Business Strategy - Tesla Assignment Solved

BUSINESS
STRATEGY

INTRODUCTION
The term business strategy refers to consolidation of various actions performed and
decisions taken by business organisation to achieve organisational goals and to maintain existing
competitive position in market (Scholes, 2015). It is basis of organisation because it is a
blueprint which develop path in order to achieve predetermined goals. The report exhibits
analysis of impact and influence of macro environment, assessment of organization’s internal
environment and capabilities, evaluation and application of outcomes of an analysis using
Porter’s Five Forces model. Apart from this application of different models, theories and
concepts to assist with the understanding and interpretation of strategic directions available in the
context of Tesla, an American energy and automotive company. Company is operating its
business through Palo Alto, California. This company is leading company in electric car design
and manufacturing and, in solar panel manufacturing.
TASK 1
P1 Application of framework to analysis impact and influence of macro environment:
Macro environment: It refers to those factors which directly affects organisation's
decisions and are beyond the control of organisation (Verbeke, 2013). These factors have direct
impact on performance and growth of organisation. In this context, Tesla conducts PESTLE
analysis to recognise all such factors, as follows:
Pestle analysis: It is a systematic framework that is applied by big organisations to
analyse and evaluate factors and elements that can have unfavourable impact on growth and
performance of organisation. Following is the analysis in the context of PESTLE, as follows:
Political: This factor combines all rules, policies, guidelines and regulations imposed by
government. Change in country's government have a great influence on particular product, sector
and organisation. Tesla is mainly associated with automotive and solar manufacturing sectors so
consideration of political influence with respect to these sector is useful to reduce any adverse
impact. In UK governance make policies that only cars that produces smoke less than 23% get
the valid licences, thus it will have a major impact on Tesla strategy because the have to make
decision for improving their engine capacity that would produces less smoke.
 Advantage: In Tesla policies are formulated according to political forces which helps it
to decrease interferences of political parties.
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 Disadvantage: If managers in Tesla ignore political factors then it will become difficult
for it to reach all the organisational goals because it can result in interferences of
political authorities in business operations.
A favourable policy of government in respect of electronic vehicle can boost Tesla's
business and market share in industry.
Economic: Matters regarding foreign exchange, inflation, banking policies, deflation and
different interest rates etc. are several economic factors which can influence company's strategy
and actions positively or negatively (Spender, 2014). In large scale organisation like Tesla it is
important for organisations to consider all these factors to operate its various activities in market
effectively. Due to sudden modification in interest rate made by local banking authority, the
entire business strategy of Tesla will get impacted because they have to make a considerable
changes in the price of cars so that they can maintain favourable profit.
 Advantage: Tesla deals with futuristic technology like advanced electronic vehicle, solar
technologies etc. So company is not considerably affected by economic inflation and
other factors which is an opportunity for company. Beside this company is availing some
extra benefit for contribution in nation development through its dream projects.
 Disadvantage: Tesla requires huge capital investment for its projects but due to inflation
and rescission in economy it is hard for company to attract investments. Also due to
inflation purchasing power of consumers decreases which affects company's sales.
Economical change like reduction in price of cost of battery, stability and decline in cost
of renewable energy etc. has affected business of Tesla positively.
Social: Consumer's dynamic taste and preferences, social trends and cultural behaviour
etc. are considered as social factors that can affect turnover and profit margin of companies like
Tesla. To achieve sustainability in growth Tesla is required to consider and identify these factors
by Tesla while formulating and implementing strategies. Plan and actions performed as per such
polices helps to reduce and eliminate adverse or negative effects. Likewise, in UK now customer
are attached to save ecosystem thus they prefer using cycles or electrical bikes and cars. This will
make a greater affect to Tesla strategy as they would produces cars and other vehicles by making
sure that they can fulfil the needs of customer.
 Advantage: Tesla sale products to clients according to their taste and preferences which
helps it to attract large number of customers.
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 Disadvantage: Some time adoption of social change may lead to increase in expenditure.
In practical life for large scale companies like Tesla a wrong prediction of incoming
social trend may affect company's market share.
In country increasing trend of low carbon lifestyle and renewable energy is most
considerable social factors that have favourable impact on Tesla's business.
Technological: These factors include recent technological changes, trends, new
innovations, product development as per new technology etc. Tesla's core policies are to provide
highly advanced technology in products with futuristic approaches. Company's most of the
project is based on latest technologies and new innovations. In present time customer desire to
operate there vehicle just by click, thus Tesla have to improve there production strategy such as
they make use of artificial intelligence that ease the controlling for customer.
 Advantage: In order to meet clients expectations related to latest technology Tesla
focuses on latest trends of market and try to implement them in organisations procedures
to attract mewo and moew clients.
 Disadvantage: Ignorance of latest technology can affect company's survival in market
and so Tesla is aware about this fact and continuously developing its product to reduce
any threat.
Day to day increase in automation and online mobile system is major technological factor
that affects Tesla's business favourably.
Legal: Law and regulations, taxation polices and other government policies are
considered as legal factors that have direct impact on organisations strategy and growth (Peng,
2017). In the context of Tesla, it is essential to comply with law and regulations to maintain its
growth and performance. In contrast, the UK government has drastically reduced corporate tax
from 30% to about 28%, that appears to provide the Tesla with an opportunity to increase its
revenues and profits.
 Advantage: Tesla is moving towards new markets currently and company is complying
with all legal aspects related to its patents. Company is focusing on providing ozone-
friendly cars due to which company has full government support at international level
also.
 Disadvantage: A sudden change in law and regulation can affect company's policies and
future actions so ignorance of these factors may lead to reduction in growth.
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Due to new regulations of energy consumption and dealership sales, Tesla's business
would achieve sustainability in success.
Environmental: Changing climate, whether due to global warming, Environment
protection rules and acts are considered as environmental factors. US government is highly
concerned with environmental issues. Tesla is manufacture of cars and solar equipment so
consideration of these factors is important for company in order to operate effectively. Thus
Tesla has partnered with IPCC (Intergovernmental Panel on Climate Change) with the objective
of significantly lowering environmental footprint and contributing to protecting the environment.
 Advantage: As Tesla is engaged in manufacturing of eco-friendly cars and also engaged
in manufacturing of solar equipment, so it is an opportunity for company to comply with
rules framed by government regarding environmental issues.
 Disadvantage: Non-compliance of rules and regulations related to environment can
affect company in negative way because Eco-friendliness is a core policy of company.
Climate changes and increasing focus on waste disposal is main economical factors that
leads to increase in Tesla's business.
P2 Analysis of internal environment and capanbilities of organsiation
Internal environment: This is the combination of element that describes atmosphere
within business organisation (Granados and Gupta, 2013). It help to understand the problems of
business organisation which are arising internally. It give a positive results to organisation that
help to run a business successfully. Such as Tesla is larger organisation that focuses on internal
environment in order to expand the business at global market. It involves number of tools that
can be used to evaluate the internal environment. SWOT analysis is one of them, which is
described as-
SWOT analysis: This is useful technique that help to guide organisation to know the
strength, weakness, opportunity and threat for company for running business long term. The
SWOT analysis of Tesla are as follows:
Strengths Weaknesses
 Tesla has unique position in market
because it uses new technology in
order to manufacture new product.
Fast changes in technology can impact
negatively on Tesla.
The cash flow of Tesla is not matching
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 It focuses on regular research and
development that help to attract
customer (Borggaard and et.al., 2012).
 It help to create customer base that
increase sale and growth of business
industry.
properly because of high expenses.
Opportunity Threat
To introduce from new product as customer
wants that leads to increase the competition.
 New product can be launched by
organisation to meet with customer
needs and wants.
High competition at market place that may be
reduce the sale of Tesla.
Bear high amount of cost in research and
development.
It has relatively high debt load that decrease its
profit margin.
VRIO model: This is a tool that help to analyse the capabilities of a running business and help to
make effective business decision for further action. It includes different aspect which is guides
by manager like as valuable, rare, inimitable and organised. The VRIO analysis of Tesla are
defined as:
Capabilities Valuable Rare Inimitable Organised
Battery packs yes No No No
High power charger yes yes No No
Direct selling yes Yes Yes No
High man power yes Yes Yes Yes
Valuable: Tesla has four valuable items such as High man power, Direct selling, High
power charger, Battery packs. All of the element considered as valuable aspects because it help
to run a operational activities in accurate manner. It is most important for all company that help
to bring new innovation and increase the profitability of organisation.
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Rare: Battery packs of Tesla is not rare because other company which is of same
industry can use it for manufacturing the new car or motor vehicles. High charger power is rare
because it is no easy for all organisation to produce this product (Diaz, 2013). Direct selling is
rare because every organisation can not use direct selling option as it consume more cost and
high technology. High man power is also rare because Tesla has highly skilled and experienced
person who make efforts to manufacture new car and motor vehicle. So it is not easy for all
organisation to get high man power.
Inimitable: Direct selling is not inimitable because by putting great efforts any business
organisation can sell the products directly through online and offline. High manpower is imitable
because it is tough to hire skilled and experienced person within organisation who help to
increase the productivity and profitability (Afuah, 2014).
Organised: In Tesla, High man power planning is not organised properly because
organisation does not focuses on employee's needs and wants that leads to low profitability. An
organisation should organised the man power properly that help to increase the productivity as
profitability (VRIO Model. 2018.).
Task3
P3 Evaluation and application of Porter's five force model
Porter's five force model: It is a competitive analysis model which is given by Michael E.
porter (Fox, 2012). This model help to analysis the competitive advantages within organisation.
Competitive analysis of Tesla is given as:
Existing rivalry among competitors: Competitive rivalry for Tesla is very high because
there are number of competitors at market and planning to capture the market economy. So Tesla
need to manufacture new and attractive products that help to influence the customer and also
help to sustain in competitive market. Tesla 's top competitors are Volkswagen and Ford. They
affect company's market share by shifting a large customer group.
Bargaining power of suppliers: In auto mobile industry the bargaining power of
supplier is very low because there are many suppliers in the market ( Wang and Verma, 2012). If
one industry is selling raw material at high prices then Tesla has option to shift to another
supplier. So it is a positive point for Tesla to purchase raw material as low prices as they wants.
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Tesla's top suppliers are Brembo, Inteva Products and stabilus that affect company's profit
margin and supply of essential raw products.
Bargaining power of buyers: In market there are many buyers who purchase products
and services and the number of supplier is also high. So it may be negative point for Tesla that it
has sold their product at low prices in order to attract the customer. Buyer or customer's demand
for product of Tesla affect its profitability in long run.
Threat of new entrants: In auto mobile industry it is not possible to enter easily because
it requires huge investment to operate the business. Therefore, the threat of new entry for Tesla is
very low. It may be difficult for organisation to enter in new market in order to earn profits.
Entrance of new tough competitors with new invention in existing market affects Tesla's market
share.
Threat of substitutes: It means to use another product instead of original products. The
threat of substitutes for Tesla is low because people are high concerned about new features and
technology. So it is positive aspect for Tesla that manufacture new product by using new
technology and it will help to sustain in competitive market place. Emergence of new technology
may give a substitute product for Tesla's product which can lead to a decline in revenue of
company and in long it may affect company's survival ability in market.
Thus, porter model help Tesla to sustain in competitive market by manufacturing new
product that will be feasible because it has enough resource to produce new products bu using
new technology.
TASK 4.
P4. Application of models, theories and concepts.
Different kind of models, theories and concepts in the aspect of the Tesla company are
mentioned below:
Ansoff matrix- This is a kind of matrix which is related with improving the future
growth of the companies (Chen and Jermias, 2014). It is named as Ansoff matrix on the name of
Russian American Igor Ansoff who created this concept. As well as this matrix is very useful in
identifying the best growth marketing strategies that can help to companies in achieving the
goals and objectives. Eventually this matrix consists four strategies which are market
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penetration, product development, market development and diversification. Herein, the context
of Tesla, these strategies are mentioned below:
 Market penetration- It is a kind of strategy which is related to the increasing the current
market share in the overall market. In other words, this strategy is based on the selling of
products and services to the existing customers. It consists various kind of elements to
gain the market shares such as price decreasing, increasing in the promotion etc. Herein,
the aspect of the Tesla company they use this strategy to cover the maximum market
growth by reducing their product's prices timely.
 Product development- This is a kind of strategy which is associated with the
development of any new product to gain higher market growth (McGrath, 2013).
Basically, the development of the new product is done on the basis of proper market
research and investing in the new technologies. The Tesla company can develop any new
product (car) or can modify their existing product.
 Market development- This strategy is related with entering into the new market or
building strong position in the existing market. The purpose of this strategy is to
increasing the market area so that companies can sell their product in wider area. This
strategy is successful if company's product is unique and new. In the Tesla company, they
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can enter into a new market if they have some unique products which they have not sold
before.
 Diversification- It is the risky strategy among all mentioned strategies. This is why
because under this strategy companies grow their market share by introducing new
products into new market. Companies should adopt this strategy only if they ensure that
their product will success in the market. In the context of the Tesla company, they can
use this strategy to grow the market if their product is unique and new. As well as they
should prepare about the future risk if their product gets fail in new market.
So these are the strategies of the Ansoff matrix which can be helpful for the Tesla company to
increase their current market share. Among all these strategies the company should focuses on
the market development strategy. The reason of selecting this strategy is mentioned below:
 Justification- The company has to select the product development strategy because it is
not so costly as well as it does not consider any risk. Additionally, if company adopts this
strategy then it can be beneficial for them in increasing the market share with higher
brand image of their products (cars). Strategic management plan- This is a kind of plan which includes objectives, strategies,
mission, tactics and vision. Tesla should adopt market development strategy to make
expansion in new market for example Tesla by adopting this strategy can expand its
market worldwide by opening new business premises and facilities. Under market
development strategy, Tesla should develop new market in developing countries by
launching e-vehicles. It is important for the Tesla company to follow the strategic
management plan which is mentioned below:
Objectives- Basically, the main objective of all the companies is same which is to gain higher
profitability. Same as in the Tesla company, their objective is to increase their profit by 10% in
upcoming year through developing new product.
Vision- The vision of the Tesla company is to come on the top in the car industry.
Mission- The mission of the company is to accelerate the world's transition to sustainable
strategy.
Strategies- It is necessary to follow the strategies to achieve any target. Like in the Tesla
company their objective is to development of the product and it can be fulfil if they implement
below mentioned strategies which are as follows:
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Promotion- This is very important to do promotion of the products and services by
advertisement or any other method. As well as it can help in awaking the customers about the
new product. Herein, the aspect of the Tesla company it can be helpful in promoting their newly
developed product.
Research and development- It is associated with the identifying the customer's need and
demand by effective research. In the Tesla company, it is beneficial for them if they conduct
proper research about their newly developed product.
Tactics- It is the combination of different kind of strategies to achieve the goals and
objectives (Murthy, 2012). The Tesla company should focus on the following tactics:
Arrangement of fund- The fund is the key for any kind of organisation because it helps in
operating all the activities. In the absence of the fund, all the operations and activities of the
organisations can ruin. Herein, the Tesla company they should try to arrange the required fund
from different sources.
Technological enhancement- In modern era, technology is the key of success.
Companies should focuses on use of advanced and latest technologies. Herein, the aspect of the
Tesla they are going to launch new car and they should consider the new and advanced
technology so that more customers can attract.
STP (Segmentation, Targeting and Positioning)- The STP is the combination of three
different kind of strategies which are needed to be applied by the Tesla company. Herein,
description of these strategies is mentioned below:
 Segmentation- It is associated with the dividing the customers into different groups so
that company can serve to the customers in a better way (Patel and Chrisman, 2014). The
Tesla company has to divide their customers into different segments so that their newly
launched car can be provided effectively.
 Targeting- This is related with the identification of a particular group of customers. Like
the Tesla company should target a particular segment in which they can sold their newly
launched car.
 Positioning- It refers to the creating a brand image in customer's mind (Rugman and
Verbeke, 2017). For the Tesla company it is important to use effective strategies to make
a strong brand image in mind of customers.
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CONCLUSION
From above report it has been articulated that business strategy is systematic and
regularised process of establishing strategic plan in respect of a business organisation to attain
predetermined goals. In dynamic business environment for all business organisation it is
essential to recognise internal and external factors of environment that may affect organisation
adversely, although sometimes these factors may have favourable effects. SWOT is used to
evaluate the internal environment factors and PESTLE is for external environment factor. Beside
this Porter's model assist in determining extent of competition.
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REFERENCES
Books and Journals
Afuah, A., 2014. Business model innovation: concepts, analysis, and cases. Routledge.
Online
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VRIO Model. 2018. [Online]. Available through:
<https://www.strategicmanagementinsight.com/tools/vrio.html>
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