PESTLE and SWOT analysis of Tesla

BUSINESS STRATEGY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
PESTLE Analysis and Swot analyses..........................................................................................1
Porter Five Forces Analysis.........................................................................................................3
TASK 2............................................................................................................................................5
Different strategic directions available to business.....................................................................5
Justification and recommendation for most effective strategies..................................................6
Strategic management plan..........................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business Strategy is the combination of all the decision taken to influence the work of the
organisation to accomplish the organisation goal very efficiently (Scholes, 2015). Tesla is an
American automotive company specialised in making electric car based in Palo Alto, California.
Tesla was founded in the year 2003 by the founder Martin Eberhard and Marc Tarpennin. This
reports highlight the PESTLE and SWOT analysis of the Tesla. Further this report shows the
Porters five factor analysis of the organisation and also shows the Ansoff matrix of the
organisation. Further these report goes on to show the recommendation of the strategy which can
be most beneficial for the organisation to grow in the market. In the end report shows the
Strategic management plan with strategy, objective and Plan.
TASK 1
PESTLE Analysis and Swot analyses
PESTLE analyses or external environment of Tesla
Political Factor: Tesla is well known for producing electronic vehicle. Unlike the other
traditional vehicle which requires the fuel to operate. As the government of US always support
the non fuel vehicle Tesla is getting a good support from the government side in promoting the
awareness of the product in the market. Tesla has tried to enter into the new market through their
electric car but the success in that market generally depends upon the economy of the country
(Akter and et.al., 2016).
Economic Factor: As the global economy is growing frequently demand for the luxury's
product is also growing as the reason growing economic has resulted in increase in the demand
of the electric car which has benefited Tesla as Tesla has gained a good name in the electric car
industry till the demand has come which has resulted in increase in the sell of the Tesla product.
Fall in the price of the raw material specially electric batteries has also helped the Tesla in
reducing the price of the product which has also helped the business in facing a new entrant
threat in the market as many well known car producer has introduced the electric car (Thompson,
Strickland and Gamble, 2015).
Social Factor: In today's world people love to have an Eco-friendly car as they believe in saving
the environment, it cannot be said that it is cheaper to use as compare to the fuel car but it is true
that electric car does not harm that much of environment as compare to the fuel car which has
helped the Tesla in gaining a good name in the eye of the customer, these has also helped the
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Tesla in getting competitive advantage as other company find it difficult to gain a name as
compare to the Tesla (Pisano, 2015).
Technology Factor: Technology is the only way the Tesla is able to gain a competitive edge in
the market and able to sustain the place in the market but at the same time it is also proved tough
for the business to cope up with the technology as the technology used to change rapidly it has
proved a tough task for the firm to evaluate the technology and used the best one to get the
performance out of it (Amran and et.al., 2016).
Legal Factor: Legal factor is the factor which is helping the Tesla also but at the same it is also
hurting the business as Tesla is now looking to enter into global market by selling their product
into new market, as almost all the government support the electric car it is proving good for the
organisation but at the same time all the government has their own rules and regulation which is
letting to fluctuation in the price value of the product and which eventually proving in losing the
price advantage in the global market (Chang, 2016).
Environmental Factor: it is the main factor where the strength of the Tesla lies as Tesla
produces the electric car which is environment friendly product so Tesla always promote the
product with the environment friendly tag line which helps the business to have a good name.
SWOT Analysis
 Strength: Tesla main strength lies in the innovative idea to sell the electric car to the
customer when Tesla started to sell the electric car Tesla was a only company in the
industry and has enjoyed the success of the market alone and which has also helped the
Tesla in earning a good name in the market which has helped the business as goodwill is
always looked before making buying decision. Tesla strength also lies in the product
which Tesla develops as the product develop by the Tesla is luxuries product and Tesla
never compromises on the quality aspect of their product and that's the big reason of
customer attracting toward the company (Buckley and Ghauri, 2015).
 Weaknesses: Tesla has faced the problem in cash maintaining for the business as Tesla is
investing very much of their cash resources in buying the resources for the research and
development program and also trying to cover more market area in the global market by
diversifying their business and it requires a very big investment so from the last few year
Tesla is finding it difficult to maintain the good cash reserve with them as the result Tesla
was also supported by the government by providing $365 million USD from the
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Department of Energy as the Loan, Tesla is generating the good revenue but continu
investment is reducing their part of the profit (Moseley III, 2017).
 Opportunities: Tesla is now focussed on bringing down the cost of the product as
reducing cost will mean increase in the profit for the business, So after assizing the
opportunity the company has decided to open a Gigafactory in which company can
produce the product at very large scale which will ask the company to buy the raw
material at very large scale which will allow them to have a Discount on the product
which will certainly decreases the cost of the product. Tesla has already opened two
Gigafactory and looking for opening the third one by the end of this year. Tesla also has
the good opportunity to grow in the developing country as the growing economy is
increasing the demand of the electric car in the market (Priem, Wenzel and Koch, 2018).
 Threats: Tesla Financial position is always proved threat to them as they are in many
debts as the continuous investment in the research and development program has forced
them to have a debt and continuous change in the technology in the current scenario is
also proving threat to the Tesla as Tesla need to evaluate the change and if require than
adapt the change in the companies' product (Strategy, 2017).
Internal capability
With the help of the SWOT it has been find out that Tesla is having the good product range with
the high quality of the product in their due to proper operational management tool. It has been
also find that the decision making in the organization is not clear as the financial position of the
organization is not at the right position. It has been also find that the organization is having the
good research and development program as they have find out that the cost of the company
product is high as compare to competitor.
Porter Five Forces Analysis
Porter’s five analyses is considered as one of the effective model which helps in analysing
competitive environment of business unit.
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Figure 1porter's five forces
(Source: Sustainability and the Five Forces Model, 2014)
Threat of new entrants: Tesla has to face a good competition in the market from the new
entrant as Tesla is the one which is well known for their luxuries product and the price of the
product of the Tesla is also very high which cost the company as many new entrant in the market
always look to introduce the product at cheaper rate which affects the Tesla business as customer
get attracted toward the cheaper product in the market (Scholes, 2015).
Bargaining Power of Suppliers: As in the auto mobile company all the organisation requires
buying their raw material from the different Suppliers in the market and supplier are in the
central position in the Tesla organisation to fluctuate their profit margin as the reason company
has opened the Gigafactory to produce their product at very large scale so that they can get a
discount from the supplier if the company will produce at very large scale than the raw material
requirement for the company will be high and for buying a large amount of raw material supplier
always provide the discount (Thompson, Strickland and Gamble, 2015).
Bargaining Power of Buyers: Buyers are the main factor which influence the business of the
organisation as they are the one in the end who pays the price for the product which was
produced by the organisation. Customer always look to buy the best product with spending
minimum of the money on that which has forced the company to cut down their rate of the
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product as company is well known for the luxuries' product with high rate but at the other end
the name and goodwill of the company help the company to sell their product with higher rate
also as there are customer who believes in the Tesla quality and brand (Amran and et.al., 2016).
Rivalry among the Existing Competitors: At the time of the starting of the business Tesla was
a sole organisation in the industry who is producing the electric car and which has helped the
business to rule the market for initial few years and gained the name with the quality of the
product but after some time big car manufacturing companies like Toyota has also produced the
product which has reduces the sale of the business as other company has also used very good
techniques to promote the product which has reduces the market share of the business but Tesla
is well known for research and development program which has helped the business in getting
competitive edge (Buckley and Ghauri, 2015).
Threats of Substitute Products or Services: These is the threat which is not affecting Tesla as
much as there is no such substitute of the electric car but there are some people who still believes
in the fuel car and it proving difficulties for the organisation to influence that type of customer
toward the organisation.
TASK 2
Different strategic directions available to business
Ansoff Matrix
Market Penetration: These is the strategy which is used by the Tesla very frequently as Tesla
has established the good name and competition in the local market is not affecting the business.
So Tesla always try to sell their existing product in the existing market by using different
marketing or distribution of channel as the main revenue which is generated by the Tesla is from
the local market itself some existing product which are sold by Tesla are Model S, Model X and
Model 3 electric vehicles, Power wall 2 and Power pack 2 energy storage products (Priem,
Wenzel and Koch, 2018).
Product Development: These is the most used strategy of the Tesla as explained above that
company invest very good cash resources in the research and development program which has
helped the organisation in knowing the opportunity if any present in the environment and after
that working on that opportunity, which helps the business in getting the first mover advantage
in the market and satisfying the need of the consumer in the market. Tesla has got the advantage
of first mover in the electrical car industry as Tesla was the alone organisation in the industry
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when Tesla started the business (Strategy, 2017). Tesla always try to build the product which is
in need of the customer and also always looks at the opportunity which can change the
performance of the product through research and development program.
Market Development: It is the strategy in which company try to enter into new market to cover
wider market area Tesla is also looking to diversified the business into the new market, India is
one of the country. Tesla generally looks at the culture of the host country before entering in the
new market as culture is the main factor which affects the growth of the business. Tesla also
looks at the competition which company will require facing in the global market and the main
thing which is looked by the Tesla is the economic growth as in all the growing country need of
the electric car is increasing and many governments is also promoting the electric car as such car
does not affect the environment of the business (Moseley III, 2017).
Diversification: Diversification is the strategy in which company used to diversified the
business across different aspect of the business. Tesla has diversified the business as when Tesla
started the business they was only producing the electric car but in the year 2016 after buying
Solar city a solar company they enter into energy storage sector. Tesla also looking to diversified
their business as they are investing on research program which is helping them to known about
the future opportunity (Pisano, 2015).
Justification and recommendation for most effective strategies
Tesla company had the mission of introducing the electric car in the market to give a
direction of the world transition towards the sustainable energy. Tesla motors want to introduce
the electric car in the market which would turn out to be better and fun loving than the
petrol/diesel car. The divers shouldn't need to compromise to have a ride with an electric car. As
Tesla want to launch the new product in the market, the target market will be its existing market.
So according to the Ansoff matrix, the company has to choose the product development strategy.
Tesla frequently engages into the new product development. In the product development strategy
the company used to introduce its new product into its existing market (Akter and et.al., 2016).
To introduce the new product in the existing customer data base, the Tesla has to change its
business operation taking care of the research and development of the new product.
The company needs to take this product development strategy because there is the heavy
cost in storage of the power sectors and the electric vehicle development. Tesla would choose for
the product development strategy then there will the following changes in the strategy-
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Research and development strategy- assessment regrading the investigation on the use to the new
technology, process and other requirement that you need to require for the implication of this
strategy in the market (Scholes, 2015). Tesla should continue to pay more attention on the
research and development of the company so the more and more innovation can be there to gain
the competitive advantage in the Market. Tesla should identify the need of the customer how
they want Tesla to be different from the existing competitors. By using the product development
strategy the company should analyse the different market opportunity to grab their attention to
there existing market into their new product (Priem, Wenzel and Koch, 2018).
The product development strategy is very risky strategy as to introduce the new product
into the existing market under the same brand. To reduce the risk, the company use the brand
extension for its existing customer base and loyalty of the customer. They company is
identifying the new revenue channels that they competitors are not offering. However, there is
the high risk in the strategy that if the brand extension fails to success in the market then there is
the harm to the parent company (Buckley and Ghauri, 2015).
Hence, Tesla is working for the sustainable accomplishment through introducing the
electric cars in the market. The company is far ahead then competitors in the matter of
technology and openness as they are a software company to with a car company. Tesla don't
need the dealers, they keep the contact contract with there end customers in ongoing basis. So
Tesla should use the product development strategy.
Strategic management plan
Executive Summary
Tesla is the US based auto mobile industry manufactures electric care to move the worlds
transition toward the sustainable development. The company is coming with its new product
market which consist of its existing customer base. The company want to introduce its new
product in the market under the same brand name. Company have the direct contact with there
end user so that they can know the satisfaction level of their consumer (Amran and et.al., 2016).
Aim
The aim of the Tesla is to introduce successfully the new product in the market through
achieving its mission and vision along with maximum satisfaction to the end customer by pacing
the worlds transition to sustainable development.
Mission
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The mission of the company is-
The company want to move the pace of the worlds transition toward the sustainable
development.
The company wanted to prove the world that the driver are not compromise there fun loving car
experience with electric car as compare to the petrol/diesel cars.
Vision
The company vision statement is to move the worlds transition towards the sustainable
energy.
Core values
The company has the core values revolving around the drivers, a fresh start, a
commitment to be electric and have the sparkling evolution.
Objective
 To introduce the new product successfully in the market.
 To increase the sale of Tesla by 20% by the end of the year.
Strategic direction-
The strategic direction include the planning of the company different department how they
will work to promote the new product in the market-
 Marketing department- the marketing department perform various market analysis to
know the demand of the customer and how they have to place the product between there
target market. The marketing department will also look after the various marketing
strategies that they have to apply in the market (Thompson, Strickland and Gamble,
2015).
 Human resource department- the HR department will help the market department to
identify the core opportunity-in the hiring the best human resource for the development
of the product. The HR department will look after the policy of the Tesla that no that
everybody is working under the rules or regulation or not.
The department will help ton achieve the objective of the company regarding the launch of
the new product successfully in the market (Strategy, 2017).
Market analysis-
The company had performed the various environmental analysis just like the pestle
analysis and swot analysis to identify the various factor that are affecting the launch of the new
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product in the market. In the market analysis the company will perform the SWOT analysis to
identify the strength and weakness of the company along with the threat and opportunities.
Tactics
Tesla pricing strategy- the pricing strategy of Tesla is user premium pricing strategy. As the
company used to produce high quality products and there is the uniqueness in the product so
there the pricing of the product are also the premium lining (Moseley III, 2017).
 Tesla promotional mix-
Tesla promotional activities include the following components -
Personal selling- as the company should have the end customer relationship for the
selling of the product.
Sales promotion techniques- through introducing the viable offer and discount to attract
the customer or adding the sign of luxury to the lifestyle (Priem, Wenzel and Koch,
2018).
 Direct marketing- marketing of the product direct to the customer through different
media.
CONCLUSION
In the marketing strategy of Tesla, the pestle analysis and the swot analysis has been done.
Through which we have concluded the threat on the Tesla is having the threat of the debt as they
are having the maximum investment in the research and development but it is creating the
opportunities of bringing the sustainable energy. The company has the motive to move the pace
of the world towards the sustainable energy. The pestle analysis give a critical thought on the
political factor that the export the Tesla products, the price increase due to change in the policy
of the government. So the company has to work in innovation to accomplish its vision and
mission.
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REFERENCES
Books and Journals
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Amran, A. and et.al., 2016. Business strategy for climate change: An ASEAN
perspective. Corporate Social Responsibility and Environmental Management. 23(4).
pp.213-227.
Buckley, P. J. and Ghauri, P. eds., 2015. International business strategy: theory and practice.
Routledge.
Chang, J. F., 2016. Business process management systems: strategy and implementation.
Auerbach Publications.
Moseley III, G. B., 2017. Managing health care business strategy. Jones & Bartlett Learning.
Pisano, G. P., 2015. You need an innovation strategy. Harvard Business Review. 93(6). pp.44-
54.
Priem, R. L., Wenzel, M. and Koch, J., 2018. Demand-side strategy and business models: Putting
value creation for consumers center stage. Long range planning. 51(1). pp.22-31.
Scholes, M. S., 2015. Taxes and business strategy. Prentice Hall.
Strategy, B., 2017. Business Strategy. MARKETING. 1(2). p.3.
Thompson, A., Strickland, A. J. and Gamble, J., 2015. Crafting and executing strategy: Concepts
and readings. McGraw-Hill Education.
Online
Sustainability and the Five Forces Model. 2014. [Online]. Available through <
https://www.sasb.org/blog/five-forces/>
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