Unit 32: Tesla Business Strategy Analysis Report - Strategies

This report provides a comprehensive analysis of Tesla's business strategy, examining the company's external and internal environments. It begins with an introduction to business strategy and its importance, followed by a PESTEL analysis to assess the macro-environmental factors impacting Tesla, including political, economic, social, technological, environmental, and legal factors. A SWOT analysis is then conducted to evaluate Tesla's strengths, weaknesses, opportunities, and threats. The report further delves into the company's internal capabilities using the VRIO model and Porter's Value Chain, critically evaluating Tesla's internal environment. It also applies Porter's Five Forces to analyze the competitive landscape. The report then discusses appropriate strategies to improve Tesla's competitive edge and market position, including an evaluation of different strategic directions and the development of a strategic management plan with tactics, strategies, and objectives. The report concludes with a summary of findings and a list of references.

Unit Number and Title Unit
32
Project Title Tesl
a
Business Strategy

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.........................................................13
....................................................................................................................................................13
Porter's 5 five forces..................................................................................................................13
Appropriate Strategies to Improve Competitive Edge and Market Position Based on Outcomes
....................................................................................................................................................15
Evaluation of Different Types of Strategic Direction Which Available in Tesla.......................15
Produce a strategic management plan with the help of tactics, strategies and objectives.........20
Produce a set of valid strategic directions, objectives and tactical actions................................21
CONCLUSION..............................................................................................................................22
REFERENCES..............................................................................................................................23

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.

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. There are various trade barriers in India few of them are: it is quite
difficult to get import licensing in India, procedure of testing, labeling and certification is quite
different from other nations. The import duty due to political factor, can impact Tesla to build
the factory in India, and like that offering a more affordable price for the products.
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
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 impact 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.
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. The purpose of the Tesla motors to
develop better efficient product to provide sustainable transportation facility to world which is
free of pollution. This step of Tesla makes them sustainable and effective for environment.
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.
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
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.
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.
Fig 1 Value chain
Value Chain : Value chain is a tool that is used by the business organization to analyse its
internal capability in order to make required changes to meet the pre designed goals. As pert the
above diagram there are different factors which are need to be considered in order to full fill the
market goals. Through the whole process these factors will be analysed to find loop holes and
gaps in technology to get better result with performance of organisation.
Inbound Logistics : The inbound logistic contains all lins of raw material or goods that is need
to be transported, stores or delivered to the inventory of company. For example it includes
different type of raw materials and products which are used by Tesla motors in production of
electrical car. Metal sheets, aluminium coils and other supplements are included in inbound
logistics.

In house production. - As Tesla is one of the well known electrical vehicle manufacturing
company. The current production capability of the Tesla is not up to the mark. They are lagging
at meeting market demand. The main reason behind this is less number of the manufacturing
plant of Tesla around world. Diversity is one of the factor which is affecting the performance of
Tesla in international market. They need to improve their manufacturing capacity and
geographical diversity to meet market demand.
Numerous suppliers – There are many suppliers Tesla is using to manufacturing electrical cars
with high efficiency. Few suppliers of Tesla are AGC, Brembo, Fisher Dynamics, Inteve
Products, Modin Manufacturing Co. and Sika acoustic. It is visible that they have only limited
suppliers and to improve their business they need to improve number of supplier to improve
manufacturing capacity and meet market demand.
JIT – Just in Time in approach is used by the business organization in the inventory of company.
This is important for organization to keep their production continue. As per the CEO of Tesla
Motors supply chain used in Tesla is not efficient for company. It is need to be improved to get
better result.
Operations : It is important for the Tesla to improve their business operation which is not
efficient for the market performance of the company. Due to malfunctions in the operations they
are producing product with failure. This issue need to be resolved by the company to meet their
business goals.
Innovated and automated – Tesla need to improve their business operation by implement better
innovation systems and automated system to gain maximum productivity in operations.
Multifunctional robots – In the automotive sector use of multifunctional robots is common.
Tesla can increase number of these robots to make development in their manufacturing capacity.
Easily reprogramming – The robots and programmable systems used in the Tesla Motors should
be equipped with the latest technology to meet future requirement regarding to operations.
Outbound logistics : Outbound logistics includes the processes that are used in the
transportation, storing and deliver the products to the consumer. Mainly it is known as supply
chain of company. In this stage Tesla Need major requirement. There are no suppliers are
associated with Tesla Motors. Product of company are available in the stores of Tesla Motors and
it is reducing business capability of company.
Own stores in 18 countries – The number of stores of Tesla Motors are limited in numbers
which is limiting its business in the international market. It is important for Company to open
new stores on other locations.

Online reservation -Clients are able to book electrical on online platform but it is very slow
process because the transportation process is conducted by Tesla Motors with their own supply
chain. They need to improve this process to improve client satisfaction.
Showrooms – The physical stores of Tesla Motors are in limited countries, the other countries
that are considered by Tesla Motors as target market should have enough number of stores to
provide better satisfaction to clients.
Marketing and Sales: This is one of the most important function for Tesla Motors. The
marketing and sales policy used by Tesla is standard. The marketing policy used by company is
not that effective to get higher attention of consumers. They need serious changes in their
marketing policy to get better result in marketplace.
Celebrities – Tesla Motors is using their CEO Elon Musk as celebrity to promote their product
and services. To improve their business in international market, they are required to select a
celebrity face to attract more consumers.
Web Based Short Movies- This is one of the most effective policy that is used by Tesla Motors to
attract people to use their product which are environment friendly and sustainable. This strategy
is good to aware people about clean and green energy but they are not communicating this short
movies to larger audience. So, here they are lagging in promotion.
Campaigns- Tesla had hired a new social manager in order to improve the presence of company
in the social media. Their main objective is to get better effective response from clients. But still
they need to improve their marketing in other regions.
Service : The worst thing Tesla is facing with its services. There are some sold products of Tesla
Motors are still in waiting for repairing and parts replacement. It is important for Tesla Motors to
make some crucial changes in their services to provide better satisfaction to clients.
Service centres- The service centres of Tesla Motors are limited and they are very slow at
providing service to the clients. This poor services is main reason of reduction in the sales of
company.
Charge stations- As people need different charge stations to charge their vehicles but this is not
possible for Tesla Motors to operate and open charging stations around world.
Warranty policy- Tesla Motors provides warranty on their vehicles for 4 years or 100,000 Miles
which is comparative to the other organizations. All they need to do is to stay update of the
business strategy of other companies.

Infrastructure: As in Tesla Motors Flat organization structure is used it provides better
opportunity to the employees to stay connected with employees but there are some limitation of
these structure that can affect business operation of company by providing less control over
action of employees due to small management team. The leadership of Tesla can be consider as
strong leadership because the CEO of Tesla is highly energetic and actively involved in operation
of company.
HRM : The Human resources of Tesla is Strong enough to provide better opportunity to motivate
employees to extract better performance from them.
Strong Management Team- Due to effective CEO people management in Tesla is too good.
People in company are provided with better opportunity to generate value from their work.
Outsourced recruitment- The Recruitment of Tesla is based on outsource strategy where other
consultancy or recruitment company select employees for company. It is highly effective because
the these agencies are good at their work of recruiting people.
Company shares reward policy- There are many benefits are provided by company to their
employees. These rewards are based on their performance in creativity in work. It is also
effective to motivate employees to perform even more better. Better relationship between
managers and employees is effective for the performance of company. It also creates positive
work environment on the workplace.
Technology Development : Tesla is currently working on better fuel cell technology that can
provide better opportunity to company to increase the performance of their product in
international market.
Leading Edge in Technology- Technology used in Tesla company is best in market and they are
using most advance technology to create value from their product.
Reinvesting in R&D- Investments made by Tesla in international market are good for them. A
huge part of company revenue is invested in the research and development of their products.
Cost Reduction- At these point Tesla is lagging because they are providing the best quality
product without compromising in price. They need to use new cost cutting processes to get
benefit form the medium class people.
Excellent Products- Product delivered by Tesla Motors is best in class by recently people are
facing some issues in fuel cell capacity which is trouble for them. They need to make
development in order to get better response from people.
Design- The designs of electrical cars are too good and attractive for consumers. Continuous
work in this field can help them to gain more knowledge of consumer's want.