Business Strategy Report: Tesla's Macro and Micro Environment Analysis

This report provides a comprehensive analysis of Tesla's business strategy, focusing on its external and internal environments. It begins with an introduction to business strategy and its importance, followed by an analysis of Tesla using PESTEL to assess the impact of macro-environmental factors, including political, economic, social, technological, environmental, and legal aspects. The report then delves into Tesla's internal environment, utilizing SWOT analysis to evaluate its strengths, weaknesses, opportunities, and threats. Furthermore, it applies Porter's Five Forces model to assess the competitive landscape. Finally, the report concludes with an overview of Tesla's strategic directions based on the environmental analysis and stakeholders mapping. This report provides valuable insights into Tesla's strategic approach within the electric vehicle and renewable energy markets.

Business
Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 ........................................................................................................................................1
LO 1 ...............................................................................................................................................1
P1) Impact and influence of macro environment on strategies..............................................1
LO 2.................................................................................................................................................3
P2) Analysis of internal environment and capabilities of organisations ...............................3
LO 3.................................................................................................................................................7
P3) Application of Porter's five force model to evaluate competitive forces.........................7
TASK 2............................................................................................................................................8
LO 4.................................................................................................................................................8
P4) Understanding and Interpretation of strategic directions.................................................8
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Businesses strategy is basically a course of action or set of business decisions that assist
or guide an entrepreneur in achieve its targets. It provides a long term sketch or framework to
secure a competitive position in the market through increasing efficiency of operations of a firm
(Quinlan, and et. al., 2019). It provides a set of actions that strengthen performance of an
organisation and attract more customers which lead to increase in productivity and probability of
organisation. For this report the chosen organisation is Tesla which is a well known American
automotive and energy based company providing a range of electric car and also deals in solar
panel manufacturing. This report includes an internal and external analysis for evaluation of
environment and internal capabilities. Beside this, Porter's five force model is also included to
analysis competitive environment of an organisation. At last, a strategic plan based on
environmental analysis is also included in this assignment.
TASK 1
LO 1
P1) Impact and influence of macro environment on strategies
Macro environment is the sum total of conditions prevailing or exists in economy as
whole and consists different factors that provide opportunity as well as poses threat for an
organisation. Tesla is a famous American multinational energy and automotive company that is
having specification in manufacturing of electric car (Habib and Hasan, 2019). It was founded on
1 July, 2003 and its headquarter is in California, U.S. The mission, vision and objectives of Tesla
are provided below:
Mission
The mission statement of Tesla is, ““to accelerate the world’s transition to sustainable
transport”.
Vision
The vision of Tesla motors is, “to create the most compelling car company of the
21st century by driving the world’s transition to electric vehicles.” This vision shows the focus of
company on renewable energy. Tesla addresses electric vehicle market as one of its major
avenue for better growth and success in global market.
Objectives
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Following are the some important objectives of Tesla motors:
 To generate better demand with the aim of driving sales up for TESLA Motor’s
especially for its electric car
 To build up long-term brand awareness and to effectively manage corporate reputation
 To manage existing customer base of TESLA's to create loyalty in customers.
Strategy and strategic direction of Tesla
Strategy is the actions that are taken by business managers to attain organisational goal
and objectives more efficiently. Strategy provides a set of directions and guidelines to company
to achieve it desired level of performance. A strategy is all about integrating organizational
activities and utilizing and allocating the scarce resources within the organizational environment
so as to meet the present objectives. Strategy it is essential to consider that decisions of firms are
not taken in a vaccum while it is based on proper analysis and evaluation of affected,
competitors, customers, employees or suppliers. The strategy of Tesla are focused towards
entering a high end of the market, where customers are prepared and ready to pay a premium
prices, and then drive down market as fast as possible to higher unit volume and lower prices
with each successive model. To have an effective strategy for achieving desired objective a
PESTEL analysis is used by mangers of Tesla as it a framework or tool which is used by
marketers to analyze and monitor the macro-environmental (external marketing environment)
factors that have an impact on an organization. To analyse the impact and influence of macro
environment on performance and strategy of Tesla use of PESTEL analysis is made.
PESTAL analysis
PESTEL analysis provides a theory or model for evaluation of macro environment of a
firm that have significant effect and impact on strategy and performance of organisation. The
different factors included in PESTEL analysis and its impact on Tesla is described below:
Political- This factor reflects the degree of government intervention in business
operations. It include government policies and rules, political stability or instability at national
and international level, tax policy, foreign trade policy and restriction etc. The government of US
and other international political authorities has taken many stances and steps to improve the
development of electric and hybrid engines thus, Tesla motors has having a major advantage of
getting government incentives which strengthen its financials positions. In recent years,
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expansion in free trade agreements is made thus, strategies of Tesla are also focused towards
expansion of its business operation to reach different zones of world (PESTLE Analysis of Tesla
Inc, 2019).
Economic factors- These element have significant impact on profitability of organisation
and include elements like interest rate, exchange rate, economic growth, inflation, disposable
income of consumers, etc. A growth and rise in sales of electric cars is seen in global economy
including markets of Asia, Europe and U.S which lead to better development of Tesla. Decrease
in cost of battery and other raw material is also helpful for Tesla. With the expansion in use of
renewable energy, Tesla is making more strategies for attracting general public or middle class
people through providing its electric car at exponential and affordable rate (Oldman and
Tomkins, 2018).
Social factors- Components included in social factors are population growth, age
distribution, career attitudes, health consciousness, taste and desire of customers which indicates
the shared beliefs and attitudes of people. The society of US and other market are in favour of
electric car and use of renewable resources. Thus, social factors are in favour of Tesla and
provides big advantage for Tesla as demand for electric vehicles has increased. Apart from this
wealth distribution in major markets of Tesla is also equally distributed which help Tesla in
making long term financial strategies to attract financially sound customers.
Technological factors- It represent the level of innovation and technological
advancement in a target market which have effect on ways of producing goods and services and
also on ways of communication with customers (Moeini, Rahrovani and Chan, 2019).
Technological in markets of U.S and other nations is highly dynamic and keeps on changing
thus, Tesla also needs to constantly create, develop and advance its technology so that its
operation does not become obsolete. Strategies are formed by Tesla to adapt newer technology
and aim at making its cars more affordable and user friendly. Use of Automation and AI
(Artificial intelligence) is also made by Tesla for achieving better performance in market.
Environmental Factors- With the increase in scarcity of resources and pollution both
customers and government become more aware and conservative towards ethical and sustainable
operations. Now, a large number of customers demands for environmental friendly products
which is creating a large number of advantage for Tesla. The vehicles of Tesla barely impact
carbon emission and are abide by environmental regulations and policies. Environmental friendly
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products and use of renewable source is the USP of Tesla which makes their business capable for
achieving great heights.
Legal factors- These factor represent the laws and act formed by government authorities.
It include health and safety rights, equal opportunity for employees, consumer rights and laws,
product safety, etc. Tesla fulfils all the rules and regulation made government authority for safety
and protection of customers and employees. Increase in regulations related to automobile
standard keeps a pressure on Tesla to up to date its strategies and international patents.
Increasing environmental regulations is useful for Tesla as it boost market for electric cars and
solar panel (Ahmad and Ramadan, 2018).
Thus, from analysis of macro factors of Tesla it can be evaluated that Tesla is having a
large number of opportunity in its external environment which can be grabbed by Tesla through
forming correct strategies and decisions. Tesla should focus on making its product more cost
effective and strategies should be made by Tesla for making its product affordable and more user
and environmental friendly so that a large number of customers can be attracted.
Stakeholders mapping
For achievement of business goals and success of any project understanding who are the
stakeholders and key related parties is essential. Stakeholders mapping provides a process to find
out key stakeholders of a project through identifying all individuals who have an interest in the
project outcome. The mangers of Tesla are fully focused towards satisfying expectations of the
stakeholders who have a high level of influence relating to the project and also keep them
informed about the project status. For effectively mapping its stakeholders use of stakeholder’s
matrix is made by Tesla which is described below:
Stakeholder Matrix
It is a project mangemt toll used by an oargnstions to determine the actions which are
necessary to align their goals with the project. A stakeholder matrix is of various types out of
Power interest matrix is used by Tesla. In this matrix there are two variables i.e. power and
interest. Power reflects the ability of an stakeholders to stop or modify a project while interest
shows the size of overlap and relation between stakeholders interest and project goals.
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(Figure 1: Graphical presentation of Power interest matrix, 2019)
The Stakeholders having high power and high interest are the major stakeholders that are
heavily invested in the project. These stakeholders actively managed by Tesla. The Stakeholders
with high power but low interest are kept satisfied by teas as they are having the power of derail
the project over seemingly minor issues. The Stakeholders with low power but high
interest must are properly and timely informed by mangers of Tesla as they are having high
influence on working of project. Finally, the Stakeholders with low power and low interest are
properly monitored by Tesla as it might be possible that they become more powerful and affect
the project in the future. Thus, use of Power interest stakeholder’s matrix ensures proper
mangemt of all stakeholders through Tesla on the basis of power and interest acquired by them.
LO 2
P2) Analysis of internal environment and capabilities of organisations
Internal environment includes various elements that are present inside the organisations
and have affect on choices, activities and decisions of organisation. These internal factors also
represent the capabilities and weakness of an organisation (Seifzadeh and Rowe, 2019). Use of
SWOT analysis is made to determine or analysis the internal environment and strategy and
weakness of Tesla.
SWOT analysis
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It is tool which provide a farmworker for identifying and analysing the internal strengths
and weakness of an organisation and beside this it also make a company aware about its external
opportunity and threat. SWOT analysis of Tesla is provided below:
Strengths Weakness
 Tesla is technology leader in field of
Electric vehicles (Tesla SWOT
Analysis, 2019).
 It is having a unique business model
and product concept which attract more
number of customer for Tesla.
 Tesla is having Support of US
government and also get financial aid
and funds from US department of
energy for development of renewable
sources of energy.
 Tesla is having strong control on its
production process which is based on
vertical integration and centralization
of Tesla's organizational structure
which makes it more cost effective.
 Tesla is a top employer company which
provides innovations encouraging
culture and high level of equality and
diversity at workplace which makes it
employees more productive.
 The CEO of Tesla (Elon Reeve Musk)
is having a very good track record and
well known for its innovative and
creativity skills (Anwar, 2018).
 1st company to produce fully electric
luxury car thus, having good name in
 Tesla is having limited ,market
presence and generate most of its
revenue from United States.
 Limited supply chain is another
weakness of teals which prevents it
from rapidly expanding its business in
different zones and locations of world.
 Tesla is highly dependent on single
source suppliers which hinder its
production process.
 In some parts of USA direct sale of
vehicles is prohibited which reduce
profit margin of Tesla.
 The production process of Tesla is
relatively slow and much complex from
its competitors which lead to long
waiting times for customers.
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market and is very popular among
younger age groups.
 Provide a best combination of power,
energy, innovation and design.
 Partnership with other business
organisation like Panasonic is
enhancing its brand image and
reputation.
Opportunities Threats
 The political and social environment is
in favour of electric cars and
environmental friendly products which
create opportunity for Tesla.
 Reduction in prices of battery reduce
the cost of production thus, increase
scope for lower price model attracting a
wide range of customers
 Advancement in technology creates
new opportunity for more creativity and
innovation.
 Various government incentives and
grants are provided to boost the growth
of renewable energy and electric cars.
 High level of competition from
established and well known auto
companies like BMW, Mercedes, Audi,
etc.
 Loss of government subsidies can lead
to increase in prices and can also
reduce the financial support and profit
margin (Priem, Wenzel and Koch,
2018).
 Many lawsuits are faced by Tesla
which are inhibiting innovations and
creativity.
The above SWOT analysis of shows that Tesla is having capability to remain a successful
business organisation as it provide an efficient combination of smart design, power, innovation,
renewable energy and advance technology. Beside this, Tesla needs to focus on its businesses
strategies to handle the aggressive competition from large automotive.
Resources Valuable Rarity Inimitable Organized What is the
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result?
Distribution
channel
Yes No No No Competitive
Disadvantage
Presence in
international
market
Yes Yes No No Partially
competitive
Technological
resource
Yes Yes Yes No Temporary
competitive
advantage
Employees Yes Yes Yes Yes High
Competitive
advantage
Valuable
These are the factors which increase value or capability of an organisation and make it
able to grab opportunity and handle threats. The valuable resources of Tesla are: Presence in international market- Tesla is a well known multinational automotive
company but still its presence in market of China and other developing economy is not
satisfactory thus, it should focus on its strategies to grab more potential market. Distribution channel- Distribution channels of Tesla are efficient but some time delays
are seen because of slow production process (Gorondutse and Hilman, 2019). Technological resource- Tesla is famous for its technological advancement and
innovation thus, it is a valuable asset or resource.
 Employees- Tesla is having highly productive and well coordinated employees and are
capable of handling any adverse situation and also brings many opportunity.
Rarity
These factor includes those resources which are unique and can be adopted by only a few
number of organisations. Th rarity resource of Tesla which provides it temporary competitive
strength in market are as follows:
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 Presence in international market- International market presence of Tesla is satisfactory
and it is difficult for any new competitor to gain such level of market presence thus, this
resource of Tesla is providing it temporary competitive advantage. Technological resource- Use of most creative and latest technology is made by Tesla
which makes it difficult for other companies to achieve that level of technology.
 Employees- Tesla is providing a diverse and creative workplace for its employees which
enhance their performance (Gurtu, 2019).
Inimitable
Theses are the costly factors which can not be copied by any other company without
making high level of expenditure thus, it provide more competitive advantage to an organisation.
The Inimitable resources of Tesla are as follows:
 Technological resource- The technological resource of Tesla are very effective and it is
the first organisation that developed a electric luxury car thus, provide a tough
competitions to big brands like BMW, Audi, etc. Employees- Manpower of Tesla is very effective and productivity which makes it one of
the leading automotive organisation of world.
Organized
This factor provides the most organised resource which is properly coordinated and plays
a crucial role in success of an organisation and also provides high level of competitive
advantage. The most organised asset of Tesla is :
 Employees- They are the biggest asset of Tesla which plays an important role in
achieving targets of Tesla (Hadid, 2019). To gain more competitive advantage and to
sharpen the skills and creativity of its employees timely training is also provided by Tesla
to its employees.
LO 3
P3) Application of Porter's five force model to evaluate competitive forces
Use of porters five force model is made by an organisation to gain more competitive
advantage through analysing various elements and components of market. Tesla is making use of
Porters five force model to identify potential strategies so that more competitive strengths can be
achieved.
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Threat of new entrants- Organisation power is affected by force of new entrants into
market. Threat of new entrants is generally low for Tesla as it is operating in automotive sector
and electric car which require huge amount of investment which is not possible for all
organisations (So and Kim, 2018). Therefore it can be evaluated that the threat coming from the
entrance of new organisation is relatively low but still Tesla needs to make continuous changes
and improvements in its product design and feature to counter this threat and remain in align
with dynamic environment.
Competitive rivalry- Tesla is having a large number of competitors like BMW,
Hyundai, Audi, etc. which create a threat for it and reduce its market share. But Tesla is having a
advantage that all these organisation are not exist and not having much influence in market of
electric cars and renewable energy thus, Tesla can tackle its competitive rivalry through focusing
more on its product development and sustainable resources. Therefore, it can be evaluated that
Tesla should focus on developing better cars and vehicles with low carbon emission and use of
cleaner energy with timely improvement in its technology to encounter threat of competitive
rivalry. Timely training and learning can also be provided to employees of Tesla to enhance their
skills and creativity to have better competitive advantage in business environment.
Threats of substitutes- It represent the threat from homogeneous product which are
interchangeable with product of organisation. There are many firms in sectors of automobile
providing luxury cars which is influencing growth and profit margin of Tesla. But through the
strategy of product development and focusing more on features and quality of its electric car
Tesla can eliminate this threat (Chuang, 2019). Therefore, it can be analysed that with effective
research and development techniques and timely market research to evaluate the demand and
taste of customer are effective strategies for Tesla to resolve and overcome the threat of
substitute product.
Suppliers barning power- This factor plays an important role in cost of production as
price of raw material depend on the power of suppliers, Tesla is having a limited number of
supplies are more dependent on its supplier so that its negotiation power is less and it has to buy
raw material at higher prices. Dominance of suppliers has increased the cost of production and
reduced the profit margin of Tesla. For over coming this threat of high bargaining power of
suppliers, Tesla can make better strategies to have an effective supply chain network with larger
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