Impact of Macro Environment on Tesla's Strategies

This report analyzes the impact and influence of the macro environment on Tesla's strategies, evaluates its internal environment and capabilities, and applies Porter's Five Forces model to assess the competitive forces in the automotive industry.

Business
Strategy

Table of Contents
INTRODUCTION-..........................................................................................................................3
P 1 Analyze the impact and influence of the macro environment on a given organization and
its strategies. ...............................................................................................................................3
P 2 Internal environment and capabilities of a given organization using appropriate
frameworks..................................................................................................................................5
P 3 Porter’s Five Forces model evaluate the competitive forces of a given market sector for an
organization.................................................................................................................................7
P 4 Range of theories, concepts and models, interpret and devise strategic planning for a given
organization.................................................................................................................................9
Conclusion.................................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION-
Business strategy states that actions and moves are used in a competitive manner so that
companies can attract the customers and get positive outcome which helps in strengthening the
performance and able to achieve the goals of the organization. It outlines the fact that in what
way business and its operations must be carried out so that they can reach the desired ends. This
report cover questions such as impact and influence of the macro environment on a given
organization and its strategies, Internal environment and capabilities of a given organization
using appropriate frameworks, Porter’s Five Forces model evaluate the competitive forces of a
given market sector for an organization, Range of theories, concepts and models, interpret and
devise strategic planning for a given organization. Tesla is an automotive company who is
known for the innovation of the highest range electric cars. It is an American based company
which is situated in California.
P 1 Impact and influence of the macro environment on a organization and its strategies.
Political Factors affecting Tesla-
This aspect identifies impacts which government decisions does to a business in the macro
environment. Entities or bodies of government are the main ones to lead to the societal forces
which affects the business and several industries. For instance the government can limit the trade
for industries which will affect the revenue of the company. Sometimes incentives from
government can help the company strengthen the financial performance of the company. Apart
from this factors such as Brexit that is separation of UK from European Union will affect the
economy of the country as they will change their policies or barriers. Similarly every country has
different policy and barriers which business has to keep in mind. This factor directly relates with
the issues of emissions released from the cars which must be minimum. It also expands the
agreements of trading freely and provide opportunities which are open and help them to expand
the business internationally. Political stability is also a another major threat which company
needs to be aware of. For operations of Tesla it is favorable and it also includes penetrating the
market. This aspect of the model basically provides opportunities for Tesla so that they can grow
the automotive business. (Razak and et.al., 2016)
Economic Factors-
This aspect focuses on the economic conditions on the behalf of macro environment. This factor
covers the issues which are related to unemployment, GDP, inflation in the country and the

disposable income of people. The current wage rate of UK is higher than the rate of inflation
which is around 3.8 per cent and the rate of inflation is 1.7 per cent which is beneficial for the
company. For instance the market of panels of solar energy has seen increase in rate of growth
which also tells the companies the opportunities for growth in the market of solar energy. Tesla
follows these factors that shift their market on the positive side such as they are decreasing the
cost of batteries which is an opportunity for them. They are working on decreasing the cost of
renewable energy which is also an opportunity for them but the only threat to the company is
issues in economic stability. The performance of Tesla benefits from the low cost of battery. This
states that the affordability of electric vehicles will be increased and more people will buy them.
By the help of this analysis the company is trying to decreasing the cost of renewable energy
which as an external factors make the products of Tesla more attractive. As it is believed that
their business will improve if the sources of renewable energy become more popular. Still the
company faces a threat due to the stability in the economy as it threatens the performance of the
company financially especially in countries such as Asia and Europe. This aspect of this model
highlights opportunities of growth for Tesla despite the fact that the company has to take care
about the conditions of the economy. (Hsieh, Ma and Novoselov, 2018)
Social Factors-
This factor is concerned with the culture of society. Tesla is making products according to the
society as people nowadays are more concerned for the environment and Tesla is making cars
which are electric so there is no issue of emission. Apart from this they are making innovative
products and cars with autonomous driving. People prefer advanced technology over normal
cars.
Technological Factors-
This aspect determines how the factors which are related to technology affect the company.
Tesla has advanced and developed resources of automobiles and solutions to energy. Most of the
business of Tesla depends on technology. Tesla is using the technology of artificial intelligence
in their cars which is very helpful to the people and makes it easy for them to ask the car to set
the music or the temperature. Company don't have any dealerships available in the market so
they can take the help of online portal to sell their cars. On the other side it enhances the
technology of its products. These are the same factors which stands in the barriers of

development and obsolescence of the technology rapidly. Basically this model shows the growth
and opportunities for Tesla in the technological environment. (Pisano, 2015)
Ecological Environment-
This aspect is concerned with effects of ecological conditions in the business globally. Company
has the portfolio of electric cars which is a great measure to counter the effects of climate change
and increasing the production for more aspects. Company has the opportunity to expand the
programs which are environmental and concerned with the standards of rising on disposal of
waste.
Legal Factors-
This aspect is concerned with the factors which are regulatory and which are related to the lawful
and legal systems and those which helps in shaping the management of the business for
developing it. Tesla follows the environmental laws which are given by Environmental
Protection Agency (EPA). The company is less concerned with this factor as they use cars which
run on renewable energy. The partnership of the business and the management of human
resources are also in the legal measures set up by the government. (Strategy, 2017)
P 2 Internal environment and capabilities of a given organization using appropriate frameworks.
SWOT analysis of Tesla
Strength-
Tesla has bring many innovations in the market. They are known especially for launching
their sports car which is fully electric. These factors have empowered the company and it is a
core strength for them which helps to develop products of these kind. Also Tesla is a strong
brand in the market for innovation which brings solution for the renewable energy and
innovation with their CEO as Elon Musk it is hard for any company to beat that. These all factors
combined gain the trust of people and help in attracting the new customers and retaining the old
customers. (Buckley and Ghauri, 2015)
Weaknesses-
The biggest weakness Tesla suffers from is that they have limited presence in the market.
For instance most of the revenues of the company are generated from United States and has a
small presence in China and the developing countries. This is the factor which stops the growth
of the company according to developing the economy and the overseas market. Supply chain of
the company is limited which is the reason for the company that the company is expanding

slowly in the international market. To add cars that Tesla make is slightly expensive than others
because of the technology they use.
Opportunities-
Tesla wants to increase its revenue so the company has the chance or opportunity to
increase their operations and expand them into different markets. They have many opportunities
for increasing the revenue. They can expand their production globally and support the supply
chain of the company for increasing the sales of the company. They can also try diversification it
will also help improve the performance of Tesla by acquiring businesses which are new so that
they can reduce the exposure of risk in the industry. This aspect helps the company to expand
their work and operations internationally. (Ghemawat, 2016).
Threats-
The market in which Tesla operates is highly competitive market. This threatens the
company in producing the electric car. The fluctuation in the market of prices are shown in
SWOT analysis. Threat of regulations of dealership is faced a lot by the company as Tesla don't
have dealerships they sell directly to their consumers which helps in saving the cost of products.
But it has been an issue for the company as every state or company has different regulations and
not everyone allows them to sell their products without dealership. This aspect of the analysis
tells that the company needs to maintain the competitive advantage.
VRIO analysis
Valuable- It has been analysed that the manufacturing units of Tesla is been the most
valuable resource for them. They have been engaged in making those products which produces
less of carbon emission. It has supported Tesla the company in increasing their market share. The
stores of organization are also well furnished and has made use of various attractive products
inside the stores. This has created value for firm. It has supported Tesla in gaining competitive
advantage. It has also been analysed that the production cost of company is also been low. This
has supported them in gaining more consumers and also retaining them. This has assisted firm in
growing and establishing their market share in new areas. Also the stores are situation in location
which are easily accessible to public.
Rare- The design given by Tesla to their cars and jeeps are really rare. They give a
tough competition to their competitors and to companies running along with them. Also the

manufacturing units have high productivity capacity which has increased the internal capabilities
of resources. They have made use of those resources which produces less carbon which is rare
and has positively impacted the performance of company. Global network of manufacturing
facilities in strategic locations is also high. Also it has supported Tesla in gaining competitive
advantage. It has supported firm in growing and reaching out large number of consumers. This
competency refers to the development and integration of information technologies that assist or
at least partially automate driving.
Imitable- The logo which has been used by Tesla is really innovative and creative and it
can not be imitated by any other company who can act as competitor for them. They have made
use of various new approaches like just in time so that they can deliver the cars and jeeps on
timely basis. This has supported them in making efficient use of resources. It has also helped
them in reducing the waste. Now Tesla is been able to focus on more important aspects.
(Dahlberg, Hokkanen and Newman, 2016).
Organization- Tesla is been engaged in providing efficient training to their employees
which has helped them in enhancing performance of them. It has supported company in
increasing their efficiency. It has also helped them in gaining competitive advantage. They have
also made use of total quality management which has supported them in enhancing quality of the
products and goods supplied by them. This has supported firm in growing. (Lieder and et.al.,
2017).
P 3 Porter’s Five Forces model evaluate the competitive forces of a given market sector for an
organization.
Tesla takes strategic measures to address the challenges which are competitive and
maintain their profitability with the help of porter's model of five force analysis on the global
level so that they can take out measures which affect the automotive industry. It is used to
analyze the external forces of the market and helps the company figure out the impact and
measures of any situation. Tesla is one of the biggest segment leaders in the electric car market
and they use this model effectively as they face competition and rivalry from many companies
such as companies like Honda Motors Company, Ford Motors Company, Toyota Motor

Company, Nissan Motor Company, Volkswagen, BMW etc. Tesla provides many things related
to electric cars such as solar panels, batteries, electric automobiles. (Amran and et.al., 2016)
Competitive Rivalry of Tesla-
The market in which Tesla operates is highly competitive. With the help of five force analysis
model company outlines the fact that from where they can extract the energy and take out
solutions in the automotive industry. Tesla faces strong competitive rivalry such as small number
of companies which is a weak force, highly aggressive companies which is a strong force and
low switching costs which is also a strong force. (Moseley, 2017).
There are not too many firms which operate on a small scale in the automotive
industry. But this analysis limit the competition from other companies on Tesla. Still these firms
are aggressive and give tough competition to their products as they bring innovation and ways to
promote their products. Companies who operate on a large scale conducts aggressive campaigns
of marketing. The 4 Ps of marketing mix which Tesla follows and meets the level of
aggressiveness as other companies which strengthen the effects of competitors who are against
the company. It also helps in impeding the customers and shift them to buy the cars from other
companies as cost of switching is low which also leads to increase in competition. This aspect of
this model helps the company sets the priority against their competitors and helps the industry of
automobiles figure out the solutions.
Porter's Five
Bargaining Power of Buyers-
Tesla manufactures solar panels, batteries for the development of the industry they operate in
which also influence the customers. The revenue which is generated from sales of the company
is a direct factor. The factors which are external to the company intensifies it so that forces can
be kept moderate of the bargaining powers of customers who are specifically related to the
company. Cost of switching to other companies is low which gives the power to buyers to
bargain. The reason behind this is the high level of competition company faces from their
competitors. Apart from this targeted market of Tesla is in suburban areas but people their uses
public transport which affects the desired outcome of the company.(Higgins, Omer and Phillips,
2015)
Bargaining Power of Suppliers-

The power of supplier is high in this industry because some of them are bound with the third
party contract which means they can deliver the raw materials to specific company. That is why
it creates a problem for Tesla as they don't have suppliers they can rely on. (Bentley-Goode,
Newton and Thompson, 2017)
Threat of Substitutes-
Many types of threat are faced by Tesla from the substitutes available in the market.
Competition is enabled and enhanced by low price of switching cost which also enables the
substitutes which attracts the customers such as public transportation. Strong force is imposed by
the external factor in this aspect. But on the bright side the availability of substitutes is moderate
which limits the influence of suppliers. For instance customer has many customers don't have
many options in the market and some of them don't satisfy the customers practical need due to
their performance. Public transportation does not gives a feeling of pride as a car of their own.
This condition and situation limits the factor of substitutes for Tesla.
Threat by New Entrants in the market-
The firms which are new in the market is known as new entrants which impacts the
environment in industry and performance of the companies such as Tesla is determined. This
aspect of this model gives a threat to the company with a weak force. As it is difficult to compete
with Tesla because developing a brand at high level requires a lot of money which is difficult for
a new company and to compete with Elon Musk is a whole different level. It is difficult for new
companies to match the goodwill of old companies which is also highlighted in the strengths of
SWOT analysis. This aspect is entry barrier in this model. Operating in the automobile industry
require a large sum of money which brings difficulty for new firms. To add the companies who
are already existing in the market enjoys the benefit of increasing economies of scale, which the
new companies can only achieve by increasing their production and selling more of their cars.
This aspect is a minor threat for Tesla. (Olson and et.al., 2018)
P 4 Range of theories, concepts and models, interpret and devise strategic planning for a given
organization.
Mission -
Mission of Tesla is to make the transport of the world sustainable to accelerate the
transition of world. After 2015 Elon Musk came and he changed the mission from sustainable
transport to sustainable energy.

Vision -
Vision of Tesla is to to create the most compelling car company of the 21st century by
driving the world’s transition to electric vehicles.
Objective - To increase the sale of new product by 20% till the end of year 2020
To enhance consumer experience by 10% in upcoming 6 months
To increase profitability by 20% till the end of year 2021. (Thompson, Strickland and Gamble,
2015).
Growth Strategies
Ansoff Matrix of Tesla-
Market Penetration-
This strategy states that selling of existing products to existing markets. Tesla usually use
this strategy extensively. Focus of the company is selling models particularly their Model X,
Model 3 and Model S their electric vehicles. It also includes the storage of energy products such
as solar panels, racking, inverters, powerwall 2 and powerpack 2 and devices for monitoring in
the US and 29 more countries.
Product Development-
When the company sells new products in existing markets. Tesla often engages in this
strategy. This is mainly because of the high cost in developing the vehicles which are electric
and storage of power sectors. Currently they are working on developing the trucks and semi
trucks to make it electric with storage of products.
Market Development-
This strategy is concerned with finding new markets for existing products. As Tesla
wants to enter in various markets. To increase their average profits and sustainability in the
market for the long run. Company use the approach of Porter generic market. They use the
strategy of differentiation as they want to remain their portfolio as unique. They will position
their products in a unique way so that they can generate the importance in the eyes of the
prospective buyers. The company is integrated towards their goals by vertical integration. They
keep 100 per cent of their profits in their account. (Akter and et.al., 2016)

Diversification-
In this strategy business develops new products for new markets. Tesla has been using this
strategy for many past years. History of the company was it started in 2003 as electric vehicle
manufacturer then changed their name to Tesla and further they bought a solar company in 2016
which was named as Solar City so that they can enter into the market of storage sector. Now the
company is looking to diversify into more operations but only after recovering themselves from
the financial crisis. Tesla is using the differentiation strategy so that it can help them to gain
competitive advantage in the market. They target people who buy new products at the time of
launch. Company has shifted their strategy from competitive to differentiation.
Marketing Strategy of Tesla-
Products of Tesla-
It helps in identifying the company that how much their output is as in how much
products they have sold to their target customers. Tesla deals in automobiles, components of
electric vehicles, storage of energy, batteries, solar panels. Their products are profitable because
they give them the feeling of value for money. In this variable company uses the product
development so that they can fulfill their objectives. The company is known for making electric
cars with high range of efficiency.
Tesla's Promotion-
Company uses promotional tools such as viral marketing, personal selling, public
relations, sales promotions, direct marketing. Company has implemented the marketing mix to
promote their products and they evaluate all the aspects to check the outcome so that company
has the right information and people are aware about their initiatives. They depend mostly on the
aspect of viral marketing and it has been the factor which has given them the biggest contribution
in promoting the products to their target customers. This element states that Viral marketing is
their most effective tool of promoting the brand. (Johnson, 2016) The company uses the
technique of impact monitoring to evaluate the impact of their strategies or moves. It is done
with the help of indicators which are pre determined. It helps the company to monitor both the
impacts that is positive and negative.

CONCLUSION
From the above studies it has been concluded that this report gives a brief description and
analysis of Tesla with the knowledge of where the company has the potential to grow, where
they can improve and where they have opportunities to expand their business and diversify into
another product line. Tesla is known for their innovation and launching cars which are fully
electric with features such as cars with autonomous driving. It has been cleared by this research
that the company is bringing futuristic cars in the current market. Though the cars they offer are
slightly expensive than others but they are worth every penny.

REFERENCES
Books and Journal
Akter, S and et.al., 2016. How to improve firm performance using big data analytics capability
and business strategy alignment?. International Journal of Production Economics. 182. pp.113-
131.
Amran, A and et.al., 2016. Business strategy for climate change: An ASEAN
perspective. Corporate Social Responsibility and Environmental Management. 23(4).
pp.213-227.
Bentley-Goode, K.A., Newton, N.J. and Thompson, A.M., 2017. Business strategy, internal
control over financial reporting, and audit reporting quality. Auditing: A Journal of
Practice & Theory. 36(4). pp.49-69.
Buckley, P.J. and Ghauri, P. eds., 2015. International business strategy: theory and practice.
Routledge.
Dahlberg, T., Hokkanen, P. and Newman, M., 2016. How business strategy and technology
impact the role and the tasks of CIOs: An evolutionary model. International Journal of
IT/Business Alignment and Governance (IJITBAG). 7(1). pp.1-19.
Ghemawat, P., 2016. Evolving ideas about business strategy. Business History Review. 90(4).
pp.727-749.
Higgins, D., Omer, T.C. and Phillips, J.D., 2015. The influence of a firm's business strategy on
its tax aggressiveness. Contemporary Accounting Research. 32(2). pp.674-702.
Hsieh, C.C., Ma, Z. and Novoselov, K.E., 2018. Accounting conservatism, business strategy, and
ambiguity. Accounting, Organizations and Society. 30. p.1e15.
Johnson, G., 2016. Exploring strategy: text and cases. Pearson Education.
Lieder, M and et.al., 2017. Towards circular economy implementation in manufacturing systems
using a multi-method simulation approach to link design and business strategy. The
International Journal of Advanced Manufacturing Technology. 93(5-8). pp.1953-1970.
Moseley III, G.B., 2017. Managing health care business strategy. Jones & Bartlett Learning.
Olson, E.M and et.al., 2018. The application of human resource management policies within the
marketing organization: The impact on business and marketing strategy
implementation. Industrial Marketing Management. 69. pp.62-73.
Pisano, G.P., 2015. You need an innovation strategy. Harvard Business Review. 93(6). pp.44-54.
Razak, N.A and et.al., 2016. Theories of knowledge sharing behavior in business
strategy. Procedia Economics and Finance. 37. pp.545-553.
Strategy, B., 2017. Business Strategy. MARKETING. 1(2). p.3.
Thompson, A., Strickland, A.J. and Gamble, J., 2015. Crafting and executing strategy: Concepts
and readings. McGraw-Hill Education.

1