Business Strategy: Impact of Macro Environment on Firm and Strategies

This study explores the impact of macro environment on firm and their strategies, with a focus on TESLA Motors. It includes PESTLE analysis, SWOT analysis, and Porter's five forces model.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Affects and impact of macro environment on firm and their strategies .....................................3
Internal environment and abilities of TESLA..............................................................................7
Porter's five forces model to measure competitive force of industry of TESLA.......................11
TASK 2..........................................................................................................................................12
Strategic plan for company........................................................................................................12
CONCLUSION..............................................................................................................................16
REFERENCES .............................................................................................................................17

INTRODUCTION
Business strategy is considered as set of actions of decisions taken by company for
providing benefits to its business (IGerard, 2018). It helps to define clear roadmap, consist set of
appropriate guiding principles, that define act people in organization take to achieve desired
objective and goals. The current study based on TESLA Motors, it is American automotive firm
based in California and Palo alto. It explain internal capabilities and environment of company by
including PESTLE and SWOT analysis. It justifies porter's five forces framework to measure
competitive force of automotive industry for TESLA. Furthermore, it clarifies strategical plan
that has tactical and touchable strategic priorities and objectives.
TASK 1
Affects and impact of macro environment on firm and their strategies
PESTLE analysis- It is one of the best strategic tool used to analyse impact of external
factors on TESLA company and their business strategies the most.
Political factor-
There are different types of political factors that can affect auto mobile manufacturers.
Trade policies or restriction, tax and government policy is includes in this factor that influence
how TESLA do their business effectively. The overall business performance is affected by
different trade policies. Changing environment cycle and political uncertainty have significant
affects on company operations (Hoelzlhammer, 2018). Various risks associated with global
business activities that leads to increase in operations costs, which finally impacts their ability to
sell its products that is Electric vehicles. After Brexit, changes in trade policies create barriers for
trading services or products to another nation which impact on business productivity and
profitability, it also affects on firm strategy related to trade procedure in which requirement of
changes get arise.
Economic factor-
Economic growth, inflation rates, income of people, exchange rates and unemployment
rates are the economic factors that affects business. TESLA is providing an energy system for
world of electric cars, businesses and home using batteries, that is quite expensive. Due to low
income rate, people cannot be able to buy luxury cars manufacture by company to improve
experience of driving for their consumers (Tesla PESTLE Analysis, 2018). TESLA cars in
developing regions is consider as very expensive products which cannot be purchased by every

one, it directly affects production procedure. Some people wants to buy their cars, but the need
for charging stations they cannot be able to pay extra amount or face many difficulties to do so, it
completely unsatisfied.
Social factor-
Demographic norms, customs, values and characteristics of population within which firm
operates are considered as social factors. In recent time, people are more likely drive towards
environmental safety and well fare, they efforts for making environment healthy and safe from
air and land pollution. TESLA motors produce two seater bullet car with Zero emission, people
love their ideas of electric vehicles, it means consumers preferences positively impact on
business growth and current strategy (Ihidalgo and et.al., 2018). They wants to provide Zero
emission electric generation from its giga battery that is quite beneficial for them as well as
consumer. With the support of population and by considering consumer preferences, TESLA
can grow more and more.
Technological factor-
Level of innovation, research and development activity, automation, technological
changes are the certain technological factors that affects business operations and market
unfavourably or favourably. TESLA relies on technology for its vehicles, this negative and
positive point for them. Rapid technological change is key element that impact company
performance negatively and positively as well. For example, organization effectively used
technology to enhance their product portfolio, in future they will be equipped with fully
driverless technology according to company CEO, which is possible for them while using greater
technology. But with technology the requirement of upgrades it quite essential which is not
possible for business to operate effectively, it impacts on business market position as well as
reputation.
Environmental factor-
It is very essential due to increasing scarcity of carbon footprint, population targets set
and raw materials by government in which firm operates their business successfully.
Contribution in CSR is the main responsibility of businesses according to the local authority, it
impacts TESLA business positively because they product environment friendly products and
used electricity (Kumar, Anand and Nim, 2018). Their vehicles compliance with different
environmental regulations and barely have affects over carbon emissions in comparing to that of

traditional cars that consumers a lot of gas or fuel. Centring on environment, firm build its strong
brand image in market and recognised in industry as become leaders.
Legal factor-
It is the crucial part of external analysis which find out how legal problems influence
TESLA motors macro environment. Law is very essential factor affecting businesses all over the
world. There is an expanding international patent protection, without any updates about
international copyright and patients existing in region where they wants to expand business is
bring many challenges for them. It directly affects business strategies that is expanding its large
chain in market. Certain nations do not permit for direct selling, which impact TESLA financial
performance as well as expansion of business in new market.
Stakeholder matrix-
It is the another tool used to analyse stakeholders impacts on business and their attitudes
towards company. It consider factors, such as interest level of stakeholders has in company
chosen strategies or plan and whether they like to use its power to affects this.

Illustration 1: Mendelow's Stakeholder matrix
(Source:Mendelow’s Matrix, 2017 )
High power and low interest-
Suppliers of TESAL have the high power to made affects on current business strategies.
They have low interest in increasing profitability, they can switch to another company when they
do not receive required needs.
Low power and low interest-
Employees have interest in company and direction, it is often due to its lack of ability to
influence the business, they like to accept current position.
High interest and low power-

Consumer made impact on TESLA business as they highly interested to buy their
products in low cost with all the facilities, but due to low power they cannot be able to make
changes within production operations.
High interest and high power-
Government is the external factor how have high power can use to make changes in
business strategies and plans. They also are interest for growing businesses as they can generate
more revenue and helps to improve economic status.
Internal environment and abilities of TESLA
SWOT-
It is strategic planning tool or framework used for TESLA motors as it helps to analyse
their internal capabilities.
Strength-
As one of the leading companies in their automotive industry, TESLA has several
strengths that support business to drive in marketplace effectively (Banks, Plant and Stanton,
2018). Its strengths not only supports to protect company market share in exiting markets but
also contribute in penetrating new markets. They are able to invested in building strong brand
portfolio, which is beneficial for business. They have dedicated consumers relationship
management department, in which employees is able to achieve high level of clients satisfactions
among current consumers. Company with new technologies, is capable to change the whole
driving experience of person efficiently. Organization is consider as best in class electric cars,
they sell number of vehicles according to people concern towards environmental sustainability.
They have left behind each other companies in race of greatest and best electric cars. As compare
to its range, TESLA motor proven to be the great covering maximum distance. Firm has high
rate of innovation, they can innovate Zero emission electric power generations from Giga
battery.
Weaknesses-
All internal elements in firm that causes any harm business performances' judgement is
known weaknesses. Limited market presence shows TESLA motor weakness, as they suffer a lot
due to this internal factors that reduce business competitiveness and growth in market.
Organization generate most of their revenue in US which is good for them, but due to small
presence in China they cannot be able to increase it more than before, which affects on their

financial and profit margin. This internal strategic element is the weakness that limits growth and
success of company based on rapid economic development of all over markets. Moreover,
limited supply chain is another weak point of firm that create barriers in the procedure of rapid
expansion into new markets. Company offer high cost products to consumers, which stay away
people for purchasing it (Andersen, 2015). TESLA motor products is relatively more costly than
competing cars, particularly those that has internal combustion engines.
Opportunities-
Business expansion in Asian marketing is one of the most important opportunity for
TESLA motors which is still unsaturated in automotive industry. It helps to increased their
financial budgets and also supports to make its business presence more stronger. This chance is
based on significant economic progress of nations where the has insignificant market presence
such Asia. Through expansion procedure they can increase profits margin, TESLA cars is
expensive due to their unconventional reliance on innovation, they can reduce costs of their
products that drive business towards greater success (Angwin and Cummings, 2017). Those
people who belongs to middle class were also be able to purchase their products easily is it one
of the major opportunity of growth for business. Most of TESLA vehicles is out of budget and
not affordable by middle class people however, while engaging in reducing their manufacturing
costs and operations they can garb the attention of middles class population as well.
Threats-
High Competition in automotive industry, threaten TESLA motors performance and
productivity. They are facing different competition from both luxurious and environmental
friendly automotive companies such as Toyota, Volkswagen and Fords. They holds position of
premium brand, manufacture affordable vehicles and breaking image of others. Due to high
competition in sector, TESLA compete with several brands who are able to offer low costs
products to consumers that they do not offer, it posses as thereat for company. Automotive
organizations aggressively compete with each other, which affects firm productivity and
profitability as well. It is one of the external factors that threatens, firm considering recent efforts
of another companies in producing electric vehicles. They also face threat and problem of
dealership regulations. In recent time, company directly sell their goods to consumers without
dealership collaboration that increase selling prices. However, some states like Texas and
Virginia disallow direct sales of firm goods, they required that sales must go through dealerships.

Porter's value chain analysis-
Its business management concept, it explains the collection of primary and secondary
activities that are performed by TESLA motors to make values for their potential consumers as
well as new ones.
Primary activities-
Inbound logistics-
Inbound logistics of TESLA company includes storage and receipt of raw materials to
build energy storage systems, electric vehicles and solar panels. Along with standard set of raw
materials, company is able to uses range of scare resources such as steel, nickel, cobalt and
copper.
Operations-
TESLA motors conducts vehicles producing as well as assembly operations at their
facilities in California, Fremont, Netherlands etc. its operations is divided into two parts.
Automotive is primary segment, which comprises design, manufacturing and development of
electric vehicles. Energy generation and storage is the second segment, installation, manufacture
and sales of stationary energy storage goods is includes.
Outbound logistics-
It includes warehousing and distribution of their products, electric storage systems
produced by TESLA. Company is able to ships its electric cars to their own galleries and stores
in US.
Marketing and sales-
These two activities of company is unconventional, just like other business practices of
electric auto maker. TESLA business is heavily depend on word of mouth promotion, they stay
way from virtual advertisement (Kumar, Anand and Nim, 2018). Organization engages in sales
of used cars, they used car business contribute new car sales by integrating sale of new products
that is Roadster.
Service-
In recent year, TESLA has large number of high profile clients services complaints, it
include but not limited to frustrates people using TESLA, after they refused to return their
answer emails and phone calls about servicing car in company.
Secondary activities-

Illustration 2: Value chain diagram
(Source: Tesla Value Chain Analysis, 2018)
Company infrastructure-
TESLA managed their workers performance, legal matters and accounting activities
effectively. Effective infrastructure manageable permit business to optimise value of entire value
chain.
Human resources-
Company analyse human resource management by measuring different HR aspects
including selecting, rewarding, recruiting and training. They provide training to existing as well
as new applicants in firm.
Technology development-
TESLA motor is able to implement technologies within their production procedure, they
realise the significance of technology development.
Procurement-
Organization carefully consider their procurement functions in order to optimise
operational, outbound value and inbound chain.
Porter's five forces model to measure competitive force of industry of TESLA
It the another effective model that helps to analyse and identified five competitive forces
impact on TESLA business strategies and performances as well in marketplace.

Bargaining power of suppliers-
In case of TESALA motors they totally depend on suppliers, the bargaining power of
suppliers is high (Klakurka and Irwin, 2016) rents arise to manufacture vehicles. This rise in
requirement is giving providers a lot of power to raise cost of supply and have been utilizing
that power already by raising costs. As electronic cars and use of components in products
become more desired and popular, suppliers of those goods can keep more popular.
In order to reduce the bargaining power of suppliers, TESLA motor work independently
they can build its own supply chain.
Bargaining power of buyers-
This force is high, influence of people on company and automotive, solar panel and
battery industry environment is accounted for in this force. Consumer have the power to drive
prices of products rather than before. People drive towards affordable goods when they do not
get from TESLA which bring challenging situation for company as to hold its potential clients
with them for long period of time. To retain customers, organization low down their costs of
products which reduce barriers for people to buy electric vehicles produced by TESLA.
Threat of new entrance-
Threat of new entrance is moderate, companies how wants to enter into automotive
industry faced many challenges in which they have to compromise and bargain between their
cost and performances (Stringham, Miller and Clark, 2015). General motors, BMW and other
brands make some compromised in their business when they enter into new market which affects
on its current business strategies and plan. Fully electric vehicles technically challenging and
costly to produce, it is the main reasons new companies has not been able to become profitable
up to date.
Threat of new substitutes products-
In automotive industry, consumer easily and effectively find substitute products which is
affordable in price. It means that threat of substitutes is high, TESLA motors sell their cars in
high cost which is out of boundary for middle class people how wish to buy fully electronic
cars . Other brands in same industry offer low cost products to people which make them able to
switch from Tesla motors to Jaguar. Other companies in sector also offer the best quality
products to people with low prices, it posses as threat for organization.

To reduce the threat of substitutes goods, such as public transport and cheap taxis for
supplying electric care, company will build their own supply chain effectively.
Competitive rivalry-
The number of business competitors in automotive industry in which TESLA motors
operates is few, it means the competitive rivalry is moderate. Company run their business
effectively, but they need to consistently up to date about other brands and trends in market to
sustain their position for longer (Maiyusril, 2018). It makes rivalry among existing organization
a weaker force within sector. Competitors give tough competition to other companies in which
TESLA require to develop the best strategy to deal with these challenges. Firm must get up to
date in context of another firms and latest trends within market.
TASK 2
Strategic plan for company
Vision To attain a leading place in creating powerful car in the 21st
century by way of dynamic transition of the world to the
electrical motors.
Mission To accelerate world's era towards the sustainable
transportation.
It is the mission statement that reflects a slight shift in the
Tesla's business, in seeing towards the market opportunities
in context of renewable energy. The company's mission
indicates relevancy of an enterprise batteries & the
accompanying energy in relation to storehouse of the
products in marketplace to electrical vehicle.

Objectives  To grow as a leading business in developing an
alliances with the other organization which makes
easier for the firm in respect of entering into the
newer markets.
 Increasing sales & gaining high demand for electric
car segment of Tesla's motor.
 Building brand awareness & managing reputation
of the corporate in the long term.
 Maintaining base for the existing consumers in
order to retain their loyalty towards the brand.
 To increase its market share by 5 % till the end of
2019.
 Educate customers about the goals of Tesla in order
to gain a major market in the future.
Strategies Tesla should opts for several strategies that involves
generic strategy of porter's, Bowman strategy, Ansoff
matrix, BCG matrix, vertical integration. It is useful for the
company in adopting Cost leadership with differentiation
strategy under the Porter 's generic strategy as it enables
in making the business effective and decision relating to
cost that will further assist Tesla in attaining competitive
edge in the market place by delivering innovative product
(Schawel and Billing, 2018). Furthermore, with the help
of Bowman strategy, Tesla can makes comparison among
its competitors which can help in growth as well as
development of company thereby achieving set defined
business aims and objectives. In case of Ansoff matrix
Tesla can analyse all the risk factors that are attached with
growth and development with existing product. It enables
in better penetration in terms of the growth strategy so that

better performance can be reached in the existing markets
(Chiang, Chen and Ho, 2016). Ansoff matrix forces the
market planners and the management for thinking about an
expected risk regarding moving into a certain directions. It
lays out best possible strategies for attaining growth in the
near future. For Tesla, vertical integration provides benefits
in form of reduced transportation cost with better improved
supply chain management function. Also, it helps in
providing more growth opportunities so as to have
differentiated products with increased control over its
inputs.
Thus, it can be said that for capturing large market share
along with increase customer base, it is better for Tesla to
adopt the most effective means of strategies. While making
selection of strategy, Tesla should consider that such with
the help of such marketing strategy, it is able to deliver
better quality products as well as services to its targeted
market audience in the large market place. Also, by making
use of SWOT analysis it will help Tesla in determining all
the strengths as well as weaknesses which has to be
overcome with the help of sound business plans as well as
strategies developed in line with the business aims and
objectives. By analysing market opportunities on right time
and using it in business processes will help Tesla in
making large profit.
Tactics Production- To maximize profitability & business
financial activity, through business expansion, organization
can focused on production procedure in which they need to
manufacture electric cars accordant to consumers demand
with low-priced, as it help to gain attention of people rather
than before and support to increase customers base. Price-

TESLA motors, recognized in their sector as leading brand
in automotive industry with high prices goods To react at
target market company need to set good prices, company
can adopt the best pricing strategy that is penetration
pricing strategy. Products- individual like the way
company make their products, the deign of object is
attractive. TESLA goods in sector, energy storage markets,
that is beneficial for consumers. Place- venues is the main
elements that used to reach clients, organization promote
their brand goods in most populated areas where they grab
the attention of local people effectively. firm can owned
galleries and outlets in region where they expand business,
it help to drive people towards purchasing. Promotion-
communication tactics and strategies is considered in this
element. TESLA communicate to their new consumers
through social media websites and traditional marketing
methods which is beneficial for business as help to grow
more and more. People- Company hire skilled and
qualified person who are capable to provide better
consumers services and able to solve any issues related to
products. Physical evidence- organization set their
personal websites, which assist people to know more about
their business and gather a lot of data in context of electric
vehicles.
Implementation After focusing all above things, it is the appropriate time to
utilise plan efficaciously and get the expansion process into
new market. TESLA management allocate duties and
responsibilities to each of their talented applicants. They
manage the whole plan and control overall process.
Evaluation Company measure their performance through user

feedbacks & accelerative revenue of business.
Recommendation and justification-
TESLA is recommended to choose penetration pricing strategy because it works perfectly
more than other pricing scheme. Company suggested to used digital marketing tools that helps
people drive towards purchasing of new cars within attractive features.
CONCLUSION
From above it has been concluded that external environmental factors affect on TESLA
production and performance, but still they lead in automotive industry for longer time period.
Organization is able to face internal factors impact on their business, they focus on major points
and consumer requirement. Furthermore, with the help of strategic management plan company is
capable to achieve their business objective and goal, they introduce different types of electric
vehicles with new and attractive characteristics that garb the attention of current as well as new
consumers.

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