Business Strategy: Impact of Macro Environment Factors, Internal Analysis, Competitive Forces

This report discusses the impact of macro environment factors on business strategy, analysis of internal environment and capabilities, and evaluation of competitive forces through Porter's Five Forces model.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Impact and influence of macro environment factors ........................................................3
M1: Critical analysis of macro environment for strategic management decision..................5
TASK 2............................................................................................................................................5
P2: Analysis of internal environment and capabilities of the organisation............................5
M2: Critical evaluation of internal environment and organisational capabilities..................7
TASK 3............................................................................................................................................8
P3: Evaluation of competitive forces through Porter's Five force model...............................8
M3 Strategies to improve competitive edge and market position .........................................9
TASK 4..........................................................................................................................................10
P4: Theories, concepts, models to interpret strategic planning............................................10
M4 : Strategic management plan that includes strategic priorities and objective................11
D1 Interpretation of data and information for competitive and environmental analysis to
produce strategic directions, tactics and actions...................................................................13
CONCLUSION..............................................................................................................................13
REFERENCES................................................................................................................................1

INTRODUCTION
Business strategy is a combination of action and moves that an organisation takes to
attract customers, make their business competitive, improve performance and to achieve
organisational goals. There are three forms of strategy which an organisation focusses upon, that
are strategies for general business, corporate strategy, competitive strategies. These strategies are
the outline that guides the businesses to reach their desired ends by carrying out various
activities. To formulate various strategies analysis of various factor such as macro environmental
factors, internal factors and capabilities is important for the organisation. Business strategies
could be adjustment of the prices, identification of the strength of the product, acquiring new
business etc. This report is prepared for Tesla which is an electric car manufacturer. Macro
environmental analysis, capabilities analysis, internal factors analysis is done in the report to
produce strategic objectives, tactics for the organisation which will help them to achieve their
objectives. For the organisation strategic plan is created which includes different types of
strategic directions, objectives and tactics that can be followed by the organisation.
TASK 1
P1 Impact and influence of macro environment factors
The business when operates they are surrounded by so many factors which can be within
or outside the organisation. Business have individual identity but they are bound to adapt the
changes that prevails in the industry and environment. Macro environment affects the decision-
making, planning that are done by the organisation as they consider so many factors that directly
affects the business such as political, economic, social, technological, legal, ecological (Austin
and Pinkleton, 2015). To analyse influences of these factors on Tesla following are considered :
 POLITICAL FACTORS : Political factors are those factors which reflects that to what
extend and how the government can influence the business by introducing various
policies, restrictions, regulations etc. The government of UK took initiatives for
electronic auto mobiles, new global trade agreements and also there is political stability
in the nation offers a lot of opportunity for Tesla. As they will be sported by the
government in setting up manufacturing plants, charging stations and to attract investors
as they entered into global trade agreement. Because of political stability the competitive
strategy and growth strategies of Tesla will be favourable for them. But the geopolitical

issues in UK may affect the supply chain. Tesla is dependent upon international business
for supplies and due to Brexit free trade agreements status is no more available which
may adversely affect their existing business strategies (Buckley, Burton and Mirza,
2016).
 ECONOMIC FACTORS : These factors determines the performance of the economy. It
includes various factors such as exchange rates, interest rates, disposable income etc.
Decreasing cost of battery and renewable energy in UK offers opportunity to Tesla. This
reduces the cost of the product to the company thus ultimately to the consumer which
makes the product affordable. As cost of renewable energy reduces it make their product
attractive because people will be incline to buy their products. But economic stability is a
threat as it affects the financial performance of the organisation in terms of high
borrowing costs etc. Due to which they have to modify their strategy.
 SOCIAL FACTORS : These factors reflects the lifestyle, taste and preference, trends
that the customers follows. As popularity for low carbon lifestyle is increasing in UK and
preference of renewable energy of most of the people increase demand for electric
vehicles. This offers an opportunity for them to increase their market share by increasing
their productivity. There is a rise of middle class in UK so it pressurise Tesla to reduce
their prices more so that they can target and cater upper and middle both the classes in the
society (David and David, 2019).
 TECHNOLOGICAL FACTORS: These factors are concerned with innovation,
automation, changes etc. in the products they offers. The focus on technology for Tesla is
so very crucial. It helps them to get and maintain the competitive edge. The demanding
level of technology in UK is an opportunity and a threat both. High rate of technology
where offers competitive advantage but brings a threat of obsolescence which bring on
high cost to the company. To meet up these they need to modify their strategies very
frequently.
 ECOLOGICAL FACTOR: These factors consider the impact of various environmental
factors such as climate, environmental programs etc. on the business. Tesla provides an
eco-friendly product due to which it offers various opportunity to them to operate
globally. They can easily promote their products that meets up various concerns raised by
the UK government to protect environment such as climate change, rising standards on

waste disposal etc., as they use batteries, solar energy instead of fuel. They have good
image in terms of environmental impact, which ensures least effect on their strategies
(Thompson, Strickland and Gamble, 2015).
 LEGAL FACTORS: These factors affects the business as they are implemented by the
court as law by order, compliance of which is mandatory. Legal factors are to protect the
interest of the consumer, protect investors, to ensure ethical practices and many more.
Due to expansion of international patent protection, the operations becomes easier for
Tesla as it reduces the chances of imitating the technology by others. But due to Brexit it
affected their business as it restricts the trade i.e., movements of their supplies.
This Pestle analysis will help Tesla to identify the opportunity For e.g., electric products
and concept are supported by UK Government as they are environment friendly products. It is an
opportunity for Tesla to expand their businesses but the technological factors has adverse impact
such as they have to introduce innovation so frequently which increases their demand of funds.
M1: Critical analysis of macro environment for strategic management decision
For the business to be competitive and profitable they have to analyse various factors
whether internal or external. All these factors have impact on the strategies of the organisation as
to minimise the impact of any such change the companies has to meet them. Tesla faced political
challenges due to Brexit which will affect their business but they have strong technological
conditions which offers them competitive edge. Also they have positive ecological factors as the
products they offer are environment friendly due to which they face few compliance which are
imposed to those who produces cars run by fuel (Channon and Jalland, 2016). But it does not
indicate that they just have all the advantages, these factors becomes opponent when technology
become obsolete so frequently, and taste and preference of the consumer changes etc.
TASK 2
P2: Analysis of internal environment and capabilities of the organisation
Internal analysis of the organisation helps to determine the strengths that can be build and
various weaknesses that they have to overcome. It includes the analysis of the competences,
policies, objectives, resources that an organisation possess. For efficient strategic management it
is important for every organisation irrespective of their size and scope to analyse the internal
environment so that they can combine their strength with the opportunities that are present in the

industry by minimising the impact of the threats. SWOT of Tesla is done to analyse the internal
environment (Suarez, Calvo-Mora and Roldán, 2016).
Strengths Weaknesses
 Unique position in the auto market as
they have transformed the industry by
delivering innovative electric vehicles.
 Strong control on production processes
because it is based on vertical
integration as they manufacture both
auto-mobiles and their components
which reduces dependency on third
party.
 As the prices of the electric vehicles are
more in comparison to internal
combustion engine vehicles, it restricts
them to rapidly increase their market
and customer base.
 They made significant investments in
R&D, construction of Giga factory
which is why they faces problem of
free cash flow and due to this they have
to sell more shares.
Opportunities Threats
 They have the opportunity for global
expansion of sales and production by
expanding the supply chain. Also they
can go for diversification by acquiring
new relative business.
 They have an opportunity to reduce the
cost of the products by establishing
their own factory of Giga which help
reduce the margins and transportation
cost for them thus will improve their
profitability.
 Fluctuations in the prices of the goods
that they procure from outsides, this
increases the cost of their goods.
Storage of goods in large quantity is
also not possible for them as few are
gases.
 Completion in automotive sector is
very high although Tesla is in unique
position but the prices at which they
offer their products faces stiff
competition from other luxury brands.
With analysis of internal factor it is important for the companies to also consider the
capabilities of the organisation. As only resources and identification of impact of various factors
is enough, to combine it with the capabilities of the organisation is more important. VRIO

framework is used to examine the link between the characteristics possess by the company and
their performances.
VRIO stands for valuable, rare, imitable, organised. It is used for analysing the
capabilities of Tesla.
Value : At this stage it is analysed that whether organisation adds any value to the customers.
The value that is provided by Tesla is cost effective production process, control customer
experience, neutralize the impact of external environment which all help them to provides such
good to the customer which uplift their demands.
Rare : After analysing the value, in this stage it is analysed that whether company offer
something unique or something that is hard to find. In Tesla only the manufactures focus on the
production of electric vehicles, they also do not uses dealerships from third party. Thus this
makes their process unique than others.
Imitable : It suggests that the product so offered by the company can be easily copied by any
other or not. The factory and the process followed by the Tesla can be copied but it will take time
and money. Also competition is so high which make difficult for others to imitate.
Organisation: After all the above are satisfied, in this stage it is identified that whether the
company has any organised structure, process, or policies or not. The production process they
follow are integrated, they focusses to educate customer and provide opportunity to learn more
about Tesla. Also their charging network can only be used by Tesla vehicles (Smith, R.D., 2017).
After analysing all the stages of VRIO framework in context of Tesla it is identified that
they carry on to hold competitive advantage over others in terms of their capabilities along with
the resources they possess. For e.g., the manufacturing process of Tesla is unique as they do not
engage third party dealership which make their efficient enough to give competition while
factory and process followed by them for distribution can easily be imitated by others.
M2: Critical evaluation of internal environment and organisational capabilities
The importance of analysis of internal factors and capabilities of the organisation are
identified. The strengths that are developed by the organisation are on the basis of capabilities
skills set, resources that are possessed by the company. Various opportunities that are identified
in the SWOT analysis can easily be availed by Tesla as they have sufficient resources along with
that competent staff and technology. Also the procedure and process of production so followed
by Tesla is unique which will help them to minimise the impact of threats.

TASK 3
P3: Evaluation of competitive forces through Porter's Five force model
Porter's Five Forces model: For analysing the competitiveness in the marketplace Tesla
can use this model in their business organisation. This model comprises five factors which help
the business organisation to determine the industry structure and the level of competition in the
marketplace. This will enable the manager of the Tesla organisation to identify their strength and
reduce their weaknesses so that the overall performance of the business can be improved. The
five forces of this model are define beneath:
Supplier power: The degree of power is high when there are less number of suppliers in
the market. They create monopoly market and huge revenue is generated from customers as well
as they are misused. Supplier must focus on low cost of the product so that the customers focus
on buying the products of the firm. Due to their low moderate price the supplier can easily enjoy
the higher profitability in comparison to other competitors available for the business of the Tesla
in the marketplace (Sirén and Kohtamäki, 2016). For e.g., Tesla can reduce the impact of
suppliers by making their supply chain more efficient and developing their suppliers.
Buyer power: The bargaining power of buyer is high when customers has alternate
option to switch. In this case customer can force shopkeepers to slow down the prices as they can
easily switch to other brand to satisfy their needs. This element refers to the consumer’s ability
to lead effect on the price and quality of a product and service. It is depending on the number of
the customers if a products has various customers then they have more power to influence the
price and quality of the products. For e.g., Tesla can reduce the impact on this force by
innovating their products on consistent basis and by increasing the customer base because this
will help them to reduce the bargaining power of buyers.
Competitive rivalry: There is high degree of rivalry when new business come up with
same business at low price but with best quality product. This factor of this model will help the
business in determining the competition in the marketplace so that the business can formulate
effective strategies and methods in order to beat the competition. In order to sustain in the
marketplace Tesla needs to do efforts to make their products and services differentiate from the
competitors so that the business can maintain their profitability and sustainability for a longer
period of time (Moseley III, 2017). The impact of this force can be reduce by Tesla by various

strategy For e.g., by creating differentiation in the products and by collaborating with
competitors as it will help them to reduce the interdependence upon the decisions of each other.
Threat of substitutes: The degree of threat is more when there are more substitutes
while the degree of threat is less when there is less substitute. This force of this model refers to
the situation when the various substitute products and services are available in the marketplace.
As the Tesla have to face the tough competition in the marketplace due to which the chances of
the customer moving to another products is increasing day by day which is a negative sign for
the growth of the company. In order to sustain their position for a longer period of time Tesla
needs to offer high quality of products at lower price so that they will be able to maintain the
customer’s attention in their products and services. The impact of this force can be reduce by
Tesla by various strategy For e.g., they can focus on the the services and the products that they
offers to the customers and also by reducing the switching cost of the customers.
Threat of new entry: A company is also effected by the entering of a new entrants in the
marketplace. When the new business has less capital the power of threat is high while entering
the market. It is also high because of the lower barriers for entering in a profitable industry due
to this the existing company is affected in an effective manner. In this aspects, Tesla requires to
focus on creating higher barriers to enter in the market, do higher research and focus on
producing attractive products so that the business can attain higher profitability and growth in the
marketplace (Karami and Marx, 2015). The impact of this force can be reduce by Tesla by
various strategy For e.g., they can increase their economies of scale which will reduce their fixed
cost per unit and thus it will help them to lower down the prices of the products they offers.
M3 Strategies to improve competitive edge and market position
Strategies helps an organisation to get competitive advantage by efficient planning.
Porter's five force model helps an organisation to identify the possible threats of new entrants
and substitute, how the suppliers and buyers can influence their business, impact of moves of
existing competitors which will help them to improve completive edge. Various other strategies
that can be used by Tesla to get competitive advantage and position in the market are:
 Be the first one in the marketplace
 Establish leadership
 Make your product stand out as new in the eyes of the customer
 Quality focussed and customer orientation

TASK 4
P4: Theories, concepts, models to interpret strategic planning
Strategic directions are a set of ideas and actions that help an organisation to consistently
follow so that they can achieve their goals. They help to combine the strategies of the
organisation and provides stability in the long run. Various strategic directions include vision and
mission of the organisation that defines the purpose of the organisation, culture that set the
behaviour and expectations, ideology and principles that set the guidelines, ideas, values etc.
Strategy that a company uses depends upon their ultimate goal which can be improving
the existing business, its expansion. Business strategy is that which helps an organisation to
improve the functions that can be done cost or differentiation while corporate strategy is that
where the organisation focuses on expansion through mergers or diversification (Martinez-
Simarro, Devece and Llopis-Albert, 2015). To analyse various strategies options available
Ansoff's matrix is used.
Ansoff's Matrix : This matrix is a tool that is used by the management to analyse various
strategies for growth. It provides various strategies which depends upon market segment which
can be new or existing and product that they offer which can be new or existing. Four strategies
that are suggested by matrix are:
Market Penetration : This is a strategy where the company operates in existing market
with existing products but they have to increase their advertising so that they can increase their
sales and market share. This is safe strategy as they need not to invest much but just by
aggressive promotion strategies they can achieve their goals (Johnson, 2016). For e.g., Tesla can
use this strategy with aggressive advertisement which help them to increase their existing market
share.
Market development : This is such a strategy where organisation plans to enter new
market with their existing products. The market there is entirely a new market which is why the
risk is high in comparison to the penetration for which a detailed research need to be conducted
by them. This strategy is good when the core competencies of the company is strong enough and
make the product so offered unique and innovative. For e.g., Tesla can use this strategy for
expanding the market share by entering into economy such as South Asia where they have not
yet started operating.

Product development : In this strategy the company introduces new products in the
existing market. It proves to be a competent strategy when the strength of the firm is more of
customer focussed then product focussed. The risk associated with this strategy is very high as
introduction of new product involves huge investment for research, production etc. but the
advantage they have is they know their customers well so it becomes easy for them to target
market. For e.g., This strategy can be use by them when they believes that new product on the
basis of customers taste and preference can be launched in the existing market.
Diversification : This is such a strategy where the company introduces new product in
new market. It is favourable in a case when organisation is ready to undertake intense risk as the
investment is high along with that a new target market, which demands a lot of efforts from
organisations side. The main task that they have to do is to identify the market, select the target
market and then satisfy them. Diversification can be conglomerate i.e., in the similar category of
goods or concentric i.e., something different then what they offer today (Jenkins and
Williamson, 2015). For e.g., this strategy is suitable when Tesla wants to enter into new market
with new products. It will increase the risk for Tesla and will increase their demand of funds.
The suggested strategy that can be used by Tesla is Market Development because they
have expertise in electric vehicles. They utilises their core competencies innovatively which
make them market leader in electric vehicles. While conducting SWOT of Tesla it was identified
that they can expand their business easily to those nations where they are not operating yet. They
have been following all the strategic directions to gain the long term stability and keep their
management and thus people focusses towards goals of the organisation.
M4 : Strategic management plan that includes strategic priorities and objective
Strategic planning helps an organisation to identify the set of activities, priorities, focus,
resources, operations etc. to ensures that the people in the organisation works towards common
goals. The strategic plan for Tesla to implement the strategy is given below.
Vision: To be the most powerful car company by offering innovative electric vehicles
worldwide.
Mission: The mission of the company is to intensify the world by sustainable vehicles.
Strategies: The strategy that can be followed the Tesla is Market Development as they have
sufficient capabilities to utilise their core competencies. It will be easy for them to target the

customers also they get sufficient support of the government as they offer environment friendly
goods (Dodgson, 2018).
Objectives: The objective of the organisation is to increase the customer base by 15% by
entering into new states which will increase their revenue by 12% within 15 months.
Tactics: Tactics are short terms efforts that are made by the company to achieve their objectives.
The tactics that are followed by Tesla are selling directly to the customers instead through
dealerships, establishing their own service station and charging stations. These same tactics will
be followed by them. Along with this they will take marketing mix into consideration for the
strategy of market development.
Product The product that they provide are auto-mobiles, electric vehicles, batteries and
solar panels with which they will enter into new market. They are known for their
electric vehicles which is why it will be easy for them to develop their market
with existing products.
Price As they have a strong brand value they uses premium pricing strategy because the
product that they are unique and of high value. Also they uses market oriented
pricing strategy for some of its products such as solar panel. They will expand
their market share with the same strategy.
Place They have company owned stores and outlets from where they distribute and sale
their products. When they will expand they will open more stores in that locate
and will operate from those venues.
Promotion The promotion mix used by the Tesla is direct marketing, viral marketing etc. but
for developing the market they need to advertise through television and
magazines as per the social class and income group which they want to target.
Implementation : It is important for the organisation to implement the plan so formulated for
which they need to allocate their resources. Tesla can allocate their funds with the help of
marketing budget. While to control the performance various measures can be adopted by the
organisation such as internal audit of the processes which will help them to compare actual and
budgeted performance. Also key performance indicators can be used to measures and improve
the performance.

Evaluation : Evaluation is concerned with collecting the information and the follow up of how
well the plan is going on and what are the hurdles that affects their performance. While
developing the market Tesla will analyse and compare their actual performance of marketing
team and the performance required in marketing plan.
D1 Interpretation of data and information for competitive and environmental analysis to produce
strategic directions, tactics and actions
For every organisation it is important to analyse various internal and external factors that
helps them to minimise the impact of threats that can be faced by the organisation while by
utilising the strengths they can avail the opportunities. After analysing the various environmental
factors it was identified that they get government support and faces lesser regulations which
offers Tesla an opportunity to expand while SWOT analysis it was identifies that they faces cash
outlays due to which they may face shortage of funds while expanding. VRIO framework helped
to determine that the capabilities of the company are strong and are efficiently used by them but
the threat is that they can be imitated by other although it required a lot of time and money.
CONCLUSION
It is concluded from the above report that to get the competitive advantage it is very
crucial for the company to identify the impact of various internal and external factors, which can
be done by Pestle and SWOT analysis. VRIO framework that is used in the report helped to
determine the efficiency of the organisation in utilising their capabilities. The strategies are
determined for the organisation using Ansoff matrix and strategic principles, also the strategic
plan so formulated will help them company in identifying the objectives and tactics. Five force

model of Porter's helped in identifying various factors that will help the company to take
competitive edge.

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