Analysis of Tesla Motors' Business Strategies

The assignment provides a comprehensive analysis of Tesla Motors' business activities and strategies. It identifies the macro environmental factors that support and affect the company's business activities, including strengths, weaknesses, opportunities, and threats (SWOT) analysis. The report also studies the forces of competition faced by Tesla Motors, including their positive and negative effects on the company. A strategic management plan is initiated to improve the company's strategies and enhance its ability to grow and expand its business.

Tesla Strategy Report

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
P 1 Impact of macro environment on organizational strategies and business activities..............1
LO 2.................................................................................................................................................3
P 2 Internal environmental analysis of Tesla Motors..................................................................3
LO 3.................................................................................................................................................5
P 3 Competitive forces for Tesla Motors.....................................................................................5
LO 4.................................................................................................................................................6
P 4 Strategic management plan for Tesla Motors........................................................................6
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business strategy refers to a plan or set of steps that states how the company will be
achieving its goals and objectives as well as what measures it will take to sustain competitive
advantage in the market. This report is based on the study of business of Tesla Motors, Inc. It is
an American company that is specialized in manufacturing of electric cars through solar energy.
Tesla also deals in manufacturing of solar plants and energy being served worldwide. Consisting
its headquarters in Palo Alto, California, U.S., Tesla has overall revenue of US$21.461 billion
and has 45000 of employees working under it. This report will highlight the impact of macro
environment on the organization and analyse its internal environment and capabilities. The report
will also study the application of Porter's Five forces of competition on Tesla Motors company.
The report will also include the application of different models and theories to drive towards
strategic directions for the organization.
LO 1
P 1 Impact of macro environment on organizational strategies and business activities
To understand the impact of macro environmental factors on the business of Tesla
Motors, PESTLE analysis is being initiated for the company which include following factors-
Political Factors- Political factors as fast being concerned posses benefits to Tesla
Motors in various forms. The current step being initiated by Federal Government is to offer
$7500 Tax credit to the people buying electric cars, which turns out to be main financial benefit
for Tesla Motors as more consumers will turn up to its products. Tesla can grab this opportunity
by improving its financial performance through the different incentives being offered by the
government. On the other hand the political stability of automobile industry turns out to be
favorable environment for Tesla's competitive strategy and its growth strategy. Government is
taking various initiatives for the support of manufacturing electric cars and hybrid vehicles
which turns out to be political advantage for Tesla Motors. The company is been getting low
interest loan from US government which turns out another benefit to expand its products by
Tesla Motors(Morden, 2016).
Economic Factors- There has been immense growth and popularity of electric cars
across the different economies of the world. The global economic growth is being expected to be
3% in the year 2019 and 2020 and the $39.8 billion market of electric vehicles is expected to be
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$1.5 trillion by 2025. Thus economic factors turns out to be a great opportunity for Tesla Motors
for its growth and capitalization. Another benefit from these factors is the decreasing costs of
batteries. As the cost of battery is the important cost factor in determining the overall cost if any
electric vehicle, it will turn out to be a major benefit for Tesla Motors. This in turn will make the
company to produce more electric vehicles at affordable prices by consumers. In addition there
has been decline in the material cost of the electric vehicles as Tesla provide its electric car with
low maintenance cost which in turn benefits the customers and company as well, resulting into
creation of more customer base for the company(Lasserre,2017).
Social factors- Social factors include the mindset of people as well as their purchasing
power and preference. The concept of electric cars is being more popular and fascinating for the
people especially due to their rising concern for Eco-friendly products. The elimination of the
use of fuel and reducing the pollution as well as concerning about the nature and environment
has created positive impact on the society by Tesla motors(Hitt and et.al., 2016). Another
advantage is the cars of Tesla are less expensive and at low maintenance cost which is commonly
affordable by the people of moderate income group as well. Thus, the company creates positive
impact on the society as well as resulting into a flow for its growth strategy of business.
Technological factors- Technological factors comprises the technology that impacts the
functioning as well as business strategy of Tesla motors. There may be various positive and
negative impacts on Tesla Motors on the rapid change of technology . Tesla Motors is totally
based and dependent on the use of advance technology which help them to be at top list of
competitors in the market. The company effectively uses the technology for development and
advancement of its electric vehicles. The CEO of Tesla Motors, Elon Musk stated that there will
be the application of driver-less technology for Tesla vehicles which will turn out to be great
technological advantage for the company. But on the other side the use of technology becomes
out dated and has to be upgraded every time and it is same in case of Tesla Electric vehicles as
they will become obsolete will the change in time and hence the company has to upgrade the
same resulting into more investment in research and invention components(Davidand David,
2016).
Environmental Factors- These are the factors or components that relate in sustainability
of nature resources, impact of company's operations on environment, carbon emission etc. Tesla
being an eco-friendly company as it uses electricity over fuel for its cars results in creating more
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opportunities for the company through environmental factors. The vehicles manufactured are
also in consideration with the environmental regulations and hardly creates an impact of carbon
emissions as that of traditional vehicles. The environmental friendly company Tesla has created a
good brand image in the market with its view of manufacturing energy sustainable products and
its focus on energy saving. Thus, environmental factors turn out to be as key components for the
growth strategy of Tesla Motors(Frynasand Mellahi, 2015).
Legal factors- These factors comprises all the legal issues, regulations and rules of the
government that impact the business of Tesla Motors. The company is currently facing many
lawsuit and regulatory issues for its recent two crashes occurred in 2019. Also, many countries
have restricted the direct sales of Tesla from manufacturer to consumer and implemented to
engage the third party dealership for selling its products. This in turn have given rise to high
costs and low profits for Tesla motors. Apart all these there are other legal issues such as patents,
intellectual property rights and energy consumption regulation etc. Thus, Tesla has to comply all
these regulations and law for initiating a smooth flow of business activities(Ansoff and et.al.,
2018).
LO 2
P 2 Internal environmental analysis of Tesla Motors
Internal analysis means micro environment that affect to Tesla performance direct at
regular basis. It is controllable and organization use SWOT analysis that is a tool to evaluate and
analysis of factors that affect. SWOT stands for s- strength, W- weakness, O- opportunity and T-
threats.
Strength :-
 Tesla has strength of highly innovative process that helps in develop and improve
organization performance. Through this strength it easily attract to people and increase
sales of electric car.
 They has popular brand name so it is also a strength of organization and through this
strength Tesla image is very well in mind of customers about electric car.
 It has major focus on sustainable development because it main motive is increase sale of
electric car and reduce and prevent fuel car.
Weakness :-
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 it weakness is that it provide electric car at high price so this concern reduce their sale
and customers can not afford rate of electric car.
 It major weakness is that Tesla has very weak supply chain and due to this reason it can
not provide electric car at global level (Sarsby, 2016). This weakness also reduce it
business.
 Tesla has heavy load of debt and it is a weakness because it balance sheet shows high
lease and long term debt so due to less flow of cash it cannot pay their debt.
Opportunity :-
 Tesla has very big opportunity to expand their business because now a days people
become Eco friendly due to increasing pollution and it is very opportunity to increase
their business.
 It has opportunity to increase sales of car through reduce price of it. If organization
reduce their cost so this thing helps in increase sale.
 Supply chain of Tesla is very weak and it is a opportunity so it can increase chain of
supply and increase their sales and profit through make effective image of organization in
mind of customers.
Threats :-
 Tesla has threat that day by day competition increase because other organization of car
make effective structure and design for attract to customers and it also put affect on profit
of organization.
 Tesla electric cars has issue of crashes and fires so it also decrease and reduce their sales
and profit.
 Decreasing of Petrol and oil rates is also a threat for organization because if petrol rates
decrease so customers prefer to buy petrol vehicle.
VRIO framework :- this framework is very best to analysis and evaluation of resources that
present in organization (McKiernan, 2017). Resources like financial resources, human resources
etc. VRIO stand for V- value, R- rare, I – imitate and O- organization.
Value :- resources that available in Tesla so all are valuable like financial resources,
human resources and other all resources are valuable because all helps in increase productivity
and profitability.
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Rareness :- this element of VRIO framework refers that those resources that they are
valuable for Tesla but also rare. Tesla attain costly resources and if rare resources not o present
in organization so present manage and new entrants easily enter in organization.
Imitate :- disruption is very major thing and it create many difficulties. But Tesla has no
problem about imitation because it is only one organization that manufacture electric car. So
duplication of this car is not possible because it has own proprietary battery.
Organization :- this element helps in measure that Tesla is able or not to cover valuable,
rare and imitate in market place. Through this process Tesla evaluate about their resources and
organize in systematic manner.
LO 3
P 3 Competitive forces for Tesla Motors
Competitive forces comprises of five forces of competition that includes in Porters Five
Forces model. These competitive forces are as follows-
Bargaining power of Buyers- This force include the barraging and changing demands
of the customers of Tesla Motors. The company's customers directly determines the sales
revenue for Tesla Motors. This force of competition turns out to be moderate force in the
competitive analysis of Tesla. But there has to be possibility of threat due to the low switching
cost by the company. Low switching cost enables the customers of Tesla to switch and purchase
the cars from other companies. On the other hand there have been several positive aspects as the
due to the lack of substitutes for these vehicles that limits the bargaining power of consumer and
there are customers in suburban areas having limited transportation facilities which make them to
purchase and drive their own personal car which in turn turns out to be beneficial for Tesla.
Bargaining power of suppliers- The operations of Tesla Motors is mostly depended on
its suppliers. This force includes how the supplier impacts the functioning of the organizational
operations and business activities. Suppliers of Tesla are moderately sized hence having limited
influence on the activities of Tesla Motors. That is the dominance of suppliers will have impact
on Tesla operations but not at high degree. This makes this force as a moderate level for Tesla
motors(Hitt and et.al., 2016).
Threat of Substitutes- This force comprises the threat from the alike products that are
electric cars from other companies. Tesla Motors is being facing the competition from the
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substitutes due to its low switching cost. The low switching costs is making its customers to
purchase the electric vehicles from its competitors such as Ford, Toyota, BMW that also deals in
electric cars that are less expensive than Tesla. This in turn diverts the Tesla customers from one
company to another. Tesla has developed Model S, Model X and Model 3 cars that are totally
electric and advance characteristics such as high speed and longer mileage in one charge. In
order to produce these type of cars there has been higher and expensive costs of production for it,
this makes the car expensive as well. This is the reason there is a threat for the customer to be
shifting at another companies(Porter, 2017).
Threat of new entrants- This force comprises of the new entrants and the companies in
the market and creating competition for Tesla Motors. The entry of new competitors have hardly
affected the business of Tesla Motors. The company has developed high brand name and
incurred high cost for brand development which is difficult for the new entrants to compete with
the company. Additional;y the automobile company comprises of high cost of manufacturing
that makes it entry barrier for the new entrants. Thus it can be observed that Threat of new
entrants turns out to be weak force of competition for Tesla Motors.
Rivalry among the existing competitors- This force include the competition from the
existing companies in the market. Tesla Motors is currently operating in highly competitive
market but the main advantage is that the company makes the products related to the eco-
friendly or energy saving. This makes the company to remain out of the box and have its unique
identity in the market. However there are less number of competitors for Tesla motors in this
industry which weakens down this competitive force. But on the other hand the low switching
cost as well as high marketing campaigns by other automotive companies diverts the Tesla
customers towards them. This in turn balances this force and creates it as a moderate force of
competition for the company(Carraher, 2018).
LO 4
P 4 Strategic management plan for Tesla Motors
The following are the steps and components that include an effective strategic
management plan for Tesla Motors:
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Executive Summary- Tesla Motors mainly deals in manufacturing of Electric motor cars and
vehicles and solar energy panels. The company is operating world wide and is popularly known
for its uniqueness of electric vehicles. This strategic management plan is based on the expansion
of Tesla Motors business in India.
Business concept- The concept of Tesla Motors company is technology based concept and it
uses Business to consumers strategy that is direct selling from the company to the consumers
rather than any third party dealership.
Mission- The mission statement of Tesla Motors is “to accelerate the world's transition to
sustainable energy”
Aim- To increase the sales and business of Tesla Motors in the emerging markets of Asia is the
primary aim of this strategic plan.
Objectives- 1. To expand the business of Tesla Motors in Indian markets and establish the
company stores over the country.
2. To start the sales activities by the end of December 2019.
Porter's Five forces-
Forces of Competition Level
Bargaining power of buyers Moderate
Bargaining power of suppliers Moderate
Threat of new entrants Low
Threat of Substitutes Moderate
Rivalry among existing competitors Low
Market Research-
Internal analysis:
Strengths
1. Strong Brand name of the company.
2. Effective and strong control on the
production process.
Weaknesses
1. Limited presence and operations in
various markets.
2. Low supply chain for the products.
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3. High innovation and technological
advancements.
4. Political and environmental factors
support to the cop[any for its unique
brand manufacturing and products.
5. Direct distribution to the consumers
that results in higher profitability.
6. Strong financial position due to
availability of incentives and loans by
government.
3. High prices for the cars as compared to
competitors.
Opportunities
1. Expansion of its business and global
sales.
2. Expansion in supply chain of the
company and make products available
across the world.
3. Diversification of the business to
reduce the risk of automotive industry
slowdown in future.
4. Expansion in Asian Markets such as
India and China.
Threats
1. Strong and aggressive competition by
other companies through high
marketing campaigns and
advertisements.
2. Fluctuations in material prices
especially the cost of lithium that is
vital element in company's
3. Threat of dealership regulations where
in some countries Tesla has to sell its
products through dealership and not
directly to the customers.
Financial Plan-
Particulars Amount ($)
Set-up cost 70000
Warehouse cost 2000
Interest on loan 15000
Registration expenses 14000
Advertisement 7000
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License 2000
Total expenses 110000
Recommendation-
From the above Strategic management plan it can be recommended that Tesla Motors in
order to expand its business in India should initiate its business partnership with local dealers.
This may help the company to study and understand the Indian market. India is an emerging
economy with the rising GDP currently, Tesla can initiate its manufacturing process in India
itself which will reduce their cost for bringing its manufactured products from USA. This will
also create employment opportunities for local workforce in the country as well as undertake
Tesla's CSR activities in India. Tesla should undertake market research in India to understand
the buying pattern, behavior of people as well as their purchasing power which will help them in
fixing the prices for its vehicles to be sold.
Horizontal and Vertical Integration Strategy in Tesla
For this purpose the theory applied by Tesla for interpreting and devising strategic
planning is vertical and horizontal integration. Integration refers to as combining two or more
things together. There are two types of integration which Tesla can perform that is vertical and
horizontal integration. The vertical integration is a refers to as integrating with the company
which operates in the production process of the same industry. It can either be forward or the
backward. In backward the company collaborates with the supplier and in the forward integration
it combines with the customers. Vertical Integration can be implemented in Tesla but would not
be of much use since Tesla has already expanded their operations wide in the segment in which
they operate.
Horizontal integration refers to as integrating with another company within the same
level and working in same industry. This integration helps Tesla in increasing its size and market
share and this also reduces the competition as it combines with similar company in same
industry. Also, this integration helps the company in increasing its customer base and reducing
the cost for the company as it will be divided in both the companies. For example Tesla can
integrate with similar company in another country. This will benefit the company because with
less investment it will have its presence in another country for e.g. in India another prominent
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automobile company in Maruti Suzuki which has access to the middle level and upper level car
drivers. This will help Tesla in easier expansion.
Porter's Generic Strategies in Tesla
Porter basically laid out three major strategies that would help in increasing the
competition and ultimately achieve competitive leadership in the market. These strategies, when
implemented would help Tesla in successfully launching themselves in the Asian market and
utilize the benefit of the brand competency that they have created.
Cost Leadership Strategy:- This strategy states that a firm should keep its price minimum so that
it can target more customers and hence increase the sale of its product. This strategy however,
cannot be adopted by Tesla since reduction in prices would signify reduced quality and the brand
name of Tesla which in itself is a huge selling point will get affected.
Differentiation Strategy:- It is the second strategy under Porter's generic strategy and this
strategy emphasizes that in order to compete successfully, a brand should focus on creating
differentiation in its products or services i.e. they should provide something unique (Porter's
Generic Competitive Strategies (ways of competing), 2017). Tesla, already uses extremely
differentiated and advanced technologies for its products and therefore can use this strategy in
order to penetrate Asian markets. This will help them in targeting the premium class of consumer
segment and a slight decrease in their prices can even lead to widening the targeted consumer
base.
Focus Strategy:- This is the last strategy under which Porter has stated that a company should
identify the targeted market segment i.e. narrow down the segments to which they intend to sell
and then use either cost strategy of differentiation strategy. This is the best strategy for Tesla
which they can use by implementing differentiation in their products and therefore successfully
target the premium segment of consumers in India and other Asian markets.
CONCLUSION
From the above report it is summarized that the macro environmental factors mainly
supports and affects the business activities and strategies of Tesla Motors which results in their
higher profitability and growth. The report studies the strengths and weakness as well as
organization's internal capabilities to survive in the market and achieve its goals and objectives.
The report also studied the forces of competition that are been faced by Tesla Motors including
their positive and negative effects ton the company as well. The report concludes by initiating a
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strategic management plan for the organization to improve its strategies and enhance its ability to
grow and expand its business as well as achieve its primary goals and objectives without any
complication.
REFERENCES
Books and Journals
Carraher, S.M., 2018. An examination of an instrument to measure Porter’s Five Forces
Model. In International Journal of Arts & Sciences Conference at Harvard University.
Porter, M., 2017. E.(2008). The five competitive forces that shape strategy, pp.86-104.
Ansoff and et.al., 2018. Implanting strategic management. Springer.
David, F.R. and David, F.R., 2016. Strategic management: A competitive advantage
approach, concepts and cases. Pearson.
Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.
Morden, T., 2016. Principles of strategic management. Routledge.
Frynas, J.G. and Mellahi, K., 2015. Global strategic management. Oxford University Press,
USA.
Hitt and et.al., 2016. Strategic management: Concepts and cases: Competitiveness and
globalization. Cengage Learning.
Hanson and et.al., 2016. Strategic management: Competitiveness and globalisation. Cengage
AU.
McKiernan, P., 2017. Historical Evolution of Strategic Management, Volumes I and II.
Routledge.
Jenkins, W. and Williamson, D., 2015. Strategic management and business analysis.
Routledge.
Borland and et.al., 2016. Building theory at the intersection of ecological sustainability and
strategic management. Journal of Business Ethics. 135(2). pp.293-307.
Rosenbaum-Elliott and et.al., 2015. Strategic brand management. Oxford University Press,
USA.
Ambrosini and et.al., 2015. Advanced strategic management: A multi-perspective approach.
Macmillan International Higher Education.
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Gürel, E. and Tat, M., 2017. SWOT ANALYSIS: A THEORETICAL REVIEW. Journal of
International Social Research. 10(51).
Phadermrod and et.al., 2019. Importance-performance analysis based SWOT
analysis. International Journal of Information Management. 44. pp.194-203.
Sarsby, A., 2016. SWOT analysis. Lulu. Com.
Online
Porter's Generic Competitive Strategies (ways of competing). 2017. [ONLINE] Available
through :<https://www.ifm.eng.cam.ac.uk/research/dstools/porters-generic-competitive-
strategies/>
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