What Is Strategic Management?

Reading Head: STRATEGIC MANAGEMENT 0
Management
March 6
2020

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Executive Summary
This report aims at analysing all the possible strategies that a company can adopt. These
strategies will help the company in achieving its goals and objectives. Market development
United Arab is at a pea level as people there are attracted to innovations and technology.
Companies are also adopting new and advance technologies in developing their products.
There are high chances of a company to earn maximum amount of profit but the company
should involve itself in innovations. Strategies are also adopted by companies that can
provide the components of growth and innovation. Every organization before implementing
strategies evaluates those strategies by using the appropriate strategic model. These models
enhance the advantages and problems that a company may face in the future after
implementing business strategies. The decision of implementing strategy in an organization is
also based on two major factors such as internal and external factors. These two factors affect
the organization at a higher rate. Recommendations of strategy are also mentioned in this
report.

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Contents
Executive Summary...................................................................................................................1
1.0 Introduction.....................................................................................................................3
2.0 Corporate Strategies.............................................................................................................3
2.1 Market Penetration...........................................................................................................4
2.2 Market Development Strategy..........................................................................................5
2.3 New Product Development...............................................................................................5
2.4 Consolidation Strategy.....................................................................................................6
3.0 Choice of Corporate Strategy...............................................................................................6
4.0 Business Strategy.................................................................................................................7
5.0 Evaluation of Strategy..........................................................................................................9
5.1 Acceptability.....................................................................................................................9
5.2 Suitability.......................................................................................................................10
5.3 Feasibility.......................................................................................................................10
6.0 Recommendations..............................................................................................................11
References................................................................................................................................14

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1.0 Introduction
TESLA is the best electric vehicle selling company. Electric cars are also been manufactured
and sold in 2019 by the company (TESLA, n.d.).
In this report Motors is an American electric vehicle and clean energy company. This
company is based in Palo Alto, California. This company was founded in 2003 by Martin
Eberhard and Marc Tarpenning. The main specialization of the company is electric vehicle
manufacturing. These electric vehicles consist of battery energy storage and vehicles are
charging from the solar city, collar panel, and solar roof tile. Tesla also operates in multiple
production and assembly plants but its main manufacturing facility is at the TESLA factory.
TESLA is also ranked as the world’s identification of possible strategic plans that can be
implemented by the company will be discussed. The evaluation of these plans will also be
presented by using appropriate strategic models. Recommendations and suggestion are also
been provided to the company so that they can implement plans effectively. Critical analysis
of those implications will also be done to know different aspects of the chosen strategy.
2.0 Corporate Strategies
There are many corporate strategies that a business can adopt to work effectively and achieve
goals. These strategies also provide a framework by which a company can also develop their
strategy. The main purpose of these strategies is to expand the organization and gain control
in the competitive market. There are four types of corporate strategy that can be used by
businesses such as Market penetration, Market Development Strategy, New Product
Development Strategy and Consolidation Strategy (LYNCH, 2018).

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(CFI Education Inc., 2020)
2.1 Market Penetration
Market Penetration is the strategy that occurs when a company is trying to get access to those
markets that already exist in the market. It is a product strategy where organizations try to
gain competitive advantage and control over the existing market. The main focus of this
strategy is to capture a large volume of the market. This strategy requires a high level of
competitive strength and a strong bond between customers and the company. It is a risk
approach (Davydov, 0928).
Tesla can also penetrate the market so that the company can also have a maximum amount of
market share. This can be done if the company will supply a unique product in the market.
Tesla can achieve this strategy effectively as the company is developing vehicles that are
having advanced technology For example company is developing vehicles that will charge
through solar energy.

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2.2 Market Development Strategy
Market development strategy is the growth strategy and it is used to expand the market and
attract new customers through the development of new products. This strategy is effectively
implemented when the needs of the individuals can be identified. Market research is also the
most important and critical part of this strategy. This strategy targets customers that are not
involved in the market. New customers can be identified through geographic, demographic
and psychographic segments of the market (Czarniewski, 2014).
Tesla believes in applying a strategy that will help the company in gaining a competitive
advantage. In Michel Porter’s model, a competitive strategy is that which helps the company
in competing in the market. Tesla's strategy is that the company is focusing on developing
vehicles with advance technology. Tesla is competing against General Motors Company,
Toyota, Honda, Nissan and many more. Tesla is also looking for an intensive business
growth strategy.
2.3 New Product Development
Product is the main component of every business. Therefore the development of products
according to the needs of the customers is also considered important. New product
development is the process of developing, researching and creating a new product. It is also
the process of bringing new products in the market with proper marketing and effective
strategy is also the major task for the business (Kuka, 2018).
Tesla Inc. is focusing on those strategies that will help their business achieving competitive
advantage and growth. The main focus of the company is on two strategies i.e. Market
development and New Product Development strategy. This strategy is helping the company
in initiating new technology in electric vehicles.

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2.4 Consolidation Strategy
It is the strategy that refers to the mergers and acquisition of small companies into large
companies for economic benefits. This strategy is helpful for both organizations that are
merging because it will create new opportunities for the business. The main goal of this
merger or acquisition is to reduce the cost of the business. It also helps the business in
improving efficiency and processes (Deans, 2003). By applying this strategy effectively in
the market company can earn high profits and they can also develop a customer base. There
are several ways for companies by which they can adopt this strategy (Weedmark, 2019).
Tesla has also adopted this strategy as Tesla has acquired Maxwell Technologies. The main
aim of this acquisition is to improve electric automaker. It also helped the company in
reducing the cost of the company and it helped the company in gaining competitive
advantage and reducing competition in the market (Korosec, 2019).
3.0 Choice of Corporate Strategy
Four corporate strategies can be used by any business and these strategies are mentioned
above. All this strategy has different aims and motives. The organization will choose strategy
according to its needs. These strategies will help the organization in achieving a competitive
advantage in the market.
If Tesla will use Market Penetration strategy it will be helpful for the company as it will help
the company in gaining competitive advantage and creating more customer base. The
company believes in applying those strategies that can help a company in innovations and
attracting more customers. Michael Porter’s model refers that a competitive strategy
represents the approach towards a competitive market. Tesla focuses on using new and
advanced technologies in its vehicles and other products (ROWLAND, 2018). Market
penetration strategy consists of four components such as

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Cost Leadership Differentiation
Cost focus Differentiation focus
Cost is the main factor for every business. Cost also affects many factors of the organization.
Cost Leadership is applied in the business to gain a competitive advantage in the market. But
cost leadership is the different concept from price leadership as this will help the company in
reducing the cost of producer. This feature will not reduce the cost of products. And if the
company can successfully implement this component in its company they can earn the
maximum amount of profit in the market. This factor also helps the company in reducing the
cost of the company. This factor is generally dependent on efficiency, size, scale, scope, and
experience of the company. Since the company is having several competitive advantages in
the market in terms of market and technology company can easily adopt this component in
their business strategy. Since Tesla has mastered its value chain and the company also has
experience in the market and supply chain of the company is also strong in comparison to
other competitive companies all these factors will help the company in controlling its value
system.
4.0 Business Strategy
This Strategy will focus on business growth. By applying effective business Strategy
Company can gain a competitive advantage. There are different models of business strategies

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that are used by every company according to their requirements. Tesla also has its business
strategy and that is mentioned below
(Business Strategy HUb, 2020)
When Tesla entered the market through the launching of expensive cars and the main target
of the company at that time are high-income group people. Tesla establishes that once the
company will be settled in the competitive market they will launch lower price model cars as
well. The main focus of the company was to build a brand name. There are three models of
the Business strategy of Tesla, namely:
1. Direct Sales
Tesla prefers to sell its products directly to customers. The company believes that adopting
this type of business strategy will help the company in product development at an increasing
rate. The experience of customers while buying a vehicle can also be improved by this
approach.
2. Servicing

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Tesla has combined the approach of direct sales and servicing. The company believes that
service centers have positive impacts on the demand of customers. “Service Plus” retail
centers are an additional advantage for customers of the company. Customers can service or
charge their cars at stations that are opened by the company.
3. Charger’s Network
Tesla has a wide range of stations where customers can charge their cars. The company has
also placed supercharge stations where customers can charge their vehicles in half an hour.
The company has adopted this approach because the company knows that more customers
will attract to it.
5.0 Evaluation of Strategy
Evaluation of business strategy is considered important for the organization. This helps the
company in evaluating the effectiveness of the company. Evaluation is depended on several
factors such as suitability, Acceptability, and feasibility. These factors are important for the
organization. The organization will implement only these policies that will fulfill all these
components (Wright, 2019).
5.1 Acceptability
Market penetration strategy is the chosen strategy for Tesla Inc. This strategy attracts
stakeholders as Tesla is innovating new products and it has also created a large customer
base. There are some expectations of stakeholders that need to be fulfilled by the company.
These expectations are international expansion of the company, innovations, profitability and
many more (Study.com, 2018). Marketing helps the company in fulfilling all these
expectations as there are different components of marketing penetration that helps them in
reducing the cost that will increase the profitability of the company (Sen & Rajagopal, 2015).

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The recommended ways by which Tesla can take advantage of this approach is by increasing
the market share of the company i.e. expand the business overseas. Since Tesla is an
automobile company it can expand business easily because people will get attracted to cars
that have advance technology.
5.2 Suitability
Suitability is considered most important while evaluating policy for business. Suitability
suggests the company whether this strategy is useful for the company or not. Tesla is the
company that is focusing on new trends of technology so that it can invent products with new
technology. There are many key drivers and growth perspectives for the company (Business
of accounting, 2010). The company has a large number of customer bases in the market it
helps the Company to keep motivate it. Market penetration strategy helps Tesla in identifying
new technology in advance so that Tesla can adopt those technologies earlier from other
companies. This approach will also help Tesla in gaining competitive advantage (Farooq,
2016). Tesla can also take advantage of many opportunities such as customer base,
technological advancement, and quality of products. Market Penetration also allows Tesla to
expand its customer base.
5.3 Feasibility
Tesla has many competitive advantages in terms of the supply chain, customer base,
technology, and effective management. But Tesla is now focusing on building a more
effective growth strategy by which Tesla can become a leading organization in the
automobile sector. This will also help the company in eradicating competition in the market
(Sanchez et al., 2017). Market penetration strategy provides many such advantages by which
Tesla can achieve all these objectives. This strategy will also provide feasible conditions in
the organization by which it can work more effectively and efficiently towards achieving its
goals. Tesla is already having experience and so it knows the preference of people and this

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factor can also result in a competitive advantage. Therefore, Tesla should apply this strategy
in their organization so that they can also accomplish their objectives (GUILLÉN, 2017).
6.0 Recommendations
The main objective of every company is to earn the maximum amount of profit. This can be
done when a company is in a competitive market. The company should also adopt those
plans, policies, and strategies that can help them in leading the competitive market. The
company should also work effectively towards achieving those goals and objectives. Many
strategic policies can be adopted by the organization according to the need and requirements
of the organization. Generally, four strategies are adopted by most of the organization. These
strategies are Market penetration, Market development, new product development, and
Consolidation strategy. But before implementing these strategies company should evaluate
these strategies by using the business model so that they can know about the positive and
negative impacts of the strategy.
Tesla is a company that is involved in the automobile sector. The company believes in growth
and innovation strategy. The company is also focusing on fulfilling the demands of customers
by innovating products with new and advanced technology. Currently, the company has
adopted a new product development strategy (Business Strategy HUb, 2020). This strategy is
helping the company in identifying the needs of the customers and developing products
accordingly. There are many competitive advantages for the company and they are mentioned
above. These competitive advantages are gained by the company as the company is having
experience in the market and the company also knows the expectation so customers. Tesla is
looking forward to expanding its business so that they can earn more profit (Dane, 2019).
There is also a recommendation for the company i.e. company can also adopt the Market
Penetrating strategy. This strategy will help the company in penetrating the market. There are

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four major components of this strategy i.e. differentiation, cost leadership, cost focus, and
differentiation focus. These four components will help the company in the effective
implementation of the strategy. The company should also decrease the cost of production this
will also help the company in maximizing its profit. This is possible if the company will
adopt this strategy (WHITE, 2020). Product differentiation is also important for gaining a
competitive advantage in the market. The company should differentiate its product from its
customers then only they will manage to attract new and existing customers in the market.
The focus of the company should be in initiating new technology in the products. Tesla
should develop vehicles that have the latest technology. The company has also adopted this
feature as the company has developed vehicles that will charge from solar energy. This type
of vehicle reduces the cost of customers and so people are attracted to it (DUTTA, 2019).
This report will help learn about different aspects of business strategy. There are different
aspects and importance of evaluation business strategy. Models of evaluation can also be
learned in this report. Tesla also needs an effective strategic alliance that can create stability
in the company. Future goals of the company can also be accomplished only if the company
will implement the proper strategy. It has been observed that every automobile company is
facing loss while selling the vehicle. The company can solve this type of problem by applying
a proper business plan and strategy. Issues that are faced by the company are cost to produce
product, Supply chain management, and infrastructure, political and legal environment. Al
these issues can be solved by implementing a Market penetration strategy because these are
the main aim of this strategy. Therefore, the company should adopt those policies that can
solve their issues and help the company ineffective management.

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References
Business of accounting, 2010. Suitability. [Online] Available at: htt
sp://businessofaccouting.blogspot.com/2010/04/suitability.html [Accessed 07 March 2020].
Business Strategy HUb, 2020. Tesla Business Model (2020) | Tesla Business Model Canvas.
[Online] Available at: https://bstrategyhub.com/tesla-business-model-tesla-business-model-
canvas/ [Accesed 07 March 2020].
Czarniewski, , 2014. Market Development and Relationships with Customers:A Model and
Conceptual Approach. International Journal of Academic Research in Accounting, Finance
and Management Sciences, 4(3), pp.199-205.
Dane, E., 2019. The Secret Of Tesla’s Success Is Not Selling Cars: It’s Being Able To
Anticipate The Future. [Online] Available at:
https://www.forbes.com/sites/enriquedans/2019/09/09/the-secret-of-teslas-success-is-not-
selling-cars-its-being-able-to-anticipate-thefuture/#964104f4973a [Accessed 07 March 2020].
Davydov, , 0928. How to Create a Market Penetration Strategy and Make the Market Play by
Your Rules. [Online] 2017 Available at: https://kraftblick.com/blog/market-penetration-
strategy/ [Accessed 06 March 2020].
Deans, G., 2003. MASTERING INDUSTRY CONSOLIDATION: STRATEGIES FOR
WINNING THE MERGER. Ivey Business Journal.
DUTTA, , 2019. A Deep Dive Into Tesla Business Strategy. [Online] Available at:
https://www.feedough.com/tesla-business-strategy-and-business-model/ [Accessed 07 March
2020].

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Farooq, , 2016. Business Study Notes. [Online] Available at:
http://www.businessstudynotes.com/marketing/marketing-management/types-market-
penetration-strategies/ [Accessed 07 March 2020].
GUILLÉN, , 2017. 4 Keys to a Successful International Market Penetration. [Online]
Available at: https://www.accelingo.com/successful-international-market-penetration/
[Accessed 07 March 2020].
Korosec, , 2019. Tesla’s $218M Maxwell acquisition aims to give its batteries a boost.
[Online] Available at: https://techcrunch.com/2019/02/04/teslas-maxwell-acquisition-aims-
to-gives-its-batteries-a-boost/ [Accessed 09 March 2020].
Kuka, G.K., 2018. Product Development and Management Strategies. [Online] Available at:
https://www.intechopen.com/books/product-lifecycle-management-terminology-and-
applications/product-development-and-management-strategies [Accessed 06 March 2020].
LYNCH, , 2018. CORPORATE STRATEGY, BUSINESS STRATEGY AND FUNCTIONAL
STRATEGY; WHY SO MANY? [Online] Available at:
https://www.focusedmomentum.com/blog/corporate-strategy-business-strategy-and-
functional-strategy-why-so-many [Accessed 07 March 2020].
ROWLAND, C., 2018. Tesla, Inc.’s Generic Strategy & Intensive Growth Strategies
(Analysis). [Online] Available at: http://panmore.com/tesla-motors-inc-generic-strategy-
intensive-growth-strategies-analysis [Accessed 07 March 2020].
Sanchez, et al., 2017. Feasibility of an implementation strategy for the integration of health
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https://bmcfampract.biomedcentral.com/articles/10.1186/s12875-017-0585-5 [Accessed 07
March 2020].

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Sen, & Rajagopal, K., 2015. Market Penetration through Sales Promotion - A Review. IMJ.
Study.com, 2018. Evaluating Business Strategy: Suitability, Feasibility & Acceptability.
[Online] Available at: https://study.com/academy/lesson/evaluating-business-strategy-
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https://www.executestrategy.net/blog/strategy-evaluation [Accessed 07 March 2020].

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Appendix
Executive Summary
The report aims to analyze the external and internal environment of Tesla in order to identify
the attractiveness of the automotive industry and the distinctiveness of the firm. For external
analysis of the automotive industry two tools are used that are Pestle analysis and porter five
forces framework. For internal analysis resources and capabilities of Tesla are analyzed and
VRIO analysis is done in order to know core competencies and competitive advantage. The
results of the report suggest that the automotive industry is attractive and Tesla possesses
distinctiveness and has a strong competitive advantage that is sustainable in comparison to its
rivals.
Introduction
Tesla Motors is an electric vehicle company that operates in the automobile industry in
America. The company manufactures electric vehicles and battery energy storage. The
company has various production and assembly plants in various locations (Teece, 2018). At
present, Tesla Model X and Model 3 cars are in trend as Tesla sales improved by 50% from
2018 (Chen et.al,2019). In 2018, the sales at the global platform were 245,240 units and in
2019 sales at the global platform were 367,849 units (Tesla, 2019). Tesla is a leading player
across the world in the automobile industry. Tesla covers 77% of the electric vehicle segment
in the US (Chen and Perez, 2018).
This report aims to understand the external and internal business environment in which the
company is operating. In order to assess the business environment different strategic
management tools are used such as for external analysis, porter five forces and pestle analysis
is done in order to know industry trends, key drivers and attractiveness of the industry. For

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internal analysis core competencies are identified using VRIO analysis so that strengths and
competitive advantage of Tesla can be identified. At last, the conclusion is given considering
the internal and external environment of tesla and the industry in which the company is
operating.
Industry Analysis
Trends and key drivers in the automobile industry were identified using PESTEL analysis
(Appendix 1). The Pestle framework helps in to understand the external environment in
which the business operates.
External Analysis
Trends
Increasing usage of electric vehicles: The trend that can be seen in the automobile industry is
the shift of people towards electric cars (Musonera and Cagle, 2019). Electric vehicles are
trending because of global consideration for going emission-free. This idea leads to the trend
of an electrified and autonomous vehicle in the automobile industry. It is estimated that by
2030 half of vehicles could be electrified and following autonomous concept (Teece, 2018).
Eco-Friendly Products: It is analyzed that in the automotive industry people are concerned
about the environment and due to that their habits and lifestyle shifts to using sustainable
resources. This becomes a trend in the automotive industry to shift to an electric car in order
to contribute to the betterment of the environment. Further, it is found that Tesla sales
increased because of government support for sustainable initiatives and people concern for a
sustainable environment (Thomas and Maine, 2019). Hence, sustainability is the factor in the
current business environment that is trending and adopt by businesses for long term success.
Key drivers

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Disruptive innovation: Disruptive innovation includes the rapid evolution of business models.
In the automotive industry, the barriers for new entrants are higher due to that leading player,
like Tesla is able to get a competitive advantage of its innovation in the long run. As
identified from the external analysis of Tesla that innovation is the key driver that influences
tesla to operate and increase its sales. Electric cars introduced by Tesla are one of the
innovations that drive the company to produce more and to focus on product development
(Perkins and Murmann, 2018).
World economic growth: The world economy is growing at a faster pace as seen in figure 2,
and further expected to increase in the next couple of years. A growing economy at the global
platform and at the domestic platform will lead to various opportunities for the automotive
industry so as for Tesla to increase its market share. Due to economic growth, it will become
easy for Tesla to invest in new technologies and get a positive response from the market
(Thomas and Maine, 2019).
Power Attractiveness
The attractiveness, power of industry and nature of competition is analyzed through using
porter five forces framework (Appendix 1). In the context of Tesla, the bargaining power of
suppliers in this industry is higher due to that company's need to take care of its suppliers as
electric cars will be the future of the automotive industry (Musonera and Cagle, 2019).
Moreover, buyer power and rivalry in this industry are moderate which indicates that the
industry is more attractive for the existing players and not for new players as there are already
well-established brands that are struggling in the automotive industry. Because of moderate
competition and bargaining power of buyers this industry leads to more profits (Gamble
et.al,2016).

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At last, the threat of substitution and the new entry is low that indicates that there is the high
level of barriers in this industry and there is no threat of entry of new players in the market
due to that existing players can enjoy a high level of profits and position in the market. Along
with that, there are fewer chances of getting the substitute for electric cars in the near future.
Hence, the automotive industry proves to be attractive for Tesla.
Internal Analysis
According to Rothaermel (2016) resources of the company represent capabilities, assets,
information and many more that help the businesses to implement current strategies with the
motive of bringing efficiency in the company’s operations. Tesla is trying to gain a larger
market share in order to be profitable by focusing on offering innovative products to its target
market.
Core competencies
From the analysis of capabilities and resources (Appendix 2) the core competencies that are
identified and make Tesla successful in the market are:
Easy access to funds: Tesla has goodwill in the market due to that the company get easy
access to funds. The loan from banks becomes an easy source for the company because of its
strong financial base. This leads to high expenditure by the company on infrastructure,
research and development and technology advancement gives a competitive edge to the
company over its competitors (Tesla,2019).
Innovation and Technology: The core competency that Tesla has is its technological
resources and physical resources, as the company has two manufacturing plants that are
highly technological (Thomas and Maine, 2019). Tesla has its own motor designs and a good
example is its model 3. This aspect gives the company a competitive advantage.

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Vehicle Engineering: Engineers or human resources in Tesla are recruited and provided
training in the way so that they become assets for the organization. The capability of Tesla to
produce different models with advanced technology and designs makes the company
different from its customers (Tesla,2019).
VRIO analysis
Valuable: The most valuable resource for Tesla is its innovations, this brings a successful
customer base for the company (Endsley,2017). The leader, human resources, charging
infrastructure networks, and brand image are the areas that are valuable and give a
sustainable competitive advantage to Tesla in the automotive industry and add on the value in
the operations of Tesla.
Rare: As compared to its competitor, Tesla created a combination of sustainability and high
performance that is a rare concept in the automotive industry. Tesla firstly introduced battery
cars that were also a rare thing done by the company. Tesla innovation and leadership are rare
things that lead to the success of the company (Teece, 2018).
Imitable: The mission of Tesla is to become a leader using sustainable practices and by going
green. With that motive, the company influenced people and aware them to use electric cars
and shift the focus of people towards the environment is considered a non-imitable factor
(Endsley, 2017).
Competitive advantage
Leadership: Tesla CEO, Elon Musk is amongst one of the transformational leaders that
promote and direct change in an organization. He promoted solar electricity in order to
reduce the impact of climate change. He has the ability and skills to lead and transform the
organization for the betterment of society and its employees. Tesla is successful because of

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Elon Musk's transformational leadership style and is able to compete in the market
(Musonera and Cagle, 2019).
Supercharger network: Another competitive advantage that is identified from the analysis is
its charging network across the world. From figure 6 it can be seen that the company
provided a charging network in Asia, North America, and Western Europe in order to support
the use of electric cars. In the automotive industry, the initiative taken by Tesla was never
taken by anyone that gives an advantage to the company in the market (Valentin,2019).
Batteries: The batteries that Tesla used for its electric car is a competitive advantage because
its competitors like General Motors and Ford are not able to get these batteries at the lowest
cost. It can be seen from figure 4 that the cost of batteries for the company reduced in 2020
because of the huge investment by the company in Gigafactories. As investment is
gigafactory cannot be imitated by other competitors (Perkins and Murmann,2018). Hence
taken as a temporary competitive advantage for Tesla.
Conclusion
This report included external and internal analysis of Tesla using different tools such as
Pestle analysis, VRIO analysis, and porter five forces framework. From the analysis, it is
concluded that the automotive industry is quite attractive for the existing players in the
market because of favorable social, economic and political factors. Further, it is identified
that supplier power in this industry is a dominating force and should be mitigated by using an
appropriate strategy by companies. From the internal analysis of Tesla, it is concluded that
the company got a competitive advantage because of innovation, leadership, charging
networks and batteries. At last, it can be said that Tesla can be successful in the market in the
near future by focusing on increasing its market share of electric cars.

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Appendices
Appendix 1: External Analysis
• PESTLE Analysis

STRATEGIC MANAGEMENT 24
Political
The political factors highlight the political stability in the country and its impact on
businesses. Tesla operates in the US in the automotive industry. In the US, major political
changes happened in the automotive industry. Such as at the global platform most of the
countries support the initiative taken by Tesla that is a sustainable environment or green
environment for that the company boost sales of its electric cars across the globe. But in the
US Trump decided to not support sustainable initiatives started by Tesla and framed policies
in order to interrupt the operation of Tesla (Langhelle et.al,2019).
On the other side, European countries support the initiative taken by Tesla by providing
charging stations and infrastructure to increase the use of electric cars so that emission issues
can be controlled. Further, governments are boosting the use of electric cars that provide an
opportunity for Tesla to make people use their electric cars and boost their sales at the global
platform (Munson,2018).
The table below showed the support that government across the world provide to Tesla:
Source:
Figure 1: (Langhelle et.al,2019).
Economic
The economic factors include the economic growth of the country, purchasing power, the
standard of living and the exchange rate of the currency. These factors impact directly the
growth and prosperity of businesses across the world. Tesla‘s profits increased from the last

STRATEGIC MANAGEMENT 25
couple of years because of an improvement in the world's GDP As GDP in 2007 was $60
trillion and in 2017 GDP was $ 80.5 trillion that indicates the global economy is increasing at
the rate of 2.5% each year. Tesla's market growth also increases because of this factor as
people nowadays like to buy innovative technology at the premium price.
The below figure highlights the growth rate of developed countries and accordingly the world
growth rate. It can be analyzed that in the US, the growth rate expected to slow because of
China and the US trade war due to that Tesla growth in the domestic market will slow down.
Hence, Tesla faces issues in order to operate in the domestic market but has ample of
opportunities at the global platform.
Source: (Kauerhof,2017)
Figure 2:
Social
Social factors include the lifestyle of people, their attitude, belief, and perspective. There are
many factors in the social environment that impact on Tesla operations and automotive
industry in the US. It is identified that US people are shifting and concern about the
sustainable environment and renewable energy and using innovative technology. Due to these
factors, the US people started to change their lifestyles and habits and become eco-friendlier.
Tesla sales of electric cars in the US might increase because of changing lifestyles and
switching of people to eco-friendly products whether its cars or any other product. At present,
the company is producing and launching high tech models such as model 3 and trucks and

STRATEGIC MANAGEMENT 26
vehicles that are eco-friendly. Due to that, the social factors are considered as the opportunity
for the company in the US market or at the global platform.
Technological
Technology is the key strength for Tesla in the automotive industry as the company is a
leading player in launching innovative models under the leadership of Elon Musk. Tesla
offers a perfect mix of technology, innovation, and sustainability. Engineers of Tesla
constantly focus on innovation and modification in order to deliver better products to its
customers.
In the below figure Tesla batteries cost are given that indicate that the company reduced its
cost of production because of technological advancement. This leads to an improvement in its
profit margin. Further, Tesla in the near future focusing on adopting automation in cars
through the use of artificial intelligence in order to bring a level to the automotive industry in
the US and in the world.
Source: (Teece,2018)
Figure 3:
Source: (Teece,2018)
Figure 4:
Environmental

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According to Taffel (2018), environmental factors include the focus of companies on global
consideration such as issues like climate change, pollution, greenhouse gases, and waste
management. Tesla is more focused on environmental factors and contributes to a greater
extent and to protect the environment and ensure sustainability. The green trend that is
happening in the automotive industry will change the way the automotive industry works or
operates.
• Porter Five Forces
There are five forces in the external environment that can impact on the Tesla operations and
working in the US market. These factors are explained in detail below:
Competitive Rivalry: At present, there are not many competitors for Tesla in the automotive
market because of high investment in technology in order to produce electric cars but quickly
competitors like General Motors and Ford will compete with Tesla in the electric cars
segment. Because both companies have financial and human resources in order to invest and
produce electric vehicles. Hence, the competitive rivalry force is moderate.
The threat of new entry: This industry requires high investment, due to the threat of new
entry is low. In order to produce electric cars, the automotive industry requires skilled
workers and big investments in order to compete with an established player like Tesla. This
industry requires a considerable amount of money and sources in order to compete and grow
for the long term. Already established companies are struggling hence chances of the new
entry in this industry is low.
Buying power: Buying power of customers in this industry is medium. As tesla has a strong
loyal customer base and target high-class income group this leads to less influence of

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customers on operations of Tesla. On the other side, the company produces products that are
highly innovative so the chance of buyer influence on the company is moderate.
Power of Suppliers: The suppliers in the automotive industry have high influence because
companies in this industry depend highly on raw material procured from suppliers. The
quality and price are two important considerations for Tesla and that is fulfilled by its
suppliers. Any change in suppliers will directly impact on the operations of Tesla and create a
monopolistic situation. The importance of suppliers in the automotive industry can be seen in
the below chart.
Source: (Thomas and Maine, 2019)
Figure 5:
The threat of substitution: The substitute in this industry is not available for electric cars.
However, electric cars produced by Tesla substitute traditional cars. On the other hand,
substitutes for transportation are buses, bicycles, and trains. But these substitutes are not that
comparable to the comfort level that the car gives. Hence, the threat of substitutes in this
industry is low.
Appendix 2: Internal Analysis
• Resources and Capabilities
Resources
1. Physical: The physical resources include assets and manufacturing plants of Tesla.
The company has two manufacturing plants located in Nevada and California. Both plants

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have the capacity to produce 800,000 cars on an annual basis (Cooper,2018). Other resources
of Tesla are its stores to provide customer experience of innovative technology and a huge
network of charging stations are some of the physical resources of Tesla.
Source: (Cooper,2018)
Figure 6:
2. Human: Tesla has a strong workforce that includes workers, engineers, and top-level
managers. The company employed 15,000 employees in all its locations. The key strength or
competitive advantage of Tesla is its human resources as they are passionate, innovative and
knowledgeable. The workforce of Tesla is helping the company to build a positive image in
the market.
3. Financial: Financial resources are considered as the strength of any organization if
increasing. In 2018, the revenues of Tesla increased by 10 billion as compared to 2017. As in
2018, the revenue of the company was US$21.5 billion. It is identified that the company was
running in losses from the past five years but regains its position in 2018 and now has
opportunities to further increase its market share.
Source: Tesla revenue growth
Figure 7: (Tesla,2019)
Capabilities
Capabilities are the ability of an organization to use its resources or manage its resources in
order to produce products or work as per the organizational direction. Tesla has the capability

STRATEGIC MANAGEMENT 30
to organize and manage its resources because of its skilled human resources and reputation or
goodwill in the market.
Source: (Musonera and Cagle,2019)
Figure 8:
• VRIO Analysis
VRIO analysis is considered as the tool that helps to identify resources that are valuable, rare,
difficult to imitate and exploited by the organization. Tesla VRIO analysis is given below that
helps the company to gain a competitive advantage.
Competencies Valuable Rare Imitable Exploited by organization
Implication
Brand Image Yes Yes Yes Yes Sustainable competitive advantage
Infrastructure Yes Yes Yes Yes Temporary competitive advantage
Gigafactories Yes Yes Yes Yes Sustainable competitive advantage

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Leadership or Leader Yes Yes Yes Yes Sustainable competitive advantage
Self-Learning cars or Innovation Yes Yes Yes Yes Temporary competitive
advantage