Business Strategy Assignment : Tesla

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Table of Contents
INTRODUCTION...........................................................................................................................1
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INTRODUCTION
All the business organizations need to develop some plans and make some decisions that
help the specific organization in managing their daily transactions & activities and provide
guidelines, structures and procedures which have to be followed in order to achieve the
organizational objectives and attain the goals. A set or combination of all those plans and
decisions that have been made by the management is known as business strategy. An effective
business strategy can be considered as a backbone for an establishment as it provide a path to the
administration which headed them towards the desired goals and helps in securing a competitive
position within the market. A strong business plan and strategy is important for an enterprise as it
helps in converting the organizational weaknesses into the strengths, increasing the efficiency
and effectiveness of entire company, taking the advantages of competitive market and having a
control over the business activities.
The company have been chosen for preparing this report is Tesla, Inc. which is an
American automotive company situated in Palo Alto, California. This report will present an
analysis of external environment and its impact over the chosen organization. This report will
include SWOT analysis and for assessing the internal environment of the company and Porter's
Five Forces Model to evaluate the competitive positioning of the company into the market. At
the end of the report, it will give an effective strategic plan for the establishment.
TASK 1
P1 Analysis of the Macro Environment:
Organizational Overview: Tesla, Inc. which was formerly known as Tesla Motors, Inc.
was established in 2003 by Marc Tarpenning and Martin Eberhard in California, U.S. It is an
automotive and energy company which specialized in manufacturing of electric cars. The current
CEO and owner of the establishment, Elon Musk joined the organization in February, 2004. The
mission, vision and objectives of the organization is given below:
Mission: The mission statement of the Tesla was 'To accelerate the world's transition to
sustainable transport' which was replaced by Elon Musk in 2016 by ' To accelerate the world's
transition to sustainable energy'. The statement is enough to reflect the intentions of the company
to provide affordable energy resources and transport medium to the world by using advance
technology.
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Vision: The vision statement of the selected establishment is 'To create the most
compelling car company of the 21st century by driving the world's transition to electric vehicles'.
This vision statement is showing the clear vision of the organization to provide renewable energy
resources to the world by providing electric vehicles into the markets.
Objectives: The primary objectives of Tesla, Inc. is to create demand and increase the
sales of electric cars in the marketplace, manage the reputation in the industry and build brand
image, and create loyalty in customers and increase customer base.
PESTLE Analysis: This is an assessment tool or method that help the researchers in
identifying and analysing some external environmental elements that may have huge influence
over the functions, activities, performance and profitability of an organization. Tesla, Inc. also
needs to conduct a PESTLE analysis so that it can understand the condition of the industry and
evaluate the impact of remote factors that determine the success of the business. A detailed
analysis of the company is presented below:
Political Factors: Political factors are the factors that are related to the governmental
entities and their impacts over the business. In relation to the Tesla, Inc. the political authorities
and conditions are in favour of the company such as stability in the political parties in the major
economies, the governments are providing incentives for electric automotive and new global
trade treaties are grate opportunities for the organization. The political stability is a good sign for
the intensive growth and competitive strategies of the company.
Economical Factors: These are the factors which are related to the financial and
economic condition and status of the market such as economic growth rate, inflation rate,
exchange rates, employment rate, etc. The global economy have faced a recession just a few
years back and currently it is trying to overcome hence the economic instability of the
international market is not good for the business of selected company but a slight decrease in
electric battery cost and renewable energy costs are providing growth opportunities to the
company.
Social Factors: Social factors are the current market trends and social conditions of the
economy that affect the performance of the business. For instance, population growth, age
distribution, personal beliefs and values, gender distribution, tradition, attitude and education
level of the population, etc. In context with the business of electric cars, social factors are
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favourable as people are getting aware and demanding for low-carbon lifestyles and preferring
renewable energy resources.
Technological Factors: Technological factors are related to the changes and alteration in
technology. Frequent change in the technology and utilization of it into the firm, influence the
quality of production and efficiency of entire organization. In case of respective company, the
rate of technological changes into the industry is very high of which adaption is increasing the
cost of production for the Tesla, Inc. On the other hand, technology has improved the automation
in the business which is helpful in increasing efficiency and production.
Legal Factors: Such factors are related to the laws, legislations, rules and regulations
imposed into the industry. Legal system of the economy is liable to design the business
development and managerial decisions hence have huge impact over the organizations. In
context with Tesla, Inc. regulations related to the patent & copyrights and consumption of energy
are getting strict which will provide the protection from the competitors. On the other side,
dealership and sales rules are causing the issues for the company in increasing its sales volume.
Environmental Factors: Ecological or environmental factors are the elements that are
related to the climate and climate change, availability of non-renewable natural resources, ozone-
friendly production, etc. The climate change of the various countries is favourable for the
selected company as the company can promote its electric vehicles concerned on weather
change. The battery-powered and electric vehicles are also helpful in keeping environment
pollution free which is a plus point for the organization (Pasquinelli, 2014).
Stakeholder Analysis
Stakeholders are those people who directly or indirectly affect actions of an organization. It is
very essential for every company that they are able to recognize the needs of various stakeholder
and take care of their need.
Stakeholder Influence on Tesla
Customers Most of customers of Tesla are very loyal,
which means that with time company has been
successfully able to build up brand loyalty
because of the quality and variety which they
offer in cars and it stayed unique as well from
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other competitors in market.
Suppliers Tesla manufacturing company, which means it
have to make relationships with suppliers in
order to sustain in the market for a longer
period of time. It has been analysed that Tesla
is already having effective relationships with
their suppliers.
Governments Government of every country is one of most
important stakeholders which have to be taken
care of by them. For Tesla also, they have to
adhere to all rules and laws which are formed
by government of the country where they are
having their presence. From government point
also they try to support such companies as if
they will be able to earn high profits then it is
also beneficial for them as higher profits lead
to high payment of tax which increases
revenue for government. This also helps in
growth of economy of country.
shareholders Basically, these are the real investors for a
business organisation like Tesla. In present
context, Tesla has already given hair benefits
to their shareholders, which made company to
focus upon future goals with the help of loyalty
of their shareholders.
Employees Without, this type of stakeholders for the
business organisation like Tesla cannot sustain
in the market more than a day. These are the
real performers who works for the business
organisation and against it they get monetary
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benefits from the company. Basically, Tesla
has made different range of policies to offer
best health and safety environment are there
staff.
M1 Critical analysis of macro environment on the organization:
The respective organization is improving its profitability over the time with the help of its
owner's clear and strong supervision. The company is also capable to penetrate the current
market and improve its operations into the international market. However, the business needs to
evolve its production, technology and strategies continuously as the trends shown in the PESTLE
analysis. The company has various opportunities for the development and growth of the business
for example, governmental incentives, free trade agreements and automations in the production.
The establishment is also recommended to take market based risk and plan strong competitive
strategies in order to survive in the industry and take competitive benefits.
TASK 2
P2 Analysis of internal environment of the organization:
SWOT analysis: This is a strategic analytical framework that is utilized by the
organizations to identify its own strengths and weaknesses that are reflected by the internal
environmental factors. This framework also helps in determining external factors in form of
opportunities and threats that can be converted advantages for the organization. Since the Tesla,
Inc. is an emerging organization in automotive sector, an enhance analysis of its strengths,
opportunities, weaknesses and threats is significant to help the management in determining loop
holes to convert them into strong points. A SWOT analysis of selected company is as below:.
Strength Weakness
Tesla is said to be one of the crucial business
organisation that has built electric cars that are
most effective and efficient cars that do not
emits pollution. This could effectively be
considered as strength of the company which
Demand forecasting of Tesla is not that
effective enough which impacts of negatively
upon their profit margins as they do not
become able to analyse the number of cars
within their inventory that are in house or
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has helped them in sustaining within the
market for a longer period of time. Including
this, number of employees that this company is
having has kept their focus on attaining target
which means that they are goal oriented and
this has held company in maintaining their
worth at international level.
channel. This raised high inventory where
there is a possibility of cars to need proper care
and this basically costs too much to the
company.
Opportunities Threats
Considering new technology with their cars,
would help Tesla and maintaining
differentiation from number of competitors that
are present in the market. Including this,
company could also reduce the cost of
transportation which could help them in
enhancing the profit margins and much more
effective and inefficient ways.
There are entry barriers in new markets which
company is willing to enter. Being in the
automotive industry there are so many law and
regulation which they have to adhere. They
face price based competition and also there are
short of diversification strategies on part of
company.
VRIO analysis: strength along with weakness are said to be the two important elements that are
required for a company to concentrate on and for this Tesla has utilised VRIO analysis
framework. Considering this framework will help Tesla in looking at different range of elements
like reality, value, organisation and inimitable. These are said to be some crucial elements of this
framework and all of them has been described underneath:
Valuable: Basically, there are four resources, which are valuable for Tesla in a way that
human resource TESLA will not able to execute its single function. Global presence
offers opportunity to company that they are able to reach large number of customers and
make aware about their products. Cost strategy is also a strength of TESLA which they
use to occupy a distinct position in market. Another strategy used by TESLA is
differentiation strategy where they are offering some different features such a company
provides a whole different experience to their customers in form of virtual reality and
this helps company in getting differentiation advantage.
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Rare: Global presence is not a rare concept as there are many competitors such as KIA
which is having global presence. Differentiation strategy is unique as no other Cars
brand is offering this unique feature to their customers. Cost strategy is also used by
TESLA in their products by offering them at affordable prices which no other brand can
offer. Human resource of TESLA is also a strength of this company as they believe in
having a trained and competent workforce. This is also a rare characteristic of
TESLA(Morton, Wilson and Cooke, 2015).
Imitable: Global presence and human resource are something which can be seen to be
present in other companies similar to TESLA. Differentiation strategy and cost strategy
are two different features which are not possible to be copied by any other company
which is dealing in Cars.
Organization: All resources have to be organized by the company to ensure smooth
functioning. Human resource, global presence and cost strategy resources which are
present in all companies, but TESLA should focus on its differentiation strategy. This is
the characteristic which has helped company in gaining a competitive advantage in
market.
TASK 3
P3. Evaluation of a given market by applying Porter's Five Force Model.
Bargaining power of buyer: if it is talk about United kingdom, then people from the
nation can be considered as one of the important section for Tesla. The economy of this country
is quite good. Therefore, it will be required by Tesla to focus on needs of customers any error
kingdom data looking forward to purchase a new car which is specifically electric. Basically,
people from United kingdom looks forward to consider updated technology as there in use with
some innovations. Therefore, it can easily be said that bargaining power of buyers is high
enough because of the innovations that take place and the technology which is carrying the
proper changing nature. It will be required by Tesla to keep on making modifications within their
products in order to sustain in the market with the right price (Milovanovic, 2015).
Bargaining power of supplier: basically, bargaining power of suppliers for Tesla is high
in nature because of the number of automotive car manufacturers are are high in numbers and it
will be required by the company which is tesla to maintain good and long term relationships that
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will eat them in reducing this power. If there will be high bargaining power then it can posses
threat for company in terms of its reduced profit and interruptions in their overall network of
supply chain (Linn, Sanden and Piekkari, 2018).
Threats of new entrant:- it has been analysed that Tesla is having a much more unique
concept of selling electric cars to customers so that they would effectively promote by their own
mouth about the company's products that what kind of features it is having and how different it is
from other electric cars of various automotive car manufacturers. Along with this, it is also
having good image within the United kingdom market which can be considered as one of the
crucial reason all the possibility to stop new companies enter the New market.
Threat of substitute:- this force is low for Tesla because it is not an easy task to just
develop an electronic car and sell it among people who are still using the petrol efficient cars.
With the help of innovation and invention company has become irresistible among the market
and continuously selling its products in all over the world including United kingdom (Lee, 2014).
Rivalry within market:- Over the years, Tesla has been given good rivalry to other
automotive manufacturers. This has helped them in raising good name in all over the world.
Including this, it is also said that electric cars is said to be something, which is fresh from other
engines. This has given high range of benefits for firm in maintaining the competitive
advantages.
Ans-off's growth vector matrix:-
This is being considered as one of the efficient tool that can be utilised by a business
organisation when it comes to develop a plan and regards to an effective strategy for
development for the near future. Under this, Tesla has also kept its focus on the same and utilised
Ansoff matrix, that carrying different range of strategies that can be used by buy different
departments of Tesla for proper functioning and to run business in a successful manner (Lee and
Smith, 201). Below four strategies considering the aspect of Tesla has been showed underneath:
Market Penetration:- What this strategy says is that to run the business with existing
products within the existing business market. Basically, low price or quality are said to be the
only two elements on which accompany majorly focuses, considering this type of strategy
(Rowlinson, Hassard and Decker, 2014). While focusing upon Tesla, company good either focus
upon quality or prices of a product if utilizes this type of strategy for business expansion. In
some of the areas, organisation has taken into consideration of penetration strategy as thr design
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which this brand is offering in its cars and affordability in terms of price had made it achieve a
distinct position in market.
Market Development:- selling products that has already made their existence in the
market are being sold in a whole new geographical area or the market can be considered as
market development strategy. In context of Tesla company could effectively use this type of
strategy as to sustain within the market for a longer period of time and to enhance their profit
margins along with the customer base at international level. But it has been analysed that it is not
pretty much easy for a company to just enter into a whole new market it requires both a lot of
analysis research and the investment as well that could help them in entering the new market.
Product development:- this is said to be another crucial strategy with a company
basically introduces a whole new product in the existing market where it is already performing
range of existing products. Moto of this strategies to enhance the earning capacity of the business
organization so that desired goals or objectives can effectively be achieved in a short span. Since
the company is launching a whole new car with in the market then this is said to be the strategy
which Tesla is using in order to maintain it’s competitive advantages while giving rivalry to
rivals(Hoque, 2013).
Diversification:- A popular and effectivs strategy where, a whole new product is
introduced within the new market. Usually this is been considered as one of the strategy that
most of companies utilizes in order to plan for expansion. companies generally use when they are
planning to do expansion of their business to other countries. in the same way for Tesla also, it
will be required for the company to involve themselves in utilising this strategy whenever they
are willing to explore new customer segment and plus company have new products ideas with
them (Eason, 2014).
TASK 4
P4. Applying of theories, concepts, models to understand and interpret strategic directions
available to a company
Generic model of porter: This model is consists with three main elements that could offer
direction to the company like Tesla to deal with present situation in market, when Tesla will be
willing to launch a new car they will be focussing on three generic strategies given by Porter and
these are given underneath:
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Cost Leadership: Since, competition within electric manufacturing business
organisations of cars are increasing, Tesla has kept its focus on becoming one of the cost leader
considering different range of prices for a car through offering them with both economic and
luxurious features within the same electric car. It has held business organisation in sustaining
within the market through taking into consideration of cost leadership approach of generic model
(haserháti and Szabó, 2014).
Differentiation:- In present context, or in case of Tesla this brand always lays emphasis
that they are able to provide a distinguished feature to their customers within their cars that they
are offering to customers. What actually makes Tesla different from rivals is that it offers some
value added features as well for their customers. Basically, company has given premier services
to clients through giving them best experience both virtual reality where taken drive a Tesla at
there showroom in order to experience that how a car of Tesla works and runs.
Focus:- At present, Tesla has considered two different types of focus strategies one is
cost and the other one is differentiation focus strategy. Since Tesla is having a good name in the
market company uses its cars considering differentiation strategy through offering customers
with a little high range of cars in terms of monetary as they are offering the best quality electrical
cars in the whole world. Along with this, company has also kept its focus on smaller segments of
customers from all over the world which has raised ample number of opportunities for them
(Cacciolatti and Lee, 2016).
On the other hand if it is talked about the usage that Tesla does of the cost strategy then
this could effectively be understood with a good example where, company tries to decrease cost
of procurement of raw materials and other related cost associated with cost of their cars, they try
to minimize it so that they are bale to maintain their profit margin.
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Strategic Management Plan
A strategic plan is said to be a crucial element for a business organisation that could help
in attaining specific or innovative goals and objectives in a short span. In present context, for
Tesla strategic management plan has been built with the help of different range of things like
mission, vision, objectives, market research and so on. In Tesla this plan is also developed by
their top authorities as discussed below:
Mission: Mission of Tesla is to become one of the leading electronic car manufacturer in all
over the world true offering customers with both economic and sports version of quality cars.
Vision: “ To support environment through developing different range of electrical cards, which
gives high performance level”
Objectives: basically, Tesla is looking forward to to expand their business through building or
developing effective and efficient electrical cars for their customers that would not cause them
too much. Therefore, company’s objective is to enhance sales by 25% by manufacturing a whole
new car, which runs at the top speed of 220 kilometre per hour and client can effectively run the
car for approximately 500 kilometres in one charge (Burgess and Radnor, 2013). Market research: in present time, if it is talked about the market research which has been
taken into consideration by Tesla where the information that has been carried out was that
people are looking forward to to save the environment and for this ok, they are are
considering those products and services which not emits pollution. Tesla, has consider
this as a requirement or need for their customers and has given ample number of benefits
to them by developing electric cars that do not emits pollution at all. Here, it can easily be
said that the primal objective of enhancing profit margins is with the help of cars that are
not emitting pollution. Extensive marketing: Tesla has built an effective and efficient special marketing team so
the could effectively gain all the information in regards to what their rivals are serving to
customers, what strategies they have utilised are considered to attract customers and what
customers are looking forward to have as an innovation from companies.
Tactics: To achieve set objectives of company, Tesla will be adopting two major tactis
one will be providing increased value to their customers and other will be ensuring more
technology up gradation. When both of these will be implemented then it will lead to
higher satisfaction of their customers.
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CONCLUSION
With the help of above mentioned report, it is being summarised that developing a much more
stronger and effective sort of strategy could help a business organisation in sustaining within the
market for a longer period of time. Along with this, before reaching to a conclusion in order to
develop a strategy, it is required for the company to focus upon different range of available tools
that could help them in analysing the market which are both internal and external like Swot,
Pestle, Porters five forces model and so on. On the other hand, VRIO can be considered as the
model which helps the company to look into all the benefits available that could help them in
enhancing profit margins. Including this, strategic plan are being developed by business
company in order to bring innovation within their products or services that has already made
their existence within the market.
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