Business Strategy: Impact of Macro Environment on Organization Strategies

This report analyzes the impact of macro environment on organization strategies, focusing on Tesla. It includes a PESTLE analysis and an evaluation of Tesla's internal environment using SWOT and VRIO analysis. The report also discusses the competitive rivalry in the automotive industry using Porter's five forces model.

Unit 32 - Business Strategy

INTRODUCTION
The term business strategy is described as the combination of different types of decisions
and actions that are taken by an organization to achieve the aim and objectives of the business that
also helps to secure competitive position in the market.
The Report is based on Tesla, founded in year 2003, which belongs to the industry of
automotive and energy storage. Headquarter of Tesla is located in California, United States. It
offers products such as Electric vehicles, Tesla Energy etc. across the world.
The Report will provide deeper insight about Tesla’s strategic capabilities as internal and
external environmental condition with the help of different tools. It will also shed light on the
competitiveness take place within industry through the means of Porter’s model. This report also
includes strategic plan which highlights priorities and objectives associated with the firm.
TASK 1
LO 1
Analysis of the impact of macro environment on organization strategies.
Macro Environment -
It implies for the situation in terms of political, economic, social etc that takes place in the
economy rather than in a specific region or nation. It involves various factors such as inflation,
employment, gross domestic product, fiscal policy and monetary policy etc. The state of macro
environment also affects the decision-making of the company such as investing, spending and
borrowing etc.
PESTLE analysis -It refers to the tool that helps marketing department of the business to
monitor external environmental condition. This in turn assists management team in developing
competent strategic and policy framework that contributes in organizational success.
Political factors:
It includes several factors such as tax policies, rules & regulations etc. that will impact the
strategies of Tesla. Government entities majorly affects the automotive industry. Example –
policies of government related with trade of vehicles will affect revenue and performance of the
organisation. There are various political factors that are important for Tesla such as incentives of
government for electric vehicles, new trade agreements at global level and stability in political
environment in majority of major markets. Further, Brexit will also affect the business strategies
of Tesla Inc. Political stability in UK is favourable to the competitive strategies of the firm such

as market penetration etc. Due to Brexit, automotive companies loose tariff free access to the
global markets and it has to conduct trade under the rules of World Trade Organization (WTO).
This has influence companies operating in manufacturing sectors like Tesla. Further, there is a
decline in deliveries of the vehicles across the world (Raj, Kumar and Bansal, 2019).
Economic factors:
Different types of economic components is available, that influences companies operating
their business in auto-mobile industry. Due to growth in economic factors like rate of
employment, purchasing power etc., due to which sales of electric vehicles has increased. There
is an increase in rate of employment in UK as it has increased up to 76 % as compared with 75.9
% in the month of July 2019. This has positively influenced the strategies of Tesla like product
development etc. due to availability of skilled workforce in the country (Lehman and Zaitsev,
2017). Further, economic factor like lower cost of batteries supports to amend practices of
business.
Social factors:
Various type of social factors existing in societal environment that exists outside
business. It considers components such as views, attitude of customers towards the products of
the company. This will also influence strategies and tactics of company. Manager of firm should
ensure that strategies of the business should be used to maximize the benefits of social factors.
For Example – One of the major trend that provides opportunity to Tesla to increase the sales is
people purchasing vehicles through online channels. According to a survey, there are major
activities that are performed by buyers of vehicles (Schanzenbach and Sitkoff, 2019). Such as
71% people research the price of auto-mobile over online channels before buying vehicles, 63%
perform online activities to determine the present worth of vehicles.
Technological factors:
Technological factors also influences the strategies, performance and revenue of the
business. The strategy of Tesla to develop new products like Roadster sports car. The
advancement in technology is essential to develop unique products. For instance– product
engineering technology determine the cost-benefits and level of efficiency of the company.
Further, the factors that affects the strategies of Tesla are improvement in automation, high rate of
change in technology that can be a threat or an opportunity for company, gain popularity of online
mobile systems which is the best chance for business. This will help to sell vehicles to target

segment of customers. Tesla is having an opportunity to further automate the process of business.
This will help to innovate new vehicles with the help of advancement in technology (Aithal,
2016).
Legal factors:
The legal environment involves factors such as government laws and regulations that
affects the ability of organization to operate its business. Laws shapes the decisions of
management. For Example – Tesla has to consider legal laws and regulations while developing
marketing mix. Further, the strategies of Tesla should include legal factors. Such as expanding the
protection to products with the help of patent at global level, regulations related with consumption
of energy, rules and regulations related with dealership sales. Management have to follow health
and safety regulations. Moreover, business has possibility to encourage electric auto mobiles &
strength solution products on the basis of energy consumption regulations.
Environmental factors:
Environmental factors include various factors that are influencing the operations of the
company. For Example – Tesla is having an opportunity to promote and develop electric
vehicles on the basis of change in climate, expanding the programmes for environment protection
and setting standards on waste disposal (Banks, Plant and Stanton, 2018). The electric vehicles,
solar panels and batteries are suitable for promoting environment sustainability and environment
friendly products. The ecosystem of Tesla like batteries, solar and vehicles aims to reduce the
impact of electricity production, transportation and energy use by the people, businesses and
homes etc.
LO 2
Internal environment analysis
SWOT analysis -
It defined as framework that helps business to evaluate its competitive position and also to
conduct strategic planning. It helps to evaluate internal as well as external factors and current as
well as future potential.

Strengths:
It is an ideal organization for the workers due to the culture of firm that helps to promote
innovation and diversity. Further, Tesla has also been catalogued as ideal place to work for the
employees. It has been listed in the list of America's Best Employer 2019.
Despite various issues, the sales of company has increased as compared to previous years.
In last quarter of year 2018, Tesla has delivered nearly 90,000 vehicles to various customers. It
includes 13500 vehicles of Model S, 63150 vehicles of Model 3 and 14050 vehicles of Model X.
The firm left backside other brands in race of the best electric cars. The electric cars of
Tesla are best because they cover maximum distance. Example – Model S of the firm covers up-
to 600 kilometres (Collins, 2019).
Tesla is also active in cross selling and culture diversification. Company effectively set up
insurance program for auto-mobiles in affiliation with Liberty Mutual insurance firm which is
also known as Insure MyTesla.
The strengths of the company like good work culture, electric vehicles etc. will help Tesla to
adopt strategies like product development, diversification etc. that helps to vantage competitive
benefit over business competitors.
Weaknesses:
Figure 1 : SWOT analysis. 2015
Source : (SWOT analysis, 2015)

Higher standard of innovation, more will be production risk factors and complications.
Tesla has faced various challenges related with production of vehicles when it has launched
Model X. This has led to continuous delay in delivery of vehicles.
Because of very complicated procedures and experimenting, company have to face
unbalanced demand and supply. Due to which, Tesla is unable to meet out the requirements. For
Example – The rate of delivery in first quarter of year 2019 is alarming because there has been
nearly 31 % decline in sales as compared with last quarter of year 2018 (Akter and et.al., 2016).
The rate of production of the vehicles has reduced because of constricted supply of the
batteries. The shortage in batteries has negatively affected the turnover of vehicles.
Tesla should make efforts for making the process of production easy that will help to
supply auto-mobiles according to the demand of clients. This will also help to increase sales of
the firm (Messner and et.al., 2017).
Opportunities:
One of the major opportunity available to Tesla is to expand the business in untapped
market like Asian market. It should enter into the market of India and China. China is the largest
market for auto-mobiles. The Asian markets are growing in the world and there are various
opportunities for Tesla in China that also includes large market for other products also other than
vehicles.
The demand for sustainable products has increased across the globe. This has lead to
increase in need of electric vehicles. This trend reflects that, there will be high supply of the
electric vehicles in the further business situation. The firm will release another Model X and S.
From above opportunities, it has been analysed that Tesla should focus on developing and
marketing electric vehicles in other countries also like China, India etc.
Threats:
The company is facing intense rivalry from alternative fuel vehicles like fully electric,
hybrid, plug-in-hybrid etc. It is facing competition from other companies like Toyota, Audi etc.
Other organization are not only plan for introducing new and eco friendly car, as well as they also
offer the vehicles at a lower price (Lehman and Zaitsev, 2017).
Due to complex process of production for innovative vehicles, energy products and cars of
the firm are having weaknesses forces in manufacturing, design the various features that may
harm the image of the company.

VRIO analysis -
This model is provide the business a way for evaluating the resources. It is a technique
that helps to evaluate the competitive advantage and resources of the organization. VRIO means
value, organization, imitability and rareness. Once in the company and business knows the
resources help to understand the competitive advantages (Nylund, Ferras-Hernandez, and Brem,
2018). The technique is complement to PESTLE analysis. VRIO is used by Tesla to evaluate the
situation that exists inside the business, its impact on competition and possible chances for
improvement for a specific resource.
Resource
and
capabiliti
es
Specific attributes V
(valuable)
R (rare) I (costly to
imitate)
O
(exploit
ed by
the
organiz
ation)
Impact on
competition
Purchasin
g
Despite the growth of
Tesla in past years, it is
one of the smallest
manufacturers of auto-
mobile in terms of
volume. Therefore,
partnership with Toyota
will help company to
keep the cost low for
buying basic
components.
Yes No No Yes Competitive
parity. It
means that
it helps
Tesla to
attain
average
results as
compared to
other firms
in the
industry.
Inventory
Holding
The company maintains
low level of inventory
and manufactures
Yes Yes Yes Yes Sustainable
competitive
advantage.

products on demand.
Currently it is using
Just in time strategy.
The company does not
have traditional
dealerships across the
globe. Although, it
occupies small spaces
in outlets and malls that
showcase the auto-
mobiles (Messner and
et.al., 2017).
Engineeri
ng and
design
The company allows
the clients to select and
design individual
specifications\ of the
auto-mobile they have
ordered. This high level
of customization allows
business to charge
premium price.
Yes Yes Yes Sustainable
competitive
advantage.
Manufact
uring
The organization
manufactures vehicles
in own factory.
Management is able to
control own quality of
products and inventory.
Reduction in raw
material helps to reduce
Yes Yes Yes Yes Sustainable
competitive
advantage.

the level of storage fees
and inventory.
Sales The strategy of firm for
customizing each and
every vehicle and
operating on individual
orders is having certain
limitations.
No Yes Yes Yes Competitive
disadvantag
e
Tech
support
and
strategies
The company provides
a three-year buy back
guarantee that helps to
assure clients in respect
of resale value of the
vehicles (MacDuffie,
2018).
Yes Yes Yes Yes Sustainable
distinctive
competence.
LO 3
Porter five forces model.
The model is refers with various forces which are presents individual forces which gives
shapes the overall rivalry in the industry. It is also defined as the framework that is used by
companies to determine the structure of industry to develop corporate strategy (Raj, Kumar and
Bansal, 2019).
Tesla will use this model for evaluating impact of various external forces on business as
well as competitive landscape of environment of automotive industry.
Competitive rivalry -
Tesla operates their business in highly competitive market. It defines the influence of
rivalry among companies that are operating their business in automotive sector on energy
solutions and auto-mobile industry. There are various external factors that are highly responsible
for managing effective strong force which are related with competitive rivalry such as- small

number of firms, low switching cost and high drive of firms. There are only few companies that
are operates in automotive industry. This factor limits the impact of competition on Tesla
(Kauerhof, 2017). The marketing mix of the firm partly meet out aggressiveness in marketing that
helps to strengthen the influence of competitors against the business.
Bargaining power of customer’s -
The customers of the business are a major factor that impacts the sales revenue of the
company. There have various factors which are give moderate force on firm with bargaining
power of customers. Such as low volume of purchasing, low switching costs and moderate
availability of the substitutes etc. The cost of switching to the vehicles of other firms is very low
for customers. This element is give higher negative impact on Tesla and other companies that are
operates automotive industry environment. As per that substitutes products are moderate and give
normal impact on the business. Therefore, it curtail bargaining power of customer’s against the
company. Example – There are various people living in suburban areas that are having limited
access for public transportation which means is more practical for them to drive own car.
Bargaining power of suppliers -
The business of Tesla also depends upon the reliability of suppliers that supply
inputs for manufacturing different types of vehicles. This aspect shows that how the suppliers are
affecting the environment of automotive industry by influencing supply of raw materials that are
required by the firm. External factors generate the moderate bargaining power of suppliers are
average level which is moderate size of suppliers, forward integration and moderate level of
supply of inputs. The supplying firms have low level of forward integration. It means that
suppliers are had lower level of control on the sales as well as distribution of the items. Therefore,
bargaining power of suppliers imposes only a moderate force on Tesla (Musonera and Cagle,
2019). Moreover, most of the providers are moderately size that means they are having limited
impact on auto-mobile industry. Another factor have moderate impact on supply of components.
This empowers the suppliers to influence the operations of Tesla at a certain level only.
Therefore, this is the secondary strategic management is on the priority of company in effective
manner.
Threat of substitution -
The company also experiences effect of substitutes on environment of automotive
industry. There are various forces that leads to moderate impact of substitutes on the performance

of Tesla. It includes low cost of switching, moderate availability of substitutes and moderate level
of performance of the substitutes etc. The cost of switching to other products is lower for the
customer’s. For Example – Low cost of switching enables the vehicles of other companies like
public transportation that is help for attracting customers. This factor majorly impacts the
performance of Tesla. But, the moderate availability of other types of vehicles restricts the
influence of such substitutes. For Example – Buyers have only limited number of substitutes in
automotive industry. Further, there are other substitutes that are having only limited level of
performance in satisfying the requirements of customer’s. For Example – transportation is not
comfortable as per private transport because private transport is provided various benefits as per
our needs. This condition also restricts the impact of substitutes on Tesla.
New entrants are those organizations that impacts the environment of the industry and influences
the performance of the business. There are outside factors that creates a weak pressure on threat
on Tesla from new entrants. Such as expending heavily for development of brand, economics of
scale and related activity. All these factors are weak forces for Tesla. Cost of brand is the biggest
factor which used to create the variety of the issue for the organization looking to enter into new
market. This acts as an big barrier for new entrants to enter into automotive sector. Other than
this, manufacturing the vehicles involves huge expenditure which is also a barrier for other firms
(McCain, 2019). Moreover, Tesla is gaining the advantage of economies of scale that new
companies are only capable of attaining exceeding the threshold of production. Therefore, threat
of entry emerging firms is only a small SGM concern for Tesla.
TASK 2
LO 4
Strategic planning for TESLA motors
Range of strategic directions available to company-
Cost leadership-
By setting the low cost of products TESLA lead effectively in marketplace which is
beneficial for business.
Differentiation-
This strategy make organization unique in whole industry in which they designed
attractive model for cars.
Cost focus-

According to this strategy company only centring on cost advantage in their target market.
Differentiation centring-
Furthermore, with this direction firm will focus on designing goods instead of cost.
Recommendation and justification-
penetration pricing method will be the best pricing tool which can be used by the
organization as compare to the other pricing method. They suggested to use traditional and
digital marketing tools that support business to reach target market and make them able to drive
consumers toward the new product of the company with unique feature in it.
Strategic management plan-
Vision TESLA vision is to lead at position in creating the
compelling vehicle in current scenario by the way of
driving transition in the electric vehicles.
Mission To speed up world's transition towards sustainable
transport.
The mission statement of the business shows the relevancy
of using the renewable batteries in context to store the
different electric vehicle in the market.
Objectives  To build the good relation with other companies in
the market so that company find it easy to enter into
the new market.
 Improving the sales and demand of Tesla electric
car in the market.
 Promoting and developing good awareness of brand
and corporate reputation of the business in the long
run of business.
 Managing the customer base of the company in
proficient way
Strategies porter's generic strategy, Ansoff matrix, and the horizontal

integration are the few types of the strategy which can be
looked by the company in the long run of business. It may
crucial for the company to have a differentiation technique
in the Porter’s generic strategy as this will help the
company in providing the different information regarding
the cost which may help the company in getting the
competitive advantage in the market. Through Bowman
strategy, organization will able to compare the performance
of the company with the rivals in the market (Banks, Plant,
and Stanton, 2018). This will eventually help the company
in achieving the goal in better way in the organization. In
case of Ansoff matrix Tesla analyse all risk factors which
are connected with development and progress with existing
goods. It will provide the crucial hand at the time of
adopting the different types of market penetration in
context to growth strategy. By making use of horizontal
integration, organization will able to differentiate the
product on the basis of power and customer base.
Tactics Production- In order to increase profits margin of
company Tesla needs to expand their business at other
country by increasing their production. This will help to
manage effective resources for producing electric cars by
addressing needs and wants of customers in effective
manner.
Price- Tactics for price of product company need to make
effective and valuable prices by reducing their price of
product which is to high. For that they have to adopt
market penetration pricing strategy which is help attract
more customers (Collins, , 2019).
Products- Customers are attracted with quality of product
and services as well as design of product. In respect of that

Tesla needs to energy generation and energy storage
markets, that profitable for consumers.
Place- Location of company is always matters within the
company for growth of company in effective manner. In
respect of that Tesla need to more invest on research and
development department who are able to analysis the needs
and wants of customers who are effective and valuable for
company. As well as operates layout on main road which is
help to attract customers towards company.
Promotion- this is another very important for that Tesla
need to make positive public relations with customers are
help to promote product and services at market place.
People- They will try to recruit the candidate with the
multiple skill set in them. Physical evidence- TESLA will
be promoting the product in the name of the organization
and will also collect the data with the help of setting own
websites.
Implementation TESLA management and control budget with the help of
considering market share. This is the time the organization
will be implementing the plan in the organization in such a
way that it gives the better result.
Evaluation TESLA will be evaluating the performance of business
with the help of the feedbacks and revenue which will be
increased by the organization in the year. They also use key
performance indicator (Schanzenbach and Sitkoff 2019).
CONCLUSION
From above Report it has been outlined that PESTLE analysis is the best tool that supports
company to identify different factors existing in external environment. Such as political,
economic, technological, social, legal and others that influences firm in positive as well as

negative way. Further, it has been analysed that SWOT analysis is the tool that helps to evaluate
the internal strengths, weaknesses and external opportunities and threats. One of the major
strength of Tesla is that it has good working culture that helps to retain employees for long
period. One of the main weakness of the firm is that company has faced various challenges in
producing different models of vehicles that leads to unbalanced supply and demand. Moreover,
the Report has explained that organization have a chance to expand the business in the market of
India and China. It has been concluded that, porter five forces model is very effective model to
analyse the impact of external factors on the operations of the company.

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