Tesla's Business Strategy: Macro Environment and Planning

This report provides a comprehensive analysis of Tesla's business strategy, commencing with an introduction to business strategy and its application to Tesla, an American electric vehicle manufacturer. The report utilizes the PESTLE framework to assess the impact of macro-environmental factors, including political, economic, social, technological, legal, and environmental forces, on Tesla's operations. It then delves into an internal analysis of Tesla's capabilities using SWOT and VRIO models to identify strengths, weaknesses, opportunities, and threats, as well as valuable, rare, inimitable, and organized resources. Furthermore, the report applies Porter's five forces model to evaluate the competitive landscape, including competitive rivalry, the threat of new entrants, the threat of substitutes, and the bargaining power of customers and suppliers. Finally, the Ansoff model is employed to interpret and determine strategic planning for Tesla, culminating in the development of a strategic plan.

Business
Strategy

Table of Contents
INTRODUCTION ..........................................................................................................................4
TASK 1............................................................................................................................................4
P1. Impact of Macro Environment ........................................................................................4
TASK 2............................................................................................................................................5
P2. Analysation of internal environment and capabilities .....................................................5
TASK 3............................................................................................................................................8
P3. Porter's five forces model ................................................................................................8
TASK 4..........................................................................................................................................10
P4. Strategic Plan .................................................................................................................10
CONCLUSION .............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business strategy can be define as a set of competitive actions and move which an
organisation uses for attracting customers, competing successfully, strengthen the performance
and to achieve business objectives and goals. These strategies helps in outlining the way in
which business should be processed to attain the desired output and results. This report is based
on Tesla which is an American auto mobile organisation and it is specialised in manufacturing of
electric car (Brewster, 2017). This report covers appropriate frameworks for analysing influence
and impact of macro environment on Tesla and its various strategies with the help of PESTLE
analysis. It also includes internal environment and capabilities of this enterprise using VRIO and
SWOT analysis. Further, it covers evaluation of competitive forces of a market sector of this
business by utilising Porter's five forces model. At the end Ansoff model is used for interpreting
and determining strategic planning for Tesla and a plan is develop for the same.
TASK 1
P1. Impact of Macro Environment
Macro environment are the external forces and factors that has impact over business
operations and strategies. Tesla is one of the leading auto mobile organisation of America that
uses various business strategies and plans to stay competitive in the market. There are various
external environmental factors that affects the functioning and operations of this organisation as
a whole which can be identified by PESTLE analysis.
PESTLE Analysis- It is a framework and a tool for analysing and monitoring factors of macro
environmental factors which have impact over organisational performance and productivity. This
analysis is applied upon Tesla for the purpose of identifying the influence of external
environment such as political, economical, environmental, social, technological and legal forces
upon the business strategies and operations (Cavusgil and et. al., 2014).
Political- It identifies the impact of government upon the functioning, operations and
strategies of an organisation. Tesla has an opportunity for strengthening its financial performance
by using various incentives from the government. The political environment of United Kingdom
is stable which makes it favourable for this auto mobile business to expand its business
internationally. This is also favourable for market penetration and development strategy of this
organisation (PESTLE Analysis of Tesla Inc, 2019).

Economical- Due to increase in the overall global economy, the sales of electric car has
been increased to a large extent. Due to rise in economy of Asia, Europe and United States
results in more electric developments which has positively affected the sales and profitability of
Tesla. Decrease in cost of battery has lead to enhanced performance of this business which can
be considered as a weakness for this organisation.
Social- Due to rapid changes in tastes and preferences of customers, people prefer
electric cars and not traditional cars. These cars satisfy their self recognition in the environment
they are living and build up their standard of living. Moreover due to improved wealth
distribution in developing markets such as USA, Asia and Europe has boost up the financial
performance of this business.
Technological- Due to increase in technology and innovation, auto-mobile industries like
Tesla is benefited to a large extent. It help this organisation in maintaining a competitive edge on
the competition. It also allows Tesla to be fuel efficient and to be more adaptable towards new
innovation than traditional options available in auto mobile industry (Chang, 2016).
Legal- There are certain legal laws and regulations that must be followed by this auto
mobile industry in order to run their business in a smooth manner. In UK, all the vehicles must
be EC type approval which is a national type approval. Tesla follows all the legal rules and
regulations of government of all countries.
Environmental- Due to increase in environment awareness among people has enhanced
the love for electric cars among people which is an opportunity for Tesla. This organisation
generates electric vehicle that limits the usage of fuel and it barely affect the carbon emissions.
Due to high focus upon environment, this organisation has developed a brand name for itself
which is difficult for other business enterprises to match.
TASK 2
P2. Analysation of internal environment and capabilities
Tesla is a multinational auto mobile organisation that deals with electronic cars since
2003 and has successfully developed its brand image in markets of various countries. The
internal environment and capabilities of this organisation can be analysed and identified with the
help of SWOT analysis and VRIO model (Chen and Jermias, 2014).
SWOT Analysis

SWOT analysis can be defined as an approach which is undertaken by a business for the
purpose of identifying its strengths, weakness and external factors such as opportunities and
threats (Tesla Inc. SWOT Analysis & Recommendations, 2019). It is utilised by Tesla for
identifying the competitive edge of a company and developing strategic planning on that basis as
follows-
Strengths Weaknesses
 The basic strength of this organisation
is that it generates and creates highly
innovative products such as electric
sports car. It keeps on innovating new
products like integrated manufacturing
of battery at Gigafactory.
 When it comes to electric car, the first
thing that comes to people mind is
Tesla because of its high brand
recognition in the market. This
organisation do not only keep its focus
upon selling cars but it focuses upon
revolutionizing driving experience of
customers.
 The weakness of this large auto mobile
industry is that it offers high prices for
its products which is not easily
affordable by all range of customer. It
limits the market share of Tesla and it
also leads to decrease in its customer
base.
 This organisation has limited market
presence in China and other
developing countries (Goffee and
Scase, 2015).
Opportunities Threats
 Tesla can consider in expanding its
global sales in other developing
countries and can enhance its revenue
through expanding in renewable energy
markets and Asian automotive markets.
 This organisation can also invest in
diversification strategy and can
enhance its market share. People trust
this brand so if it introduce something
 The main threat for this organisation is
its aggressive competitors that keep on
innovating electronic cars by using
latest technology and innovation.
Moreover, Tesla is a brand and it
charges high prices for its products. If
its competitors charges low prices for
the same than it can affect its
profitability and sales in an adverse

new in market other than electric cars
than possibility is that it will enhance
its overall profitability.
manner.
VRIO Model
in order to ascertain internal capabilities and resources, this model is used by
Tesla as follows-
Resources Valuable Rarity Inimitable Organized What is the
result?
Effective
market
presence
Yes No No No Competitive
Disadvantage
Offerings Yes Yes No No Partially
competitive
System
software
Yes Yes Yes No Temporary
competitive
advantage
Personnel Yes Yes Yes Yes High
Competitive
advantage
Valuable
The valuable elements of Tesla are:-
Effective market presence: This enterprise has a valuable market presence and brand
image that provides assistance in value to consumers for attaining maximum satisfaction from
them.
Offerings: It offers high quality products according to the demand, needs and preferences
of customers (Jeston, 2014).
System software: It uses Retalix Systems that is developed particularly to execute its
business activities in an effective and timely manner.

Personnel: The workforce of this organisation are competent and skilled which helps in
using their potential and capability for assisting the organisation in achieving its business goals
(Klettner, Clarke and Boersma, 2014).
Rarity
The rare components of this organisation are-
Offerings: The offerings provided by this organisation are rare as they are made out of
latest technology and innovation.
System software: Retalix Systems is used by Tesla for designing and developing
according to the specifications of a business which is only suitable for this specific business
entity.
Personnel: This organisation's workforce possessed important competence and skills by
which it conduct its operations in a suitable manner.
Inimitable
The inimitable resources that are considered for this company are-
System software: It is used by Tesla within a premises that is relevant to the business
entity and is utilised within an organisation.
Personnel: In Tesla, workforce is given regular training which helps them in dealing with
typical situations in an appropriate manner (Peng, 2017).
Organised
Tesla's organised factors are considered as follows-
Personnel: The people working in Tesla are well organised so that they can easily deal
with the typical and complex situations existing within the business entity.
TASK 3
P3. Porter's five forces model
Porter's five forces model can be determined and defined as a framework and tool that is
utilised to analyse competition of a business. It determines and analysed the intensity of
competition for identifying the competition prevailing in market. It helps in understanding the
environmental forces which affects the overall profitability of a business and on this basis,
business develops it strategy accordingly. Tesla can use this model for the purpose of analysing
its strengths and weaknesses and its impact over long term profitability of its business. It consists

of five forces such as competitive rivalry, power of supplier, buyer power, threats of substitution
and new rivalry.
Competitive Rivalry- This factor focuses upon the strength and number of company's
competitors existing in market Tesla operates in a highly competitive market. There are small
number of organisation in market that deals with automotive firm which limits its effectiveness
upon this organisation. But at the same time, these organisations are aggressive for innovating,
promoting and developing new products. Such as large automotive has aggressive campaigns of
markets that helps in strengthening the affect of competitors among business (Scholes, 2015).
Threat of new entry- New entrants are the new firms that affects the environment of
industry and helps in determining company's performance. It is very difficult for new entrants to
compete with strong brand like Tesla. In addition to it, auto mobile manufactures has high cost of
production that impose upon barriers to new organisations. Moreover, well established
companies like Tesla benefited from high margin of economies of scale which can be achieved
by new entrants when they exceed a production threshold. Based on external factors, the threats
of new entry can be considered as a minor concern of strategic management in Tesla.
Threat of Substitutes- This organisation experienced the affect of substitutes upon
energy solutions and automotive industry environment. In this context, the low switching costs
of other substitutes such as public transport are very easy for customer's attraction. It has large
impact over industrial environment of Tesla but as public transportation is as much versatile and
comfortable as a car which further limits the impact of substitutes upon Tesla (Spender, 2014).
Bargaining power of Customers- The impact of buyers and consumers upon automotive
and solar panel industry is large. Customers of Tesla are considered as a direct factor which
determines sales and revenue of a company. Low switching cost reduces the barriers for the
customers of Tesla in order to purchase cars from other providers. For instance, customers of
suburban areas have a limited access towards public transportation which makes it practical for
driving their own car. In addition to this, the low purchase volume results in reduction of
customers influence upon Tesla.
Bargaining power of Suppliers- This factor of analysis helps in showing the way in
which suppliers shape the environment of industry environment influences materials availability
which the firm requires. Tesla's business highly dependent upon its supplier's reliability and its
suppliers has low forward integration level. Some suppliers use third party for selling raw

material to Tesla, while other transact it directly to this company. In this framework, this factor
impose moderate force upon its corporation. Moreover, these suppliers are moderate in size,
therefore, they have limited impact on Tesla's industry environment. Another factor that can be
considered is moderate supply level that empowers these suppliers to affect Tesla but to a limited
degree only (Veit and et. al., 2014).
TASK 4
P4. Strategic Plan
In order to identify, understand and interpret the strategic decisions in Tesla, various
models and concepts can be used. For achieving overall business objectives of an organisation,
the first thing that must be considered by an enterprise is to adopt an accurate strategy. These
strategies can be used by an organisation for enhancing profits, market share, productivity and
overall profitability of a business. On the basis of these strategies, a strategic marketing plan is
formulated that focuses upon aims and objectives of a business. In order to identify appropriate
strategy for this organisation, Ansoff Matrix can be used.
Ansoff Matrix- It is a strategic tool and technique of planning which helps in providing a
framework to an organisation for analysing, planning and identifying the strategies for growth. It
shows four marketing strategies which helps a company to grow and it also identifies the risk
that is associated with each strategy. This model is applied on Tesla in order to identify the best
suitable strategy that can be used by this business enterprise. The four strategies that can be used
by Tesla are-
Market Penetration- This strategy includes increasing sales and profitability of existing
products in an existing market. It can be done in various ways like decreasing prices to attract
new customers, increase efforts of promotion and distribution, or by acquiring competitor in the
same market place. This strategy can be utilised by Tesla by promoting its latest products like
Model X electric car, inverters , solar panels, etc (Wheelen and et. al., 2017).
Product Development- In this strategy, an organisation introduces new product or make
changes to existing products in an existing market. It is used by a business only when it has wide
knowledge about current market conditions. This strategy can be applied in number of ways such
as by doing investment in research and development in order to develop new products or by
acquiring product of a competitor. Tesla keeps on innovating new products on frequent basis

such as recently it is working on developing pick-up truck and semi truck with a range of energy
storage products.
Market Development- This strategy focuses upon entering into new market with the
existing products by catering into completely different customer segment, by expanding
regionally or globally. Tesla can enter into any new market either globally or regionally for he
purpose of expanding its market share and profitability (Brewster, 2017).
Diversification- This is the riskiest strategy among all the strategies of Ansoff matrix
model as it focuses upon entering into new market with the new products. It requires both
product and market development which can impose high cost of production upon a company.
Tesla can use this strategy by developing new range of products and making them available in a
foreign market.
Among all the strategies, the most suitable strategy which can be used by Tesla is market
development strategy as it will help in expanding market share of this company. It will result in
enhancing overall profitability and productivity of a business. On basis of this strategy, a
strategic plan is developed as follows-
Strategic Plan
It is a plan which is used by an organisation for setting up goals of a business,
strengthening business operations, and making sure that stakeholders are working towards
achieving a common goal. Here, strategic plan is developed for Tesla on basis of market
development strategy as follows-
Overview
Tesla is an American based auto mobile organisation that deals with manufacturing and
selling auto mobile products at international level. It is a first auto mobile industry that produce a
fully electric vehicle which run on batteries. It is the only company which sells a zero
greenhouse emission cars. This organisation has expanded its products in US, Canada, Europe,
UK, China, Hong Kong, and Australia. Now, it is planning to introduce its products in other
developed countries like Germany, Austria, Netherlands, Denmark, and so on. For this purpose,
a strategic plan is developed (Cavusgil and et. al., 2014).
Mission

The mission of this Tesla is, “ To accelerate transition of world to a sustainable energy.”
This business entity aims at proving to the world that people don't have to compromise for
driving electric vehicles.
Vision
The vision statement of Tesla is, “ To become the number one electric car company in the
world and meet the customer's objectives. ”
Objectives
The objectives of this strategic plan of doing market development are as follows-
 To increase the market share of this company up to 20% To increase the sales and profitability of its business up to 10% in up coming one year.
Goals
The short term goal of this company is to provide due consideration to price and quality
of products and its long term goal to to attain access into emerging markets.
Strategies
Tesla is using market development strategy for the purpose of enhancing its market share,
sales and overall profitability.
Tactics
In order to use market development strategy, Tesla is planning to expand its market on
global basis for covering more customers. It will use both online and offline promotion
techniques in order to promote its products on global basis (Chang, 2016).
CONCLUSION
From the above report, it has been concluded that business strategies helps an
organisation to identify the manner in which business should be processed. These strategies helps
a business entity in attracting large number of customers and achieving overall business
objectives in a desired manner. PESTLE analysis is useful in identifying the impact of macro or
external factors upon the overall functioning and processes of a business firm. SWOT analysis
plays an important role in determining the competitive advantage of a firm by identifying
internal factors that are strengths and weaknesses and external forces which are opportunities and
threats. VRIO model is utilised in ascertaining internal resources and capabilities of a business
entity and Porter's five forces model is utilised for identifying competitive edge of a business.

Ansoff matrix is beneficial for an organisation identifying most accurate and suitable strategy
for an organisation.
REFERENCES
Books and Journals
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Auerbach Publications.
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performance. Accounting & Finance. 54(1). pp.113-134.
Goffee, R. and Scase, R., 2015. The Real World of the Small Business Owner (Routledge
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Jeston, J., 2014. Business process management. Routledge.
Klettner, A., Clarke, T. and Boersma, M., 2014. The governance of corporate sustainability:
Empirical insights into the development, leadership and implementation of responsible
business strategy. Journal of Business Ethics. 122(1). pp.145-165.
Peng, M. W., 2017. Cultures, institutions, and strategic choices: Toward an institutional
perspective on business strategy. The Blackwell handbook of cross
‐cultural
management, pp.52-66.
Scholes, M. S., 2015. Taxes and business strategy. Prentice Hall.
Spender, J. C., 2014. Business strategy: Managing uncertainty, opportunity, and enterprise.
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Veit, D. and et. al., 2014. Business models. Business & Information Systems Engineering. 6(1).
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Wheelen, T. L. and et. al., 2017. Strategic management and business policy. Pearson.
Online :
PESTLE Analysis of Tesla Inc. 2019 [Online]. Available Through:
<https://pestleanalysis.com/pestle-analysis-of-tesla/>
Tesla Inc. SWOT Analysis & Recommendations. 2019 [Online]. Available Through:
<http://panmore.com/tesla-motors-inc-swot-analysis-recommendations>