Influence of Macro and Micro Environment on Tesla

This report analyzes the influence of macro and micro environment on Tesla, including political, economic, social, technological, legal, and environmental factors. It also examines the strength, weakness, opportunities, and threats faced by Tesla, and discusses Porter's five force model.

Unit 32 Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
LO1..................................................................................................................................................3
Influence of macro environment on Tesla .................................................................................3
LO2..................................................................................................................................................5
Influence of micro environment on Tesla ..................................................................................5
LO3..................................................................................................................................................8
Porter's five force model ............................................................................................................8
LO4................................................................................................................................................10
Evaluation of different strategic directions .............................................................................10
Recommendation ......................................................................................................................11
Strategic management plan ......................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business strategy refers to the term that defines setting objectives and goals for the
company for taking decision in the organization (Johnson, 2016). There are three different
strategies such as leadership, differentiation and focus that will be used for enhancing business.
Present study will be based on Tesla company. It is an American automative and energy
company that specializes in electric car manufacturing.
Report mainly emphasized on different frameworks that is having an impact on macro
environment as well as micro environment of the organization. It includes porter's five force
model that help in evaluating competitive forces for an organization. Furthermore, it includes
theories, concepts and models that help in interpreting strategic planning in an organization and
also emphasized on strategic management plan that provide tangible and tactical priorities and
objectives.
LO1
Influence of macro environment on Tesla

Macro environment are the external factors that are uncontrollable and having greater
influence on business decision making that also affects performance and strategies. It includes
following factors such as political, economical, social, technological, legal and environmental
factors.
Political factors
Tesla is dealing in automobile sector that may have influence of government taxes and
that affect performance of it in the future. Changing in tax rates affect functioning of Tesla as
selling its automobile into the global market. As Tesla is providing both gas and electric vehicles
to consumers that influence various perspective of company. Policies that will be implemented
by government limit trade and performance of company's revenue of Tesla. In some countries it
is banned to drive automobile that emit gas so it becomes difficult for Tesla to sale its product
into the market (Akter and et. al., 2016). Political instability providing bigger impact on
business operations as create more competition in the future. Due to penetration in the market
that affect sale of automobile in other countries. Further, trade barriers in countries such as India
will impact the auto mobile companies. It include barriers such as impact of Brexit, license on
imports, Testing, anti dumping measures etc.
Economic factors
This include economic condition that includes market growth, change in currency rates
and other variables that impact on automotive business. Decreasing cost of battery is useful for
Tesla as manufacturing car that provide effective use of products into the car and provide low
cost product into the market. Through this performance of company increases and enhance
business operations. Economic stability is the biggest threat for Tesla as changing in currency
rates influence import and export of business from other countries. This will have impact on
financial performance as currency cannot be exchanged so provide slow growth for business. It
is providing consumers luxury vehicle by using the latest technology. This is beneficial for
middle class people in the country. There are various economic factors that impact the strategies
of Tesla such as gross domestic product, rate of unemployment, rate of inflation etc. in the
country etc.

Social factors
Social trends affect firm's performance through employees, customer and investors. This
is providing electric cars that is liked by most of the people in the country that is of less cost too
and affordable. Tesla is providing sustainable environmental friendly products to consumers that
help in increasing social status in the marketplace. Word of mouth affect most as friends and
reference group provide feedback from the market that influence purchasing decision by buyer.
For maintaining trust of consumers it is providing low cost product that influence operational
activity in the company (Buckley, Burton and Mirza, 2016). Through this it boosts its financial
performance and help in achieving objectives of the company. Change in Lifestyle is another
aspect that influence business operations of Tesla. Due to change in the lifestyle and people
remain busy in other important activities. Nowadays, nearly 59 % of the customers spend their
time on searching auto mobiles online. Company is offering discounts to buyers to increase
online sales.
Technological factors
Change in technology is the biggest factor that lead to increase operational cost of the
company. Development in Tesla's product depend on technology that is available in the market.
Increasing automation is an opportunity for the company to grow at larger pace of scale. Rapid
change in technology create problem for Tesla to beat competition in the market. It is not easy
for adopting technological change at fast speed as that may take time to build efficiency in
business. Increasing online mobile system also help in enhancing business as connecting
automobile industry for providing technological changes in the company. It provides more
importunities for Tesla to grow in the market for the future.
Legal factors
This includes laws and regulation that help in shaping decision and developing business
for the future. Tesla is having an opportunity for expanding its business at international level for
this patent right is required for selling its product into the market. Selling product without patent
right is against rules and regulations that is governed in the country. Tesla is making eco friendly
cars that is more efficient and it will sale its product into international market as it is according to
their rules and regulation (Martinez-Simarro, Devece and Llopis-Albert, 2015). Patent
protection is required for selling product into other countries otherwise it treats as illegal and do
not sell into the market. For example – Firm will also require to follow environmental

regulations that are developed by government of the country in respect of controlling pollution
etc.
Environmental factors
Change in weather conditions that may have greater impact on business operation of
Tesla. As in some countries pollution free vehicles are promoted so it introduces electric vehicles
to them that is eco-friendly to the nature. Using solar panel help in consuming less electricity that
can be used in vehicles for saving electric energy for the future. Use of waste material in making
product protect environment from being destroyed. Company has to follow environmental rules
and regulations that are developed by the Government for safety of people living in the country.
Government takes various actions to control the emission of carbon di oxide in the environment.
LO2
Influence of micro environment on Tesla
Micro environment consist of internal factors of economy that affect business operations
of the company that include strength, weakness, opportunities and threat.
Strength
Tesla is the biggest automobile industry that provide various services to its consumers. It
is having unique position in the market as selling cars by transforming technology and delivering
innovative cars to consumers. It is not only sales automobile but also offer electric vehicles that
provide larger domination by consumers as it is less expensive and affordable. Due to this eco

friendly product its sales increases at larger scale and enhance business operations for the future.
It provides diversified product to consumers that help in gaining more profit as well as
productivity also increase. Tesla is bringing high innovation into its products that help in
developing competitive market and sustaining financial gains in the future. It stood at third
position as selling electric vehicle and having larger impact on consumers regarding use of eco-
friendly products (Balon and et. al., 2019). It's another strength is that during niche marketing it
introduces its electric car that help it in making brand name in the market. Investors also provide
fund to Tesla for taking initiative related to save energy as providing eco-friendly cars to
consumers.
Weakness
Its biggest weakness is that it do not have sufficient cash during some years as it invest its
money in research and development for bringing transformed in its cars. For manufacturing
product in future it has to take loan that create huge debt and significant change in business
operations. For expanding operations of company investment that is being done that create
problem for Tesla in the future for running business. It is having small manufacturing force as
compared to its competitor. While manufacturing cars Tesla is having greater implications as
providing innovation into it as sometimes it leads to risk that may affect operations of business.
It faced many challenges that leads to delays in manufacturing cars and provide slower service to
consumers. As it is adopting high level of innovation and complicated procedures that might
affect demand and supply of Tesla product. Due to shortage of batteries its production of electric
cars get limited as supply decreases due to it. This directly affected sales of the company.
Opportunities
The biggest opportunity for Tesla is to expand its business in Asian markets as there is
less number of automobile industry. It is also not much developed in this sector this help it in
expanding its market at global level and through this financial stability also gets stronger. It is
providing less expensive car that is affordable with less range and consuming less power that is
an opportunity for it to grab customer attention. It is planning to make its own battery that
increase manufacturing rate and reduce production cost (McAdam, Bititci and Galbraith, 2017).
They are building gigafactories that help in fulfilling target and increase in production of
automobile. As it is producing product at larger quantities so it may get an advantage of getting
material at discounted price. It developed its two gigafactories and going to establish third one in

coming years. It is mainly focused on future driving that help in saving environment and provide
eco-friendly products to customers. Only Tesla has power to generate its business in making
environmental friendly products for the future.
Threats
The biggest threat for Tesla is its competitor as it have to find out unique selling
proposition in the market that help in enhancing business for the future perspective. Most of its
competitors are selling luxury cars by using internal combustion engines. As its competitor Audi,
BMW and Daimler is providing various perspective and they are involved in making electric
cars before Tesla. As there is increase in competitors that provide hybrid cars and less expensive
that will be easily affordable by customers. Another major threat of company is debt as it has
invested its money in development of innovation that provide larger use of money that enhance
business for the future course of action. For adopting new technologies in making cars Tesla
have to invest in technological change that create problem in business. Because of complex
innovative vehicles used in company that provide defects while manufacturing car. Products may
have defect in terms of designing, manufacturing or some other factors that may involve in
providing different aspect (Mahmood, Chung and Mitchell, 2017). Adoption of cars by
consumers is another threat for Tesla for bringing out in the market. In UK adults do not feel safe
as driving self so that may create problem for Tesla.
Porter value chain -
The model includes various activities such as support and primary activities. These activities are
consisted of various elements.
Inbound logistics – It include all the activities of Tesla that are related with storing, receiving
and distribution of inputs of vehicles.
Outbound logistics – It include activities of company that are related with distributing the
vehicles and delivering services.
Support activities -
Human resource management- The activities related with managing human resource of company.
VRIN/VRIO framework-
Value-
It include the resources that can be a means of competitive advantage.
Rareness-

The resources that are available to all the companies.
Imitability -
The resource cannot be taken over by competitor.
Non substitutable -
An ideal resource cannot be substituted by any other resource.
LO3
Porter's five force model
Porter's five force framework was developed by Michael porter in 1979 that provide five
forces that help in shaping industry based on these forces in the future. There are five factors that
analyse competition between rivalry firms in the marketplace.
Threat of New entrants
One of the biggest challenge for the company is to bargain regarding price of electric
vehicles and improving performance and cost. In contrary, its competitors such as BMW, Audi is
also involved in making electric cars that are not expensive as compared to Tesla. As electric
cars battery is not run for longer period of time as comparison with traditional cars as there
batteries run for longer time of period. Tesla is providing different models of car such as Model
s, Model 3 etc. that are fully electric and in built with advanced technology that provide high
speed while charging single time. This type of product is difficult to make and it is expensive in
producing this type of cars. New entrants bring significant change in operations of business that
create more competition and technological change for the future. The threat from new entrants is
low because auto mobile companies require high amount of funds to manufacture vehicles.
Bargaining power of Buyer
In this there is low bargaining power of buyer as only Tesla is providing electric vehicles
so customers not be able to switch from it other competitors in the marketplace. Price is another
aspect that affect bargaining power of buyer (Teh and Corbitt, 2015). As compared to other
competitors consumer found out that price of Tesla is more than compared to other competitors
in the market. By comparing with other competitors buyer doing bargaining with Tesla regarding
prices of product in the market. Other factors that affect bargaining power of buyer is adopting
substitute product that help in differentiating with other manufacturer. On the other hand,

costumer is having low switching cost that will be benefited for the company in providing cars to
customers. The buyers can easily shift towards products of other firms.
Rivalry among existing firms
Tesla is operating in highly competitive market. This influence competition in automotive
and energy industry. As Tesla is known for its electric vehicles other automobile companies also
announced to increase its operation in this segment. For example: BMW, GM is also planning to
make electric cars that create more competition in the marketplace. Competition of making eco-
friendly products is increasing gradually that provide more competitive advantage for enhancing
business for the future. There are various aspects that lead to provide effective change in
business. Rivalry is the biggest threat that help in providing effective use of resources so that it
will be easy for competing in the market for the future. Expanding business at international level
provide changes as implementing new policies and procedures that provide effective changes in
bringing utilization of resources that help in manufacturing cars by Tesla. In the end it can be
said that there is high level of the rivalry in the existing firm.
Bargaining power of Supplier
Supplier provides raw material to Tesla that help in evaluating various aspects for the
future. If raw material is not provided on time then it disturbs production and sales of products.
Availability of raw material plays an important part for manufacturing cars as that may lead
impact on business in the future. Some suppliers use third party for selling material to Tesla.
Most of the supplier are of moderate sized as through that automobile industry will not get
affected. Availability of substitute supplier is also less for Tesla that help in maintaining
performance by satisfying customer needs. This lead to emphasize Tesla in market and ensure
better bargaining power of supplier that provide effective product to consumers.
Threat of substitute products
There is an impact of substitute product on Tesla. Customer is having low switching cost
that reduce competition in the marketplace. As due to low switching cost consumers shift
towards public transport that will be more affordable for them. This is providing strong force to
Tesla and create more competition for the future (Anwar and Hasnu, 2016). Consumers switch
to other brand create problem for Tesla to survive in market for longer time period. Other
competitors such as BMW, Audi also provide electric cars in less cost as compared to it so

consumer shift from Tesla to other brand. Public transport are the other big substitute which used
to offer the variety of the difficulty for the Tesla.
LO4
Evaluation of different strategic directions
For evaluating different directions available in Tesla for making effective business
strategy ans off matrix is applied as follows:
Ansoff Matrix
This is used for doing strategic planning that help in taking decision for implementing
various strategies into business for future growth (Lehmann, 2016). It is divided into four
segments such as market penetration, market development, product development and
diversification.
Market penetration:- In this stage organization is trying to grow by using its existing product
and services in existing market. Instance, it wants to increase its market share in current market.
For example: Tesla is growing by selling its existing product as electric vehicle in the existing
market by decreasing its price and making it affordable for consumers. Through increasing in
promotion that help in increasing sales for the future.
Market development:- By using this strategy firm going to expand its market by selling existing
product into the marketplace. For example: Tesla use this strategy by segmenting customer
according to geographical location. It is selling its product into foreign markets that help in
developing market.

Product development:- In this company creates new product and services by providing services
in existing market for achieving growth. For example:- Tesla is bringing driver less car that will
be sold in the existing market for bringing growth.
Diversification:- In this organization is introducing new product in new market. For example:-
Tesla diversify its product in providing mobile phones as in the new market
Porters five
Competition in the Industry: Their is a high level of the competition in the industry.
Potential of new entrants into the industry: As the start capital is high low level of the threat is
seen from the new entrant in the industry.
Power of supplier: As the demand of the product is not that high in this industry there is low
level of power in supplier end.
Power of customer: As the competitor are high there is good amount of the power in consumer
hand.
Threat of Consumer: Their is no such threat of substitute product in this industry..
From this model it can be evaluated that by using market penetration strategy Tesla can
reduce price of its car that help in attracting more consumers towards the company (What is
business strategy, 2019). On the other hand, by adopting market development technique
uncertainty will increase as there is risk in expanding offering in new market for Tesla as
consumers not fastly adopt new development of market. Product development is also a risk for
Tesla to introduce new product into market as it is not acceptable by consumers that may lead to
loss in the future (Evans and et. al., 2017). Lastly, diversification option is more risky as
compared to other growth strategy as in this Tesla have to introduce new product into new
market that may affect business operations.
Horizontal and vertical integration -
Vertical integration means a strategy through which business can completely control one
or more than one stage of distribution or production of the product. For Example – Company
can acquire control over electrical components and tyres which is known as backward integration
and it may purchase vehicles or provide after sale services which is known as forward
integration.

Horizontal integration means a company acquire competitive or similar business in the
industry. It can merge with or may acquire another business to strengthen itself. This will help
organisation to achieve economies of scale, increase markets etc.
Bowman strategic clock-
Figure 1 : Vertical integration. 2017
Source : (Vertical integration, 2017)

Low price and low value added-
The product is differentiated but customer perceives little value.
Low price-
It is the means to minimize cost. Often related with economies of scale.
Hybrid-
It includes component of low price and some product differentiation.
Differentiation-
The aim is to offer buyers the highest level of added value.
Focused differentiation-
It aims to position the product at highest price levels.
Risk high margins-
If business offer product at high price, in starting profit of business will be high but eventually
clients will find better products.
Monopoly pricing-
Figure 2 : Bowman strategy clock. 2019.
Source : (Bowman strategy clock, 2019)

If there is monopoly then business is not required to too focussed on what value customer
perceives.
Loss of market share-
This strategy is unlikely to win over customers who have better options of buying from
competitors.
Recommendation
Market penetration strategy should be used by Tesla for growth in the future. By adopting this
growth process Tesla enhance its sales by reducing price of its car that help in attracting more
consumers towards the company.
Strategic management plan
It is used for communicating different goals, setting priorities and strengthening
operations of the company for establishing desired outcome in the future. This plan include
following points as under:
Objective
To increase sales of the company by 20% in 6 months.
Strategies
For fulfilling aim of this objective Tesla will be using the penetration strategy in which esla
enhance its sales by reducing price of its car that help in attracting more consumers towards the
company. This is suitable because there is high amount of the competition in the market.
Tactics
Product: Organization will be developing the product on the basis of the information gather
from market research.
Price: organization will be using penetration scheme to sell the product of the company.
Place: Organization will be selling the product in both local and international market.
Promotion: Organization will be using the mixture of the promotional tool to promote the
product of the company.
Monitoring
This can be monitored by applying Ansoff tool as sales will increase 10% in 3 months so it can
be expected that in coming 3 months it again increases 10% that help in meeting objective of
strategic planning in Tesla.

CONCLUSION
From the above study it can be concluded that there are internal and external factors that
affect functioning of business in the future. Internal factors help in identifying strength,
weakness, opportunities and threat that influence business operations. On the other hand,
external factors include pest analysis that evaluate various aspect that affect decision-making in
the organization. Porter's five force model help in identifying competition in the market that
drive these forces for future. It has been also summarized that for elaborating the plan in the
market organization will be taking help of the penetration strategy so that they can get the best
result out of the market. From the above study it can be observed that making strategic
management plan is essential for business to evaluate tactics that help in fulfilling objectives of
the company in the future.

REFERENCES
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Online
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<https://www.feedough.com/business-strategy-definition-levels-examples/>
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integration.html>
Bowman strategy clock. 2019. [Online]. Available through :
<https://www.marketing91.com/what-is-bowmans-strategy-clock/>