Marketing Report on "Tesla Motors"

Marketing Audit, Segmentation & Targeting Analysis and Analysis of Product/Brand Strategy and Positioning


Term Paper, 2015
20 Pages, Grade: 1,3

Excerpt

Table of content

Introduction

I. Marketing Audit
Analysis of the external marketing environment
Political
Economic
Social
Technology
Environment
Legal
TM’s opportunities and threats
Analysis of the internal marketing environment
TM’s strengths and weaknesses

II. Analysis of TM’s segmentation and targeting strategy
TM’s market segmentation
TM’s target markets and targeting strategy
How essential is the targeting strategy for TM?

III. TM’s Product/Brand strategy and Positioning Analysis
TM’s product strategy
Product life-cycle
Positioning and Brand Strategy

Conclusion

References

Appendices

Executive Summary

This marketing report is about Tesla Motors (TM), a young American company founded in 2003 in Silicon Valley, who is specialised in manufacturing high performance premium electric vehicles and vehicle powertrain engineering.

The analysis of TM’s external marketing environment illustrates that tax incentives promote the use of EVs and thus demand for TM’s products. Moreover, the economic factors such as fuel prices, raw material prices and volatility in exchange rates of USD against EUR, have a significant impact on sales and profitability. Increasing awareness of climate change and sustainable environment boosts customers’ demand and makes the EV market more attractive for TM however range anxiety still hinders further demand. Advancements and R&D in technology are important to improve the charging network which may reduce range anxiety. Safety regulations determine TM’s whole manufacturing processes and intellectual property secures successful factors of TM. Tesla’s ‘Gigafactory’ is a major opportunity to reduce production costs and increase capacity of battery packs, making TM more competitive. However, threats such as increasing material costs and increased competition in the EV market exert more pressure on TM’s competitiveness.

The analysis of TM’s internal market environment shows that TM’s strength is relying on its powertrain engineering and innovative product development, exclusive product design, unique customer service and brand reputation, which are TM’s core competencies and thus difficult for competitors to imitate. TM’s human resources, in-house capabilities and unique know-how secure TM’s competitive advantage and thus strong competitive position and brand perception. However, the recent PR crisis in 2013 weakened TM’s financial situation due to falling share price and thus marketing activities and future investments were negatively affected.

TM’s market is the EV market which is segmented by geographic, demographic, socioeconomic, psychographic and behaviour variables. TM targets families, the high-end market and the price sensitive market in future. It utilises the differentiated marketing approach by offering different products for different target markets. This differentiated marketing strategy enhances TM develop better knowledge over customers and identify specific needs and preferences of each single target markets making it possible for TM to increase satisfaction and customer loyalty. The targeting strategy enhances TM to differentiate from other competitors more and thus improves TM’s competitiveness, differentiation strategy and competitive advantage.

TM’s product strategy to extend and deepen its product lines lowers development costs. Moreover, if the line extension is successful, it will attract new customers and bolster the brand. However, if the product is not successful, it will also influence brand perception and perception of other products . TM’s products move in different stages in the product life-cycle and own different strategies contributing to TM’s growth. Introducing new products helps TM to manage the movements of its products through the market. Developing strategies may help to balance possible declining sales of Model S in future. New product development makes TM still competitive and increases TM’s technical and organisational knowledge which leads to better innovations and improved core competencies. TM’s brand and positioning analysis using a perceptual map illustrates that TM’s Model S is the EV with the highest performance in the EV market, putting TM in a very competitive position.

Introduction

This marketing report focuses on Tesla Motors (TM), a young company specialised in manufacturing high performance premium electric vehicles and vehicle powertrain engineering which was founded in 2003 in Silicon Valley. With TM’s first launch of its Model S in 2012, it introduced “the world’s first premium electric sedan” which brought TM on its successful way into the EV market (Tesla Motors, 2015b). TM follows its mission “to accelerate the world’s transition to sustainable transport” (Tesla Motors, 2015a) and goal “to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible” (Tesla Motors, 2015b). TM stands for high performance, sustainable transportation and exclusive service which are also TM’s values (Tesla Motors, 2015a).

I. Marketing Audit

Analysis of the external marketing environment

Political

The USA grants a federal income tax credit up to $7,500 and tax incentives (Fuel Economy, 2015). Furthermore, the UK provides a grant up to £5,000 (Tesla Motors, 2015) in order to increase demand for EVs. Governments are increasingly investing in infrastructure, thus expanding the charging network and reducing range anxiety (AEA, 2009). All these incentives are attractive for TM to sell its products in these markets.

Economic

TM is mainly exporting its products to Europe therefore volatility in foreign exchange plays an important role. The USD is currently appreciating against the EUR (Appendix 2) leading to more expensive exports thus hindering growth in exports and sales (Davidson, 2015). Low oil prices (Appendix 3) exert pressure on the EV market as price sensitive consumers may adopt cheaper conventional vehicles leading to decreasing demand (RT, 2015). Fluctuations in raw material prices (Appendix 4) may increase TM’s production costs, having a significant impact on profitability (Tesla Motors, 2014).

Social

Increasing awareness of sustainable environment is a major reason for drift towards buying EV (AEA, 2009). Markets of TM consist of premium consumers who are less price sensitive (Tesla Motors, 2014), seeing TM’s vehicles as a prestige and part of their lifestyle (KPMG, 2014). However, range anxiety due to an insufficient expanded charging network and low battery range is still widespread thereby inhibiting further demand (ICCT, 2012).

Technology

The EV industry is highly dependent on advancements and R&D in technology, which are essential for improving the charging network, being currently deficient and also for innovations which help EV manufacturers to be more competitive (McKinsey & Company, 2013).

Environment

Climate change is a main driver towards adopting EV as they reduce CO2 emissions and prevent environmental damages. Furthermore, it increases awareness of sustainable environment among consumers boosting demand for EV (Go Electric Drive, 2015).

Legal

Safety regulations play an important role as they determine the whole manufacturing processes and composition of products of EV manufacturers. Moreover, intellectual property is vital for the position of competitiveness and for securing factors contributing to the success of companies (Welch, 2012).

TM’s opportunities and threats

The ongoing trend of being more aware of sustainable environment provides profitable opportunities for TM to grow further. TM plans to expand its Tesla Supercharger Network to decrease range anxiety. Furthermore, TM is currently building the ‘Tesla Gigafactory’ (Tesla Motors, 2015d) which reduces production costs and increases capacity of battery packs, equipping TM’s vehicles with a longer range. TM is planning to sell the Model 3 in 2017 for half the price than other models of TM which will make TM more able to compete with lower price ranged electric or hybrid vehicle manufacturers such as Hyundai.

However, increasing material costs and foreign exchange volatility have an important impact on production costs and selling price. The increased competition in the alternative fuel vehicle market by other premium vehicle manufactures like BMW exerts more pressure on the TM’s competitiveness (Tesla Motors, 2014).

Analysis of the internal marketing environment

TM’s strengths and weaknesses

TM’s core competencies (Prahalad and Hamel, 1990) are its powertrain engineering and innovative product development, exclusive product design, unique customer service and brand reputation which are difficult for competitors to imitate.

TM’s human resources are important for pursuing TM’s marketing plan and are one major contributor to TM’s differentiation strategy, building exclusive premium EVs supported by TM’s in-house capabilities and unique know-how. Furthermore, TM’s sales (See Appendix 6) are growing leading to higher revenues thus being more able to conduct essential investments and implement marketing plans. TM’s owned service network and direct selling creates an extraordinary customer service leading to increasing brand perception (Tesla Motors, 2014).

However, TM is dependent on raw material suppliers and Panasonic for delivering essential battery cells. Range anxiety and price sensitivity are still barriers for TM to growth in the EV market. The recent PR crisis in 2013 (Tesla Motors, 2013) dropped the share price (Woolley and Steverman, 2015) which decreased total return and increased financial losses (Appendix 5+6) thus affecting funding for marketing activities and future investments. TM is still struggling with its insufficient expanded Tesla supercharger network (Tesla Motors, 2015).

illustration not visible in this excerpt

Figure 1: SWOT-analysis of TM, compiled by author based on Tesla Motors, 2014

II. Analysis of TM’s segmentation and targeting strategy

TM’s market segmentation

TM’s market is the EV market which is segmented by geographic, demographic, socioeconomic, psychographic and behaviour variables.

Geographic segmentation:

The EV market is predominantly present in areas where the infrastructure is highly developed and expanded and where spending on charging networks is high (IEA, 2013).

Demographic segmentation:

Family size determines the manufacturing and development of EV cars as it also determines the type of target markets in this market (ICCT, 2014a).

Socioeconomic segmentation:

Consumers have a high level of income and are mostly highly educated about consequences of climate change and pollution (Bevis et al, 2013).

Psychographic segmentation

Interest in being eco-friendly and sustainable transportation play an important role. Consumers are willing to pay more for eco-friendly vehicles and want to reduce pollution (Bevis et al, 2013).

Behavioural segmentation:

Price-sensitivity among consumers, perceived benefits about quality, safety and performance are widespread in this market and determine the R&D and customers service of EV manufacturers (Todd et al, 2013).

TM’s target markets and targeting strategy

illustration not visible in this excerpt

Figure 2: TM’s target markets, compiled by author based on Tesla Motors, 2014, LeBeau, 2013, AEA, 2009, Korosec, 2013

Target market 1

TM focuses on males (83.9%) and business executives. The majority is between 45-64 years old. 77.3% have an income over $100,000 and are considered to be wealthy and in the upper-middle class (LeBeau, 2013). They are less price sensitive, seeing TM’s vehicles as a prestige and part of their lifestyle (KPMG, 2014) and focus on luxury premium cars which are fast, save and eco-friendly. Extraordinary service, performance and brand reputation are also important (Tesla Motors, 2014).

Target market 2

TM targets families by selling the Model S and X equipped with seven seats, which offer big space for families (Tesla Motors, 2014). The offer of these models is attractive for family trips and holidays.

(Future) Target market 3

TM is planning to sell the Model 3 in 2017 for half the price than other models of TM (Tesla Motors, 2014), thus targeting the more price sensitive segment in future. This enhances TM to be present in the mass market and able to compete with lower price ranged electric or hybrid vehicle manufacturers (Korosec, 2015).

How essential is the targeting strategy for TM?

TM focuses on more than one target market and utilises the differentiated marketing approach by offering different products for different target markets. TM employs a separate marketing mix for more than one targeted segment. It is essential to construct specific target markets, making possible for TM to identify countries or where TM can exploit its strengths and competitive advantage best (Tesla Motors, 2014). The differentiated marketing strategy helps TM to identify specific needs and preferences of the single target markets, making it possible to boost customer loyalty and satisfaction. The targeting strategy enhances TM to differentiate itself from other competitors (Hartung, 2013).

III. TM’s Product/Brand strategy and Positioning Analysis

TM’s product strategy

TM’s line extension involves selling the Model S, Model X and Tesla Roadster (Tesla Motors, 2014). Furthermore, TM has decided to deepen the product line of Model S by developing the Model D (Davies, 2014). TM’s line extension saves costs as it would be more expensive if TM would introduce a completely new product. Moreover, if the line extension is successful, it will attract new customers and bolster the brand.

However, if the product is not successful, it will also influence the brand perception and perception of other products (Wood, 2013).

Product life-cycle

illustration not visible in this excerpt

Figure 3: Product life-cycle (Kotler & Armstrong, 2011)

Product development stage

TM’s Model 3 is in the product development stage and will be sold at a lower price in 2017. This new product development is expected to enable TM to compete with lower price ranged electric or hybrid vehicle manufacturers in future and thus may gain higher market shares. The production costs are much lower than TM’s other models as it is produced in the ‘Gigafactory’ (Tesla Motors, 2014).

[...]

Excerpt out of 20 pages

Details

Title
Marketing Report on "Tesla Motors"
Subtitle
Marketing Audit, Segmentation & Targeting Analysis and Analysis of Product/Brand Strategy and Positioning
College
Kingston University London
Grade
1,3
Author
Year
2015
Pages
20
Catalog Number
V341484
ISBN (eBook)
9783668323858
ISBN (Book)
9783668323865
File size
1364 KB
Language
English
Tags
Marketing, Strategie, Produktmarketing, Brand Strategy, Positioning, Segmentation, Tesla Motors, EV Market, Produktlebenszyklus, SWOT-Analyse, STEP Analyse, PESTEL Analyse, Externe Unternehmensanalyse, Interne Unternehmensanalyse, Elektrofahrzeug, Marktanalyse
Quote paper
Aylin Kadriye Tansel (Author), 2015, Marketing Report on "Tesla Motors", Munich, GRIN Verlag, https://www.grin.com/document/341484

Comments

  • No comments yet.
Read the ebook
Title: Marketing Report on "Tesla Motors"


Upload papers

Your term paper / thesis:

- Publication as eBook and book
- High royalties for the sales
- Completely free - with ISBN
- It only takes five minutes
- Every paper finds readers

Publish now - it's free