Business Strategy: Impact of Macro and Internal Environment on Tesla Inc.

This article discusses the concept of business strategy and its importance in coping with competition. It explores the impact of macro environment factors such as political, economic, socio-cultural, technological, environmental, and legal factors on Tesla Inc. It also analyzes Tesla's internal environment through SWOT and VRIO analysis to identify its strengths, weaknesses, opportunities, and threats.

Business Strategy

INTRODUCTION
Business strategy is stated as competitive move that business associates adopts so as to
cope up with rivalry in the intense market place (Anwar and Hasnu, 2016). It is the core task
which need to be performed so that business can sustain over the years. This is prepared by
company so that the desired set standards can be accomplished in the specified deadline.
Business strategy adopted by every company is different because it depends on the type of
business they are operating in the global market. In the open market place there are two kind of
business strategy such as, generic and competitive strategies. This strategies directly or indirectly
assist in identifying products strengths, acquiring new businesses, differentiate goods, adjusting
prices and many more. Tesla. Inc is undertaken to complete the report in effective manner. It is
a leading American automotive and energy company. On July 1, 2003 it came into existence in
California, United States. The team of the organization is working day and night to meet the
needs of the consumers over the years. This successful company is expertise in manufacturing
electric cars along with it firm manufactures solar panels with it's subsidiary Solar city. This
report includes impact on large geographical area. Analyses of internal environment by using
suitable framework is done. To attain better outcomes Porter's Five Force model is evaluated.
Many theories are showcased to understand devise strategic planning.
LO 1
P1)
Macro environment is illustrated as general environment which influence the working of
business associates to a large extent in the international market (Buckley and Ghauri, 2015).
Some of the examples of macro environment are, modification in interest rates, climate,
authorities policies, interest rates and many more. All this aspects directly or indirectly influence
the business day to day working of Tesla Inc. Inflation, unemployment rates taxes are factors of
macro environment. All this reduces the overall productivity and profitability ratio which is a
negative mark for the company. To remain in the competitive world Tesla Inc. need to examine
macro environment because it helps in determining the decisions of an organization. On the other
hand it affect the business operation activity tremendously so top level management of Tesla Inc.
is formulating strong and unique strategies in order to deal with them. By this organization is
able to meet their set standards. Organisation need to be flexible in nature so that they can easily
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cope up with the external environment and can achieve the rising preferences of the consumers.
Below are the some of the external environment factors which impact and influence Tesla and
it's strategies are showcased as under:
Political factor: In the cut throat competitive world political factors plays a vital role in
business day to day activities (Chang, 2016). The continuous fluctuation in political condition
greatly affect the business to a large extent across the globe. Taxation system, governmental
policies, fiscal policy, trade restrictions, monetary policies and so on are stated under political
factor. All this aspects impact business strategies greatly. However, across the globe UK tend to
be political stable so Tesla Inc. has huge opportunities to grow their business in this particular
nation. As well as UK makes favourable condition for business expansion. Moreover, Brexit
may cause imbalance and uncertainness in United Kingdom so management of Tesla design
tactics in such a way that the business activities does not get influenced. On the other hand UK
government is providing complete support on manufacturing electric car as it is environmental
friendly. So it is a great opportunity for Tesla to expand their business in UK. However,
initiatives are being taken by the governing bodies regarding reducing usage of oil and use
more eco-friendly energy resources to cut down global warming.
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Illustration 1: Pestle analysis, 2018
Source: Pestle analysis, 2018
Economic factor: It is another external factor which are impacting the business of Tesla
Inc in the global market (Grayson and Hodges, 2017). In order to determine the overall
performance of economy and it's influence on business strategies various economic factors such
as, inflation rates, unemployment rates, GDP trend, interest rates and many more need to be
studies properly. As Tesla Inc. is dealing in manufacturing electric car UK is the best nation to
grow and develop their business because it provide cheap technology and batteries that can be
utilized by them in their electric auto-motives. By this operational cost can be cut down and car
can be offered to the customers at nominal rate. Due to Brexit there can be decrease in the value
of pound that indirectly raises prices of the electric car. Also, Brexit results in trade deals among
United States and United Kingdom that will impact the tactics of the form so that cost can be
controlled from raising high.
Socio-cultural factor: In the global market socio-cultural factor reflect taste, trends,
demographic, culture, preferences, lifestyle and so on. United Kingdom has ample market
belonging to numerous traditions and culture with varied demand and preferences. As global
warming is raising tremendously it is a major concern due to customers are seeking for more
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eco-friendly products in the global market. As Tesla Inc. is manufacturing electric car which is
completely environment friendly so there is huge opportunity for Tesla business expansion. By
this electric auto-mobiles will be able to compete with the existing rivalry (Habib and Hasan,
2017) . Also, firm will be able to meet the preferences of the consumers which leads in raising
goodwill on the brand. Whereas, it has been seen that there is more disposable outgo difference
in United Kingdom as compare to other nation. It will assist nation that might impact firm's
tactics in pricing strategies of its electric car.
Technological factor: Business can compete with rivalry when have modern tools and
techniques for production of goods and services in the global market. Technological factor is
associated with automation, technological advancement, new idea and innovation. Worldwide
UK is technological advance as compare to other developing nation. By this numerous business
opportunities are provided to organization so that they can modify their products and can cut
down the production cost. By this at low rate high quality goods can be offered to the customers.
Tesla Inc. is dealing in electric car manufacturing it is the best and most suitable place to expand
their auto-mobile business as UK has high tech plant and machinery. Moreover, by frequently
changing the technology it leads in quick devolution of the goods of the firm and raises cost of
innovation . By this it makes the car more costly for client (Johnson, 2016).
Environmental factor: Terrain, environmental regulations, availability, weather
conditions, climate change and many more are example of environmental factor. To remain in
the competitive world business need to focus on environmental factor. On cretin norms and
principles the environmental policies of United Kingdom are based on. By this any organization
can not exceed the pollution rate. If it is done huge penalty need to beard by auto-mobile
company or cancellation of their licence is done. As global warming is raising day by day and
creating awareness regarding it provides several opportunity to Tesla Inc. in order to operate
their manufacturing business of electric car smoothly in UK market. Moreover Tesla's products
are environmental friendly so it can be easily commercialized because they manufacture solar
energy operated batteries rather than car based on oil.
Legal factor: It is essential to follow legal norms framed by the governing bodies of the
nation to operate the firm smoothly. Every country has their own set of norms which is
compulsory to follow by businesses so as to assure customers that they are conducting legal
work in the global market. United Kingdom has suitable legal structure for Tesla Inc. to run in
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the nation. By this business of auto-mobile can be carried easily and expectation level of
customers regarding delivering ozone-friendly good can be achieved in the set deadline (Lai and
Stacchezzini, 2016). However, the United Kingdom government render plug-in car grant up to
£5,000 for electric and hybrid vehicles. Along with this many policies and charges are
formulated by the governing bodies regarding creating polluting cars. So, it is a favourable
opportunity for Tesla as they are dealing in electric car which does not emit harmful gases in the
air. Tesla need to follow all the legislation designed by UK governing bodies in order to ensure
that thy are conducting business in the designed legal framework of the nation.
M1)
Macro environmental factor are those uncontrollable forces which can not be controlled
by company instead they need to frame strategies to deal with them in the open market. By
scanning the external environment strong tactics is framed so that their influence of business
operation can be reduced. Through business strategies firm is able to accomplish set standards in
the set time duration . According to the dynamic environment Tesla need to change their
business strategies so ad to cope up with political, social, legal and economic conditions which
occurred due to Brexit. On the other hand UK is providing advance technology to Tesla for their
flourishment of the company in electric car whereas, the frequent obsolescence of goods is a
threat because the demand of the customers are fluctuation quickly.
LO 2
P2)
Internal environment are those type of factors that are prevailing in an organization and
are greatly affecting the business decisions and strategy (Linder and Williander, 2017) .
Management can easily control the internal environment factors and can cope up the rivalry
prevailing in the global market. Some of the examples of internal factor are, technology, vision,
value system, corporal culture, physical resources, mission, objectives and employees of a firm.
Tesla's internal environment and capabilities can be analysed beneath:
SWOT analysis: It provides complete detail information regarding internal factors of
Tesla. By this strengths, weaknesses, opportunity and threats can be identified easily that is a
optimistic mark for the enterprise in the global market. Through SWOT analysis opportunities
prevailing in the open market can be ascertained and strategies can be framed to capture them for
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their betterment. Tesla conduct SWOT analysis in order to discover the threats prevailing all
around. It assist directly or indirectly in identifying various ways to overcome the threats so that
business can easily operate their business. The SWOT analysis of Tesla Inc. are explained as
under:
Strengths Weaknesses
 Tesla has integrated battery
manufacturing at Gigafactory.
 Serving high quality good at low cost in
the international market so that
maximum profit is gathered.
 Organization is using differentiation
electric power train technology so that
set standards are accomplished in the
specified deadline (Marx, 2015).
 Customer satisfaction is their main
motive which leads in raising loyal
customer for their electric car.
 Market share is low in the global
market. So less profit is maximized as
compare to rival present in the open
market place.
 Tesla Inc. conduct research and
development activities on continuous
basis which incur huge monetary value.
Due to which investment is not done in
other segments of the business which is
serving it's electric car worldwide.
 Organization has individual source of
supply of cell for battery power packs.
Opportunities Threats
 The awareness created on global
warming has raised the supply of the
electric car in the in the market as
compare to fuel based car.
 Tesla has huge growth opportunity as
they can diversify their business of
eco-friendly products in other
segments too. By this number of
customer base can be raised to a large
extent.
 Across the globe there are many
organization who are dealing in eco-
friendly products. But customers
mostly prefer those goods which are
environmental friendly and are cheaper
in price.
 The value of pound reduced after Brexit
that ultimately leads in uplifting the
prices of Tesla's electric car in the
competitive market place.
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VRIO analysis is the another tool through that internal environment can be measured and
tough competition can be formulated for rivalry in the intense market place. Across the globe
Tesal is well known for its unique product launched in the market. All this has enhanced Tesla's
position in the intense market place. Through this firm has become the leading company above
a;ll its rivalry dealing in the same segment of car (Moseley III, 2017).
VRIO analysis of Tesla is as follows:
Value: Through these it can be identified weather the designed goods and services are
successful in providing value to the customers or not. The car designed by Tesla are quite
comfortable as it provide easy ride to the customers. As well as render high value for the
consumers who are concern towards their environment. By this competitive advantages can be
gained easily.
Rare: Here, it is analyses weather firm is capable to provide unique goods and services
which are difficult to replicate to the consumers. In the open market place Tesla render electric
motors with two moving parts and single-speed transmissions with no gears in it which makes it
different from it's competitors goods commercialized in the market. It yield Tesla the benefit of
not being copied by other organisation.
Imitable: It is another part of VIRO model which is widely adopted to examine the goods
and services of a firm can be imitated. The electric car which is designed by Tesla is very unique
and creative in nature. It can not be copied by competitors prevailing in the global market it will
require sufficient fund and time for imitating it. Additionally, within the time rivalry try to copy
it Tesla's product would have successfully capture huge market ratio with this product.
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Illustration 2: VRIO Model,2020
Source:VRIO Model, 2020
Organisation: Policies, culture, structure and managerial system of a company are
determined by this factor VRIO model. It directly or indirectly assist in fully realising the
potential of a firm's extraordinary and costly resources and ability. Tesla is capable in meeting
competitive advantages because organization has strong and effective processes and
management systems (Parnell, 2016).
M2)
The positive and negative side of the firm can be determine by assessing the internal
environment in proper manner. To remain competitory in the intense market place it is essential
to mould the opportunities present in the market for their business betterment. Also, proactive
action need to be taken in order to overcome threats and to flourish in the market. VIRP model
has assist Tesla to come up with unique product as to create value for customer’s and can not be
easily copied. Additionally, effective process and norms aid firm to gain sustainability
advantages as compare to rivalry.
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LO 3
P3)
Porter's Five Force Model was discovered by M. Porter in the year 1978. By using this
degree of power can be examined with the with of five forces. It is widely adopted for planning
and executing the tactics to raise the potential of enterprise (Shuen, 2018). Porter's five forces in
Tesla are explained as under:
Threats of new entrants: The power of fresh entrants is more they are financially strong
and can compete with market challenges. The manufacturer of auto the new entrants in the global
market. New entrants are adopting low pricing tactics in the market and also, supply new value
to the end users. Due to which the pressure of coming up with innovative product and services
has raised in Tesla. In order to remain in the competition Tesla has identified the way to
overcoming new entrants challenge by innovating eco-friendly car at cheap price. On the other
hand it has build new economies of scale to control the fixed cost per unit. To be in the leading
position more unique ways need to be discovered so that new entrants can not enter the market.
By this set goals and objectives of Tesla can be full-filled easily.
Supplier power: In the global market there are several auto manufacturing firm who are
serving their best products to the customers. There there is few supplier of Tesla's product so
they have high power in their hand. In this case customers are exploited to a large extent and are
charged large amount for the raw material. Due to which margin of Tesla's has reduced due to
the dominance of the suppliers. Tesla can overcome this threat by improving their supply chain
as well as upgrading the supply of raw materials from several suppliers. By this bargaining
power of suppliers can be managed to a large extent.
Buyer's power: The bargaining power of buyer is more can force the suppliers to low
down their prices and can charges for high quality goods and services at nominal prices in the
market. By this organization is unable is to maximize huge profits from the people. The powerful
client of organization has raised their bargaining power and demand for offers. By this Tesla is
benefited by is it helps in managing the bargaining power of customers and the overall
production process and sales are uplifted rapidly (Sia and Weill, 2016.).
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Illustration 3: Porter's Five Force Model, 2020
Source: Porter's Five Force Model, 2020
Threat of substitute: The sales and profitability volume of the organization is impacted
by the entry of substitute in the competitive market place. Slight change in the prices and quality
of the car customers easily switch to other brand like, Fortwo electric drive and Ford Focus
electric. This are the alternate option for Tesla. When Tesla is unable to achieve the preferences
of the client switch to substitute because they are satisfying the emerging demand of the
consumers. So it is very essential to transact with the substitute of Tesla by focusing on services
instead of goods.
Competitive rivalry: The existence of rivalry affect the sales ratio of the customers to a
large extent. Tesla is operating its business among the competitors prevailing in the international
market. Organization is capable of tackle the rivalry in the global market by serving sustainable
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product variation. Additionally, by building competitive strategies are designed to cope up with
them. Tesla collaborate with small rivalry so as to increase their market size and position
(Thompson and Gamble, 2015).
From the above it can be concluded that with the help of porter's five force model Tesla
can easily identify factors influencing the growth and sustainability of the firm. Additionally, it
helps in utilizing the opportunities which are favourable for the business in the global market.
M3)
Strategic provide guidance in taking suitable decisions and actions in order to attain
firm's set standards. Porter's Five force model aid in measuring external forces that impact the
tactics of the firm. The positive and negative aspect of the company is identified and with the
support of tactics the loop holes ca be overcomed with the phase of time. With the help of
proactive actions threats can be managed. To gain competitory advantages in the global market
organization need to capture the opportunities present in the global market and then turning
them into their business opportunity.
LO 4
P4)
Ansoff Matrix was developed by Igor Ansoff. It was designed to provide a framework so
as to aid top level management of the firm in order to devise tactics for further growth and
expansion. Tesla adopts this model as it directly helps is business to grow in the competitive
market place. The model is illustrated as under:
Market penetration: In this case, present goods are sold in the existing market. It is less
risky tactics because consumers are well aware about the product and services (Tsai, K. H. and
Liao, 2017). Organization can do market penetration through advertising and attracting ample
number of client towards the goods and services. In order to sell model S, Model 3 and so on
Tesla adopts this strategy.
Market development: Here, in the new and fresh market existing goods are sold to the
customers. In the market place Tesla has numerous untapped market that it used to
commercialize their electric car. By this market share and revenue maximization ratio can be
raised tremendously as this is a new concept in many countries.
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Illustration 4: Ansoff Matrix
Source: Rick De Vileger, 2019
Product Development: In present market completely fresh and new goods are sold to the
client. Less product development is done by Tesla in their product and services this is because it
requires huge capital. Therefore, pick-up trucks and semi truck are developed by this
organization to achieve the preferences of the client.
Diversification: Totally fresh and innovative goods are sold in the completely new
market. By doing so huge market ratio can be captured by the firm . In the year 2003 Tesla
started with electric car but later on diversified their business to SolarCity in 2016. This
particular tactic is costly because huge finance is needed to advertise the new good in new
market in the global market where intense competition is prevailing (Vlachos, 2016).
From the above discussion it is summarized that Tesla is using market development
strategy for flourishing their business in the market. By this firm is able to sell out their present
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car in the new market. Electric car is a new concept so there is immense growth opportunity for
Tesla to grow their auto-mobile sector in various nation.
M4)
Strategic management plan is widely used for framing vision and mission by
understanding the external factor. Through this company is able to gain long-term sustainability.
The strategic plan for Tesla are showcased as under:
Vision: To bring huge change in the sector of auto-mobile industry by coming up with
innovative car.
Mission: To stimulate people for using sustainable transport
Strategies: Tesal adopts market development tactics so as to raise sales ratio of existing
car in the new market.
Objectives: To uplift the sales volume by 20% in the coming 8 month.
D1)
To compete with rivalry it is mandatory to examine internal and external factors. SWOT and
PESTEL analysis provide detail regarding the factors affecting Tesla 's day to day operation
activity. By doing so strong strategies can be framed in order to overcome them. Whereas, VRIO
model assist in meeting the competitory potential of Tesla. Along, with it Ansoff model aid firm
to raise their sustainability in the industry (Sia, and Weill, 2016).
CONCLUSION
From the above it can be summarized that in order to compete with rivalry it is very
essential to design business strategy. It is the most essential task which need to be performed by
management of the company in effective manner. Business strategy should be prepared by
scanning the external environment so that best tactics can be identified. Influence on macro
environment is studied so that necessary improvements can be done. By doing so business can
grow and develop easily without government interference in open market place. For continuous
flourishment in the competitive market it is essential to measure the influence of macro
environment on firm's tactics and day to day working style. Analysis of internal environment in
order to make modification within organization so that in the desired time duration the set
standards can be accomplished. Porter's five force model is studied so as to gain productive
outcomes as compare to competitors in the international market. Many theories like, Ans-off
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matrix and Porter's generic model is determined as it aid in devising the most suitable marketing
strategy. By this competitive advantages against rivalry can be attained easily.
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