What is a market space and what kind of market space is Tesla considered to be in?
In: Economics
A market space is the set of sellers and buyers of a particular type of good or service. There are two defining characteristics of a market space: The first is that there are finitely many buyers in the space at any one time, and the second is that the sellers are competing with each other by selling goods or services that are fundamentally indistinguishable.
Companies can rarely be said to exist in just one market space. Markets are not objectively defined things. You can “slice up” markets in a variety of ways based on the minor characteristics of goods or services available for sale or the demography of the buyers in a market. But the fundamental idea is that buyers in a given market *make a choice* to buy from either this seller or that one or another one. Meaning for each sale, only one seller gets to book the revenue.
It’s probably closest to objective truth to say that Tesla is exclusively in the high-end electric car market, while as a company they aspire to someday participate in the broader automobile market.
It is a segment of a larger market.
Let’s take the US for example:
1. You have the US market. This includes all market activity (buying and selling) in the US.
2. Then you have the US consumer market. This is all the things people buy for their personal use.
3. Next lower is the consumer automobile market. The cars people buy for themselves.
4. Then you have new consumer automobiles
5. Premium consumer cars.
6. Sports/Luxury automobiles – This is the market space I would say Tesla is in. They are a premium automaker, with electric cars and high-tech as driving ideas behind their brand identity.
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