Business Strategy of Tesla

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Analysis of macro environment on the business strategies...............................................1
TASK 2............................................................................................................................................5
P2 Analyse the internal environment and capabilities of an organization.............................5
TASK 3............................................................................................................................................9
P3 Applying porter's five force model to evaluate the competitive forces.............................9
TASK 4..........................................................................................................................................11
P4 Apply theories, concepts and models to interpret strategic planning..............................11
CONCLUSION..............................................................................................................................13
REFERENCES .............................................................................................................................14

INTRODUCTION
Business strategy is a set of activities that an organization uses to attract customers,
improving performance as well as achieving the objectives in effective manner. This is a
combination of all activities and decisions that are required to accomplish the goals of business
and secure a competitive positions in the marketplace. These plan of actions assist the
organization in identifying product strengths, setting value, getting new business concern,
distinguish products etc. For analysing the business strategies and its impacts Tesla Motors is
chosen in this report. It is a American automotive and energy company founded in Palo Alto,
California and established on July 1, 2003. The company specialise in manufacturing electric car
through solar panel and operate multiple production and assembly plants. In this report studied
about the internal and external environment of an organization which effects the strategic
decisions as well as competitive positions. This also disclose the theories and concepts that are to
interpret the strategic planning for an organization by setting up strategic decisions, objectives
and tactical actions. Also, facilitates the recommendation to develop the strategic growth and
achieve competitive advantages.
TASK 1
P1 Analysis of macro environment on the business strategies.
Strategic management plan is a framework which is used to communicate the long-term
goals and measure or evaluate the performance of an organization. It provides a clear
understanding about the mission, vision, objectives as well as strategies of a company which are
needed to achieve the goals and objectives (Ayala, 2016). In the context of Tesla Motors,
strategic management plan can be described as:
Vision: The vision statement of Tesla's is to appoint the most persuasive car
establishment of the 21st century by impulsive the world’s transformation to electric vehicles.
Mission: Tesla's mission is to speed up the world's change of state to sustainable energy
as well as transport.
Objectives: To increase the customer base as well as market shares by 15% & 16%
respectively by expansion in the market area.
Strategies: The company adopts market development strategy to expand their business in
new geographical location to increase the customer base in the marketplace.
1

SWOT analysis: It presents the internal report of the Tesla Motors by examining internal
and external strategic factors. Strengths and weaknesses are the internal forces in that strength
helps in examining the positive and valuable aspects of the company. Whereas, weaknesses helps
in understanding the drawbacks of a company which reduces the organizational performance
(Scholes, 2015). Along with this external forces includes the opportunities and threats that focus
on the emerging changes of growth for a company and analyse traits that introduce as a
roadblocks for the company.
Tesla is the top leading automotive company as a highly innovative advancements and
processes. Have a positive aspect in product differentiation by introducing electric technologies
and on the top of the selling electric vehicles considered as a strength. The company suffers
more from the manufacturing complications because it delays at a time of launching highly
innovative and new products. Sales of electric vehicles and energy storage system decreased
because of the limited supply of batteries and also have limited market place are the weaknesses
of company. Tesla have opportunities to make its own battery cells which helps in increasing
the manufacturing rate as well as decrease the production cost. In relation to weakness, Tesla
must consider the opportunity for expansion in their global sales. Brixit deal between the UK and
Europe is main trait for the company. Large competition in the automotive sectors and
fluctuations in the foreign exchange rates creates a roadblock in grabbing the opportunities.
Stakeholder analysis: Tesla has corporate social responsibility strategy which impacts
on the business at a great extent. The electronic car of Tesla viewed as an antipode to traditional
cars which use combustion engines and impacts negatively on environment. Stakeholder
priorities in accordance with the CSR strategy can be described below: Communities: Tesla is a automotive business that influenced by communities because
they design corporate image. Communities interest as a significant stakeholder is related
to environment protection. Customers: It impacts on the product quality and pricing level which effect the income of
Tesla. To satisfy the customers and fulfil demand by minimising cost of car batteries to
reduce the overall cost of final goods. Employees: They are the crucial factor of the company which impacts directly on the
productivity and profitability. Tesla trying to satisfy them by facilitating competitive
compensation and professional growth.
2

 Investors: They are crucial for maintaining cash flow and capitalisation for the company
because they concern on profits and business growth. Tesla CSR needs to satisfy their
interest by using long term strategies.
 Governments: It concerned about legal actions and compliances of company and
contribution to the state economic growth. International expansion strategic plan satisfy
the government interests.
Macro environment factors are exists in the overall economy rather then specific sector
which directly impacts on the operational performance, strategies as well as decision-making of a
company. These factors are uncontrollable that includes political, economical, social,
technological etc. elements are involved. Macro external factors facilitates the detailed
informations related to the operating challenges which Tesla Motors will face in prevailing the
macro situation rather then competitive forces (Tesla, Inc. PESTEL/PESTLE Analysis &
Recommendations, 2019.). The external factors that can impacts on the Tesla Motors and its
factors:
Political factors It includes the introducing new policies, political corruption as well as
regulations related to the environmental issues, legislations and policies of
automotive industry, taxation etc. impacts on the strategies and performance
of an organization. The government of UK is stable and supportive so it
positively impacts on the Tesla Motors. Also initiatives are being interpreted
by the government to cut down the usage of oil and alter to more eco-friendly
energy resources to bring down global warming. Due to the Brixit deal the
changes in adopting the carbon emission regulations are introduced which
negatively impacts on the UK's auto-mobile industries because for
manufacturing car approx 60% parts are imported in this country (Johnson,
2016). However, Brexit may cause instability and uncertainty in UK so Tesla
needs to develop its plan of action in a way that this does not consequence its
operational activities.
Economical
factors
These factors are related to the inflations, growth, income and wealth
distribution, trade etc. which effects the business strategies. The economic
growth of UK is positive which provides more opportunities to increase their
sales in future. Along with this there is a quite fear of fluctuations in currency
3

as well as duties. In the UK technologies and batteries are available at a
cheaper rate which can be used by Tesla to produced electric auto-motives
thus minimising its operation costs and prices to made them affordable for
their customers. However, due to Brexit the value of pound can be a reduced
which might force Tesla to change its prices. Brexit might also effect in fast
trade between US and UK which will affect the strategies of company so that
prices can be obsessed.
Social factors Socio-cultural factors includes demographics of population, lifestyles, trends,
preferences as well as culture effects the performance of business operations
and strategies. For taking social advantages a company needs to invest in
heavy R&D activities to meets millions of social media followers. UK has a
big consumer marketplace which belongs to the different cultures and
religions with unique mixture of needs and wants. However, there is a broad
income difference in UK as compared to other developed countries which
might influence company plan of actions in pricing strategies of its products.
Technological
factors
These involves the technological advancement, automation and innovation in
techniques as well as introducing new ideas by developing in the business
strategies to take a competitive advantages. Tesla has a large opportunity to
spread out its business in UK as technologies for advances in renewable
energy is accessible in UK. Auto-mobile industry concentrate on creating a
changed business state of affairs, developing technology road maps for CO2
emission free vehicles and hydrogen propelled cars, it also centring on the
research and development schedule of the UK automotive industry.
Environmental
factors
It includes the weather condition, climate, temperature, availability of water
as well as environment protection and pollution act which effects the
performance of an organization. Environmental determinants affiliated to
CO2 emission, petrol and gasoline usage etc. if the auto-mobile has a high
CO2 emission rate there will be high TAX charges (Akter, 2016). The UK
government has introduced financial measures to favour vehicles with lower
CO2 emissions, Environmental policies in the UK are based on rule of
4

command and control, which may yield polluters certain standards which
cannot be overstep.
Legal factors These are the law of command that dominate in a country which are
compulsory to remain for all the businesses to run with success. These laws
are related to protect the interest of customers and investors, assure ethical
and CSR practices in a businesses etc. UK has highly positive lawful
constitution for Tesla to operate in the country. The UK system of rules
supply plug-in car grant up to £5,000 for electric and hybrid vehicles. Also
many laws are being formed against polluting vehicles which is favourable
opportunity for Tesla. However, the company requires to precede with UK
legislations so as to insure working within the legal framework of the
country.
Evaluate the macro environment to determine strategic management decisions:
By using the SWOT analysis tool a company able to understand their internal and
external strategic forces that are strength, weakness, opportunity as well as traits. This helps in
grabbing the market opportunity at a time and able to take a competitive advantages. Macro
environmental factors cannot be controlled or change so the company needs to take a strategic
decisions to deal with the changes and its impacts. Business strategies are required to manage the
changes effectively as well as take competitive advantages in an appropriate manner. Tesla
Motors faces many difficulties due to the political and technological changes due to the
instability in the political and economical situations or conditions (Higgins, Omer and Phillips,
2015). Although, advancements in technologies provides an opportunity to Tesla, it can also be a
threat as the changing technologies can lead to quick devolution of products as the customers
preferences keeps on changing.
TASK 2
P2 Analyse the internal environment and capabilities of an organization.
Internal environment is a basic element of every business environments which
comprises of several determinants that are available inside the organization and can effects the
decisions and strategies (Amran, 2016). It involves the culture, climate, equipments, work
5

process, management, resources, practices as well as structure. The internal environmental
factors can be varied and disciplined so as to stay competitive in the marketplace and for
successful operational activity of business. There are several ways which helps in analysing the
internal capabilities and environment of Tesla Motors that are as follows:
Strategic capabilities: It can be defined as resources and competencies of a company
which are needed for the long term survival of business. Strategic competencies refers to the
business strengths like, humans, skills, resources, capabilities etc. that helps in taking
competitive advantages.
Components of strategic capabilities: Ability to compete: Strategic capabilities focuses on assets, resources, market positions of
an organization in order to gain competitive advantages.
 Identifying critical competencies: Property and patent contributes to the ability to
formulate and employ strategies. Human resources and organisational structure etc.
contribute towards business competitiveness.
McKinsey's 7's model: It is a model which illustrate the seven elements of businesses
that can be straight to increase the effectiveness. On the basis of structure, system and strategy
are considered as a hard element whereas shared values, skills, staff are presents as a soft
elements. Strategy: Tesla strategy is based on the electric cars which is driven by the company's
mission to accelerate world's transition to sustainable energy. Structure: The structure of the company into a single category because of its unique
nature. There is no organisational chart or public list of senior leaders at Tesla. System: A wide range of systems which are useful for long term growth prospects that
involves recruitment, selection, development, oriented, customer relationship
management etc. Shared values: Specific oriented goals are the core values of Tesla which helps in
demonstrated in general work ethic and corporate culture. Skill: Competencies and skills of staff who are employed in Tesla are important for the
companies productivity and profitability. Strong and competitive skills leads the success
and growth directly.
6

 Style: It includes the leadership approach which is adopted by the company to ensure the
effective participative and effective management.
 Staff: Employees are considered as a competitive factor which helps in the
accomplishment of organisational objectives.
Resource based view strategy:
This is considered as a managerial framework which are used to examine strategic
resources for accomplishing sustainable competitive advantages. Resource-based view
framework of Tesla helps in maintaining company's ability to perform better as compared to its
competitors by using unique features and resources. These are used to take sustainable
competitive advantages that requires to meet the four criteria of being valuable, rare, imitable
and organised business. Through resource based view analysis strategic capabilities of Tesla
needs to be evaluated by considering tangible and intangible resources. Tangible resources are
classified into financial, physical, technological and organizational structure. In addition,
intangible resources includes human resource factors only. This can be determined by using
VRIO model that are described as:
VRIO analysis: This tool is used to understand the internal environment and capabilities
to take a competitive edge as compared to other rivalry companies. It is an analytical technique
of Tesla Motors resources and competitive advantages (Buckley and Ghauri, 2015). VRIO
analysis is used for rising in the business positions in the market and helps in implementing some
unique strategies to cope up with their competitors. This model can be analysed in the context of
Tesla which are as follows:
Value This factor analyse the products, services as well as resources which are
provided by the company that adds something value for customers. With the
context of Tesla Motors this factor is presents because the products of this
company is going to solve a major problem for the humanity. This will helps in
taking a sustainable competitive advantages.
Rare It analyse those products which are control scarce resources and capabilities or
can say that which are rarely available in the market. Tesla Motors proprietary
technology and R&D activities to develop innovative energy products are rare
such as cars and batteries. Technological advancement satisfy the pertaining
7

rarity that gives an advantage of not being imitated by the other companies.
Imitable This factor identify that the resources and capabilities of a particular company is
expensive to duplicate by other organizations. Tesla's technology, strengths,
R&D activities, energy space as well as positioning are difficult to imitate. The
company spent more time and efforts on that to reach the current stage that are
complex to replicable by other companies (Song, Sun and Jin, 2017).
Organization It means examining the internal structure, procedures, culture, system as well as
structure of an organization is well managed and organised. Tesla Motors deals
with the strong leadership, practices and culture to make company capable for
sustaining in the competitive market for a long time by exploiting opportunities.
Value chain analysis: M. Porter presents the generic value chain model in 1985 which
enables the internal activities of business related to the production of goods and services. It is a
set of activities which a business operating in specific industry in order to deliver the valuable
products and services in the market. Value chain analysis is a process in which Tesla identifies
their primary and support activities that adds some value in final products and analysed that to
reduce the cost along with increase differentiation. This analysis helps in identify the source of
competitive advantages and complex interdependences or inter-relationship as well as improve
the flow of money, information and material. In addition a company may loss their vision and
overall strategies by dividing their operational activities into different functions as well as Tesla's
information system is not structured properly.
Critically evaluate the internal capabilities to access on the strength and weakness of an
organization:
Internal surroundings and competencies plays an important role in an organizations
which assists in developing practices, structure as well as develop constructive culture at their
workplace (Pan, Chen and Zhan, 2018). In the context of Tesla Motors, a company takes
competitive advantages by changing in their internal forces and making effective decisions. Also,
defines the strategic capabilities and its components as well as McKinsey 7's model to take a
competitive advantages. Along with a company use resource-based view and VRIO analysis to
8

make sure that the resources and capabilities are rare or non imitate by other players as well as
compete in the sustainable market growth.
9

TASK 3
P3 Applying porter's five force model to evaluate the competitive forces.
This model is the one which is used by the business in order to identify the competition
level from the competitor prevailing in the market place so that the business can plan strategies
in the best possible manner. It consist of thee 5 major factors that are explained below: Bargaining power of suppliers: It is one of the condition where suppliers gets the power
to charge higher amount of money form there customers for the delivering the low quality
of services. It is only possible whenever there are very less number of competitors
available in the market. In context of TESLE, there are number of suppliers who can
distribute them the raw material which they requires to manufacture the car. So, it can be
simply understood that there is low bargaining power of suppliers within the market
(Kauerhof, 2017). Bargaining power of buyers: It is the condition where consumers of the company likes to
buy the product at low price in which they required higher quality. This situation only
arises whenever there are more number of companies available producing similar
products. While talking about TESLA, their customers have higher bargaining power in
current situation because number of organisation such as Jaguar Land Rover, BMW etc.
have involved themselves in industry of electric cars. Due to which customers of TESLA
are able to purchase the vehicle at low price. Threats of entry: It is the situation where new organisation enters into the market and
creates problem for existing company by delivering the product as per the requirement of
customers. It is important for every organisation to check that whether there is any threats
from market and it can be done with the help of marketing team only (Kauerhof, 2017).
While discussion about TESLA, they have higher threats from other business
organisation like FORD, Porsche because they have started to enter into similar form of
market.
 Threats of substitutes:This are the condition where customers of the company try to
search for other similar form of option which is available in the market. It happens in the
situation where customers wants to buy new products at low price where quality is not be
compromised. Here, TESLA does not have any problem in current situation because the
10

quality which customers expect is being only delivered by them. But, there is high
chances that in future period of time, other automotive company might manufacture high
quality of cars as compared to TESLA due to which it can be said that there is a
moderate situation for substitutes of TESLA (Grant, 2016).
 Competitive rivalry: In context of business organisation, competitive rivalries are the
most important part in for companies. It mainly focuses on finding positive and negative
of competitive firm. It is one of the source which provide advantage to the company
because they easily know about other firm. Although number of organisation are there
who have been dealing in automatic cars but while delivering the satisfaction, TESLA
takes lead in every department. As, other companies have also got the chance to give
tough challenges but still there is low competitive rivalries in the present scenario.
Invent appropriate strategies to improve the competitive edge:
Effective strategies provide a blueprint that necessarily to be followed by taking proper
decisions and human action which helps in achieving organisational goals and objectives.
Porter's five forces model help in ascertaining the external forces which influenced the strategies
of an organisation. It assists to determine the organisation's capabilities that can be enhanced and
the weaknesses for understanding the drawbacks of a company which cut down the
organizational performance. Possible threats can be faced by proactive actions and strategic
planning by the manager of a company (Yu, 2015). Opportunities should be grabbed on time so
as to achieve competitive advantage. Along with this it focused on the factors that introduced
while entering into a new industry, rivals study and adopting effective strategies to improve in
the organizational performance.
11

TASK 4
P4 Apply theories, concepts and models to interpret strategic planning
Strategic directions need to be used by the organisation which guides the organisation in
achieving the goals and objectives. To plan various strategies the organisation need to go through
to their existing strategies and structure. Strategies that an organisation follows vary from
organisation to organisation which depends upon their ultimate goals. Strategy that can be
followed by the organisation can be business or corporate. Business strategy are concerned with
the growth which can be achieved either on the basis of cost or differentiation while corporate
strategy can be related to diversification, mergers and acquisition etc. In case of Tesla, the focus
is on strategy to expand their market share (Jussani, 2015). To analyse various strategies that can
be followed by the Tesla, Ansoff's matrix is taken into consideration.
Ansoff's Matrix : Ansoff's matrix is generally used by the organisation to determine
various strategy that can be followed by the organisation. In this matrix, products that are offered
by the company and the market segment that is catered by the company is considered. Various
strategies that can be followed are :
 Market penetration : This strategy focuses on operating in the same market with the same
product which can be done by improving their advertising and promotion as it will
increase awareness about their product also the investment is not much in this strategy.
 Market Development : This strategy the organisations plan to enter new market with the
existing product. In this the investment is comparatively much which is because of
research and the risk is also high as they enter into new market.
 Product development : This strategy signifies that the organisation will launch new
product in the existing market due to which requirement of funds is high and risk is also
higher as taste of customers may change with change in time.
 Diversification : In this strategy, the organisations enter into new market with new
product. This implied that the risk is highest in this strategy and the level of investment is
also very high. Diversification can be done in same segment or it can be done in different
segment.
12

The strategy that can be used by Tesla is Market development as they just want to expand
their market share which can be done without any new product. This strategy will help them to
achieve their goals.
Critically evaluate the environment and competition to produce strategic decisions,
objectives and tactical actions:
For every organisation it is important to examine in detail the effect of different external
and internal environmental factors which effects the growth and development of a company. This
analysis helps an organisation in formulating strategies that can assist it in achieving its vision
and mission through cost effective approaches that bring down costs and rise value for their
customers. PESTLE and SWOT analysis gives a detailed information about the impacts of
environment on Tesla whereas resource based view framework and VRIO helps in assessing the
abilities and competitive potentiality of Tesla (Min, 2016). McKinsey model is also used to
identifies the internal capabilities and Ansoff Matrix can aids Tesla in making suitable marketing
strategy so that its profitability and sustainability can be raised.
13

CONCLUSION
It has been concluded from the above report that every company needs to understand and
evaluate the internal capabilities and external factors which effects the organizations
performance and competitive positions of an organization. Along with this SWOT analysis is
required to know the strength, weaknesses, opportunities as well as threats that effects the future
growth of the company. Moreover, porter's five force model helps in evaluating competitive
forces of market which impacts on the organizational functions and activities. Although applying
a wide range of theories, models and concepts to interpret the strategic planning as well as
prepare a strategic management plan that have the strategic objectives, tactics and practices to
accomplish the objectives. Overall collected informations related to the environment and
competitive advantages are helps in making strategic decisions and provide appropriate
directions.
14