Unit 32 Business Strategy

This document discusses the strategic plans and analyses used by Tesla Motors to attract consumers and improve their market presence. It includes PESTLE and SWOT analyses, VRIO framework, Porter's five forces, and recommendations for growth strategies.

Unit 32 Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Pestle and Swot analyses........................................................................................................1
VRIO framework....................................................................................................................2
Porter’s five forces.................................................................................................................6
TASK 2............................................................................................................................................9
Strategic direction available to organisation..........................................................................9
Bowmwn Strategical Clock..................................................................................................10
Recommendation for appropriate growth Strategy..............................................................12
Strategic management plan...................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Strategic plan is a group of actions and plans that are used by the organization to attract
more consumer towards the company and their product (Johnson, 2016). This important for
organization to work with effective strategies to get better result in the target market. Tesla
Motors is one of the fastest growing organization in current time. It is providing electrical
vehicles to the world wide consumer base. Tesla Motors was established in year 2003 and
current CEO of Tesla Motors is Elon Musk, who is a well Known Entrepreneur. This report is
providing different strategic plans that can be used by the organization to meet their goals with
high efficiency. The PESTEL and SWOT analysis is performed to study the internal and external
factor that can affect the business of Tesla in the global market. Porter Five force model will be
used to known the current status of electrical automotive industry. The Ansoff Matrix is used to
get the strategic direction to improve its presence in the global market. A Strategic plan will be
used in the report to improve the consumer base of company in the current market.
TASK 1
Pestle and Swot analyses
Strength
The main strength of Tesla lies in their production of electric vehicles along with energy
generation products. While the other manufacturers of vehicles mainly emphasis on providing
electric cars that are affordable, Tesla targets the certain niche market that is the luxury electric
market of auto mobile (Akter and et. al., 2016). This is their main strength where they are the
pioneer in terms of electric cars. Another strength which has dominated tesla is their
transformational strategy of delivering the innovative technologies. This is distinct from others in
the sense that they provide highly cost effective electric vehicles as well as the gas-powered
vehicles. Their high investment in the innovation has been their greatest strength which has
enabled them to capture the great market share.
Weakness
The company generally have extreme load of high debt. In 2016, Tesla had around $2.5
billion of the debt and thus their capital leased and reduced to around 72%. This debt became
their biggest weakness and thus hindered their operations along with their decrease in revenue
and profit. Besides this, it's another weakness encompasses their burning of large amount of
cash. This is because of their high investment in research and development. This company has
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been reported to have the negative flow of free cash since its inception which has somehow
raised their debts and compelled them to sell their shares (Olson, E.M. And et. al., 2018).
Besides this, company has the limited presence in market and builds most of its revenues within
US along with china and has restricted their expansion.
Opportunities
Company has the golden opportunity for expanding its value chain across the globe. Like
company can eventually increase their revenue by expanding in the Asian automotive as well as
markets of renewable energy. Another opportunity which tesla have is that in order to enhance
their profit margin, they would need to mitigate their cost. Thus, with the help of various
gigafactories, they have the potential to enhance the production of auto-mobile. Because of this,
the company would be able to grab the benefit of different discounts on the purchase of bulk
material. Apart from this, the growing awareness of people to lead healthy life free of pollution
and harmful gas would be an excellent opportunity for tesla who are mainly focussed towards
producing fuel efficient cars.
Threats
However, Tesla develops vehicles which target niche vehicle owners, it still faces the
extreme competition from various other organizations such as Toyota, Ford etc. This would
hinder their operations in the future and might lower their revenue. Another major threat which
the company might face is the debt (Amran, A. and et. al., 2016). Due to its expansion in new
technologies as well as development of manufacturing industries, they would need to raise their
funds either with the help of debt financing or the equity offerings. One more threat which might
dominate tesla is their low cost offerings. Providing the cars at low cost might lower down their
profit margin in comparison to the other famous companies of car and slashing the price might
force them to lose their market share.
VRIO framework
It is basically used to analyse the resources of the organizations which will provide them
the competitive advantage in the long run.
Valuable Rare Imitable Organization
This comprises of the resources
which provided some value to the
customers and thus provide the
This constitutes
the resources and
products which
This constitutes
the resources as
well as the
This involves the
well through
process, structure
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opportunity. Tesla provides electric
vehicles and the gas-powered
vehicles to the customer which
creates the value for customer as they
remain cheap and health efficient.
becomes difficult
to find and thus
are rare. The
unique and
futuristic design
of the electric
vehicles is
difficult for the
competitors to
find in the market
and design.
products which
are difficult to
duplicate and
hence cannot be
imitated. The
proprietary
battery as well as
the supercharger
network installed
by Tesla in
vehicles are hard
for the
competitors to
imitate.
and system of the
organization
which helps it to
achieve
competitive
advantage. The
highly talented
engineers and the
staff of Tesla
provides them the
edge over their
competitors. They
are highly
organized to bring
continuous
innovation in the
products.
Pestle analyses of Tesla
This is the tool which aids in evaluating the position of company in external market and
analysing its potential to manage business operations if external factor gets changed.
Political factor
Tesla is offering electrical cars in the market which is unique concept as compare to
other cars which requires fuel. Political instability create problem for economic condition of
nation, due to this, terrorism can get increased. In such condition disruption gets created and
enterprise fails to attract consumers towards the organization. Political disruption impacts on
supply chain activities which increases production cost of the firm. But if there is great political
condition and have great relationship with other political government then Tesla would get
benefit in performing well in the new market which will increase sales of business unit to great
extent. There are different other things that are important for the business of organization. The
policies made by government are most crucial for the organization. These policies affect the
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business of the company in national and international market (Lieder, M. and et. al., 2017).
Policies of country like foreign policy, taxation policy and business policy can affect the
business of Tesla. For example the foreign policies are depended on the relation between two
nations. If the relations are not good then it can create the resistance in the business path of
organization in the particular country. The taxation policy is decided by the government to
maintain the economic stability in the country. If certain reform performed by government in the
taxation policy then the whole pricing policy of Tesla get affected by this. To come out of this
crisis Tesla need to make effective change in its pricing policy to stay effective with its profit
and revenue. This is how the different political factor can influence the decision of organization
and its business operations.
Economic factor
Stable economic conditions improves purchasing power of customer, in such condition
companies can get benefit in raising sales of the company. If there is high employment rate then
consumers would have potential to spend money on buying cars. This will enhance sales of the
firm and will help the business in gaining competitive advantage. But if there is recession then
spending capacity of people will get down which will decrease profit of the company and Tesla
will not be in position to invest more amount. Economy of company is somehow associated with
the economy of nations. Any minor change in the country's economy can lead to huge impact on
the organization like Tesla. There are various economic conditions can influence the
performance and business of Tesla Motors. For example Recession, Economic Crisis and
economy crash can affect the economic policy that is used by Tesla. The condition like recession
and economic crisis can cause major problems to organization. Economic crisis and recession
can lead to the problems like unemployment, inflation and lack of resources. These all conditions
are not good for the performance of the organization in the global market. The unemployment
and lack of resources can affect the production line of the organization. This can reduce revenue
of company and company will lead to failure. Situation like inflation can force the customer to
stop buying product of company cause of rise in the price of the company product. In the positive
and better responsive economic condition of country can help the country to be more innovative
and productive in the target market.
Social factor
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This is the major factor which influences the working and performance of company to
great extent. Tesla ensures to satisfy consumers and offer them products which has high quality
so that they get value for their money. It has sustainable products which enhances its market
image to great extent. Greener and sustainable products are great for the society because it saves
natural resources (Strategy, 2017). The social factors that can have impact on the performance of
organization are educational status of locality, cultural conditions and per capital income. The
education level of local are required high to keep the organization productive. Better education
level of population will allow them to recruit better employees from the location without
spending much capital in recruitment process. The per capital income of local and international
people is important to decide the pricing of its products. If the per capital income of people high
then Tesla can launch their premium products in the particular market. Culture is the main factor
for the business of the organization. To conduct business with high stability Tesla need to know
the culture of the target people. By knowing their culture company can make specific changes in
their product to be productive in market place. This is how the social factors can affect the Tesla
motors.
Technological factor:
Tesla is using advance technology which gives positive result to business unit, as it raises
production capacity of organization and aids in reducing wastage in the production process as
well. Sustainable technology raises sales of company and help in increasing profit of the firm to
great extent. But use of such advance technology enhances financial pressure of Tesla as well.
The Technological factors can be classified in three different categories which are- technology
that is used by the organization, the future possible technological changes in the market place
and the last factor is their technology used by the competitors of Tesla (Pisano, 2015). The if the
current technology used by the Tesla is of advance level then it can help them to manage their
production line and also can help them to maintain the supply chain to the target market. The
future changes in the technology are crucial for the organisation because to stay productive in the
international market it is important to meet the latest technology. By this Tesla can provide
product to the consumer with the latest technology to offer better service to them. The last
technological factor that can affect the performance of organization is technology used by the
competitor of company. If the technology used by the competitor is better than Tesla then it can
force the consumer to switch company and it can affect the consumer base of Tesla. This is how
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different technological factor can affect the performance of Tesla motors in the national and
international market.
Environmental factor
Tesla always take cares of atmosphere hence it’s all products are unique because it does
not harm to environment. That is the reason that company has developed great image in market.
It saves energy and also use natural resources in appropriate manner. That has helped company
in developing unique brand image in the market. The different conditions that are considered in
the environmental factor are location of company manufacturing plant, weather conditions,
geographical location and diversity of company. These are the major factors that can affect the
performance of Tesla in the international market. The location of company decide the
accessibility of consumer to the company. If the consumer can easily access the location of
organization then it is beneficiary for Tesla (Yuliansyah, Rammal and Rose, 2016). It will
increase their sales and revenue. Location of the manufacturing plan can influence the supply
chain and marketing plan of Tesla. If the location of the manufacturing plan is good then it is
easy for them to easily access the resources and raw material. This will reduce the manufacturing
and transportation cost of company. It is also important to continuity of the production line of
Tesla Motors. The factor like diversity can help the organization to improve its positioning in the
international market. High geographical diversity can reduce the transportation cost and improve
the availability of resources.
Legal factor
Company Follow environmental law in appropriate manner. UK is very concern about
atmosphere hence has made strict laws which helps in protecting environmental condition of the
country. Laws related to supply chain enhances operational cost of tesla. Smooth following of
legal regulation aids business unit in performing well in market and maintaining its competitive
position in the market successfully. If government makes changes in laws then tesla also
immediately take action to modify its operation, this approach always aids the company in
sustaining in market for longer duration.
Porter’s five forces
Porter Five Force Model is used by the companies to evaluate the different type of threats
of industry in different conditions. By analysing these threats, organization can effectively plan
their market strategy to stay productive in the market (Leonidou, L.C. and et.al., 2015). To
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improve the performance of the organization in the competitive market Porter Five force model
can help Tesla to understand the competitive market.
Threat of New Entrant
For an organization it is really difficult to enter a new market where the competitors are
selling same product. In this case the biggest challenge for organization to acquire the consumer
base and make them loyal to organization. For the Tesla Motors threat of entering new market is
not that high because of different factors. Tesla is one of the most famous organization in current
time. The products provided by the company in the current market are best in its category. The
services and product provide by the Tesla motors is best in its type (Balon, V. and et. al. 2019).
So consumer can easily recognize the company in the international market. So in this case this
threat of entering new market is low for Tesla. This will help them them to launch their product
in the international market.
Thereat Of Substitute Product
There are many companies are working on the technology which is important to make the
electrical car's. Some of these companies are BMW, Volkswagen, Toyota and Tata but the
technology is best and far more advance then the technology that is used by other companies.
This is really difficult for other organization to meet the technology of the Tesla Motors. So the
threat of substitute product is low for company (Martinez-Simarro, Devece and Llopis-Albert,
2015). This can help Tesla motors to Efficiently perform business in the local and international
market. To improve this current status Tesla can increase their budget for research and
development to develop their product more. This is how they can offer better product to the
consumer to stay on the top of the competitive market.
Bargaining Power of Buyers
The Bargaining power of the consumer can be considered as the power of consumer to
force the company to reduce the price of their products. This power of consumer is known as
bargaining power of consumer. If the product provided by the company is rare and valuable for
company then the power will be in the hand of company. For Tesla Motors the, the products
provided are highly capable and rare in the market. The services provided by company are of
premium class and this technology can not receive form other organization. This is how Tesla
Motors holds the high power and consumer are not able to switch company because there are no
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other alternatives of company product are available in the target market (Dahlberg, Hokkanen
and Newman, 2016). This power can be improved by organization by improving the quality of
product and in introduce more innovation in the product. This can help the organization to reduce
the power of the consumers.
Bargaining Power of suppliers
This power of supplier is known as, is the suppliers of organization are only few and the
raw material provided by them to the company are rare. In this condition suppliers can ask the
company to pay more to get same resource. This is how suppliers can force the company to pay
high cost for same material and it can reduce the profit of company. There are different suppliers
are associated to the organization. The operations of the Tesla includes reuse and recycling
process that can support them to arrange the resources. High number of power help the Tesla to
keep power in their hand. The reduced power of supplier help the organization to arrange the raw
material on the cheaper price. That how the bargaining power of consumer is law and it is
beneficiary for Tesla to be competitive in the global market.
Rivalry Among the Existing Competitors
Tesla motors is the organization that is known for its products. The services and product
provided by the company is of high quality and better then other competitors. In this case the
power is in hand of Tesla motors because the technology used by other companies is not efficient
as Tesla. So this not possible for other company to force the consumer to switch their choice
from Tesla Motors.
As per the above analysis competitive position of Tesla Motors is too good, and they do
not have any big threat in the competitive market (Soltanizadeh and et. al., 2016). To stay
competitive in the internation market Tesla can use innovation in technology to provide better
products to the consumers.
TASK 2
Strategic direction available to organisation
Tesla being a leading car company always ensure to satisfy its consumers in great manner.
Hence organisation always take support of such strategic direction that aid the firm in gaining
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success in market and managing long term sustainability. Tesla majorly focus on implementing
advance technologies which make it unique from other enterprise.
Market penetration
Tesla is using this tactic as its intensive growth strategy, this technique help business unit
in managing growth in existing market and raising its brand image in local markets. In this,
enterprise sell its electrical car products to the consumers of current market. The major agenda of
Tesla is to raise sales of its electrical cars in UK, by using penetration technique firm becomes
able to raise its revenue in UK where currently it is operating. This supports Tesla in gaining
competitive advantage and increasing market share in this market. It always gives benefit to
business unit but sometimes restrict the Tesla in local market only.
Product development
This is another growth direction that can be avail by Tesla. Firm can develop new
product to attract more consumers in United Kingdom. Tesla continuously implementing new
technologies, by this way it has developed such products which are environmental friendly.
Tesla Roadster is developed by Tesla which has gained attention of mass audience (McAdam,
Bititci and Galbraith, 2017). Hence in near future also, Tesla develop its products then it would
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Illustration 1: Ansoff Matrix
(Source: Annmarie Hanlon, 2019)

be able to raise its revenues and world be able to meet its long term sustainability goal
effectively. Tesla can also maintain its investments in Research development activities for
developing new products as per the need of potential buyers.
Market development
Tesla has also option to develop its market to meet its long term organisational goal. It
can enter into new country and sell its electrical car products to citizen of that nation. This
market development tactic will help business unit in gaining more return over its investments.
Tesla has started gradually to enter into new markets which has supported in raising its profit to
great extent. Tesla wants to become leading car firm globally and for that there is requirement to
have great presence in global market. Though it requires lots of investment hence it can be
increased but if enterprise take support of this tactic then it would give benefit to Tesla in
generating more revenues and managing sales in the new market significantly.
Diversification
This is the strategic direction available to business in which organisation can offer new
products in new market. Tesla can sell battery items in new location to gain attention of new
potential buyers. This business solution will support the firm in managing its growth in the new
market to great extent. Though it requires lots of money but definitely diversification will help
tesla in gaining attention of consumers and increasing profit of organisation to great extent.
Bowmwn Strategical Clock
As per the strategic clock of Bowman ther are eight different direction of strategy whih
can be used by the organization to improve thir performance in the the international market or for
a specific target market. The strategies according to strategic clock are-
Low price and Low Value- This positioning is not good for the performance of Tesla because
they provide premium products to consumer.
Low Price- This policy is not good for the business and revenue of Tesla because the cost of
electrical car manufacturing is too high.
Hybrid- This sytrategy is good for the performance of Tesla in particular market but due to
limited production this strategy is not effective for them.
Differentiation- This strategic direction is highly effective for Tesla because their product
quality is too high and their business can be improved by performing better promotion of
company product.
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Focused Differentiation- It is one of the best strategy for Tesla Motors but it can be used for the
target consumers only. This is not possible for organization to generate enough profit just by
targetimg limited number of people.
Risky Margins- High marginal cost strategy good for short term business but this is not possible
for Tesla to survive in market condition for longer time.
Monopoly- This policy is only good for organization who are only service provider iin market so
it can not be used by Tesla Motors.
Loss of Market Share- This strategy can not be used by organization because Tesla Wants to
earn high profit by conducting their business for the larger market and this business strategy is
not made for companies like Tesla.
Recommendation for appropriate growth Strategy
There are different strategies are possible for Tesla company to improve its growth in the
international market. For the different condition Tesla can use various strategy to meet the goals
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Illustration 2: Bowman's Strategic Clock
(Source: Bowman's Strategic Clock (Strategic Positioning), 2018)

that are associated with their growth in the international market. The strategies that are provided
above can be effectively used by the company. To launch a new product in the existing market
Tesla can use market development strategy that can help the company to improve their consumer
base to gain more success and profit. As per this strategy Tesla can use different marketing and
promotion strategy to make the people aware of their new product. By this they can attract more
consumers from the existing consumer base.
Strategic management plan
Aim- Increase Sales of new company By 20%.
Objectives-
11 Improve the Marketing policy of company.11 Improve the awareness of consumer about new company prioduct.
Strategies-
1. Include the digital technology in the process of marketing to increase the awareness of
consumers.
2. Utilise the Social media to improve the consumer base.
Tactics
1. Improve the social media presence of company.
2. Improve the social media followers by frequent activities.
Future Implications
By making continuous updates in the digital marketing Tesla can meet their goal of
improving its consumer base.
CONCLUSION
From the above study it can be concluded that, Business strategy is an effective tool as it
helps in better operational performance and productivity of the business. This study will focus on
outlining the Pestle and Swot analysis of the company in order to gain wider perspective about
internal and external environmental factors. Sustainable technology raises sales of company and
help in increasing profit of the firm to great extent. This study also helps in evaluating porter five
force model which is used by the companies to evaluate the different type of threats of industry
in different conditions. This study also helps in determining strategic direction available to
organization and effective strategic management plan.
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REFERENCES
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