1

Business Management HL
Internal Assessment

Research question: To what extent has Tesla's marketing

strategy contributed to the company's success in the electric
vehicle market in terms of revenue and profit?

Concept: Change

Word count: 1800

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Table of contents
Introduction……….………………………………………….… Pages 3-4

• About Tesla …….………………………………………………..Page 3

• Conceptual lens.. ……….………………………………………..Page 3

• Methodology employed …………………………………………..Page 3

Major findings and discussion……………………………………Page 5-15

• Findings and analysis 1 (Ansoff matrix) …………………………Page 5

• Findings and analysis 2 (4Ps of Marketing Mix)………………….Page 10

• Findings and analysis 3 (Financial Analysis)……………………..Page 11

Conclusions……………………………………………………….. Page 14
Bibliography……………………………………………………Pages 15-16
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Introduction

Tesla, a Silicon Valley-based company founded in 2003 by Elon Musk and engineers, rose to

prominence as a pioneer in the fields of electric cars and renewable energy. Tesla is a company that

specializes in electric vehicles, solar energy systems, and energy storage devices with the primary

goal of promoting sustainable energy. The 2012 release of the legendary Model S is well-known for

both its appearance and self-driving functionality. The Model X is a luxurious electric SUV, while

the Model 3 provides an inexpensive electric car choice. With its solar panels and energy storage

devices, Tesla also participates in the renewable energy market, encouraging environmental

responsibility and lowering dependence on nonrenewable energy sources.

Tesla's marketing strategy, known as "Zero budget marketing," sets them apart in the industry.

Despite minimal marketing expenses, Tesla is highly profitable.

Conceptual Lens: This research aims to analyze impact of Tesla's changing marketing strategies.

Thus, the conceptual lens of ‘change’ is used. Change refers to “an act or process through which

something becomes different”.1 The research will explore how these strategies have influenced

Tesla's profitability and overall standing in the market.

1
“Oxford Languages and Google - English.” Oxford Languages, languages.oup.com/google-dictionary-en/.
Accessed 25 Oct. 2023.
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Methodology employed:

For this research project, five supporting documents have been used, the data would then be analyzed

by using different analytical tools such as Ansoff Matrix and Marketing mix in order to evaluate the

research question. The financial statement of Tesla will also be evaluated in order to come to a

conclusion. However, the credibility and the reliability of the sources may be questionable, which is

why other external sources have been used which have been cited at the end.

Research question: To what extent has Tesla's marketing strategy contributed to the company's

success in the electric vehicle market in terms of revenue and profit?

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Major findings, Analysis and Discussions

This segment of the essay uses the business tool Ansoff matrix in order to evaluate the research

questions.

Ansoff matrix is a methodology for assessing and identifying potential business growth opportunities

by looking at their markets and products.

Analysis 1: Ansoff Matrix2

Figure 13

2
Supporting document 1
3
Reiling, John. “Ansoff Matrix Model: Explanation, Advantages, and Disadvantages.” The Strategic Project
Manager | Just Another WordPress Site, 23 Jan. 2023, Accessed 27 March 2023
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1. Market Penetration4:

Tesla employs a market penetration strategy by utilizing social media, with CEO Elon Musk actively

engaging in online discussions and leveraging his significant following to enhance the brand's

visibility. Musk's outreach strategy, including live-tweeting events, sharing insights, and responding

directly to user comments, strengthens the connection between Tesla and its consumers.

Tesla's unique referral program played a significant role in increasing revenue. Much like many

businesses, Tesla utilizes a referral program to encourage customers to recommend their vehicles.

Customers tend to engage more when they receive desired rewards. Prior to the end of October 2015,

Tesla's referral program rewarded referrers with $1,000 in credit, which could be used towards a new

Tesla, Tesla services, or accessories for each successful referral. This substantial incentive greatly

boosted Tesla car purchases, resulting in substantial profits. For instance, well-known YouTuber Ben

Sullins5 generated over $12 million in Tesla sales and received 2 free cars through this program.

However, the program became exceptionally popular, to the extent that Tesla gave away 80 new cars

in 2019. Consequently, they had to change their referral programs to earning credit points instead, to

ensure their sustainability while still providing benefits to customers.6

Tesla has a direct sales strategy7, in contrast to the majority of automakers who sell their vehicles

through licensed dealerships. Tesla maintains a network of showrooms mostly situated in prominent

4
Rowland, Christine. “Tesla’s Generic Strategy & Intensive Growth Strategies.” Panmore Institute, 30 Apr. 2023,
panmore.com/tesla-motors-inc-generic-strategy-intensive-growth-strategies-
analysis#:~:text=Market%20Development.,establishing%20new%20offices%20and%20facilities. Accessed 27 March
2023
5bethestrategicpm.com/ansoff-matrix-model-explanation-advantages-and-disadvantages/. Accessed 27 March 2023
6Ian. “How Tesla Used a $0 Marketing Strategy to Dominate a Market.” Marketing Strategy, 5 Sept. 2019,
www.marketingstrategy.com/marketing-strategy-studies/how-tesla-used-a-0-marketing-strategy-to-dominate-a-
market/#:~:text=If%20you%20had%20two%20referrals,yourself%2C%20or%20for%20a%20friend. Accessed 27 March 2023
7
Arun, Rahul. “Tesla Marketing Strategy 2023: A Case Study: Simplilearn.” Simplilearn.Com, Simplilearn, 22 May 2023,
 7

urban locations. These showrooms, referred to as "centers," were designed to provide a clean,

welcoming, and comfortable environment for customers. Unlike traditional dealerships, Tesla

employees don't earn commissions from sales, avoiding conflicts of interest that often lead to

upselling as a result of the incentive systems. Currently, Tesla is transitioning to an online-only sales

model, this change eliminates high-pressure sales tactics and traditional showrooms while

maintaining service centers for vehicle maintenance.

2. Market Development:8

Tesla's strategy for sales and global presence enhancement centers on market development through

entry into new markets. This entails the establishment of offices and services to gradually expand

their global footprint. Tesla currently operates in a limited number of countries but anticipates further

international expansion. To enter new markets successfully, Tesla aims to increase its geographic

reach and set up new distribution channels. China, being a major auto market, is a significant target,

with plans for exports and Supercharger station construction in countries like Thailand. Tesla is also

proactively seeking strategic partnerships with other businesses to facilitate entry into unfamiliar

markets, aligning with its aggressive expansion strategy.9

8
www.simplilearn.com/tutorials/marketing-case-studies-tutorial/tesla-marketing-
strategy#:~:text=MarketingExplore%20Course-
,Tesla%20Marketing%20Channels,who%20sell%20through%20franchised%20dealerships. Accessed 27 March 2023

9
Toh, Michelle. “Tesla’s China Factory Is about to Play an Even Bigger Role in Its Global Ambitions I CNN Business.”
CNN, Cable News Network, 21 Oct. 2022 www.cnn.com/2020/10/21/business/tesla-model-3-china-europe-intl-
hnk/index.html. Accessed 27 March 2023
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Elon Musk's exploration of the Indian market aligns with Tesla's strategic goals despite initial import

tax challenges. In 2023, Tesla plans to purchase a factory in India to produce affordable “all-new

$24000 cars”10. This change could potentially open up broader markets in South Asia.

In 2014, Tesla implemented an Open Innovation Policy, vowing not to sue competitors who use its

electric vehicle technology in "good faith."11 This policy aimed to foster innovation in the electric

vehicle industry and address the carbon crisis through collaborative efforts, recognizing the need to

work together to drive change.

3. Product Development:

Product development is Tesla's second, high-intensity growth approach. Through this comprehensive

approach, the company expands by developing innovative products that boost revenue. The company

uses cutting-edge technology to create new products that minimize damage to the environment in

order to achieve this goal. For example, the company makes solar panels and produced the first sports

car in history to run entirely on electricity—the Tesla Roadster. This holistic approach, which

emphasizes unique high-tech vehicles and associated goods that appeal to the target market, supports

Tesla's differentiation-based general competitive strategy. Keeping up large research and

development (R&D) expenditures is therefore a strategic objective for this aggressive expansion plan.

10
Mitra, Anwesha. “Tesla Mulls Factory in India to Build New Car, Set to Hold Talks with Govt.” Mint, 24 July
2023, www.livemint.com/news/india/tesla-mulls-factory-in-india-to-build-new-24-000-car-set-hold-talks-with-
commerce-minister-11690213238502.html.

11
dknab1892. “Open Innovation at Tesla – Time for a Change?” Technology and Operations Management,
d3.harvard.edu/platform-rctom/submission/open-innovation-at-tesla-time-for-a-change/. Accessed 8 Sept. 2023.
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The focus of Tesla's product development is enhancing its current electric vehicle lineup by adding

new models like the Model Y to expand its customer base and introducing novel features such as

self-driving capabilities.

4. Diversification:

Tesla employs diversification as a part of its growth strategy, but it's just one element. The company

aims to expand aggressively by venturing into new businesses, including developing battery packs

for non-automotive applications. Tesla also implements integration growth strategies such as

acquiring competitors or small players such as SolarCity in 2016.

One key strategic goal linked to diversification is increasing R&D spending to explore new business

opportunities. Another goal involves acquiring or partnering with other companies to create entirely

new products. Tesla's diversification efforts extend beyond the electric vehicle industry, with a focus

on offering complementary products and services, such as solar panels and energy storage systems.12

Musk has also expressed interest in introducing Starlink, a SpaceX project, in India, potentially

benefiting rural areas.13

12
Rowland, Christine. “Tesla’s Generic Strategy & Intensive Growth Strategies.” Panmore Institute, 30 Apr. 2023,
panmore.com/tesla-motors-inc-generic-strategy-intensive-growth-strategies-analysis. Accessed 18 Aug. 2023.
13
Republic World. “Elon Musk ‘looks Forward’ to 2024 India Visit amid Tesla’s Plans to Enter Indian Market.” Republic
World, 23 Aug. 2023, www.republicworld.com/business-news/international-business/elon-musk-looks-forward-to-
2024-india-visit-amid-teslas-plans-to-enter-indian-market-
articleshow.html#:~:text=Tesla’s%20entry%20into%20India%20has,India%2C%20potentially%20benefiting%20remote
%20communities. Accessed 27 March 2023
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Analysis 2: Marketing mix 14

Figure 215

The four main components of the marketing mix are product, pricing, place, and promotion, often

referred to as the marketing mix or the four P's of marketing. However, as product, place as well as

promotion were discussed in the previous analysis this analysis will focus on price.

1. Price:

Tesla's pricing strategy is unique in the vehicle industry. Unlike traditional automakers, Tesla uses a

floating pricing strategy, a departure from the century-old industry norm. This strategy allows Tesla

to align its prices closely with the average cost of new cars in the US, typically differing by just

$300.16

14
Supporting document 2
15Admin. “Marketing Mix - Definition, 4 P, 7 P of Marketing, Example, Elements.” BYJUS, BYJU'S, 5 Oct. 2020,
byjus.com/commerce/marketing-mix/. Accessed 27 march 2023
16
Wells, Taylor. “Tesla Pricing Strategy: What Sets It Apart from Competitors? .” Pricing Recruitment I Pricing Jobs I Revenue
Management Jobs, 30 Jan. 2023, taylorwells.com.au/tesla-pricing-strategy/.
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For example, when Tesla introduced the Model 3 in 2017, Elon Musk priced it at $35,000, nearly

identical to the national average for new car prices at $34,944. Fast forward five years, and a Model

3 now costs $46,990, while the average new car price in the US stands at $47,692.

Tesla initially justified midyear price changes for the Model S and Model X by introducing new

features. However, with the Model 3's production in 2018, Tesla fully embraced weekly price

adjustments, sometimes with no product changes. Though initially met with consumer apprehension,

this flexibility allows Tesla to respond to supply challenges or boost demand, distinguishing itself

through its distinctive floating pricing strategy.

Financial analysis:

Tesla’s Financial position in terms of revenue

Figure 317

Carlier, Mathilde. “Tesla’s Revenue 2022.” Statista, 17 Mar. 2023,

17

www.statista.com/statistics/272120/revenue-of-tesla/. Accessed 27 March 2023

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The graph illustrates a significant revenue increase for Tesla, notably since 2018, where revenue in

2022 surged by approximately 280%. This aligns with Tesla's strategic changes in market approach

and marketing strategies, spanning from product innovation to dealership reforms. These measures

have greatly contributed to revenue and profit growth, even during the pandemic, with sales rising

by about 118%. In 2022, Tesla's profit exceeded expectations, reaching $12.6 billion, more than

double that of 2021.18

Tesla's financial metrics show positive trends. For the three months ended September 30, 2023,

Tesla's current ratio was 1.69. This demonstrates strong short-term financial strength. Tesla's total

current assets for the fiscal quarter ending June 30, 2023 were $43.875 billion, representing a 40.53%

rise year over year. The debt-equity ratio has consistently decreased over the years indicating reduced

reliance on debt financing compared to equity, however there was a slight increase from 2023 to 2024

(0.07-0.08).

In 2019, Tesla's debt-to-equity ratio was 2.03, with around $23 billion in debt and $6 billion in equity

raised. By 2021, the capital structure had transformed, with $30 billion in liabilities and equity each,

resulting in a debt-to-equity ratio of 0.23. This year, the ongoing debt to equity ratio is expected to

rise to 0.83. This decreasing ratio implies lower financial risk and greater ability to cover interest

payments.

Tesla's net profit margin shifted from negative to positive despite the pandemic, reflecting significant

revenue and profit growth. Retained earnings improved by 106.11%.

18
Domonoske, Camila. “Tesla’s Profits Soared to a Record – but Challenges Are Mounting.” NPR, 25 Jan.
2023, www.npr.org/2023/01/25/1151317322/teslas-profits-soared-to-a-record-but-challenges-are-mountin.
Accessed 27 March 2023
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Moreover, Tesla has consistently increased its return on investment (ROI) by effectively allocating

resources and making high-return investments. Between June 2020 and June 2021, Tesla's stock

outperformed competitors with an impressive ROI of 224.93%. These financial indicators suggest

Tesla's strong financial performance and strategic investments. Below graph represents Tesla’s

growth over the last few years.

Figure 419

19
“Tesla Gross Profit 2010-2023: TSLA.” Macrotrends,
www.macrotrends.net/stocks/charts/TSLA/tesla/gross-profit. Accessed 15 Jan. 2024.
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Conclusion:

Tesla's success in the electric vehicle market can be attributed to its high-end brand image that values

quality and innovation. As seen in Ansoff analysi, Tesla, is well-known for its cutting-edge features

like quick charging and automated driving, places a high value on providing outstanding customer

service to build brand loyalty. Tesla diversifies its product portfolio, introducing innovations like

solar roofs and car batteries, often offering extra features for a fee. Tesla successfully conveys the

value of its products, builds a strong brand identity, and makes sizable sales and profits despite

occasional controversies which is seen in financial analysis. It means its pricing strategy (marketing

mix analysis) has been successful in driving more sales.

Hence, the answer to the research question is Tesla's marketing strategy surely contributed to the

company's success in the electric vehicle market in terms of revenue and profit?

For Tesla to continue to succeed, it will be essential that it stays innovative and flexible as the electric

vehicle market evolves.

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Bibliography and references:

• Person. “Tesla's China Sales Slow as Price-Cut Boost Wanes.” Reuters, Thomson Reuters, 28 Feb.

2023, www.reuters.com/business/autos-transportation/teslas-china-sales-slow-price-cut-boost-

wanes-2023-02-

28/#:~:text=While%20competition%20intensifies%2C%20Tesla%20aims,Asian%20country%20ea

rlier%20in%20February. Accessed 27 March 2023

• Rojas, Frank. “Council Post: Eight Digital Marketing Lessons We Can Learn from Tesla.” Forbes,

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digital-marketing-lessons-we-can-learn-from-tesla/?sh=25e5a24f48c8. Accessed 27 March 2023

• Arun, Rahul. “Tesla Marketing Strategy 2023: A Case Study: Simplilearn.” Simplilearn.com,

Simplilearn, 15 Feb. 2023, www.simplilearn.com/tutorials/marketing-case-studies-tutorial/tesla-

marketing-strategy. Accessed 27 March 2023

• Wells, Taylor. “Tesla Pricing Strategy: What Sets It Apart from Competitors? .” Pricing

Recruitment I Pricing Jobs I Revenue Management Jobs, 30 Jan. 2023, taylorwells.com.au/tesla-

pricing-strategy/. Accessed 27 March 2023

• Gorton, David. “Tesla Stock: Capital Structure Analysis.” Investopedia, 12 May 2023,

www.investopedia.com/articles/markets/052316/tesla-stock-capital-structure-analysis-tsla.asp

Accessed 27 March 2023

• Domonoske, Camila. “Tesla’s Profits Soared to a Record – but Challenges Are Mounting.” NPR, 25

Jan. 2023, www.npr.org/2023/01/25/1151317322/teslas-profits-soared-to-a-record-but-challenges-

are-mountin Accessed 27 March 2023

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• Carlier, Mathilde. “Tesla’s Revenue 2022.” Statista, 17 Mar. 2023,

www.statista.com/statistics/272120/revenue-of-tesla/. Accessed 27 March 2023

• Toh, Michelle. “Tesla’s China Factory Is about to Play an Even Bigger Role in Its Global Ambitions

I CNN Business.” CNN, Cable News Network, 21 Oct. 2022

www.cnn.com/2020/10/21/business/tesla-model-3-china-europe-intl-hnk/index.html. Accessed 27

March 2023

• Republic World. “Elon Musk ‘looks Forward’ to 2024 India Visit amid Tesla’s Plans to Enter Indian

Market.” Republic World, 23 Aug. 2023, www.republicworld.com/business-news/international-

business/elon-musk-looks-forward-to-2024-india-visit-amid-teslas-plans-to-enter-indian-market-

articleshow.html#:~:text=Tesla’s%20entry%20into%20India%20has,India%2C%20potentially%20

benefiting%20remote%20communities. Accessed 27 March 2023