TESLA INC. BLUE OCEAN SUCCESS
3 Stocks That Followed Blue Ocean Strategy: What's in Store?
Nasdaq
Published: Sep 17, 2015 5:00 AM EDT
In a competitive market, as the battle for survival gets murkier with
intense price wars and diminishing technological barriers, companies are
increasingly devising newer avenues to outsmart rivals. These include
out-of-the-box ideas for innovative product concepts to redefining the
corporate strategy within a framework in accordance with the changing
dynamics of the customers.
In this regard, 'blue ocean strategy' has been one of the much acclaimed
tactical moves adopted by diversified companies to gain a competitive
advantage over peers. The term is coined from the book "Blue Ocean
Strategy" penned by W. Chan Kim and Renee Mauborgne. Before we seek some
classic examples as to how some companies have benefitted from it, let
us dig a little deep to get an essence of this strategy.
A Brief Synopsis of the Strategy
The concept exemplifies a typical scenario in the real world, where
intense competition leads to bloodbath and thereby renders an ocean red.
Instead of viciously fighting against each other to gain market share,
companies therefore should create an 'uncontested market space' or
rather a blue ocean, which is pristine and pure and devoid of any
interference or competition.
The strategy is likely to be successful as it would simultaneously
attract a large chunk of customers as well as raise the cost of
competition with a first-mover advantage. Whether it's a new product
altogether or an existing product refurbished with some added features
or services, the uncontested market space is likely to have a better
emotional connect and create a new value curve for the customers.
Various companies have successfully found this elusive blue ocean and
have been able to fend off competition against the odds. Here we take
the examples of three diverse firms to showcase the efficacy of this
strategy.
Tesla Motors, Inc. TSLA : This automobile manufacturer that sells
battery-charged electric cars created a blue ocean for itself by
designing a car that integrates the features of a green vehicle with
that of a high-octane driven premium sports vehicle. The company
redefined the industry metrics with Tesla Roadster, a lithium-ion
battery fuelled car that clocked 0-60 mph in 4 seconds with zero
emissions and a sports-car look.
The Roadster hit the markets in 2008 and was the first highway-capable
all-electric vehicle in serial production for sale, which eliminated
fossil fuel usage and related high maintenance costs. Although electric
cars occupy a small portion of the global automobile market, Tesla has
acquired substantial market share within this niche segment. Its
subsequent car Model S was the best-selling electric vehicle in the U.S.
in the first half of 2015.
Tesla delivered a record high of 11,532 vehicles in the second quarter
of 2015, representing a year-over-year improvement of 52%. The company
anticipates annual sales of 500,000 units by 2020. Thereafter, Tesla
hopes to double its production every year for a few years to attain
annual sales of several million vehicles by 2025.
Starbucks Corporation SBUX : The speciality coffee provider was able to
develop an uncontested market space by redefining the mundane coffee
drinking experience into an ingrained way of customer life. This was
achieved by refurbishing the ambience with music, Wi-Fi, relaxed seating
and luxurious interiors that served a perfect occasion for customers to
socialize with friends and relax at a slightly premium price. Along with
the unique 'me-time' experience, Starbucks created a new value
proposition for its customers with focus on mobility and social media by
introducing the Mobile Payments Application.
Starbucks holds a leading position in digital, card, loyalty and mobile
capabilities through wide proliferation of smartphones and mobile
technologies. At present, more than one-third of all the U.S. and Canada
transactions take place through Starbucks cards. At the end of June
2015, the company had over 10.4 million active members in the U.S. under
My Starbucks Rewards (MSR) program, up 28% from the last year. Moreover,
Starbucks' mobile app is reportedly one of the most widely used mobile
payment apps in the U.S.
In an interview, Kim observed: "What they (Starbucks) are really selling
is atmosphere. By changing the atmosphere in which coffee is sold,
Starbucks created an uncontested market and made the competition
irrelevant."
Apple Inc. AAPL : This famed electronics goods manufacturer eked a new
chapter in its history by shifting its business from computer
manufacturing to disruptive innovations like iPod, iTunes, iPhone, iPad,
iCloud. These devices have since been an integral and essential part of
our lives.
With ingenious products that are based more on functionality and
usability, Apple creates technological innovations that customers least
expect, focuses on its unique selling points to build a need and scales
up production before competitors could react. This enabled the company
to gain a competitive advantage over its peers and create a niche market
when supply exceeded demand.
Apple's growth story was perfectly summed up by Kim, when he remarked:
"By making a series of blue ocean strategic moves such as iPod, iTune,
iPhone, and iPad, Apple not only achieved sustained profitable growth,
but also revitalized the declining consumer electronics industry. Apple
achieved its success not by investing in what was hot in the
marketplace, but by making strategic moves to lead and shape the
evolution of a declining industry."
What Lies Ahead for These Game-changers?
In a comparative study, all these stocks have performed relatively
better than the benchmark S&P 500 index in the last five years. Tesla
recorded a phenomenal 1,204.7% average return, followed by 338.3% by
Starbucks and 178.6% by Apple compared with a 73.7% return by the S&P
500. In addition, Tesla has a long-term earnings growth expectation of
25.0%, while Starbucks and Apple have 17.6% and 14.1%, respectively.
These metrics give us enough confidence about the long-term potential of
these Zacks Rank #3 (Hold) stocks. Therefore, shouldn't these stocks
form an integral part of your portfolio?
-------------
Lancaster University | Management School 2016
Blue Ocean Strategy (for Tesla Roadster)
Tesla's goals are to increase the number and variety of EVs available to
mainstream consumers to reduce the dependence upon foreign oil and
eliminate emissions. It tried to satisfied customers with higher
efficiency and comfort in a relative low price.
In traditional "red ocean" marketplace of vehicle, the market is
segmented to many different groups according to different customer
demands. In order to satisfied the target group, the vehicle companies
need to adjust the attributions of vehicle from size, appearance etc.
The "green" car and sports car seems to always focused on two different
customer groups in the past. The major feature of green cars was low
energy cost, which seems to conflicted with the characteristic of
premium sport vehicle. Tesla Motor was the first company to combine
these two attributes in one single vehicle model- the Tesla Roadster,
which was the first vehicle of the company. It is a fast vehicle with
plenty of torque with zero emissions. Tesla created "green performance
vehicle" marketplace, it is completely new market which haven't existed
before (Chamberlin, 2013). Tesla create this "blue ocean" to itself,
where exist large space for it to develop.
Within the current business market, the companies are always involved in
fierce competition, due to the development of technology and
globalization. Survive and further develop the company seems to be
harder than before. As Mauborgne(2005) said, the capacity of an
enterprise to move into the blue ocean could be described as the
business success. Even if the most popular model of Tesla vehicle is not
Tesla Roadster currently, the continuous development of this vehicle
model assist Tesla establish high entry barriers in this blue ocean, the
first mover advantages that Tesla has are benefit to the development of
Tesla as a whole.
-----------
"Blue Ocean" Thinking: Not Just For Elon Musk and Tesla
December 10, 2019
Mike Cioffi, TireTalent.Com
Our industry can be somewhat 'old school' and traditional. How can you,
as an independent dealer, 'open up new space' in your market, drive
increased demand for what you offer and set your business apart from the
competition?
My advice? Look to Elon Musk and the 'blue ocean strategy' that he is
applying. Love him or hate him, the controversial entrepreneur recently
made headlines when he unveiled Tesla's Cybertruck concept. To date,
Musk says Tesla has received 250,000 orders for the truck, despite the
fact that it won't be released until 2021.
How did he do it? How can you take this blue ocean approach and make it
your own?
First, let's look at what this truck means for the auto industry and
what we can learn from Musk's strategy. Despite glitches during the
Cybertruck's unveiling, the vehicle is gaining massive press around the
world.
This is a one-of-a-kind product and its features are truly impressive.
It has a top-notch, four corner air suspension, and Tesla designers also
added in a wraparound rock rail, which protects the passenger doors and
the rear panels. When it comes to tires, the truck seems to be equipped
with products that are well-sized and designed for off-road capability.
So, what does the term 'blue ocean' mean? Put simply, blue ocean is
unexplored, new areas of the market.
The blue ocean concept comes from a book of the same name, published in
2005 by W. Chan Kim and Renee Mauborgne, two professors from the
European Institute of Business Administration. The idea is that if a
business can open up a new space in the market, it will be able to
create its own demand and make the competition irrelevant. (In contrast,
a 'red ocean' is a crowded market, so packed full of other sharks
fighting over fish that the water has turned bloody.)
Kim and Mauborgne challenged their readers to let go of the limitations
of industry structure and market boundaries, and value innovation
instead.
Blue ocean describes the vast and deep unlimited potential waiting in
unexplored market spaces. I believe that Tesla's Cybertruck is an
excellent example of blue ocean strategy. It certainly looks different
than anything else that has come before it. There are other electric
pickup trucks on the market, but the stainless steel construction of the
Cybertruck makes it unique.
A lot of the time, Blue Ocean products also are more cost-efficient than
anything that has come before them. Tesla has created a very easy entry
point for those who want to pre-order the vehicle. All you need to do is
make a simple $100 deposit, which is 100% refundable. This is a
relatively affordable price for someone to pay for bragging rights that
they have a Cybertruck on the way.
Other pickup truck manufacturers are operating within the
long-established boundaries of the current market. They are competing in
a frenzy in the blood-red ocean, trying to beat each other on fuel
efficiency, towing capacity and more. New pickups even look somewhat
similar. And their manufacturers seem to be targeting the same type of
buyer.
Instead of bringing out just another truck, Tesla did something
different by creating this eye-catching and different, futuristic
vehicle. Tesla has been able to add new value at a lower cost, at the
same time.
How can you take the blue ocean concept and apply it to your dealership?
I would argue that you first must let the current limitations of your
red ocean market go and then brainstorm ideas that are completely
different - and even, some might say, 'bizarre!'
It's also valuable to seek creative and innovative talent - people who
have the ability to see blue ocean potential. A blue ocean strategy can
inspire us to think outside the box. Look at the dealers who are
innovating in the mobile tire installation space, for example.
As 2019 winds down, I encourage you to leave the red ocean and instead
adopt a blue ocean mentality. This will position you for even greater
success in the year ahead.
-----
Frontier Strategy
Tesla Motors
Company Snapshot
Tesla Motors is a start-up company based in San Carlos, California. It
designs and sells high performance, highly efficient electric sports
cars and sedans.
Blue Ocean Strategic Move to Watch
Tesla Roadsters created a big Blue Ocean wave. Tesla Motors has created
a stylish, high performance sports car that is 100% electric and more
than twice as efficient as today's best hybrids. The company is
leveraging existing battery technology to create Value Innovation by
reducing costs and increasing buyer value at the same time.
The Roadster accelerates from 0-60 mph in 4 seconds (faster than a
Porsche 911) and has a top speed of over 130 mph. Unlike previous
electric vehicles, it also has a much wider range (over 200 miles per
charge) and can be charged anywhere since it has a built in Li-ion
battery system and mobile charger that can plug into any outlet. Best of
all, the sports car looks great and uses no gasoline. It creates zero
emissions.
Future
Tesla has already sold over 2,300 of its its first vehicle, the
Roadster, and in June 2012, delivered its first affordable sports sedan,
the Model S. Its goal is to "accelerate the world's transition to
electric mobility with a full range of increasingly affordable electric
cars." This bold vision is compelling and has the potential to create a
huge blue ocean. The sedan's appeal to a larger mass of buyers may allow
the company to significantly reduce production costs through scale
economies.
------
Transformation Academy
TESLA - A BLUE OCEAN
Tesla Motors is a great example of a blue ocean company. In 2003, they
decided to innovate into an areas where there was no competition. Other
car makers at the time were making 'compliant' cars, meaning the were
making hybrid cars to show they were meeting the government's mandates
to be working on 'green' technology. Sales of these products were low
because they weren't terribly good and the benefits did not outweigh the
extra costs of the hybrid models. Tesla decided to go a different
direction and create a 100% electric car, which had been done before.
But, Tesla did what others said was impossible. They overcame most
people's arguments against electric cars - they're slow, they don't go
far enough, and they're ugly. The Tesla is a sports car. It is fast,
goes over 300 miles in between charges, and is sexy too! In fact, recent
tests show that Tesla has faster acceleration than Lamborghini and
Ferrari!
You might be thinking my, "industry doesn't have a blue ocean." Ford,
GM, Toyota and the rest of the big car companies didn't either, but they
were wrong. They allowed industry norms to hold them back:
They were held back by the notion of the money they thought they would
lose if they made electric cars that took sales away from their gas
cars. You see, car dealerships and manufacturers make so much money off
the repair costs of cars that they don't want electric cars to replace
internal combustion engines because electric cars have extremely low
maintenance costs. They were held back by their assumption that there
was no market demand for electric cars because of the objections people
had to them - slow speed, poor range, and ugly aesthetics. They were
held back by the powerful established influence of the oil industry who
didn't want the car industry to disrupt their profits due to gas-powered
engines.
And so, they all continued to compete in the red ocean of the auto
industry, refusing to see the possibilities.
Elon musk, the billionaire founder of Tesla, created a blue ocean for
electric cars. And, his innovation has planted the seeds of disruption
for the entire industry. Not only did Tesla invent an electric car that
meets all of the needs of a car driver and avoids the pain points of
older electric models, they pioneered the technology of autopilot. Along
with other companies, like Google, cars that can drive themselves
without any human intervention, and do so with many times greater safety
than human drivers, are already on the road. In the near future,
autopilot vehicles will be replacing traditional drivers, including
those who drive taxis or large commercial trucks. And next, they're
coming for average car drivers. As autopilot cars become more accepted
into society, many people will choose not to buy a car at all because an
individualized form of public transportation will have arrived.
The blue ocean that Tesla created may not always remain blue, which is
why ongoing creativity, future anticipation, and innovation are needed
in any business that wants to remain successful in the long term.
------------