Business strategy of Tesla : Assignment

Business strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Analyse the impact of the macro environment on a Tesla..........................................................1
Analyse the internal environment and capabilities of a TESLA..................................................3
Applying Porter’s Five Forces model evaluate the competitive forces of a given market sector
......................................................................................................................................................5
TASK 2............................................................................................................................................6
Strategic directions available to the organisation........................................................................6
Recommendation ........................................................................................................................7
strategic management plan with strategies, objectives and tactics..............................................8
Tactics..........................................................................................................................................8
Conclusions......................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business strategy is refers to management of business activities. It includes different
types of strategies which implement and formulate in the business for achieve goals and
objectives of the firm . It can be describes as combination of different strategy. Therefore, this
strategy helps to accomplish the overall goal of the firm (Hsieh, C.C. Ma and Novoselov, 2019).
Thus, this report will discuss the business strategy of Tesla. It is the car manufacturing
and American automotive and energy company based in Palo Alto California. The company
making hybrids cars such as electric car through its scarcity subsidiary, solar panel
manufacturing etc.
The report will explain the impact of macro environment in the context of Tesla by using
the pestle analysis. Moreover, report will analyse the impact of internal environment capabilities
of a Tesla by using swot analysis. Furthermore, report will describe the porter five forces model
to improve the competitive advantage of the firm. Furthermore, report will describe the Bowman
strategic clock model and recommendation. Furthermore, report will describe the strategic plan
of the Tesla.
TASK 1
Analyse the impact of the macro environment on a Tesla.
Macro environment is the environment which affects the firm performance with different
factors. These factor is influence the decision making power of the firm. There are diffident
factor such as political, economical, social, technological, legal, environmental. These factor also
known as pestle analysis (Pucheta‐Martínez and Bel‐Oms, 2019).
Pestle analysis - It is the tool used by different firms to analyse the external factor and their
implication. Firm monitor the macro-environmental factors that have an influence on an
company .
Political factor- This factor is describe that how government is interfere in the economy and
this rules and regulations is how to impact in the performance of the firm. It contains different
lows. Labour law, employment low, tax policy, contract low etc. the political factor is affects
the performance of Tesla. Therefore, the taxes is increase in car manufacturing industry this is
creates the negative impact because the cost of production is increase due to increase the taxes.
In other side, due to financial instability in the world, government encourage the firm to increase
1

the employment in domestic area so people are happy for the job and they increase their
performance to produce high quality product. So, that is create the positive impact on the
performance of the Tesla (Deneffe and Vantrappen, 2019).
Economical factor - This factor is describe the economy effects in the firm. Factor contains
economy growth, interest rates, currency exchange rates , inflation rates etc. The economy of US
is good because the GDP of the US is growing in nature. Therefore, its support the Tesla
because people are generally buy this types of innovative cars. So it helps to generate the
profitability of the firm it creates the positive impact on the future growth of the firm. In other
side, nations other than US . do not support dealers of the firm. Many nations have own laws
that bans the dealers from selling the cars directly to the consumers (Gorondutse and Hilman,
2019). Therefore, this situation is crates the losses for the firm because the it reduce the
customer it creates the negative impact on the firm.
Social factors - Under this factor it describe that there are many different needs, wants and
attributes of the consumer which affect the decision of the firm. It includes values, attributes,
norms, income distribution, lifestyle, safety force etc. Therefore, due to changes in future trends
is affect the production of the firm. Therefore, Tesla has make innovative model in cars and they
enhance the number of hybrid cars offered for sales (Hsueh and Gomez-Solorzano, 2019). So,
The demand of electric car is increased because it generate high sales and it creates the positive
impact on the firm. In other side, consumers prefer the affordable prices on the product with
high quality of product. therefore, but the prices of Tesla cars is high because the raw material is
expensive it will increase the prices of the cares. So, low income group of people, have not much
interested to purchase the electric cars and it creates the negative impact on the firm.
Technological factor – This factor is describe that innovation in technology it impact on the
operation of the firm. It includes the research and development, product innovation, etc.
Therefore, Tesla used the different technology to enhance the performance of the firm. Tesla
manufacture the eco friendly cars with advantage of low flue efficient. Therefore, they use solar
panel for manufacture the care it is good and best innovative ideas which leads the sales of the
product so it creates the positive impact on the sale of the Tesla. In other side, there has also
negative impact Tesla has use artificial intelligence to make best cares but the competitors is
arise because many firm used the different types of technology to manufacture the cars so it
creates the negative impact because Tesla faced competition.
2

Legal Factor - This factor is describe the different rules and regulation of the government that
may affect the performance of the firm. It contains employment and labour law, different
government policy etc (Widuri and Sutanto, 2019). The negative impact is that Tesla expand
their business in international market but the different import and export duty is arise the value of
the cars in international market so that international customer are not attracted towards the
product. There has also positive impact, since the car focuses on eco-friendliness, that means
they provide the best cars which not harm the environment. So, Tesla can promote their cars as
energy efficient and ensure it remains by foreign environmental regulations.
Environmental Factor – This factor is explain that there are different factor which affects the
environment of the firm. This factor is contains the different environment friendly aspect
therefore, the brand of Tesla is recognize as environment friendly cars because company focus
on manufacture electronic cars rather than gas and fuel cars. So it helps to environment it creates
the positive impact. In other side, when Tesla are not provide the best cars to the customers it
crates the negative impact on the brand .
Analyse the internal environment and capabilities of a TESLA
Internal environment is refers to firms internal environment that is affect the performance
and decision of the firm. It includes different types of internal elements such as current
employees, management, and especially corporate culture etc. this elements affect the
organization.
Swot analysis - Swot analysis is the tool which identify the strength, weakness, opportunity and
threat of the firm. It helps identify the capabilities of the firm. Tesla can use this strategy to
identify the capabilities.
Strength
Highly innovative process - Tesla has introduce as innovate manufacturer, they produces new
and innovative cars, Tesla is the first who launched the fully electronic sports cars in world.
Therefore, The demand of this type of cars increased and it generated high sales . Therefore, it is
the biggest strength for firm because they always create innovative products and it will leads
competitive advantage and high profitability(Zucchella and Previtali, 2019).
Successful brand – Tesla is a strong brand which recognize as environmental friendly firm that
produced highly valuable electronic cars. Therefore, firm is successful that has a strong brand
and it helps to firm for ascertain the Tesla ability to attract the customers.
3

High control on production process – This is another strength of the firm. Therefore, Tesla has
control on their production process they use the valuable raw materials for manufacturer the cars
and makes the innovative product. For example, firm manufacturer the different types of
products in auto mobiles it is the biggest strength for the firm because firm is recognize as
innovative brand.
Weakness
Limited market opportunities - Tesla has not successful to expand their business in
international market. Therefore, Many government of other nations have own laws that bans the
dealers from selling the cars directly to the consumers. It is the biggest weakness of the firm
because they cannot expend their business in different countries(Gans, J.S., Stern and Wu,
2019).
Expensive prices on the product – Tesla used the high quality of raw materials for
manufacturer electronic cars. They use highly valuable materials such as internal combustion
engines, this engines are highly expensive it leads the prices of the product. Therefore this types
of prices is inhibit the firm from hurriedly growing its consumer base and market share.
Few supply chain - Tesla have few supply chain. Therefore, many firms ban the dealership and
they cannot supply their products in international market. This is the biggest weakness that firm
have few supply chain it reduce demand of the product (Hsueh and Gomez-Solorzano, 2019).
Threat
Aggressive competition- The different companies is compete with Tesla because it has always
making the best product and innovative product (Gorondutse and Hilman, 2019). So this strategy
leads competition therefore, many firms makes innovative cars to expand compete with Tesla.
Instability in material prices - The process of material is fluctuate which increase the prices of
the product. So, The fluctuation in prices of raw material its increase the cost of the production
and this is the biggest weakness for the firm.
Opportunity
Global sales expansion – Tesla expand their business globally by providing the high quality
product. They must grab this opportunity for expand the business. it helps for their future growth
.
4

Business diversification – Tesla can used the different types of strategies for improving their
performance globally. Therefore Tesla expand their business to establish and acquiring the new
business.
Applying Porter’s Five Forces model evaluate the competitive forces of a given market sector
Porter’s five forces model refers to a framework through which strategic decision of the
company are taken. This is helpful in analysing the competition of firm. Tesla five forces
analysis in done in following way –
 Threats of New Entrants – New Entrants are bringing innovations in the market which
is building pressure on Tesla but is is not easy to beat the company. The business of firm
cannot be easily compete by the new entrants due to occurrence of high costs while doing
brand development (Scholes, 2015). Auto mobile manufacturing company required huge
amount of capital which is not easily get fulfilled. There is also government intervention
in auto mobile industry which makes difficulty for new entrants . Tesla can overcome the
threat of new entrant by bringing innovation in the market. Thus, this makes new entrants
a weaker force.
 Threats of Substitutes – This is weaker force as Tesla is providing their products in
competitively low cost than their competitors such as Jaguar and Land rover. The only
mode or substitute is available is public transportation but this cannot replaced the auto-
motive vehicle convenience (Akter, Wamba and Childe, 2016). Thus, the customers
switching behaviour is moderate as very less substitute are available.
 Bargaining power of customers – The Bargaining power of the customers is weaker
force. The switching behaviour of customers is low as Tesla Auto- mobile products are
of less cost than its competitors (Hompson, Strickland and Gamble, 2015). There is low
volume of purchases is being made by the customers as they also have access towards
public transportation. Thus, the bargaining power of customers is somehow is moderate
force for the company.
 Bargaining power of Suppliers - The suppliers of Tesla has forward integration. The
suppliers has limited control over distribution network as Tesla already have direct raw
material supplier available at local level which supply in comparatively less cost than
others (Higgins, Omer and Phillips, 2015). Another aspect is that moderate number of
5

suppliers is available in auto mobile industry. Thus, the suppliers bargaining power for
Tesla is moderate force.
 Competitive Rivalry among competitors – The competition in Auto mobile industry is
high. Tesla is operating in the industry in which competition is already at intense level.
The firms are doing competition by coming up with new innovative products such as they
are coming up with electric vehicles (Gorondutse and Hilman, 2019). This helps in
reducing carbon emission. Hence, government is also supporting such firms. This make
Tesla bound to come up with innovation. In order to take competitive advantage it is
crucial for the Tesla to make improvements in their existing products. Thus, competitive
rivalry is strong force.
TASK 2
Strategic directions available to the organisation
Strategic direction is most important tool. It establish the structure for the firm for
achieving the goal of the company.
Bowman strategic clock model- It is the marketing model firm can use this model to establish
their new product in different markets. There are different types of positions in this model which
helps to firm foe enhance the competitive advantages.
Position 1: Low price and low added value
It described that the product is not differentiate to each other and also the process of product is
low, Tesla can use this position to reduce the competition and attract the customers. Therefore,
keeping the price low it helps to attract the customer as well as firm can use to complete with
other rivalry(Gans, J.S., Stern and Wu, 2019).
Position 2. Low price
Under this position, it described that company focus on reduces the prices on the product by
using the low quality of raw materials in the product. Therefore, Tesla can use this to focus on
produce more and also on minimum price. it leads the profit margin because the high production
generate high incomes.
Position 3. Hybrid
6

under this position, it described that firm used differentiation in product. Therefore, This
products are highly valuable and including high quality of raw materials. In other side, firm also
focus on low prices. This position is highly profitable for the company because it provides the
good added value to the customers.
Position 4. Differentiation
In this position, it explained that firm focus on providing the high quality of product with
minimum prices. This is also the best strategy to attract the customers because firm not only
provide the high quality they also provide the branded product so customer are willing to pay this
type of prices in the product.
Position 5. Focused Differentiation
This position is describe the high quality of product as well as high prices. Tesla can use this
position to target the customers. Therefore firms use the target, segmentation, promotions
strategy to leads the profitability of the firm.
Position 6. Risky high margins
In this position company Charge the high prices on the product with minimum quality.
Therefore, Tesla cannot use this strategy because this strategy is not much good. Therefore,
consumers will not purchase this type of product and they find other product with low prices and
high quality (Hsueh and Gomez-Solorzano, 2019).
Position 7. Monopoly Pricing
In this position, Firm are only provide product to their target market and they have not fear for
the competition. So this is also good strategy for expand the growth in target markets.
Position 8. Loss of market share
In this position, This is a negative position which describes that firms are not able to perform in
the market and they are not god in providing the best service and products in the market.
Recommendation
Tesla should use the hybrid position because its suits their business. in this position it
describe that Tesla should use differentiation in product. Therefore, This products are highly
valuable and including high quality of raw materials (he Chen and Zhu, 2019). So it helps to
attract the customer and also generate the high profitability.
7

strategic management plan with strategies, objectives and tactics.
Strategies- Tesla should use the Hybrid position to make the best product. Therefore, they uses
the best raw material in the product to improve the quality of product (Hsieh, C.C. Ma and
Novoselov, 2019). Furthermore, further they try to make sure that they provide the affordable
prices on the electronic cars . So this strategy is best to implement in the processes of
production. It helps to increase the sales as well as increase the profitability of the firm.
Objectives
 To improve the quality of product by the end of 2020.
 To increase the customer base by the end of 2020.
 To enhance the supply of the product in 6 months.
Tactics
 Establish a plan and budget to complete the goal and objectives of the firm.
 Target the right audience for the product.
 Identify the best pricing strategy to attract the customer.
 Identify the best promotional activities to promote the products.
Conclusions
From the above report it can be summarized that business strategy helps to identify the
macro or micro environment of the firm, it describe that marketers used this strategy in their
business to achieve the future goals of the business.
Hence, the report has been based on the business strategy of teals. The report has been
decided the impact of macro environment in the context of Tesla by using the pestle analysis.
Moreover, report has been analyse the impact of internal environment capabilities of a Tesla by
using swot analysis. Furthermore, report will describe the porter five forces model in the context
of firm which helps to improve the competitive advantage of the firm. Furthermore, report will
describe the Bowman strategic clock model and recommendation. Lastly, report has been
described the strategic plan.
8

REFERENCES
Books and Journals
Akter, S., Wamba, S.F., Gunasekaran, A., Dubey, R. and Childe, S.J., 2016. How to improve
firm performance using big data analytics capability and business strategy
alignment?.International Journal of Production Economics.182.pp.113-131.
Chen, X. and Zhu, J. 2019, May. Research on the Business Strategy of Qingyi Book Bar under
the Internet Environment. In1st International Conference on Business, Economics,
Management Science (BEMS 2019). Atlantis Press.
Deneffe, D. and Vantrappen, H. 2019. Fad-Free Strategy: Rigorous Methods to Help Executives
Make Strategic Choices Confidently.
Galpin, T.J 2019. Strategy beyond the business unit level: corporate parenting in focus.Journal
of Business Strategy.
Gans, J.S., Stern, S. and Wu, J. 2019. Foundations of entrepreneurial strategy. Strategic
Management Journal.40(5). pp.736-756.
Gorondutse, A.H. and Hilman, H. 2019. Testing the Effect of Business-level Strategy on
Performance of Hotels. Global Business Review, p.0972150919846799.
Higgins, D., Omer, T.C. and Phillips, J.D., 2015. The influence of a firm's business strategy on
its tax aggressiveness.Contemporary Accounting Research.32(2).pp.674-702.
Hsieh, C.C., Ma, Z. and Novoselov, K.E. 2019. Accounting conservatism, business strategy, and
ambiguity.Accounting, Organizations and Society.74. pp.41-55.
Hsueh, J.W.J. and Gomez-Solorzano, M. 2019. Social tie heterogeneity and firms’ networking
strategy.Entrepreneurship Theory and Practice.43(2). pp.352-359.
Pucheta‐Martínez, M.C. and Bel‐Oms, I. 2019. What have we learnt about board gender
diversity as a business strategy? The appointment of board subcommittees. Business
Strategy and the Environment. 28(2). pp.301-315.
Scholes, M.S., 2015. Taxes and business strategy. Prentice Hall.
Thompson, A., Strickland, A.J. and Gamble, J., 2015. Crafting and executing strategy: Concepts
and readings. McGraw-Hill Education.
Widuri, R. and Sutanto, J.E. 2019, January. Differentiation Strategy and Market Competition as
Determinants of Earnings Management. In International Conference on Tourism,
Economics, Accounting, Management, and Social Science (TEAMS 2018). Atlantis Press.
Zucchella, A. and Previtali, P. 2019. Circular business models for sustainable development: A
“waste is food” restorative ecosystem. Business Strategy and the Environment.28(2).
pp.274-285.
Online
Bowman Strategy Clock 2017 [Online]. Available through :
<https://www.toolshero.com/strategy/bowman-strategy-clock/>.
9