Impact of Macro Environmental Factors on Tesla's Functioning

This report analyzes the impact of macro environmental factors on the functioning of Tesla, including political, economic, social, technological, environmental, and legal factors. It also includes a stakeholder analysis and a critical analysis of these factors to determine management decisions.

Business Strategy

Executive summary:
Tesla is a automotive brand founded in the year 2003 by engineers who proved that no one
needs to make any compromise to drive electric vehicles. In present scenario tesla is a brand
manufacturing electric vehicles but also is involved in practises such as clean energy generation.
They have started their company with a belief that world has to stop relying on fossil fuels and
move towards a world of zero-emission for future sustainability.

Table of Contents
Executive summary:........................................................................................................................2
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
Impact & influence of macro environmental factors on functioning of a organisation........4
Stakeholders analysis:............................................................................................................7
Critical analysis of of macro factors to determine the management decisions....................11
TASK 2..........................................................................................................................................12
Analysis of internal environment and capabilities of the organisation................................12
Critical evaluation of internal environment and the capabilities..........................................15
TASK 3..........................................................................................................................................16
Appropriate strategies for improvement of competitive edge & present market position...16
TASK 4..........................................................................................................................................16
Theories, concepts, models that can help in strategic planning ..........................................16
Strategic marketing plan ......................................................................................................17
Critical analysis & interpretation of information & data......................................................19
CONCLUSION..............................................................................................................................20
REFERNCE...................................................................................................................................21

INTRODUCTION
Strategies are the plan of action used for achievement of long term objectives and
business strategy are set of actions concerned with motives of a business. They together help a
organisation in improvement of present performance level of their workforce to attain a
competitive advantage and attract more number of customers. For determining correct path
organisation has to adopt in order to attain their desired objectives. Strategies are formed based
on goals specified for general business. Strategies have to be formulated based on organisational
goals (Ardley and McIntosh, 2019). This report is on Tesla, it is a electric & automotive
company having specialisation in batteries, electric cars etc. this report is based on making
analysis of tactics, strategic & objectives of a organisation. Various topics discussed in this
report includes analysis of External environment, with use of various models. Further a strategic
plan of growth is made where strategic objectives & tactic to be used by the organisation are
discussed.
TASK 1
Impact & influence of macro environmental factors on functioning of a organisation
All business function of a macro environment that posses influence on their business
functions (Bai, Cordeiroand Sarkis, 2020). Organisations have to make a analysis of different
external factors that can help them in making use of profitable opportunity for reduction of such
threats. Tesla is functioning in a macro environment and is affected by various factors that can be
understood by PESTLE analysis as mentioned below:
POLITICAL FACTORS : These factors are very helpful in determining overall impact of
governmental and extend to which it can affect a organisation. Government of UK is taking
initiatives for promoting electric vehicles and providing various incentives for encouraging
organisations (Bohnsack, Pinkse. and Bidmon, 2019). It has created many opportunities Tesla as
demand for their products will increase. Political stability of UK will also provide various
growth opportunities without getting impacted by unstable political environment because of
events such as Brexit.
ECONOMIC FACTORS : Economic factors are ones that directly impact operation of a
company and includes factors such as exchange rate, interest rate, periods, situations of rising

prices, increasing GDP. one such factor is reduction in batteries cost in UK has been favourable
for Tescla as it has lead to reduction in prices of auto mobile products that is making it more
affordable. Reduction in renewable energy cots is also making their products attractive as it is
utilising less sources of renewable energy required for manufacturing of electric vehicles
(Belzand Binder, 2017). Increase in interest rates will also posses impact on Tesla as it will
become difficult for procurement of funds.
SOCIAL FACTORS : Social factors include factors real to population analysis, cultural trends
etc. People have become more conscious for environment as there is a new concept of less
emission of carbon dioxide by vehicles. With growing amount of consciousness for sources of
renewable energy demands of vehicles with low emission of carbon dioxide has increased. It has
a disadvantage that people belonging to middles class are not able to afford such vehicles with
high prices. It leads to huge pressure on organisation such as Tesla as they have to increase ether
quality and at same time maintain reasonable prices of their products (Gumusluoglu and Acur,
2016).
TECHNOLOGICAL FACTORS : These factors are having a association with innovative
technology that can be used by companies. In case of an, automotive industry technology is
changing very fast and it is necessary for companies in tesla to bring continuous modi9fications
& innovations in their products. Tesla has a opportunity that they can introduce automation
technology in their products by launching a new online auto-mobile store. If such technology
will be adopted early by competitors then it will lead to reduction in overall sales of Tesla.
ENVIRONMENTAL FACTORS : Environmental factors include association with exeyrmal
environmental conditions such as climatic conditions. Weather etc. it is also a part of
surrounding in which business is functioning, there is a increase in concern fort environment and
it is very important for Tesla to acquirement environmental friendly vehicles so that they can do
sustainable development. Tesla is involved in manufacturing of solar panels and batteries
suitable from environmental safety.
LEGAL FACTORS : These factors are related with various legal rules & obligations. It is
having aim of protecting the interest of stakeholders and ensure that business are following all
legal rules imposed. There is a criteria that no harmful care emissions have to be done that can
affect the quality of air. Tesla has to comply with all legal obligations made by various legal
authorities. It also gives protection to Companies in a way that if Tesla wants to protect their

patent rights they will be able to exercise this right and prevent it to be used by any other
organisation.

Stakeholders analysis:
communities Communities are stakeholders that have a
impact on overall brand image if a
organisation. 15 The environmental friendly
product manufactured by Tesla helps them in
increasing satisfaction level of various
communities that will lead to a positive
goodwill in the Market and long term
sustainability.
customers Customers are posing impact on Tesla overall
revenue. There is maintenance of satisfaction
level of customers because of quality and
innovative features that are offered by Tesla in
their products it leads to enhancement of
revenue.
employees Tesla believes that while designing their CSR
strategy employees are one of very important
factors for success. Employees posses
influence on performance of a organisation and
their productivity as if they will not be satisfied
then they will leave the organisation and
overall turnover of employee will increase.
Shareholders In initial years, Tesla was depend on
shareholders as a source of funding, all these
stakeholders are very important for overall
growth of business. CSR approach of Tesla has
lead them toward addressing long term interest
of their shareholders.
Government Tesla is impacted by actions of government
such as recent referendum of Brexit has laid a

lot of impact on functioning of Tesla in form of
reduction of their sales. But Tesla has
successfully adopted all the legal
requirements and obligation imposed by
government. This leads to fulfilment of their
responsibility towards government as their
stakeholders. 18

Porter's Five forces Model: 19 Five force model was introduced by Michael porter for making
a analysis of various competitive forces that is having impact on operations of a organisation .
This model is used for purpose of analysing factors affecting a industry and corporate strategy
formation. This model is used by organisation in determination of their strengths and
attractiveness in a industry. 20 Five force analysis of tesla is disused below:
 Threats of substitutes: There is a threat of substitutes in market can be high if
competitor are offering products with same quality and similar or lower process (Lozano,
2018). Hence, it becomes very essential for Tesla to identify such sources of threat and
keep their customers satisfied enough so that they are not willing to switch to nay other
brand. 24
 Bargaining power of suppliers: This force is related to ability of suppliers to posses
influence on business. Tesla is a independent organisation on their suppliers. It is not
possible to switch very easily between suppliers as it results in operational functions
getting impacted. Hence, Tesla should make attempts to maintain long term relationships
with their suppliers which can help them in having continuous supply of raw materials
and maintenance of cost effectiveness in overall production process.
 Bargaining power of the customers : this force is used in identifying ability of
customers to influence a business Tesla is dealing in electric vehicles that are more
efficient. Vehicles are those that are not purchase so frequently by people so that are very
price sensitive for such products. Hence, it becomes very essential for Tesla to reduce the
bargaining power of customers so that they are not switching from this brand. If prices
increase then consumers will move to products that are being offered at low prices by
their competitors.
 Potential new entrants : When a new entrant is entering the market then it becomes
difficult for present organisations in a industry to operate. There is a threat of new
entrants in Tesla is low as they are part of automotive industry and it is very difficult for a
new organisation to make such huge investments. Examples of threat can be new
innovation being done by brands such as BMW, Hyundai ioniq etc. who are continuously
involved in making new innovation models.
 Industrial rivalry: Three is very high level of competition in automotive industry in
which Tesla is dealing but at same time Tesla has a differentiation advantage. In terms if

their products such as electric vehicles Tesla posses a competitive advantage and it is not
easy for their competitor to imitate this product.

Critical analysis of of macro factors to determine the management decisions
To become more competitive every company has to identify various opportunities &
threats present in external business environment. Such factors posses influence on company's
strategies and to minimise its impact of such changes critical analysis of such factors is very
crucial (Hillary, 2017). In case of Tesla there is positive impact of some factors such as political,
legal & social at same time with some factors such as environmental and economic changes are
required to be done by this organisation for minimizing negative impact of these factors.

TASK 2
Analysis of internal environment and capabilities of the organisation
Internal environment of business is having concern with factors such as members,
culture, management all these factors posses impact on overall decision making by a organisation
(Johnson, 2016). For making a analysis of these internal factors irt is necessary for organisations
to ascertain such weakness. A detailed internal analysis of thee factors will also be very helpful
in identification of competencies of a particular organisation. Internal analysis is done to develop
a understanding of various opportunities, strengths of business. Below mentioned is SWOT
analysis of Tesla for making a analysis of various internal factors as discussed below:
Strengths weakness
 Tesla has a very high innovative
process which is providing them a
opportunity as compared to their
competitors.
 Strong brand image of Tesla is
supporting them in planning their
expansion strategies in global market.
 Tesla posses a very strong control on
overall production process.
 Manufacturing capacity is a issue for
Tesla as they sometimes face problem
of large production and difficulty in
meeting their orders.
 Prices at which Tesla offers its products
is very high in comparison with similar
products of other competitors, it leads
to low level of sales.
Opportunities Threat
 Tesla has a attractive opportunity for
adding value to their products with help
of upgraded technology (Kitsios and
Kamariotou, 2019).
 Tesla can plan expansion of their global
supply chain expansion for having
maximum market reach to their target
customers.
 Tesla has opportunity to increase their
 Major threat for Tesla is that similar
companies are also introducing
competitive product like Tesla which is
providing them increased competition.
 Prices of goods are fluctuating because
of increase in exchange rates it leads to
increase in cost for Tesla.
 For minimization of cost of raw
materials Tesla is focussing on

present distribution channels for having
expansion in countries where they are
not operating presently.
purchasing of goods in bulk but again
this has a impact on storage cost of
Tesla.
 There are many dealership regulation
that is being affected by Tesla while
they are planning to enter any new
country.
For every company it is very necessary for making a detailed analysis of their overall
capabilities & competencies that can be availed. VRIO framework is used for making a analysis f
such capabilities of organisation (Lai, Melloni and Stacchezzini, 2016). It is very helpful in
making decision related to competitive advantage for a organisation.
Mckinsey 7 s Model:
There are seven elements that are part of McKinsey 7s model as discussed below:
Strategy: Tesla business strategy is focussing on electric cars for achievement of overall
mission of the company to accelerate the world in transition for sustainable source of energy.
Structure: It is not possible to classify structure of Tesla in one category hence, it is said
that divisional structure is followed in Tesla.
Systems: There are many systems that are very essential for Tesla such as prospect for
long term growth. It includes system of employee recruitment, selection, team development,
CSR management etc.
Culture: Overall culture in Tesla that consist of beliefs and values help in ensuring
Smooth management of overall workforce of the organisation.
staff:Human resource management is very essential recourse for Tesla which helps them
in gaining competitive advantage in their electric vehicles.
Skills: In terms of skills it can be said that human resource of Tesla posses distinctive
competencies that helps them in attainment of competitive advantage by innovation which they
have in their vehicles.
shared values: The overall guiding concepts and fundamental ideas on which Tesla is
based on is very complicated (Kitsios and Kamariotou, 2019). This is the reason there is
requirement of highly skilled workforce in Tesla.

VRIO is a commonly used framework where organisation are assess based in four major
characteristic such as Valuable, rare, imitability and organisation. This framework is applied in
Tesla as discussed below:
Value These factors are helpful in identification of
resources and capabilities being valuable for a
organisation or not. Resources in case of Tesla
includes strong brand image, distribution
change, competent workforce and leadership
styles.
rareness Rarity of a resource is very important in
identifying capabilities of a organisation can be
defined as are or not. In case of Tesla, their
brand image, competent workforce and
distribution channels are some of the resources
which are rare.
Imitiability It is identified that capabilities & resources of a
organisation can be imitated by other
competitors or not. Distribution network and
strong brand image of a organisation are very
unique and cant be Imitated by their
competitors.
Organisation It is also identified that organisation will be
able to utilise their capabilities if they keep
their resource organised as these actually help
them in achievement of competitive advantage.
In case of Tesla, brand image is the most
critical resource that has to be kept organised
which can help them in long term survival in
the external market.
22

Valuable Rare Imitable Organisation
Strong brand
image
Yes yes Yes Yes
Distribution
network
Yes Yes Yes No
Competent
workforce
Yes Yes No No
Leadership
styles
Yes No No No
After making a detailed analysis of capabilities & factors of a organisation Tesla will be
able to formulate effective strategies by making a consideration to weakness & strength that is
helping them in achievement of organisational objectives (Linder. and Williander, 2017).
Critical evaluation of internal environment and the capabilities
Internal analysis is very helpful for all organisation in identification of their weakness,
strategy. These capabilities are every useful in grabbing of profitable opportunities for
minimizing impact of environmental threats. Expansion opportunity can be used for utilisation of
extra competence of organisation. It is also very helpful in carrying on of various business
functions.

TASK 3
Appropriate strategies for improvement of competitive edge & present market position
Strategies are very helpful for every organisation in planning their activities that have to
be done for achievement of these goals. Porters analysis is a great tool that can be used for
understanding of various factors present in external environment and posses impact on
achievement of organisation's objectives. Different strategies which can be used by Tesla is
discussed below:
 Tesla can start their loyalty program to increase their competitiveness in the market.
 There must be increase in focus towards quality and innovative designs to attain
competitive advantage.
TASK 4
Theories, concepts, models that can help in strategic planning
Strategic planning is a tool that can be used for determination of strategy and direction
used for allocation of resources in a organisation. This is a process which is used by leaders &
managers in a organisation for determining the vision and how to achieve future objectives,
goals of business. Strategic direction is very helpful in determination of how strategies can be
combined for increase in productivity of the organisation (Mahmood, Chung, and Mitchell,
2017). Strategic direction includes vision and mission which is further used for defining of
purpose of the organisation.
To make a analysis of strategic options Ansoff matrix can be used in Tesla as discussed
below:
Ansoff's Matrix: This is a matrix used by Tesla's management for identification of strategies
that can be adopted for achievement of business objectives for business growth, various aspects
of this matrix is discussed below:
Market Penetration : In this strategy there is use of existing products to increase sales in exiting
markets. This strategy is used in Tesla in a positive manner as they are focussing on Model 3 and
Model X electric vehicles for capturing larger share of existing market.

Market development : Market development strategy is related to new markets for existing
products. Tesla is using it in a positive manner as they are helping them in getting a detailed
evaluation of various markets such as they are identifying different markets that are willing to
capture. Tesla is making plans to enter various Asian market such as India where they can
expand themselves (Ndubisi, Nygaard and Capel, 2019).
Product development : Strategy of product development is related with new products to launch
in existing market of companies. Tesla is having its positive impact as they are involved in new
product development so that they are able to cover high cost entering a new market as this
requires a huge amount of investment in promotional strategies and make people aware of their
brand.
Diversification : Diversification strategy is very helpful in development of new products in new
markets. Tesla is making use of diversification strategy since past few years. They started
manufacturing of electric vehicles in the year 2003 and then after that their name changed to
Tesla Motors Inc. This Strategy has a negative impact as they have to make huge amount iof
investment for adoption of this strategy. After they acquired solar city in the year 2016. Fuel
vehicle manufacturers have to make strategies for diversifying in new markets this requires large
amount of investment to be done by tesla.
From above discussion it can be said that in context of Tesla one of the most suitable
strategies is market development as Tesla is expert in manufacturing of electric vehicles. They
can utilise this potential for expanding their present market share and expand their share in
economy. It also provides them capabilities to diversify their business in other approaching new
markets.
Strategic marketing plan
Strategic marketing plan is very important for every organization as it helps then in
developing a understanding of overall steps to be taken by a organisation for achievement of
some specified objectives in specified period of time.
Objectives: In the present scenario there are some objectives created management team of Tesla
is mentioned below:
 Increase the present market share of Tesla by 10% that can have a positive impact on
enhancement of revenue by 15% in coming time period of two years.

Vision: Tesla has a vision To create most compelling car in 31st century by driving towards
world's transition for electric vehicles.
Mission: the mission statement of Tesla clearly mentions that they want to accelerate the world's
transition towards a sustainable transport or a complete transition towards use of sustainable
energy.
Tactics: Tactics will be developed by Tesla by making use of marketing mix as a strategy as
discussed below:
Product Tesla is a leading manufacturer of electric cars
and eco-friendly products. Major products
manufactured by Tesla includes solar batteries,
solar charging stations, solar panels. Electric
cars are the most differentiation product of this
brand.
Price Pricing strategy of tesla is premium pricing . It
means that prices at which tesla is offering its
products is quiet high and there si a
requirement that price have to be kept a little
low so as to achieve larger share of market.
Place Tesla is a UK based brand having its
operations spread in different parts of the
world and its headquarters are present in
California. There is a huge demand of Tesla
product in areas where they are present to meet
their timely deliveries Tesla has to increase
their rate of production as Lithium in batteries
is not enough in supply. For overcoming this
Tesla is planning to start manufacturing Li-ion
batteries for their cars to maintain their
production levels.
Promotion Promotional strategy of Tesla is made with

zero marketing budget as they do not have any
commercial advertisement or bill boards,
advertisement agencies reason behind this is
Tesla already has large number of sales and
their orders are already pending which is
difficult for the, to meet. But apart from this
Tesla is involved in online promotions
Implementation:
It is very important for organisation for effectively implement a plan for this there is
requirement of finance. In present scenario, Tesla has prepared the budget as mentioned below:
Evaluation: Evaluation of performance is very important to keep a track record on
various strategies that have been adopted to keep a record on various activities necessary for the
success of a particular business plan (Tsai and Liao, 2017).
Critical analysis & interpretation of information & data
Strategic directions are very important for providing guidance to organisation on who to
work towards achievement of gaols in a consistent manner, there is a requirement for developing
an understanding of internal & external factors by using of PESTLE analysis, SWOT analysis,
porters five force model, ans off matrix, marketing mix strategies are some of the tools that are
required for achievement of organisation overall objectives laid in a business plan. It is very
important for every organisation to evaluate all the available information in such a way that it
can result in understanding of the what can be most profitable strategy for achievement of
business objectives. All the strategies have been formed after making detailed evaluation so it
will help in increasing the chances of success and achievement of laid objectives.

CONCLUSION
It can be concluded from above report that strategy formulation is required in every
organisation for achievement objectives. For every organisation It is essential to identify in detail
with use of techniques such as PESTEL analysis, SWOT analysis for understanding various
driving forces of internal and external environment on their organisation. VRIO framework,
porters five force model are some of the tools commonly applied in every business organisation
for achievement of business objectives of a particular business plan.

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