Business Strategy in Tesla Plc

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
PESTLE analysis of TESLA.......................................................................................................1
SWOT analysis of TESLA..........................................................................................................3
Analysis of organisational capabilities........................................................................................4
Analysis of competitive environment using porter's five forces.................................................6
TASK 2 ...........................................................................................................................................7
Evaluation of various type of strategic directions available to organisation..............................7
Justification and recommendation of most appropriate growth strategy and platform...............8
Strategic management plan with objectives, tactics and strategies.............................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business strategy is referred to the set of actions and decisions which benefits a business
in achieving their expected outcomes and results. It is a formal plan that is utilised by
management of a business company to acquire a strong position in a marketplace. It will benefits
the business firm in gaining advantages over competitors (Amran and et. al., 2016). This
assignment is based on TESLA which is an automotive organisation, headquartered in
California, USA. Company specialises in providing electric vehicles to their clients and also
operates production plants within US only. This assignment is going to include internal and
external analysis which offers a basis for business strategy. Also, to acknowledge organisational
capabilities and competitive forces in market, VRIO model and Porter five forces are used.
Beside this, different strategic direction and growth strategies are discussed. At last, a strategic
business plan is made to achieve organisational goals desirably.
TASK 1
PESTLE analysis of TESLA
PESTLE analysis is referred to a framework that is used for analysing external business
environment in a proper and detailed manner. This analysis benefits a business organisation in
taking strategic decisions so that organisation can acquire high profitability. In case of TESLA,
PESTLE analysis is mentioned beneath:
 Political factor: There are various political factors which impacts automotive sector.
There are different political aspects that can impact TESLA such as bureaucracy,
corruption, trade tariffs, taxes etc. Rule and regulations of different nations also impacts
TESLA in a considerable manner. In order to attain high revenues and profitability,
owner of TESLA is needed to initiate business in those areas and regions that have
political stability. If company is going to operate in unstable and war prone area, then it
can results in business failure and loss of revenues. Government in UK is providing high
support to organisations which provide environment friendly hybrid and electric cars,. In
this respect, TESLA is granted a subsidised loan of 465 million. Company is required to
operate in those areas in which tariffs and tax rates are less so that high revenues and
profits can be earned (Bharadwaj and et. al., 2013).
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 Economic factor: These factors are associated with economic and financial growth in
alternative energy industry and increment in cost due to enhanced price of fuels. These
factors include aspects like inflation rate, GDP, interest rate, purchasing power of
citizens, growth rate etc. currency fluctuation can majorly impacts TESLA. Varied
interest rates can impacts TESLA in a considerable way foe instance, if interest rate in
UK will have 10% change, then expenses of company will be raised by 7.6 million USD.
Tax incentives given by government can also benefits TESLA in a positive way. Also,
Zero emission vehicle in California is other factor that benefits TESLA. Company is
needed to operate in area with easy availability of raw material and less labour cost so
that high revenue can be attained.
 Social factor: These factors are associated with trends and lifestyle of people in UK
along with condition of organisation in respect with employees, customers and investors.
These factors are related with preference of people living in the region where
organisation is operating. As people in UK are concerned about nature and ecology along
with using innovative products, electric or hybrid vehicles are going to attain high
popularity. In case of maintenance and running cost, electric vehicles are less expensive
than the traditional cars. This means social factor is in favour of TESLA. Operating at
international level will benefits TESLA in attaining high customer base and profitability.
 Technological factor: It is vital for every business organisation to upgrade their
machines and other technology at timely basis. Population in UK likes to buy those
entities and products which are modern and technological advance. As TESLA offers
vehicle with innovative and advanced technological approach, company will achieve high
advantage over rival companies. If company will not adopt advanced technology then it
will became difficult for them to earn high market shares and revenues. Also, customers
will shift their preference towards products offered by other companies (Drnevich and
Croson, 2013).
 Legal factor: These are essential aspects which must be considered by a company before
starting business operations is a country. Changes in regulations and laws can influence
business operations in a visible manner. In context with TESLA, manager of company is
needed to formulate business policies as per Companies Act, 2006. It will allow the
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company to perform work in a legal way. If company will perform activities without
complying with legal laws then they may have to pay heavy taxes and fines.
 Environmental factor: UK government has developed different environmental laws and
regulations which can influence profitability of TESLA in either a positive or negative
manner. To show concern regarding environment, TESCLA is switching fossil fuels with
CNG and other substitutes. In this regard, company offers electric and hybrid vehicles
that maintain environmental standards as per government regulations. If these laws and
factors will not be considered, it will result in reduced image of company due to which
revenue and profit margins will also decrease.
SWOT analysis of TESLA
SWOT is a framework which helps an organisation in acknowledging their weaknesses
and strengths is a proper manner. Beside this, it benefits in telling threats and opportunities in
context with company. In context with TESLA, SWOT framework is mentioned below:
Strengths Weaknesses
 The business of Tesla is not limited
with selling cars, its also creating, the
market for luxury and electric auto
mobiles of long-range as well as gas
powered vehicles. Therefore it has
unique position in the market
 The growth of sales has grown rapidly
over last few years due to more interest
of public in their auto mobiles.
Therefore, the re boost in sales has
been a significant strengths for the
company (Ghezzi, 2013).
 As Tesla targeted niche segment which
was electric and energy cars which
helped in gaining steeper growth.
 The investment made in research and
development for transforming
technology results in suffering by
spending high amount of cash.
Therefore, Tesla faces more debt and
sell more share.
 Tesla is suffering from high debt load
position. Their 72% of capital is
considered as long term debt by report
of March 31, 2016.
 Tesla focus on product which are
necessary for environment so the
products are highly futuristic and
customer might not invest in these
expensive technologies.
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Therefore, company operates in a
monopoly market.
Opportunities Threats
 The technologies like hybrid vehicles,
green cars, electric cars, battery
operated cars has taken a whole new
turn which results is too much
excitement and flourish.
 To earn profit, Tesla will bring down
their cost. They are making moves to
fulfil the objective. Company is
focusing on building giga-factory
which result in formation of batteries at
reduced cost.
 In coming month, Tesla will not be
able to fulfil the requirement of fund
for its ambitious production due to their
low financial status.
 The competition is high in automotive
market as Tesla competitors are luxury
cars in which internal combustion
engines are used. All other companies
has better financial, manufacturing and
posses marketing strategies that push
company in a stressful situation.
Analysis of organisational capabilities
VRIO is referred to a strategic tactics that is used by business companies to acknowledge
their resources and organisational capabilities. This will benefits them in attaining high position
against rival companies. VRIO is abbreviated as Value, Rareness, Imitiablity and Organisation. It
will allow TESLA in acknowledging their resources so that aims can be attained properly. In
case of TESLA, VRIO analysis is mentioned below:
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(Source:Applying VRIO Framework to Tesla, 2018)
 Valuable: It is very important for a business organisation to have valuable resources,
this will benefits them in achieving high returns. Having essential and valuable resources
will benefits the company in gaining wide opportunities and profitability. In context with
Tesla, valuable resources are Tesla power trains, motors and battery pack.
 Rareness: It is very important for a company to acknowledge whether the products
offered by them are rare or not. If products of company will be rare, there are more
chances that they will stood high against products of rivals. In case of TESLA, products
produced and manufactured by them are very rare because of their innovative aspect,
environmental sustainability and technological advancement. In this respect, Company
can utilise direct sale method which is a rare manner to sell products (Grover and Kohli,
2013).
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Illustration 1: VRIO of TESLA

 Imitable: Each organisation wants that their material and resources must not be copied
by the competitors. If resources belonging to a company will be imitable then it will
results in low sales and profitability. In context with TESLA, organisation posses a
strong place in market as products which are offered by them are innovative which are
difficult to imitate. This will benefit company in gaining competitive advantage over
rivals.
 Organisation: It is vital for TESLA to use and manage their available resources in an
appropriate way. If the resources of organisation will not be managed in a systematic
way then company will face difficulties in achieving their targets. Using resources in
optimal manner will help company in attaining high profitability against rival firms.
Analysis of competitive environment using porter's five forces
Porter's five forces is a strategic framework which is useful in identifying competitive
forces that shapes up various industries and allow them to identify their competitive edge in
market. In case of TESLA, Porter's five forces are mentioned below:
 Threat of new entry: If an organisation wants to start a business in automotive sector,
high amount of funds and resources are needed. It is impossible for a new company to
collect such as big amount and fight against established company like TESLA. Beside
this, arranging advanced technology to fight TESLA is also difficult due to which this
force is low for concerned company.
 Threat of substitution: In context with present time, this force is medium for company
but it can became high in next years. Due to this, productivity and profitability of
company will be impacted in a negative way. Already established companies like BMW,
Audi etc. also expand into electric and hybrid vehicle that can replace the products
offered by TESLA in an easier manner (Hoejmose, Brammer and Millington, 2013).
 Bargaining power of supplier: In case of TESLA, this force is very high as auto-mobile
industry is a very competitive sector and it is difficult for business organisations to
arrange all required parts for manufacturing vehicles and cars. Because of the rise in
demand of electronic parts, suppliers have became very stronger and adjust price
according to their wish. Due to this, bargaining power of supplier is very high.
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 Bargaining power of buyer: This force is medium in context with TESLA. This is
because there are few alternatives for hybrid and electric cars due to which bargaining
power of buyers is low. But some other people prefer the products of company to show
off their level and status. In this context, bargaining power of customers is high.
 Competitive rivalry: At present, people have less alternates and substitutes for electric
cars but because of technological advancement, this condition can be changed in no time.
If compared with today's situation, this force is medium but after some years it can
impacts the revenues of TESLA in a negative way (Köseoglu, and et. al., 2013).
TASK 2
Evaluation of various type of strategic directions available to organisation
There are different strategic directions that are available for the organisation. By adopting
these strategies, the company can acquire high profitability and revenues that allow the company
to sustain a strong presence in market. In case of TESLA, Ansoff matrix is discussed beneath:
Ansoff's matrix
Ansoff matrix is a strategic planning framework that allow business firms to formulate
effective business strategies. This growth matrix focus on potential market and products of
company. This model have four kind of strategies and these are mentioned beneath:
 Market Penetration – It is a strategy uses by organisation to grow its existing product or
services. This strategy is focused on acquiring more market share with the existing
resources of company. It is achieved through generating more demand of existing
product. If TESLA uses this strategy it results in increased sales through more promotion
and increasing supply. This can be applied through decrease in price or acquisition of
competitor's market. The focus on selling its model s, model y, model 3 electric vehicles,
inverters in more than 29 countries which result in acquiring market share globally (Li
and Tan, 2013).
 Market Development – This strategy uses by firm to expand into new market with
minimal development of product and services. It can be achieved by targetting different
segment and by exploring new areas of country or might be selling it into foreign market.
There are some conditions where strategy can be applied successfully that are when
market is not different from the existing and the profitability from buyer is more. If
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TESLA uses this strategy, they will be able to explore new countries to enter where they
can find market for their electric automotive.
 Product Development – It is a strategy used by firm to create new product or service for
its existing market to attain growth and this result in extension of product range offered
by firm. The development of new product obtained through considering after some
conditions which are investment in research and development and acquiring rights to
produce the product of someone else. If the strategy which is development of new
products is frequently applied by TESLA it will result in reduction of high cost involved
in development of electric vehicles and power storage sectors (Maté, Trujillo and
Mylopoulos, 2012).
 Diversification – In this strategy, firm tries to acquire market share by establishing new
product in the market. The risk is more in this strategy as it involves both market and
product development. The diversification can be applied in two ways which are related
diversification where firm introduces product in existing market and another is unrelated
where market and product both are new for firm. If TESLA uses this strategy it will result
in increased market share from different product which automatically increase
profitability and provide competitive edge.
Justification and recommendation of most appropriate growth strategy and platform
There are four kind of growth strategies given by Ansoff matrix, these strategies will
benefit TESLA in achieving their desired results and aims. From all discussed strategies,
manager of manager of company is recommended to use market penetration strategy. This
strategy will help the company in attaining high profits and revenues with the help of existing
resources only. Also, company will target existing market, so there will be less issues for
customers related with quality. By using this strategy, company can decrease its price along with
high promotional and distributional tactics. This will allow the company to attain high sales and
profit margins (Oestreicher-Singer and Zalmanson, 2013). These business strategies will allow
the company to attain high market shares due to which high returns will be achieved. It will
allow the company to gain competitive advantage over rival companies.
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All these measures will help the company in increasing their market shares so that high profit
margins can be attained. This will benefits the company in gaining competitive advantage over
rival companies.
Strategic management plan with objectives, tactics and strategies
Strategic management plan is used by business organisations to define their operations,
priorities, goals and resources to stakeholders, investors and employees in an appropriate way.
This plan will benefit TESLA in attaining their aims and targets desirably.
Mission of TESLA
Mission of the organisation is to enhance transition of world towards the sustainable
energy.
Vision of TESLA
Vision of TESLA is to develop most compelling car organisation by shifting preference
of consumers towards electric vehicle.
Value statement
Value of the company is to protect the welfare of workforce along with achieving
sustainability through innovation.
Objectives of company: Main objectives of organisation are stated below:
 Sustaining a long-term awareness of brand and managing company reputation.
 Management of existing customer base to build customer loyalty.
Strategic direction and tactics of company
Company is going to implement market penetration where existing products of
organisation will be given to customers in existing market by adoption of new tactics. Company
can reduce product of their price and increase their promotional tactics so that high sales can be
attained (Scholes, 2015).
Operational budget
Company needs a budget of about 2 million pounds. Within this amount, company is
required to perform all operations related with market penetration.
Monitoring and Evaluation of strategic plan
Manager of company is required to evaluate and monitor all the activities of strategic
plan in a timely manner. This will benefits in carrying out required modifications as per customer
demands.
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CONCLUSION
From above discussed report, it has been concluded that an appropriate business strategy
allows the organisation in achieving their targets and issues without facing much complexities.
SWOT, PESTLE and VRIO will benefits the company in analysing internal and external
environment of company in a proper manner. Porter five force benefits in acknowledging
competitive edge in marketplace. Out of all the strategies, a company can adopt any strategy so
that high advantage can be attained. With the help of a strategic management plan, a company
can attain high profits and market shares.
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REFERENCES
Books and Journals
Amran, A. and et. al., 2016. Business strategy for climate change: An ASEAN
perspective. Corporate Social Responsibility and Environmental Management. 23(4).
pp.213-227.
Bharadwaj, A. and et. al., 2013. Digital business strategy: toward a next generation of
insights. MIS quarterly. pp.471-482.
Drnevich, P. L. and Croson, D. C., 2013. Information technology and business-level strategy:
toward an integrated theoretical perspective. Mis Quarterly. pp.483-509.pp.1326-1358.
Ghezzi, A., 2013. Revisiting business strategy under discontinuity. Management Decision. 51(7).
pp.1326-1358.
Grover, V. and Kohli, R., 2013. Revealing your hand: caveats in implementing digital business
strategy. Mis Quarterly, pp.655-662.
Hoejmose, S., Brammer, S. and Millington, A., 2013. An empirical examination of the
relationship between business strategy and socially responsible supply chain
management. International Journal of Operations & Production Management. 33(5).
pp.589-621
Köseoglu, M. A. and et. al., 2013. Linkages among business strategy, uncertainty and
performance in the hospitality industry: Evidence from an emerging
economy. International Journal of Hospitality Management. 34. pp.81-91.
Li, Y. and Tan, C. H., 2013. Matching business strategy and CIO characteristics: The impact on
organizational performance. Journal of Business Research. 66(2). pp.248-259.
Maté, A., Trujillo, J. and Mylopoulos, J., 2012, November. Conceptualizing and specifying key
performance indicators in business strategy models. In Proceedings of the 2012
conference of the center for advanced studies on collaborative research (pp. 102-115).
IBM Corp..
Oestreicher-Singer, G. and Zalmanson, L., 2013. Content or community? A digital business
strategy for content providers in the social age. MIS quarterly, pp.591-616.
Scholes, M. S., 2015. Taxes and business strategy. Prentice Hall.Wang, J. and Verma, A., 2012.
Explaining organizational responsiveness to work‐life balance issues: The role of
business strategy and high‐performance work systems. Human Resource Management.
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Online
STRATEGIC CAPABILITIES. 2019. [Online]. Available through:
<https://managingresearchlibrary.org/glossary/strategic-capabilities>.
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