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REUBEN ABRAHAM OOMMEN

STRATEGIC MANAGEMENT
ID NO H00172088
BBA 3RD YEAR
Lecturer - UMMESALMA
MUJTABA
Word Count - 1597

Global competition and increasing pressure from third-world economies and formulate
new competitive strategies to help them compete and at times just to survive. As longterm investors, people invest in those companies with competitive advantage as they have
a greater chance to outperform their peers . Competitive stance is used to gain
competitive advantage. (McClelland, 1994). Strategy refers to two things, deciding where
the business has to go and how to get there. Competitive advantage is defined as the
differential value that is endured between the products and services of one organization to
that of its competitors in the mind of the consumers. (Mende, Thompson& Coenen,2015).
Every organization should strive to create a sustainable competitive advantage as it helps
differentiate it from its competitors. It is the uniqueness of every organization that will
help it thrive in a competitive environment. (Gould, 2015)
As a strategist, competitive advantage allows a company to have a large base of
customers who have a preference for their products over those that are offered by their
rivals, despite efforts to offset its appeal (Gamble and Thompson, 2009). For example, a
company can either compete with its rival by selling its product by keeping its costs low
and selling products at low prices or it can aim to providing a better product at high
prices with more customer service, regardless of the strategic approach chosen, the aim
has to be to produce a product that will appeal to buyers which will set it apart from the
competition. (Harvard Business Review, 1997)
Any company can have four competitive stances on the basis of competition. Economic
strategy, Differentiation strategy, Premium strategy and Blue Ocean strategy (MacIntosh
and Maclean, 2014). (Porter, 1996) explained that any company can have generic
strategies, which a company uses to pursue its competitive advantage over a market
space. A company can choose to pursue one of the two types of competitive advantage
either by providing its customers with products at a low costs (Cost
Leadership/Economic strategy) or by differentiating its product compared its rivals
(Differentiation strategy). A firm when it uses Economic strategy aims to win market
share by providing products to cost-conscious customers. We can use the automobile
industry as a example. Toyota and Kia are famous for producing cars for the masses.
These firms can use the strategy and can provide its customers with low priced products
due to their economies of scale; having greater profit margins cause of low cost of
production and having control over their external environment. (Murray, 1988).
The differentiation strategy on the contrary is the opposite, this is appropriate to target
customers who are not price sensitive are willing to pay to be seen as unique. A strategy
of differentiation is usually developed around firm or product driven innovation and
marketing strategies which maybe hard to imitate very quickly. (Banker,, Mashruwala, &
Tripathy 2014). In the automobile industry, Toyota entered the luxury car segment with a
completely new brand name Lexus. They differentiated themselves from other luxury
car manufacturers by producing a highly sophisticated luxury executive car and entering
the market at a lower price point than its competitors and by branding it a luxury car for
everyone. They differentiated themselves by marketing itself as a single brand and not a
brand that was attached to its parent company Toyota. This strategy helped them

undercut their competition and gain early market share .


(academiccommons.columbia.edu, 2014)
Mercedes-Benz uses the Premium competitive stance for its products. This strategy was
adapted from Cliff Bowmans view of Porters focused on differentiation. Luxury , high
performance and rarity are some of the features that people in this segment demand for.
Innovation is the most important concept of a successful premium strategy; educated
consumers are willing to pay more for innovation, trading up for higher priced products.
The price premium is usually justified due to high value for the customer and the high
quality of the product. (MacIntosh and Maclean, 2014).
Tesla Motors wants to become the first company, which can deliver a high value electric
car at low costs. They use the Blue Ocean strategy. A blue ocean strategist should gain
insight about reconstructing market boundaries by not looking at existing customers but
instead looking at the non-customers and how a product can be created which will
provide value to them. (Randall, 2015)
In terms of blue ocean terminology, Tesla is successful because of a superior feature set
and creating a green performance vehicle market space. Value innovation backed with
commercial and consumer backing is key element for blue ocean strategy (Kim &
Mauborgne 2004).
As a marketing communication strategist, we can analyze the different types of
communication strategies used by Mercedes-Benz and Tesla in the automobile industry
on the basis of their competitive stances and how it helps them achieve their strategy. A
marketing communication strategy is essentially about positioning, putting in consumers
mind what the brand means and how it differs from the competition There are four
strategic approaches to marketing communication strategy , they are Positioning ,
Audience , Platform & Configuration. (Fill, 2013), (Smith& Zook 2011).

(P.T.O)

STRATEGIC
COMMUNCATION
OPTIONS

MERCEDES BENZ (Premium


stance)

POSITIONING

AUDIENCE

TESLA MOTORS (Blue


Ocean)

Luxury vehicle sedan market


with high focus on safety and
reliability
Old average age of typical
Mercedes-Benz customers is
age 46
Now their marketing strategy
is more life style oriented and
is focused more on presenting
the more fun loving,
approachable, and energetic
side of Mercedes Benz

They use a combination of


Push & Pull strategy is used
with the product being the
main message focus with a
communication goal of being
that to purchase.
Push strategies
include trade shows,
showrooms, and creating
a supply chain to facilitate
distribution, Pull strategies
include mass media
advertising, referrals,
customer relationship
management, and sales
promotions.

Currently in the Luxury


vehicle sedan market,
moving towards a more
Mainstream vehicle
consumer segment
Its image and
positioning has
characteristics of being
high-tech , reliable,
attractive and most
importantly
environmentally friendly
(Mangram, 2012)

They use Pull strategy


in motivating customers
to seek out their brand in
an active process.
They have a high focus
on word of mouth
referrals and customer
relationship
management.

PLATFORM

CONFIGURATION

They use a combination of


traditional media with a
greater focus on social media
as they want to increase their
market segmentation with
millennials.
Traditional Media such as
billboards, newspapers, TV ,
sponsorship etc.
Online platforms such as their
multimedia car configurations
on their website, interactive
online films and engaging in
conversations with consumers
on social media.
(Dialmer,2016).

They use bi-directional


communication as it results in
increased feedback and
results .
Their content is direct &
product orientated as they use
social networks and online
communities serve to
influence consumer attitudes
to change behaviour.

They do not use the


traditional media of
advertising to promote
their product
(Forbes.com, 2013).
Only focus digital
advertising to inform
consumers of their
product
Founder Elon Musk,
uses website blog to
communicate directly
with consumers and
update them with
developments

In order to compete in
the industry and
establish the new market
space , their focus is to
deliver the positioning
statement very
frequently .
It is bi-directional and it
is customer focused
product development.
Their content is indirect
and they use various
platforms to inform
consumers as well as
building long term
collaborative
relationships.
(Mangram, 2012)

In true essence, the job of a strategist is to understand the competition and how to cope
with it , how managers usually find competition that is narrow which are their direct
competitors , yet competition is far greater than its immediate rivals , they include four
competitive forces ; Buyers , Suppliers , potential entrants and substitute products. These
define the structure of the industry and how competitive interacts within the industry.
These are known as Porters competitive forces. (Porter, 2008)
Threat of substitutes for Mercedes-Benz
They are basically the existence of products outside the common boundaries,
which give customers an option switch between the alternatives
(Porter,2008).Despite the high competition in the automobile market, it is harder
for consumers to substitute this brand as they have invested heavily in producing
innovative and high quality vehicle brands. They have unique differentiation
features which cannot be matched by other manufacturers There are more
luxurious brands other than Mercedes than some consumers may prefer. They are
also various government policies and regulations which urge people to use public
transport to reduce traffic and environmental pollution in the city. This may to
lead to substitution of private vehicles with public service vehicles. But their
premium differentiation stance helps them as the users of Mercedes will be loyal
and prefer the strong quality brand.
Threat of new entrants for Tesla Motors
There were high barriers of entry as they wanted to enter the automobile market,
which had a number of luxury sedan brands and then enter a un-contested space
of a electric motor car which was aimed at being environment friendly. They have
overcome initial barriers and helped pioneer electric cars. It required high initial
investment with a focus on R&D along with highly skilled personnel who can
take the company forward. (Stringham, Miller & Clark, 2015). Unique part of the
strategy being , after creating the market space they have kept low barriers of
entry for other competitors to come into the electric car market as they have
released patents & rights so others can copy their product. This will help them
create economies of scale within the industry and then give them a first-mover
advantage in order to produce the first mass produced low cost electric car.

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