External Factors Affecting Tesla: A Business Strategy Analysis

This report analyzes the external factors affecting Tesla and how they impact the company's business strategy. It covers political, economic, social, technological, environmental, and legal factors. The report also includes an internal capabilities analysis of Tesla and a Porter's Five Forces analysis.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
P 1 external factors affecting Tesla.......................................................................................3
P 2 Internal capabilities analysis of Tesla.............................................................................5
P 3 Porters five forces Analysis of Tesla................................................................................7
P 4 Strategic Planning of Tesla..............................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategy is the lifeline of any organization as the strategy enables the business to
enhance its productivity and improve its activities. It is a systematic management of resources
which will gain its productivity to increase its revenue while evaluating the external and internal
factors of the organization which will satisfy its customers and shareholders respectively. Tesla
is also an organization which analyzed the importance of strategies to enhance its activities so
that they can provide more satisfaction to the customers. Tesla is a US based company which
deals in manufacturing of automobiles, the company was established in 2002. The company also
works in energy generation. The main motive of Tesla is to provide the latest technology along
with great comfort. The company has aimed at innovation which gives the company competitive
advantage in the market. This report will have a brief explanation about internal and external
factors which affects the business of the company as well as it will also show how different
factors will help the company to improve its productivity by the help of effective planning.
P 1 external factors affecting Tesla.
There are many factors which decide the course of action and their strategies to make the
organization effective in meeting its objectives. Tesla have analyzed these external factors which
will help the company to make effective strategies to increase the growth o the company. The
factors which are external are not in control of the company so by analyzing those factors they
can convert those negative factors into positive ones with the help of effective strategic planning.
Political Factors
Tesla was successful to gain subsidies from the government as they were making electric
cars and which is carbon emission free, so the government supported the company to increase the
awareness of low emission vehicles which will also prove a safe and healthy environment. This
will also improve a new electric cars filling station that will give employment to many
populations all over the world. The importance of analyzing political factor in Tesla is important
as the company is always expanding itself in other countries, and they need to know the political
stability of the country before investing in that country. The company also have to consider the
changes which will impact the strategies because of Brexit will also change the monetory
policies of the government and many laws and regulations as it has impacted the stability of the
government of UK. The company should also weather the country is having any new policies

which will help the company or which will also help in formulating new strategies to take
advantage of those laws. (Carlson, 2015.)
Economic Factors
There was a need to evaluate the economic factor of the market or the new country as
there are many factors which can affect the sales of the company positively and negative as well .
Tesla is also engaged in appointing the marketers who will analyze the growth rate, Foreign
exchange rates, GDP of the country, net disposable income of the population among the per
capita income of the country is low in its GDP then Tesla can't invest in that country as low GDP
for example after the Brexit economic Condition of UK was low so the company have to
decrease the prices of the products to stabilize the sales and also support the GDP of the
nation.indicates low productivity of the country and low movement of currency within the
country. (Aaij and et.al., 2016) Another reason which can affect the stability of the company in
the new market taxation policies of government if the country is having high tax rate which will
make the profits of the company very low this will discourage Tesla not to invest in the country.
Social Factors
Tesla have created a brand image of Eco friendly cars in the world by providing them the
best luxurious electric cars which no other automobile company can match which gives Tesla a
competitive advantage . Tesla is also engaged in attracting their customers with a marketing
stagy of low emission vehicles which have also impressed their Eco friendly customers and
convince to buy their cars with more comfort and with much economic in maintenance as it is
much cheaper than tradition fuel cars.(Fiorino and Bhan, 2016.) Tesla is also investing to
innovate in creating the energy which will be more cost-efficient and the customers will have no
choice other than switching to Tesla for buying cars. Tesla is also engaged in analyzing the
market demand of low carbon emission cars in the market and come up with electric cars which
gained its popularity easily. As Tesla has not opened any dealerships and supported the online
factors as the company have analyzed that customers are more convenient to buy products at
their own comfort.
Technological Factors
Technology in case of Tesla is very essential and the company is also improving its
technology by innovating and finding more effective alternatives to gain a competent advantage

from its competitors and this will also help the company to establish very rapidly with higher rate
of sales and revenue generation. There is a negative aspect of technological changes which will
affect the growth of Tesla, as technology is changing rapidly with the change of technology the
current technology will become obsolete and will demotivate the sales of the company.
(Mahmood, Chung and Mitchell, 2017). The company have also expand the fuel network by
opening the charging hubs so that tey can adopt with the cars which the company offers.
Environmental Factors
Tesla is simply based on the environmental factors as it has created cars Eco friendly
which have low carbon emission which does not affect the environment and also provide better
satisfaction in comparison to the traditional cars. The company have also manage a goodwill
worldwide for its innovating Eco friendly cars which are as good as traditional cars and are better
in some aspects .this also help the company to convince the government to lower the taxes for
the company as the main motive of the company is to care about nature with customer
satisfaction in hybrid technology of the cars .
Legal Factors
Tesla is doing its business lawfully and ethically which makes the company trustworthy
for the investors to invest in the company which will give the company a better working capital
to increase the efficiency and productivity by innovating and analyzing all the market trends and
also analyzing the strategies which competitors are using. (Ghemawat, 2016)The company have
also registered their innovation under the patent act so that no other company can use their
technology which will give Tesla Core competence in the market. The company uses an
aggressive analysis of the market to gain all the knowledge which can help them to increase
their sales and also provide customer satisfaction.
P 2 Internal capabilities analysis of Tesla
Tesla have kept evaluating its activities, and it also analyzed its strength and weakness to
resolve errors and make the company more productive. SWOT analysis is an internal approach
which help the company to analyze the activities which can be improved from management of
human resources to applying of new strategies it is all analyzed under this.
Strength

The company have a very effective workforce and for finding the right individual the
strategies are very effective which makes it more efficient and company have focused on
development of its employees to give them better knowledge and skills to complete their tasks.
Due to its unique technology and advancements which had made Tesla the world's top
automobile company they have also increased its comfort for the customers to provide them
more satisfaction and which have made them loyal to the company. The company have never
failed to prove luxury with new technology and which make the company more trustworthy
which also increased Tesla's sales very much. Tesla believes in innovation and its objective is to
innovate heir technology which will also attract new customers and help the company to increase
their sales and profits revenues (Soltanizadeh and et.al., 2016.)
Weaknesses
As the motto of Tesla to innovate their technology by that the company have to face
many problems in constructing the vehicles as new technology will need more skillful labors and
new equipment which will increase the cost of the company as they have to purchase new
equipment and also provide training to their employees and labors.(Scholes, 2015) This will also
result in low efficiency and the company will not fulfill the agreements which is made to the
customers and the dealers which will affect the brand image of the company as well. To improve
the efficiency the company have to start their production with low level which will also impact
the late deliveries of the vehicles and will make the company untrustworthy. Tesla also faced the
lack of proper supply of batteries by the suppliers which impacted sales of the company and
decreased the revenues drastically.
Opportunities
Tesla have always effective in exploiting its opportunities to gain maximum sales and
effective growth of the company. As the company have analyzed the demand of cars in Asian
markets which helped the company to establish there as that market is not properly developed
and do not have methods to generate energy to use the electric cars. Tesla invested in those
countries to have stable growth of sales and increase their market. The company have also
targeted on low price segments to increase their sales by attracting the population which have
limited income as analyzed by the analysts in Asian markets. As the company have also analyzed
the low income level in the Asian market the company have made a strategy to provide them

employment by establishing the factories to manufacture the batteries of the cars and meets their
demand which is not fulfilled by their current suppliers.
Threats
Due to innovation in technology and inefficient employees and labors it had been very
difficult for the company to meet the expectation of the customers as they company have
designed many new hybrid technology which have not been successful and the customers have
filled legal complaints against the company which lowered the brand image of the company as
one survey said if a customer liked the product or services he will pass the suggestion to next
three person but if they do not like the product and services the customers will spread it to next
11 person which is what can happen in case of Tesla.(Pisano, 2015) Tesla is also facing
competition from all over the world not only from electric car companies but also from
traditional car company as they are holding more customer base and Tesla have to convince their
competitor's customers to buy electric cars. Tesla has a major threat as the latest technology need
much of training and the customers are not trained to use advance technology which will also
discourages the customers to switch to different car company. The company have innovated
some self driving cars which are still a very big problem as it does not have intelligence of
stopping and had also met with many accidents which is not safe for the safety of the customers.
VRIO analysis framework of Tesla
Valuable: Employees of the company are most valuable resources of Tesla. They have been
provided with more skilled and efficient employees.
Rare- The technology which is used by company is rare, as it is not used by any other
organization.
Imitability- The logo of company is unique and cannot be shared by any other firm.
Organization- Firm is making effective use of resources which is given to them.
P 3 Porters five forces Analysis of Tesla
The five forces are according to the market and it is developed by Michael porter.
Threat of new entrants
There can be a threat to Tesla as there are not much electric car companies in the market
so some are willing to invest and challenge Tesla but this threat is balanced as there are many

traditional car manufacturing companies which have launched some electric car which are
cheaper the those of Tesla but their efficiency can not be matched with Tesla's products which
give Tesla a competitive advantage. And being the leading company in the world, Tesla also
need to maintain its position by innovating its product and changing its strategies and making
effective marketing skills with efficient employees which will help in lowering the cost of the
company with increasing the profits to make new and better investment to grow the company
which a new company cannot do. And it will also discourage the new entrants to compete with
the giant automobile company like Tesla as they cannot invest too much in the business with
having stable environment. (Olson and et.al., 2018).
Bargaining power of Suppliers
This factor impacts the sales of the company and cost efficiency as Tesla has to purchase
its raw material form its suppliers to manufactures its product. But there is a threat to the
company as the suppliers are having monopoly of selling their products, so they can increase
their prices according to their will which will impact the Tesla's cost efficiency and it will also
decrease the sales of the company due to increases in the prices. Company have to analyze the
alternatives which will help the company to switch when this condition appears. The company
can resolve this problem by finding and developing different alternatives which are more
effective and low in cost. Tesla have also developed its own manufacturing of raw material by
analyzing the economy of scales of the production of the company, they have assigned the
particular manufacturing associated to Tesla so that there will be no bargaining power of the
supplier as it will be only dependent on Tesla for selling its products. Bargaining power of
suppliers is moderate.
Bargaining power of Buyers
The buyers are king of the market and they have the potential to make any business
successful or unsuccessful. Tesla have also analyzed this factors to develop a better relationship
with their customers. The company has also understood the behavioral patterns which help the
customers get better satisfaction and become a loyal customer of the company. Tesla analyzed
the switching threat to some different company which have innovated to electric cars with lower
rice range. This helps the buyers to bargain in the market to fulfill their desire in limited
resources. The company have launched many varieties of electric cars with different price range
and different technology which help the company to lower the risk of switching the company and

get attracted to Tesla. Bargaining power of the customers also forces the Tesla to make the
company more cost-efficient to lower their prices and making new strategies to effectively
deliver their products with a great impact in the minds of the customers. The company have also
provided special discounts and offers to its existing customers so to keep them loyal to the
company.(Moseley III, 2017) Bargaining power of buyers is moderate.
Threat of Substitutes
The threat of substitute products emerges when the competitors also come up with the
same technology and services which can satisfy the customers according to willingness to pay
for their products and services. Tesla also have this threat as there are many automotive
companies who are providing the same features with electric cars and this give the customers
choices to compare for the best products and services. Tesla have also applied new strategy to
increase the customers services and provide them more safety so that they can be relaxed in
buying their products (Johnson, 2016) Tesla is customer oriented company and always focus on
the customer satisfaction by providing them the extra advantage which no other company has,
they also innovate their products and services by analyzing the market trends so that the threat of
substitute products and services and be nullified.
Rivalry against the Competitors
Rivalry in auto mobile industry is beneficiary for the customers point of view as there is a
cut-throat price competition among all competitors which force the companies make them more
effective and productive to improve their products with lowering their prices. Tesla made new
strategies which helped the company to differentiate their products with their rival's products and
the company have also invested in increasing the production capacity to lower the per product
cost which will give the core competence to the company. (Higgins, Omer and Phillips, 2015).
Tesla have tied up with some competitors to provide better products with the knowledge of both
the companies. It have also made cartels in the industry which is the committee of all the leading
automotive companies and set some rules and policies to avoid the competition and generate
more profits. Rivalry against the competitors is quiet moderate.
P 4 Strategic Planning of Tesla
Mission- Tesla's mission is to accelerate the world's transition to sustainable energy.

Vision- The vision is to see how much better and sustainable electric vehicles and renewable
energy are.
Core values- Always do your best. Company endeavor to apply the brightest minds and the best
available technology to each and every new challenge.
No forecast is perfect, but try anyway.
Objectives- To increase the sales of firm by 30% till the end of year 2020.
To enhance the profitability by 10% in upcoming 6 months.
Strategy- Market penetration
Tesla can use market penetration strategy by aggressive marketing of their product as in this
strategy the company is trying to sell its product in the same market as before to improve their
revenues.
Product development- Tesla can use this strategy if they want to introduce a new product in their
existing market, this mainly include product innovation because the customer needs keep
changing.
Market development- In this strategy Tesla would introduce their product in the new market.
This would include introducing Tesla's product to new customer segment, foreign market etc.
Tesla must consider factors like economies of scale, experience in the new market etc. before
considering this strategy.
Diversification- This strategy is used if Tesla wants to grow the scope of its business because it
include dealing in new market with new product and it involve a large amount of risk as the new
business is completely unknown.
Marketing tactics- Tesla have opened its own dealership instead of distributing their dealerships
to different persons, this helped the company to understand the customers behavior and feedback
faster than the traditional method of distribution and the company have also applied this model to
every store which have opened in the high societies keeping in mind the social class distribution
as not lower class and lower middle class can afford Tesla's products. As the dealerships were
owned by the company it also had a same policy and gave a better buying experience to the
customers.(Chen, Eshlemanand Soileau, 2016)
Tesla has a very healthy working environment which help the employee to think broader
and have creative ideas to improve the services and product of the company to provide better

satisfaction with low price. The company also allow their employees to think like the owners and
have a better commitment to increase their efficiency.(Balon and et.al., 2019)
CONCLUSION
The report had a brief information about the concepts, models, strategies, which Tesla
used to overcome all the market issues and problems which occurred internally and externally.
The company have also focused on customer satisfaction of customer and become the leading
electric car maker in the world with the efficient fuel. Tesla have also focused on innovating
their products and providing better and unique service to give it a competent advantage in the
market. The report had in depth information about Tesla's internal and external factors which
will impact the growth of the company and methods how the company overcome with that
problem to increase its productivity and provide maximum satisfaction to their customers.

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