Analyzing Tesla's Business Strategy: A Comprehensive Report

This report provides a comprehensive analysis of Tesla's business strategy, examining its competitive actions and market position. It begins with an introduction to business strategy and its importance for organizations. The report then delves into the external environment using PESTEL analysis, assessing political, economic, social, technological, environmental, and legal factors impacting Tesla's operations, particularly focusing on the UK market and global factors. A SWOT analysis is conducted to evaluate Tesla's internal strengths and weaknesses, as well as external opportunities and threats. The report further analyzes Tesla's internal environment using the VRIO model and Porter's Value Chain to assess its resources, capabilities, and value-creating activities. Porter's Five Forces are applied to assess the competitive intensity within the electric vehicle market. The report discusses various strategic directions available to Tesla and culminates in the production of a strategic management plan, outlining objectives, tactics, and strategies to enhance its competitive edge and market position. The report concludes with a summary of findings and references.

Business Strategy
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Table of Contents
INTRODUCTION...........................................................................................................................3
PESTEL and SWOT Analysis......................................................................................................3
Critically analysing the macro environment to determine and inform strategic management
decisions.......................................................................................................................................6
VRIO Model................................................................................................................................7
Porters Value Chain......................................................................................................................8
Critically evaluating the internal environment to assess strengths and weaknesses of an
organisation’s internal capabilities, structure and skill set...........................................................9
Porter's 5 five forces....................................................................................................................9
Appropriate strategies to improve competitive edge and market position based on the
outcomes....................................................................................................................................10
Discuss about the evaluation of different types of strategic direction which available in Tesla.
....................................................................................................................................................10
Produce a strategic management plan with the help of tactics, strategies and objectives.........14
Produce a set of valid strategic directions, objectives and tactical actions................................16
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17
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INTRODUCTION
Business strategy is defined as the competitive actions which are used by organizations to
improve their performance, attract customers as well as to retain their strong position in the
competitive market. The strategies adopted by organization affect the success and risk factor of
business to a great extent. Thus, it is vital that service providing organization must emphasis on
adopting suitable strategic approach for achieving its business goals (Thompson, Strickland and
Gamble, 2015). The business strategy of the organization is influenced by several factors such as
internal and external business environment, competitive forces and long term growth strategies.
Thus while developing strategic plan it is very essential that these factors must be taken into
account.
The main aim of this report is to develop an understanding about business strategies of an
organisation and the factors which can impact those strategies. To fulfil this aim, this report is
based on Tesla which is an automotive manufacturing company and is currently focused on
improving their electronic vehicles. This report will evaluate the impact of external factors on
strategic decisions and how internal capabilities of the company can be used to attain growth by
business organisation. The study will also analyse a strategic plan for the organization so that use
of appropriate business strategy can help organization in achieving its profitability and success
goals.
PESTEL and SWOT Analysis
Tesla is a large manufacturer of auto mobiles which is known for its contribution against
developing technologies which are environment friendly and focused upon sustainability. There
are ample factors which can impact the functioning and strategies of Tesla, for which it is
important to study the environment in which this company operates. For this purpose, PESTLE
analysis of this company is conducted below which can provide an understanding about how
macro factors impact operations and business strategies of Tesla.
PESTEL Analysis
PESTEL analysis is a tool that is used to analyse the impact and influence of the external
macro factors on the performance and decision-making of the organization (Johnson, 2016).
These macro factors include Political, Economic, Social, Technological, Environmental and
Legal Factors. Each of these factors has different impact on the performance and policies of
company.
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Political Factors
The first external factor which can affect the business strategy of Tesla is political factor.
The political stability in operational region of the organization helps in successful
implementation of the strategies. The government policies related to sustainability, employment
and resource utilization, taxation can influence the decisions related to products and services.
Thus, it is required that Tesla must analyse the policies and outcome of political changes which
not only affect regional or national outcomes but also influences the international trades and
results. The political instability can have adverse impact upon social, legal or economic domains
as well.
Tesla is a multinational organization which operates in various countries and one of them is
United Kingdom. At present, UK political environment is facing huge instability over Brexit
issue. As a result, people and political authorities of UK are stressing over increasing taxation
rates over luxurious goods which is a threat for Tesla. Thus launching a new product in such
environment can be risky for the organization or can even cause a decline in sales of existing
products. The failure to establish compliance with government policies can result in operational
barriers and legal penalties (Johnson, 2016). The change in government and their policies can
influence the taxation or operational reliefs provided to organization. Hence, company must limit
their strategies over market penetration where they should focus upon developing their existing
products in existing market. In India in today time period also after liberalization trade barriers
are maintained. For example, certain categories of product like fat, oils of animal origin are
prohibited in India. Items that need import license are restricted and few items comes in this
category. In case of few pharma products approval of central government is needed (Bentley-
Goode, Omer and Twedt, 2017). Such kind of barriers affect business firms interest in India.
Many firms because of these reasons do not like to invest in India. Such kind of barriers affects
any firm investment plan and strategy in India. Global firms cautiously make investment in India
and does not manufacture on large scale. For example, large number of products will be available
with “Made in China” tag but few products of global firms will be observed with tag “Made in
India”. Thus, political environment is not congenial for business firms in India.
Economic Factor
Economic factors are related to the current economic condition of national and
international market in which the organization is performing their business activities. Issues that
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are considered under the economic factor are change in the Taxation policy, recession, inflation
and economic crisis. These factors are more crucial for organization like Tesla Motors
(Thompson, Strickland and Gamble, 2015). The economic crisis and recession are most
important to study because it can affect the company in different ways. Condition like recession
and economic crisis can directly affect the operational efficiency of Tesla Motors because these
factors are directly related to the market place in which organization is currently working. Tesla
operates in region of UK where the most important factor which impact operations of Tesla is
Brexit. Brexit has resultant into enhancing trade barriers due to which this organisation has to
face more restrictions. Despite of this negative impact, positive impacts which facilitate Tesla
against economic factor are decreasing battery costs in UK and decreasing renewable energy
costs in UK. These factors are the positive influences for Tesla by which strategies of this
company is impacted as they are now stressing over trading more electronic vehicles in UK.
Social Factors
Social factors are connected to the personal views and perspectives of people that are
connected to operations and working of company. Social factors such as consumer trends and
choices in UK has a positive impact on Tesla as people in UK are more concerned about
decreasing carbon footprint by their lifestyle. Also, there is a high trend of using renewable
energy sources in UK. These positive influences and social factors impacts strategies of Tesla as
strategies of this company is now stressing over penetrating their market in United Kingdom by
improving their electronic vehicles.
Technological Factors
Tesla is an automotive organization which is providing electrical cars to customers in the
global market. So, the technical or technological factors are more crucial for company. The most
influential factor in technological environment of UK for Tesla is the high rate of technological
change which results into continuous change of technological products. Technology is seemed to
be continuously improving and developing due to which every year a new age technological
automotive car is launched. This factor can negatively impact Tesla as now they have to cope up
with the ever enhancing technology which will result in increasing cost of research and
development for this company (Amran and et.al., 2016). Due to above mentioned technological
factors, strategies of Tesla also get influenced as now the strategies of Tesla should consider to
allocate appropriate budgets against research and development so that constant changing
demands of consumers can be fulfilled.
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Ecological Factors
Environmental factors are the influencers which impact the functioning of an organisation
such as climate change and policies to protect environment etc. (Jannesson, Nilsson and Rapp,
2016). Tesla operates in UK which is highly concerned about developing programs for
environment protect which positively influences Tesla as this company manufactures electronic
vehicles. These factors also impact strategies of Tesla as now this company will make sure to
comply with all the governmental program and develop policies in their strategies which will
ensure ecological sustainability. Tesla's mission is to accelerate the world’s transition to
sustainable transport energy. They are trying to create an entire sustainable energy ecosystem
where unique set of energy solution will be manufactured. Tesla is focusing on reducing
pollution through its cars and due to this reason, it do innovation in its business. Under this time
to time it makes changes in technology used in cars which lead to less emission of carbon from
car and in this way, Tesla bring sustainability in transport.
Legal Factor
The legal factors are concerned about the legislation that are made by the legal authorities
of country (Ardley and McIntosh, 2019). There are various laws which are made and defined by
the authority of UK to keep the operations of automotive companies under control. These factors
can legally affect the Tesla Motors to perform some action that are out of the limit such as
establishing showrooms at certain locations which can drop their sales. This can even affect the
innovation policy of company. These factors even impact strategies of Tesla by persuading them
to follow all legal rules even if they are not profitable for them.
This is how some external factors can affect the company and its policy that are made to
improve the performance of company in the global market.
Critically analysing the macro environment to determine and inform strategic management
decisions
Macro environment includes external business environment factors which impacts strategic
management decisions of company both positively and negatively. Macro environment factors
such as enhancing social trend of environment sustainability positively impacts Tesla’s strategic
management decision as this organization manufactures electronic vehicles which run on
renewable energy sources. Macro factors such as economic instability and low income of people
negatively impact this organization’s sales and their management decisions.
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SWOT Analysis
Strengths
Tesla is one of the best employer organization in the market. It is providing better
opportunity to the people who are skilled and well-educated. In the production of the electric car
Tesla motors is leading company (Schaltegger, Hansen and Lüdeke-Freund, 2016). The
reputation of organization is too good in the market place so this is advantage for company. Tesla
Motors is providing the vehicles that are best in the category. The CEO of Tesla Motors is a well-
known person. The innovation and practicability of organization leader is helping the company
to work more on research and development in their product with high innovation.
Weaknesses
It is the only organization that is working on the huge level in the electric automotive
sector. There are still some complications Tesla is facing in the manufacturing of the electric car.
The fuel cell technology is big issue for organization (Bentley-Goode, Omer and Twedt, 2017).
Because they want to improve this technology to improve the battery life and capability of
electrical car. The demand of electrical cars is too high and Tesla is not able to meet the demand
of market place. The production unit of Tesla is not enough to produce in bulk. Company do not
have other star face other than Elon Musk.
Opportunity
Expansion in sales is big opportunity for Tesla Motors. They have huge market to
improve their sales. A huge market is open for Tesla in the Asia and European Market. The
current price of their product is too high but company can target middle class by offering
electrical cars with low price.
Threats
There are many organizations that are working on the electrical fuel cell technology and
it is big threat to Tesla. The competition for Tesla is increasing in global market. The defect in the
product is also big issue for Tesla (Prajogo, 2016). People are still not comfortable with electrical
cars so. Legal factors also can affect the business of company.
VRIO Model
There are different resources which are used by Tesla to perform business activities. To
form better business strategy, organization need to evaluate its resources and capabilities.
Valuable Rare Inimitable Organized
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Machines Yes
Quality Yes Yes
Technology Yes Yes Yes
Employees Yes Yes Yes Yes
Valuable:
Machines – Tesla is an electronic car manufacturer which produces automotive cars from
renewable energy using high tech machinery. These machines are valuable for this company as
these are the producing end and helps in manufacturing products involving low cost.
Quality – Tesla automotive cars are known for their quality. These quality goods are
valuable for company as they enhance brand equity of the company.
Technology – Tesla has based its operations on technology which even act as USP of this
company. This resource is valuable for tesla as it helps in growing the business in terms of
environment sustainability.
Employees – These are the most valuable resource of Tesla as they add value in the
operations of this company by using their skills and knowledge of manufacturing electronic
vehicles.
Rare:
Quality – Rare is used for resources which are unusual in their competitors. Qualitative
electronic cars are rare in industry of electronic vehicles as of now no other competitor of Tesla
has maintained this quality.
Technology – Technology used by tesla is rare as only market leaders can use it as it
requires ample funds.
Employees – Employees are the human resources which are rare as their knowledge and
skills are limited to Tesla only and no other competitor of Tesla can use those skills.
Inimitable:
Technology – Tesla has innovated their technology of electronic vehicles due to which it
cannot be copied by any other organization.
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Employees – These resources are trained and developed by Tesla due to which they
cannot be copied or inimitable by competitors of Tesla.
Organized:
Employees – These human resources are the only resource within Tesla which are
valuable, rare and even inimitable due to which they are organized.
Porters Value Chain
Tesla Outbound Logistics
The outbound logistic of Tesla includes the distribution of electrical vehicles and
warehousing of ready to sale product. The process used by Tesla is Direct delivery to consumer
ant it can increase the cost of their products.
Marketing
The marketing policy of Tesla is not different from other organizations. There is no
particular strategy is preferred by Tesla. They perform marketing with their sold products and by
auctioning their products.
Services
There are many consumers of Tesla are facing problems with services of company. Their
vehicles are under waiting period for maintenance work and repair work.
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Fig 1 :https://www.slideshare.net/PrateekDhariwal1/tesla-potential-market-expansion-in-india
Critically evaluating the internal environment to assess strengths and weaknesses of an
organisation’s internal capabilities, structure and skill set
The above mentioned capabilities of Tesla are its strengths as they add value in
organisation and are limited for the use of Tesla only. On the other hand, structure of tesla is its
weakness as it is complex in nature which results in requirement of high skilled employees.
Porter's 5 five forces
Competition: At present there are very limited number of service providers of electric
vehicles such as BMW, Toyota and Volkswagen who deals in electric cars. However, the existing
companies gives strong competition to organisation (Ivančić and et.al., 2017). In terms of rivalry
organisation has moderate level of competition. Thus, in order to survive in the market Tesla
must ensure that its product and service quality is improved and better as compare to its
competitors to sustain its place in the market. Aggressiveness among firms in this industry is
quite high and switching cost for customers is too low. Tesla is facing tough competition from its
rival’s. There are small number of players in automobile industry and few one produce electronic
car. There are small size firms in competition to Tesla but such kind of firms are very aggressive
and innovative because of which they are giving stiff competition to the Tesla. Switching cost is
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low in the market because of which customers can easily switch from Tesla to another brand
(TESLA Five force analysis and recommendation., 2019). Hence, it can be said that Tesla is
facing tough competition from its rivals.
Threats of new entrants: Gradually most of the auto-mobile service providers are shifting
towards environmental sustainability. Thus, there is increasing trend and competition of electric
vehicle providers (Abratt and Mingione, 2017). It shows that there is high level of threats of new
entrant. Thus, in the near future organisation may face tough competition from the new entrants
in the industry. To deal with this threat company must emphasis on its pricing and product
strategy so that it can build loyal customers and can retain its success for long term. It is quite a
minor force due to high economies of scale. There is high threat for new entrant and no firm can
easily enter in to this market. Heavy capital investment is required to enter in to electronic car
market. Moreover, new entrant has to compete with well established brand name of Tesla which
is hard task (Dobbs, Manyika. and Woetzel, 2015). Moreover, Tesla get benefit of economies of
scale in the business but new entrant can not get benefit because for observing same in business
it need to achieve threshold level which is hard task. Thus, there is low threat of new entrant.
Power of suppliers: Another factor is known as the extent up to which suppliers can drive
the input or operational cost. It is influenced by uniqueness of product and on the cost in
switching over suppliers. At present organization has sufficient number of suppliers and
moderate level of supplier’s power and thus has limited dependency on them for its operations.
Supply level in this industry is quite moderate as large number of suppliers are available in this
industry. There are moderate number of suppliers who supply spare parts to the Tesla. Few
suppliers directly supply spare parts to Tesla and few sold their spare parts to Tesla through third
party. Hence, suppliers have bargaining power but they can affect Tesla only to some extent.
Threat of Substitute: This threat is about some other company launch product with similar
features of organization which can reduce the sales of company. Tesla is working on the fuel cell
technology and Toyota is also working on the same technology so they can become the supplier
for other companies so this is a big threat for Tesla. To overcome this factor Tesla can improve
investment in R & D to faster develop the fuel cell technology. All the substitutes available in the
market for customers have moderate performance so switching cost for consumers decreases.
Already in the market there are low substitute options. On other hand, electric car as substitute to
diesel cars is already in the market. In upcoming time period any substitute of Tesla cars in terms
of efficiency will not be observed. Thus, there is no threat on this front.
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Bargaining Power of Consumer: The bargaining power consumer is about forcing the company
to reduce cost by threats of switching company. Tesla is the only supplier of the electrical cars so
people do not have many options so, in this case the power of company is high. Consumers
cannot ask the company to reduce the price of their products (Leischnig, Wölfl and Ivens, 2016.).
This power can be more improved by providing better quality and services to customers. As
there are moderate number of substitutes available and purchase level of consumers is quite low
so this power has moderate effect on tesla. As mentioned above switching cost is low in the
business and customers can easily look for other company cars which reflect that there is high
bargaining power of customers (Lindqvist and et.al., 2016). However, options are limited in front
of the business firm which indicate that firm here is moderately powerful.
Appropriate strategies to improve competitive edge and market position based on the outcomes
It has recommended the strategy in the business to identify different issues that can be
determined after adopting strategy. It ensures that customer really do have any demand related
products and services. In this way, it can easily identify their behavior, attitude towards brand.
On the other hand, it might be specified the differentiation of existing competitors.
Discuss about the evaluation of different types of strategic direction which available in Tesla.
Strategic direction is a type of approach that applicable for long term planning that
mainly include different specific goals and objectives (Corrall, 2013). Tesla is the fastest growing
organization that mainly improve their business good and services by implementing strategic
direction as per requirements. It is also considered as company mission in term form of tangible
that likely including specific products and services.
Tesla is mainly including the Bowman strategic clock for maintaining their position in
global marketplace. It always explores the options of strategic position where how to maintain
their image in competitive environment. The primary purpose of bowman strategic model is to
illustrate that business will have various type of options based on the price and perceived values.
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