Analyzing the Impact of External Environment on Tesla: A Business Strategy Study

This study analyzes the impact of external environment on Tesla, including political, environmental, social, technological, legal, and economic factors. It also examines Tesla's internal environment and capabilities through VRIO analysis and applies Porter's Five Forces model to assess the competitive landscape.

BUSINESS
STRATEGY

Table of Contents
TASK 1............................................................................................................................................4
P1. Analyse the impact of external environment on an organisation..........................................4
TASK 2............................................................................................................................................6
P2 Identify the internal environment and capability of an organization.....................................6
TASK 3............................................................................................................................................8
P3 Application of Porter's Five Forces in Tesla..........................................................................8
TASK 4..........................................................................................................................................10
P4 Application of various Concepts and Theories to make Strategic plan for Organisation....10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business strategy is made in order to accomplish the goals and objectives of an
organisation. It is a significant function which identifies the future activities and various actions
respectively. The aim is to connect the vision, mission and objectives of an organisation which
determines the future purpose and needs of plan which helps in attaining the market. Moreover,
it helps in understanding the actual position of market and its existing weaknesses which impacts
the growth and success of company (Yuliansyah Rammal and Rose, 2016). This study is based
on Tesla which was founded in 2003 by the group of engineers in order to launch the electric
vehicles in marketplace. It is an American automotive and energy company which is situated in
Palo Alto, California. It is made by two engineers Martin Eberhard and Marc Tarpenning. This
report is going to focus on analysing the external environment of business and its activities of
Tesla and plans which is adopted by them through PESTLE analysis. Internal analysis is done on
which covers the strengths and weaknesses of an organisation which is used to discover those
factors which influences them internally. Furthermore, it competitive forces are analysed and for
this Porter's five forces model is implemented. Additionally, Ansoff's model is used in order to
explain and discover the strategic management decisions which is applied for the business
practices.
TASK 1
P1. Analyse the impact of external environment on an organisation
PESTLE analysis is used by the many organisations in order to analyse the external
factors which influences their manufacturing and operational activities. Organisations conduct
this before introducing their product in market or entering into new market area. Moreover, it
helps in analysing the success factor for company by planning or conducting research in order to
attain the opportunities and threats for company (Yuliansyah, Gurd, and Mohamed, 2017). Tesla
use this framework because it helps in determining the barriers or issues in the market and take
corrective action for them.
Political: This factors plays a significant role in order to increase the foreign exchange in
the market. International trading, foreign currency and manufacturing and many more is
influenced by the political elements and it impacts the overall performance of business. UK and
US are the basic market of Tesla and its stability and business environment helps them. It

involves the trade policies and various threats from the European market. There are many
political factors which becomes an opportunity for it such as incentives given by the government
to automotive industry, new global agreements for trading and their political stability in the
market.
Environmental: These factors are important in the automotive sector. Government added
many laws for pollution in order to control it. Moreover, in some areas penalties are charged on
many companies because they do not follow these norms and regulations which is made by the
government (Strategy, 2017). Therefore, it order to reduce this factor, Tesla launch its new
product which is electric cars. There are many factors which influences this factor such as cost of
batteries and renewable energy cost is also decreases which is an opportunity for company but
the economic stability becomes the threat for it.
Social: These are the factors which impacts the purchasing power and taste of consumers.
These factors plays an important role for the development of automotive industry. Various
factors which influences the trends are the demographics areas, education, changes which takes
place in society and impacts the market conditions and its preferences because it impacts the
marketing actions of business. Various factors which influences these factors are increasing the
awareness of low carbon and preferences for renewable energy becomes an opportunity for
Tesla. Moreover, company also put emphasis on improving the wealth distribution in its market.
Technological: These are the factors which are foremost responsible for the development
and shaping the future of automotive industry for Tesla. It includes the changing trends in digital
market and technology in automotive (Schaltegger, Hansen and Lüdeke-Freund, 2016). If
impacts the various methods of distribution, manufacturing and production activities of an
organisation. Frequent changes takes place in technology becomes a threat for the Tesla because
it influences the working behaviour of their employees and organisation too. In order to launch
its electric car in the market, company has also launch its shares in the German Research centre
concerning its AI technology in its products.
Legal: These factors include the consumer legislation, employment laws, health and
safety and trade regulation act and its restrictions on it. To manage the overall business activities
and its operational activities successfully of an environment, it is important for company to
regulate by considering the respective segment and factors of market. These laws and regulations
shape the managerial decisions in order to develop the business and its activities. The various

factors which influences its corporate strategies include making aware the companies about the
patent protection and consumption of energy regulation which becomes an opportunity for Tesla
in order to launch its electric car.
Economical: These are the factors which influences the economy of the country and
helps in increasing the reputation and profitability of an organisation. These factors include
interest charges, employment and unemployment rates and many more (Razak and et. al., 2016).
These elements impacts the demand and supply of market and influences the offered products
and services. There are many factors which influences the availability of materials and
production process such as climate opportunities as green initiative is taken by company by
making electric cars and spreading awareness about the environment which are the opportunity
for company. Moreover, rising standards for the waste disposal is also an opportunity for
company.
TASK 2
P2 Identify the internal environment and capability of an organization
VRIO Analysis: This analysis is used to analyse the internal resources which is useful in
attaining the sustainability and profitability of the competitive advantages. It is done in order to
analyse the internal competencies and resources of an organisation.
Resources Valuable Rare Imitable Organised
Mode of
distribution
Mode of
distribution
- - -
Human
resources
Human resources Human resources - -
Organisational
structure
Organisational
structure
Organisational
structure
Organisational
structure
-
Financial
resources
Financial
resources
Financial
resources
Financial
resources
Financial
resources
Valuable

 Mode of distribution: These resources are valuable because it helps in meeting the needs
and requirements of the respective customers of company. This way make sure the huge
profitability and income for Tesla. Human resources: It represents the capabilities and talent of their workforce. It is
valuable because it helps in increasing the productivity of company. Organisational structure: This factor is valuable for company because of this new
resources can easily managed and explored and also helps in achieving the growth and
success for company. Financial resources: These are highly valuable because it helps in investing in the future
opportunities for company which helps it in dealing with the threats.
Rare Human resources: It is analysed that workforce is rare in the company and in order to
retain them, managers do best possible things (Peng, 2017). They are trained and
perform necessary skills in order to possess the various functions of Tesla. Organisational structure: It is analysed that the organisation structure is important for
Tesla in order to retain their workforce because they are rare and for them effective
culture is adopted. Financial resources: It is determined that financial resources of Tesla is rare as only few
companies have proper financial resources in order to survive in the industry.
Imitable Organisational structure: It is analysed that the culture of an organisation is complex
and very difficult to imitate. Tesla does not easily change its culture as by doing this they
can face resistance of employees. Financial resources: These resources are hard to imitate as they are reserved by
company through their profits, reserves and surplus.
Organised
 Financial resources: These resources are organised by company in order to capture the
value of company. They are used by company as these resources are helps in attaining the
competitive advantages.
SWOT Analysis:

Strengths: The strengths include the positive aspects of company which helps in
retaining the position of company (Moseley III, 2017). It includes that company is best in
providing its electric cars which helps in covering the maximum distance. The comparison
represents that company acquire the top three position in the world in terms of automotive
industry. Moreover, Tesla is the one who dominates the US electric vehicles over it and its high
rate of innovative technology and skills also helps in gaining the trust and faith of their
customers which helps in developing the competitive market and product for company.
Weaknesses: These factors can damage the performance of company and identifies the
weakness of it by conducting SWOT analysis. As its innovation increases the complications and
risk in production for company. Moreover, continuous launch and manufacturing delays the
launching of new vehicles in the market. Apart form this, its production rate is also gets
decreased because of the limited supply of batteries and the lack of batteries influences the sale
of electric vehicles.
Opportunities: This factor helps in emphasising the emerging chances and success of
company. Tesla improve its business performance, structure and growth by its sales expansion
and helps in analysing the renewable energy of market (Johnson, 2016). It helps the company in
expanding the financial stability of company. Tesla is expensive because of its innovative and
financial support. Moreover, it helps in bringing the production technology in order to increase
the manufacturing rate of its production cost.
Threats: These are the factors which are considered by the companies in order to analyse
its available strengths such as its premium quality and high standards of manufacturing by which
they face fear of its financial blows. Moreover, company faced lawsuits in order to relate with
the failure of the technology in its production and its competitors such as Toyota, Ford, Volvo
and many more become its threats and become hurdle in order to achieve the competitive
advantage of market.
TASK 3
P3 Application of Porter's Five Forces in Tesla
It is a tool which is used by organisations in order to analyse and evaluate their
competitors in business environment. It is also used to prepare the business plans and strategies
as per the situation and it consist five forces which defines the different threats such as from new

entry, rivalry, substitutes, suppliers and customers (Hart, Sharma and Halme, 2016)(. Every
organisation conduct market research before entering into new market or launching its product
into market because through this it helps in attaining the effective and efficient competitive
advantage of business environment. Tesla has its presence in the international market with good
brand image because of its innovation and it increases its appearance in the Asian market
respectively. These forces are described as under:
Threat of new entrant: New entry in the industry impacts the existing business by
affecting their overall performance. There are many weak forces who become the weak forces
such as cost of brand development, economies of scale and operations of business is high.
Therefore, it is difficult for the new entrants to compete with Tesla because of its popularity and
rapidly increasing reputation. Moreover, company has develop its new models like Model S,
Model X and Model 3 which operates through electricity or battery and boost the technical
features such as speed and mileage in one time charge. In addition to this, to compete with Tesla,
new entrants require huge amount of capital investment which become the weak point for its
competitors.
Threat of substitutes: Every company always keep eye on its substitutes because it
become threat for them for their survival in the industry, also become barrier in their research
and study of consumer behaviour (Grayson and Hodges, 2017). This analysis is necessary to
conduct in order to study the market and its trends which brings similarity in the products and
services of the company. Substitute products of Tesla is also present in the market but company
tackle it in order to provide its services such as being service oriented instead of providing more
products to their respective consumers, understanding the requirements of consumers instead of
their purchasing power and increases their switching cost for their potential customers.
Therefore, company perform cost analysis in order to analyse the switching cost is low or high
for their consumers how they like to switch from their one offering to another one.
Threat of existing rivalry: In this factor, level of existing rivals are going to analyse and
it covers various factors such as size, strength and their success capacity is compared.
Environment is the competitive factor which is used to understand the nature, size, structure and
various success factors. Presence of rivals for Tesla is quite high and reason behind this is their
competitors which increases rapidly. Tesla is the most famous brand for electric vehicles but it
also has its competitors such as GM, Porsche, Volkswagen and many more. From them, some

are already available for their customers such as Chevrolet Bolt and Nissan Leaf hit the market
within 1-2 year.
Bargaining power of customers: This factor measure the purchasing position of buyer
over the company and how strong they can perform. There are some features which helps in
analysing the availability of substitutes, alternatives and bargaining power. If the customers are
not loyal for the firm and because of this it becomes very easy for them to switch from one
product to another one who has low cost and by this, they also pressurise company to decrease
their cost according to them (Chen, Eshleman and Soileau 2016). By increasing the range of
electric vehicles and automotive companies, customers observe that the prices of Tesla is very
expensive and it increases their bargaining power.
Bargaining power of suppliers: It is concerned with the relationship and various forces
of suppliers in the market and also considering their customers. In order to analyse the number of
suppliers, market research is conducted as it helps in providing the competitive position of
market and analyse the number of suppliers (Chang, 2016). It the suppliers are monopolistic
then the bargaining power is high in nature and if there are number of suppliers present in the
market then negotiation power is low. The bargaining power of Tesla is low in nature in order to
control its distribution and sale of their offerings. Most of the suppliers are moderate in size and
influences the automotive industry.
TASK 4
P4 Application of various Concepts and Theories to make Strategic plan for Organisation
Company Overview: Tesla is an American automotive company situated in Palo Alto,
California. Company is specialised in manufacturing of electric cars which is done through solar
energy and solar panel. Company was founded in July, 2003 by two partners Martin Eberhard
and Marc Tarpenning. The aim of company is to offer the electric cars at very least or affordable
prices to their respective consumers and in 2019, company started selling its products in China
too.
Vision and mission: The vision of company is to create the most compelling car in 21st
century by driving the world's transition to the electric vehicles which focuses of the renewable
energy of the batteries. It mission statement is to shift and address the market opportunities for
the renewable energy. Its vision statement is to accelerate the transition to sustain energy.

Strategic objectives:
 Its aim to provide innovative technology in order to sustain the efficiency and
effectiveness by which they can become the leader of market and also satisfy their
customer base by offering good quality products.
 It purpose is to earn sales and profitability for long period of time and also strengthen the
stability of company in order to face the complex market situations. It also need to put emphasis on providing its best services and become leader of market
by its well talented workforce.
Strategic Direction:
In order to provide guidance and direction to company it is important for them to use a
specific model which helps in analysing the best market opportunity for Tesla and for this Ans
off matrix is used which has four quadrants and every part is associated with its risk. Its criteria
is used to make effective marketing strategies which is used to determine the different horizons
of new products and existing products.
Market penetration: This part is associated with the strategy by which existing product is
launch in the existing market. Here, products are old which need more sale so that it does not get
vanish from market and hence runs out from the business (Amran and et. al., 2016). Major plans
and strategies are made for their products which only need modification in their existing products
in order to attain their purpose. Moreover, effective promotional and distributive channels need
to develop for the sale of products. Risk is associated with this quadrant is low and it is easy task
for the marketers.
Product development: As per this strategy, company launch its existing products in the
new market and also focuses on the expanding and developing its market in order to invest by
them. In this strategy, market strategy is conducted in order to understand the buying behaviour
and trends of consumers which helps in their expansion. Risk is associated in this factor is high
and moderate for large organisations in order to make its effective plans and research plays an
important role in it.
Market development: As per this strategy, the existing products are launched in new
market. Firm enters into new market in order to acquire demographic areas, consumers segments
and many more. This strategy is developed by various ways and risk is associated with it high in
nature.

Diversification: As per this strategy, new product is launch into new market in order to
acquire the market segment. In this, involvement of risk factor is high and for this company need
to make strong plans and policies in order to achieve its objectives (Akter and et. al., 2016).
In the context of Tesla, market development strategy is best suited for it as its operations
in many new locations with its familiar goods in order to acquire the market segment.
CONCLUSION
From the above discussion, it is concluded that business strategies are used by
organisations in order to launch its products in the market which helps them in gaining market
conditions. In order to make strategies and plans, companies need to conduct research about the
market and its situations in order to influence its consumers. For this, companies conduct
PESTLE and SWOT/VRIO analysis as it helps in determining the both internal and external
factors of business environment. Moreover, marketing plan is also made for which helps it in
launching its products by reducing the risk factor.

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