by Justin Grensing, Esq., MBA
Tesla, the electronic vehicle (EV) company headed by high-profile billionaire Elon Musk, is a fascinating organization in many ways. The media has recently been excited about the company’s back-to-back quarterly profits. Despite the company operating in the red for so long, observers love to root for the revolutionary company. It’s also interesting to look at Tesla from a business strategy standpoint. For example, Tesla is widely recognized for the way it generates intense customer loyalty.
A recent article for CNBC by Michael Sheetz highlights another real-world business lesson. Those familiar with Porter’s Five Forces have no doubt heard of the concept of barriers to entry. Barriers to entry make it difficult for new companies to enter an industry, making the industry more attractive to those already operating in that space because they have less competition.
Tesla’s Competitive Moat
Sheetz quotes Morgan Stanley analyst Adam Jonas as pointing to Tesla’s network of charging stations as a possible “competitive moat,” another way to say barrier to entry.
“Tesla upped its network of global ‘supercharger’ stations to nearly 13,000 by the end of last year, while also increasing its total ‘destination chargers’ to more than 21,000,” Sheetz writes. “Superchargers refuel most Tesla batteries in about an hour, whereas destination charging stations provide longer charging times more suited for long stays at malls or overnights at hotels.” According to Jonas, that represents 30 to 40 percent of total US charging outlets.
Building Competitive Advantage
The reason this charging network acts as a competitive moat is that one of the biggest current limitations of EVs is that it’s not easy to keep them charged. Charges don’t last as long as a tank of gas, and there are far fewer EV charging stations out there than traditional gas stations. To make matters worse, there isn’t uniformity in the charging stations that do exist. “The EV charging infrastructure is a fractured, multifaceted monster, involving competing or even conflicting charging systems and equipment, and it is rife with complicated pricing schemes,” says Charles Fleming in an article for the LA Times.
This means that a company like Tesla, with its large existing footprint of EV charging stations, has a competitive advantage over potential competitors who might make a great EV but can’t provide sufficient infrastructure for its customers to keep them charged.
Marketing is never simple. The best organizations understand that and take advantage of the complexities of marketing to gain a competitive advantage by considering not just promotion, but the entire marketing mix: product, price, place, and promotion to gain competitive advantage. Do you?
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Tags: beating the competition, competition, competitive advantage, Marketing, marketing mix, Porter's Five Forces, Tesla