11/4/2019 Tesla, Inc.

’s Generic Strategy & Intensive Growth Strategies (Analysis) - Panmore Institute

P a n m o re I n s t i t u te

BUSINESS, MANAGEMENT

Tesla, Inc.’s Generic Strategy & Intensive Growth

Strategies (Analysis)
UPDATED ON JUNE 24, 2018 BY CHRISTINE ROWLAND

Tesla, Inc. (formerly Tesla Motors, Inc.) applies its generic

strategy to achieve competitive advantage against other
rms in the global automotive industry. In Michael Porter’s
model, a generic competitive strategy represents the
company’s approach to competing in the market. In this
business analysis case of Tesla, the generic strategy
re ects the company’s focus on using advanced
technologies in its electric vehicles and related products,
as a way of competing against General Motors Company,
Toyota Motor Corporation, Honda Motor Company, Nissan
Motor Company, Bavarian Motor Works (BMW), and
A Tesla Roadster in 2011. Tesla, Inc.’s (formerly Tesla Motors,
Volkswagen, among other automobile manufacturers.
Inc.) generic competitive strategy (Porter’s model) and intensive
growth strategies emphasize the signi cance of product Aside from the generic competitive strategy, a company
development and expansion in the automotive industry. (Photo: uses intensive strategies to ensure business growth. This
Public Domain) company analysis case shows that Tesla Inc.’s intensive
growth strategies gradually evolve. Such an evolution is a
re ection of the company’s increasing popularity and improving pro tability, along with the business strengths
identi ed in the SWOT analysis of Tesla Inc. Strategic adjustments, over time, ensure the corporation’s resilience in
the face of technological advancement and changing customer preferences.

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Tesla’s generic strategy (Porter’s model) enables the company to maintain competitive advantage, and attract
early adopters in the global automotive market. The corresponding intensive strategies support organizational
growth based on increasing sales revenues from current markets where Tesla, Inc. operates. The matching of the
intensive growth strategies with the generic competitive strategy contributes to the company’s operational
effectiveness.

Tesla’s Generic Strategy (Porter’s Model)

Tesla’s generic competitive strategy is broad differentiation. This generic strategy builds competitive advantage
based on the development of products that differentiate the company from other rms in the industry. For
example, Tesla Inc.’s products are competitive because they integrate advanced environmentally friendly
technology, considering that the vast majority of automobiles today use internal combustion engines. In using this
generic competitive strategy, the company broadly attracts all potential customers, who are now increasingly
interested in environmentally friendly products. Initially, Tesla used differentiation focus as its generic strategy
for competitive advantage. In applying the differentiation focus strategy, the company emphasized the
uniqueness of its products, but also focused mainly on early adopters in the high-end market for electric vehicles.
These early adopters are af uent customers who have a high tendency to purchase newly introduced products.
However, now that the company is already popular and production costs are declining, Tesla’s generic competitive
strategy has shifted to broad differentiation. The declining production costs and increasing brand popularity
enables the company to broadly target customers in the automobile market.

The generic strategy of Tesla, Inc. requires suitable strategic objectives to ensure competitive advantage. For
example, one of the company’s strategic objectives is to increase investment in research and development (R&D)
to develop new products that satisfy market demand for enhanced renewable energy solutions, such as batteries
for various purposes. Another strategic objective connected to Tesla’s generic competitive strategy is to
strengthen competitiveness by broadening its market reach to generate more sales and support brand popularity.

Tesla’s Intensive Strategies (Intensive Growth Strategies)

Market Penetration (Primary Strategy). Tesla, Inc. uses market penetration as its current primary intensive
growth strategy. This intensive strategy enables business growth by increasing sales revenues in current markets.
For example, with aggressive marketing, the company aims to rollout and sell more of its electric cars in the United
States. In this way, the corporation maximizes its revenues from the markets where it currently operates. This
intensive growth strategy relates with Tesla’s generic strategy by developing competitive advantage based on
increased market share. A strategic objective based on this intensive strategy is to grow the company’s sales
revenues through aggressive marketing.

Product Development (Secondary Strategy). Product development is Tesla Inc.’s secondary intensive growth
strategy. In this intensive strategy, the company grows by developing new products that generate new sales. The
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company applies this strategy
For GDPR by
compliance, wedeveloping new products
do not use personally with
identi able advanced
information technologies
to serve ads in the EUfor
andminimal
the EEA. environmental
impact. For example, the company
See our Privacy offers
Policy page to ndsolar panels,
out more aboutand developed
cookies the
or to switch Tesla
them off. Roadster, which was the world’s

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11/4/2019 Tesla, Inc.’s Generic Strategy & Intensive Growth Strategies (Analysis) - Panmore Institute

rst fully electric sports car. This intensive strategy supports Tesla Inc.’s differentiation generic competitive
strategy by focusing on unique high-technology automobiles and related products that attract target customers.
In relation, a strategic objective for this intensive growth strategy is to maintain extensive investments in research
and development (R&D).

Market Development. Tesla, Inc. uses market development as a tertiary intensive growth strategy. This strategy
involves entering new markets to generate more sales and grow the global business. For example, the company
gradually expands its market reach worldwide by establishing new of ces and facilities. At present, the company
sells in only a handful of countries, but further international expansion is expected. This intensive strategy
supports Tesla’s mission and vision statements, which highlight global leadership in the automotive industry, with
energy solutions for the transportation and other sectors. The differentiation generic strategy enables market
development by creating unique products that attract customers when the company enters new markets. Based
on the market development intensive strategy, a strategic objective is to grow Tesla Inc.’s multinational business
by establishing alliances with other companies that make it easier to enter new markets.

Diversi cation. Tesla applies diversi cation, but only as a minimally signi cant intensive growth strategy. This
intensive strategy helps grow the company through new business creation. For example, the rm aims to create
new battery products for a variety of non-automotive applications. However, this intensive growth strategy
currently has insigni cant effects on the company’s nancial performance. Tesla focuses most of its efforts on
market penetration and product development to grow its automotive and energy solutions businesses. The
company can apply the differentiation generic competitive strategy to increase the likelihood of success in using
this intensive growth strategy. A strategic objective linked to diversi cation is to increase Tesla’s R&D investment
to identify new business opportunities. Another strategic objective based on this intensive strategy is to acquire
other rms or enter joint ventures to develop entirely new products.

References

Corsten, H., & Will, T. (1994). Simultaneously supporting generic competitive strategies by production
management: supportive concepts of information technology and work organization. Technovation, 14(2), 111-
120.
Dess, G. G., & Davis, P. S. (1984). Porter’s (1980) generic strategies as determinants of strategic group
membership and organizational performance. Academy of Management Journal, 27(3), 467-488.
Glazer, R. (1999). Competitive Advantage Through Information-Intensive Strategies. Handbook of Services
Marketing and Management, 409.
Merchant, H. (2014). Con gurations of governance structure, generic strategy, and rm size. Global Strategy
Journal, 4(4), 292-309.
Miller, D. (1992). The generic strategy trap. Journal of Business Strategy, 13(1), 37-41.
Musk, E. (2016). Master Plan, Part Deux. Tesla, Inc.
Ormanidhi, O., & Stringa, O. (2008). Porter’s model of generic competitive strategies. Business
Economics, 43(3), 55-64.
Parnell, J. A. (1997). New evidence in the generic strategy and business performance debate: A research
note. British Journal of Management, 8(2), 175-181.
Tanwar, R. (2013). Porter’s generic competitive strategies. Journal of Business and Management, 15(1), 11-17.
Tesla, Inc. – Form 10-K.
Tesla, Inc. – Solar Panels.
Varadarajan, P., & Dillon, W. R. (1982). Intensive growth strategies: A closer examination. Journal of Business
Research, 10(4), 503-522.

TA G S :   A U T O M O B I L E I N D U S T R Y , A U T O M O T I V E I N D U S T R Y , C A S E S T U D Y & C A S E A N A LY S I S , G E N E R I C
S T R AT E G Y ( P O R T E R ' S M O D E L ) & I N T E N S I V E G R O W T H S T R AT E G I E S , S T R AT E G Y , T E S L A I N C . ( T E S L A
M OTO R S I N C . )

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