Business Strategy Analysis: Tesla's Macro Environment and Capabilities

This report provides a detailed analysis of Tesla's business strategy, focusing on its macro environment and internal capabilities. It begins with an executive summary and introduction to Tesla, highlighting its mission, vision, and objectives. The report then delves into the strategic context, defining strategy and its role, and explores various strategic planning techniques. A key focus is the macro environment, analyzed using frameworks such as SWOT, PEST, and stakeholder analysis, providing insights into political, economic, social, and technological factors influencing Tesla. The report also applies Porter's Five Forces model and the Structure Conduct Performance Model to assess the competitive landscape and market dynamics. Furthermore, the analysis extends to Tesla's internal environment and strategic capabilities, including the application of McKinsey's 7S model. The report concludes by offering a comprehensive understanding of Tesla's strategic position and challenges.

Unit 32
Business Strategy
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Executive Summary
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INTRODUCTION
Business strategy is defined as the achievement of desired ends or objectives. This is
also called long term business planning usually period of 3 to 5 years. It is also knows
actions and moves of competitors that is used by firms for attracting large number of
consumers, improving performance, competing and achievement of organization’s goal
and objectives. It is the master plan of any organization to carry out their activities and
operations in proper manner. The business strategy can be of different types such as
competitive, corporate and strategy in general.
The company chosen for assignment is Tesla which is American start-up powered by
Silicon Valley which is specialized in manufacturing of electric cars. This was founded
by Elon Musk in 2003 and reached to its success as a dynamic automotive and energy
solution organization. The company became famous for its innovativeapproach in the
market and the dominant position worldwide.
This report highlights about impact and influence of macro environment on business
and internal capabilities and environment. The porter's five force model and use of
different theories, concept, models for understanding strategic directions available for
business.
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TASK 1
LO1 Applying appropriate frameworks in order to analyze impact and influence of
macroenvironment and its strategies
It is essential for business to make proper plans and strategy in order to accomplish set
goals and objectives in an effective and efficient manner. This provides guideline to
business to work as per their mission and vision of organization. Therefore, it is
imperative to first understand the strategic context of any organization.
1.Strategic Contextof Tesla
1.1Mission- The mission of Tesla is to speed up world's transition for sustainable
energy (Mission and vision of Tesla. 2019).
1.2Vision- “The future is electric” to be thecompany of 21st century through driving
world's to electric vehicles (Mission and vision of Tesla. 2019).
1.3Objectives- The main objectives of Tesla is to manufacture, design and market for
luxurious electric powered 360,000 - 400,000 vehicles this year as predicted by Tesla
CEO . (Wayland,2019)
2.Meaning of Strategy
It is defined as high level plan in order to accomplish one or more goals and objectives
under uncertainty conditions. This is scope and direction which assist in achievement of
organization advantage through configuration of resources having challenging
environment for meeting stakeholder and consumer expectations. (Pahwa 2019)
2.1Role of strategy
Strategy plays different roles for business to achieve goal and objectives, their strategic
intent and different strategic direction. They helps in providing direction to business to
go to right path and make strategy for business in order to achieve set outcome or
desired results. (Pahwa 2019)
2.2 Different strategic planning techniques
There are different types of strategic planning techniques which helps in proper
planning of enterprise activities and operation. As per size and nature of business,
respective organization has to adopt techniques for positive outcomes. This includes
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benchmarking, budget planning, business analysis, business models, competitive,
financial analysis & market analysis and so on. (Pahwa 2019)
3.Macro Environment
The conditions of the environment which the business operates to influence its
operation for better performance. Consumers’ ability and willingness, to spend
fluctuations in spending, price levels have a direct impact in macro environment
The trends of macro environment are GDP, employment, spending, monetary policies,
government tax policies. .(Chappelow, 2019)
Various frameworks and models have been looked into to analyze the macro
environment of Tesla. Key frameworks such as SWOT, PEST and Stakeholder Analysis
has been conducted with examples.
3.1Tesla SWOT Analysis
Figure 1 SWOT analyses (TESLA motor 2019)
Strength –
The Leading automotive company innovate, develop, competitive and profitable
electric vehicles. And the best In Electric Cars – traveling up to 600km with single
battery charge. Also Tesla engaged in cross sell and diversification- eg: Tesla
insurance program with Liberty Mutual Insurance Company
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The CEO Elon Musk oversees all the product developments, engineering and
design of the company’s products.
Weaknessescould be highlighted withmanufacturing complications with production risk
factors, delays in distribution and also extreme troubles while manufacturing Model X
battery assembly at Giga factory 1 and also unable to meet the customer demand –
( this might affect the brand value.) Battery shortage is also another weakness as this
will have direct impact on the company revenue. On the other hand CEO Musk is the
sole representative of Tesla and there is no other immediate person trained to take his
position in his absence.
Opportunities
Expand its business to the Asian market which is still new to the automotive and
renewable energy market and to make their own battery cells to reduce the production
cost. Currently the primary supplier is Panasonic.
Threats
Aggressive competition from many automotive brands such as Mercedes, BMW, Audi,
Lexus for both self-driven technology and alternative fuel vehicles (Hybrid, Plug-in-
hybrid) and at the same time Often have product defects due to manufacturing designs.
This will affect the company image as all the organizations named above are able to
provide electric and sustainable products (High competition for Tesla. 2019).
Product liability claims over autopilot vehicles which is not very successful.
(Shewen 2019)
Environmental Analysis- The environmental analysis can be performed through PEST
(Political, Economical, Social and Technological) and Porter's Five Forces Model.
Tesla design, manufacture and distribute environmental friendly electric cars to the
market. This reduces the carbon footprint in the environment. Also Tesla has excellent
reputation on environmental impact on their electric vehicles and other energy saving
products, it is also important to work on their product and supply chain more energy
efficient if they expect for higher popularity/demand.
Political:
Any business environment has an impact with the political situation directly or indirectly
in its operating country. The political environment is effects the regulatory environment
too. Economic instability due to political instability will lead to business operational
disruption and therefore financial losses. Political disruptions between nations and
terrorism will also effects business environment.
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Tesla will face the political factors such as, work week regulations in auto manufactures,
mandatory employee benefits, minimum wage and overtime regulations, Industrial
safety regulations etc. in any country operating their business.
Economical:
The country’s economy is based on its rising businesses. The growth of the economic
activities directly contributed to increase the level of global employment and that has led
to higher spending on luxury vehicles and goods. Therefore the market for SUV’s has
increased globally with higher economic activity. The rise of the middle class has been
especially beneficial for the vehicle brands. However, If Tesla can approach the middle
class consumer segment with lower cost models the company can grow faster with
middle class consumers (Higher economy support in growth of Tesla. 2019).
Social
Cultural factors have a major influence on the demand and supply chain. Certain
products are perceived in certain societies and the level of acceptance of these
products are varies on cultural believes. More people are focused on environmental
protection
Tesla is also especially focus on helping the brand transition towards better, greener,
sustainable fuel efficient future. If the Tesla plan “the future is electric” is successful, the
world could save billions that are spent on every year on fossil fuels
Technological
Technology is undoubtedly the largest factor influencing growth of the businesses
globally. It’s makes business efficient and affects the competitiveness. Every business
is look for the newest technology to see their sales growth.
Tesla is also with the modern 21stcentury technology as their sales and profit increases
every year (Technological contribution in the growth of Tesla. 2019).
Apart from the SWOT Analysis, there is another analytical tool which could use to see
the macro analysis of a business.
Stakeholder Analysis- There are different framework which helps in stakeholder
analysis such as stakeholder matrix and stakeholder mapping. Tesla has used
stakeholder matrix which means to analyze stakeholder of project to align goal with
project. It includes power interest, stakeholder analysis and stakeholder engagement
assessment matrix (3 Types of Stakeholder Matrix, 2019). If employees of Tesla has
power and interest then they carry out project work. In order to know analysis of
stakeholder, it is very important to analyze different factors such as religious belief,
value of ownership, demographics, communication and so on. It is very important to
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include stakeholder engagement for given topic in terms of unaware, neutral, leading,
supportive and resistant.
Figure 2 stakeholder analysis and mapping (Larry, 2000)
Structure Conduct Performance Model- This is the framework which helps Tesla in
making relations with market structure, conduct and performance. There are three
elements of such model which are described below.
Figure 3 Structure Performance Model: (Lee, 2007)
 Structure- It is stable for particular time period and affect buying behavior of
buyers and seller. The organization has to depend upon market supply and
demand. In case of any change in those leads impact to business. The
respective organization has to understand structure of market in order to conduct
business activities for their users in effective manner.
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 Conduct- It is the way where buyers and seller behave among themselves and
each other for buying of products and services in an effective and efficient
manner. They chose own investment, research and development, strategic
behavior. Tesla has to behave proper with their seller and buyer so that they can
conduct their activities, operation and functions of business in appropriate
manner.
 Performance- This is measured through comparing results of firms and industry
in terms of profitability and different ratios. The components covers under this are
product quality, production efficiency, resource allocation. Tesla has to improve
their performance for achievement of maximum profits and gains in order to
survive at marketplace. (Lee, 2007)
P2 Analyses the internal environment and capabilities of the given environment
Strategic Capabilities
Ability of entity to use all available skills, knowledge, capabilities and resources in
order to gain competitive advantage over others, improving business value. Strategic
capabilities are of three types Physical (machines, infrastructure, raw materials),
Financial (balance sheets, funds, cash flows) and Human (manpower, consumers,
suppliers). It has three important components:
Strategic Analysis- Its a way of understanding company's environment, make up
view about important factors or resource which can affect organizations present and
future performance.
Strategic Choice- This stage comes after strategic analysis,it helps in selecting
best plan of action on basis of available strategic options for business.
Strategic Implementation- Last but most important stage, it defines structure in
which all planned strategies are being implemented in organization with taking careful
steps in proper execution of predetermined plans.
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Application of McKinsey’s 7S model in Tesla Motors:
McKinsey’s 7S model contain different parts which are used to increase
efficiency and effectiveness of organizations operations (Scholes 2015). These seven
elements are divided into hard ( Structure, Strategy and System) and soft (Shared
value, Skills, Style and Staff).
Hard Elements:
Strategy are plans or designs organizations make to have competitive advantage
over others. Tesla Motors strategy focus on electric vehicles which costs lower than fuel
cars, already gaining competitive advantage.
Structure of Tesla Motors is not clear due to its differentiated nature, but it can be
classified as divisional structure as its very close to it as compared to other business
structures present in market.
Systemmeans day to day activities performed by employees to attain objectives.
Many systems are present in Tesla Motors for long term growth of company as its a
manufacturing unit. Some most important systems it includes are manufacturing,
recruitment and selection, team orientation and customer relation management system.
Soft Elements:
Shared Value are basic values on which business operations depends and
entity's culture is made up of. Tesla Motors has developed electric cars with view
increasing issue of global warming. As well as its production strategy is based on clean
energy generation.
Skills relates to staff knowledge and expertise (Spender 2014). Tesla Motors is
built by three silicon valley engineers, therefore its clear that Tesla Motors has best
talent associated with it.
Style is ways leaders use to motivate employees to obtain firms goals. Tesla
Motors leaders are friendly with workforce, involving them in decision making for
important tasks.
Staff element is very clear by its name here, employees and their abilities are
talked. Its visible that Tesla Motors introduce of new innovative products that employees
are skilled, filled with knowledge showing best results.
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Application of VRIO model in Tesla Motors:
VRIO model is technique used to study organization internal power to sustain
competitive advantage. It has four aspects through which analysis is done whether
company can continue to have competitive advantage over others. These elements are:
Valuable criteria comes first which identity's if resources are adding any value to
business or not. If resources do not satisfy this function its considered as competitive
disadvantage. In Tesla Motors its unique valuable resource is its differentiated products
they offer to customers.
Rare function says about uniqueness of resource that only one or few companies
can acquire. Tesla Motors rare resource is idea of 'giga' battery used to generate power
in factory which gives its temporary advantage from competitors.
Cost to Imitate is high if duplicating resources are difficult for others giving Tesla
Motors upper hand as its result advantageous for company.
Organized to Capture Value feature says about having a systematic operations
to bring potential results from valuable, rare and costly to imitate resources providing
competitive advantage to Tesla Motor.
LO3: Evaluate and apply the outcomes of an analysis using Porters Five Forces
model to a given market sector.
As a strategic management tool, Michael Poter deloped the Porter Five ForcesAnalysis Model
to understand the external factors of organisations and the competitive advantage of their
purtucular industry environment such as bargaining power of customers or buyers and
suppliers, the threat of substitution and new entrants.The Five Forces analysis can help
companies assess industry attractiveness, how trends will affect industry competition,
which industries a company should compete in—and how companies can position
themselves for success. (Puthran, 2017)
The effect of different forces will be different within each industry. This is why it
becomes imperative to develop this model separately for every industry even if the
same company is competing across different markets and industries.
The film business, there is a high threat of substitutes from various other forms of
entertainment. In addition, the power of suppliers (e.g. filmmakers, etc.) is also high as
they supply the vital most input for the industry.Whatever the industry, there may be one
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or two forces that end up driving all strategy formation. It is not always easy to
determine which force is the key one. An obvious force may not be the one increasing
or decreasing profitability. (Dudovskiy 2014)
When applying Five Forces analysis at Tesla, the largest player in the automotive
industry and energy solution industry is very significant that how much those external
factors affect the company. To ensure the company’s long term competence,Tesla
should address effectively the above external factors and resilience be more with their
competitors such as Ford Motor Company, General Motors Company, Volkswagen,
Toyota Motor Co-operation, Nissan Motor Company and BMW. However,Tesla needs
to look into the nature and characteristics for automobiles, batteries and solar panels in
the domestic and international markets when consider the external analysis.
In this analysis it shows how Tesla should tackle its macro business environmentmacro
environment with the pressure from the new substitutes, bargaining power of
suppliers,bargaining power of customers, Threats of new entrants as shown in figure 2
(Kessinger, 2019)
Figure 2 Porters five Forces Model (Puthran, 2017)
Bargaining Power of Suppliers
An assessment of how easy it is for suppliers to drive up prices. This is driven by the
number of suppliers of each essential input; uniqueness of their product or service
relative size and strength of the supplier; and cost of switching from one supplier to
another supplier. (Puthran 2017)
All input sources for the production to keep under control for the following reasons:
 To make sure there are no substitutes for the particular input.
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