Analyzing the Influence of Macro Environment on Tesla

This report analyzes the impact of macro environmental factors on Tesla, including political, economic, social, technological, environmental, and legal factors. It also examines the internal capabilities and weaknesses of the company using a SWOT analysis.

BUSINESS
STRATEGY
1

Table of Contents
INTRODUCTION...........................................................................................................................3
LO 1.................................................................................................................................................3
P1 Appropriate frameworks to analyse influence and impact of macro environment on
TESLA........................................................................................................................................3
LO 2.................................................................................................................................................6
P2 Internal environment and abilities of company.....................................................................6
LO 3.................................................................................................................................................9
P3 Porter’s Five force model......................................................................................................9
LO 4...............................................................................................................................................12
P4 Strategic management plan..................................................................................................12
CONCLUSION.............................................................................................................................14
REFERENCES .............................................................................................................................15
2

INTRODUCTION
Business strategies is a set of appropriate actions and competitive moves that companies
used to attract consumers, compete successfully, achieve organizational objectives or goals and
strengthening performance (MENDOZA, 2018). It helps business to reach at desired results,
business strategy is understood as set of decisions which support company in achieving
particular objective. It prepares top management with integrated or systematic framework, to
analyse, exploit and discover beneficial opportunities. The present report is based on TESLA
company, it is an American automotive firm based in California. They are specialized in
manufacturing electric car, through solar panel and their solar city subsidiary. They operate
assembly plants and multiple production system. This study explains influence and impact of
macro environment factors on company, internal capabilities and environment of business. It
justifies, Porter’s five forces model and strategic management plan for firm. Furthermore, it
explains models, concepts and theories to assist with interpretation and understanding of
strategic directions available to TESLA.
LO 1
P1 Appropriate frameworks to analyse influence and impact of macro environment on TESLA
PESTLE analysis is a tool or appropriate framework used by many organizations to
analyse the macro environmental factors and to monitor external marketing environment that
impact on business as well as their strategies. It is considered as one of the most correct
frameworks which help to analyse the external factors affects on TESLA company.
Political factor-
Government policy, labour law, trade restrictions and tax policy are including in political
factor that affects how company do their business. Governmental entities are the most common
societal forces that influence business strategies (Mbithi, Muturi and Rambo, 2015). Policies on
trade made impact on TESLA organization and its current strategies. According to the trade
policy they need to pay extra charges on export and imports services which helps to run its
business effectively (TESLA PESTEL/PESTLE ANALYSIS, 2018). They need to follow the
overall trade regulations and rules accordingly which affect on its strategies. When they pay
extra charges it impacts on profit margin of organization. Management has to make changes in
3

previous strategy and modified it according to the policy of trade. Brexit impact negatively as it
increase the trade barrier which affect the trade procedure of company goods.
Economic factor-
It has significant impact on how company do their business and run operations, it
includes economic growth, exchange rates, disposable income of people and inflation. Sales for
electric cars has been risen as global economy increased, it projected that economy grow by
3.5%. these rises in Europe and Asia as well as US, let to more electric developments (Tervo and
et.al., 2018). The costs of battery are decreased that impact on TESLA performance as it is
one of the best opportunities for them to gain competitive advantages. The business performance
of company gets benefits from lower battery costs. It also impacts on their strategies of
manufacturing electric vehicles; they need to used battery rather than fuel engines. Renewable
energy cost is another external factor that makes business products more effective and attractive.
Unemployement rate in specific state impact on company growth in which they have to
do some changes in their employment structure.
Figure 1: PESTLE Analysis Model
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(Source: TESLA PESTEL/PESTLE ANALYSIS, 2018)
Social factor-
Trends and social conditions affect TESLA and their strategies as well, these elements
include population growth, career attributes, age distribution and health consciousness. Socio
cultural components is important just like the other factors (Herrmann and et.al., 2014). The
demand of sustainable goods is increased globally, people wants products that is good and
beneficial for environment. TESLA makes sustainable products such as electric cars which helps
to prevent environment from air pollution. Increased popularity of sustainable goods or trends in
market regarding sustainability impact on organization performance positively as they are able to
supply electric cars which is the main plus point for them to grow more. They need to make
strategies for manufacturing Zero emission electric power vehicle, which is the best for them as
well as society.
Technological factor-
Technological changes impact on how TESLA market their products, it effects on
management and marketing activities of business. From marketing to operations and productions
technology advancement impact on overall business performance. Changes in technology takes
place every day and every company adopt newest or latest technology first. TESLA operations is
highly depend on technology and this growth positively impact on their business and make them
a leading brand in marketplace. Company profits and sales are getting too higher as they adopt
new technology and produce zero emission electric power generation. Company work with
different types of technologies that helps to satisfy people effectively, their current strategy is to
enter in new market where people prepared to pay premium price. Through associated with
advanced technology they can provide its products according to consumers’ needs which helps
to drive them towards purchasing.
Environmental factor-
Due to increasing pollution targets, scarcity of raw materials, doing business as
sustainable organization and ethical and carbon footprint targets set by the government of any
nations, impact on TESLA performance, as all these are including in environmental factor which
need to be analysed by company while entering into new market. TESLA contributes in
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environmental sustainability which makes positive impact on their profit margin, they use
electricity rather than gas that helps to prevent air from pollution. UK government want that
every companies need to contribute and support in sustainable environment which is beneficial
for them as well as community. When TESLA vehicles bear with environmental regulations they
can grow more and more, by focusing on sustainable environment company had made Road star
car with less carbon emission.
Legal factor-
It includes equal opportunities, consumer laws and rights, health and safety, advertising
standards, product labelling etc. to enter at high end of market, TESLA need to know what is
legal in order to trade products successfully. Law is very essential force affecting business and
their strategies of operations, from environmental to labour regulations laws have directly affect
on firm. TESLA management pay wages equally and fairly without discrimination, they give
good salary packages to every worker which helps to retain them with company for longer time
(Zackrisson, 2017). Environment protection agency made pressure on company to manufacture
environmental safety products that effect on work activity of business.
Ansoff Matrix model-
It is marketing planning model that support business to determine their goods and market
growth plan. Macro factors impacts on Ansoff matrix, it also affects the decision of business for
choosing it accordingly. It is based on four strategies:
Market penetration-
In this strategy, company seeks to achieve progress with existing goods in their existing
market segments, wants to increase market share (Mbithi, Muturi and Rambo, 2015). In
emerging market, simply maintaining market revenue will outcomes in growth, and it exist the
best opportunity for them to increase market share when competitors reach ability limits. It is the
first quadrant of Ansoff model, often adopt by company when they have existing products with
needs growth strategy and known market within sector.
Market development-
When organization seeks growth by targeting their current products to new market
segments, they can use this strategy (Schaltegger, Lüdeke-Freund and Hansen, 2016). This
option includes pursuit of geographical regions or additional market division. Development of
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new place for existing products may be best for strategy for business if its core competencies is
connected to particular goods more than to their experience and knowledge with specific market.
Diversification-
This strategy is quite risky rather than the others in which company can enter into new
market with the new products which increase the risk as failure. When people do not expect their
products, it impacts negatively upon their operations which is not suitable for sustaining for
longer.
Product development-
According to this strategy company can develop its new products for existing market in
order to retain them for long period of time so they help to increase their profit margin and drive
other consumers as well towards business. The move usually includes extensive development
and research or expansion of goods range which require more investment for success in project.
LO 2
P2 Internal environment and abilities of company
SWOT analysis model is the appropriate framework for analysing internal environment
and capabilities of TESLA. In simple words, it is effective tool used businesses to identify their
internal organizational environment, strength, weakness, opportunities and threats that effect on
TESLSA performance in market (Spender, 2014). It supports in analysing and identifying
external as well as internal factors that impact on viability of person, project, place or products.
This framework organized the top abilities, weaknesses, opportunities and threats into well
organized way.
Strengths-
Good communication skills, well performance management system, handles consumers
effectively, physical strength, gets along well with all departments and good availability of
resource are considered as strength of any business branding is the strength of company. When
people think about electric vehicles and futuristic driving, the name of only one company come
into their mind that is TESLA. They just not centring on selling cars, but also wants to transform
driving experiences of consumers. Organization begun with providing electric vehicles. Despite
fact that they just not by any means only business offering these kinds of vehicles, Tesla is
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repeatedly first that people consider when electric autos are referenced. Whereas, other vehicle
producers centre around offering moderate electric vehicles to local people, Tesla select reverse.
Firm is able to focuses on a specific sphere: that is luxury electric automobile market (SWOT
Analysis of Tesla, 2019). Company have the capacity to change people change the whole
experience of car driving as they provide innovative and new technologies which make people
happy and provide safe journey which is quite impressive. Firm has always been connected with
cutting edge technologies and many organizations have adopted technologies launched by them.
TESLA is also able to makes their own distribution channel which helps to delivery its products
rather than before.
Range of product portfolio is defining the strength of business which make them able to
lead in automotive sector.
Weaknesses-
Poor liquidity is one of TESLA weakness which impact on their business, as compare to
Ford, they only have USD 3 billion that is totally not sufficient for them to survive in
marketplace more than the other manufacturers. Ford used USD 20 billion that is more than
TESLA which affects on their overall business performance. Moreover, they produce its
products just one plant which is established in Fremont, California. Plant have capacity to make
more than 500,000 electric vehicles and increased production of business is limited to this figure
making it very difficult for organization to target high volumes (Dikmen and Burns, 2016). Poor
consumer awareness regarding specializes goods of TESLA harm their image in market. They
make specialized products which is very essential for environment because these goods have
sustainability angle. But it is highly innovative and most people are still not assured about where
they need to invest or not in these technologies which is costly as well. Company have much
lesser manufacturing force than other firms in industry. At some point, business only had single
plant, which clearly means that they only make certain number of vehicles that made beating
high target capacities difficult.
Opportunities-
Decreasing cost is one of the best opportunities for TESLA that helps to improve their
profits margin and attract people towards purchasing its products. They recently achieving this
by developing giga factories (Prajogo, 2016). With this company fulfil their targets and
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maximize auto mobile production. With capacity to built in large quantities, organization is able
to take benefits of discounts on bulk purchasing materials. They heavily centring on future of
driving and implement new technologies for same that helps to increase its productivity and raise
the position within marketplace. The vehicles they develop ease stress off environment, what
more eco friendly people love. Asian and Chinese market is emerging as lucrative option for
business as it helps to grow company rather than the other companies. TESLA focusing on their
sales, supply and maintenance network that also contribute brand to grow faster as possible as
they can. Furthermore, the most essential and major opportunity for company is that growing
demand for electric cars more than gas. Auto-mobile industry experience high requirement of
electric vehicles, TESLA start working to launch their specialized cars before other can do so
which garb the attention of people.
Threats-
TESLA is facing simple competition from both luxurious automotive and
environmentally friendly brands Toyota, Volkswagen etc. that poses as threaten situation for
them which affects on its current strategies and overall performance of business. Rising
competition threat organization. Regulatory and legal requirements of government turn out to be
very costly for them and can result in increased prices. Company is operating their business in
many nations which means that they need to deal with political regulations, rules as well as legal
within those markets which bring many challenges for them. Before entering into any country,
they have to comply with rules and policies of US, UAE and other countries which is quite
difficult for them as they need to invest more than before in order to manage its effectively.
Tesla is not been able to fund their ambitious production ramp which effects on their market
image. Government around the world are not supportive for encouragement of electric cars, that
impacts on TESLA productions. Funding for their formidable design to manufacture vehicles is
another danger which company is facing. They reported with $1.5 billion of funding that is less
than final amount required for its project.
VRIO model-
Competency Valuable Rarity Imitate Organization
HQ in silicon Yes NO Yes Company is able
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valley to gain
competitive
advantages.
Futuristic design Yes Yes Yes They are able to
provide unique
design products
High efficient Yes No Yes They provide
highly effective
goods or services
to consumers.
Brand reputation Yes Yes Yes Company have
good brand
position in
market.
Porter’s value chain-
Porter’s value chain is cantering on systems and how efforts is changed into results
purchased by customers. It is divided into two parts, that are
Support activities-
Firm infrastructure-
TESLA company organizational structure is wider like the other firms.
Human resource management-
They have good HR management department that able to handle any situation in
workplace.
Technology development-
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Technological integration in distribution, human resource activities and technological
integration required TESLA to realise significance of technology development.
Procurement-
It is value chain denotes procedure included in buying inputs that range from machinery,
supplies, equipment and other items essential for manufacturing finished goods.
Primary activities-
Inbound logistics-
TESLA motors inbound logistics is consisting with storage and receipt of things use to
build solar panels and electric vehicles.
Operations-
Company operate many operations such as energy storage and generation as well as
automotive.
Outbound logistics-
Organization outbound logistics includes distribution and warehousing of products
manufactured by TESLA.
Marketing-
Company sales and marketing practice is unconventional, equal to other business work of
electric automaker. They have the ability to charm wide media coverage at international level
and serves main source of value in term of maximizing stage of brand awareness.
Service-
Organization had number of good consumers service profile; it includes more but not
limited. They provide post service at firm owned service centres.
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LO 3
P3 Porter’s Five force model
This model supports to analyse and identifies five competitive forces shape any industry
and determine its strengths as well as weaknesses. It frequently used by marketers to identify
auto mobile industry structure to identifies corporate strategy. This model is based on five forces
that described below:
Competitive rivalry among existing companies-
This force is quite different from the others, it helps to analysed how intense competition
recently is in market, which is easily determined by number of existing companies in same
industry and identify what they can do to sustain business for longer. Rivalry competition is
higher in market when there are just few organizations equally selling the similar service or
products, and when industry is increasing and also when people can smoothly switch to
competitors delivering for little cost. Competitor rivalry is higher in auto mobile industry, which
consist of different well build up companies like General Motors, Toyota, Volkswagen, Ford etc.
all these organizations looking out for new terms to gain competitive benefits by producing new
products with low cost prices and attractive value proposition. It impacts on TESLA business
performance as well as productivity which they need to be secure and protect from any harm. In
simple words, rivalry among present companies in electric cars sector is highly intensive that
influenced business operations. TESLA need to work different, they focus on people needs,
analysed current market and than manufacture goods which drive consumers towards them and
helps to gain competitive benefits.
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Figure 2 Porter's Five Forces
(Source: Porter's Five Forces: Analysing the Competition, 2017)
Threat of new entrants-
This force reflects how difficult or simple it is for competitors to join marketplace in
automobile industry being observed. The easier it is for competitors to join bigger risk of
business share being depleted. Threat of new entrance is lower, because barriers to entry in
automotive sector is quite higher, due to great capital investment that makes entry difficult for
other companies in this industry. It means that TESLA had low threat from new entrances which
is quite beneficial for them as they retain consumers with them for longer period of time
effectively. New entrants always impact industry environment and can determined companies’
performance like TESLA Inc. it is quite difficult for new firms to match the organization strong
brand image which is one of its strength. In order to enter into new place new entrances has to
faced many challenges that might be impact on its profits and financial budgets because they
have to deal with strong and well-established brands that is not possible.
Threat of substitute services or products-
This component threatening business when consumers easily find substitute goods with
affordable prices or find out the better quality rather than others. When people switch from one
services or products to another with attractive price it impacts on TESLA productivity that get
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decreased. The threat of substitute products is high, because organization sell their products in
high cost which make people able to switch on another company who selling the same goods in
market with attractive cost. Ford and other auto mobile companies offering the value proposition
that is quite unique and different from TESLA providing to consumers, they set affordable prices
on its goods that garb the attraction of consumers. Value and convenience provided by personal
electric vehicles is matched, which increase threat for TESLA motors and decrease their
consumer base which is not appropriate for them. It is very essential for firm to save their brand
image in market, they work and perform effectively for retaining people with them for longer
period of time. Setting affordable prices contribute for retaining consumers, it is one of the best
way.
Bargaining power of suppliers-
Strong power of bargaining permit suppliers to sell low quality raw materials or sell
higher costs to its consumers. It directly affects purchasing companies’ profits because they have
to pay extra for resources. The bargaining power of TESLA suppliers is low because they are not
depended on suppliers of materials, company established their Own battery producing business
that permit them to reduce dependency on resources provider. It helps them to achieve upright
integration in supply chain, that supports to gain competitive advantages. Organization
manufacture good quality battery for their cars and other companies who sales electric cars. It
does not provide the high power to suppliers for changing prices of materials, they do not make
bargaining which is quite profitable for business as work independently. Most of the
manufacturer is depend on raw material suppliers, but TESLA perform freely. They do not
totally rely on number of providers for receiving raw materials. Through their factory they
produce number of batteries that enhance their performances effectively.
Bargaining power of consumers-
Consumers are the most important part of any business; they have power to demand
higher quality of products or lower prices from automobile industry producers when their
bargaining power of strong. Higher quality goods raise cost of production, while lower products
prices lower down the revenue for manufacturer (Welford, 2016). The bargaining power of
customers is high in automotive industry because in market there are many options available for
them. They have great number of options accessible for people to select from which negatively
impact on business. It means that it increases the power of people to reduce prices of electric
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cars and if they do not get low cost goods, they also have option to switch effectively. Influence
of buyers on companies and automotive, solar panel and battery industry environment is
accounted for in facet of Five force analysis. Due to high power of buyers TESLA lose their
position in market, as well as decrease consumer base. People have the power and ability to
drive the prices of electric cars. Company need to offer low cost products to their consumers
which is quite beneficial and helpful for them as to retain people.
LO 4
P4 Strategic management plan
Bowman strategic clock-
It is based on 8 strategic positioning strategies-
Low price & low added value-
According to this strategy company can set low prices of products and provide low added
value.
Low price-
In this strategy they only offer low price goods which is valuable for consumers.
Hybrid-
in this plan, TESLA can sell their electric cars in low cost but also add some
differentiation in its products.
Differentiation-
Organization according to this strategy offer totally different products to consumers by
adding some value for them.
Focused Differentiation-
When company adopt this strategy they position goods at highest price stage where
people buy their products because of great perceived value.
Risky high margins-
If the consumer find better quality products with low prices , it directly impact on
TESLA productivity as well as profitability.
Monopoly pricing-
Company can set prices which they want to without considering the other factors.
Loss of market share-
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When they set low prices company, it decreases their profit margin and market share.
Justification and recommendation-
After analysis the business environment TESLA recommended to adopt product
development and market development strategies that is best and suitable for growth of their
business (Zhu and He, 2017). They should produce new products for their existing consumers,
that satisfied them, if they feel happy the other people drive towards purchasing after seeing
them which is quite good for business.
Horizontal and vertical integration-
Horizontal integration combines of organizations that get similar company in retail
sector, while vertical integration consists of firm that acquire another business operated either
before acquiring organization in production procedure. TESLA is vertically integrated they
demonstrated commitment to vertical integration which is not seen in auto sector for many years.
Strategic management plan-
It is the most important document used to interact and communicate with company
the set priorities, organization’s goals, strength operations, focus energy, configure
resources, assure that workers and other stakeholders performing towards same goals.
Vision- Statement of vision depict aims, goals and
methods taken to achieve further organization
objectives. TESLA vision is to create the best
compelling car firm of 21st century by moving
worlds transition to electric cars.
Mission- Organizations wants to become the leading car
selling brand and provide people facility to
drive towards zero emission future.
Objective- The main objective of TESLA is to increased
their sales more than 7% which helps to
increased their profitability and financial
budget.
Strategies- TESLA need to offer low cost products with
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good quality, they get more info about
consumer needs and produce accordingly. Cost
leadership, Cost focus, differentiation, and
differentiation focus are the four different
types of porter’s generic strategies that help
company to achieve their business goals.
Differentiation is the best strategy for
organization as they can use it for specific
product.
Tactics ( Marketing mix) Products- The electric care of TESLA grab
the attention of consumers, they add new
technologies within it, that helps to increase
their revenue.
Procedure- firm design the structure of good
in different way that hold the power of
attracting clients.
Price- company set affordable price for their
products that attract the consumers.
People- Organization should trained their
workers and make them able to provide better
consumers services.
Place- TESLA need to chose the place for its
business where population number is higher.
Promotion- They must used social media
platform for marketing their products.
Physical evidence- they place holding and
promote brand through this.
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Implementation and control They must monitor the performance of
workers, make plan for controlling their
activities. Key performance indicators help to
control the unessential activities.
Evaluation Self-evaluation is the best way to measure the
success of plan and growth of business. By
measuring the Market share company will
evaluate the effectiveness of plan.
CONCLUSION
From above it has been concluded that political, legal, social, technology, environmental,
and economic factors impact on TESLA business. It impacts on their decision-making procedure
and make some changes accordingly that helps to run business effectively and efficiently within
marketplace. Furthermore, company is able to increased their sales with new technology, they
adopt new technologies for providing the best experience to its consumers. There are different
types of strategic direction available for firm, but they need to chose the best one according to
their capability that is beneficial and appropriate for overall business success and growth. Market
development and products development is highly recommended to company for better work and
growing faster within automobile industry.
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