The Global Business Environment

This report analyzes the forces that have shaped the car manufacturing industry and the evolution of the automotive industry. It also examines the opportunities and challenges present in the industry and provides an overview of how companies can gain a competitive advantage.

THE GLOBAL
BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
Analysis of the forces which shaped the car manufacturing industry environment and
evolution of automotive industry............................................................................................3
TASK 2............................................................................................................................................5
Analysis and examination of the opportunities and challenges that are present in the company
and overview of how company can gain competitive advantage. .........................................5
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
With the increased globalisation the international expansion of business captured great
attraction. The global business environment refers to the business environment in different
countries pertaining to host and parent country operations. Every business now wants to expand
its operations internationally, in order to grow and prosper further. The operations in going
international need thorough understanding of the internal and external environment. The aim of
this report is to highlight the international factors which affect the automotive industry. The
reason behind selecting automotive industry is that this industry is changing rapidly and
(Arumugam, Kannabiran and Vinodh, 2020) factors influence its growth. In order to develop the
understanding of micro and macro factors which affect this industry growth this report is
presented. The organisation selected is Tesla Motors, Inc. founded in 2003, headquarter in US.
This company is engaged in production and manufacturing of electric vehicles and solar operated
automotive parts. The internal and external analysis of the factors is examined in order to see the
company’s global expansion efficiency.
TASK 1
Analysis of the forces which shaped the car manufacturing industry environment and evolution
of automotive industry.
The PESTLE analysis helps in analysing the impact of external environment on the
company. The Tesla Motors, Inc. PESTLE analysis will help in analysing the external
environment which are impacting it in automotive industry.
Political factor
The political factors play major role in determining the growth and direction of company.
The Tesla has the advantage of the political stability across its headquarters and subsidiaries
countries. The government forces play important role in shaping political factor. The company
deals largely in automotive electric cars, the company is highly in advantage because of its major
working. The Tesla can have the advantage of subsidies and incentives provided by the
government for enhancing the use of electric cars. The free trade agreements between
government and political stability will ensure opportunity for the company in increasing its
operation globally (Dower, 2017).
Economic factor

The economic factors include the tax rates, currency rate etc. factors, the Tesla can be
benefited by this factor. The governments to promote the use of electric vehicles are decreasing
the cost of raw materials, and giving various incentives to set up manufacturing plant of electric
vehicles. The Tesla can use this as their opportunity because of the reduced battery materials cost
and the decreased renewable energy cost will be able to make the affordable cars. The company
can face the problem of economic instability created by the Coronavirus pandemic. The overall
economic environment is being shaken and it is being getting on track simultaneously.
Therefore, the company is benefited by the reduced and incentivised cost of materials and the
growth of Tesla because of this will overcome the instability in environment.
Social factors
The social factor represents the social trends and cultural influence the customers exert.
The Tesla is in good position here already as by serving the battery operated vehicles. The social
trend is changing which is favourable towards company, the sense towards the reduced carbon
emission lifestyle is increasing and demand for renewable energy is also increasing. The demand
of such products is in favour of Tesla growth (Huang and Meng, 2019). The company can attract
more public because of its product ranges of electric vehicles. The purchasing power of people
has affected very much because of the pandemic and work from policy may affect the demand of
Tesla products.
Technological Factors
The technological factor is the result of automation and developments in the technology.
The Tesla product innovation with use of technology is highly efficient. Tesla is being remarked
of the use of updated technology in automotive industry. The use of automation and artificial
intelligence will be highly efficient for the company productions. But the obsolescence of
technology is also one factor that can prove great challenge for the company. The use of the
automation for surely will prove the opportunity and will ease the company operations.
Environmental Factors
The environmental factors are very favourable for the company. As, the Tesla
manufactures highly electric and battery operated vehicles which leads to reduced pollution and
carbon emissions. It can contribute by this to climate change issue which is an major concern all
over the globe (Hussain, Zafar and Toor, 2020). Therefore, the manufacturing of battery and
solar operated automotive components leads to the great contribution by Tesla to environment.

Legal Factors
The legal factors possess an threat for the Tesla largely. As, the legal factors change
constantly and does not remain same therefore the company needs to be updated with the
changing laws and regulations. The company can take advantage of the trademarks and energy
related rules will also favour company. The energy consumption majorly will help to cut down
its expenses a take advantage of it for company growth.
The automotive industry changed very rapidly owing to the technological developments
in this industry. The industry just innovated with the gases firstly but with limited globalisation
high rates of transporting and setting up manufacturing hub lead to high financial losses. After on
the World War II the rules were liberalised all over the economy and this created opportunity.
The countries such as Germany, Europe, China and UK all countries started to experiment with
the electricity and battery operated versions of vehicles. But the market was not developed and
didn't supported much of the these developments. Later on, the ease in designs came and
economies of operations were created and the ease in designs was understood and the various
models started to be experimented (Lee, S.Y. and Klassen, R.D., 2016). The know-how of
technology was gained with the globalisation. With the later developments the political stability
was framed and the operations with this begin on track. The trade agreements so developed and
government relations so eased helped in the production oversees effectively. With this, the
evolution of this industry began starting. With such developments in this industry it attracted
many giants to take up this as main line for success. The rapid success and growth of the
automotive industry lead to the international expansion of this industry.
TASK 2
Analysis and examination of the opportunities and challenges that are present in the company
and overview of how company can gain competitive advantage.
The internal and external analysis helps in the analysing the position of the company in
relation to industry competitiveness. The internal analysis is done by using the SWOT analysis
and the company’s position in industry is examined using Porter’s five force model.
SWOT analysis
The Swot analysis helps in the internal examination of the resources and capabilities of
organisation. With this internal analysis it helps in letting knowing the opportunities and threats

lying in the external environment (Liu and Vrontis, 2017). This analysis helps the organisation in
gaining the competitive advantage in market against the competitors.
Strength
 The company operational and technical
department is its strength in its success
which continuously leads to innovation
in the products.
 Tesla has the great advantage of brand
credibility.
 The company manufactures the
automotive part for the other companies
which help in strong relations with
other companies globally.
 Tesla has strong financial networking
Weakness
 The prices of the cars and automotive
part are high as compared to other
competitors which may lead to the high
switching cost of consumers.
 The company has been the delayed in
its manufacturing and production
process. The orders are take long time
in delivery.
 Tesla breaks down of strategic alliance
with its earlier partner lead to reduced
capacity of process i.e Mercedes and
Daimler.
Opportunities
 The Tesla has great advantage of the
global expansion in other countries also
with its successful start.
 Tesla can be benefited greatly of the
subsidies and incentives so provided by
the governments with aim of increasing
the demand of electric vehicles.
 The company can even take the benefit
of the technology updates to make it
production process more efficient.
 The company can even take advantage
of the developed logistics and supply
chain innovations to achieve synergy in
its delivery.
Threats
 The economic patterns are disrupted
globally which put may constrain on
the company's finances.
 The purchasing power have been
greatly affected because of the
pandemic and lock downs this may
affect the profitability of the company.
 This industry is being attracted by
many new players and existing
competitors are turning their journey
towards the production of electronic
cars which will possess great challenge
for company to grow.

 The changing social patterns will also
be favourable indicating increased
demand for the electric vehicles and
self-driving cars.
Porter's Five Force Model
The Porter five forces is model which specifies the industry growth drivers. This model
analyses the company's external environment in relation with the industry factors (Miller, Lavie
and Delios, 2016). This model helps in analysing the profit levers of the industry that will be
beneficial for the company future growth and performance. The analysis of the Tesla growth
driver in relation to automotive industry area as follows; Threat of new entrants: This factor is weak in regard to Tesla growth. The entrance in
this industry is not that easy it requires huge investment and time to develop the brand
presence. The Tesla captures the market greatly and has the strong position in this
industry which can't be threatened by the new player’s entry. Threat of Substitutes: The threat of substitutes is not very much impacting on the
company performance. The switching cost is high impacting factor of the buyers in this
case as the availability of other pool vehicles is also feasible option for the customers.
The performance of the other substitutes available in the industry does not affect largely
the Tesla performance. As, the performance of these available products does not offer
same experience as of Tesla therefore, it is a moderate threat (Sindhu, 2020). Bargaining power of buyers: The bargaining power of the buyers play significant major
role in the Tesla's growth. The competitors in this industry is already producing the same
designs that of Tesla's and even at affordable prices the same services and experience is
being delivered by the them. The buyers get easily switched with such affordable price
and promotions being offered by the existing companies. Bargaining power of Supplier : This factor depends on the availability of the suppliers in
the industry. The Tesla's operation depends completely on the efficiency of distributors.
Therefore, this factor exerts moderate impact on the Tesla's performance. The company
has it own effective network of value chain. The company owns the great operations in its
value chain by cutting down the middlemen to make smooth functioning of operations.

 Rivalry among existing firms: The automotive industry is highly competitive in terms of
the electronic cars. There are many firms which are giving intense competition to the
Tesla. Such as Bentley, Volkswagen, Lords Town Motors etc. companies are delivering
same product design with more added features and affordable prices (Subramanian and
et. al., 2020). Therefore, the Tesla should maintain its position in electronic car
manufacturing by continuous innovations and affordable differentiator services.
With this analysis it can be inferred that the Tesla is in strong position to grow and
sustain its position in this industry. The company just needs to constantly innovate and update its
structure constantly in terms of the new designs in the product. The delivery time needs to be
shortened. The company is in strength to expand its operations more overseas. Tesla can even
diversify its product ranges for lower and middle segment to maintain the competitiveness in the
marketplace (Tanwar and Prasad, 2016).
CONCLUSION
The international business is fluctuating very much it needs to be constantly reviewed to
analyse the position of the organisation in external environment. The constant review of external
and internal factors helps in knowing the competitiveness of the overall market in industry. The
synergy between the functional departments should be there in order to achieve the
organisational objectives efficiently.

REFERENCES
Books and Journals
Arumugam, V., Kannabiran, G. and Vinodh, S., 2020. Impact of technical and social lean
practices on SMEs’ performance in automobile industry: a structural equation modelling
(SEM) analysis. Total Quality Management & Business Excellence, pp.1-27.
Dower, G., 2017. Modularity for greening the automobile. In The Business of Sustainable
Mobility (pp. 103-111). Routledge.
Huang, Y. and Meng, S., 2019. Automobile insurance classification ratemaking based on
telematics driving data. Decision Support Systems, 127, p.113156.
Hussain, T., Zafar, M.Z. and Toor, A., 2020. Examining Factors of Purchase Intention for Local
Products in Comparison to Imported Products: A Study on Automobile Industry in
Pakistan. Journal of Business & Economics, 12(1), pp.165-185.
Lee, S.Y. and Klassen, R.D., 2016. Firms’ response to climate change: The interplay of business
uncertainty and organizational capabilities. Business Strategy and the
Environment, 25(8), pp.577-592.
Liu, Y. and Vrontis, D., 2017. Emerging‐market firms venturing into advanced economies: The
role of context. Thunderbird International Business Review, 59(3), pp.255-261.
Miller, S.R., Lavie, D. and Delios, A., 2016. International intensity, diversity, and distance:
Unpacking the internationalization–performance relationship. International Business
Review, 25(4), pp.907-920.
Sindhu, P., 2020. Computer Aided Assembly Line in an Automobile Industry for Supply Chain
Management System Optimization: A Review. International Journal of Computer
Aided Manufacturing, 6(1), pp.1-18.
Subramanian, K. and et. al., 2020. A Statistical Analysis on Automobile Sales Performance in
India. Journal of Computational and Theoretical Nanoscience, 17(2-3), pp.778-782.
Tanwar, K. and Prasad, A., 2016. Exploring the relationship between employer branding and
employee retention. Global Business Review, 17(3_suppl), pp.186S-206S.
Wang, Y., Huscroft, J.R., Hazen, B.T. and Zhang, M., 2018. Green information, green
certification and consumer perceptions of remanufctured automobile parts. Resources,
Conservation and Recycling, 128, pp.187-196.