Business Strategy: Impact and Influence of Macro Environment on Tesla

This report analyzes the impact and influence of macro environment on Tesla, including political, economic, social, technological, environmental, and legal factors. It also includes a SWOT analysis and VRIO model of Tesla, as well as Porter's Five Forces Model.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
LO 1.................................................................................................................................................3
P 1 Impact and influence of Macro Environment-.................................................................3
LO 2................................................................................................................................................5
P 2 SWOT analysis and VRIO model of Tesla- ....................................................................5
SWOT analysis of Tesla-.................................................................................................................6
LO 3 ................................................................................................................................................8
P 3 Porter's Five Forces Model- ............................................................................................8
LO 4 ..............................................................................................................................................10
P 4 Range of theories, concepts and models to devise strategic planning-..........................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategy is defined as group of competitive moves along with actions for a
particular business for the purpose of attaining customers, successfully compete in the market,
strengthen its performance along with achievement of organization goals in effective manner
where ultimate goal is to operate business activities in such a manner to attain desired outcomes
as final results. The report will address impact and influence of macro environment on different
organization situations along with its strategies. Further organization's internal environment
strengths and weakness along with internal capabilities, skills and structure will be assessed. The
report will also display competitive forces of market sector of the organization using Porter's
Five Force Model to improve competitive edge and market positions. Finally, the study with the
applicability of models, concept, theories and interpret will device business strategic plan for the
organization.
MAIN BODY
LO 1
1 Impact and influence of Macro Environment-
Pestle analysis will help to analyze the external factors which affect the performance of Tesla. As
for pestle analysis it is a strategical tool that will help to counter the forces of external
environment for Tesla and how it will compete in the market of automobile industry and how
they can increase their customers who are loyal to them and making cars which are more
affordable and advanced for the market (Akter and et.al., 2016).
How does Political Factors affect Tesla Inc.-
Tesla is focusing on making their financial performance and stability strong and they are
thinking of it through incentives offered by the government. Currently if consumers buy electric
cars, they can avail the benefits of tax credit and offers tax credit up to $7500. Tesla uses
intensive growth strategy which is a competitive strategy and which helps in maintaining
political stability which makes the environment favorable for many industries who are dealing in
automobile sector. Government has taken many initiatives to show their support for the
development and rapid growth of hybrid and electric vehicles which basically is the future if we
want to survive (Akter and et.al., 2016).
How does Economic Factors affect Tesla Inc.-

As demand and popularity for electric cars is increasing rapidly which is connected with the
economy at a global level. The economic growth globally is expected to be same in 2019 and
2020 which is around 3 per cent. After analysis and evaluation of the potential in this market,
from the report it was obtained that in 2018 this market had a value of $39.8 billion and has a
potential to reach $1.5 trillion by 2025 and as Tesla serves in electric car market it is a great
opportunity for them to obtain gain more and more share.
Another factor which is affecting to economic growth is the decreasing cost of battery. It is one
of the most important factors in the total cost when it comes to electric cars. Tesla has innovated
power ball batteries that has created a new opportunity for the company and they are
manufacturing it in the affordable range which will make the electric vehicles more affordable.
The cost of raw materials is also decreasing in the market which brings all in all good news for
Tesla and lower the cost of materials lower and effective the cost will be of the electric vehicle
for the market (Bentley-Goode, Newton and Thompson, 2017).
How Social Factors affect Tesla Inc.-
Having the idea of owning an electric vehicle is fascinating in itself for most people and
especially for those people who believe in eco-friendly products and electric vehicles are eco-
friendly as they don't run on fuel. Electric vehicles are tending to be less expensive than normal
utility vehicles in terms of cost of maintenance and running cost. Tesla provides products which
are sustainable environmentally. This pestle analysis of Tesla Inc. states that social status is the
Social Factor. The car you drive says a lot about you and people are judged on the basis of what
car they drive. Owning an electric car will help them change their status socially (Burlton, 2015).
How Technological Factors affect Tesla Inc-
This factor helps in knowing which affect the company in technological aspects. Tesla has been
hit positively as well as negatively by the rapid change of technology. Technology is the key
factor in generating opportunities and eliminating threats for Tesla as it has already managed to
maintain Tesla to maintain a competitive edge over their competitors. They use advance
technology which helps them enhance their product profile. Elon Musk the CEO of the company
has also announced that their focus is on a car which will be equipped with fully driver less
technology and if possible, it will gain advantage of competitive edge for Tesla in the market.
The negative factors which affect the company is time after time technology becomes obsolete

that means they have to constantly upgrade and update it so the cars on road of Tesla don't get
obsolete (Chen, Eshleman and Soileau, 2016).
How Environmental Factors affect Tesla Inc.-
This analysis helped Tesla to know that this factor is the key opportunity for them since their
cars are eco-friendly and don't run on fuel. Instead it runs on electricity. Tesla produce vehicles
which are also in limits of environmental regulations and they don't even care about the impact
of carbon emissions as compared to normal vehicles. By focusing more on these factors
company has built a strong image for itself and has made their name in the list of leaders.
Working on electric vehicles and saving energy and resources Tesla has maintained
sustainability in the market. Tesla enjoys a good brand image and loyalty when it comes to
environmental factors and now company is putting it focusing on to make their supply chain
more energy efficient (Dahlberg, Hokkanen and Newman, 2016).
How Legal Factors affect Tesla Inc.-
These factors help Tesla to analyze how legal issues affect and influence them in macro
environment. For example, Elon Musk and Tesla are facing many lawsuits regarding regulatory
issues. Two Tesla cars which was crashed in 2019 are now getting investigated by National
Highway Traffic Safety Administration and Transportation Safety Board. They are working on
to know how they happened. Currently many states have blocked the sales of Tesla from
manufacturer to consumer. According to laws and regulations of these states Tesla need to
engage is third party dealership process and this requirement will affect the delivery of the cars.
This process will also be more expensive and will result in less profitability. There are also many
other issues like rights regarding patents and consumption of energy. To serve legally in the
market Tesla will have to follow the rules and regulations of the company (Eaton and Kilby,
2015).
Stakeholder analysis
The stakeholder analysis can support Tesla in finding out the efficient employees which can
increase the productivity of organization. It will also help in analyzing the conflict at an early
stage which can improve efficiency of firm.
LO 2
2 SWOT analysis and VRIO model of Tesla-

VRIO analysis of Tesla
Value- This analysis is used to get the information of competitive advantage that the company
has over their competitors. Tesla has already put their focus and they are implementing ways
with a lot of unique features that have helped them to gain a high market share and better
position in the market. VRIO stands for Valuable, Rare, Imitability and Organization. Tesla
stands at every aspect of VRIO model. Tesla has valuable resources such as high manufacturing
process, high production capacity, intelligent driven technology, fastest and very cheap car who
beat Bugatti, they have battery, supercharger for battery. By using batteries of lithium-ion they
have increased the mileage of their cars that helped them create a record of taking out a run of
200 miles on a single charge.
Rare- Tesla has created batteries which have higher energy density which are way better than
that of batteries used by their competitors. People think that batteries will take a lot of time to
charge as it is giving good fuel efficiency but they are not aware of the fact that Tesla has made
superchargers available that is they can switch their battery with a fully charged battery at the
station.
Imitability- Tesla owns giga factory to reduce the cost of manufacturing so that everybody can
afford this vehicle. At the time of set up of this factory huge investment was made to establish it
for lowering the cost of manufacturing.
Organization- Tesla doesn't have dealerships yet they have made a new direct sales procedure
where you buy the car directly from manufacturer and eliminating the middlemen (Fiorino and
Bhan, 2016).
SWOT analysis of Tesla-
Strengths-
a) A Top Employer Company-
The reason for the remarkable success of Tesla is it employs good and beyond the level people.
They seek young candidates with fresh state of mind, talents and energy. It is the only ideal
company because they encourage employees because of their innovation and diversity. Tesla has
also been featured in Forbes as America's Best employer 2019.
b) Leading Automotive Company-
Despite suffering from legal issues, Tesla has not loosened their sales. Currently it has become
one of the leading brands of 2019, they have successfully delivered 90,000 of their vehicles in

the last quarter in 2018 which contains 63,150 of Model 3, 13,500 of Model S and 14,050 Model
X vehicles. They have put unmatchable efforts for innovative, advancement and in luxury
together. Tesla has beaten big giants like Mercedes and BMW (Fontana, Sastre-Merino and
Baca, 2017).
c)Best in Class Electric Cars-
They have beaten finest of those who were their competitors in this segment. When it comes to
fuel efficiency, they have proved themselves to be the best as they have covered maximum
distances as compared to all. Their vehicle which termed out to be the best was Model S by
running up to 600 kilometers on a single charge.
d)Tesla Dominates the U.S. Electric Vehicles Sales-
Tesla Model 3 is the most sold electric vehicle of 2019 with units sold around 1,87,971. Then
comes Chevrolet Volt which has sold 1,55,477 of units then again with third position. They are
topping the sales chart in this segment.
Weakness-
1) Manufacturing Complications-
They have kept their standard of innovation very high and the higher it is the greater will be the
complications in risk and production. Tesla suffers from ramp delays while manufacturing and
launching their products.
2) Unable to meet Demand might affect Brand Value-
Due to regularly facing problems in ramps delays it creates unbalanced demand and supply
which leads to delay in meeting the production requirement. They have already dropped 31 per
cent as compared to 2018. They have just delivered 63,000 cars (Ghemawat, 2016).
3) Shortage of Batteries-
Elon Musk the CEO of the company has admitted that their rate of production has decreased
because of limited supply of batteries. The shortage of batteries resulted in reduction of sales and
energy storage systems.
Opportunities-
a) Sales Expansion in Untapped Market-

Company can expand by entering into Asian market, it is a great opportunity for them as that
market is still not developed in the field of renewable energy and electric vehicles. Especially
now when Tesla needs to make its financial stability consistent and make their presence stronger.
b) Less Expensive Car-
Most of the models of Tesla are expensive because of its innovative methods which
requires a lot of support in finances to convert the innovation into technology. But
recently they have launched Model 3 which is an affordable and changed version of
Model S with less price, fewer features and power. To expand the size of their loyal customers it
is an excellent opportunity.
c)Bringing Production of Battery Technology in house-
Currently they have a deal with Panasonic they were their supplier for battery. But now Tesla
has decided to make their own cells or batteries and this move can be a game changer for the
company so that they can fasten the rate of manufacturing and decrease the cost of production
(Higgins, Omer and Phillips, 2015).
Threats-
1) High Risk Factor Due to Usage of Lithium-ion-
Tesla uses cells which contains lithium-ion. It is very highly reactive and an element which is
explosive which also make our products risky. Few cases have been reported where their cars
have caught fire and vented smoke which has made their reputation very bad on a big level.
2) Lack of Regulations for Self-Driving-
Many countries don't have many laws for self-driving yet and that results in reduction of sales of
Tesla cars in many areas and this also risks the future of this venture and innovation.\
3) Self Driving Cars are still a Concern for Pedestrians-
A report released from a survey conducted stated that adults don't feel safe walking around self-
driving cars especially people who are old and don't like technological stuff.
4)Product Defects-
It takes high and complex engineering for these kinds of vehicles as these cars and other products
like this have cases with major exhibited flaws. Products which are not perfectly engineered will
lead to weak designs of products, flaws in manufacturing and may other cases which will affect
the reputation of the company permanently (Leonidou and et.al., 2015).

LO 3
3 Porter's Five Forces Model-
Rivalry Among Competitors-
Multiple companies are now trying to attain market share in this segment to compete with Tesla
and that has increased the rivalry between other competitors but it is proven by a survey that how
much they try to improvise or innovate they will never be a Tesla. Tesla is on a whole another
level in this segment where competitors can't reach. Competitors who wish to gain the market
share of Tesla must design their cars with futuristic looks and design and with performance and
mileage similar as a car which runs on gas. No one has a network of 2000 charging stations
across the globe other than Tesla (McAdam, Bititci and Galbraith, 2017).
Threats of New Entrants-
In this industry and in this segment this threat is moderately high. Tesla has acquired the
competitive advantage because they produce their own lithium-ion batteries which can run 200
miles on a single charge. Till now other company have this technology to developed a battery
like that. That is why threat in this segment is low. The technology that Tesla has created of zero
emission releasing cars and performance similar to gasoline cars have raised the expectations of
consumers.
Bargaining Power of Buyers-
Bargaining power of supplier is low for Tesla. Power of negotiation is relatively low of buyers
though only buyers have the right to decide whether they will buy the product or not. Other
competitors and Tesla have set prices for their utilization of electric vehicles. Tesla owners have
free use of charging stations, solar powered supercharger stations and lithium-ion batteries with
advanced technology will affect the pricing and the cost of their setup is high and ultimately the
electric vehicles will be unaffordable for many consumers (Moseley III, 2017).
Bargaining Power of Suppliers-
The bargaining power of suppliers is very high. When Tesla entered into this industry not many
suppliers were ready or capable to change their production into the specialized way of Tesla. But
with limited no. of suppliers and its choice of suppliers they have to pay them more than others
because of moderate competition. Then Tesla tried to reduce the costs by flexibly handling their
suppliers. Typically, Tesla gave orders to only one supplier which fulfill the tasks and
components needed for completion of vehicles (Soltanizadeh and et.al., 2016).

Threat of Substitute Products-
The threat of substitute product is really high. This threat is relatively low because no other
companies have gain this success in this segment like Toyota has gained success with its Prius in
the hybrid segment but no other companies have come near the successful advancement of
lithium-ion battery with a 200 mile run on a single charge or a charging station which is free to
use. Other companies who want to serve in this segment would have to make the substitute
beyond the level of Tesla so that they can be acceptable (Raghunath and Rose, 2016).
LO 4
4 Range of theories, concepts and models to devise strategic planning-
Objectives-
To increase the sales of firm by 30% till the end of year 2020.
To enhance the profitability by 10% in upcoming 6 months.
Mission and Vision-
Tesla's aim is to accelerate the world’s transition from a mine-and-burn hydrocarbon economy
towards a solar electric economy. Their goal was to make cars which runs without gas and
release no emission while leaving behind the gasoline power cars both in riding conditions and
efficiency. By now Tesla has put its focus and achieved its aim by manufacturing electric cars in
an affordable range to serve large no. of consumers (Razak and et.al., 2016).
Core values-
Always do your best, no prediction is 100 per cent sure but attempt anyway, always respect and
encourage people, always learn with practices.
Tangible stratgey
Ansoff Matrix of Tesla-
Tesla uses all four strategies-
1) Market Penetration- Tesla uses this strategy to sell its existing products. The company is
selling its existing products such as Model X, S and 3 and energy storage products in US
and 29 more countries.
2) Product development- In this strategy company put their focus to develop new products
into existing markets. Tesla is infrequently innovating new products and services and

because of the high cost of development in this sector. Now Tesla is putting their efforts
on semi and pick up trick with facility of energy storage products.
3) Market Development- This strategy involves exploring new markets for products which
are already existing. Tesla is focusing on entering into various markets. They have
shortlisted India already as India will become the third largest automaker by 2020.
4) Diversification- This strategy focuses on developing new products for new markets. Tesla
is using this strategy in recent years. Tesla is putting their focus to diversify to improve
and overcome their current financial issues.
Tactical strategy
Promotional Strategy-
The CEO of Tesla is very fond of social media and on this platform, Tesla outnumbers giants
like Ford, Toyota and Volkswagen. Tesla don't pay for advertisements to promote sales. They
have a good word of mouth and free media coverage from social media is enough for them to
promote the image of the brand and its products. It is one of those brands who have built a strong
name and reputation in the market with less advertisements and promotion. Their website is also
an effective method which helps them boost the sales as well as marketing, The CEO of Tesla
also uses twitter to connect with large no. of audience who are their fans and followers and clears
their doubts and propose and announce their new innovations, products or venture into the
market. They also give news and report about their success and failure of venture through this
channel which is an effective medium to stay connected with their loyal and prospective
customers (Scholes, 2015).
CONCLUSION
From the above study it can be concluded that business strategy is important for
performing business activities in a well and desired manner. The report concluded that internal
factors such as strength, weakness, opportunity and threats as by doing this analysis it is clear for
Barberry that will be what are their strength as buy knowing its strength it can expand its
business along with lead competitive advantage and weaknesses addresses out pitfalls to take
corrective measures for business operations of Tesla and measures are taken so that it improve
the weakness. Study concludes PESTLE analysis which company know what are factors
affecting the business and help in dealing with them. Porter's five model is explained which

helps shows competitive rivalry, bargaining power of customer, which help the company in
dealing with that.

REFERENCES
Books and Journals
Akter, S. and et.al., 2016. How to improve firm performance using big data analytics capability
and business strategy alignment. International Journal of Production Economics. 182.
pp.113-131.
Akter, S. and et.al., 2016. How to improve firm performance using big data analytics capability
and business strategy alignment. International Journal of Production Economics. 182.
pp.113-131.
Bentley-Goode, K.A., Newton, N.J. and Thompson, A.M., 2017. Business strategy, internal
control over financial reporting, and audit reporting quality. Auditing: A Journal of
Practice & Theory. 36(4). pp.49-69.
Burlton, R.T., 2015. Delivering business strategy through process management. In Handbook on
Business Process Management 2 (pp. 45-78). Springer, Berlin, Heidelberg.
Chen, Y., Eshleman, J.D. and Soileau, J.S., 2016. Business strategy and auditor reporting.
Auditing: A Journal of Practice & Theory. 36(2). pp.63-86.
Dahlberg, T., Hokkanen, P. and Newman, M., 2016, January. How Business Strategy and
Changes to Business Strategy Impact the Role and the Tasks of CIOs: An Evolutionary
Model. In 2016 49th Hawaii International Conference on System Sciences (HICSS) (pp.
4910-4919). IEEE.
Eaton, D. and Kilby, G., 2015. Does Your Organizational Culture Support Your Business
Strategy?. The Journal for Quality and Participation. 37(4). p.4.
Fiorino, D.J. and Bhan, M., 2016. Supply chain management as private sector regulation: What
does it mean for business strategy and public policy?. Business Strategy and the
Environment. 25(5). pp.310-322.
Fontana, A., Sastre-Merino, S. and Baca, M., 2017. The territorial dimension: The component of
business strategy that prevents the generation of social conflicts. Journal of business
ethics. 141(2). pp.367-380.
Ghemawat, P., 2016. Evolving ideas about business strategy. Business History Review. 90(4),
pp.727-749.
Higgins, D., Omer, T.C. and Phillips, J.D., 2015. The influence of a firm's business strategy on
its tax aggressiveness. Contemporary Accounting Research. 32(2). pp.674-702.

Leonidou, L.C. and et.al., 2015. Environmentally friendly export business strategy: Its
determinants and effects on competitive advantage and performance. International
Business Review. 24(5). pp.798-811.
McAdam, R., Bititci, U. and Galbraith, B., 2017. Technology alignment and business strategy: a
performance measurement and Dynamic Capability perspective. International Journal of
Production Research. 55(23). pp.7168-7186.
Moseley III, G.B., 2017. Managing health care business strategy. Jones & Bartlett Learning.
Raghunath, S. and Rose, E.L. eds., 2016. International Business Strategy: Perspectives on
Implementation in Emerging Markets. Springer.
Razak, N.A. and et.al., 2016. Theories of knowledge sharing behavior in business strategy.
Procedia Economics and Finance. 37. pp.545-553.
Scholes, M.S., 2015. Taxes and business strategy. Prentice Hall.
Soltanizadeh, S. and et.al., 2016. Business strategy, enterprise risk management and
organizational performance. Management Research Review. 39(9). pp.1016-1033.

1