University Report: Analysis of Tesla's Business Strategy and Impact

This report offers a comprehensive analysis of Tesla's business strategy, examining its operational environment through PEST analysis, which covers political, economic, social, and technological factors influencing the company. The report also incorporates a SWOT analysis to identify Tesla's strengths, weaknesses, opportunities, and threats, alongside an evaluation using Porter's Five Forces to understand the competitive landscape. Furthermore, it delves into Tesla's value chain, assessing inbound logistics, operations, outbound logistics, marketing, and sales strategies. The analysis provides insights into Tesla's market positioning, competitive advantages, and recommendations for future strategic development, highlighting the company's unique approach to the automotive industry, focusing on creating compelling electric vehicles and leveraging technological advancements. The report also provides a brief overview of the marketing strategy followed by Tesla and its sales approach.

RUNNING HEAD: ANALYSIS OF TESLA’S BUSINESS STRATEGY
Title: Analysis of Tesla’s Business Model
Name of student:
Name of University;
Author Note:

1ANALYSIS OF TESLA’S BUSINESS STRATEGY
The newly implemented regulations on environmental safety as well as the restrictions on
the vehicle emissions have ushered in the growing market of the fully electric vehicles.
Moreover, the shifting needs and concerns of the customer, coupled with the technological
advancements have brought in a vast change and a competitive market in the automotive
Industry. Tesla is among one of the leading companies in this sector that took a unique initiative
of focusing on the creation of the compelling cars rather than putting much endeavour on the
mass production and marke1t. The paper will discuss in details the effectiveness and impact of
this business strategy through the parameters of PEST analysis, Porter’s five forces, value chain
and Diamond of nation.
PEST analysis of Tesla:
1. Political: Tesla Company operates in various countries where the regulations and laws are
different. The Company has the compulsion of meeting up the requirements of environmental
laws and customer or trade laws in each of their operational area.
Impact on the Company: the political factors that influence the company have created
some of the positive impacts on it. The company can aim at the economic strengthening by
utilising the incentives offered by the government. Since the main operational area of the
company is in developed countries, there is also a more or less political stability. Thus the
environment is favourable for the intensive growth strategy.
2. Economic: the increased cost of fuel has been an opportunity for Tesla, being the electronic
car manufacturer. Other economic factors that can affect the business are- the cost of fuel, the
decreasing cost of battery, the economic condition of the population and others.
1 Stobbe Jr, J.J., 2019

2ANALYSIS OF TESLA’S BUSINESS STRATEGY
Impact on Tesla: the popularity of electric cars is intensely related with the global
economic growth. Again the decrease in the cost of battery is a boon for the company as battery
is an essential economic factor. This will help Tesla to effectively produce more EVs.
3. Social: the main social factors that affect the Tesla company are the rising concern of the
customer regarding the environment and regarding the possession of E cars as a status symbol.
This has helped Tesla to a great extent.
4. Technological: the company has made quite a good use of tthe recent technologies and
innovations. Apart from creating the fully electronic vehicle, the company also invests in the
manufacturing of solar panels, electric storages and others. The advanced functionality of
batteries also gives it an added advantage.
TWOS MATRIX ANALYSIS:
EXTERNAL FORCES
INTERNAL FORCES
STRENGTH- Improved
technology
Distribution Channel
monopoly
WEAKNESS- poor
liquidity
Capacity issues
OPPERTUNITIES-
Making use of new
technologies
Expansion of market
Strength/ opportunity-
Company can make use
of the advanced
technology to expand
the market.
Weakness/opportunity
The exploration of
market can rule away
the capacity issues
THREAT- Competition Strength/ threat- Weakness/threat-

3ANALYSIS OF TESLA’S BUSINESS STRATEGY
Substitution
The monopoly that it
has is a buffer against
the competition as well
as substitution
The solution of capacity
can lessen the threat of
substitution.
Explanation:
Among the various strengths of Tesla, the foremost is their strong brand value and the
monopolised market all over America, Europe and parts of Asia. The improved technology used
by the company will thus, give them an opportunity to explore various markets all over the
world. Again, their strong base of supply channels with Panasonic or Toyota can help them in
this prospect, One of the major weakness that the company has is its less flow of liquidity which
can be checked by means of introduction of new technologies that will help in producing
comparatively less costly yet effective products. The threat of substitution an also be checked by
te company by means of the expansion of `their markets. Also, if the capacity issues can be
solved automatically in turn, the company can rule out the threat of competition in the market.
Tesla Motor's five forces analysis:
1. Threat of new entrant: since the automotive industry is a competetive one, Tesla like any other
companies, has the threat of having a tough competition with the new entrants. With the
advancement in the technologies and the innovative mind sets, the other companies can always
sprang up posing a threat to the monopoly of Tesla. Providing new value propositions to
customer or by offering a lower price, these companies can beat Tesla in terms of sales. 2
2 Chen, Y. and Perez, Y., 2018. Business model design: lessons learned from Tesla Motors. In Towards a
Sustainable Economy (pp. 53-69). Springer, Cham.

4ANALYSIS OF TESLA’S BUSINESS STRATEGY
2. Bargaining power of Suppliers:
Almost all the big industries have to depend on the suppliers in order to get the raw materials for
their products. The bargaining power of these suppliera can to a large extent, decrease the margin
of Profit that Tesla motors incurs. By using their negotiating power, the powerful suppliers can
try to get a high value for their raw materials. This will negatively impact the profitability of
Tesla.3
3. Bargaining power of Buyers:
The buyers of any market often turns to be much demanding. However, Tesla focuses much on
creating a network and does not sells directly. This helps Tesla to a great extent. Again, there
alwyas remains the threat of high bargaining powers because of the company's smaller and
powerful customer base4.
4.Threats of substitution:
When any new products or service cater to the same needs of the customer, the previously
existing market has to suffer a great loss. The threat of substitution for Tesla motors are the other
mode of electronic vehicles, e- bikes, trains etc. However, as analysed in the PEST study, the
possession of Electronic cars are a matter of social status and hence the fear of substitution for
the company is comparatively less.
5. Threat of Competition:
3 Mangram, M.E., 2012
4 Morrish, S.C., Miles, M.P. and Deacon, J.H., 2010. Entrepreneurial marketing: acknowledging the entrepreneur
and customer-centric interrelationship. Journal of Strategic Marketing, 18(4), pp.303-316.

5ANALYSIS OF TESLA’S BUSINESS STRATEGY
Tesla as a an automotive industry, has to face a severe competitive market. Because of the low
price of batteries and the rising concern for the customers regarding environment, various
companies are also aiming at the production of the totally electronic cars and vehicles. This has
the high risk of cutting down the monopolised market of Tesla.
Recommendations:
In order to cope up with these main five perils, Tesla Motors can take the following steps:
1. The company can focus more on the research and development process in order to create
more innovative cars so that the new entrants find it hard to have a competition with it.
2. The company can also develop its supply chain policies with multiple suppliers
3. The company can invest on building an economies on scale so that it can reduce the cost
per unit.
4. The company can start experimenting various designs in order to get a variety in different
materials
5. The company can also focus on creating dedicated suppliers so that they can get offers
and discounts.
6. The company can shift from being product oriented to service oriented in order to create
a large customer base
7. It can rule out the threat of substitution or competition by switching the shift cost for the
customers.

6ANALYSIS OF TESLA’S BUSINESS STRATEGY
Value Chain analysis of Tesla Motors:
Inbound logistics of Tesla: the company has the system of creating their products in their
own factory at Fermont. For this purpose they store the raw materials collected from the
suppliers. Along with these materials, the company also uses a vast range of scarce material
so that they do not have to completely depend on the suppliers.
Operations: the company operates the car manufacturing and assembly operation by
indulging into various innovative designs as well as investing more on research and
developments. Apart from car assembly parts they also manufacture, energy storage system
as well as energy storage panels. They produce 101,420 Model S and 1,764 Model X vehicle
approximately every year.5
Their operations system also includes the manufacture as well as installation of stationary
energy storage systems. These are produced by means of high level integration of robots.
3. Outbound Logistics: This segment involves the warehousing and the distribution of the
produced vehicles and solar panel or the electric storage system. The products are shifted to
the company’s own store. There are also provisions of direct deliveries to the customers. The
electronic automakers. However, maintains a small inventory of its vehicles at the stores. The
company has, no system of dealing with the dealers or the resellers6. This is the most
significant part of Tesla’s outbound logistics. The direct sales helps in decreasing the time of
delivery and also helps in keeping the cost of Tesla cars intact without increasing it much.
5 Binkiewicz, N., Chen, J. and Czubakowski, M., 2008. Tesla Motors. Unpublished document
6 Hettich, E. and Müller-Stewens, G., 2017. Tesla Motors. Business Model Configuration.

7ANALYSIS OF TESLA’S BUSINESS STRATEGY
Tesla Marketing and Sales
Tesla showcasing and deals rehearses are offbeat, like different strategic approaches of the
electric automaker. As indicated by CEO Elon Musk, Tesla "dishes out for all intents and
purposes nothing on promoting and supports, and depends vigorously on expression of mouth."
7The capacity to pull in broad media inclusion at the worldwide scale fills in as a significant
wellspring of significant worth as far as expanding the degree of brand mindfulness in the
worldwide scale.
Marketing system of Tesla: tesla follows an unconventional marketing system that includes the
direct sales to the end users. They also sell the vehicles of their company as well as of other
companies via any third party auto auction. These opportunities offerd by Tesla helps them in
generating a network as well as a repute for the company.
7 Rothaermel, F.T., 2017.

8ANALYSIS OF TESLA’S BUSINESS STRATEGY
Reference List:
Binkiewicz, N., Chen, J. and Czubakowski, M., 2008. Tesla Motors. Unpublished document.
Chen, Y. and Perez, Y., 2018. Business model design: lessons learned from Tesla Motors. In
Towards a Sustainable Economy (pp. 53-69). Springer, Cham.
Hettich, E. and Müller-Stewens, G., 2017. Tesla Motors. Business Model Configuration.
Mangram, M.E., 2012. The globalization of Tesla Motors: a strategic marketing plan
analysis. Journal of Strategic Marketing, 20(4), pp.289-312.
Morrish, S.C., Miles, M.P. and Deacon, J.H., 2010. Entrepreneurial marketing: acknowledging
the entrepreneur and customer-centric interrelationship. Journal of Strategic Marketing, 18(4),
pp.303-316.
Motors, T., Strategy enterprise and innovation Tesla Motors.
Røste, R., 2013. Value chain analysis of the Norwegian electric vehicles market–Think a first-
mover.
Rothaermel, F.T., 2017. Strategic management. New York, NY: McGraw-Hill Education.
Stobbe Jr, J.J., 2019. A Strategic Audit of Tesla.

9ANALYSIS OF TESLA’S BUSINESS STRATEGY