In "Blue Ocean Strategy", Kim and Mauborgne argues there are blue oceans and red oceans in which companies operate in. Companies operating in red oceans must produce a product or service to always try to outperform their rivals in order to gain a greater share of demand. On the other hand, blue ocean companies operate in an unknown market space because the company creates the demand rather fight over customer demand. Blue ocean companies have a higher opportunity for growth that is profitable and rapid because there are no competitors in this market.
Tesla Motors is a great example of a company forging into blue waters. Tesla produces all electric cars that are powered only by a battery pack. What makes their vehicles different from the other hybrid cars on the roads? The initial model, Tesla Roadster, is sleek and stylish, and easily comparable to other high performance sports cars, such as Porsche or Ferrari. The Roadster offers features desired by those found in luxury cars. But, at the price of $102,000, it is a price many cannot afford (TrueCar, 2016).
So how can Tesla lower the cost of production while producing the quality car that consumers want and desire from Tesla? Elon Musk, the CEO of Tesla, wants to dominate the electric car industry by initially entering the premium car market to fuel customer demand to decrease costs and pay for the development of a more affordable model of Tesla for the general population.
The current limited production allows Tesla to focus on their development as a company and make decisions such as building a mega factory to increase its battery production, increase the popularity of electric vehicles by sharing its patents to create a standardized electric car specification, and installing electric super charging stations to make it more accessible for charging vehicles while on the roads (Halla, 2015).
Rather than focusing on potential competitors, Tesla Motors is using them to their advantage. By sharing Tesla patents, other car companies would use Tesla electric battery packs in their vehicles. Tesla battery packs will eventually be the Microsoft Windows to computers. If a company uses the Tesla patent, they must use the Tesla battery for compatibility. A new battery factory in Reno, Nevada will meet the demand and supply of electric car battery packs. Legislation will be more willing to enact the “Clean Air Act” because of the increased availability and popularity of electric vehicles produced by numerous car companies.
Tesla is creating a blue ocean and drawing other companies into it. By building cooperation rather than competition, Tesla makes the right strategic moves to drive down their costs and be the dominate market force in the electric vehicle industry.Works Cited
Halla, B. (2015, September 16). Piecing Together the Tesla Strategy Puzzle. Retrieved from hbr.org: https://hbr.org/2015/09/piecing-together-the-tesla-strategy-puzzle
Musk, E. (2006, August 2). The Secret Tesla Motors Master Plan (just between you and me). Retrieved from https://www.teslamotors.com: https://www.teslamotors.com/fr_CH/blog/secret-tesla-motors-master-plan-just-between-you-and-me
TrueCar. (2016). New Tesla Cars & Models. Retrieved from Truecar.com: https://www.truecar.com/prices-new/tesla/