Global Business Environment: PESTLE Analysis and Porter's Five Force Model

This report explores the global business environment through PESTLE analysis and Porter's Five Force Model. It focuses on Tesla, an electric automobile manufacturing company, and examines the political, economic, social, technological, legal, and environmental factors that impact its operations. The report also analyzes the competitive forces within the automobile industry and provides insights into Tesla's strategies for success.

Global Business
Environment
Assessment 2
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Table of Content
Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
Main Body.......................................................................................................................................3
PESTLE analysis.............................................................................................................................3
Porter’s five force model.................................................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8
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INTRODUCTION
In an era of globalisation, there is significant changes in business enterprise at a global
level which assist firm to grow and maximise the overall productivity (Eisler, 2016). Global
business environment is a broader term that constituent of both internal plus external factors that
influence the company in case of decision-making capabilities as well as determine the
availability of resources. When firm plan to expand globally, it increases the efficiency while
promoting culture and thus encourage a healthy competition. This report is based on Tesla which
is an electric automobile manufacturing company as it is headquartered in United States. This
company is propounded by Elon Musk in the year 2003 as it deals with several kind of
merchandise such as battery and so on. This report includes PESTLE analysis as it aids in affect
the business operations and lastly it includes Porter’s model which aids in determining the
competitive edge over a marketplace.
Main Body
PESTLE analysis
This analysis provides the framework to environmentalist to scan both internal and
external factors by determining the availability of resources so as to gain a competitive edge
within a marketplace (Halperin and et.al., 2016). This consist of several elements such as
political, economic, legal, environmental, legal and so on which provide assistance to the firm to
take decision so as to improve the overall profitability. The manager of Tesla would conduct
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PESTLE analysis so that it could identify several factors into consideration present in a
marketplace and provide a firm to measure a vast level of growth within the confines of
automobile industry. Tesla is most popular company which is manufacturer. With reference to
Tesla, the several elements of PESTLE are prescribed below:
Political element: These include the aspects which affect the business cycle of the
country like corruption, trade restrictions and so on. USA is considered as the political stable
country which promote a peace and harmonious environment (Hamilton and Webster, 2018).
This would provide a great opportunity to Tesla to follow constant rules and regulations for a
longer time as there is less interference of government and latest global trade agreements is
another opportunity that is used by the firm so as to boost the greater economy of scale.
Economic element: These cover aspects such as inflation, economic stability, fiscal and
monetary policies and so on. Foreign Direct Investment would render a vast opportunity to Tesla
to generate multiple streams of revenue and provide the growth at an international level. The
impact of Coronavirus is deepened and widespread that affect the sales operation due to shut
down of manufacturing of units and thus decline the purchasing power of consumers.
Social element: These includes elements such as lifestyles, changes in health awareness,
and many more (Jewell, Rivas and Mankin, 2019). Nowadays, customers put more emphasise on
quality rather than for prices so the manager of Tesla tends to prepare a unique strategy by
creating differentiation like largest producer of electric vehicles so as to live up to the
expectations of clients.
Technological element: USA is most technologically advanced country in the world as
there are drastic changes in automobile sector. Tesla pave the path easier by focussing more on
advancement in technology as it provides constantly provides new gadgets and models of cars
which fascinates and develop the interest of individuals towards it.
Legal element: This includes patent, copyright, health and safety laws and many more. It
is necessary for a business to protect the intellectual right so Tesla has strong patent over its
products or articles which facilitate smooth conduct of activities (Jiang and Lu, 2018). The top
management of Tesla follow the proper code of conduct and abide all rules and regulations in
order to maintain a reasonable growth and build trust among the buyers.
Environmental element: This attribute is one of the greatest strengths of Tesla as it has greater
contribution towards the environmentally friendly products. It makes use of renewable source of
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energy and reduce the carbon footprints which create a positive brand image across the globe.
Such idea of bringing electric car of Tesla by Elon Musk help in creating environmental
awareness which ensure sustainability for a long time and it also make judicious usage of
resources efficiently which creates customer loyalty as they would save fuel cost and thus reduce
noise pollution.
Porter’s five force model
This is a method which determine the level of attractiveness and profitability within a
marketplace as it assist the firm to gain a strong rivalry edge. This model assists the firm in
identifying the positive and negative aspects of an industry which help in analysing the profit
margin as this framework is devised by Michael E. Porter (Maake, 2017). This model is used by
the senior management of Tesla so that they could improve the productivity and profit margin of
a company. In the context of Tesla, the five components of Porter’s model are presented as
follows:
Competitive force: This element of Porter’s model is high in case of automobile sector.
There is huge revolutionise in this sector due to new and innovative technology which possess
the risk of obsolescence. For example: There are numerous competitors of Tesla such as Ford,
General Motors as well as Honda which possess a greatest threat for the firm. Tesla is popular
for its electric car as it has invested huge sum on infrastructure facilities which provide a greater
revenue in case of automobile company. The senior authority of Tesla would make an effective
planning like it could focus on sustainable differentiation and would build on large scale in order
to gain maximum exposure around the world (Porter and Prenzler, 2017). Another strategy that it
could formulate is that Tesla could form a strategic alliance with its competitors in order to
accelerate the share of market which maximise the sales operations of a business.
Bargaining power of suppliers: The power of this force is usually low because there are
giant number of suppliers which are currently present as they could acquire raw materials from
them. This provide them with several opportunities to buy the offerings from them in a bulk
quantity so as to minimise the cost of production and to improve the overall profitability ratio.
The top manager of Tesla focus on creating mutual relation with its suppliers so that they could
design the merchandise according to the latest and current requirements and to provide an utmost
level of satisfaction. In this case, Tesla is highly dependent on its suppliers so it creates a strong
distribution of network which help in contributing towards the success of an industry. They
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provide a greater assurance about the quality which build customer loyalty and allow it to
maximise the share of market in case of automobile industry.
Threat of substitutes: The extent of this force is regarded as high as there are several
alternatives present which provide same offerings of similar features. The CEO of Tesla that is
Elon Musk emphasise on creating product differentiation as it tends to adds greater value among
their clients as rendering them with efficient services and unique merchandise which boost their
satisfaction level and thus generates more sales and thus maximise the revenue in a marketplace
(Porter, 2019). The manager of a concerned firm tends to focus on enhancing the satisfaction of
them by fulfilling their criteria and requirements so as to bring desired level of output. The are
several competitors of Tesla like BMW, Bentley but Tesla is considered as the largest electric car
manufacturer which enhance maximum revenue and thus generate a vast growth of a business to
a ultimate level.
Threat of new entrants: The magnitude of this force is considered to be low due to the
reason that it is difficult for newly company to beat such as huge company which is Tesla as it
requires huge capital and greater economy of scale. Tesla has strong global presence which come
with new and innovative models as it greatly satisfies the needs of not only present clients but
also emphasise on uplifting the demands of attracting new customers. The senior authority of
concerned firm incurs huge investment on research and development as provide great innovation
which tends to fulfil the requirements of buyers and discourage the entry of newly electric
automobile company. The concerned firm also focus on providing greater value proposition to
their customers by meeting their expectations which enhance more productivity and allow it to
become a prominent leader within a marketplace. In addition to this, the manager could tackle
such threat by forming a unique and innovative strategy that help in ensuring the sustainability
for a longer time.
Bargaining power of buyers: The bargaining power of buyers is very low. The manager
of Tesla would emphasise on streamlining the process of production so that it could enhance
maximum productivity. Customers has numerous options to choose from as they as there is rapid
demand in cars. Elon Musk focus on creating new and rapid innovation by coming up with new
models and designs so that it could generate giant number of clients. There are several rivalries
of such firm such as Jaguar, Audi, Nissan so here the switching cost for customers is high. As
there are range of companies that are manufacturing electric vehicles so the most aspect such as
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price sensitivity is taken into consideration (Shageeva, and et.al., 2017). The prices of Tesla cars
are very high so buyers would get the opportunities of several alternatives and would emphasise
Tesla in order to reconsider their prices. But at the same time customers are more conscious
towards environmental aspects as it provides benefit for longer time like it saves cost of fuel and
also there is likely to be growing demand of electric cars instead of conventional cars in future.
By rendering an excellent service among the customers and awesome quality would decline the
switching cost of customers and motivate them to retain it for a longer time.
From the above components, it has been determined that Tesla would strong achieve the
most valued business in the world by beating its competitors as it is the manufacturer of several
parts such as batteries and other automobile components which reduce the dependence on other
countries. Therefore, the manager tends to make planning in advance by grabbing opportunities
at the earliest so that it could become a strongest player within the confines of automobile sector.
Criticism and limitations of Porter’s model
This framework is considered as static as there is no latest or current changes are
provided which is very essential aspect in a modern era. Also, it is best appropriated in case of
short term strategy which is one of the major drawback of Michael Porter model. New trends
such as Globalisation as well as rapid technological advancement are not showcased in such
model which make it inappropriate and hamper the decision making and growth of a firm. This
model is used basically for determining the attractiveness for industry but there is lack of
financial details which is most precious point (Shenoy and Aithal, 2017). As in the above model,
Tesla has not considered any of the financial details and regarding the transformations adopted
by the company. The overall model of Porter’s model is surrounded by the industry as there is no
specific definition provided regarding the industry as it pertains to whole sector which create
confusion among the readers. Various external factors like government regulations, laws and
procedures as well as varied regulations is not covered in such model which result in declining
the trade barriers and thus would affect the overall growth of a firm in an undesired manner.
There is lack of value chain in the marketplace which result in minimising the rate of success and
result in threat which directly affect the customers from different parts of countries. Tesla might
face several issues such as imbalance between demand and supply which directly affect the
brand value and would adversely affect the overall production rate.
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CONCLUSION
From the above report, it can be comprehended that the business environment is considered as
dynamic which allow the manager to manage and carry the activities in accordance of latest
trends so that it could assure greater chances of success. Also, PESTLE analysis and Porter’s
model is conducted in this report which assist in taking best decision and improve the
effectiveness and success of a firm.
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REFERENCES
Books and Journals
Eisler, M.N., 2016. A Tesla in every garage?. IEEE Spectrum, 53(2), pp.34-55.
Halperin, I., and et.al., 2016. The effects of attentional focusing instructions on force production
during the isometric midthigh pull. The Journal of Strength & Conditioning
Research. 30(4). pp.919-923.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Jewell, J.J., Rivas, J.A. and Mankin, J.A., 2019. Tesla: Is the Market Efficiently Pricing or
Efficiently Excited?. Journal of Critical Incidents.
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Jiang, H. and Lu, F., 2018. To be friends, not competitors: A story different from Tesla driving
the Chinese automobile industry. Management and Organization Review. 14(3). pp.491-
499.
Maake, N., 2017. A strategic analysis of the folktale of Tselane le Dimo. Southern African
Journal for Folklore Studies. 27(1). pp.1-9.
Porter, L.E. and Prenzler, T., 2017. Police officer gender and excessive force complaints: an
Australian study. Policing and society. 27(8). pp.865-883.
Porter, S.L., 2019. The evidential force of spiritual maturity and the Christian doctrine of
sanctification. Religious Studies. 55(1). pp.111-129.
Shageeva, F.T., and et.al., 2017, September. Training the achievement-oriented engineers for the
global business environment. In International Conference on Interactive Collaborative
Learning (pp. 343-348). Springer, Cham.
Shenoy, V. and Aithal, P.S., 2017. Quantitative ABCD Analysis of IEDRA Model of Placement
Determination. International Journal of Case Studies in Business, IT and Education
(IJCSBE), 1(2), pp.103-113.
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