Tesla's Business Strategy: Macro and Micro Environment Analysis

This report provides a detailed analysis of Tesla's business strategy. It begins with an introduction to business strategy and the selection of Tesla as a case study. Task 1 focuses on the impact of the macro environment using PESTLE analysis, examining political, economic, social, technological, legal,...Read More

Unit 32
Business Strategy

Table of Contents
Introduction......................................................................................................................................3
Task 1 ..............................................................................................................................................3
P1 Impact of macro environment on organization and its strategies. ....................................3
M1 Critically analyse macro environment to determine decision of management................5
P2. Analysis of internal environment.....................................................................................6
Task 2...............................................................................................................................................8
P3 Porter's five forces model to evaluate the competitive forces...........................................8
P4 Apply theories/ concept/ models for strategic plan...........................................................9
Conclusion ....................................................................................................................................12
References......................................................................................................................................14
Books and journals...............................................................................................................14

Introduction
Business strategy is a combination of all the decisions taken and actions performed by the
organization for accomplish the business objectives. It useful to secure business organization and
competitive position in market (Akter, 2016). This process is the backbone and essential for
business to achieve goals and meet objective. In this present report, Tesla is being chosen for
assessment. Tesla was founded in 2003 by Martin Eberhard. Company is operating their business
at global level. Electric vehicle and energy produce by Tesla because engineers want to prove
that electric vehicle is better than petrol cars. This report will be cover macro and micro-
environment factors, internal environment porter's five forces model and devise strategy
planning.
Task 1
P1 Impact of macro environment on organization and its strategies.
Macro environment means factors of environment that put impact on organization
strategies. It does not affect organization and its performance on regular basis but it is
uncontrollable. Tesla use PESTLE analysis to evaluate and analysis of factors that present in
external environment because it operate to business in many countries and wants to promote
electric vehicle. . PESTLE stands for P- political, E- economic, S- social, T- technological, L-
legal and E- environmental factors.
Political factor: - This factor includes tax, rules and regulation of government, political
stability etc. Tesla produces electrical vehicle to reduce fuel vehicle because abundance of fuel
vehicle is harmful for environment. Government takes many types of action to improve the
development of electric and hybrid engines. It also gives tax credit to people for buying electric
vehicle. If government stability is not present it is creating the biggest concern that create
difficulties and Tesla must face many problems like change rules of organization, corruption and
pay more tax to import and export. So, all these things put impact on strategies of organization.
Economic factor: - Inflation rate and exchange rates include in this factor. Tesla
manufactures electric vehicle so many types of electrical elements and accessories has need for
manufacturing (Olson, 2018). Decreasing battery cost is helping to Tesla for expand their
business. But if economic factors like inflation rate and exchange rates of currency increase so
strategy of organization affected as they must raise the price of the product. Due to increasing
inflation rate it cannot manufacture vehicles in huge quantity with reasonable cost. Due to

increase exchange rate organization must reduce export and import. So, these concern affects to
strategies, productivity and profitability of organization.
Social factors: - It includes choice, preference and wants and expectation of customers.
Tesla strategies affecting due to frequently changing in choice and preferences of customer
because organization has need to understand and research market time to time and consumes
more cost. So, it effects on budget and strategies. People who are eco-friendly, so they prefer to
electric car and this vehicle also very affordable. These thing helps to improve financial long-
term goals.
Technological factors: - This factor includes automation, innovation and use of advance
technologies. As, nowadays technology and innovations are increasing and it is an opportunity to
improve artificial intelligence and automation in vehicle. People are highly aware about
environment so Tesla manufacture renewable energy and electric car through different and
advance technologies. But organization and it strategies affected due to high rates of
technological changes because it consumes more cost that leads to raise the cost of production.
Legal factor: - This factor includes laws and regulations like employment laws, safety
laws and other business laws. So through employment laws employees get protection at
workplace, and they feel safe and secure. As per the law, it is very important that employees do
not suffer from discrimination on bases of colour, caste etc. if government increase labour cost
so organization must pay more cost to employees and it cannot earn more profit. Tesla also has
faced lawsuit because it has delivers car direct to customers from manufacturer so government
stop to deliver direct and give order for includes third party. This legal issue reduce profit as well
as it also influxes the reputation of company in negative way along with the strategy of
organization.
Environmental factor: - It includes environment sustainability and climate change.
Tesla has opportunity to grow market and productivity due to climate change. This factor is a
strength for organization because it manufactures eco-friendly car that helps in control pollution.
If corporate social responsibility is not followed by Tesla so it affects to investment of
organization because investor not invest their capital in organization and it investment decrease
due to this reason.

M1 Critically analyse macro environment to determine decision of management.
As per the views of Tanujaya, Macro environment helps to making strategic decision of
managers in tesla because it manufactures eco-friendly car that helps in save to environment.
Political factor provide helps to managers because government give tax credit when buying to
car. Environment factor also positively impact to organization and managers easily making
decision about strategies and increasing profit and productivity because it manufactures eco-
friendly car.
As per the views of Lesiak, Technological factor has negative impact because day by day
technology increasing and Tesla must adopt and establish innovation to make advance their
process. So, it consumes more cost and managers has to face difficulties in making decision.
Stakeholder matrix:-
It is a tool to analyse a project stakeholder to determine actions that necessary to align
goals with projects.
Interest of
Stakeholders
KEEP COMPLETELY
INFORMED
Employees
Government
MANAGE MOST THOROUGHLY
Employees
Shareholders
Directors
REGULAR MINIMAL
CONTACT
Suppliers
Community
ANTICIPATE & MEET NEEDS
Customers
Employees
Shareholders
Influences of stakeholders -----------

Employees are important stakeholders for organization has keep to satisfied them
because they play main role in company and manufacture car through create new ideas.
Customers are important stakeholders of organization because they increase demand of
car and profit of tesla. Organization put major focus on satisfaction of customers and understand
their choice and needs to manufacture and provide car.
P2. Analysis of internal environment.
Internal environment of organization direct affect to Tesla on regular basis. Organization
use SWOT analysis to evaluate and analyse factors that affect to organizational performance and
profitability. SWOT stands for S- strength, W- weakness, O- opportunities and T- threats.
Strength:-
 Tesla has focus is on sustainable development. They manufacture electric car and its
main motive is to provide affordable vehicle to customers.
 It is a very popular brand name of electric car which is also the biggest strength of the
organization.
 Expertise in innovation is also a strength of it because they use different technologies for
innovation and bring improvement in products.
Weakness:-
 Tesla has high debt load because huge numbers of long-term debts and capital leases
shows in their balance sheet (Hsieh, Ma and Novoselov, 2019). Due to insufficient flow
of cash it cannot pay all liabilities.
 Tesla provide car to customers at high prices so it reduces their sales.
 Supply chain is also limited so it is a weakness because it cannot supply their car
effectively.
Opportunities: -
 Company has opportunity to expand business in many countries. So, through expansion it
can easily increase the profitability.
 Tesla has opportunity to improve business by reducing the price of car and improve
supply chain. If it makes strong supply chain so profit increase.
 It easily can take more support to government.
Threat:-

 Increasing competition is a major threat of Tesla because day by day competition
increase in auto mobile sector. So, this concern reduce profit and sell.
 Crashes and fires in cars due to electric and it decreases sale and profit.
 Price of oil and petrol decrease so customers prefer fuel car and market of electric car
decrease due to this reason.
Mc Kinsey’s 7's model:-
This framework includes strategy, structure, systems, style, staff, skills and shared values.
These elements use by Tesla to evaluate skills, structure and strategies to accomplish goals and
objectives.
Strategy: - Tesla has strategy to improve and expand the selling of electric car. Its
mission is to prevent pollution of air and save environment.
Structure: - Tesla structure into a single category due to its unique nature and its
structure is close to divisional structure. Many division presents like energy, engineering,
production, HR, finance and sales. This structure makes easy to manage and maintain to
organization's functions.
Systems: - Tesla has wide range of systems that is important for long term growth
prospects. It includes employee’s recruitment, selection system, team development, customer
relationship etc. Manufacturing system is very important and critical system for organization.
Style: - In Tesla management use transformational style to inspire positive changes
within organization and influence to get unexpected results. Tesla use this style and motivate,
encourage and inspire to employees so that helps in meet objective.
Shared values: - Shared values means accept standard and norms at workplace and in
Tesla members and management accept actual behaviour (Amran, 2016). Through this it
influences the behaviour of members so these values increase performance.
Skills: - Tesla has skilled and knowledgeable employees that they have high capabilities
to perform. Members of this organization create new ideas and innovate new things to improve
and increase profitability and productivity. Technological skill and communication skills are
highly present in organization, so they also achieve many goals.
Staff: - Large numbers of staff engage in Tesla and it provides training and development
for raising skills and knowledge of employees that they can achieve targets and goals by creating
innovative and creative ideas.

VRIO framework:-
This framework is the best analytical tool for the evaluation of organizational resources
and competitive advantage. Resources includes like financial, human etc. VRIO stands for V-
value, R- rareness, I- limitability and O- organization.
Value: - It means those resources that is most valuable for organization and increasing
profit and productivity. Like financial, human, marketing and operations resources.
Rare: - It includes resources that are valuable and rare also for organization that means
Tesla attain to costly resources. If rare resources not available so present managers and new
entrants easily enter and get access in competitive landscape.
Imitate: - Disruption is a major issue that create difficulties but car of Tesla organization
is difficult to imitate. Imitate of product possible in two ways that duplication of product and
competitors come in market with substitute product (Yuliansyah, Rammal and Rose, 2016). But
imitation of Tesla car is very difficult because it has own proprietary battery so no one can do
imitation.
Organization: - It measures that Tesla has able to cover valuable, rare and difficult to
imitate resources in marketplace. Organization has to organization their all resource in
systematic manner. That means organization resources capture all values, process and structure
and culture of organization. All valuable, rare and imitate resources captured in organization to
long term competitive advantage.
Task 2
P3 Porter's five forces model to evaluate the competitive forces.
Organization uses this model to evaluate and analyse competition in market. Through this
model Tesla give shape to organization according to situation and condition of competition
because porter five forces model analyse weakness and strength. Then it is making decision.
Following forces contain in this model like:-
Competition in the industry: - rivalry among other competitors has increasing and
moderately. Many organizations come in market with same products, and they attempted to
manufacture electric car to reduce Tesla performance (Eaton and Kilby, 2015). So competition in
market increasing very high. They failed in manufacturing electric car, so they manufacture
attractive and smart car to attract customers.

Threat of new entrants: - New entrant in electric vehicle industry is moderate. Tesla has
unique aspect because it’s it produces its own proprietary lithium ion batteries that give more
than 200 miles per charge. So no organization produce this type of battery and Tesla has low
threat about new entrants.
Bargaining power of buyers: - Buyers of Tesla has low power of bargaining. That
means if organization has large number of buyers and it increases price of car so customers and it
wants to up price so it affected. That means buyers have huge power to bargain and Tesla has
low risk of buyers because its only one organization of electric car with their unique battery
feature.
Bargaining power of suppliers: - This power of supplier significantly highly present in
tesla. Suppliers supply products and services if they earn profit that means if supplier contact
does work in organization and person do not get sufficient revenue, so they switch to
organization and start to work in other organization that they give more money compare to last
company (Linder and Williander, 2017). Tesla has not enough supplier so it has to adjust with
them.
Threat of substitute products: - This threat in tesla is moderately low because it only
one organization that manufacture electric car with unique battery feature. So substitute products
not available in market. That means this product present in market and it satisfies same need of
customers. Few substitute products present in market but substitute products is more expensive
and tesla provide car on less cost compare than other. So this thing helps in reduce and prevent
threat.
Tesla uses many strategies to beat competition and attract to customers for establish
market position. Due to high price of car, customers cannot afford price and its sales and profit
reduce so for overcome to this issue Tesla use strategy like low cost with high quality that means
it provides car at low cost with high quality to attract customers. It also has weak supply chain so
for this loophole it makes strategy about expand and improve to provide car easily. Tesla also
use strategies of expand their sup[ply chain that means if they expand chain of supply so
customers can purchase easily to electric car and this thing beneficial to improve business.
P4 Apply theories/ concept/ models for strategic plan.
Balance score card- this is a type of technique which is used to measure the performance
of the overall company. Tesla uses this technique in order to identify and improve the internal

functions of the business and the outcome of those internal functions. This technique is used in
order to accomplish the mission, vision, goals and objectives of the business (Akkermans and
Van Oorschot, 2018). The balance score card is used by Tesla in aligning the business activities
and the working with the goals of the business. This alignment is done in order to ensure that the
activities which the company carries on are in the direction of the accomplishment of the
objectives of the business only and not for other reason.
With help of this balance scorecard the company can improve the communication of the
organization both internally and externally. Also, this technique helps in monitoring the business
performance from time to time in order to make sure that the business operations are in direction
of the attainment of the goals of the company. With the help of the balance score card the
company can gather relevant information relating to non- financial and the financial aspects of
Tesla. The balance score card is used to make a balance between the four major aspects of the
business that is customers, internal process, innovation and the finance. Use of this technique
helps Tesla to focus on what the company must do in order to improve its performance.
Ansoff matrix
It is a type of tool for doing the strategic planning which helps the manager in devising
different strategies for the development of the products or the services for future growth. The
growth matrix consists of the four different types of growth strategies which the Tesla can adopt
in order to have future growth.
Type of growth Description
Market penetration With help of this type of growth option the
company achieves growth with help of the
existing product only and promoting that
product in the current market segment only.
This is done in order to increase the market
share (Dawes, 2018).
Market development In this type of strategy, the company with the
existing product only tries to enter into the new

market where earlier the company was not
dealing (Schawel and Billing, 2018).
Product development In this type of growth strategy, the company
will try to develop a new product or service to
target and get attention of its existing
customers only. This involves expanding the
existing product range by either producing a
new product or by acquiring other or by doing
joint venture with others.
Diversification In this Tesla can increase its market share by
producing a new product for a completely new
market and for new target customer which is
totally different from the earlier product or
service.
Out of all these growth strategies the company Tesla must go for a market development
option (Gurcaylilar-Yenidogan and Aksoy, 2018). This is because of the reason that this type
focuses on developing the market and this does not involve huge cost because new markets can
be attracted by way of good advertising.
Porter's generic model:-
Porter's generic strategies use by tesla to gain competitive advantage because customers
gain great value of products at lower prices. So, all these concern helps in improve business and
profitability in an organization.
Cost leadership: - in cost leadership tesla set out to low cost producer in industry
because cost depends on structure of organization. It depends on and increase cost through
technology, economies of scale and raw material so low-cost producer must find all sources that
consume low cost. If tesla achieve and sustain overall cost leadership, so they easily command to
their cost. Leaders of cost analyse and research time to time about all resources and choice those
resources who consume less cost. So this helps to improve and increase profit of tesla.

Cost focus :- organization wants to and focus on narrow competitive scope that means it
chooses niche market, their low competition present, and they offer car at low and reasonable
price so this strategy helps in attract to customers and increase profit and productivity (Razak,
2016). This strategy interrelates with cost leadership because if low cost producer use resources
that consume low cost and organization can easily provide low cost car with high quality. Cost
focus strategy helps in provide offer to customers and increase sales because customers always
wants to high quality product at low cost.
Differentiation leadership: - this strategy uses by tesla to target broad market because it
helps in beat to competition. Organization also make their product more attractive compare than
competitor’s product through use of research and development, new innovations and deliver high
quality products and services. They research market frequently and understand needs and wants
of customers because their choice changing frequently and this thing also provider helps in
analyse competitor situation in market. Tesla always use this strategy to improve and develop
profit and sale of organization.
Differentiation focus: - tesla concentrate on differentiation focus because their electric
car has unique feature. This strategy also includes strong brand loyalty in mind of customers.
Through this strategy it set uniqueness of products and services in mind of them. It mainly
focuses and concentrate on uniqueness and always try to provide unique feature to customers so
these useful in increase to profitability and productivity.
Diversification- it is a strategy used by company within which the company goes for a new
product range within which the company was not dealing before or earlier.
Vertical and horizontal integration- the vertical integration refers to as a strategy adopted by
company within which the company take control of one or more stages of production or
distribution of product. On the other hand, horizontal integration is a strategy adopted in order to
acquires the business operation of same industry.
Conclusion
From above study it has been summarized that business strategy is essential for
organization because it helps in make plan and effective strategy for accomplish organizational
goal. Pestle analysis also conclude in this report that means it is a tool of evaluate and analyse
external factors and SWOT analysis tool helps in evaluate to internal environment. McKinsey
7's model helps in analyse skill, structure, strategy, style and many more things about

organization. VRIO framework included in it and it use by organization to evaluate about
resources that valuable, rare, imitate and organization. All these things help in maintain and
manage in effective manner. Porter five forces use in evaluate situation of competition in market.

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