Will Tesla turn the Whole Automotive Industry Upside Down? An Analysis of the International Marketing Activities of Tesla


Term Paper, 2017
25 Pages, Grade: 1,0

Excerpt

Table of Contents

List of Abbreviations

List of figures

1 Introduction
1.1 Problem and Target of the Paper
1.2 Structure

2 Tesla
2.1 About the Company
2.2 The Role of Elon Musk

3 International Marketing & Sales Strategies
3.1 Definition of International Marketing
3.2 Market Entry Strategy
3.2.1 Contract Manufacturing
3.2.2 M&A-Strategy
3.3 Market Segmentation
3.4 Positioning
3.5 Unique Selling Proposition
3.6 Timing Strategy
3.7 Standardisation vs. Differentiation

4 Marketing Mix
4.1 Product
4.2 Price
4.3 Promotion
4.4 Place

5 Conclusion

References

List of Abbreviations

illustration not visible in this excerpt

LIST OF FIGURES

Figure 1: Distribution Channels

1 Introduction

1.1 Problem and Target of the Paper

More than 130 years ago, the combustion engine had been invented (Gupta, 2013). Today, incumbent automobile manufacturers still mainly use this engine to drive a vehicle. But after such a long time of no change, vehicle manufacturers are nowadays at a crossroads and have to face considerable challenges. Being dependent on gasoline-powered combustion engines as the primary automobile powertrain technology causes various negative aspects: It raises environmental concerns and even issues, creates heavy reliance among industrialized and developing nations on imported oil and it also suspends consumers to volatile fuel prices (Larminie & Lowry, 2003). All these challenges offer a great opportunity for companies trying to introduce new, innovative ways to drive a car.

Tesla is a young company trying to start off the next technological era of the car industry by producing innovative electric powertrain technologies and their own electric cars (Tesla, 2017a). This is one reason why the company can be considered to be different than traditional car manufacturers and it indicates that they need to build a lot of trust in order to sell their products.

Therefore, this paper will focus on the company's international marketing activities in order to find out why Tesla is considered to be different. Moreover, the objective of this assignment is to find out if and how Tesla is establishing confidence among its potential customers. In this work, the focus will be on Tesla's vehicles as this is the company's main product. Certainly, in some parts of this paper other products will also be mentioned to convey a comprehensive understanding of the company's activities.

1.2 Structure

As a first step, this paper will introduce the company Tesla and briefly comment on its history and mission. Furthermore, the role of Tesla's CEO will be discussed. Afterwards, the international marketing and sales strategies of the company will be analysed. For this purpose, the term International Marketing will be explained in order to provide an understanding of what this paper is dealing with. Then, different strategies will be examined more precisely with regard to Tesla. This includes the Market Entry and Market Segmentation Strategy, Positioning and Timing Strategy, Tesla's Unique Selling Proposition and the question, whether Tesla's products are standardised or differentiated. The following chapter is dealing with the marketing mix. After a short explanation of what this is, Tesla's marketing activities will be explored with respect to the variables of the marketing mix. Finally, all information will be brought together and shortly summarised. Therefore, this paper is going to provide an overview of Tesla and its marketing activities on an international level.

2 Tesla

2.1 About the Company

Tesla, inc. is an American company that was founded by two engineers in Silicon Valley in 2003 (Tesla, 2017a). One year later, Elon Musk (CEO of Tesla) invested in Tesla, became chairman of the board and developed Tesla into what it is today: A company acting on an international level (Vance, 2016). Musk founded and also invested in a few companies developing different technologies, thus he is known as an innovative entrepreneur of our time (Hrachowy, 2016).

With Tesla, Elon Musk is sharing a unified mission: To expedite the conversion to sustainable energy. Convinced, that electric cars would outclass gasoline-powered cars, his vision is to build uncompromising high performing cars without any emissions but with incredible power. To get closer to accomplishing the mission, the aim of Tesla is to reduce the acquisition price with every new model they build. Tesla's first car was launched in 2008. It is powered by an alternating current induction motor, which has been patented by the inventor Nikola Tesla. Inspired by Nikola's invention, the founders of Tesla named their company after him.

By now, Tesla designs, manufactures, develops and sells several models of electric vehicles addressing different target groups. Moreover, they produce stationary energy storage systems worldwide. Therefore, Tesla is not only an electric vehicle manufacturer anymore. Instead, they go even further to forward the transition from combustion towards solar and electrical technologies (Tesla, 2017a).

Tesla acquired Solar City and renamed their company from Tesla Motors into Tesla to underline their willingness to accomplish their mission of converting into sustainable energy and not just building cars (Higgins, 2016; Fiegerman, 2017).

2.2 The Role of Elon Musk

An important part of Tesla's success is Elon Musk in person. His entrepreneurial background and his proven past show that he is able to build large and scalable businesses (Vance, 2016). This helps him to convince investors, such as Ron Baron, to support him on his mission (Belvedere, 2016). A few years after selling PayPal, Elon Musk is CEO of Space X, Solar City, Hyperloop and Tesla (Guldner, 2015; Deutsche Presse-Agentur, 2016; Vance, 2016). All of his companies are focusing on building a market that did not really exist before.

A very unique characteristic of Tesla is that Elon Musk stands behind his company and its products as a symbolic figure (Bratzel, 2016). In comparison to traditional automotive companies Elon Musk is not just a hired manager, but the face behind Tesla.

A few days ago, a German Tesla owner intentionally hit another car and damaged his car by driving into a car of an unconscious driver to safely stop the uncontrolled car and thus save the life of this person. Elon Musk noticed this incident in Germany and announced that he will cover all costs arising for repairing the Tesla Model S in appreciation of this heroism (Spiegel Online, 2017; Aust, 2017).

This reaction of Elon Musk shows his attachment to his customers and how much he appreciates them, even across borders and not only in America. Elon Musk is acting like this in many situations and worldwide. His Twitter Profile reflects the importance of Tesla's customers and that their wishes and needs are paramount. Musk is paying attention to many customers and gives answers to their questions. His experiences and professional background, his way of presenting new products and his proximity to his customers help him to gain trust from customers and investors (Vance, 2016).

3 International Marketing & Sales Strategies

3.1 Definition of International Marketing

To define international marketing, it is best to start with a definition of marketing itself. The American Marketing Association (AMA, 2013) describes marketing as “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.“ This value can be created by anticipating, identifying and satisfying the wants and needs of individuals and groups (Chartered Institute of Marketing, 2015; Kotler & Armstrong, 2016). Therefore, marketing is a market-orientated way to manage the activities of a company based on customer needs in order to achieve the company's objectives (Runia, Wahl, Geyer & Thewißen, 2015). In other words, marketing is a tool to build a relationship with the customer and includes every activity aiming at satisfying the demand of potential customers (Brady, 2015).

International marketing extends the idea of marketing with a multinational dimension. This means that international marketing activities are conducted in many countries or at least more than one country and need to get coordinated (Srinivasan, 2008). This implies international marketing differing from (national) marketing, because it involves crossing national boundaries. Consequently, international marketing also includes every action that is done to satisfy customers, but the customers are located in external countries (Brady, 2015).

3.2 Market Entry Strategy

As already mentioned, Tesla's mission is to expedite the conversion to sustainable energy (Tesla, 2017a). This is not possible if they only sell luxury products with a high price to a specific target group and a specific country. Instead, an electric car by Tesla should be affordable for everyone worldwide. This is why Tesla offers different products addressing different target groups. Elon Musk introduced this concept as his Master Plan: The first step to enter the electric vehicle market was building high cost and low volume sport cars, such as Tesla S and Tesla X. These models were built in order to earn money that can get invested into product innovation and developing a car which is affordable for a larger target group (Musk, 2006). In conclusion, buyers of the expensive premium models have financed Tesla's business model and supported Musk regarding his mission. At this point it is important to mention that right from the beginning of selling the first car, everyone in the world could purchase it online and get it delivered into his hometown (Tesla, 2011).

At Tesla's event of unveiling the new model 3, which is supposed to be the affordable car the money was needed for, Elon Musk said thank you to all his customers for being part of the mission and supporting by buying his premium cars (Tesla, 2016a).

The electric vehicle market is still new and Tesla has taken its place in the market at an early stage (Larminie & Lowry, 2003). Therefore, Tesla knows even if the market develops faster and more companies are going to create and sell electric cars, Tesla will always be able to grow even faster, because in contrast to other automotive manufacturers they only build electric vehicles and thus will always be a step further than their competitors which also have to focus on optimising their combustion engine to retain their customers (Musk, 2014; Bratzel, 2016). To show this confidence and to clarify their mission to accelerate the conversion to sustainable energy, Tesla made patents available open source (Musk, 2014). Musk (2014) explains, that everyone would avail oneself of a shared, fast developing platform providing technology.

To grow new markets, it is required to establish new ways of thinking and to go different ways. To grow the electric vehicle market, Tesla and also all other manufacturers need batteries on scale. Certainly, the world production of batteries is insufficient and the technology not good enough for Musk's high standards. This is why Elon Musk decided to build his own and the world's biggest factory developing and building enough batteries for the world (Tesla, 2016b).

Those massive moves of Tesla are great regarding their international marketing perspective. Tesla is not just talking about a big story, instead they translate promises into action. Press and social media do not stop talking about recent actions and next big steps Tesla is going to take to coming a little closer to accomplishing their mission.

3.2.1 Contract Manufacturing

In order to be prepared for massive growth, Tesla decided not to develop and produce every single piece of the car on their own. Instead, they benefit from the industry and the ecosystem of manufacturers by getting other companies involved and letting them develop and produce parts of the car (Maverick, 2015). This does not only support Tesla in case of massive demand and making the business more agile and the production cheaper, but also makes it possible for Tesla to focus on the parts they do best. This is necessary when they want to keep their promise of building and selling premium electric sedans at pace.

3.2.2 M&A-Strategy

To be able to even grow and produce even faster and cheaper, Tesla decided to also take the risk of acquiring companies. They decided to merge with firms such as Grand Rapids, Riviera Tool and Grohmann Engineering (Bomey, 2015; Tesla, 2016c). The latter company is German, thus Tesla's M&A Strategy enabled and supported Tesla to cross borders. These manufacturers have also been acquired to obtain more control over delivery speed and the price of needed car components (Tesla, 2016c).

Tesla is in need of production lines for their components and processes, such as batteries or assembling. Therefore, they have also bought a robot company to expedite their car manufacture even further (Covert, 2016).

One of the latest acquisitions was SolarCity, which is a company of Musk. They decided to merge those companies, to strengthen their overall mission to convert into sustainable energy (Tesla, 2016d).

3.3 Market Segmentation

Segmentation stands for identifying the right target countries and target consumers. In this context right means addressing people and markets that “would respond to a product and related marketing mix” (O'Riordan, 2016, p. 295).

Elon Musk's Master Plan reveals their segmentation process. With Model S, Tesla wanted to start selling to people that do have the money to buy an expensive electric sports car (Musk, 2006). This restricts the target group, because mainly people with a high income would be able to afford such an expensive car and they are probably around middle-aged or older.

With Model X, Tesla's sport utility vehicle (SUV), the company started to focus on families, too. Tesla X can have up to 7 chairs. In this way it is a car that is suitable for big families. (Tesla, 2017b).

A few years later there was supposed to be a Tesla model that is affordable for everyone and therefore it arises an additional, bigger target group (Musk, 2006). The model 3 is the first car that is significantly cheaper and thus affordable for more people (Tesla, 2016a).

This shows, that Tesla does not want to focus on a specific target group. They build different models addressing different target groups, but every person should be addressed by at least one model. This plan goes well with Tesla's mission, because having different models addressing every driving person, better helps expediting the conversion to sustainable energy.

Furthermore, a Tesla car can be purchased online by everyone through the company's website worldwide (Tesla, 2017c). But having a closer look at the countries, in which Tesla has placed a store, gives a better understanding of Tesla's geographic and demographic segmentation (Tesla, 2017d). Tesla started selling locally in the USA in 2008 (Tesla, 2017a). Since then, everyone in the world was able to purchase a Tesla online, even if there was no store in his country (Tesla, 2011). In 2010 they opened their first store in London, thus crossed borders and expanded into Europe (Tesla, 2010a). Within the same year, they opened their first store in Asia or more precisely in Tokyo. Japan is the origin of Toyota (Patrascu, 2010). In 2010, Tesla also expanded to Switzerland (Tesla, 2010b). Six years later, Tesla started their activities in Spain (Tesla, 2016e). These are just a few examples of Tesla's expansion into other countries, they have a lot more stores and also entered more countries (Tesla, 2017d). It seems like Tesla chooses rather rich countries that are also well-developed regarding infrastructure (Jakobs, 2013; Statista, 2016; Ulrich, 2016). Lastly, they do not have stores in poor, developing countries. Nevertheless, everyone can purchase a Tesla online and Tesla will import it into the city where the buyer lives (Tesla, 2017c).

[...]

Excerpt out of 25 pages

Details

Title
Will Tesla turn the Whole Automotive Industry Upside Down? An Analysis of the International Marketing Activities of Tesla
College
University of Applied Sciences Essen
Grade
1,0
Author
Year
2017
Pages
25
Catalog Number
V374948
ISBN (eBook)
9783668522695
ISBN (Book)
9783668522701
File size
505 KB
Language
English
Tags
International Marketing, Marketing Activities, Tesla, Analysis of Marketing Strategy, Marketing Strategy, Internationale Marketingstrategie
Quote paper
Anna Rüttger (Author), 2017, Will Tesla turn the Whole Automotive Industry Upside Down? An Analysis of the International Marketing Activities of Tesla, Munich, GRIN Verlag, https://www.grin.com/document/374948

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