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This essay sample focuses on Tesla communication strategy. Here, youll find Teslas strengths, weaknesses, opportunities, threats, and issues as well as other useful information. Learn more about Tesla internal communication strategy with our sample!
Tesla Communication Strategy Essay Introduction
Founded in 2003, Tesla Motors is an American automobile manufacturing company. The development of the brand is owed to the efforts of engineers from Silicon Valley. Its headquarters are located in Palo Alto, California (Tesla Motors, 2014). The company developed its first model, Roadster, with the objective of setting way for the development of an electric car as an alternative to gasoline propelled cars (Hardester 2010, p. 43).
Since this early innovation, Tesla Motors has experienced a problem with sales of products with zero marketing communication budgets. Upon the adoption of communication strategies for pushing its sales higher through the creation of the brand awareness, the company has an opportunity of developing a brand loyalty. In fact, Tesla Motors is the only company that produces high performance and lucrative fully electric sedans in the US.
After proving that electric technology was a possible impulsion of vehicles, Tesla Motors progressed to release Model S into the market in 2012 (Karamitsios, 2013, p. 44).This model targeted the lucrative sedan market segment, which is also the target market segment for the proposed marketing communication plan. Tesla Motors markets its model S brand as a luxurious, technological, and high performing brand.
The organisation also engages in the design and sale of electric trains to various automakers, including Mercedes Benz and Toyota among others. However, this paper does not focus on this product lines. Rather, its objective is on the analysis of the company and its marketing communications. It suggests online communication platform as a possible way of enhancing communication of the organisations brand in the effort to boost sales from 20,000 units in 2012-2013 to 35, 000 units in 2014-2015 fiscal year.
Market Definition and Parameters
The market segment for Tesla Motors is mid-sized with highly performing luxurious sedans. The company has the capability to succeed in this market segment upon considering that the Model S is not only purely eclectic, but also a highly performing eco-friendly automobile (Mangram, 2012, p. 300).
In this market, the company does not have any close parallel competitor. Indeed, the closest organisations that compete with it in the electric luxury sedan segment include Nissan through Nissan Leaf and Chevy through its product, Chevy Volt (Tesla, 2013). Nevertheless, they both present low threats. They offer lower performance electric cars in comparison with Model S.
Model S particularly fits well in the mid-size luxury automobile market. Forbes magazine conducted a research on the sales of different luxurious automobiles. It reported an increase in sales volume of luxurious vehicles for a period of 5 years. As shown in appendix 1, this increase was highest in 2012 by about 20 percent compared to 2011 (Karamitsios, 2013, p. 44).
This finding suggests an increasing demand for luxury vehicles, especially as the economy recovers from the aftermaths of the global financial crisis. However, amid the increment in demand, organisations that offer a brand with high performance and efficiency are likely to make more sales because luxury products market segments value product utility and conformance to specifications while making buying decisions (Simon, 2007, p. 126; Yelkur, 2011, p. 110).
The market definition for luxurious a vehicle can perhaps be best accomplished by considering forecast for the expected sales level. Appendix 2 exemplifies one of such approaches of forecasting purchasing behaviour in the US for consumers with household incomes amounting to $100, 000 and above. From the appendix, downturns in 2009 and at the beginning of 2010 are evident. Declines are also evident in July to august 2011. They can be explained by uncertainties that are associated with debt ceiling fears and downgrading of the US credit. Upon considering that data of market dynamics in the lucrative vehicles category is forecasted for a period of 6 months, the trend line implies greater expectations for Model S.
Market Dynamics and Trends
While developing a marketing plan for Model S, it is important to consider marketing dynamics and performance trend for electric cars in the marketplace. Appendix 3 shows potential for increased demand for greener vehicles. This data depicts the changing preferences among consumers, especially those who are environmentally conscious. Changing fluctuation in oil prices may also create a higher demand for purely electric vehicles such as Model S. In the US, this segment accounts for only 3.38 percent in the whole industry of electric cars, including hybrid vehicles (Lim, 2014, p. 1).
Changing the perception among consumers in terms of their role in protecting the environment from pollution that is associated with green gas emissions and/or the rising demand for luxury items constitutes a reliable indicator for better performance and embracement of luxury electric vehicles such as Model S. However, the success of this model in the marketplace depends on competitive forces and the capacity of the Tesla Motors to capitalise on its opportunities and strengths to overcome its weakness and threats. This claim suggests that a complete analysis of the marketing trends and dynamics requires an aggressive investigation using Porters five forces and SWOT description.
SWOT description
Strengths
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Has a strong brand that is built around the perception of high performance, reliability, and luxury,
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It has devoted customers, and
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It demonstrates an uncompromising attitude towards its future success in terms of creativity and innovation.
Weaknesses
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It depends on external suppliers, an unknown brand, and a dynamic new technology for its operations,
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It eliminates the use of fossil fuels in the propulsion of automobiles, and
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The new technology poses the challenge of uncertainties associated with negative preconceptions about the performance of the electric vehicle in comparison with the oil or gas engines.
Opportunities
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The existing external environment, which can make the organisation improve its performance,
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The increasing number of people who are becoming cautious over degradation of the natural environment,
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Unstoppable growth when fully electric car market bursts, and
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It can break free any negative notions and preconceptions about electric cars.
Threats
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Incumbent automobile makers,
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The twin threat of introducing a new company and a new product in the market, and
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Dependence of info-structure.
For the viability of marketing plans, SWOT description for new or existing brand is necessary with the aim of determining whether an organisation has the capacity to place the product in the market (Menon, 2006, p. 30). This approach calls for the strategic planning approach for evaluating the strengths, restrictions, prospects, and threats that a business establishment encounters (Hill & Westbrook, 2007, p. 50).
Tesla Motors has managed to establish a strong brand that is built around the perception of high performance, reliability, and luxury. Mangram (2012) confirms that the model demonstrates how technology can be deployed in the development of alternative automobile products with high performance and high safety features (p. 300). Tesla Motors also possesses incredibly devoted customers. It also has an uncompromising attitude towards its future success in terms of creativity and innovation.
Although Tesla Motors has strengths that can favour the success of the Model S, it has some weaknesses. It depends on external suppliers, an unknown brand, and a dynamic new technology for its operations (Mangram, 2012, p. 300). Model S eliminates the use of fossil fuels in the propulsion of automobiles. Apart for the brand being new in the market, assuming it is not well known by all potential customers, the new technology poses the challenge of uncertainties associated with negative preconceptions about the performance of the electric vehicle in comparison with the oil or gas engines.
Opportunities include the existing external environment, which while utilised well, can help an organisation to improve its performance (Hill & Westbrook, 2007, p. 51). One of the major opportunities for success of the Model S encompasses the increasing number of people who are becoming cautious over degradation of the natural environment due to high carbon emissions that are associated with the rising number of automobiles.
With already developed superior features, Model S has the opportunity for unstoppable growth when fully electric car market bursts. Tesla has a capability of breaking free any negative notions and preconceptions about electric cars. Indeed, hybrid varieties and various other eco-friendly vehicles currently in the market have performance compromises.
Incumbent automobile makers pose a significant threat to Tesla Motors. They have a well-established and protected brand, which may enable them secure higher sales even if they may resort to the production of inferior fully electric vehicles. Motavalli (2013) reveals that Audi, Volkswagen, Lexus, and BMW among other automakers are in their advanced stages of developing fully electric cars (p. 20). Tesla Motors also suffers from the twin problem of introducing a new company and a new product in the market.
Competitor Analysis (Porter five forces)
Threats of New Entry
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High costs that are involved in setting an electric car production system imply that Tesla Motors experiences low threats of new entrants,
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The market target segment for Model S customers encompasses people who are looking for luxurious products,
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New entrants lack reputation, and
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Hence, they suffer from incapacity to outdo those with already well-established customer loyalties.
Suppliers Bargaining Power
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Tesla experiences high bargaining power from its suppliers since it does not purchase commodity type of goods,
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Relies on suppliers from different places and in different areas of specialisation to ensure sustained manufacturing processes,
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More than 33 suppliers did business with Tesla Motors to facilitate the production of Model S in 2013, and
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Tesla Motors suppliers can set their prices at higher levels without considering the unwillingness of the organisation to pay.
Rivalry among existing competitors
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The market demand influences the organisations market price due to the lower number of competitors who offer products with similar performance, technology, and luxury characteristics,
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Appendix 2 illustrates the extent of rivalry in the electric car industry
Buyers Bargaining Power
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Tesla Motors buyers have a low bargaining power
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Tesla positions its Model S brand as a luxurious and high-performance product.
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High-cost technology that is involved in its production drives the prices of Model S higher compared to gas and oil cars that have an equal carriage capacity.
Threats of Substitute Products/Services
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Threats posed by substitute products are low,
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The company is the only automobile maker that specialises in the production of zero green gas emission cars, and
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Therefore, eco-friendly customers who also love sports vehicles have Model S as the only option
Industry environment is a risk to an organisation in terms of threats of new entrants, supplier and buyer bargaining powers, industry rivalry, and threats posed by substitutes. Tesla experiences high bargaining power from its competitors, as it does not purchase commodity type of goods. It depends on suppliers who are derived from different places and in different areas of specialisation to ensure sustained manufacturing processes.
Mark (2013) informs that more than 33 suppliers did business with Tesla Motors to facilitate the production of Model S in 2013 (p. 1). This move suggests that in case of failure of the organisation to pay a specific amount of money as demanded by a given supplier, the entire production process becomes halted. This situation disadvantages Tesla Motors since its suppliers can set their prices at higher levels without considering the unwillingness of the organisation to pay.
Buyers possess a low bargaining power. Tesla positions its Model S brand as a luxurious and high-performance product. High-cost technology that is involved in its production drives the prices of Model S higher compared to gas and oil cars that have an equal carriage capacity. The market demand influences the organisations market price due to the lower number of competitors who offer products with similar performance, technology, and luxury characteristics (Ashtiani et al., 2011, p. 452).
High costs that are involved in setting an electric car production system imply that Tesla Motors experiences low threats of new entrants. The demanding technology in the production makes capital requirements prohibitive to small-scale automakers. The market target segment for Model S customers encompasses people who are looking for luxurious products.
Such people consider quality and performance essential attributes of product before arriving at purchasing decisions (Farris, Neil & Pfeifer, 2010, p. 211; Freshwater, Sherwood & Drury, 2006, p. 300). This observation highlights the significance of good reputation as a major component in branding luxury products. New entrants lack reputation. Hence, they suffer from incapacity to outdo those with already well-established customer loyalties.
While the industry loyalty for Tesla Motors is high, threats posed by substitute products are low. Tesla Motors constitutes the only automobile maker that specialises in the production of zero green gas emission cars (Mangram 2012). This case implies that eco-friendly customers who also love sports vehicles have Model S as the only option.
However, even though Tesla Motors is the only organisation that is currently producing EV Model, several other well-established automakers are focusing their attention on research and designs of EVs in the effort to have a share of the market in the future as trend in the adoption of the model continues to pick. Appendix 4 illustrates the extent of rivalry in the electric car industry.
Overview of the selected Brand
Upon considering that Tesla Motors is the only organisation that produces fully electric vehicles, it has good opportunities for building its reputation to establish significant customer loyalties. This success depends on the ability of the organisation to establish effective marketing communication strategies. Unfortunately, Tesla had no budget for its marketing, although it had attained revenue growth of above 75 percent by 2010-2011 fiscal year and 102 percent in the 2011-2012 fiscal year amounting to $ 413m (Karamitsios 2013). Incorporating brand communication strategies can help in pushing Model S into the market.
However, without specific marketing communication budget, Tesla Motors attempts to brand itself as Apple automaker akin its use of technology in production (Mangram, 2012, p. 300). Upon considering that it is a new brand, it needs building a strong brand identity. Taking the benchmark of Apple Company is perhaps an important starting point. However, the creation of consumer awareness about the brand remains significant for increased performance.
This strategy needs to be accompanied by the production of more innovative products. Through budgetary allocations to initiate brand communication over new and traditional media, Tesla Motors can increase its brand identity across the globe. Perhaps, this step is the biggest strategic marketing opportunity available to the organisation.
Strategic Marketing Opportunities
In its marketing initiatives, Tesla Motors needs to consider introducing creative strategies in order to manage customer relationships. Keeping potential clients up to date with information is of important methods of maintaining positive relationships with customers (Hill & Ettenson, 2005, p. 88; Holt & Quelch, 2009, p. 70).Tesla Motors needs to update its customers constantly with new features for Model S so that they can update their vehicles using the internet.
These attempts would be done for the commitment of financial resources in communication. Although the strategy increases the cost of running Tesla Motors, it is justifiable in the context of Fornells (2002) assertion, marketers are quick to recognise that the value of the customer asset is the sum of the discounted net contribution margins of the customer over time (p.11). The claim here is that attempting to build customer relationships comes at a cost, which Tesla Motors must be willing to incur, notwithstanding its past loss experiences.
Ensuring that Tesla Motors website is up to date with the information on innovative and technological developments that are aimed at making Model S offer even higher customer experience is critical in the development of the brand image of the organisation.
Potential customers are likely buy products from a manufacturer whose information on what is available in-house is easily accessible (Roth, 2008, p. 310; Saxena, 2012, p. 40). This claim suggests that through the commitment of financial resources in online communication, Tesla Motors acquires a higher probability to capture the loyalty of both the existing and potential clients to gain competitive advantage.
Advertising to potential customers of Model S encompasses a major milestone towards enhancing the performance of Tesla Motors. However, retention of the clients is a function of how well the products satisfy their needs, in this, case luxury and technological innovativeness and performance. This claim underlines the significance of the utility of a product in terms of helping build good customer relationships (Kotler et al., 2009, p. 201).
Potential clients can also arrive at their decisions to seek products from an organisation that engages in online communication based on how the communications personnel handle them and/or how the sales personnel handle them at the physical premises of the organisation (Rust, Zeithaml & Lemon, 2004, p. 114). In the quest to build positive customer relationships, it is vital for an effort to be made to select people who can represent the interests of the organisation in the most pragmatic way.
Customers not only buy a product, but also pay for the brand image. According to Keller (1998), brand image is a perception of customers when they see a brand reflected by brand associations in their mind (p.27). These associations are multidimensional. They contain a myriad of attitudes or dimensions, which are emotionally instigated in relation to customer perceptions on brand quality and the degree to which the brand satisfies customer needs (Zineldin, 2000, p. 15). In case of Tesla Motors, the brand image can be enhanced using the power of the internet as the main approach for developing and creating awareness of the brand.
Using the internet as the means of creating the brand image of Model S implies that it can serve the dual purpose of distribution and communication. Using social networks, websites, and traditional media such as TV and contests among others as shown in table 1 makes it possible to influence the demand for the Model S. Internet aids in helping an organisation focus on enabling customers find information about products (Fields, 2010, p.14). Brand image cannot be satisfactorily developed if potential clients are not aware of the existence of an organisation that offers products.
In the effort to create alertness of the existence of an organisation, social media is incredibly helpful. Such a strategy for building positive brand image is opposed to traditional approaches of brand communication in which organisations mainly focused on controlling what was said about their products and brands by dominating communication channels with carefully planned messaging (Anbu & Mavuso, 2012, p.3 12).
However, in the modern business environment, control of messages is immensely difficult since the ability of customers to access information through online interactions has become incredibly sophisticated. This sophistication entails online communication through B2B (business to customer) platforms. Therefore, Tesla Motors needs to the deploying latest developments in web 2.0 applications in enhancing communication to its market segment both cheaply and effectively.
Quantification of Marketing Objectives
The objective of engaging in both traditional media and online communication for the Models S is to achieve a sales target of 35, 000 units over 2014-2015 fiscal year. This sales level is achievable upon considering that the company receives more than 1 million people who visit its stalls in 2013, with 25 percent of them testing Model S (Karamitsios, 2013, p. 70). This observation suggests that with increased promotion of the product, it is possible to increase the number of people who visit the stall either physically or through an online platform, later making purchasing decisions.
Tesla Motors can currently produce 20, 000 cars at 20 percent capacity utilisation (Karamitsios, 2013, p. 70). This observation implies that initiating a marketing communications plan for marketing 35, 000 cars annually is achievable within the range of the available resources. Indeed, increasing production potential can help the organisation take the advantage of economies of scale to lower costs, which in turn increase its profitability levels.
The overall objectives of the marketing communications plan are increasing sales, enhancing Tesla Motors brand awareness, and/or driving potential consumers to access the organisations online communication platforms. The sales target of 35,000 units per year is feasible upon consideration of the past sales level of the organisation. Tesla (2013) data indicates that when customers receive their ordered car, the organisation acquires 3 more reservations from each customer (p. 1). In this extent, verbal communication has proved that communication can aid in boosting the sales levels of Tesla Motors.
Financial Analysis
To achieve the objectives of the marketing communications plan, $45M is required. The organisation has a financial resource to funds such as the marketing communications initiative. In 2013, it sold 20,000 units at $75,000 (Karamitsios, 2013, p. 73). This figure translates to $1500. The market communications budget will only cost 3% of the total sales in 2013. From the paradigm of cost-benefit analysis, the commitment of these resources is a viable decision upon considering that it will yield an increase of 15, 000 automobile sales in 2014-2015 fiscal year.
Selling the vehicles at $75,000, Tesla will make sales amounting to $2625M. Therefore, at the end of the fiscal year, a $45M communication budget will represent only 1.7% of the total sales. This finding shows a long-term gain in investing in communication to drive the sales potentials for the organisation until it produces at full capacity. Table 1 below summarises the financial requirements for implementation of the marketing communications plan.
Budget for the Proposed Marketing Communication Plan
Objectives and the scope of the marketing campaign
The idea of Integrated Marketing Communications (IMC) has become an integral process in marketing in the current decade. It alludes to the procedure that advertisers utilize to arrange, create, execute and assess composed, quantifiable, powerful brand correspondence programs over the long run to focus on various segments of people (Yelkur, 2011, p. 108). It is currently broadly accepted that the incorporation of all types of advertising interchanges is fundamental for business achievement.
Indeed, the IMC methodology contends that shoppers see different interchanges by the same brand per say, instead of as individual messages, addressing them in better places and diverse ways. The real advantage of IMC is that a steady flow of messages is passed on to all intended interest groups by method for every accessible type of contact and message channels (Yin, 2009, p. 67). As a consequence of the consistency in the middle of instruments and messages, IMC has a tendency to be more viable and effective than customary marketing correspondences.
Tesla Motors considers its future performance to oscillate around the better placement of Model S in the marketplace. Currently, it employs an excess of 2000 people across all its fully owned subsidiaries that are situated in Asia, North America, and Europe. It also opened a new outlet in Toronto in 2012 in a bid to market itself in the Canadian market. This long-term strategic goal is not only to offer highly performing automobiles to average consumers, but also vehicles that have zero emissions.
Tesla Motors remains the only organisation that offers serial produced luxury electric sports cars. It anticipates launching its Model X this year, 2014. It plans to develop a large number of recharging stations across the world whilst making a significant progress in terms of innovation of battery technologies as an attempt to boost the dependability of its products (Roy, 2012, p. 60).
The company has experienced losses since its inception until 2013 when it began to make profits through sales of 20,000 units with an average price of $75,000 each. The company depended on the word of mouth communication between people who came to purchase a vehicle and/or potential clients who interacted with them, to create awareness of its brand. Thus, the 20,000-unit sales level was achieved with zero allocation of financial resources on marketing communications.
The current marketing communication plan proposes that with a budget of $45M, Tesla Motors can increase its sales from 20,000 units to 35,000 units in 2014-2015 by incorporating online and traditional media marketing communication strategies (Roth, 2008, p. 77). This way, the company can clear misconceptions and doubts on the usefulness of the Model S. This strategy can help in terms of solidification of Tesla Motors brand equity. The objective of the plan is to increase sales, enhance Tesla Motors brand awareness, and/or drive potential consumer traffic into the organisations online communication platform.
There are seven key subjects which are normal for IMC. These subjects are: correspondence, marking, relationship administration, cross-useful arranging, mix, cooperative energy and business sector introduction (Reynolds & Valentine, 2011, p. 320). These speak to a critical part of the IMC idea; however, one is especially prominent relationship administration.
Developing from a prior practice of advertisers corresponding with customers on a monolog premise, it is presently a generally acknowledged principle that connections need to be overseen in the l
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