Business Strategy - Tesla Assignment

Business
strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 ..................................................................................................................................1
P1 Impact and influence of macro environment on organizations and its strategies.............1
P2 Internal environment and capabilities of organization by using appropriate frame works3
TASK 2 ...........................................................................................................................................5
P3. Porter five force model to evaluate the competitive forces of a given market. ..............5
P4. Range of theory concepts and models, interpret and devise strategic planning for a given
organisation. ..........................................................................................................................6
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business strategy is defined as set of decisions which are taken by organizations to
accomplish long term and short term goals. It is used as master plan in companies, to secure
desired position in competitive market. Strategies are framed by the top management to achieve
organizational objective, it is a framework which is designed after analysing the internal and
external environmen(Yuliansyah, Gurd and Mohamed, 2017). Tesla is chosen as business
organization in this report, it is a automotive energy storage which builds all electric vehicles.
This company was founded by a group of managers in 2003 headquartered in California, U.S.
They want to prove that gasoline cars are not better and quicker than electric cars. So they
introduced electronic infinitely scalable clean energy generation and storage products. Here, this
report will cover the influence of macro and micro environment with the help of pestle and swot
analysis, porter's five force model will also be defined to evaluate the competitive forces of
organizations.
TASK 1
P1 Impact and influence of macro environment on organizations and its strategies
Business strategies are formulated after analysing macro environment. These strategies
are important to design long term and short term plan for smooth functioning of an organization.
Macro environment is defined as external environment which influences business
strategies(Torrent-Sellens, 2015). This environment is consist with six component such as
political, economic, socio, technical, environmental and legal factors. The decisions of Tesla
company are also influenced by macro surroundings. So to monitor the impact, companies can
use PESTLE analysis.
PESTLE analysis
Political factor: It define government interventions in the economy such as tax policy,
labour law, environmental law, trade restrictions and political stability which affect business
organization. Positive impact: Tesla is positively influenced by political stability of government by not
making changes in regulations every year which helps the organization in enhancement
of growth opportunities and the government also granted loan of approx $465, this
1

amount helped the company to expand its market(Thompson, Strickland and Gamble,
2015)
 Negative impact: Tesla operates in various countries when the government of other
countries make any changes in the trade policies for eg: license requirement. Then it
impacts a negative influence for the organization(Teh and Corbitt, 2015).
Economic factor: This factor describes economic growth, exchange rates, inflation rates,
and interest rates. These factors generally impact the decision making and growth opportunities
of Tesla company. Positive impact: The decrease in rate of material cost such as battery, it is a important
part for electronic vehicle. This economic factor helped the company to develop more
affordable products. Electronic cars are popular among the youngsters so they will prefer
these cars over traditional cars which lightens a positive influence on Tesla(Shuen,
2018Scholes, 2015)
 Negative impact: When the interest rates of economy will increases it will directly
impact Tesla's profitability by affecting consumers income.
Social factor: It includes the components such as health consciousness, age distribution,
career attitudes, population growth rate, this factor affects the demand of companies product and
services. Positive impact: Health factor of government impacted positively to the company. Tesla
manufactures low-carbon lifestyles products and promote preference for renewable
energy(Schaltegger, Hansen and Lüdeke-Freund, 2016). The company take care of social
health this in turn attracts the consumers towards its advanced products and increase the
profit.
 Negative impact: Change in demand and preferences for more advanced products can
affect the organization's stability.
Technological factor: This factor define components such as R&D activity, automation,
level of innovation, technical changes and technological awareness. It determine minimum
production level and also influence outsourcing decisions. Positive impact: Tesla uses research and development to analyse the demand of
consumers this positively impacts the company to measure proper data.
2

 Negative impact: When Tesla lack behind in use of technology such as innovation of new
features in cars then it will lighten negative impact and shift its users.
Environment factor: It define the factors such as weather, climate, environmental
policies regulated by government. Positive impact : Tesla manufactures electric cars over gas and fuel vehicle, so this
helped in decrease of harmful gases and global warming through emission of gases and
pollution. This a positive factor for the company to increase sales and profit.
 Negative impact: climactic changes can affect the solar panels such as rainy season, solar
panels are charged by sunlight and if there is no sunlight then this will impact the use of
Tesla energy panels.
Legal factor: This external factor include discrimination law, antitrust law, consumer protection
law, employment law, health and safety law. These factors affect companies costs. Positive impact: The organization follow discrimination law by avoiding different wage
for women and men. Tesla treat its employees equally which motivate the employees and
increase their productivity it results in positive impact for Tesla.
 Negative impact: Government blocked direct dealership from manufactures to consumers
so it results in the involvement of third person. By this the profit of organization is also
distributed over third person which affected profitability of Tesla.
P2 Internal environment and capabilities of organization by using appropriate frame works
Internal environment refers to the events and factors which occurs within the organization
and affects companies decisions and choices(Rosemann and vom Brocke, 2015). The factors of
internal environment are value system, human resource, corporate culture, vision, mission and
objectives. SWOT analysis is used to analyse micro environment.
SWOT analysis of Tesla
Strength Weaknesses
 Tesla is a first company to introduce
electronic cars and has unique
positioning in auto mobile market.
 Growth of Tesla has increased
approximately 50% from year 2015.
 Poor customer awareness of Tesla is its
biggest weakness.
 The company fails to produce estimated
capacity because of limited plant.
 Tesla's products are Highly priced in
3

 The company has strong brand image
for highly innovative processes.
 Tesla operate their own distribution
channels and has great leadership and
team spirit.
comparison of other competitive
brands.
 It has limited market presence because
target niche market only.
 The companies cars are very expansive
so it has limited supply chain.
Opportunities Threat
 Demand of Preference for new
technology is increasing which in turn
is a opportunity of Tesla to expand its
market.
 Global sales and market expansion to
introduce innovative products.
 Emerging Competition with other
established companies as Toyota, ford
is a threat for Tesla.
 Cost of current models is high in
comparison of Ford and Nissan.
 Proper Research and development
strategies used by other brands can be a
threat for Tesla.
VRIO analysis
It is framework that help in analysing the capabilities and long-term competitive
advantages. This analysis explains value, rarity, imitability and organization sustainability.
 Value: It define the resources of organization which add value to the customers and
economy. Tesla manufactures electronic cars which in turn solve a major problem for
humans by reducing fossil fuels uses. Clean energy products of company contributed in
affordability and energy demand challenges for the entire world, When an organization
achieve value system then it move to the second stage rarity.
 Rarity: It define valuable resources of organizations which are used properly to
differentiate a company from others. Tesla's technology and improved research and
development enhanced the energy products such as technical cars and batteries which
make the company unique from other competitors.
 Imitability: It explain uniqueness of Tesla products which are hard to imitate by other
company. For other competitors it is hard to copy the technology, manufacturing,
4

strength and R&D capabilities of Tesla motors because the product positioning is
different from others.
 Organization: It is very important to organise a company in proper way to exploit the
resources. Tesla's strong leadership and cultural practices make the company capable to
attain competitive advantages by accomplishment of opportunities in the alternative
energy statement.
TASK 2
P3. Porter five force model to evaluate the competitive forces of a given market.
Porter five force model model was introduce by M. Porter in 1979. It is design for
analysing the organisation's competitive environment. This Porter's five force model known as
the tool which is use in determine its competition in Tesla and its profitability level. Porter's
five force analysis is mentioned below:
Threat of new entrants: when other company join the market than its required lot's of
capital in establishing the company and also its required high cost. In this factors threat of new
entrant is low. At the time of establishing new company its required licensee and different
government policies which can be tough for the establish company. This make threat of new
entrant part weaker(Martinez-Simarro and Llopis-Albert, 2015)
Bargaining power of supplier: In market there are high number of supplier which can
provide raw material, resources to the company this make the bargaining power of supplier is
weak. Tesla has its multiple supplier within its supply chain. For example: Tesla have different
supplier at its different geographical location. The product which supplier provide to Tesla are
less standardised, less differentiated and having the low cost so this make easy for Tesla to
switch its supplier(Pisano, 2015)This makes the bargaining power of suppliers is weaker force.
Bargaining power of buyer: In Tesla the number of buyer is more than the number of
product which Tesla is produce. In this context, in market there is few firm to choose the product
which is produce by Tesla this make the bargaining power of the buyer is low. The product
which Tesla produce is different from other and having its unique identity so it is not easy for
the buyer to found its substitute in the market. This makes the bargaining power of the buyer is
weak. The most important thing for the customers is quality of a product and the quality of Tesla
5

is very good. This term of quality make frequent purchase and this makes the bargaining power
as weaker force for buyer within the industry.
Threat of substitute product : In the market there are few substitute are present for the
product such ford motors company, general motors, Honda motors etc. in which Tesla operates.
In market there only a few number of substitute which present in the market with having low
profit earning in the industry. So it is confirm that in market there is no any other company who
earn more profit than Tesla. All of the factor confirm that threat of substitute of product is weak.
In Tesla there are some substitute is available in the market but they are highly expensive such as
ford motors company in comparison with Tesla product. Tesla provide its product at low price
with having good quality so the more customers are attracted towards the Tesla product this
make the threat of substitute of product is low.
Competitive rivalry or competition: This shows the rivalry among the current player
which is known as competitors. In this context, it is include price competition, improving
qualities, increasing customer warranties. Tesla operates its business in a highly competitive
market. In market there are only a few numbers of firms which operates in the automotive
market as compare to Tesla company. This organisations is more effective in term of innovating
and promoting their product. Marketing mix of Tesla give strong competition to its competitors
like general motors against the business(Linder and Williander, 2017).Product which are
produces within the industry are highly differentiated in Tesla. As a result it is not easy for
general motors to attract the customers because each product of Tesla is unique. This make the
competition weaker among the Tesla and general motors and other same field of company.
P4. Range of theory concepts and models, interpret and devise strategic planning for a given
organisation.
1.Evaluation of the different types of strategic directions available to the organisation.
This porter generic strategies is adopt in order gain competitive advantage. This
competitive advantage company gain by offering grater value, lower price or by providing the
grater profit that justifies higher price. The porter generic strategy in mentioned blow:
Cost leadership: The main aim of this leadership is to become the lowest cost producer
in the market. In the context, Tesla should charge the lower for increasing it market share. The
lower price can be done in Tesla by casting the organisation as low cost alternative this will
effective in increasing the sale and company's profit both.
6

Cost focus: In this context, the main focus of the company in is to to find out
advantage in their specific market segment. Focus is all about manage the good balance between
the cost and delivery(Kane and et. al., 2015) In term of cost focus, fin out those market where
the cost is optimal.
Differentiation leadership : In a organisation for attracting more price play a important
role. When an organisation make its product unique and different they attract large number of
employee in market. Tesla should apply this strategy in term of attracting large number of
customers. To implement its differentiation strategy Tesla should make effective promotional
team which defining the brand and emphasizing on product uniqueness(Akter and et. al., 2016).
Tesla should apply ongoing research and innovation.
Differentiation focus: In this context, the main focus of Tesla company should on the
unique of a market which is effective to maximize efforts. Tesla should focus on producing the
different and unique product which work effectively in term of increasing the profit in the
organisation.
2. A justification and recommendations of the most appropriate growth platform and
strategies
From the above explained porter generic strategies it is justified that differentiation
leadership strategy is considered as the best strategy for Tesla. This is best strategy for Tesla
interacting the large customers toward the product(Higgins, Omer and Phillips, 2015)
Recommendation:
 It is recommended that manager of Tesla should focus on each and every trend which
going on in the market according to that they should produce the product.
 Tesla should open its outlet at place where where they are not well established so that
customers are more aware about the product(Amran and et. al., 2016)
 Tesla should provide the proper training to its employee about gathering the information
from market which is effective in making new unique product.
3. Strategic management plan with strategies, objective and tactics.
Strategic management plan: this strategic plan is defined as the document in which all
the goal , set priorities, resources and objectives mentioned. This strategic plan is effective in
give the clear view of the organisation(Evans and et. al., 2017) In this context, with help of
strategic management plan Tesla company can achieve its goals and objective in an effective
7

and efficient manner. The strategic management plan is mentioned below which based on Tesla
company.
Vision : vision of Tesla company is “ create the most compelling car company of the
21th century by driving the world's transition to electric vehicles”
Mission : The mission of Tesla motor is to design high performance and electronic
sports cars with no compromise.
Value statement: Main value of company is to secure the welfare of employees along
with attaining sustainability through innovation.
Objective:
 Generate demand and increase sales for Tesla Motor's electric car.
 Manage the corporate reputation and build long term brand awareness.
 Manage the customer base in order to create loyalty and customer referral.
Strategic direction and tactics of company : in this context company use differentiation
leadership in this they produce innovative and unique product which attract the large customer in
market. In this the manager of Tesla should use the promotional strategy in which they need to
create awareness among the customers about the product and also about its uniqueness. To
implement its differentiation strategy Tesla should make effective promotional team which
defining the brand and emphasizing on product uniqueness. In Tesla some of the brand sell fully
vehicles and Tesla has its brand by adding luxury to its car(Eaton and Kilby, 2015)
In this tactics are use in organisation in term of solving the short issues in short period of
time in organisation. Tesla should use innovative, fluctuation in price. With the help of
innovation company can apply the changes according
Operational budget: In this context, In order to apply differentiation strategy
effectively , manager of company should estimated that company requires a budget of 4 million
pounds. In this amount, all the tactics and measures adopt by company in producing
differentiation of products and differentiation strategy heavy cost in research and
development(Chang, 2016)
8

Monitoring and evaluation: In this context, In order to achieve the goals and objective
of the Tesla company. Tesla need to monitoring the plan effectively and evaluate each aspect of
the plan(Burlton, 2015)In order to monitoring the organisation manager make sure that the
objective is achieved in the organisation or not. Evaluate the task that they are done in a proper
or not. If any changes are required than apply it at the same time when it is required(Anwar and
Hasnu, 2016)
9

CONCLUSION
From above mentioned report it can be analysed that business strategies helps in decision
making to achieve short term and long term goals. Strategies are developed after analysis of
external and internal business environment such as at first the company build on the vision and
focus on top level objectives then competitors are analysed to develop a winning strategic
framework. . The macro environment includes six components such as political, economical,
technological, social, environmental and legal factors which affects Tesla's functioning. SWOT
analysis helped in evaluating the strengths, weaknesses, opportunities and threat for organisation.
Porters five force model helped in evaluating the competitors strategies by analysing potential
entrants, threats of substitutes, Bargaining power of suppliers, Industry competitors to
accomplish the objectives.
10

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.
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.
Anwar, J. and Hasnu, S. A. F., 2016. Business strategy and firm performance: a multi-industry
analysis. Journal of Strategy and Management. 9(3). pp.361-382.
Burlton, R. T., 2015. Delivering business strategy through process management. In Handbook on
Business Process Management 2 (pp. 45-78). Springer, Berlin, Heidelberg.
Chang, J. F., 2016. Business process management systems: strategy and implementation.
Auerbach Publications.
Eaton, D. and Kilby, G., 2015. Does Your Organizational Culture Support Your Business
Strategy?. The Journal for Quality and Participation. 37(4). p.4.
Evans, S. and et. al., 2017. Business model innovation for sustainability: Towards a unified
perspective for creation of sustainable business models. Business Strategy and the
Environment. 26(5). pp.597-608.
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.
Kane, G. C. and et. al., 2015. Strategy, not technology, drives digital transformation. MIT Sloan
Management Review and Deloitte University Press. 14. pp.1-25.
Linder, M. and Williander, M., 2017. Circular business model innovation: inherent
uncertainties. Business strategy and the environment. 26(2). pp.182-196.
Martinez-Simarro, D., Devece, C. and Llopis-Albert, C., 2015. How information systems
strategy moderates the relationship between business strategy and performance. Journal
of business research. 68(7). pp.1592-1594.
Pisano, G. P., 2015. You need an innovation strategy. Harvard Business Review. 93(6). pp.44-
54.
Rosemann, M. and vom Brocke, J., 2015. The six core elements of business process
management. In Handbook on business process management 1 (pp. 105-122). Springer,
Berlin, Heidelberg.
Schaltegger, S., Hansen, E. G. and Lüdeke-Freund, F., 2016. Business models for sustainability:
Origins, present research, and future avenues.
Scholes, M. S., 2015. Taxes and business strategy. Prentice Hall.
Shuen, A., 2018. Web 2.0: A Strategy Guide: Business thinking and strategies behind successful
Web 2.0 implementations. O'Reilly Media.
Teh, D. and Corbitt, B., 2015. Building sustainability strategy in business. Journal of Business
Strategy. 36(6). pp.39-46.
Thompson, A., Strickland, A.J. and Gamble, J., 2015. Crafting and executing strategy: Concepts
and readings. McGraw-Hill Education.
Torrent-Sellens, J., 2015. Knowledge products and network externalities: Implications for the
business strategy. Journal of the Knowledge Economy. 6(1). pp.138-156.
11

Yuliansyah, Y., Gurd, B. and Mohamed, N., 2017. The significant of business strategy in
improving organizational performance. Humanomics. 33(1). pp.56-74.
Online
Porter's Five Force Analysis. 2019. [Online]. Available Through: <http://panmore.com/tesla-
motors-inc-five-forces-analysis-recommendations-porters-model>.
12