Marketing Management Business model and Infrastructure

Question: Discuss about the Marketing Management for Business model and Infrastructure. Answer: Introduction Tesla Motors is an automotive and energy storage enterprise founded in 2003. Its headquarters is based in Palo Alto, California, United States. The company was established by a team of engineers named JB Straubel, Martin Eberhard, Ian Wright, Elon Musk and Marc Tarpenning. They build this company to show to the world that cars run by electricity are much more efficient than the cars run by gasoline. The firms mission is accelerating the transition of the world to sustainable transport. This firm is involved in designing, manufacturing and marketing battery electric vehicles, battery packs made of lithium ions and components of electric vehicle powertrain. The firm has flourished from a single retail store where the vehicles are used for marketing in the year 2008 to a total of 18 stores in at least 30 countries. From 2008 onwards, the firm has sold a total of 1650 Tesla Roadsters globally with a price tag of $109,000. By the year 2013, it has a global market share of 2% in the luxury sedan segment (Motors, 2015). Teslas main goal is increasing the number of battery electric vehicles to the consumers in three different ways. First step is by selling the vehicles through its vast network of showrooms owned by the company and also through online. The second is selling the components of the electric powertrain which have patent rights to different automakers to arouse interest so that they buy more battery electric vehicles. The last one is acting as a catalyst and setting an example to the people about the importance of driving which is fun and also socially responsible to the society (Mangram, 2012, pp. 289-312). The main strategy of this firm is to initially create a market base by selling its Roadster model. After that they will launch the Model S Sedan with a base price of $57,000 and by the year 2015, they will build Tesla BlueStar at a price tag of $30,000 that could capture the middle class consumers. Product Analysis Tesla has launched some models like the Tesla Roadster, Tesla Model S and Bluestar targeting the premium consumers to the middle class consumers. An analysis of the products has been discussed below. The first one is Tesla Roadster. It comes at a price of $109,000. It is a high performance electric sports car which can drive upto 250 miles. This car uses a lithium-ion polymer battery pack. Its unique selling proposition is it takes only four seconds to accelerate from 0 to 60 mph. It has a sporty look to attract the people in the luxury sports segment that is already occupied by legendary car makers like Ferrari and Porsche (Liu et al., 2014, pp. 236-286). The next model is Tesla Model S. It is a sedan with a price of $57,000 with the aim of competing with the likes of Audi A6, Mercedes E-Class and BMW 5-Series. The car has a seating of seven people when another third row of seats with rear facing are attached. The batteries available will last between 160 miles to 300 miles. The significance of this model is it has the capacity of swapping the battery in quick time and capability of recharging with the help of power sources available in 100V, 200V and 480V. By the year 2015 they will be launching two new models namely BlueStar and Model X to cater to the middle class (Anthony, 2014, pp. 112-121). Tesla has its own manufacturing unit and it has collaborated with two major automobile firms namely Daimler and Toyota. They also partnered with an electronic manufacturing firm Panasonic and another manufacturing enterprise Lotus Cars (Pinkse et al., 2014, pp. 43-60). The luxury sedan segments and the premium sports cars evolve to be a great advantage over other brands. Their unique selling proposition includes highly efficient battery efficient vehicle technology, positioning the market as a first mover, recognition of the brand and has some unique products in their kitty like powertrains, vehicle batteries, etc. SWOT Analysis This analysis is used to describe the internal and the external environment of the company. Internal environment includes the Strengths (S) and Weaknesses (W) while the external environment includes the Opportunities (O) and Threats (T). These are explained in details. Strengths (S) A firms strengths is analyzing the resources and the capability where it can have an upper hand against other firms. Their main unique selling propositions include cutting edge technologies related to various equipments like design of the vehicles, battery and powertrain technology. They have highly efficient products like range of the electric batteries which lasts upto 300 miles with one time charging and eye-catching designs of the vehicles like the Model S. Their management is open to new ideas and flexible in their working style and their leaders have an innovative thinking approach. They have positioned themselves as a first mover in the battery electric car market. They have built a superb reputation among the consumers through word of mouth and also the media have positive reviews about the company. The business model and their logistics network which is very innovative help them to have a competitive advantage over the others (De Pin, 2015, pp. 163-185). Weaknesses (W) Their structure that is business model and also the infrastructure is very costly due to absence of major economies of scale. As the electric vehicle industry is a new entrant so time and trust is required to be built to get a strong foothold in the automobile industry. Their recognition of the brand name is very limited as there are various brand names prevailing in the market and the big brand names have a strong legacy. The supplies for the components of electric vehicle are limited and it would create a problem if there is a rise in demand. There could be problems in the producing the output as Tesla manufacture their products with the help of Lotus Cars whose capacity of producing is very limited. So when there will be a high demand in the luxury sedan market they can face problems. Another problem with Tesla is they have very less number of stations for charging the vehicles, the mile range that is upto 300 miles, various types of charging options (Birk, 2015, pp. 20-25). Opportunities (O) There are some opportunities for Tesla Motors that are a boon to them which are described below. There are major advancements in the vehicle technology and that is good news for Tesla. By owning a battery electric vehicle, consumers could understand the benefits related to cost and environment. Due to increase in prices of gasoline, the producers and also consumers are looking for alternative power sources. Peak-oil pressures globally led to searching for other options. Various policies drafted by the government for infrastructures are required for adopting battery electric vehicles. Due to rising tension about the global warming and various pollutions in the environment led to the entry of the electric cars in the market. High chaos created to reduce to dependency of fossil fuels and security of energy helps Tesla to get a strong foothold in the market. Increasing number of mandates and the regulations by the government for adopting battery electric vehicles like providing subsidies to the electric vehicle, subsidizing those who are phasing out of the fossil-fuels, etc (Truong et al., 2016, pp. 14). Globally the governments are providing incentives like rebates, tax-breaks, loans with low interest rates and various grants for adopting the battery electric vehicles. Many sectors like the premium sports cars and the luxury sedan segments are still not touched by many brands and these areas can be of huge potential for Tesla (Nykvist Nilsson, 2015, pp. 329-332). Threats (T) There are some threats that need to be countered to sustain in the market. There is rise in various firms who are also selling BEV directly to the consumers. Rising of substitutes against BEVs like the plug-in hybrids, hybrids powered through gasoline, vehicles running with natural gas, ethanol powered vehicles and non-electric vehicles which are more fuel efficient than the electric vehicles. The entry of the big automobile firms in the BEV segment which have capability of higher economies of scale. Superior and efficient cutting edge technologies used in the BEV as compared to the technologies used by Tesla. Alternative sources of energy like vehicles run with hydrogen are creating a barrier for Teslas rise in the BEV segment. Decrease in the oil prices for a short period could hinder Teslas growth and people can use cars run by gasoline (Barmore, 2013, pp. 185). Strategic Marketing Plan of Tesla Their major marketing goals include generating demand for the vehicles by generating leads with the help of their sales personnel. Next is creating a long and lasting awareness about their brand in the minds of the consumers and have a good reputation in the corporate arena. Managing the existing customers so that they can be turned into loyal customers and create a strong market base with the help of the customers referring to others about their brand. Getting customer feedback is very important so that they can create more efficient product that can satisfy customers needs (Moritz et al., 2015, pp. 85-92). BCG Matrix for market growth rate: Star Market growth rate is extremely high as company has already able to expand in different geographical areas successfully Highly effective market penetration strategy implemented by Tesla Motors Question mark Limited consumer base for Tesla Motors due to high price Lack of well-developed infrastructure in the Australian market such as dealerships, factories, supply limitations Cash cows Tesla Motors have huge share of the market particularly in USA and some of the European countries but it had very low growth rate As a result, the company has to investment huge amount to ensure its growth in the new market Dogs Comparatively low market share in the Australian market. As a result, business units of Tesla Motors has face cost disadvantage Figure 1: BCG Matrix (Source: Contreras 2015) Marketing Strategy The firm has adopted the marketing strategy of Apple for cutting edge technologies. It started with the thought that any new technology that will be launched in the market is costly and the millionaire people will be the first customers to use the new technology. So, Tesla launched the model Roadster targeting the rich consumers in the premium sports car segment for the optimization of the technology before launching affordable cars to the mass consumers. Brand/Product Positioning The companys image and the positioning of their products for its battery electric vehicles emphasizes the features of the cars like using innovative technologies, reliability, attractive in terms of design and it is eco-friendly with zero emission of carbon dioxide (Birk, 2015, pp. 125). Market segmentation A firm can solve the consumers needs by segregating the vast heterogeneous market into small segments which can be easily manageable. Tesla has identified three different segments for adoption of their products. First is the market for the premium sports car. This is a small market which many people dont know about Tesla brand so this area can be targeted to sell the products. Next is the luxury vehicle sedan market. This is a large market where the competition among other reputed brands is very high. This is an area where there will be lots of customers to buy the BEVs. The last one is the mainstream vehicle market for the consumers. Here they will create affordable cars to target the mass consumers and can create a strong foothold in the market (Gomes, 2013, pp. 141-151). Product design strategy This strategy is related to the looks, feeling and the functioning of the product according to the demands of the consumers. Designing of the product enables to differentiate and helps in positioning of the product compared to other brands. Their major objective is the Model S that will create a sedan of middle size that can accommodate seven people with luggage and the car will be eco-friendly, various functions that suits customers needs and sporty look. The car boasts of zero-emission standard. It has a highly decorated interior with a touch screen of 17 inch and a control centre which is known as the iPhone of the auto industry. It has a battery with life expectancy upto seven years and it ranges from 160 miles to 300 miles (Rimmer, 2014, pp. 525-656). Product pricing strategy As the firm is a premium brand and uses innovative technologies that are costly. So they rolled out the high-end model named Tesla Roadster at a cost of $109,000. This master strategy is used to accommodate the unit costs which are high and also the cost of unit volume is low for a marketing model that is using cutting edge technology. Their main target is to sell the BEVs at a cheap price within the price range of $30,000 to $57,000 so that they can penetrate more into the auto market (Martins et al., 2015, pp. 99-117). Branding strategy They have already built a strong brand foundation by introducing the Tesla Roadster model. Model S which comes at a cost of $57,000 will attract large consumers which will help to increase the sales volume. The Model S design highlights a BEV brand which can be driven by both male and female, has advanced features with cutting edge technologies. The car can be used by everyone with superb safety features which makes it lovable for environment conscious consumers. The company has able to create the brand through the power of word-of mouth and through corporate events. The firm is creating a technological hub for building products, which are innovative like Model S and Roadster, and also various products like battery packs, components of powertrain, technology related to managing power supply and extra lines of BEV (Hardman et al., 2015, pp. 1625-1638). Product life cycle curve of Tesla Motors: In the Introduction stage, Tesla Motors will have to focus about the market penetration strategy so that it can able to connect with the major portion of the customer. Since, Australia as a market has huge amount of potential to increase the present level of revenue for the company. Tesla Motor has to spend huge amount of money on its marketing campaign. In the growth period, Tesla Motors will have to focus on the knowledge level of the potential customer. Since, it will help the company to gain different portion of the market. As mentioned earlier, Australian market has huge potential, which can help Tesla Motors to increase its present level of revenue. Maturity stage involves Tesla Motors to initiate innovative strategies, which can prolong the lifetime of newly introduced product of the company. For instance, Tesla has to initiate product trial for the customer to increase their present level of satisfaction. The company also will have to secure its retail distribution so that it can avoid the decline stage of product life cycle for a longer time. Figure 2: PLC of Tesla Motors (Source: Gomes 2013) Sales and Service strategy Tesla doesnt have any franchises to sell their products. They sell their cars and market them directly to the customers with the help of stores owned by the firm all over the world, through telecalling or meeting the person at their headquarters or through corporate events. Tesla has opened their stores which have a higher visibility, premium outlets in the main metropolitan areas which are a trend setter for the public (Crane, 2015, pp. 652). The stores opened by the firm act as showrooms are designed in such a way that the customers get to know about the benefits of owning a electric vehicle and the specific beneficiaries of having a Tesla car. The stores are equipped with snack which are provided free of cost, coffee bars, couches which are very comfortable and fast internet connectivity. The Tesla customers engage directly with highly skilled Tesla employed sales and service personnel which are quite different from the buying experience when the customers enter into a traditional vehicle franchise outlets and their service centers. In the future they will introduce Mobile service vans for servicing the Tesla vehicles situated in the remote locations (Reinecke, 2014, pp. 84-88). Marketing Communications plan The plan should be crafted for educating the sales prospects about the advantages of owning a Tesla car as compared to other electric, hybrid or gasoline powered cars. They should inspire the prospects to visit their stores to get a firsthand experience about the products. Tesla should interact with firms customers, sales personnel of their retail outlets, industry analysts and the media addressing the different needs of each of the groups in a transparent way. This helps them to eradicate further talks with any third party or any dealer outside their network (Abdulsater et al., 2014, pp. 215-238). Advertising Strategy The firm should give importance to the special events and the conferences that are at par with Apples MacWorld Expo and the Apple Expo. These types of events attract a lot of sales prospects and the media people. They should launch campaigns which should contain creative themes like Drive Different that would attract creative and innovative customers for engaging (Hirsch Hirsch, 2016, pp. 52-56). They can be successful by introducing a series of BEVs with the help of media outreach and reviews, explaining the importance of electric vehicle technology and reinforcing their product line with the help of the models like Roadster and Model S. They have positioned themselves as the first firm to commercially manufacture an all-electric car that complies with the federal laws and is successful in becoming a market leading range with a single charge. Due to extensive media outreach globally and through word-of-mouth they have able to scale higher without any specific advertising plan and their marketing costs are very less. Another strategy would be highlight the members of the Tesla design team in main media outlets which focuses on green technology, automobile freaks, automobile technology, etc. (Contreras, 2015, pp. 787). Sales promotion strategies Tesla has showcased their products in Frankfurt, Los Angeles and Detroit auto shows. They should create specialist events once in a year and several conferences which should be on the same page like the Apples Mac World Expo and the Apple Expo. The firm should have a partnership with top notch car magazines like Car and Driver or Motor Trend for supporting the publication of Teslas specialty magazine focused on the electric vehicle industry like TeslaWorld or EVWorld. By collaborating with the major green, clean energy non-profit organizations for promoting the advantages of BEVs. They should join various programs initiated by the government for promoting to adopt the electric vehicles and provide different incentives for purchasing electric vehicles (Yeleti Sayed, 2015, pp. 56-69). Budget allocation Marketing technique Investment amount Expected income Search engine marketing and website and marketing $15 $22 Direct marketing $10 $18 Event marketing $5 $22 Social media marketing $25 $17 Display marketing $17 $12 Video marketing $23 $10 Electronics marketing $25 $26 Table 1: Budget allocation (Source: Contreras 2015) Recommendations The company must continue to build innovative products and also launch various cars with creative designs. The firms electric vehicles of innovative technologies, battery technology and components of powertrain for electric vehicles have created a strong foundation for Tesla. They should build few and memorable products which should be of highest quality as compared to other auto makers. Ads created should be very unique, focusing on high quality and should be effective for creating a stimulating effect in the minds of the consumer. Tesla should create a theme like Drive Different for showcasing to the world about their eco friendly and sporty look cars. To create a good public relation they should place their products in motion pictures and television shows. The enterprise should launch their products in high profile events by discussing about the cutting edge technologies and eco-friendly BEVs (Thomopoulos Givoni, 2015, pp. 1-14). Conclusion Due to rise in oil prices, global warming, various types of environmental pollution and environment conscious consumers, battery electric vehicles are set to rule the automobile industry (Bohnsack et al., 2014, pp. 223-232). Many brands which have a rich legacy in the automobile industry have started to position themselves by launching various BEVs which have a larger market share than Tesla and have various advantages related to prices, production and marketing. 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