Business Strategy: PESTEL, SWOT, and Porter's Five Forces for Tesla

This report provides a comprehensive analysis of Tesla Motors' business strategy. It begins with an introduction to business strategy and its importance, followed by an application of the PESTEL framework to analyze the macro environment, including political, economic, social, technological, environmental, and legal factors influencing Tesla. The report then uses SWOT analysis to assess Tesla's internal strengths, weaknesses, opportunities, and threats, followed by a VRIO analysis to evaluate its resources and capabilities. The competitive forces within the market are evaluated using Porter's Five Forces model. Finally, the report concludes with a discussion of strategic planning for the organization and provides recommendations for future strategies based on the analyses conducted. The report emphasizes the importance of adapting to changing market conditions and leveraging technological advancements to maintain a competitive edge in the automotive industry. References are included at the end of the report.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
P1 Applying appropriate frameworks analyse the impact and influence of the macro
environment on a given organisation and its strategies..............................................................1
PESTEL Analysis........................................................................................................................1
P2 Analyse the internal environment and capabilities of a given organisation using appropriate
frameworks..................................................................................................................................3
P3 Porter Five Force model to evaluate competitive forces of market.......................................6
P4 Strategic planning for organisation........................................................................................9
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategy is termed as a procedure in which business organisations take help of
numerous forms of competitive actions along with formative moves (Brewster, 2017). All these
actions lead towards providing proper support to enterprises in order to achieve goals and targets
in well-defined manner. thus, in order to formulate best effective form of business strategy
organisations is required to consider numerous set of techniques and measures. As this will
directly aid in directing performance towards high end success and take market lead in specific
business sector. Present report has been conducted on, Tesla Motors a leading American
automotive entity. Organisation effectively engage in building electric cars, scalable clean
energy generation along with storage products. Company perform their operations in vehicle
manufacturing sector while headquarter in Palo, Alto, Silicon Valley. In this report formative
discussions have been made on, PESTLE and SWOT analysis of organisation capabilities along
with formative concept of Porter’s Five Force Model. In addition to this, numerous set of
theories and models are described in this report and to devise a well effective business strategic
plan.
P1 Applying appropriate frameworks analyse the impact and influence of the macro environment
on a given organisation and its strategies
PESTEL Analysis
Political:
It is an important set of rules and regulations which followed by Tesla, in order to work
with effective fluency without disrupting the political environment created by government. The
norms used may have huge emphasizes on the marketing, production and manufacturing
strategies developed by the company.
The existing stability of government elected have issued factors like trade barriers such as
EU and NAFTA, social cause policy to create a healthy environment in a world. Tesla in their
early stages of business, they manufactured customised cars on the demand of their target
consumers and satisfies them with highest quality in product and their services, they are offering
in North America. They widely gave exposure of their services in Western Europe and Asia.
Taking new step in business, have emerge the political culture in positive and negative
aspects, depending on the adaptation of new technologies used by company. This results, in
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feedback from the consumers. If we take example of Norway and Europe, the government have
generated techniques for industries, by providing parking and bus facilities for average people.
These decisions by Tesla creates an overall circumstance for entering in a new market
and provide maximal profitability to the company. While with the advanced improvement in UK
public transport TESLA face some serious negative impact on its functioning as people prefer
more cost effective transportation.
Economic:
Economy totally depends on its GDP rate, GNP rate, Inflation rate and taxes management
of any company. As economic factor is the heart core of any country because the market share
relies on economy of scale. The Tesla company can take initiative of producing more electronic
cars internationally through market assessment, as the result showed that the there is huge hike in
sales and fuel engine which will provide Eco friendly environment to the world which will help
in profitability to the company as well growth of the country through globalisation. In addition
with this, it has been evaluated that individuals are more tend towards environment protection
this may impact on TESLA in a positive way and company can further increase their market
share along with simultaneous increase in profit of shareholders.
Social:
Every country in the world, have emphasizes on development of society and provide
healthy and safe environment to public (Jeston, 2014). The Tesla, majorly focuses on education,
development of new life style, raise the basic income of their employee, this in turn result in
highest productivity. This allow the company to know the buying behaviour of their target
market across the globe, set their product price which are affordable to the consumer and provide
quality service. This will create Tesla brand loyalty from their customers.
Technology:
Through PESTELE analysis, the research department provide solution when a new
technology is being introduced in the market and informed about the techniques to IT sector
which give training session to their employee's. This creates a productive outcome for company.
Tesla are improving their level of efficiency and reduce the cost of fuel cell and clean hydrogen
energy.
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In this process, the company allocate huge finance in research and development
department. There are chances where the tools used is not up to the mark and will result decrease
in production which impact on manufacturing of product. This will emphasize on overall growth
of the company.
Environment:
The government plays a major role in creating an environment for a business which will
not affect to common people. The Tesla government, provide Eco-friendly fuel cars to their
customer due to high awareness of pollution across the globe which directly impacting on every
country in the world and this will generate hike in demand of their product in national and
international market.
Legal
Legal factors emphasise purely on decision of leading government rules and regulation
which every firm have to follows. The Tesla company have adopted EQUALITY Act and
Discrimination Act, which have no gender discriminations between their employee's.
The employees are paid equally and medical aid is being given as stated by UK ruling
government. This result in cordial relationship between the staff member in an organisation.
P2 Analyse the internal environment and capabilities of a given organisation using appropriate
frameworks
In order to evaluate actual strength, weaknesses, opportunities and threats company can
consider formative tool of SWOT and VRIO. Both of these methods will aid company to gain
knowledge related to their actual capabilities and potential.
SWOT Analysis:
STRENGTH WEAKNESS
 TESLA take advantage of Tesla Stores
in order to distribute their products
instead of using traditional mode of
distribution which is through dealers.
 Company effectively engage in the
process of offering energy efficient cars
 Company mainly faces delays in their
production that lead towards their low
sales.
 There is a narrow target segment in a
marketplace which as a weak element
for TESLA to operate their functions.
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with the help of best effective,
innovative technological design.
 There is more functional safety in
TESLA product range along with
stylish and attractive modern design.
 TESLA is lacking in infrastructure for
which it is required to invest large
investments.
OPPORTUNITIES THREATS
 TESLA by taking opportunity of
adaptable battery can further increase
efficiency of their energy efficient cars.
As company mainly offer their products
in energy efficient manner thus, by
further evaluating consumer sentiments
along with evaluating climate
awareness can gain more
developmental opportunities (Jocovic,
2014).
 In order to increase brand image and
consumer awareness TESLA can
initiate their business activities at
international market.
 TESLA operates their business
functions with high set of opportunities
as electricity prices is comparatively
low against petrol price.
 TESLA faces loss of Government
subsidies along with facing risk of
competitors such as BMW and
Mercedes that nowadays enter into EV
market.
 Threat of political and economic
instability is facing by TESLA that lead
towards decreasing of buyer power.
 TESLA is facing threat which is related
to highly competitive industry. In which
established market players are mainly
engaged.
VRIO Model:
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Resources Valuable Rarity Inimitable Organized What is the
result?
Employees Employees Employees Employees Employees Competitive
advantage
Software Software Software Software - Competitive
advantage on
temporary basis
Products Products Products - - Partially
competitive
Global
presence
Global
presence
- - - Competitive
Disadvantage
In order to effectively evaluate internal capabilities TESLA is required to consider four
resources that include, software, global presence, products and employees.
Valuable: This factor comprises those elements that effectively lead towards adding additional
value for consumers as to gain more strategic advancements and edge over other prevailing rivals
in a marketplace. In relation to this, valuable resources of TESLA are described below:
Employees: Company is having highly talented and skilled labour force those who
effectively operate their day-to-day business operations in best effective manner as to achieve
predefined targets and goals of company in well-defined manner.
Software: TESLA utilize Paragon’s Live Software in order to effectively conduct their
global business operations with a formative aim to achieve high end efficiency and increase
company overall brand image in best effective manner.
Products: TESLA offer their product range with the help of advanced technology. They
effectively analyse current market environment and then produce highly qualitative products
with new and advanced technological tools and techniques.
Global Presence: TESLA attained high set of strong global image which lead company
towards attaining great amount of strategic edge against its competitors.
Rarity: It include those effective set of resources those existence is mainly unique acts as a
strongest element for company in order to let them take the advantage of competitive edge. It has
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been evaluated that TESLA global presence in their merchandise sector is not rare as in
international market there are already established companies who offer same. Some of the certain
set of rare resources that are found in entity:
Employees: TESLA have effectively strengthened workforce set those who possess special
skills and knowledge. With help of these competencies employees collectively lead towards
effective achievement of company goals and targets in a stipulated period of time.
Software: TESLA use software in order to conduct their daily basis operations which is rare
which is mainly designed and developed according to company.
Products: Products that are mainly offered by TESLA such as energy efficient electric cars
are as per accordance to present prevailing trend and taste of market and customers. Thus, it
become hard for other related rivals to match that exact same.
Inimitable: In this factors, those resources are included that are hard to be copied for any
competitor (Wheelen, 2017). In relation with this, it has been evaluated that TESLA is lacking in
this factor as those tools and technologies that are used to design these can be copies by rivals.
Employees: Workforce of TESLA effectively perform their operations with a common
motive to achieve organisational goals and targets in best formative manner. It will lead
company towards high end performance. Company have skilled and potential employees those
who have high competence and strong educational background. In addition, with this, TESLA
provide specialised set of training to their employees which is hard to be get copied by other
rivals.
Software: TESLA take advantage of Paragon’s Live Management software in order to
effectively manage their business operations at global level. This lead towards increasing their
overall efficiency in an effective manner.
Organized: This factor mainly considers those essentials which is required for an organisation to
maintain in an orderly manner as to make sure that proper accomplishment of goals and
objectives are done. In relation with TESLA, it is required by company to continuously update
their software that is being used in company premises as to meet current prevailing needs.
Employees: TESLA is having highly skilled and potential set of employees that effectively
engage in the process of increase production efficiency of entity. It further helps company to
ensure their long term sustainability in market along with this it facilitates high end sales and
profitability.
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As per the above evaluation it has been seen that, TESLA posses competitive advantage
along with partially competitive. All these strength and capabilities has been posses due to
company best effective skilled labour force along with advanced technology. These can be
copied by other competitors thus TESLA is required to implement innovative measures as to
launch new inventions in their products and services.
P3 Porter Five Force model to evaluate competitive forces of market
PORTER FIVE FORCES
Threat of New Entrants – Low:
In auto-mobile sector, threat of new entrants is low because it required huge amount to
enter into this market. Along with this, level of competition from existing brands is also a major
barriers which may reduce the market share of the company (Klettner, Clarke and Boersma,
2014). This is the main reason that, new entry is difficult for the company that may reduce the
threat from the new players. For establishing their positive brand image new brand needs to
focus on its product quality and engineering. If they do the same then they improve their
performance and also compete their competitors.
Threat of Substitutes – High:
Tesla Motors face high threat of substitute because various competitors serve substitute
cars like solar power cars, electric cars and many more that capture customers attention. This is
the main reason that threat of substitute is high in auto-mobile sector for Tesla. Along with this,
customers also use alternative modes of transportation like buses, trains, planes and many more
that negatively impact on the overall performance of the company at market place.
Bargaining Power of Buyers - Moderate to High:
In auto-mobile market, increasing awareness among customers mind towards the
innovative products introduce in market along with its low prices. This is the reason that threat of
bargaining power of buyer is moderate to high. In this customers analysis the products and its
low range in market from other brand then they easily change the company and buy products
from another brand. So that it is important for Tesla to implement diversification within their
products so that they can easily keep their string customers base.
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Illustration 1: Porter Five Force Analysis Model
Bargaining Power of Suppliers – high:
Due to specification and particular part designs in auto-mobile industry, bargaining
power of suppliers is high because organization wants some specified parts and raw material
from suppliers. Thus, it is important for company to evaluate the actual needs to material so that
they can easily make their brand image more popular by serving quality services at market place.
Competitive rivalry – High:
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In auto-mobile market, competition is high because number of companies are offer
various parts of vehicles according to the customers needs and wants. Along with this,
organization also ficus on products quality and offer the same at lower cost to capture customers
attention. This may create high competition at market. Thus, it is important for Tesla to maintain
their products quality according to customers expectation so that they can easily increase their
market share as compare to its rivals.
As per above analysis, it can be evaluated that Tesla face huge competition and threats at
the time of operating in auto-mobile sector (Jeston, 2014). For this they needs to focus on their
quality of cars and also tries to produce innovative parts to invite large number of customers. By
this, company can create their competitive brand image and improve their profitability as well.
Along with this, Tesla also ensure that customers needs are fulfilled as per their expectation by
offering them services accordingly. This will increase customer base within the market place.
P4 Strategic planning for organisation
Ansoff matrix is described as the strategic tool for planning which is useful for firm in
order to develop and design their plans and policies thus business can achieve growth and
success in their operations. The Matrix consist of four different factors which are evaluated
below in terms of Tesla are designed as:
Market Penetration: This is the growth strategy which is linked with evaluating
the existing products which are available at the present market place. This is beneficial strategy
for Tesla as they have retained their image at market place. The firm have loyal customers who
are buying their offered products and services and they are not willing to buy other substitute
products which are available with the competitors. This is an important factor for firm as it
results in enhancing their overall market shares thus firms can attain growth in their operations.
Market development: This is also called as market growth strategy where firms
develop plans in order to sell their existing products in the new market place. This strategy is
beneficial for firms as it helps them to gain attention of people so they can purchase new
products through different channel. New geographical locations are designed where products and
services are offered at different location in new country.
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Product development: This growth strategy is developed in order to sell the new &
innovative products into those market place which are already existing (Chen and Jermias,
2014). This strategy is designed in order to formulate competencies for business so they can
develop new products for selling into the existing market place. This strategy is best suitable at
those place which require differentiated products in order to achieve competitive gain. Tesla uses
this strategy in order to conduct research and develop plans for analysing needs of customers.
Diversification: This growth strategy is designed in order to sell new goods at new market
place. This strategy is risky as compared to other strategy because firm is selling their products at
new places which they are not experienced. If Tesla wants to adopt diversify strategy, then they
should formulate clear ideas about how they have to sell their products and also analyse the risk
factor which can hamper their business growth. In order to formulate balance between rewarding
and risk factor the diversification strategy is best suitable and highly rewarding for business
growth.
From the above analysis of related with growth strategies of Ansoff matrix, it is
suggested that Market development will be the most effective strategy for Tesla as according to
this strategy TESLA is required to introduce new product in existing marketplace. In this
company is aware about the location which makes it easier for them to influence interest of
customers towards the new product. As a result, it’s easier for the company to make their new
product successful in the existing market place.
Porter's Generic: It is a competitive strategies with the help of which organisation can
able to achieve above average performance. Within this there are numerous strategies which help
an organisation to pursue competitive advancements across chosen marketplace. This model
include strategies, Cost leadership strategy, Differentiation strategy, cost focus strategy and the
differentiation strategy. In context with cost leadership strategy, company can able to increase its
overall base of profits by reducing cost. While in The differentiation strategy, organisation make
their products and services more attractive and different from other while initiating new product
development process. Lastly the focus strategy allow company to effectively understand market
dynamics and offer products as per according to customers unique needs.
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