Impact of External Environmental Factors on Tesla: A Business Strategy Analysis

This report analyzes the impact of external environmental factors on Tesla, a leading auto mobile business entity. It includes a PESTLE analysis to identify the influence of political, economic, social, technological, legal, and environmental factors. The report also applies the VRIO model and SWOT analysis to assess Tesla's internal capabilities and competitive strengths. Furthermore, it examines the competitive forces affecting Tesla using Porter's five forces model.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION ..........................................................................................................................1
LO1..................................................................................................................................................1
P1. ..........................................................................................................................................1
M1...........................................................................................................................................2
LO2..................................................................................................................................................3
P2. ..........................................................................................................................................3
M2. .........................................................................................................................................6
LO3..................................................................................................................................................6
P3. ..........................................................................................................................................6
M3. .........................................................................................................................................8
LO4..................................................................................................................................................8
P4, M4. ..................................................................................................................................8
D1.........................................................................................................................................11
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategy is certain actions which are competitive and initiatives that is adopted
by an organisation for attracting consumers, face competition and strengths the overall
performance of an enterprise for the purpose to achieve business objectives and goals. It
determine way in which an enterprise carry out its business activities in order to achieve its goals
to achieve certain desirable results (Johnson, 2016). This report talks about Tesla, that is an US
based auto mobile business entity and is famous for specialisation of electrical cars. It includes
impact and influence external environmental factors upon the overall functioning of Tesla.
Further, it includes identification of strengths, weaknesses and capabilities of an organisation by
using SWOT analysis and VRIO framework. It also includes determination of competitive forces
that affect Tesla by applying five forces of Porter framework. At the end, a strategic marketing
plan is developed for this auto mobile organisation by using Ansoff Matrix for facilitating
business activities appropriately.
LO1
P1.
Macro environment refers to all the external factors and forces that has influence upon
operations and strategies of an organisation. Tesla is determined as a leading organisation which
deals with auto mobile in America. It uses different strategies and plans for staying competitive
in a market (Akter and et. al., 2016). There are different macro environmental factors which
affects operations and functioning of Tesla and these factors is identified by using Pestle
analysation as follows-
PESTLE Analysation- It is determined as a tool, approach or a technique which is used to
monitor and analyse external factors of a business that has impact upon functioning of an
organisation as a whole. This framework can be used by Tesla for identifying the impact of
macro environment which are economical, political, social, technological, environmental and
legal factors which is affecting its business operations. It is elaborated as follows-
Political- This factor identifies affects of government upon overall operations, strategies
and functioning of an enterprise as a whole. Tesla has this opportunity which it can grab to
strengthen its overall business performance by taking into use certain government incentives.
UK's political environment is stable which is proved to be favourable for this auto mobile
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business for global expansion. This has proved to be favourable for market development and
penetration strategy of this enterprise.
Economical- Due to growth in overall economy at global level, electric car sales had
enhanced up to a large extent (Rothaermel, 2017). Economies of Europe, Asia, and US had risen
which results in development of more electric car and it has positively affected profitability and
sales of an organisation appropriately. Decrement in battery cost had results in increased
business performance which is proved to be its weakness for this business entity.
Social- Because of fast changes in tastes and preferences of consumers, they prefer
modern cars with unique features over the traditional cars. Such innovative cars helps the
customers in satisfying self recognition in their surroundings and enhance their living standard.
In addition, improved distribution of wealth in developed markets like Asia, Europe, and USA
has boosted up company's financial position.
Technological- As innovation and technology has increased, enterprises such as auto
mobile has largely benefited with it. This developed technology helped Tesla to maintain its
competitive edge and strength. It also helps this organisation to become more fuel efficient and
also in becoming even more adaptable for latest innovative ideas than the traditional choices
which are existing in an auto mobile organisation.
Legal- Various legal regulations and laws are there which are required to followed by
Tesla for running its business smoothly and appropriately. In United Kingdom, all the vehicles
are required to be approved by EC type, that is considered as nationally approved for auto mobile
industries. Tesla follows legal regulations and rules of the government of all the nations (Peng,
2017).
Environmental- As now a days environment awareness has been increased among the
people which has enhanced people's love for electric vehicles as these vehicles limits fuel usage
and it very rarely affect carbon emissions. Because of high focus upon a business environment,
Tesla had developed its brand name which becomes difficult for other businesses to match.
Brief Analysis: From the above discussion, it is analysed that PESTLE analysis is useful to
examine the external environment which impacts the company in its expansion or launching of
new product. As in political, the government policies of UK impacts the company in their
product launch. In addition to this, technological factors improve the worth of company in terms
of its innovation such as fuel efficient or innovating the electronic cars.
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M1.
External environmental forces has large impact upon overall functioning of an
organisation. The political stability of UK allows this organisation to strengthen its economic
position by using incentives provided by government and in global expansion. Due to overall
growth of economy in developing countries, this organisation is able to develop more electric
cars. Social factors such as rapid changes in customer's tastes and preferences helps this
organisation in producing electric cars as now customers prefer these cars over traditional
vehicles (Linder and Williander, 2017). Technological factors also proved to be favourable for
this organisation as it helps this business entity to use latest innovative technology in producing
its electric cars. As this organisation follows all the legal regulations and its vehicles are EC type
approved which helped this enterprise to have favourable legal policies and laws. Moreover,
these electric vehicles reduced the carbon emissions which helped this enterprise to become an
environmental friendly car manufacturer.
LO2
P2.
Tesla is an auto mobile business enterprise which has expanded its business activities at
international level. This organisation is dealing with electronic cars since the year 2003 and it
had developed its brand image successfully in various countries and markets. The capabilities
and impact of internal environment upon this enterprise can analysed by applying VRIO model
and SWOT analysis (Evans and et. al., 2017).
SWOT Analysis
This analysation is determined as a framework , undertaken by an organisation in order to
identify its weakness, strengths, threats and opportunities that can affect an organisation. It is
used by this organisation to identify its competitive strengths and edge and on developing
strategies for planning on these basis.
Strengths Weaknesses
 Tesla's strength is to create and
generate latest technical and innovative
products like electric sports car. It
believes in innovation and always
 The basic weakness which can be seen
in this enterprise is that it offers electric
cars at very high prices which is not
affordable by most of the customers.
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innovate latest products such as battery
manufacturing at Gigafactory.
 This enterprise has strong brand image
and brand loyalty and people think
about this brand whenever electric car
name comes. Tesla not only focuses
upon selling cars but it has wide focus
upon improving the experience of
customers (Grayson and Hodges,
2017).
 Moreover, this enterprise is not
expanded to China and other such
developing countries.
Opportunities Threats
 This organisation can expand its market
share by expanding its products at
global level and in other developing
countries such as Asian automotive
markets and markets of renewable
energy which will help it generating
more revenue.
 This enterprise can also use
diversification strategy and can
introduce new product in new market
as people trusts this brand so it will be
easy for this brand to earn profits by
this strategy.
 The basic thing which can be proved to
be this company's threats is its
aggressive competitors that innovate
new products and charge them at lower
prices as compared to Tesla.
VRIO Model
VRIO Model is determined as an analysation of a business which helps in forming
organisation's large strategic schemes. For the purpose of ascertaining resources and internal
capabilities, this model can be applied on TESLA as below-
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Resources Valuable Rarity Inimitable Organized What is the
result?
Strong
presence in
market
Yes No No No Competitive
Disadvantage
Offers Yes Yes No No Partially
competitive
IT software Yes Yes Yes No Temporary
competitive
advantage
People
engagement
Yes Yes Yes Yes High
Competitive
advantage
Valuable
Strong market presence- Tesla has a strong market presence and powerful goodwill
which helps this enterprise in assisting value of its products to consumers for the purpose of
attaining high level of customer satisfaction (Sia, Soh and Weill, 2016).
Offers- This enterprise offers latest innovative products in the field of auto mobile which
helps in meeting customer's expectations.
IT software- The information technical software which is used by this organisation is
Retalix Systems which is developed in order to formulate its activities of business effectively and
timely.
People engagement- This organisation is full of skilled and talented workforce which
helped this enterprise in achieving various objectives and goals of an organisation.
Rarity
Offers- The products which are offered by this business entity are rare and these
products are made of latest innovative technology (Leonidou and et. al., 2017).
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IT software- The IT software used in this auto mobile industry is Retalix Systems and it
is utilised by this enterprise to develop and design products as per business specifications that is
suitable for its business activities.
People engagement- Workforce of Tesla have competence skills and knowledge which
helped this enterprise in conducting its operations of a business in an appropriate manner.
Inimitable
IT software- The IT software utilised by Tesla in its business activities within its
premises that is relevant towards business organisation and within its processes.
People engagement- In this business enterprise, the workforce is provided training on
regular basis which helps these workers to deal with every kind of typical situations in a specific
manner (Spender, 2014).
Organised
People engagement- The employees of this auto mobile organisation are organised in an
appropriate manner and are ready to deal with complex and typical situations takes place within
a business entity.
Brief Analysis: Thus, it is analysed that SWOT and VRIO model is used to determine the value
of the resources and how they can be organised in an effective manner. In addition to this,
strengths, weakness, opportunities and threats are described which describe the benefits and
positive features of company and also limitations like high prices, competitors and many more.
M2.
SWOT analysation is used by this enterprise for the purpose to identify its competitive
edge and competitive strength in a market place. This is a global brand and it has strong brand
image which has proved to be company's strength. But due to its high prices, many customers
are not able to purchase these cars which is considered as its weakness and its competitors who
are offering these products at low prices are considered as its threats. Also, it can expand its
market share in other developing countries (Veit and et. al., 2014). VRIO model is used by this
enterprise to identify its capabilities and it is determined than this enterprise has strong image of
brand in the market which makes it unique from its competitors.
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LO3
P3.
The model of five forces of Porter is elaborated as an approach and tool that can be used for
analysing competitors prevailing in an enterprise. It helps in determining and analysing
competition's intensity to identify and define competition which is prevailing and existing in a
market. It also helps to understand the forces of external environment that has impact upon
business's overall productivity and profitability and on this basis, a business develop certain
strategies in accordance (Amran and et. al., 2016). Tesla can utilise Porter's five forces to analyse
and identify its weaknesses and strengths and their impact upon company's long business's
profitability. It includes the five factors and forces which has impact upon an organisation which
are supplier's power, power of buyer, substitution threats, and entry of new rivalry.
Competitive Rivalry- This factor pays attention upon strengths of an organisation and
the competitor's number which are existing in a market. There are very few enterprises in a
market which are automotive organisations and it results in limiting its effectiveness upon Tesla.
But due to same consideration, these enterprises are aggressive to innovate, promote and develop
new innovative products. For instance, large automotive organisations has campaigns which are
aggressive and which helps in empowering affect of competition upon a business (Schaltegger,
Hansen and Lüdeke-Freund, 2016).
Threat of new entry- New entries are the new coming enterprises which can affect the
industry's environment and surroundings in which it is dealing. It helps in identifying
performance of an organisation and in this case, it becomes difficult for the new entries to face
competition with strong brands such as Tesla. Moreover, manufacturers of auto mobile industries
has the high production cost which imposed upon various barriers of the new enterprises. Also,
many well established firms such as Tesla get benefit from high scale of economies that can be
attained from new entrants when these enterprises exceed production threshold. On the basis of
external factors, new entry threats is considered a minor concern in regards to strategic
management in Tesla.
Threat of Substitutes- This business entity had experienced substitutes affect upon the
environment of automotive industry and energy solutions. In this regards, other substitutes low
cost of switching like public transport is easy to attract customers. It had affected largely Tesla's
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industrial environment but as it is known that public transportation is comfortable and versatile
as the car is which will limit substitutes affect upon Tesla.
Bargaining power of Customers- The affect of customers and buyers upon solar panel
and automotive industry is wide. Tesla's customers are considered as a factor which directly
determines revenue and sales of an organisation. The low cost of switching reduce customer's
barriers of Tesla for purchasing cars from different car providers (Razak and et. al., 2016). For
instance, suburban area's customers has limited access towards the public transportation that
makes it more practical to drive their own car. In addition, the low volume of purchase result in
reducing influence of customers upon Tesla.
Bargaining power of Suppliers- This force analysis helps to demonstrate the way in
which the suppliers helps in shaping environment of an industry which influence the availability
of materials which is required by the firm. The business of Tesla is largely dependent upon the
reliability of its supplier which has low forwarded level of integration. Some of the suppliers
utilises third party in order to sell raw materials to Tesla, while another transact directly towards
this organisation (Boyd and et. al., 2017). In this approach, this force imposed force upon its
corporation which is moderate. Another factor which is considered is the moderate level of
supply which helps in empowering such suppliers to affect this organisation but to a limited
extent.
Brief Analysis: From the above section it is determined that company use different strategies to
improve its positive in market by using Porter's five force model as it is helpful in understanding
the intensity of forces. Hence, it is evaluated that competitive rivalry is low nature as there are
only few organisations present in the market who provide electronic cars. In addition to this, new
entrants and threat from substitutes can impact the process of company like new entry came in
market with new and innovative ideas which are more worthy then company.
M3.
Tesla can use various strategies to improve its market position and competitive edge
within an organisation and in market by utilising Porter's five forces model. This will help this
organisation in identifying the competitive edge in the market and in understanding its intensity.
Competitor's rivalry helps in identifying the number of competitors in market and the strengths
which are possessed by an organisation. Another factors such as threats of substitutes and new
entry determines the impact of new entry and substitutes of Tesla can affect its functioning.
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Bargaining power of customers and suppliers determines the revenue, sales and raw materials
availability in an organisation.
LO4
P4, M4.
For identifying and understanding certain strategic decisions of Tesla, there are different
concepts and models that can be utilised. In order to achieve overall company's objectives, the
very basic thing which is considered by a company is adaption of appropriate strategy (Hart,
Sharma and Halme, 2016). Such strategies and plans can be utilised by an enterprise to enhance
overall profitability, market share and productivity of an organisation. In this context, a strategic
plan is developed which pays attention upon objectives and aims of an enterprise. To identify, a
effective strategy, this enterprise is using Ansoff Matrix as follows-
Ansoff Matrix- This is determined as a strategic technique or tool that helps to provide a
framework for an enterprise to analyse, plan and identify certain strategies for the growth of an
organisation. It demonstrates four strategies of marketing that helps an enterprise to develop and
the risk which is associated with each strategy. Ansoff Matrix can be used by Tesla for
identifying the most suitable and appropriate strategy which an enterprise uses and these are-
Market Penetration- It includes increase in profitability and sales of current products and
services in existing market. It can be accomplished in different manner such as by decreasing the
costs for attracting new consumers, by enhancing distribution and promotional measures or it can
also be done by copying the competitors in marketplace. It can used by Tesla to promote its new
latest products like inverters, Model X electric car and solar panels.
Product Development- In Product development strategy, an enterprise introduce a new
service or product or by making some changes in existing products or services. It is use by an
enterprise by investing in research and development for developing a brand new product or it can
be done by acquiring competitor's products in a target market (Neugebauer, Figge and Hahn,
2016). Tesla believes in innovation and keeps on innovating products on daily basis such as this
enterprise is working upon development of semi and pick-up truck with a energy storage
products range.
Market Development- In market development, an organisation enters to a market which
is new with its existing products by entering into different segment of customers or by expanding
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globally and regionally for market share expansion and increased profitability. Tesla can enter
into other global markets for market expansion.
Diversification- Among all the strategies, this is the riskiest strategy of this models as it
pays attention to enter to a new marketplace with the latest products and services. It is the
mixture of market and product development that imposes high production cost upon an
organisation. Tesla can use diversification strategy by developing new products range and make
these products available in new market (Moseley III, 2017).
Out of strategies as elaborated above, most appropriate strategy for Tesla is strategy of
market development as this strategy is not risky as this is the trustable brand in auto mobile
industry. Moreover, it will help this organisation in increasing its overall sales and profitability.
In this context, market development strategy, strategic market plan is elaborated as follows-
Strategic Plan
Strategic plan is determined as a plan that is utilised by a business entity for the purpose
of setting goals of a an organisation, strengthening its business operations and in ensuring that
stakeholders must work to achieve common business goal. Here, a strategic marketing plan is
developed for Tesla on basis of market development strategy.
Overview
Tesla is an auto mobile business organisation which is headquartered in United States and
it deals with selling and manufacturing of auto mobile products at multinational level. This auto
mobile industry is considered as the first organisation that provide completely electrical vehicle
that are run through batteries (Chang, 2016). This is the only organisation that sell zero
greenhouse emission cars. The products of this enterprise has expanded in Canada, UK, China,
Hong Kong, Australia, Europe, and so on. Now this enterprise is planning to enter into global
countries such as Austria, Netherlands, Germany, and so on. For this purpose a strategic market
plan is developed.
Mission
The mission of Tesla is, “ To develop world's transition into a growing and sustainable
energy.”
Vision
The vision of this organisation is, “ To become world's number one auto mobile
organisation that is expertise in electric car production.”
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Objectives
The objectives of Tesla towards adopting market development strategy are-
 To enhance the market share of an organisation up to 15% To increase profitability and overall sales of this business entity up to 20%.
Goals
This organisation has both short term goals which is to provide consideration towards the
quality and cost of company's products and its long term goal is attaining its access over
emerging markets (Johnson, 2016).
Strategies
This enterprise is utilising the strategy of market development in order to enhance its
sales, profitability and market share.
Tactics
The tactics which is utilised by Tesla for adopting market development strategy is to
expand market at international level and cover more customers. For this purpose, this enterprise
will use both offline and online promotional measures for global promotion.
Brief Analysis: Here, business plan is made which is used to attain the competitive goals and
objectives of company. For this, appropriate strategy is used which is market development as it is
risky but also helpful for company to cover or acquire the new marketplace. Before adopting this
strategy, company use appropriate and suitable research which helps in eliminating the risk
factors and improve the chances of success for an organisation.
D1.
Business strategies and plans are important component of an enterprise which helps it
achieving different goals and aims. Tesla is the first auto mobile industry which provides electric
cars in USA. This organisation must identify impact of external forces upon its operations.
SWOT and VRIO model helps this enterprise to identify its strengths, weaknesses, opportunities,
threats and internal capabilities and than work on it. This will help the firm in knowing its
competitive advantage. Firm can choose from various business strategies such as produce
development, market development, penetration and diversification which will help this
organisation in achieving certain objectives. Tesla can use market development strategy by
identifying its strengths and weaknesses and external environment (Akter and et. al., 2016).
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CONCLUSION
From the above report, it is concluded that the strategi9es of business helps a business
enterprise in identifying the ways in which business should be processes. It helps an organisation
to attract many customers and to achieve various goals of a business in a desired and appropriate
manner. PESTLE model is utilised to identify influence and affect of macro environment and
external factors upon overall business functions and procedures of an organisation. SWOT
analysation is an important key element to determine company's competitive edge and to identify
internal forces such as strengths and weaknesses and external elements such as threats and
opportunities. VRIO model is used to ascertain internal capabilities and resources of an
organisation to identify the most suitable strategy for a business entity.
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