Business Strategy: Evaluation of Macro Environment and Internal Capabilities of Tesla

This assignment focuses on the evaluation of the macro environment and internal capabilities of Tesla, an American automotive and energy company. It includes an analysis of the PESTEL factors affecting Tesla's business environment and a SWOT analysis of its internal strengths and weaknesses. The assignment also discusses the opportunities and threats faced by Tesla and its competitive advantage in the market.

Business
Strategy

INTRODUCTION
A business strategy is a set of decisions or course of actions which guide and assist an
organization in achieving and fulfilling its particular business goals and objectives. Business
strategies is treated as a master plan that is adopted by management of a company to implement
its plans and polices for securing a competitive position in market and for conducting its
operations in a better way to achieve its desired ends of business (Pereira, and et. al., 2019). For
this assignment Tesla organisation is selected which is an American automotive and energy
based company having specialisation in electronic car manufacturing. This project includes
internal and external analysis of business environment through proper evaluation of PESTLE and
SWOT. This assignment also contain analysis of competitive environment of an organisation
trough using Porter's Five Force Model. At last, a strategic plan based on environmental analysis
is also included which comprises different strategies, objectives and tactics.
TASK 1
P1) Evaluation of macro environment
Macro environment represents the conditions of economy as whole and includes external
factors of an business environment which directly or indirectly affects operations and growth of
an organisation (Luo, 2019). Tesla is a American company having its branches across different
parts of world which includes Asia, Europe, middle east, Australia,UK, etc. Tesla motors make
use of PESTEL analysis to evaluate its external or macro factors of business environment.
PESTEL analysis

It is a strategic management tool that is used by an organisation to effects of macro
environment on performance of an organisation (Tesla, PESTEL/PESTLE Analysis &
Recommendations, 2019). The differ aspects included in PESTEL analysis are explained below :
Political – It includes political factors that are related with government policy and other
administrative authorities that have a significant effect of business operations of an organisation.
Tesla is a multinational organisation and majority of its share markets( UK,USA, Asia, etc.)
have political stability thus, provides an opportunity for its electronic vehicles and is favourable
for Tesla's generic competitive strategy and intensive growth strategies which include market
penetration. Different government incentives are also provided for promotion of Electronic
automotive thus, it has strengthen the financial performance of Tesla. An expansion in free trade
agreements has created better opportunity for company for Tesla to expand its operations at
wider level. But some political stability is faced by Tesla due to Brexit which lead to withdrawal
of UK from European union thus, creating some trade barrier on international trade of Tesla.
Economical- These factors are a indicator of economic conditions of an business
environment which includes market growth, inflations or deflation rate, price level, trade level,
etc. economic conditions of USA and UK and other markets of Tesla are highly devolved and
stable. A decrease in price of battery costs and renewable energy costs creates huge benefits for
Tesla as it has reduced the cost of Tesla electric automobile products which makes product more
affordable thus, increase sales and profits of Tesla. Increase in the popularity of renewable
energy has created bright future for Tesla but economic instability in some parts of Asia and
Europe is threatening the financial performance of Tesla (Zin, and et. al., 2019). The GDP of UK
is good which create better environment for Tesla but the unemployment rate of UK is 3.9%
which have negative impact on its strategy as it dose not get cheap labour in UK.
Social- It includes different factors related with habits and culture of society. Social
conditions effect an organisation as employees, customers and investors of company are also a
part of society. An increase in popularity of low carbon lifestyles and more preference of society
towards renewable energy is providing better opportunity for Tesla for its electric vehicles.
Stable economic conditions of large market of Tesla has improved market demand for its
vehicle. An increase in wealth distribution of developing markets has boost Tesla financial
performance through increasing potential customers for its expensive cars. Based on
sociocultural opportunities Tesla inc. is having huge growth opportunity to expand its

international businesses. A new trend is seen in society of UK and US where people buying more
items online thus creating an opportunity for Tesla to increase its sales and to expand its market
share trough making its cars available on online site.
Technological- It represents the level of technological advancement and how progress
and innovations of technology influence the operations of an organisation. Being an automobile
company, success of Tesla is highly dependent on advancement of energy solutions and
technologies (Fontdevila, Verger and Avelar, 2019). Material engineering technology and other
updated technology has created a opportunity for Tesla to become more efficient and cost
effective (Stubbs, 2019). Increasing businesses automation has created a better scope for Teals
through automation of its business process. Rapid technology change has created opportunity for
Tesla but at the same time it has leads to threat of obsolescence of technology used by Tesla and
also require huge investment on technology. An increase in popularity of online mobile systems
prompt Tesla to increase integrated systems in its automobile for providing better feature and
comfort to customers.
Environmental- It includes ecological factors that have an impact or influence on life
and health of living organism like quality of air, water,etc. It also includes the quality of material
used by an organisation to for production of product. Economic environment has created huge
opportunity for Tesla as increase in concern of people for environment has increased the demand
the of electronic cars and vehicles. The electric vehicles, batteries and solar panels provided by
Tesla are considered as most suitable for addressing the environmental issues and for reducing
further degradation of environment. Thus, Tesla is having significant opportunity to develop or
produce nature products to increase its sales and profitability But high concern of government
and society towards environment is also creating a pressure on Tesla to reduce amount of
emission of carbon dioxide and other green house gases in environment to protect ozone layer to
reduce effect of global warming.
Legal- These factors include the laws and act formed and implemented by government
and legal system of a nation (Hill and Hill 2019). Laws and legal systems plays a important part
in managerial decisions and development of business. Energy consumption regulation of UK and
major parts of world creates a opportunity for Tesla and promotes company's electric vehicles
and energy solutions products. Dealership sales regulations of United states has created a
opportunity for Tesla to increase its profit margin as now direct sales is allowed in sates of US

and there is not need of any dealership or intermediators, thus, it will lead to increase in profit
margin of Tesla.
It is clears from above evaluation that Tesla is having a variety of opportunity in its
external environment that can be easily availed by it through properly coordinating strategies and
objectives. An strategy of manufacturing more renewable energy and natural products is
beneficial for Tesla. Direct sales opportunity offered through USA is making it easier to plan and
modify its distribution strategies for improving its profit margin through elimination middlemen
and third party dealers. Tesla needs to focus on its production process and other operations for
reducing emission and exposure of carbon dioxide and other harmful gases.
TASK 2
P2) Internal environment and capabilities
Tesla is an American automotive organisation incorporated in July 2003 and ranked as
best seller and manufacturer of plug in passengers car of world in 2018 and also as a brand of
automotive group. To analysis the internal strength and weakness of Tesla, use of SWOT
analysis is made.
SWOT analysis
it is a strategic planning tool used to identify and evaluate strengths, weakness,
opportunity and threats of a business or project. SWOT analysis of Tesla is provide below to
properly evaluate its internal factors and other capabilities and weakness (Tesla SWOT Analysis,
2019 ).
Strengths Weaknesses
 Tesla is providing a innovative and
encouraging work culture to its
employees thus, attract young job
seekers and fresh talents which
improves quality and creativity level of
organisation.
 Unmatched advancement, innovation
and luxury provided by Tesla has made
it a leading automotive brand which has
 High level of innovation has increased
the level of manufacturing
complications and production risk thus,
Tesla, faces delays while launching
their new vehicles and products.
 Tesla is facing an issue of unbalance
supply and demand due because of its
highly complicated and experimenting
procedures thus, Tesla is unable to

left behind some of the most exclusive
brands like Mercedes and BMW.
 Tesla is providing the world the finest
electric car covering the maximum
distance (approx 600km) thus, it
dominates the U.S. Electric vehicle
sales and earning huge amount of
profits.
 The cross sell and diversification
services provided by Tesla has created
a good name for this brand. Tesla is
also providing a comprehensive
insurance program for its vehicles
which has increased the trust of its
customers.
meets its production requirement on
time (Goh, and et. al., 2019).
 Shortage of batteries in USA, UK and
other parts has directly affect the
production rate of Tesla thus, reduced
the sales of electric vehicles and energy
storage systems.
Opportunities Threats
 Asian market which is still unsaturated
in field of renewable energy and
automotive is creating a significant
opportunity for Tesla to expand its
target market to increase its financial
stability.
 Till now, product of Tesla are
expensive due to unconventional
reliance on innovation and technology
but the new products and model of
Tesla are more affordable with less
range and limited feature thus, creates
an opportunity for Tesla to increase its
audience market (Muñoz‐Torres, and
 Tesla company is facing many lawsuits
and claims related to its technology
failure which is the biggest setback for
its bend name and financial
performance.
 Huge amount of competition is faced
by Tesla from luxury segment like
Mercedes, BMW, Audi, etc. many
brands are launching environmental
friendly technology at comparable
lower prices creating a threat for
innovative and expensive cars of Tesla.

et. al., 2019).
 Tesla is planning to make its own
battery cells to reduce its dependency
on suppliers of battery. It will helps in
increasing manufacturing rate ad
reducing cost.
Thus, innovation and technology advancement are the biggest capabilities of Tesla and
use of renewable energy and electric vehicles are creating huge opportunity. But legal claims and
large number of competitors are drawbacks for growth Tesla.
VRIO analysis
It provide a framework to analysis the internal resources and capabilities of organisation
to gain and sustain competitive advantage (Ikeda and Marshall, 2019).
Resources Valuable Rarity Inimitable Organized What is the
result?
Distribution
channel
Yes No No No Competitive
Disadvantage
Market presence Yes Yes No No Partially
competitive
Technological
resource
Yes Yes Yes No Temporary
competitive
advantage
Human
resource
Yes Yes Yes Yes High
Competitive
advantage
Valuable

These are resources which adds value in organisation through enabling a firm to exploit
opportunity and defend threats. It helps increasing in the perceived customer value and
satisfaction.
 Distribution channel – Distribution channel is a valuable resource of Tesla as it does
not follow traditional Chanel of distribution and maintain its own sales force to timely
deliver its product. Tesla does not have any intermediator or dealer which eliminates the
cost of commission and provide a direct contact with customers (Mahfuz Ashraf, and et.
al., 2019).
 Market presence- Market presence of Tesla is very effective and it is having a very good
brand name.
 Technological resource- Tesla is having a advance and innovative technology which
provides valuable strength to this organisation to garb opportunity and defend threats. Human resource- Workforce of Tesla is highly skilled and creative providing most
valuable resource to Tesla to meet any adverse situation.
Rarity
These are the resources which can be acquired by only few companies thus, considered
rare. Rare resources grants temporary competitive advantage.
 Market presence- Market presence of Tesla is quite good thus, acting as a rare resource
for Tesla which is difficult for its competitors to acquire.
 Technological resource- The new and most creative technology used by Tesla is rare
and can not be copied by any company easily thus, providing a temporary competitive
advantage to Tesla (Liu, Ma and Liang, 2019). Human resource- The diversity and creativity provided by Tesla is very useful in
improving the skills of its manpower thus, it is also a rare resource.
Inimitable
Theses are the resource which are costly to adopt i.e. can not acquired by any
organisation without paying sustainable amount of price. It provide sustainable amount of
competitive advantage. Following are the inimitable resources of Tesla :
 Technological resource- Tesla makes use of latest and most advance technology to
deliver bets quality electronic vehicles. It is difficult and expensive for any other
company like Mercedes, BMW, etc. to meet the technological level of Tesla. Tesla has

provided Tesla Roadstar car which is staggeringly quick and have no wheel spin, no
traction control stutter and no drive line shutter. Human resource- Workforce of Tesla is highly efficient and creative providing greatest
strength and capability to Tesla to handle competition and all adverse situations.
Organized
Trough properly organising its resource a company can achieve high competitive
advantage.
Human resource- It is the most organised and well coordinated resource of Tesla. Proper
training and development program are provided by Tesla to its employees to improve their skills
and talent to gain competitive advantage at global level. Human resources of Tesla is a
sustainable resources as best policies and incentives are provided by Tesla for their retention and
betterment, thus, employees remain and continue working in Tesla for a long period of time
which making it a sustainable resource.
McKinsey 7S model
this model provide link and coordination between 7 elements of an organisation which
lead to enhance in effectiveness of organisation. Theses elements in context of Tesla are
explained below:
Shared value- it represent the shared value and beliefs of an organisation. Tesla having
a shared value of innovation and creativity to provide better product to customers.
Strategy- this factor represent the method used by an organisation to form its strategy for
attaining goals. Tesla is making use of a number of strategic planning strategy to achieve its
targets.
Structure- this element represent the hierarchy or organisational structure of an
organisation. Tesla is making use of function la structure so that due importance can be provided
to all functions to meet the desired level of standards.
System- this element shows the process or method of operation according to which
activities are carried in an organisation. A simple system of operation is used by Tesla to remove
all type of complicity in its organisation.
Staff- it represent the quantum and efficiency of employees. At present Tesla is having
around 45000 which are very creative and efficient.

Style- this element represent the manner or style which is followed by an organisation to
achieve its targets. Tesla is making use of latest technology and innovation in its day to day
operation.
Skill- it represent the talents and capabilities of workforce of an organisation. Manpower
of Tesla is highly skilled and creative which is the greatest asset of Tesla.
TASK 3
P3. Porter's five Forces model.
The model that benefits a company to properly understand industry competitiveness in
effectual manner is said to Porter's five force framework. It is primarily used by entities to
identify potential strategies that can contribute towards maximising profit margins in positive
aspects. The management team of Tesla Motors applies such model in order to shape overall
competitive extent within the automotive industry (Akakpo, and et. al., 2019). The elements or
forces of the model in relevance to Tesla Motors are discussed beneath:
New entrant threat: Influence of the force in automotive sector is generally low as huge
proportion of monetary resources are to be invested so to enter in this sector. New entrants are
popularly said to new companies that brings unique innovations as well as new aspects of
performing things which results in pressure on managers of Tesla Motors in order to lower their
car prices addition to providing innovative propositions to customers. It tends to generate huge
opportunities for company to launch its new model which is Tesla Roadstar that can help in
becoming market leader. For this, the company has to build customer base through research and
development so to fight off new entries via cost advantage and dedicate its quality together with
innovative offerings.
Competitive rivalry: In automotive industry, there are various rivals of Tesla Motors
including BMW, Chevrolet, Hyundai, Toyota, Volkswagen, Ford Motors and Nissan that shows
high extents. In contrary, the firms manufacturing electric cars are founds less yet they are at
well established positions having more customer base which adds serious threats for the
administrators of Tesla Motors. In order to tackle the competitive rivalry, selected manufacturer
should build sustainable differentiation and collaborate with competitors so that market share can
be enhanced.

Threat of substitutes: When a new commodity meets homogeneous customer needs in
distinct manner, profitability of industry suffers. The force results in high influences on Tesla
Motors due to existence of other firms in emerging market. But in context to Tesla Roadstar
which has no wheel spin, no drive-line shutter and no traction control shutter results in low threat
of substitutes which shows more opportunities to invest in product segment along with adopting
differentiations so that company can differentiate itself with that of other electric car producers.
In addition, by following customer oriented approach and increasing customer switching cost,
managers of Tesla Motors can turn into market leaders possessing loyal customer base (Nave and
Ferreira, 2019).
Suppliers bargaining power: in context to Tesla Motors, the suppliers generally have
moderate powers due to the limited production of firm in comparison to others in same sector.
The administrators of Tesla Motors are generally dependent on various suppliers and these
suppliers are in dominant position which reduces profits of the company and suppliers earns
more. Powerful suppliers uses negotiation powers for getting higher prices from automotive
manufacturers. To effectively tackle suppliers bargaining power, Tesla motors managers should
build contracts or relationships with multiple suppliers and develop dedicated suppliers that are
dependent on the entity.
Buyer bargaining power: Buyers are customers whose influences are found huge on the
products available in automotive industry due to existence of large multinational firms who
provides best offerings at minimum prices. However, relatively less automotives are available in
the market that deals in electric cars which provides opportunities to Tesla Motors for grabbing
attention of larger market share through offering quality as well as enhancing features in
upcoming duration. Tesla Motors have smaller yet powerful customer base that leads towards
higher customer bargaining powers addition to huge capabilities to seek discounts or offers.
From the above Porter’s five force analysis it can be concluded that Tesla motors is
having little threat of new entrant as automobile industry require huge investment which is not
easy for all organisation. Threat from substitute and competitors can also be handle by Tesla
through developing better electric car. Tesla should search for some more options of suppliers so
that raw material and other stock can be managed at lower price. Buyer bargaining power is also
manageable by Tesla as it is having a large customers base for its electric car.

TASK 4
P4) Strategic plan
Strategic plan are made by an organisation to properly mange and coordinate its activity
to ensure that efforts of employees and other workforce is made towards achievement of
common of goal (Wettstein, and et. al., 2019). Strategic plan is developed by an organisation for
meting its growth target and other objectives on time. The main product of Tesla includes a
Roadstar car which is very quick and efficient. Use of ansoff matrix is made by Tesla to analysis
different growth strategy which will be helpful for organisation to increase its target market and
profitability.
Ansoff matrix
It is a strategic planning technique which provides evaluation of different growth
strategies for achieving the growth objectives of an organisation. The main four strategies of
ansoff which can be adopted by Tesla to achieve its target and objectives of growth are as
follows:
Market Penetration
It is a strategy of selling exiting products into exiting markets. This strategy aims at
increase market share of current product which can be achieved through modifying pricing
strategies, advertising and sales promotion. This strategy can be adopted by Tesla for increasing
target market for its current products through making use of more aggressive promotion and by
reducing price of its products.
Market development
Under this growth strategy business seeks to sell its existing product into a new market.
This can be done through launching a existing product in a new geographical area and use of
new distribution channel can also be made to target new market. Tesla can make use of this
strategy to increase its market share through launching its electronic car in some new locations of
world like in that parts of Asia where renewable energy is still not exists (Mathew, 2019).
Product development
Under this strategy business aims at introducing new product into exiting market. This
strategy require to develop and modified its product which can attract the customer of exiting
market. This strategy can be used by Tesla to gain more competitive advantage through detail
insight of customer needs and providing most suitable product to meet that demand.

Diversification
It is that growth strategy where businesses markets a new product in a new market. It is
quite risky strategy and require proper balance between amount of risk and rewards (Tunn, and
et. al., 2019). Tesla can make use of this strategy to provide new products at relative low price in
a new market to increase its market share and profits.
Tesla is a popular brand and having a good image in market thus, diversification is most
suitable strategy for expansion of its business operations. Tesla is having a very efficient
research and development department to bring new idea and more innovative technology to
deliver a best quality electronic car which can attract customers of a new market. Tesla is know
more focused towards reducing cost of its cars to make it affordable for more potential consumer
thus, it creates an opportunity for Tesla to launch its product in new target market at lower price
to attract more customers.
Tesla can also make use of horizontal or vertical integration for its better growth and
development.
Horizontal integration- It represent a process of acquisition of a business operating at same
level of value chain in a similar or different industry. Tesla can expand its business operation
through horizontal integration as it increase market share and also reduced competition.
Vertical Integration- Under this process organisation mainly expand its business operation
through acquisition of business from upstream or downstream of supply chain. Use of vertical
integration can also be made by Tesla as lead to improvement in supply chain coordination and
also reduce cost of transportation.
Overview
Tesla is a well known multinational American automotive and energy based company
formed in 2003. In 2018 it become the world's leading seller of pug in passenger car
manufacture. To expand its businesses in all parts of world, Tesla is planning to launch a more
affordable family electric car in unsaturated parts of Asia where electronic cars and renewable
energy still not exists. For this purpose Tesla is also providing zero emission electric power
generation from their giga battery factory (Tesla, 2019).
Vision
Tesla having a long term vision, “ To expand its business in every part of world and to
become a leading brand of electric vehicles.”

Mission
the mission of Tesla is, “ To deliver more affordable electric care to increase its
productivity and profitability”.
Objectives
Tesla having following targets and objective fir this strategic plan :
 To increase its target market and sales by 25% in coming one year.
 To increase its profitability by 10% in next 8 months. To increase the goodwill and brand image of its product in Asia and other parts of world.
Goals
Tesla is having a goal of entering a high end market where customers can afford its
luxury cars and its new electric family car. To make its cars more affordable and to reduce its
cost of production a large sum of profit is ploughed back its research and development
department (Müller, 2019).
Strategies
Tesla is making use of diversification strategy to launch its new family electronic care in
a new target market (i.e. in new market of Asia where electronic cars are not present). For that
purpose Tesla is spending a large amount of money on market research and R&D department.
Use of horizontal integration can also made by Tesla to properly launch its new product and to
handle the high level of competition in the market.
Tactics
it represent the actions conducted for achieving the targets and objective. Tesla is making
use of an efficient marketing strategy to achieve its objective. Timely market research and
promotional activity are conducted by Tesla to understand the taste and preference of customers
and to make them aware about new product. Following marketing mix is papered by Tesla for its
new family electric car:
Elements of marketing
mix
Tesla family car
Product A new affordable family electric car is provided by Tesla in which
use of best technology is made which will reduce the emission of
carbon in environment.

Price The expected cost of new family car of Tesla will be £8000
Place This new car will be available at showroom of Tesla and it can also
be booked through online website of Tesla.
Promotion Tesla can promote its new electric car through making use of
aggressive advertising policy.
Implementation and control
For proper execution of its strategic plan timely controlling measures are taken by Tesla.
Work and activities of employees of Tesla are timely monitored by mangers to control their
efficiency and performance (Harmon, 2019). Use of KPI can also be made by Tesla for analysis
of its performance and success of project. KPI (key performance indicator) provide a measurable
value to demonstrate or analysis the effectiveness of an organisations which is necessary to
achieves the desired targets. KPI provide a comparison between and actual and budgeted
performance so that if there is any deficiency in result, corrective action can be taken on time.
CONCLUSION
From the above assignment it can be summarised that business strategy provide a
guidance in achieving the targets bad objectives of an organisation. PESTEL analysis is used to
analysis and evaluate the external and macro factors of a business environment. SWOT analysis
is performed to estimate the internal strengths and weakness and VRIO model is used to analysis
the internal capabilities and available resource of an organisation. Ansoff matrix provide
different strategies like market penetration, diversification, etc. to meet the growth objectives. At
last it can be concluded that, strategic plan are made to achieve the objectives and goals of
organisation.