Business Strategy: Internal Environment and Strategic Direction of Tesla

This document discusses the internal environment and capabilities of Tesla, including a VRIO analysis. It also explores the strategic direction of Tesla using Porter's Generic Strategy and Bowman's Strategy Clock. The document provides insights into Tesla's position in the market and suggests a strategic management plan for the company.

Business Strategy

Table of Contents
Introduction......................................................................................................................................1
Main Body.......................................................................................................................................1
TASK 2............................................................................................................................................1
P1Assess the internal environment and capabilities of Tesla.....................................................1
M2 Measure the internal environment to assess strengths and weaknesses of Tesla.................2
TASK 3............................................................................................................................................2
P1 Interpretation strategic direction for Tesla.............................................................................2
M4 Produce a strategic management plan for Tesla ..................................................................5
References........................................................................................................................................7

Introduction
Business strategy refers to combination of different types of decisions that are taken in
the organisation and actions are taken in order to achieve them and hold competitive advantage
in the industry. It act as a roadmap to the company which provide direction by analyse it
competitive position in the market to fulfil the organisational objectives (Phawa, 2020). Business
strategy is the process which help in overall organisational planning, find the strength and
weakness, strategy to have control over the decisions, Provide competitive advantages and also
ensure the efficiency and effectiveness. For current report, chosen organisation is Tesla, an
electric car manufacturing company founded by Elon Musk in 2003.
Main Body
TASK 2
P1Assess the internal environment and capabilities of Tesla.
VIRO Analysis: The model help management authority to analyse the company's resources and
capabilities. It is acronym that stands for Value, Rarity, Imitability and Organisation. Theses four
components of the model help in discover the sustainable competitive advantage for company.
Thus it help in long term growth.
Core competency value Rarity Imitable Organise
Innovation    
Product extent   
Suppliers   
Brand image    
In order to understand the model the following components of this model is discussed in
following section in context to Tesla:
Value: The company is gaining popularity only because of the innovational thought they have
put in the company. It is the innovation around which the whole business model of Tesla revolve
around. The idea was profound by Nicolas Tesla and winged by Elon Musk. The company
through its vision have provide clarity in future of vehicle industry which will going to dedicate
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sustainable resources and effective use of technological innovation for the future generations.
According to Musk, to make an effective fleet on self-driving vehicles moving around town
while their owners are at work, Autopilot needs to be rated as Level 5 on the NTSB’s scale
(Gach, 2017).
Rarity: The company that have made possible sustainable as sexy concept in terms of future of
the Electric Vehicle (Ferris, 2017). Tesla's objectives are so clear that they never confused
between high performance and luxury and being the pioneer to conquer such innovative concept
where they have successfully introduced new market segments for its product which offer
sustainable luxury car.
Imitable: Tesla being focused on saving the world from excess of carbon emission that have
rapidly increase with increase in population and so in Automotive sector. Its one the ultimate
strength is the innovation that they have forged it in order to meet the upcoming environmental
challenge that may be bigger than ever. Thus their plan that are now have attain some degree of
success only because of the knowledge they are using at higher priority level to use in their
technology based vehicles. The company also set out to be the largest mission and and invested
large amount in it that it is impossible to beat the strategy and also hard to imitate.
Organisation: Since Tesla have many suppliers around the nations who provide them raw
material for the manufacturing. Thus company follows standardized decisions making otherwise
it could effect the brand image. Tesla is going set its own battery manufacturing unit for its
vehicle in Nevada, in order to reduce it dependency on other suppliers.
M2 Measure the internal environment to assess strengths and weaknesses of Tesla.
Since company operate on a global level, thus it is important for company check on its
internal environment which may under control of the organisational authority but any changes in
the internal environment could harm the company's performance and productivity level. As from
VRIO analysis it observe that when company's main strength lies in its innovation for sustainable
future with the help of emerging technologies that set company stand above from the crowed
(Smith, 2021). With all above, from its innovational level to suppliers of the Tesla which have
strengthen its internal environment successfully.
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TASK 3
P1 Interpretation strategic direction for Tesla.
Porter's Generic Strategy. It determine the whether the firms profitability is above or below the
industry average. The generic strategy reflect the sustainable competitive advantage in long run
for the company. The strategy follow three generic strategies, which is discussed below in
context of Tesla:
The competitive scope of a firm is considered broad when cost leadership and
differentiation of the product of the firm is unique in the industry. It means when firm can
achieve and sustainable overall cost leadership , then it is said to be an average performer in the
industry.
The firm's competitive scope is consider as narrow when both types of focus that is, cost
and differentiation focus of the firm in industry target segment s that different from that of other
industry's segment. It is assumed that target segment may either have buyers with strong
purchasing power and can satisfy their unusual needs.
When this strategy is applied in context to Tesla, it can be said that the competitive
strategy is broad, as firm posses competitive advantage in the industry as the product
development from Tesla which is luxury EV that differentiate the company from the rest of the
industry. Tesla with their innovation and one of well recognised engineers developed
environmental friendly electric vehicles, equipped with latest technology for future generations.
Using such a technology company largely attract potential customers around the world. With
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Illustration 1: Porter's Generic strategy

continuous evolve with time and technology company is increasingly gaining competitive
advantage. The only thing the company believe is the innovation with change in time that keep
the company ahead with their models in the industry. Earlier, the company focus were on
Differentiation focus strategy as the company largely focused on particular target market only.
Thus it can be observed that Tesla at present is using differentiation strategy as they moving
from narrow to broad market by adding higher value in their products.
Bowman's Strategy Clock. The model help in exploring the strategic positioning which means
how a product should be positioned the market which will give competitive position (Riley,
2018). The model is discussed below in context of Tesla:
Low Price and Low value: As it is the lowest competitive position of the business since the
product is not differentiated and customer perceives is very low. As Tesla neither offering low
price as the manufacturing cost of Tesla is much higher.
Low Price: A strategy for cost minimisation is required to be successful for the company. At this
position profit margin is very low only high product development can lead profit for the
company. Since Tesla is not manufacturing their products at higher level thus position is not
suitable for the company.
Hybrid: This position suggest that it involve both low price and product differentiation. The aim
is to pursue customers that there is good value through combination of price. As Tesla can not
cut down the price which could be the negative impact on the company's profitability.
Differentiation: This aim to provide customer product differentiation with perceived value.
When quality of the product is high and also posses strong brand awareness, then only strategy
can be helpful. The strategy could be helpful but since Tesla is popular only in selected segment
of the society who can afford such quality with such higher price.
Focused Differentiation: This strategy aim to position the product at highest price level, where
customers can buy the product only because of high perceived value. Since Tesla is a luxury
brand and the strategy can be helpful. Which can aim premium price in highly target customers.
High Risk Margins: this type of strategy is assumed as risky strategy as this involve failure. In
this strategy firm set price at high also without any perceived value. For Tesla it can profitable
for short term as eventually in the industry any new or existing player may offer much better
product with high perceived value.
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Monopoly Pricing: This type of strategy refer to monopoly of the company in the market.
Where firm not care about nay perceived value for customers. The only choice is given is buy or
not to buy the product. For Tesla the strategy is not useful as for the them perceived value to
their customer is the key ingredient for the company.
Loss of Market Share: This is most disastrous strategy for any competitive market. Where
company charge higher value for same price from remaining competitors will leave consumers
who can have much better option. The strategy is not helpful as Tesla can set standard price with
low perceived value of their brand.
M4 Produce a strategic management plan for Tesla .
The plan consist of five steps, in order to develop strategic plan for Tesla following process may
followed:
Tesla's Position: Tesla being one of the leading Futuristic but sustainable electrical vehicle
making company. The company is one of the poplar in terms of the brand and the its associated
product that is sustainable luxury car. The company have its major resources that is its manpower
who are irreplaceable.
Priority Objective of Tesla: Tesla is determined to develop environmental friendly electric
Vehicle , which have all necessary feature like; class, design, power and sustainability. Company
is desirous to provide change in the future of transportation sector by using technology to steer
up innovation.
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Illustration 2: Bowman's Strategic Clock

Plan: Tesla need to open different units so that car can be reach to maximum people and price of
the car need to be redesign so that affordability of buyers can increase. For that Tesla can use
following plan:
Open company in Primary Locations: for that company needs to do intense search on
localities.
Set up Supercharge station- after set up in different locations.
Partner with different mega Stores: Parter with Wall-Mart it will benefit Tesla where both
facilities of gasoline as well as supercharge station will be there.
Execute The Plan: Tesla need to regularly check on its plan if need they could make change in
them on right time.
Review Plan: Tesla need to check its progress from its plan and every department of the
company need to cooperate with all necessary informations regarding plan and its
implementation.
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References
Hossain, E., and et. al., (2019). A comprehensive review on second-life batteries: Current state,
manufacturing considerations, applications, impacts, barriers & potential solutions,
business strategies, and policies. Ieee Access, 7. pp. 73215-73252.
Online
Phawa. A., 2020. What is Business Strategy?. [Online] Available through:<
https://www.feedough.com/business-strategy-definition-levels-examples/>
Gach. M., 2017. Tesla Network could bring Radical Changes to the way we Own Cars. [Online]
Available through:<https://www.teslarati.com/tesla-network-autonomous-ride-sharing-
change-ownership-model/>
Ferris. R., 2017. As Tesla Goes Mainstream, Rival carmakers Plan Rivals. [Online] Available
through:<https://www.cnbc.com/2017/07/28/as-tesla-goes-mainstream-luxury-carmakers-
plan-rivals.html>
Smith. R., 2021. Explaining VRIO Framework. [Online] Available
through:<https://www.clearpointstrategy.com/vrio-framework/>
Tesla Motors, Inc., (2014). Form 10-K Annual Report . Palo Alto, California. [Online]Available
through:<http://ir.teslamotors.com/secfiling.cfm?filingID=1193125-14
69681&CIK=1318605 >Riley. J. 2018
Riley. J. 2018. Bowman's Strategic Clock. [Online] Available through:<
https://www.tutor2u.net/business/reference/strategic-positioning-bowmans-strategy-clock
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