Business Strategy: PESTEL Analysis, SWOT Analysis, Porter's 5 Forces Model

This report discusses the business strategy of Tesla, including PESTEL analysis, SWOT analysis, and Porter's 5 Forces Model. It examines the internal and external factors impacting the organization and analyzes the market. It also covers concepts and theories for effective strategic management planning.

Business Strategy

Table of Contents
Contents
INTRODUCTION...........................................................................................................................2
TASK 1............................................................................................................................................2
PESTEL ANALYSIS..................................................................................................................2
TASK 2............................................................................................................................................4
P2. Analyse the internal environment and capabilities by using SWOT analysis.......................4
TASK 3............................................................................................................................................6
P3. Porter’s 5 forces model along with evaluation......................................................................6
TASK 4............................................................................................................................................8
P4. Range of theories, conception models together with interpretation and development of
strategic plan................................................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
1

INTRODUCTION
Business strategy is a blue print of activities that the companies uses in order to gain
competitive edge in the market. It is a strategy that organisation uses to strengthen the
performance of the company with an aim to achieve and attain organisational goals (Aubry and
et. al., 2012). Business strategy is essential to make effective planning, to control and monitor the
activities and to properly allocate the resources of the organization. This report is based on Tesla,
an American company deals in manufacturing of cars. The company was established in 2003,
headquartered in California. U.S. The founders of the company is Elon Musk, Martin Eberhard
and Marc Tarpenning. The report examines the internal and external factors that impacts the
organisation. In addition to this, Porters five forces model will be use to analyse the market.
Later, it covers the concepts and theories that will help in making an effective strategic
management plan.
TASK 1
PESTEL ANALYSIS
Pestle analysis is a technique used by the company to identify and analyse the external
factors that effects the performance of the organisation. It includes political, economical, social,
technological, environmental and legal factors that is used to examine the threats and weaknesses
of the organisation (Burgess and Radnor, 2013). With reference to TESLA, the manager of the
company uses PESTEL framework in order to know the impact of external factors in growth of
the organisation and its strategies. The factors are discussed below:
Political factors
Political factors ascertain the degree of government interferences that impact the
economy or the industry. It includes Political stability, government policies, tax policies, trade
tariffs, Fiscal policy and so on. In context to Tesla, manufacturing of electric vehicles reduces the
use of fuel and gas. The U.S government took initiative towards the adoption and development
of electric cars and hybrid engines in the country that allows Tesla to easily receive loans,
backed grants and tax breaks. The company financial stability improves which further leads to
more manufacturing of cars and earn high profits.
Economical factors:
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Economic factors are those factors that directly affect an organisations demand and
supply, consumer willingness and performance in long term. The factors include inflation rate,
disposable income, interest rate, exchange rate etc. with reference to TESLA, sales of the electric
cars increased by 35% between 2017 to 2019 due to increase in the global economy. The price
of batteries is low, which benefit the company by reducing in production cost. This leads to the
creation of cost effective cars for the citizens and increase in sales and profit of the company. In
other countries, people make investment in luxury cars such as BMW, SUVs and so on which is
good for the company as it is viewed as lavish and luxury with advance technology by the public
(Cacciolatti and Lee, 2016).
Social factors:
It is also known as socio cultural factors that affect beliefs, value and attitude of the
people. Social factors consider demographics, career, attitude, population growth and so on. In
context to Tesla, manufacturing of ecofriendly cars like by the population of society and they
prefer to buy it. Tesla sustainable electric cars is good for the environment and builds a positive
image in the mind of consumers. It is focused on implementing strategies which are inconsistent
with the demands of people living in the society. It is using renewable energy in order to become
acceptable in the areas in which it is operating. Furthermore, it make investments in making the
lifestyle better together with making expenditure in infrastructure, employment and many more.
Technological factors:
These factors are connected with growth and marketing of business at global level. These
are used in every operation of the entity for better management of the work. With the use of
advanced technologies, companies can bring innovation resulting in higher profit and revenue
(Cserháti and Szabó, 2014). In the context of Tesla, it is one of the organisations which make
sure that latest technologies are used which can increase customer satisfaction. It has used
Autopilot 2.0 which is the technology for self-driven cars. Furthermore, it has installed
megacharger stations for charging the electric cars. These are available in almost all major fuel
stations. Similarly, some other technologies have also been used in order to sustain in the market
and retain the position.
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Environmental factors
These factors affect the environment and its surroundings. There are laws made by the
government and other bodies which are to be abide by organisations in order to protect the
environment. With regard to Tesla, it has started using the materials that are less harmful to the
nature. It has plans to make sustainable electric cars which can be charged as the megacharger
stations. This reduced the emission of gases and pollution to a significant level. It is an initiative
to save the environment and make the company acceptable by the people living in the society.
Legal factors
These are the factors that affect the business in a significant manner. These include all regulatory
and law that govern the business and decisions of management of a company functioning in a
particular country. In the context of Tesla, it should focus on legal provisions that are applicable
to it while carrying disease in different countries (Eason, 2014). Similarly, it has registered all
the intellectual properties to protect them from misusing as these are valuable assets.
Furthermore, there is a separate team for looking at the laws applicable to the company in order
to comply with them. In this way, it creates huge opportunities for other entities to invest in
Tesla as well as lower down the financial burden which can arise from non compliance.
From the above analysis, it can be concluded that Tesla is a renowned company having a
leading position in the automotive industry. The quality of the products provided by it it is
premium which is why the goods are expensive as well as exclusive containing the luxurious and
essential features. The impact of external environment can not affect the company to a
significant level because of the competitive advantage it has among its competitors. Moreover,
the policies and strategies adopted by it are effective to accept the changes and make adjustments
accordingly. In addition to this, the strategies adopted by Tesla are the examples which are
considered as base for or other organisations existing as well as new entrants.
TASK 2
P2. Analyse the internal environment and capabilities by using SWOT analysis
SWOT analysis is a framework that provides a clear picture of market standing of the
organisation in the industry (Hoque, 2013). Strength, weaknesses, opportunities and threats can
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be known with its application. It helps in assessing the internal capabilities for making
appropriate strategies. The same has been provided below in the context of Tesla:
Strengths-
 It is the most liked company in which the employees prefer working because of diversity
and innovation encouraging culture it has. Also, the workplace has been considered ideal
which attract Young job seekers having fresh ideas and talent.
 It is the leading automotive company delivering huge number of units without
compromising the quality and features along with luxury.
 Recently, it has started manufacturing electric cars which are the finest one and proven to
be best covering maximum distances. The approx distance product has covered is 600
kilometres.
It has dominance in US electric vehicle sales, this is because of competitive advantage it has
from other entities operating in the same industry (Kohtamäki and et. al., 2012).
 Innovation is the feature it always incorporate in producing the products in order to retain
the existing and attract potential new customers. It leads to substantial financial games
also increase the competitive edge.
Weaknesses
 The use of innovation in an extensive manner open bring mechanical complications and
production risk which ultimately leads to delay in launching the new products in the
market. There was some issues in the batteries used in the cars which affected the
statistics of Tesla.
 The complicated procedures and high experimentation main result in unbalanced supply
and demand leading to unwillingness of meeting the requirements of customers. This also
affect the delivery rate.
Since the features and unique technologies are adopted which are very innovative often leads to
failure to produce high volumes of automobiles for any of its models (Rowlinson, Hassard and
Decker, 2014).
 The increasing demand of electric car has created an issue for Tesla as there is limited
supply of batteries which affect the sales of electric vehicles and energy storage systems.
Opportunities-
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The first and most significant opportunity for Tesla is to expand the business in Asian market as
these are unsaturated in the field of automotive and renewable energy markets. It is going to to
increase the global brand image making stronger market presence (Lee and Smith, 2018).
 It can use new technology which provides innovative features making the cars less
expensive so that large number of customers can buy Tesla cars.
 It can start in house manufacturing of battery which can ultimately lead to lower costs of
production. It is beneficial in cutting down the final prices.
Threats
 There are high chances of product liability claims which can occur even if the highest
quality products are delivered to the customers. This can be a substantial financial burden
on the company.
 There are many other companies like BMW and Mercedes who have started making
alternative fuel vehicles such as hybrid, plug in hybrid electric as well as self driven cars.
This is a factor raising the competition in the existing market (Storey, 2016).
 The mechanism and technology is used in reducing cars by Tesla can face increased
product defects due to complexity level involved. Also, there has been number of cases
about major flaws and weaknesses in design.
 The unstable manufacturing conditions often creates doubts regarding sustainability of
the company as well as its public image. This can damage the brand and its position
severely resulting in loss of customers.
 It has the threat of convincing the customers in adopting the changes that are brought by
it in the cars. With the innovation, challenges can be increased to an extent which can get
hard to deal with.
TASK 3
P3. Porter’s 5 forces model along with evaluation
Porter's five forces model is an analysis tool that uses fives industry forces to determined
intensity of competition in an industry and its profitability level. It was created by M. Porter in
the year 1979 for assessing and understanding the impact of five factors that are there in business
environment. Each of such have their own influence on the competition in the industry. Porter's
five forces model has been used in the context of Tesla which is as follows:
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Threat of new entrants- This is about new entities trying to enter manufacturing industry
in order to who established their business. This depends on the attractiveness of the industry. The
competition level increases with organisations viz. Large as well as small make entry into the
industry. The threat of new entrants into the alternative fuel vehicles manufacturing industry is
moderate. Also, the companies making their place in the industry has to provide the quality
witches given by Tesla in the cars manufactured by it. The companies like BMW, Mercedes,
Toyota etc. Compromise with the performance of the cars in order to reduce the premium
charges. Therefore, Tesla has a strong position when it comes to making electric cars. Thus, it
has gained profit even when other entities what trying to enter the market leading to increase in
the competition.
Bargaining power of suppliers- The suppliers are the party who provide input to the
organisations for manufacturing the products as per the demand of the customers. If an industry
has limited or future suppliers providing exclusive input then they are going to have the
bargaining power. In the context of Tesla, generally the suppliers sell their products through third
party leading to to moderate force on the corporation. Also, they have low level of forward
integration which limit the control and distribution and sale of their products. Currently, the
bargaining position of suppliers is limited because many other suppliers wish to grab the
opportunity to work with this company for which they are ready to accept the terms and
conditions of Tesla. This is why, the company is in a great position to limit the cost charged by it
suppliers (Lee, 2014).
Bargaining power of customers- These are the people for whom companies make
products in order to sell them for making profit. The influence of customers on forms and the
automotive industry is accounted for this aspect of five forces analysis. The major share for
company’s revenue and sales are because of its customers. With regard to Tesla, it has huge
number of customers in many countries who are willing to pay the premium prices. Since, it
provides products of exclusive quality, there are less chances that customer will switch to
another entity for the same product. Therefore, the bargaining position of customers is low which
helps Tesla to retain the buyers and attract new one.
Threat of substitute- There are many companies selling same products at lower cost in order to
attract customers. However, the quality factor is low. Companies like BMW, Mercedes etc. Tend
to introduce products which can have the similar market share just like the cars of Tesla. People
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often look for same products with cheap prices. In the context of Tesla, it charges premium cost
for the luxury and futuristic features provided by it in the manufactured cars. It is a major threat
for Tesla as people look for substitution in the form of public transport or products having
similar quality but at cheap prices. There are many companies trying to enter the market in order
to compete against Tesla by providing they are good at affordable prices (Linn, Sanden and
Piekkari, 2018).
The conclusion can be gathered from this analysis is that Tesla is a successful company
having dominance in the market does not have to worry about new entries in the industry. Also,
the bargaining position of suppliers and customers are not likely to affect the business because of
the attractiveness of company and exclusive products it provide. However it can increase the
quality of its products through innovation and new technology in order to retain the customers.
TASK 4
P4. Range of theories, conception models together with interpretation and development of
strategic plan
Every organisation is required to apply some theories for models in order to help it conduct the
business operations in a better manner. This can be chosen on the basis of their characteristics
and applicable it even in the organization in order to achieve the goals and objectives. However,
the ultimate motive is to achieve strategy target (Milovanovic, 2015). These theories and
concepts are implemented to gain competitive advantage and make the market position stronger.
Ansoff Matrix has been applied to show the current position of Tesla in order to formulate
strategies by which it can grow. The details of the matrix has been provided below:
Market penetration- This strategy is based on foxing the existing product in the current market
segment. There is no introduction of new products on new market and the growing market in
which business is already established are tapped. The risk factor involved is very low because of
the knowledge the organisation already has. Also, the opportunities which are present in the
market can be e explode for increasing the capabilities in order to sustain the competition. It is
suitable for those companies which tend to grow in every situation and usually large organisation
like Tesla uses this strategy for achieving more growth in the existing market. With use of this
strategy, Tesla can continue with the production of existing cars in the market segment which are
growing with the time and are known to the company. This reduces the chances of failure as
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strengths and weaknesses of the market have been identified with the experience of conducting
business in the same market segment (Morton, Wilson and Cooke, 2015).
Market development- According to this strategy, new markets are taken into consideration for
launching the existing products. The already established goods are made available in new and
different geographical regions. It is useful for the companies having core competencies and like
to experiment to see the success of its products. The scope is limited to a specific product. In
other words, kabaddi is focused on bringing some products in entirely new market to increase the
customer base through expansion. The risk involved in this is slightly higher than market prnetra
strategy. With regard to Tesla, it can be a good approach to attract new customers by increasing
the market base on the basis of existing products (Pasquinelli, 2014).
Product development- This is regarding the strategy which is for introducing new products to
existing market segments. There is no modification or changes made in the existing but an
entirely new item is launched in the marketplace. It may be appropriate if the forms is friends are
related to specific customers rather than to specific product itself. In this situation, it can leverage
its strength by developing a new product targeted to its existing customers. Similar to the case of
New market development, new product development carries more than simply attempting to
increase market share. In the context of Tesla, the electric cars which are to be made by it can be
introduced in the existing market for testing the success rate. On the basis of these outcomes, it
can launch the same product in international market by incorporating the features which are in
demand by the targeted customers (Rasula , Vuksic and Stemberger, 2012).
Diversification- It is considered the risky strategies among the four strategies because the
product as well as the market are entirely new to the companies. However, there is great chance
of high return because of the huge risk involved. With the use of this strategy, Tesla can reduce
the overall portfolio risk and gain competitive advantage along with market dominance in an
entirely new market.
From the above analysis, the most appropriate strategy for bringing electric car and expanding
the market base, market penetration. This is strategy will allow it to launch the product in the
existing market which ultimately have low risks. If the targeted product gets success in the
established an existing market, then it can further launch it in new market. Also, the experience
that will be gained by it in the existing market will help it introducing the amount of defaults and
errors. This can lead to higher profits, sales and growth (Ritter and Andersen, 2014).
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Strategic plan
Vision To become global leader in electric car automotive industry.
Mission To achieve the target of gaining competitive advantage and
maintain healthy relationship with customers.
Objective To launch the new product in coming 6 months by using new
technology and innovation.
To increase profit by 14% in 6 months from now.
To attract new customers through attractive offers in order to
expand the customer base.
To gain competitive advantage and create a market
dominance through strategies such as market penetration.
To provide high quality in all the products.
Tactics It will be using different types of ways for providing
advertises to large number of customers. Also, there will be a
PR team devoted for attracting the buyers by making them
connected with the company. Furthermore, the management
will be appointing candidates who are eligible for the job
roles and provide innovation and creativity.
Implementation There will be a constant monitoring of the action plan and the
implementation will be done by providing training to all the
employees along with effective leadership in order to guide
them with right actions.
CONCLUSION
Above report it can be concluded that Effective strategies planned by any company plays a
very crucial role in achieving success in long term. Growth and development are two most
desired phenomena by every company for their survival in market. There are various tools which
companies use such as SWOT analysis, PESTLE analysis, Porters five force model, Ansoff
matrix is also used so that most suitable strategy can be selected by company and that can help t
hem in achievement of their objectives and goals in more effective way. A strategic plan has
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been developed by company for a new innovation which they are trying to bring in their
products.
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REFERENCES
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