Business Strategy: Macro Environment, Internal Analysis, Porter's Five Forces

This document discusses the application of appropriate frameworks to analyze the macro environment, internal environment, and competitive forces for Tesla Motors. It includes a PESTLE analysis, SWOT analysis, and Porter's Five Forces model. The document also explores the opportunities and challenges faced by Tesla in the electric vehicle industry.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1: Apply appropriate framework that influences macro environment.......................................3
M1: Critically analyse macro environment to determine strategic management decisions.........5
TASK 2............................................................................................................................................6
P2: Analyse internal environment for an organisation................................................................6
M2: Critically evaluate the internal strength and weakness........................................................8
TASK 3............................................................................................................................................8
P3: Apply Porter's five force model to evaluate the competitive forces......................................8
M3: Devise strategies to enhance the competitive edge............................................................10
TASK 4..........................................................................................................................................10
P4 & M4: Applying range of theories in order to devise strategic planning.............................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Business strategy refer to the core management practices that include combination of
decision and their implementation in order to avoid the existence of adverse condition within the
organisation (Scholes, 2015). Such strategies assist the firm to secure desired position which
leads to meeting desired ends of firm. For the better understanding of report Tesla company has
been selected which is specialised in manufacturing electric cars by using solar panels in order to
carry out multiple production in more quicker and efficient manner. The company is known for
its innovative approach to come up with electric cars that leads to minimal or zero emission of
carbon. This report cover topics like impact and influence of macro environment on an
organisation. Access the internal environment as well as capability of an organisation. Along
with that application of the outcome by using porter's five factor model. Furthermore, application
of the models, theories as well as concept to interpret the strategic direction available to an
organisation are covered in the report.
TASK 1
Apply appropriate framework that influences macro environment
Pestle analysis: This include various external environment that help the firm to
understand the macro environment in which it operate its business and can affect the functioning
or performance of firm. Tesla is well know brand that has used sustainable methods to
effectively designed the business model for which it focuses on the energy product. Thus, in
order to adopt and implement the changes to concentrate on the various external factors that are
explained beneath:
Political factor: The political environment of any nation directly as well as indirectly
affect the economic activity and the rate of employment (Johnson, 2016). Usually the nations
which are politically stable leads to prosperity due to rise in higher economic activity and vice
versa.
Positive impact: Tesla unlike other vehicles depends upon electricity as well as gas
instead of fuel to run the cars. Along the drivers of Tesla can refill the cars by just visiting
electronic station for the convenience of user. Such initiative was highly appreciated by local
authorities and helped the company to expand by giving them state tax credit in order to widen
its reach.

Negative impact: Even after signing the global trade agreement and positive response
from government Tesla can find huge complexity to expand in the emerging economies because
there they can face the issue of political instability.
Economical factor: It include different economic phases that need to be studied by Tesla
company as it can affect business fortune. With the increase in awareness and disposable
economy of the people the demand of electric cars has grown up in both developing and
developed countries.
Positive impact: In order to meet the upcoming demands and expand the reach Tesla
company has come up with various variants in luxury cars like it launched Tesla Roadstar,
Model X which is the electric SUV car and gained immense attention of people. Along with that
the company introduced Model 3 which is low cost car that met the demand of middle income
group effectively.
Negative impact: Though the company has low competition in terms of electronic vehicle
but still majority of the people spend in fuel cars instead of green cars.
Social factor: This is simply of the most important factors that can influence the strong
demand and supply of product. It is vital for the company to understand the perspective and
desire of the target market for launching any product.
Positive impact: Nowadays most of the people are aware about the environment and
understand the relevance of sustainable product due to which they are favourable to seek interest
for sustainable brands like Tesla Roadstar. Thus, such transition in the attitude and preference of
people have affirmatively enhanced the market of company.
Negative impact: In order to cater the growing market for fuel efficient car Tesla need to
expand its capacity otherwise the company can consume huge time and money to supply the car
to end user which can reduce the interest level of consumer and lead to dissonance.
Technology factor: This is one of the most influencing factors that has assisted the firm
to expand their business globally from smooth production till the marketing of brand. Adoption
of latest and newest technology has lead to the growth and profitability of company.
Positive impact: Tesla has gained the special position due to the implementation of
artificial intelligence as well as automation in vehicle that leads to the advancement which is not
achieved by the other countries (Verbeke, 2013). Implementation of such strategy in terms of
technology gained huge recognition.

Negative impact: The company constantly create and develop the new methods to run
business which at times is huge time and cost consuming that even increase the final price for
user.
Environment factor: For the adequate functioning the business need to take special
precaution to implement suitable CSR strategies that leads to substitutability by saving energy.
Positive impact: Tesla already has good image and reputation in terms of sustainable
development as it has always focused on the production of energy efficient product which can
lower down the emission of carbon. The company has sustainable used more electricity in
comparison with gas.
Negative impact: To adopt the environment friendly technique the company has to make
huge investment to develop the gas station that can refill the car. So due to huge expenditure the
company relatively takes more time to expand their business.
Legal factor: It include the legislation which is designed by the local authorities to
preserve the interest of the employee (Pestle analysis, 2018). As Tesla is expand on the regular
basis so they need to be updated regarding the internation patents, business regulation and labour
rights.
Positive impact: Tesla company ensures that it abide by the international regulation and
promote their cars by focusing on environment friendly techniques.
Negative impact: As different countries has somewhat same or different laws that can
leads to rigidity in the functioning of business and can even lead to high operational cost.
Tesla has widely captured huge market because it has always focused to make the energy
products that can appeal the interest of internal and external stakeholder and carry out sustainable
development effectively. It has played the dynamic role to develop the technologically
innovative vehicle which has helped the company to transform fossil fuel into the greener
method that has dropped down the carbon emission to retain the interest of environment
(Blackburn, Hart and Wainwright, 2013). Subsequently, Tesla motors one after the other come
up with new creation like Roadstar, Tesla S as well as offered the zero emission power
generation with the help of giga battery that can be used either for business or home purpose.
Contrary, as the company is expand to different parts of the country and new geographical areas
so political disruption or any kind of internal chaos can drain the market of company. Hence,

although the company functions for the welfare of surrounding but at same time the manager
need to think about the preferences of customer otherwise they may lack in meeting the end users
need.
TASK 2
Analyse internal environment for an organisation
SWOT analysis: Swot analysis of Tesla motors helps the firm to determine the internal
capabilities of an organisation based on which they can gain core competency by exploiting
opportunity and retaining the existing position of firm.
Strength
 Tesla motors has always taken the effort to adopt cost cutting technology that are
environment friendly and has been adopted by top brands such as Mercedes Benz, Toyota
and so on. Additionally, the co founder of Tesla motors that is Martin Eberhard
discovered electric two seater car which leads to zero emission of carbon due to which it
gained huge brand awareness.
 Tesla's vehicle like Roadster gained immense support from the government due to the its
initiatives for energy management techniques that gained huge recognition (Oestreicher-
Singer and Zalmanson, 2013). Thus, such strength can help the company to strengthen its
capability worldwide.
Opportunity
 Testle with the help of their research and development department understand the market
and bring new turn in terms of manufacturing of vehicle by producing green cars, hybrid
vehicle as well as battery operated cars. This idea gained the huge attention due to which
the company exploit the opportunity and expand its business by selling the batteries for
both home as well as business use which reduces the carbon footprint (SWOT analysis of
Tesla Motors, 2019).
 The vehicle of Tesla was expensive due to its reliance on the innovation but in order to
expand the market company too launched various other cars like Model 3 and Model S in
order to expand the market and gain the attention of audience.

Weakness
 Tesla at-times faces the capacity issue because it make it difficult for the company to
manufacture various cars under one roof. Although the company has the capacity to
manufacture roughly five lac cars but during the time of high demand company find it
difficult to meet the higher volume of target. '
 Although the company safeguard the interest of environment and adopt sustainable
methods to develop. But still due to lack awareness customer thinks before investing their
fund in the Tesla.
Threat
 Tesla faces immense competition from other car as well as technology companies like
General Motors, Ford, Google etc. These are basically the large companies that too have
renowned image. Thus, the company need to prepare the sound strategy and identify the
functioning of its competitor so that they can articulate the innovative plans and gain
success. Hence, this method can help company to overcome the threat from other
substitute.
 Due to the major dependency on manufacturing of innovation Tesla cars has exhibit the
flaws in terms of functioning, design as well as other features. Like, being electric or
hybrid cars the company faces certain restriction in terms of design. Although Tesla
company 9identufy different sustainable method to get wider choices.
VRIO Model: This model is used to determine the capability or unique features of the company
that help to attain the competitive position within the market over competitors.
Valuable: In terms of Tesla motors the valuable factors associated with company are
renowned market share, high brand image as well as capability that help the firm to come up
with innovative design. These are the valuable factors because Tesla ahas gained it after
choosing the sustainable process to bring innovation in terms of auto-mobile industry. The main
reason to gain the global brand image and large customer base is due to their zero emission of
carbon. This has further helped the organisation to carry out the operations effectively by gaining
long term competitive advantage.

Rare: Tesla motors is rare on the basis of brand image and market share that help to
produce the unique design. On contrary, although the firm has high financial capability which is
not the rare feature because the other company may too have the abundant fund to invest in
electric cars. These component need to be effectively utilised in order to maintain the potential
image in market (Schrader, Freimann and Seuring, 2012).
Imitable: the existing brand image and market share is not imitable as it take time to the
company to establish their own image which is different from the competitor. But the unique
designs can be imitated after a certain span of time which makes it essential for Tesla motors to
carry out innovation on the regular basis.
Organised: The financial activity as well as existing image of Tesla company is
organised that directly leads to sustainable development. Although the market share of company
is not organised because the firm adopt different strategy to cover different market which after a
long run helps to create the positive image.
Tesla motors plan, manufacture and sell the electric cars all around the world with the
motive to develop sustainable. At 2015 the company operated in approximately two hundred
countries and come up with different variants in electric vehicle like it launched Model X which
is sports vehicle an Model 3 Sedan are at nominal prices in comparison to other competitors.
Additionally, Tesla Roadstar is one of the main products of company which is the quick car with
no wheel spin and drive line shutter. The company usually get the advantage of economies of
scale and government support due to which they have maintained their sustainable growth and
contributed significant changes within the environment by reducing the emission of carbon.
Contrary, even after the immense support from external part Tesla faces crises because of the
huge investment in research and development department that eventually helped company to
bring transformative technology but at the same time enhances the expenditure of company and
hampered the liquidity and profitability ratio.
TASK 3
Apply Porter's five force model to evaluate the competitive forces
Porter's five force model is used by the company to shape their strategy after recognition
the existence overall competition within the similar type of industry (Ghezzi, 2013). This can

basically help the Tesla Motors to analyse the rivalries that deal in the similar manufacturing of
fuel vehicles.
Threat of new entrant: The chances of the entry of new entrant in the manufacturing of
electric vehicle is moderate. As it is technically challenging for the new companies to produce
the electric advance vehicles as it incur huge capital expenditure. Tesla has been able to develop
and sell various electric driven cars like Roadstar, Model 3 successfully which has helped the
company to gain global recognition because of it is tough for the new entrant to grab the market.
Hence, in case if the Tesla motors takes decision to waive patent right then it can lead to the open
market where the chances of new entrant will increase.
Bargaining power of buyer: Buyer plays a relative role to make the suitable choice due
to which the bargaining power of buyer in terms of electric car is significant or high. The
customer can switch from one electric vehicle to the other like from Tesla model S to Jaguar I-
Pace, Audi and so on. The prices of Tesla motors are very expensive and if the population is
price sensitive they it will shift to other options due to high switching cost. Perhaps the company
is taking effort to cover the middle income group as well by bringing new models such as Model
S and cover the mass market effectively.
Bargaining power of supplier: Auto manufacturing industry majority depends upon the
supplier to get quality raw material on time and deliver the final product to user within short span
of time (Peng, 2017). In terms of Tesla company the bargaining power of supplier is low as the
company itself operate at a large scale due to which multiple supplier are keen to work with
them. Thus, the Tesla motor needs to build efficient supplier supply relationship so that the
company can deal with customer by offering them latest design and attribute at suitable prices.
Threat of substitution: Within electric vehicle Tesla faces the threat of high substitution
so they need to concentrate on the USP that is unique selling proposition of their brand which
can help to retain the existing and potential customers. Along with that the company with the
passage of time need to anticipate the basic needs so that they can fulfil them by being service
and product oriented. Additionally, the company can adopt differentiated technique will help the
customer to consider as well as prefer Tesla over the other rivalries. Extensive marketing and
advertisement technique through digital media can assist the company to retain the existing
customer as well as reach out the potential market.

Competitive rivalry: The existence of competitive rivalry in terms of electric vehicles is
highly intensive. Tesla being one of the recognizable brands bring innovation on constant basis
but similar some of the strong competitors of company like BMW, Jaguar, Mercedes Benz and
so on are even trying to communicate their plans to the target market and gain the attention of
huge audience. So Tesla competes both on the basis of Electric products as well as solar energy
system thus they need to build high sustainable difference in order to tackle the intense rivalries.
The firm can never establish an effective strategy after just understanding the internal
environment so along with that the firm need to understand the macro environment so that they
can devise effective strategy (Hoejmose, Brammer and Millington, 2013). Implementation of
porter five factor model give the arena to Tesla motors based on which they can understand the
competitive pressure, importance of supplier as well as customer. Application of these factors
has determined the collective strength of the Tesla company like as the negotiation power of
supplier is low. Due to which the company can form viable relationship supplier and get the
quality material to produce innovative product at reasonable prices. This will finally present
reliable image of company in the public and they will keen to buy the latest model. Further,
adding innovative is the useful practice for Tesla to remain ahead of their competitors. Therefore,
this can help to maintain the suitable within the market like as the Tesla motors experience
intense rivalry. So to cope with with this situation firm can either plan to different itself from the
company or can for alliance with their competitor to create win win situation.
TASK 4
Applying range of theories in order to devise strategic planning
Ansoff matrix: This planning model is used by Tesla motors company to make strategic
decision regarding the functioning of company. It include different growth strategies that are
defined below:
Market penetration: Within this strategy the firm remain comfortable in selling the
existing product at existing market which is being adopted by the Tesla extensively. The
company basically focuses to sell the certain model that is Model S, Model 3, solar panel,
racking, inverters within the geographical market as well as other twenty nine countries.

Product development: It includes the situation under which the firm focuses to sell the
new product within existing market (Iacob, Quartel and Jonkers, 2012). Herein, Tesla motors is
bit infrequent in terms of involving new product development as high cost is involved in the
production of electric vehicle. So after certain duration the firm focuses to launch the product
based on anticipated need.
Market development: By adopting such strategy the firm look for the new geographical
area to sell out its existing product. The CEO of Tesla that is Elon Musk taken the initiative to
gain the global dominance by talking the products of company in various new market. Further,
instead of just focusing in the developed market the CEO introduced the brand in emerging
economy as well so that they can cover the potential market successfully.
Diversification: This is on of the most riskier strategy usually adopted by the large
organisation under which new product is launched in the new market. Tesla motors has even
adopted this strategy effectively as company initially in 2003 started with the production of
electric vehicles but later on it purchased the solar company as well as sell the batteries for both
personal and business usage.
Therefore, amongst the different strategy the company needs to constantly focus on
product development so that it bring various variant of electric cars at different rages so that the
prevailing countries can participate in the sustainable development of an economy.
Strategic management plan: This is the valuable organisation process that help in the
preparation of decision to make the best possible strategy and allocate the resources accordingly
(Sia, Soh and Weill, 2016). It is basically used to strengthen the operations of company in order
to attain the objective suitably. Thus, the strategic management plan for Tesla company is
defined below:
Objective: The objective of Tesla motors is to cover the huge market and increase the
revenue by at-least 10 % within one year by concentrating on the production of customised
vehicle.
Vision: The vision of company is to be top electric vehicle that can help to penetrate the
whole geographical market.
Mission: Mission of Tesla motors is to enhance the sales of electric vehicles in order to
reduce the emission of market and gain long term sustainable development.

STP: It include different areas that need to be focused by firm before launching new
product or variant in the existing or new market. The STP for Tesla motors is defined below:
Segmentation: Tesla motors for the tailor-made electric cars has done the segmentation
on the basis of demographic. Within, demographic the company segment the mass market on the
basis of age and income of the people because it usually target to the high income group so it
include the adults who are either the businessmen, entrepreneur or CEO.
Targetting: This strategy is used by the Tesla motors to break the large market into the
smaller segment so that it becomes easier for the company to target the particular group for the
customised cars. The main target market of the company are adults who have achieved the better
position in their lives and can easily afford the products of company.
Positioning: It refer to the process of setting unique image of brand in the mind of
customer so that they the end user prefer Tesla over other brand's electric car. The company
extensively uses social media as well as print media to interact with the customer and inform
them regarding the latest technology launched by the company. Especially digital media help the
company to create huge buzz and position the brand as sustainable brand.
CONCLUSION
From the above report it has been determined that business strategy is an efficient part of
the organisation that help to formulate as well as implement the best possible strategy in order to
attain the objective. It is significant for various business entities that they need to determine both
internal and external environment so that they can bring the positive changes within the
functioning of an organisation. Therefore, there are certain models such as Porters, Vrio analysis,
SWOT as well as Ansoff Matrix that can help the firm to analyse different factors and adopt
sustainable methods to enhance long term profitability and productivity.

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