nevertheless, the motor industry is experiencing a slow but steady economic growth. This positive change indicates an increase in consumer’s purchasing power.

Social

There are various social trends affecting the motor industry. Therefore, it is important for the company to keep up with these trends in order to survive. One such trend involves consumer’s car preference in Western countries. In these countries, the type of a car one owns portrays their social status. Another significant social trend is the aging population. As people grow older, their vehicle preferences switch to premium vehicles that enhance comfort. Further, customer tastes and preferences for vehicles change very fast. This calls for vehicle manufactures’ need to keep up with these changes. There is also a declining interest in the fuel-powered cars. People are switch to more eco-friendly products. Therefore, Tesla can benefit from this by providing alternative electronic cars, which meet people’s shifting preferences. All these social trends affect the demand for certain types of vehicles in the automotive industry.

Technological

The rate of technological discoveries and speed of its transition are vital features of the motor industry. Currently, there is a very high evolution of technologies, which aim at meeting customer’s needs. For instance, recent technological innovations have led to the introduction and consequent demand for automated vehicles with GPS capabilities, keyless entry, heat resistant glass and video systems. Further, automotive industry currently relies on the B2B platforms for idea sharing and distribution of components. The high cost of research and development is however proving to be a problem for this industry’s innovation.

Ecological

There are significant environmental issues affecting the functioning of the motor industry. These include the issues of waste disposal and utilization of energy. In addition, there is a rise in the interest for sustainable development that refers to green consumption. Due to the increase in energy sensitivity globally, vehicle manufacturers are facing higher pressure to produce eco-friendly products. All this has caused companies to focus more on the 3P’s of responsibility: profit, people and planet.

Legal

From a legal perspective, the motor industry has been forced to comply with numerous laws and restrictions regulating it. These regulations include laws on competition, products, customer welfare and security of the well-being of employees such as the health and safety laws. This has placed companies in danger of facing legal charges in a form of suits for violation of the laws and restrictions regulating the industry. For instance, there has been an increase in risk of law suits as a result of violation of patent trolls. Further, such organizations as unions present powerful legal constraints for the players in the motor industry.

In summary, the future growth of Tesla as well as the entire motor industry and adaptation of the electronic vehicles largely depend on a number of external factors. Certainly, economic growth is the most significant external factor due to its influence on consumer’s purchasing power. Further, oil prices are expected to increase in the long run because of economic growth. This might drive the adoption of electronic vehicles bringing positive results for Tesla. Moreover, battery prices, which are the key drivers for adoption of electric vehicles, currently represent the main constraint for Tesla.

1.2 Micro Environment Analysis – Porter’s 5 Forces Model

The application of Porter’s five forces model to analyze Tesla’s microenvironment serves as a starting point for the strategic analysis of the motor industry. This features a discovery of innovations that can facilitate improvements in company’s performance and profitability. Therefore, Tesla’s microenvironment analysis is presented below.

Threat of New Entrants

The ease of entry into an industry highly depends on retaliatory power of existing firms and issues regarding the economies of scale. Given that Tesla entered the motor industry in 2003, the company has faced a challenge of being a new entrant in the market for a while. Further, it has taken time for the company to become profitable. Currently, the barrier to entry in the electric car market is relatively high due to a high demand for environmentally friendly vehicles across the globe. This is because Tesla has already achieved economies of scale with its highly innovative products. Further, the market has become leveled to some extent because replicating technology has become easy, which poses a threat for Tesla.

Bargaining Power of Buyers

The bargaining power of buyers in the motor industry depends on the formation of permanent relationships between the seller and the buyer. For instance, Tesla depends on its relationship with Toyota and Lotus as well as the sales they make to individual customers. Such issues as switching costs remain significant in this industry. Consequently, the bargaining power of customers remains at a moderate level because of the lasting relationship that exists between sellers and buyers. Further, due to company’s offering of differentiated products combined with prestige and eco-consciousness, buyers’ bargaining power is low. This, in turn, has led to the company securing high-income customers. In addition, buyer’s power is limited due to the lack of strong competition since company’s products are unique and a few companies have successfully ventured into a manufacture of similar products.

Threat of Substitution

Customer sensitivity to pricing and existence of similar products in the market increases the threat of substitutes, especially in the motor industry. The main reason for this is a high rate of imitation of models and vehicle components that is common after the initial release of a product into the market. In many instances, components with almost similar prices increase the possibility of substitution. However, for Tesla Motors the threat of substitutes is low because other electronic vehicles are hybrids, which still require some amount of fossil fuel to function. Further, some of these substitutes require new forms of infrastructure, whereas Tesla vehicles are functioning well with the current grid.

Bargaining Power of Suppliers

Bargaining power of suppliers usually depends on factors such as their number and ability of a firm to produce components needed for their manufacturing processes instead of buying. In the motor industry, suppliers have moderate bargaining power. As well as in the case of buyers, they gain from the lasting relationships established with their clients. Therefore, for a company like Tesla having over 200 suppliers it is difficult to set up permanent relationships with each of its suppliers. This has led to a moderation of bargaining power whereby both parties have developed the capability to maintain reasonable levels of demand during transactions. Tesla has also moderated suppliers’ bargaining power by manufacturing some of the components individually. For example, the company has replaced Lotus Chassis with self-manufactured ones. Suppliers’ bargaining power is rather low because of the abundance of suppliers and low switching costs in the industry.

Intensity of Industrial Rivalry

Rivalry within an industry depends on the differentiation of products and the rate of growth. In the motor industry, companies differentiate products with the help of elaborate designs and production of hybrid vehicles. In the current automotive market, rivalry among competitors is high due to Tesla’s continuous growth since its inception in 2003. Company’s growth has posed a threat to existing vehicle makers like Nissan and BMW. Current trends in the industry indicate intensive rivalry in the future, which will lead to the market demand for higher levels of innovation and improved vehicle designs.

In summary, the five forces analysis has determined the degree to which certain factors affect the motor industry’s profitability. The findings show that capital intensity limits the threat of new entrants. Buyers and suppliers have limited bargaining power since they highly depend on the industry. Intense competition among companies in the industry is the most significant challenge of the market profitability.

2. SWOT Analysis

Strategic review of the SWOT analysis of the Tesla Motors Inc. will provide an in depth understanding of the factors influencing company’s business operations. SWOT analysis will aim to show a clear and unbiased perspective of company’s key strengths and weaknesses as well as its opportunities and threats. The strengths and weaknesses represent internal elements affecting the company, while opportunities and threats are external elements. In addition, gaining an insight about these four factors about the company will make it easier to grasp the complex competitive landscape the company faces. Therefore, the SWOT analysis of the electric car designer and developer is presented below.

Strengths

First, the company has an admirable skill of business execution. Although the company has been accused of breaking some of its promises regarding unveiling of some of its vehicles, it has managed to succeed in the end. The second strength of Tesla Inc. is its utilization of vertically integrated value chain to enhance its cost and quality control. This has enabled the company to maintain a balance and control of its revenues and expenditures ensuring that it remains profitable. Tesla has also cultivated a good brand perception among its clientele and potential customers increasing company’s strengths. This has differentiated the company as a reputable electric vehicle manufacture. The fact that the company specializes in the manufacture of luxury vehicles has also contributed to its reputation. The fourth strength of Tesla is its ability to produce its vehicles in house. This on-site manufacturing capability includes all the necessary sub-assemblies as well as company-owned stores. This particular strength has significantly helped the company save its costs. Another strength of the company is its position in the market as result of the first mover advantage. By being the first company to successfully venture into the electric vehicle manufacturing, Tesla established itself as a market leader within this business niche. The company retains this position to date with its ground breaking electric vehicles inventions. Other significant strengths of the company include efficient production practices, low marketing expenses, talented staff and strong technological expertise. All this strengths have helped the company gain competitive advantage over its rivals and become a market leader among not only electric vehicles, but also luxurious vehicles.

Weaknesses

Despite the above-mentioned strengths, the company has some weaknesses that hinder its success. One such weakness is its business niche in the motor industry. In particular, many people remain skeptical and suspicious about the electric vehicles. Moreover, the fact that the longevity of electric cars remains to be proven has increased the skepticism and suspicion among consumers. The second weakness refers to its manufacturing process. The fact that the company fully develops its vehicles including its sub-assemblies in house has resulted in increased costs of production. This has occurred because this method of production does not allow the achievement of economies of scale. The third weakness entails that the infrastructure of support for the electric vehicles has not been developed yet. Though the company is doing all it can including the construction of superchargers in forms of the gas stations for electric vehicles, it is not enough if these vehicles are expected to eventually become the vehicles of the future. The fourth weakness of this company is the lack of brand recognition among the general public. This may be attributed to the fact that company’s vehicles are pricy and are mainly bought by wealthy people of the society such as celebrities and rich business owners. Moreover, the fact that the company has delayed the development of a vehicle that can be afforded by the average customer has also made it difficult for the general public to reach. Tesla has very low economies of scale, which has been worsened by the size of the company and its small volumes of sales. Other company’s weaknesses include potential problems with the supply of components, high costs of rapid expansion and limited operating history given that the company is just over a decade old. All these weaknesses may hinder the future survival of the company, especially if they are not addressed in timely manner.

Opportunities

There are a number of opportunities existing in Tesla’s external environment that the company can explore to improve its product. One such opportunity is the growing support from the governments for environmentally friendly vehicles around the world. This has been pushed by an increasing climate change that is threatening the future well-being of the world. One way of these governments showing their support is the exemption of the company from its tax duties. The second opportunity available to Tesla is the depletion of oil reserves, which increases the price of fuel because of the limited supply. The result of this might be people’ transition to electric vehicles as alternatives. Another significant opportunity is people’s inclination toward the protection of the eco-system. Similar to governmental concern highlighted in the first point, the general public is also becoming more aware about the ecosystem. For this reason, the manufacture of vehicles that limit the use of fossil fuels and produce fewer pollutants is an idea that has been considered by many. Therefore, Tesla can capitalize on this new trend and manufacture more electric cars. Other opportunities include economic growth in key markets for the electric vehicles, current low interest rate, increased interest toward electric cars and improvement in quality control processes.

Threats

The biggest threat of Tesla is competition from the older industry players. Various auto manufacturers work hard to release their own versions of the electric vehicles. In addition, many of these auto producers have enough resources to duplicate the Tesla technology. These resources include sufficient finances, pre-existing production lines and enough talent. Moreover, company’s actions to grant patent rights for the manufacture of some of its components has placed it in danger of its technology being replicated by competing companies. The second threat of Tesla is high costs of production of the electric cars, which has been very difficult for the company especially during the recession experienced in 2008. Such economic difficulties limit the demand for company’s electric cars. Another relevant threat for Tesla is young people’s loss of interest in cars despite the fact that company’s vehicles are very technologically advanced and highly innovative. Other threats include company’s pricing strategy that is not very common in the auto industry, its determination to individually produce, distribute and sell, which has proven to be difficult to achieve and the length of time that combustion engines may take to obsolete.

3. Marketing Objectives

Tesla Motors Inc. has developed a number of marketing objectives that are meant to help the company manage its marketing activities and determine its success in the market. These marketing objectives have been structured in a way consistent with the overall aims and objectives of the business. Some of company’s marketing objectives are described below.

Tesla’s first marketing objective is to increase its product awareness among the public. It has come to the attention of the management team that the public has very limited knowledge about its electric vehicles and their capabilities. Some people are completely unaware of their existence. The company has identified this as a weakness and a factor that will inhibit its growth.

The second marketing objective for Tesla Motors is to reduce consumer resistance to its product. The portion of the public aware of the company’s electric vehicles is skeptical about the possibility of such vehicles. Many of them have developed a suspicious attitude toward them and doubt if they can function as well as the combustion engine vehicles. Consequently, they have become resistant to the adaptation of this type of vehicles and technology in automotive industry. Thus, the company has set a priority on this marketing objective in order to secure its success.

In addition, the company has established a marketing objective of achieving a larger market share. It has set to achieve a 40% increase of the market share within the next five years. This entails making a lot changes in all aspects of its business operations. This will also be a viable goal to achieve once the company has managed to realize its first two goals. In particular, increasing market share will only be possible once the company has spread awareness about its vehicles and has overcome public resistance.

The final marketing objective for Tesla is to increase its sales and profits. The company is aimed to sell more of its vehicles and thus, increase its profit. It has therefore adapted a number of useful techniques and strategies that will assist in this course of action. In the first place, the company has decided to improve its vehicles to ensure that they meet the needs of the customers as best as they can. The charge power for the batteries has been improved to last longer. The company has also strived to enhance the infrastructure supporting electric vehicles by building more charge stations.

4. Marketing Strategies

Tesla’s marketing strategies are highly innovative. The company has developed marketing strategies that are beyond the typical marketing strategies utilized in the motor industry. This has proven to be a smart and appropriate move given the unique nature of the product: electric automobile. Some of the most significant marketing strategies adopted by the company can be understood from the perspective of a marketing mix as explained below.

Product strategy

Tesla has strived to manufacture vehicles that differentiate the company from its competitors. For this reason, its product strategy entails developing electric cars with a sense of luxury. This is completely different from the hybrid cars producers competing with the company. This has worked well for the company as it has produced a product that completely meets the needs of its customers. This vehicle appeals to people’s eco-friendly attitude and still satisfies their desire for a luxury car.

Distribution Strategy

Tesla uses a distribution strategy that can best be described as selective. This distribution strategy is used because the company lacks a conventional distribution technique prefering to market its products in the showrooms of the malls or shopping streets. Further, customers do not buy a Tesla vehicle on site in a show room. When a customer wishes to purchase a car, reservations for the purchase must be made in advance. The company sells its products itself without involving an intermediary.

Promotional Strategy

Tesla’s has established own show rooms to present their vehicles. This marketing strategy has been executed in a highly unusual manner since these show rooms are situated in unique locations. Normally, many vehicle manufacturers place their dealerships along the main roads, which is not the case with Tesla. The electric car developer has placed its show rooms in the shopping malls. This radical change of the promotional approach has reinvented car-marketing techniques. This location has enabled company’s vehicles to be seen by thousands of people on a daily basis. In addition, the company does not advertise its products. There is no person who can claim to have seen, read or heard an ad of a Tesla car in any form of media. This is because the company has developed a strict policy for not advertising itself. For this reason, the company has no advertising agency and its marketing team is very small. This has influenced company’s unique branding, which results in free advertising that is very effective in its delivery.

Pricing strategy

The company has developed an up market niche. Right from the start, the company has developed vehicles targeting high end customers. Their vehicles are very expensive as they are mainly luxury vehicles competing side by side with brands such as Porsche and Ferrari. This has positioned the company’s vehicles as market leaders. The basic Model S is priced at $ 71,070 USD. In some states, the incentives for the company’s cars range from $9000 to $500USD. This pricing strategy has proven to be beneficial as it has hit the company’s target market of younger, wealthier individuals.

5. Marketing Implementation

Following the development of the marketing plan for Tesla, it is company’s imperative to develop an efficient marketing implementation procedure. For this marketing plan, the marketing implementation procedure can be organized as follows.

First, the company should evaluate and prioritize the objectives of the marketing plan and set in place a realistic time frame for its implementation. Evaluating the marketing plan is essential as it will help the company find a clear method of prioritizing the objectives of the plan. When these objectives have been prioritized a clear time frame can then be established. This time frame should clearly state how long the implementation should last and when everything must be done. The second step in the implementation of the marketing plan is communicating it to the concerned stakeholders. This will be essential in securing their support for the realization of the plan. The third step is aligning the budget of the implementation process with the overall goals of an organization. Once it is implemented, the company should establish a system for tracking and monitoring the plan.

During the process of implementing the plan, it is significant for the company to remember some concepts. One such concept is facts. This addresses the aspect of who, where, when, and how necessary to reaching the goals and objectives of the company in its motor business. Another relevant concept to remember is the implementation phase of the marketing plan usually translates into important policies and procedures for other important areas of the organization like procurement, research and development, and production.

6. Evaluation and Control

Following the implementation of the marketing plan, it is crucial for the company to ensure it is still contributing to the overall marketing objectives set through the process of evaluation and control. This can be achieved in the following ways.

Firstly, the company should analyze its sales. If the results of the analysis show that sales increase, then the company is doing well. On the other hand, if they decrease, then the marketing plan is failing and there is a need for a change. The second thing necessary to do is ask for customers’ feedback. This is imperative to provide the company with an opportunity to receive insights from customers’ perspectives. The third thing needed to do is the assessment of the company’s ROI. This will involve checking if the money put in the marketing plan has resulted in profit. If Tesla has generated profit, it is an indicator that company‘s marketing plan has been a success. If this is not the case, it implies that the plan has failed and there is need to make a change. Finally, the company should asses the response of its competitors in order to see whether the marketing plan has been a success or a failure. In this case, if competitors are struggling to copy company’s marketing strategies, it indicates that the plan has been a success.

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