Impact of Macro Environment Factors on Tesla

This report analyzes the impact and influence of macro environment factors on Tesla, a leading automotive and electric company. It examines the political, economic, social, technological, environmental, and legal factors affecting Tesla's operations and strategies.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1 ...........................................................................................................................................3
P1: Impact and influence of macro environment factors on the organisation........................3
M1: Critical analysis of of macro factors to determine the management decisions...............5
TASK 2............................................................................................................................................5
P2: Analysis of internal environment and capabilities of the organisation............................5
M2: Critical evaluation of internal environment and the capabilities....................................8
TASK 3............................................................................................................................................8
P3: Analysis of competitive environment of the organisation...............................................8
M3: Appropriate strategies to improve competitive edge and market position.....................9
TASK 4..........................................................................................................................................10
P4: Theories, concepts, models that can help in strategic planning.....................................10
M4: Strategic marketing plan...............................................................................................11
D1: Critical analysis and interpretation of data and information.........................................12
CONCLUSION..............................................................................................................................12
REFERENCES................................................................................................................................1
.........................................................................................................................................................2

INTRODUCTION
Strategies are the action plan which is undertaken to achieve the long term goals while
business strategy is a set of actions and competing motives that a business attempt. It helps the
organisations in improving the performances of their employees, to take competitive advantage
and to attract the customers. They determine the path that the organisation has to follow to reach
to the desired goals as it facilitate in planning the activities. The strategies are formulated on the
basis of the goals of the organisation which can be for general business conduct or to take
competitive advantage. It is important for the organisation to analyse the macro environment
factors, internal factors, existing strategies and capabilities before they plan their strategies as
they have direct influence on the operations of the organisation. This report is prepared for Tesla,
which is a automotive and electric based company, it is specialised in manufacturing of electric
cars, batteries etc. In this report the analysis of macro environment, internal environment,
analysis of the capabilities of the organisation is done with the helps of various models. Also a
strategic growth plan is developed in which strategic objectives, tactics are identified which will
help them to achieve their goals.
TASK 1
P1: Impact and influence of macro environment factors on the organisation
The business operates in dynamic environment which influence their operations. Due to this the
organisations analyse various external factors which helps them to grab the opportunities and
reduce the impact of threats. As Tesla operates in global environment therefore they are affected
by various factors. Such factors can be analysed with the help of PESTLE analysis. In this the
political, economic,social, technological, environmental and legal factors are considered. It will
assist Tesla to understand the challenges, risks and opportunities which can arise due to these
factors (Verbeke, 2013). The PESTLE analysis for Tesla is given below :
 POLITICAL FACTORS : This factors helps to identify the impact of the actions of
the government and the extend to which they can intervene in the organisation. The
government of UK took initiative to promote electric vehicles in the economy for which
they have provided incentives. This is an opportunity for Tesla as it will increase demand
of their products. Also the political stability in UK provides a favourable working
environment which will help Tesla to carry out their growth strategies for a longer period

of time without make significant changes in them. But the geopolitical issues faced by the
company affects their operations as they are dependent upon international partners for
supply of finished goods and raw material (Suarez, Calvo-Mora and Roldán, 2016).
 ECONOMIC FACTORS : Economic factors are those factors that determines the
economic performance which directly affects the operations of the company which
includes interest rate, exchange rates etc. The reductions in the cost of batteries in UK is
favourable for Tesla as this will reduce the price of the auto mobile products that will
make them affordable. Also reduction in the cost of renewable energy will make their
products attractive as they utilises renewable source of energy for manufacturing of
electric vehicles. But the stability in the economy may affect the business of Tesla as it
will affect their financial performance because the rate of interest will increase due to
stability in the economy. It will become difficult for Tesla to procure funds (Barberá and
et. al., 2012).
 SOCIAL FACTORS : Social factors are related with the cultural trends, population
analytics etc. People are becoming more conscious of the environment due to which the
concept of low carbon lifestyle has emerged. This will be favourable for Tesla as they
provide electric cars and products related to it. With growing consciousness for
renewable energy, the demand of such products will increase which will increase their
profitability. But due to the prices of their products, the people belonging to middle class
cannot afford it and in UK there is a rise in their number. This put pressure on Tesla to
reduce their prices by maintaining the quantity (Sirén and Kohtamäki, 2016).
 TECHNOLOGICAL FACTORS : Such factors are associated with the innovation in
technology which is used by the company. In the automobile industry the technology
changes rapidly which is why the organisation need to keep an eye on them. Tesla is
famous for their high rate of technology and innovation in their product and process
which is beneficial and a threat both. This increases cost for the company which
ultimately increases the prices of the product but it help them to get the competitive
advantage. Tesla has scope of introducing automation in their products and also to
introduce online mobile system in their automobiles.
 ENVIRONMENTAL FACTORS : Environmental factors are associated with climate,
weather. It also includes the surrounding in which the environment operates. The concern

for environment is growing day by day and it is favourable for Tesla as it provides the
electric vehicles which are eco-friendly. They can promote their products as is favourable
in all the climatic conditions. Tesla also provides batteries and solar panels which are
suitable products from the environment point of view. Due to this, the demand of their
products will rise in UK as they are more concern of the environment.
 LEGAL FACTORS : These are the factors which can put the organisation into legal
proceedings. They aim to regulate the business to protect the society, employees etc.
Various implications of laws affects the business such as due to dealership sales
regulations Tesla has to meet up with the compliances due to which their existing
contracts set affected. Also with expansion of international patent protection, the
Company is benefited as they will get protection for the technology they has introduced
because it cannot be copied by others. Energy consumption regulations are also in favour
of Tesla as they uses renewable energy in their manufacturing processes for the products
(Reich and Benbasat, 2013).
M1: Critical analysis of of macro factors to determine the management decisions
To be competitive and profitable the company has to identify the possible opportunity
and threats which are present in the business environment. These factors has influence on the
strategies of the company but to minimise their impact they have meet with such changes. On the
basis of analysis it is identified that Tesla has positive political impact as the government also
promotes electric vehicles which are produced by them. Due to this they have favourable
environmental factors but their operations got affected by the technological changes as it changes
so often which increases their cost and requirement of funds of Tesla.
TASK 2
P2: Analysis of internal environment and capabilities of the organisation
Internal environment of the business is concerned with the culture, members,
managements and many more which has the ability to affect the decision making of the
organisation. For this the analysis of internal factors is important for the organisation as it helps
them to identify the strengths of the organisation and their weaknesses. Also the internal analysis
facilitate to identify the competencies of the organisation, their policies, resources etc. The
internal analysis can be done by any organisation irrespective of their sizes, nature of products

they deal in. To achieve the goals of the organisation Tesla has to integrate their strengths with
the opportunities that they have identified while analysing the external environment by
minimising the impact of the weaknesses (Oldman and Tomkins, 2018). SWOT for Tesla is
prepared to analyse their internal factors is provided below:
Strengths Weaknesses
 Tesla has a strong technological
advantage as they have invested a lot of
funds on the innovation and
technology.
 They have support of the government
as they are promoting environment
friendly products also they provides
incentives to Tesla to facilitate their
operations.
 They have their own channel of
distribution which will help them to
ensure the availability of the products.
 The capacity of manufacturing of the
cars is an issue for Tesla as due to this
they faces problem in meeting up the
targets of the higher volume.
 Tesla offers products which are
innovative and environment friendly
but the customers still are not sure
whether to invest in such technology or
not which is because of lack of
awareness.
 The prices of the products Tesla are
high in comparison to combustion
engine vehicle due to which people
cannot afford their product.
Opportunities Threats
 Tesla has an opportunity to add on the
value in their products through more
advanced technology .
 Technology will help them to reduce
cost which will prices and thus they can
target middle class people who are
large in number. This will increase the
demand for their products.
 As they have strong distribution
channel they can easily expand their in
 The major threat Tesla faces is of
competition from existing players as
they are also introducing similar
products.
 The prices of the goods that they
purchases from other countries
fluctuates due to change in exchange
rates. This increases cost for the
company.
 To minimise the cost of procuring from

countries where they are not yet
operating.
other countries they may procure in
bulk which is why they storage cost
may increased.
For an organisation it is important to analyse the capabilities of the organisation as on the
basis of them capabilities and competencies the opportunities can be availed. VRIO framework
can be used to analyse the capabilities of resources of the organisation. Analysis of capabilities
facilitates the organisation to take the strategic competitive advantage (Noe and et. al., 2017) .
The VRIO stands for value, rareness, imitability and the organisation. The framework is
used for Tesla :
Value This factors helps to identify that the resources or the capability of the
organisation is valuable for them or not. The resources such as battery,
charging network, selling and distribution channel and the leadership
styles in Tesla are all valuable to them as it offers them sustained
competitive advantage. While giga factory is also valuable as it has the
potential to provide them the competitive advantage.
Rareness Rareness helps to identify whether the capabilities of the organisation
are rare or not. All the capabilities and the resources of Tesla are has
rareness which enable them to take the sustained competitive advantage.
While Giga factory which they are opening is a rare concept which will
provide them potential competitive advantage.
Imitability It identifies that whether the resources or the capabilities of the
organisation can be imitated by the competitors or not. The batteries and
charging network of Tesla are unique as they have invested a lot of
technology in it which provides them the sustained competitive
advantage as they cannot be copied but the methods of direct sales can
be easily imitated by anyone (Murthy, 2012).
Organsiation In this it is identified that whether the organisation can exploit the
capabilities or not. Tesla can effectively utilise all their resources and
capabilities to achieve the sustained competitive advantage but the giga
factory provides them the potential competitive advantage as it has just

been started.
After analysing the internal factors and the capabilities of the organisation, Tesla can
easily formulate their strategies by considering all their strengths and weakness as they helps
them to achieve their organisational objectives (Maté, Trujillo and Mylopoulos, 2012).
M2: Critical evaluation of internal environment and the capabilities
Internal analysis helps the organisation to identify the strengths and the weaknesses of the
organisation. The identification of the capabilities and the resources helps the organisations to
grab the opportunities and to minimise the impact of the threats. The opportunity of expansion
can be availed by utilising the efficiency of the marketing team as they will identify the market.
Structure of the organisation helps them to smoothly carry out the activities so that the objectives
can be easily achieved by the organisation.
TASK 3
P3: Analysis of competitive environment of the organisation
Porters five force model : The five force model was introduced by Michael Porter,
which helps the organisation to identify and analyse various competitive forces that has influence
on the operations of the organisation. This model is basically used to analyse the factors of the
industry along with their corporate strategy. The model provides five forces are which facilitates
the organisation to determine the competitive strengths, attractiveness in the industry (Marx,
2015). These five forces are used for Tesla, which are given below :
 Competition in the industry : This factors help the organisation to identify the
competitors which can affect their operations. On the basis of this force the influence of
other automotive companies on Tesla is analysed. The level of competition is high for the
companies who offers low priced cars but for Tesla provides unique electric cars due to
which they have strong force. Also Tesla adapt aggressive innovation and promotion
which helps them to gain competitive advantages. In spite of this they faces strong threat
from competition as various automotive companies has started working in this segment.
 Threats of the Substitutes Products : When there are more substitutes available the
threat is high but when there are lesser substitute the threat is less. With the increasing
competition the threat of substituent is increasing day by day for Tesla. Also the low
switching cost increases substitutes which affect their operations such as public transport

etc. To reduce the impact of substitute they need to increase the quality of the products
that they offers (Köseoglu and et. al., 2013).
 Powers of the suppliers : This force identifies the ability of the suppliers to influence
the business. Tesla is dependent upon their suppliers for the batteries and for the
distribution. As they have been operating in multiple location so they easily switch to
other suppliers but frequent change in supplier can affect the operations and thus the
quality. This implies that suppliers have moderate powers to bargain.
 Powers of the customers : This force helps to identify the ability of the customers to
influence the business. Tesla provides electric vehicle which are efficient then any other
competitor which limits the bargaining power of the customers. Also car is such a
product is not frequently purchased by the customers and this implies that they have
lesser impact of the consumers.
 Potential new entrants : When a new entrant enters the market it affects the business of
existing players. The threat of new entrant is low for Tesla due to various barriers to enter
into the market. Also due to large size of the competitors and huge investment in research
and development restricts the new entrants. Tesla need to focus on the existing players
which give them competition more than focusing on new entrants. The threat of entering
in this market is low as the level of investment required is very high (Karami, 2016).
M3: Appropriate strategies to improve competitive edge and market position
Strategies helps the organization to plan well in advance the activities that they have to
undertake to achieve the goals. With the helps of Porters analysis it is identified that they have
lesser impact of the new entrants and the buyers bargaining as they provide strong force for the
company. The threat from the suppliers is moderate because of availability of suppliers in the
market but they have strong threat of competition and substitute for which they have to formulate
strategies (Hoejmose, Brammer and Millington, 2013). Various strategies that can be followed
by them are :
 Tesla can develop and promote customers loyalty programs which will reduce the
impact of competitiveness
 By increasing the focus on the quality of the products and the innovation in their
designs will offer them the competitive advantage
 With aggressive marketing campaign they can stand out their products differently

TASK 4
P4: Theories, concepts, models that can help in strategic planning
Strategic planning is the process which helps them to determine the strategy and the
direction which will helps in making the decisions in regards to allocation of resources. In this
process the leaders of the organisation determine the vision of the company for future and
decides the goals, objectives that they have to achieve. With the help of strategic direction,
various strategies are combined so that productivity can be increased in the organisation. In
strategic direction vision and mission are included which defines their purpose (Grover and
Kohli, 2013).
To analyse various strategic options for Tesla Ansoff's matrix is used which is given
below :
Ansoff's Matrix : This matrix is used by the management to identify various strategies
that they can adopt to achieve the goals which is growth. Various strategies are :
Market Penetration : This is the strategy can efficiently be used by Tesla, in which the
organisation operates in existing market with existing products. To achieve the objectives they
need to adopt the aggressive promotion which will help them to create awareness among the
customers. For example: Tesla can adopt this by improving their existing promotional strategy.
Market development : This strategy can be used by Tesla as in this the organisation
moves to new market with their existing products for which they need to undertake the research
which will help them to understand the market well. For example: Tesla can adopt this strategy
with the help of extensive research of the target market.
Product development : This strategy can be used by Tesla as in this company introduces
new product in the existing market for which also they have to undertake the research for the
taste and preference of the customers. It is risky as it includes a huge investment (Drnevich and
Croson, 2013). For example: Tesla can adopt it with the help of research in the changes in taste
and preference of the company.
Diversification : This strategy can be used by Tesla as it is a strategy in which the
organisation enters into new market with new product. It is suitable for the organisation when
they are ready to undertake the intense risk also when they want to expand their business in new
territory. For example: Tesla can adopt this strategy with detailed research and higher
investment which will help them to expand their market share.

For Tesla, Market development is appropriate as they have expertise in manufacturing of
electric vehicles. Tesla can utilise their core competencies for expanding their market. They have
scope of expansion as every economy is focussed towards the environment. It was also identified
that they have capabilities top expand their business (Dodgson, 2018).
M4: Strategic marketing plan
Strategic marketing Plan for Tesla is given below :
Vision: To be the most innovative company with continuous improving the technology of the
organisation.
Mission: The mission is to escalate the world by providing sustainable vehicles.
Strategies: The strategy that Tesla can follow is Market development, which will help them to
expand their market share by utilising their core capabilities.
Objectives: The objective of the company is to increase their market share by 10% that will
increase their revenue by 15% within 2 years.
Tactics: The tactics that they can follow for developing market can be identified on the basis
marketing mix strategy.
Product The products that Tesla offers are batteries, electric vehicles, solar panel. They
can enter into new market with same products.
Price The pricing strategy that is followed by Tesla is premium pricing strategy as
their products are innovative and of high value. In the new market also they will
follow the same strategy.
Place Tesla has their own stores and strong distribution channel with the help of
which they will enter into new market.
Promotion Tesla can promote their products with the help of magazines and television as
the target group go through them on regular basis.
Implementation : It is necessary for the organisation to effectively implement the plan which
they have formulated. This can be done by preparing the budget which will help them to allocate
their resources and utilise them effectively (Chen and et. al., 2018). The marketing budget for
Tesla is prepared which is given below :

Evaluation: Evaluation of the performance is important which can be done by regular follow up
which will help the company to be on track. Also the comparison between the actual and the
budgeted performance helps to evaluate the success of the implementation (Buckley, Burton and
Mirza, 2016).
D1: Critical analysis and interpretation of data and information
Strategic directions are the set of actions which guides the organisation to consistently
perform towards the goal of the organisation. Also it includes culture of the organisation which
are defined to govern the behaviour and expectation of the employees. The organisation need to
identify various internal and external factors which will helps them to achieve the goals and
objectives of the organisation. With the helps the PESTLE they identified the opportunities and
the threats while from VRIO framework they identified the capabilities of Tesla.
CONCLUSION
It is concluded from the above report that to formulate the strategy the organisation need
to prepare a strategic plan which will helps them to identify various tactics , objectives etc. For
an organisation it is important to identify the influence of the business environment which is
done with the help of PESTLE and SWOT for internal and external environment. To identify
the capabilities and opportunities VRIO framework is applied on the organisation. It is also
concluded that to understand the industry five force model is used.

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Online
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