Strategic Management Plan of Tesla

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
P1. Appropriate framework to analyse macro environment.......................................................1
P2. Analysis of the internal environment and capabilities of Tesla Inc......................................4
P3. Applying Porter's Five Forces model....................................................................................6
P4. Strategic management plan...................................................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business strategy is essential for the industry to attain the objectives and goals. It also
refers to the management plan that assist the company to enhance the overall performance. The
assignment report is made on Tesla Inc.- an American auto-mobile and energy company based in
California. Tesla specialises in manufacturing of electric cars. The study is categorised in two
major parts; the first part will identify macro environment that affect the business operation and
strategies through PESTLE analysis and Porter's five forces model. In addition to this there are
various factors that present within the organisational environment that will be discussed in the
study through SWOT analysis of the organisational capabilities. The second part of the study
evaluate various types of strategic directions available to the industry. It is recommended to the
company regarding the growth and strategies. Furthermore, the study will produce a strategic
management plan with strategies and objectives and tactics.
MAIN BODY
P1. Appropriate framework to analyse macro environment
Macro environment – Macro environment refers to the external environment that exists
outside the organization. It consists all those factors that indirectly influences the operations of
the company. These factors also affects the performance, decision-making of the firm. For
analysing macro environment of Tesla, PESTLE Analytical tool is effective (Chown and et. al.,
2017). There are various types of external factors that may affect the business and strategies of
Tesla, they are as follows -
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Political factors – The political factors have both negative and positive effect on the
industry. The UK federal government has supported the advent of electric vehicles through
verbally and incentives. New carbon emission scheme based vehicles provide an opportunity to
the company. Support of UK government provide growth opportunity to the business as the
government has taken position in order to improve the growth of hybrid and electric engines.
However, the tax rates, inflation rates affect the operation of the business negatively (Akter and
et. al., 2016). The potential market targeted by Tesla are political stable that boost the business of
Tesla.
Economic factors – Economically electric vehicles are gaining popularity. Economy at
global level and at domestic level affect the operations and further strategies of Tesla. This factor
appears as opportunity for the business as it is estimated that global economy would grow by
3.6% that lead towards more electric developments. Additionally, decreasing battery cost and
renewable energy cost also beneficial for the business growth and help in further business
strategies. However, raise in economic activity and recession has affected the growth. The
demand of the products of Tesla has risen but to grow quicker it required to address challenges
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Illustration 1: PESTLE Analysis

comes in the pricing strategy that limits the brand to reach the middle class consumers
(Thompson, Strickland and Gamble, 2015).
Social factors – Socio-cultural factors have influence on the supply and demand of the
certain goods and services of Tesla. The lifestyle is changing and popularity of low-carbon is
increasing that provides an opportunity to the business to grow with their strength that is their
CSR strategy. The company also have opportunity to grab the market with promoting
replacement of fuel vehicles with eco-friendly vehicles that increases the demand of electric cars.
Along with it, wealth distribution in the market is equal that assist the company to achieve the
long-term financial goals.
Technological factors – Expanding and growing technology at an exponential rate will
undermine and help the company to make their effort effective in the growth and development.
This factor determines on which degree the brand is competitiveness. Tesla have opportunity to
adapt new technology and implement it in their products that help Tesla to make their car more
affordable and use-friendly (Pisano, 2015). Moreover, Tesla also can take advantage of Artificial
Intelligence and incorporate the AI system in the vehicles that develop and uphold the demand of
unique cars. Increasing demand of online mobile system enable Tesla to enhance their integrated
system in their products.
Legal factors – As the organisation is global and expanding into other markets thus, they
are required to have proper understanding of the laws and legislation of various countries.
Industry have opportunity to properly expand their business. On the other hand, this factor
appeared as negative because of some safety issues. Many states in UK temporarily banned
direct sale from producer to consumer of Tesla. Company have opportunity to market their cars
in other countries being in line with energy consumption regulations. The strict law regarding
taxes, carbon emission in several countries limits the operation of Tesla and if the policies and
laws are in support that assist the business to expand their profitability.
Environmental factors – This factor is the biggest strength of the industry. Tesla mainly
deals in environment friendly vehicles. The forte of company goes with approx all the
environmental laws and legislation as the electric vehicles have unnoticeable carbon emission.
The company builds a strong brand image in the market by focusing on more of the environment
and recognised Tesla as the market leader in this industry. Ethical and sustainable business
operation provide an opportunity to the business to position their brand name.
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P2. Analysis of the internal environment and capabilities of Tesla Inc.
Tesla Inc. succeeds as an energy solution and innovative automotive business. Through
SWOT analysis, the strength and capabilities of the company can be identified effectively as well
as future opportunities and present threats (Amran and et. al., 2016). This analytical tool will
provide hints of strategic implications. SWOT highlights the main issues from the macro
environment and strategic capabilities of the company that have significant impact on the
strategic development of the business.
Strengths- The company contains various strength that assist them to be over others in
the auto-mobile industry. Tesla is known in the market for their high degree of innovation. The
brand name recognised for introducing world's first sport cars that is fully electric. The strength
of the industry empowers Tesla Inc. to develop profitable and competitive products. The brand
image is also a strength of the company that present a strong symbol of renewable energy
solution and many innovations. The cars introduced by the brand is easily noticeable and have
attractive and high performance features (Hsieh, Ma and Novoselov, 2019). The brand is also
become the first EV organisation who introduce Roadster. Efficient distribution channel are
established in the high traffic retail location that enhance the interaction with the potential clients
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and make the company more able to integrate with digital technology and e-commerce.
Furthermore, Tesla have around 300 patents that ensure the security of the innovation.
Weaknesses- One of the biggest weakness of Tesla is that the products are very
expensive. The massive price tag of the company eliminates any potential profit from the middle
class income population that affect the consumer base as well as the market share. The weakness
can reduce the competitiveness of the brand as well as affect the business growth opportunities.
The limited supply chain is also appeared as a weakness of the company. It also affects their
expansion strategies in the global market. Limited production capacity can lead the company
towards the failure to meet the enhanced consumer demand in the marketplace. Additionally,
company is reliable on batteries and shortage of battery cells and heavy reliance on the supplier
can harm the brand image. That is due to of delay in vehicles delivery to the potential consumers.
Opportunities- The opportunities can utilise by the business to grow and develop the
business in the industry. The brand has many opportunities that developed by external factors in
the automotive industry (Kourdi, 2015). Demand of consumers of environment friendly car is the
most driving opportunity for Tesla and boost the sale of the company. Along with it, consumer
awareness is rising regarding the benefit of having electric vehicles, substitute products for fuel
cars and awareness regarding environmental pollution that create an opportunity for Tesla to
generate demand for the products. The political support also provide an opportunity to the brand
to do more innovation and improve the performance through diversification. Tesla is also
required to consider the opportunity for expansion of global sales. However, the opportunities
are based on the significant growth in terms of economy in various countries where Tesla have
insignificant presence in the market.
Threats- there are various factors that reduce or limits the performance of Tesla called as
threat that forbid the brand from maximising benefit from the opportunities and strengths. Tesla
is facing threat of established manufacturers make their entry in the marketplace with high
expertise and economies of scale that make negative impact on the industry. This threat also raise
the possibility of taking away the potential consumers by the intense competitors. The global fuel
efficiency standard is also being a threat for the industry that force auto-mobile manufacturers to
assess their choices including implementation of technological advancement (Thompson,
Strickland and Gamble, 2015). The brand is required to address present threats in order to
manage the elasticity contempt the changing condition of the electric vehicle industry.
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From the SWOT analysis capabilities of the brand can identify. The capabilities of Tesla
include their innovativeness, suppliers that are willing to work with Tesla, equipments.
Furthermore, the production techniques with robotics is the effective capability that position the
company over their competitors.
P3. Applying Porter's Five Forces model
Porter's five forces model is an appropriate strategic tool that help the company to
evaluate the competitive forces that can affect the brand directly or indirectly. Porter's five forces
model that use for assessing the attractiveness of the company. It also assists the brand to
discover desirable strategic innovation that improve the company and its profitability. The five
forces aims to evaluate consumers, suppliers, competitions, substitutes, new entrants in the
marketplace that support the company or appeared as barrier in front of the brand (Yeow, Soh
and Hansen, 2018).
Bargaining Power of Buyer- Bargaining power of purchaser is modest in the Tesla. As
the brand is operating in a niche market and is high end electric car manufacturer, thus, there are
low substitutes available for the consumers. The products provided by the brand is unique and
high quality and various programs by government in regarding eco-friendly cars provide
consumer tax credit deduction stimulate the demand of electric car vehicles that make the
bargaining power of consumer low.
Bargaining Power of Supplier- The bargaining power of supplier is low to moderate
because of the company is reliable on the selected supplier that provide raw material and other
equipments that are of high end quality. This have significant impact on the production of the
company and negatively reflects the brand image. The company sources for the Model S's parts
globally from over 350 suppliers. The prices of the parts fluctuate that based on the demand and
supply.
Threat of New Entrants- Threat of new entrants or entry barrier is low. Entry in the
industry and especially in the electric vehicle provider required enormous amount of resources,
capital and technology that is difficult for the new company. Along with it, it is not easy to beat
the brand in terms of innovation and brand image.
Threat of Substitute products- Threat of substitute products is low to moderate because
of there are few choices for the consumers in electric cars. But other than that, there are various
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substitutes for the industry such as walking, bike, local transportation, etc. that can reduce the
choice of the luxurious car purchase.
Competitive Rivalry- The competition level of the industry is moderate as the available
competition of the industry are technological advanced and that put pressure on the brand to
make changes in the price strategy and the company. The main competitors of the brand are;
Nissan, BEV, Ford.
Ansoff matrix
With the help of Ansoff matrix, Tesla can take competitive advantages because it consists
of mainly 2 approaches and put pressure on the company to focus on cost and product
development.
Market penetration: It is a growth strategy which states that the company should focus
on selling its existing products in existing markets. It is time-consuming and cost effective
strategy. Tesla operates in various countries and for market penetration it requires securing its
dominance of growth market.
Market development: In the market development strategy, company requires and seek
new market in order to sell its existing products to the new and potential customers. It is a
complex strategy as compare to market penetration because in this strategy, the company need to
perform various functions to reach the new market and new customers. It can take time to attract
customers towards their products and services.
Product development: In this type, the company requires developing and introduce new
products into new market. The main aim of this strategy is to attract wider range of customers
and improve brand image. For making this strategy successful, Tesla requires focusing on its
competencies with the main aim of develop its new or modified products.
Diversification: This strategy of diversification enable company to introduce new
product in the new market that help the company to grab different consumer segment.
Diversified strategy might be difficult to implement but provide opportunity to the business to
expand.
P4. Strategic management plan
Strategic management plan can be defined as a document which is being used by
different types of organization. Tesla motor company also use this plan because this plan gives
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them several important informations and it consists of goals, vision and operations on which
basis it performs. Elements of strategic plan of Tesla motors are described as below:
Bowman' strategic clock
Bowman' strategic clock is a framework that helps in exploring the strategic positioning
options. Tesla motors can effectively identify about how the product should be positioned in the
target markets so that it can give most competitive position. There are various options for
positioning the product based on two dimensions i.e. perceived value and price.
Position 1 (Low price and low value added): In these products are not differentiated
and customers tend to perceive very low value to it. The products are low priced.
Position 2 (Low price): In this, Tesla motors can focus on cost minimization and it is
associated with economies of scale.
Position 3 (Hybrid): This strategy involves, some elements of product differentiation
and some elements of low price.
Position 4 (Differentiation): Through this strategy, Tesla motors can offer the highest
level of perceived value to the customers. This strategy is concerned with providing high quality
products value- added services.
Position 5 (Focused Differentiation): In this strategy, Tesla motors can focus on
providing high perceived value and positioning the product with the highest price levels and high
quality products.
Position 6 (Risky High Margins): With this strategy, company tend to set high process
for the products without providing anything extra for the perceived value. Thus, it is considered
as the risky positioning strategy.
Position 7 (Monopoly pricing): The monopolist marketer can set the product prices as
they want. The monopolist does not need to concern about the what value customers perceive in
products.
Position 8 (Loss of market share): This strategy describes that Tesla motors can set
standard or middle-range price for the products and low perceived value.
The focused differentiation strategy can lead to bring the best and most opportunities for
the Tesla motors. As this strategy focuses on positioning the products at highest price levels and
customers tend to buy the products due to the high perceived value. This strategy can lead to
bring high profits for the company and effectively sustain in the competitive market.
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STRATEGIC MANAGEMENT PLAN
Mission Mission of Tesla Motor company is to accelerate the world's
transition to sustainable transport.
Vision Vision of this company is to make and create the most compelling\
car company and it wants to develop and expand its products by
using advanced and innovative ways.
Organizational culture Organizational culture of this automotive company has various
characteristics which makes it able to take competitive advantages
and develop its brand image. The culture of Tesla motor company
encourages and motivates their employees by behaving ethically.
Employees also find creative ideas for solving any type of
problems.
Strategic Objectives The strategic objective of Tesla Focuses on expanding their
business to increase growth in international as well as domestic
market.
Market Research It has been analysed through swot analysis that company can
expand the business by continuing their brand image of
innovation. The demand of electric car is enhancing that should
consider by the industry.
Operational Action The best strategy suitable for Tesla's objective is Product
development, in which company attract wide range of consumers
through introducing new product in the existing marketplace.
Along with it, the focus diversification help the company to add
new feature in the product that help in achieving business
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objective.
CONCLUSION
From the present study it has been summarised that the external environment is essential
factors that should be consider by the industry that contains opportunities for the growth of
business. The macro environmental factor also enhance the capabilities of the industry in the
domestic market as well as in the global marketplace. Through SWOT analysis it has been
identified that the brand name and innovation is the biggest strength of the company, on the other
hand high prices of the products of Tesla is the biggest weakness. Porter's five forces analytical
model helped in to identified the intense competition of the company that provide opportunity
and helped in identifying present threat. It also has been analysed that the strategic direction
provided a way to develop strategies on the basis of the organisational goals and objectives.
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REFERENCES
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and business strategy alignment?. International Journal of Production Economics. 182.
pp.113-131.
Thompson, A., Strickland, A.J. and Gamble, J., 2015. Crafting and executing strategy: Concepts
and readings. McGraw-Hill Education.
Pisano, G. P., 2015. You need an innovation strategy. Harvard Business Review. 93(6). pp.44-
54.
Amran, A. and et. al., 2016. Business strategy for climate change: An ASEAN
perspective. Corporate Social Responsibility and Environmental Management. 23(4).
pp.213-227.
Hsieh, C. C., Ma, Z. and Novoselov, K. E., 2019. Accounting conservatism, business strategy,
and ambiguity. Accounting, Organizations and Society. 74. pp.41-55.
Kourdi, J., 2015. Business Strategy: A guide to effective decision-making. The Economist.
Thompson, A., Strickland, A.J. and Gamble, J., 2015. Crafting and executing strategy: Concepts
and readings. McGraw-Hill Education.
Yeow, A., Soh, C. and Hansen, R., 2018. Aligning with new digital strategy: A dynamic
capabilities approach. The Journal of Strategic Information Systems. 27(1). pp.43-58.
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