Business Strategy Analysis of Tesla: Macro and Internal Environments

This report provides a comprehensive analysis of Tesla's business strategy. It begins with an introduction to Tesla, outlining its mission, values, and operational scope. The report then delves into Task 1, which focuses on the macro environment using the PESTLE framework, detailing the political, economic, social, technological, legal, and environmental factors influencing Tesla's operations. The analysis includes both positive and negative impacts of each factor. Task 2 shifts to the internal environment, employing SWOT analysis to assess Tesla's strengths, weaknesses, opportunities, and threats. The report also utilizes McKinsey's 7-S model to analyze organizational capabilities and alignment. Furthermore, it applies Porter’s Five Forces model to evaluate competitive forces within the automotive industry and concludes with a strategic management plan, outlining strategic priorities and objectives. The report aims to provide a thorough understanding of Tesla's strategic positioning and challenges.

Assignment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Appropriate frameworks analyse the impact and influence of the macro environment........1
P2. Analyses of the internal environment and capabilities.........................................................4
TASK 2............................................................................................................................................8
P3. Application of Porter’s Five Forces model for evaluating the competitive forces................8
P4. A range of theories, concepts and models, interpret and devise strategic planning for a
given organisation........................................................................................................................9
Strategic management plan........................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business strategy is a course of action as well as set of directions that helps an individual
to attain specific business objectives (Alsudiri, Al-Karaghouli and Eldabi, 2013). It can be said
as master plan which is used by managers for carrying out operations as well as achieving
desired aims of company by securing competitive position in the dynamic market place. For
understanding business strategies, Tesla is selected. The selected company was established in the
year 2003 by Martin Eberhard, Elon Musk, Ian Wright, Marc Tarpenning along with J. B.
Straubel. Organisational headquarters are located at Palo Alto, California, United State. Its
operations are based on multiple production of electric cars through SolarCity, Solar panel along
with gasoline cars. Mission statement of Tesla is to accelerate world's transitions for sustainable
transport. Its values are fuelled with sustainability through innovation. This report includes
appropriate frameworks for analysing the impact and influence of the macro environment,
internal environment and capabilities. It further includes evaluation along with application of the
outcomes of an analysis using Porter’s Five Forces model. Lastly, it discusses about range of
theories, concepts and models by interpreting and devising strategic management plan that
comprises tangible and tactical strategic priorities as well as objectives.
TASK 1
P1. Appropriate frameworks analyse the impact and influence of the macro environment.
Macro environment are the uncontrollable factors which influences decision making of
organisational managers and affects strategies along with performances in positive or negative
manner (Blackburn, Hart and Wainwright, 2013). For analysing such environment PESTLE
framework is used for analysing impact as well as influence of macro environment. All such
factors are determined by junior strategy manager of Tesla. Detailed analysis of each of them is
as follows:
Political factors: The present political environment of UK is stable and the government
can levy policies or regulations at the time they want changes. This factor comprises global trade
agreements, political stability, government policies, legislation, administrative policies and many
more which influences as well as affects Tesla's strategies imposed by managers. Government
plays major role in providing incentives to selected organisation for the development of country
as well as providing opportunities to Tesla for attaining growth.
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Positive impact: With the help of international or government policies such as incentives
related to supplying raw materials, exemption from exercise duties and so on can strengthen
Tesla's financial performance which will help in attainment of higher profits. If managers of
Tesla makes contractual agreements with the political party and avails grants or subsidies will
help in performing operations without finance problems which will impact on expansion of
business in positive aspects.
Negative impact: If political parties changes their systems and implement new provisions
then managers of Tesla also have to change their strategies which will hamper operations of the
entity and impacts in negative manner on the performance of Tesla. If the organisation ignores
new regulations then they will be penalised and this will reduce their profit reserves together
with business image in the market which will impact in negative aspects.
Economic factor: Brexit has impacted on the economic market of UK resulting in
stressful conditions due to decrease in value of pounds against euros or dollars. Factors related to
market growth, interest rates, trade levels, currency, inflation rates as well as deflation rates are
economic factors. It is essential to consider all such factors as they impact and influences
working of whole organisations and affects purchasing power of customers (Fox, 2012).
Positive impact: Such factors are considered by managers of Tesla while determining
current value along with expected value of investment as well as business portfolio. Acquiring
natural resources at low rates can help in pricing the electronic cars to met purchasing power of
client as well as following economic system results in capital formation and determining ability
of Tesla for attaining strategic objectives and goals as well as formulating future strategies for
business. The stress or forces have made Tesla managers strong enough to compete through
forming effective strategies in order to move towards more vibrant market which impacts on
making their own image and sustaining in competing market effectively.
Negative impact: If economic cycle changes then it will result in increasing inflation and
taxation rates which will impact on purchasing raw material or automotive parts at high rates and
decreases funds of Tesla and this will impact on financial position of Tesla. The investors who
made heavy investments on company have started forcing the owners of Tesla to return the
money back that impacted on corporate image as unexpected payments were made to investors.
It also impacted functions with operations of Tesla because of investors pressures and levy of
exchanges rates by financial institutions.
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Social factors: These factors comprise of taste, preferences, facts, income level,
experiences, buying behaviour, beliefs along with values of clients. UK population is more
demanding as well as makes changes in their preferences in limited time. All these are analysed
by managers of Tesla while planning for launching a new product at market place by focusing
towards factors related to education, economic status, family history and many more at the time
of targeting potential customers.
Positive impact: Customer preferences along with changing attitude helps in
understanding customers perception towards Tesla's product and impacts in improving wealth
distribution in developing market place as well as expansion of business along with generating
higher profits. Tesla has made their product brochure which includes all the details about their
cars and uploaded on their official websites that helps in attracting larger customers. Modifying
current cars and making changes in their procedures or strategies to manufacture new cars as per
the emerging trends can impacts in positive manner on Tesla's strategies to increase sales and
satisfying customers.
Negative impact: If perception of customers changes and shifts towards competitors
products then image of Tesla will be affected in market and will impact in market shares of
Tesla. If Tesla fails to forecast emerging trends or ignores demands of potential clients about
new featured cars can result in reducing customers and decrease in sales with profit margins
resulting in negative impacts on business.
Technological factors: Technological advancement, capabilities and enhancement are
considered as technological factors. Technological market of UK is attaining attractions due to
numerous digital technologies. Adoption of technological developments, technological
infrastructure along with evolution of innovative technology helps in influencing efficiency as
well as maintaining relationship of Tesla with its customers and results in enjoying various
advantages.
Positive impact: New advancements along with innovations in launching fully automated
cars as well as products helps in satisfying customer’s needs for electronic cars and improves
relationships with targeted audiences and various clients. It helps in attainment of long term
growth (Iacob, Quartel and Jonkers, 2012). Manufacturing cars with latest technologies can
attract more clients as well as boosting sales that can result in impacting on increasing Tesla's
profit reserves in positive manner.
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Negative impact: If there are new innovations of technology available in the market can
result in making the available technology obsolete and it affects Tesla's operations. Frequent
adoption of new technologies by Tesla hampers profit and producing cars without appropriate
knowledge of technology can impacts in negative manner on business image.
Legal factors: Factors related to regulatory, law determinants as well as legislations are
part of legal factors and results in decision making along with actions in any particular country.
Road Vehicles (Construction and Use) Regulations 1986 is one of the legislation which is
governed by UK system for automotive industry. It is very important to consider all such
elements by business entities for operating business appropriately.
Positive impact: Tesla managers follows all the related laws, rules as well as regulations
which assist the organisation in gaining recognition from government bodies for executing
business operations in appropriate manner. Complying with legislation helps Tesla to run
operations or functions that impacts on positive manner as the organisation can effectively
functionality in the competitive market and sustaining growth.
Negative impact: If new legislations are governed and Tesla is forced to adopt those
legislations then it will impact on changing strategies and will affect productivity of Tesla. If
violation of any provision of the legislation is done by Tesla then numerous hurdles will be faced
while managing operations that can impact on organisational existence.
Environmental factors: Factors such as regulatory, management, corporate culture,
physical and so on are considered as environmental factors. Automotive industry of UK is
emphasis towards reducing pollutions and go green. It is very important to focus towards
environmental elements by Tesla manager for reducing adverse influence along with impact of
on company and its strategies as well as environment.
Positive impact: By complying with environmental legislations helps Tesla in
establishing a good market image as well as attracting large number of consumers.
Manufacturing eco sensitive cars and attaining recognition in competitive market impacts on
business expansion in positive aspects through which more revenues will be generated and
attainment of diversification will become easy for the organisation in new market.
Negative impact: If Tesla ignores environmental laws, then legal authorities take strict
actions against Tesla and can affect in business reputation along with level of managing sales. It
will also affects strategies which were implemented to achieve business goals. If there are
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changes in environment factors like non compliance standards then then will be pressure to
change the previous standards as per the new provisions which will affect efficiency of Tesla. If
there are any defects in cars and Tesla sales them in the market the organisation will face losses
as clients and government will charge penalties resulting on impacts on organisational
profitability as well as image in negative manner.
P2. Analyses of the internal environment and capabilities.
Internal analysis: For analysing micro environment, organisational enterprises conduct
internal analysis of aspects related to strengths, weaknesses, opportunities and threats by using
SWOT analysis (McGrath, 2013). All the aspects are determined by junior strategy manager of
Tesla. Description of SWOT analysis of Tesla is as follows:
Strengths Weaknesses
 Tesla targets niche segment based on
electric as well as alternate energy cars
and operates in monopoly market.
 Marketing strategies such as public
relations as well as direct marketing of
selected business are strong enough
which helps in improving customer
base.
 Tesla manufactures specialized
products which are futuristic as well as
many customers are not aware about
them and managers do not invest much
in marketing as it requires huge funds.
 Profitability of chosen organisation is
low which affects its market image as
well as financial position in the market.
Opportunities Threats
 The selected business is focusing
towards launching new technologies
such as green cars, self driving
autonomous cars, hybrid vehicles,
battery operated cars and many more
which is an opportunity to attract more
potential customers.
 Tesla is planning towards expanding
the business various countries such as
UAE, New York and many more at
 Tesla's supplier network base is limited
which can create obstacles related to
low productivity in future.
 There is a cut throat competition
between various companies in
automotive industry which are planning
to capture market share of Tesla (Patel
and Chrisman, 2014).
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international market for the purpose of
increase profitability (Business Insider,
2017).
McKinsey's 7s model: Such model is used for analysing organisational capabilities,
structure, skill set along with effectiveness which postulates seven internal factors of business
that are needed to be aligned as well as reinforced in effective manner (Tesla McKinsey model,
2019.). Such framework is used in various situations at work place such as examining operations,
improving performance, determining ways for implementing strategies and many more.
Elements of McKinsey 7-S framework at Tesla are as follows:
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Illustration 1: Tesla McKinsey 7S Model. 2019
(Source: Tesla McKinsey 7S Model. 2019)
Strategy: Strategy helps in plan for building as well as maintaining competitive
advantage over competitors. Business strategy of Tesla are based on focusing towards electric
cars which are driven by organisational mission. Some of the strategies of selected entity are
related to distribution ownership through company operated stores as well as marketing
campaigns at galleries or shopping centres are placed at core in Tesla business strategy which
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helps in providing them advantage at competitive market place. For pricing, Tesla follows
penetrating pricing strategy which helps in setting low prices to attract larger customer base. For
marketing, Tesla follows direct marketing and social promotions in order to promote its cars in
distant market location.
Structure: Structure is a combination of corporate hierarchy, divisional make up as well
as chain of command which helps in describing the interconnection as well as functions of
operations. The junior strategy manager of Tesla has done management configuration along with
responsibilities of workers in order to classify organisational structure of such company into
single category. Managers of Tesla do not follow any organisational structure but is closer
towards divisional structure where operations are divided into range of divisions such as
production, communication, software, energy and many more (Peng, 2017). All divisions
directly report to Elon Musk who is the Chief Executive officer (Tesla structure, 2019).
System: System encompasses daily procedures, decisions, workflow and so on which are
related to operations at work place. For long term growth of Tesla, managers adopt systems
related to recruitment system, selection system, orientation system, team development system,
transaction processing system, business intelligence system, management of customer
relationship system, business intelligence system and many more. They also consider ongoing
issues in operations related to manufacturing of electronic cars (Luftman, Lyytinen and Zvi,
2017).
Shared values: Shared values are the principles which helps in determining behaviour of
any organisation. Such element includes common accepted norms as well as standards within the
firm which influences along with temper behaviour of staff members along with management of
Tesla. It is used for providing detailed guidelines to workforce.
Skills: Skills are the competencies as well as capabilities of company and its members. It
is used for determining talents, achievements, capabilities along with work accomplishments of
Tesla. The junior strategy manager assesses available skills at workplace and managers changes
them for achieving goals as per the set strategies. Skills of Tesla members are communication
skills, informational technology skills, presentation skills which helps in attainment of
organisational objectives.
Staff: Staff encompasses personnel of business. The junior strategy manager of Tesla has
analysed number of workforce performing different operations along with their motivation
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reside, training and development programmes provided to them for accomplishing set tasks in
effective manner. Staff members of Tesla are professional experts who have specialisation in
various field to conduct smooth operations.
Style: Style are the examples or approaches used by management for leading the
operations at workplace. Such element also describes the influence of style on performance,
corporate culture along with productivity. The transformational leadership style is followed at
Tesla where leaders or managers improves knowledge as well as awareness of followers or
employees. Such leaders are internally motivated, makes difficult decisions, inspires others,
entertain new ideas and many more at workplace of selected business (McGrath, 2013).
TASK 2
P3. Application of Porter’s Five Forces model for evaluating the competitive forces
Porter's Five Forces Model: Such model is used for comparative analysis which was
propounded by Michael E. Porter in the year 1979 (Porter's five force model, 2019). This model
helps junior strategy manager of Tesla to analyse the organisational place at competitive market
with the help of different elements such as substitutes, suppliers, industrial rivalry, competitors
along with new entrants. Five force analysis for Tesla is as follows:
Illustration 2: Porter's five force model, 2019
(Source: Porter's five force model, 2019)
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Rivalry among existing competitors: Competitive rivalry in the automotive sector is
moderate so is with Tesla as there are limited competitors in the market place and tries to capture
maximum market share. Some of the competitors of Tesla are BMW, Audi, Volkswagen and
many more. The managers of selected business has to formulate and implement various attractive
strategies in order to compete with competitors as well as sustaining in market for longer time
period. There is competitive rivalry within automotive and manufacturing industry. Thus to cope
up with moderate competitive rivalry Tesla enhance their quality and marketing channel by
upgrading their technology. This helps the selected company to maintain its market share and
target global market successfully. Such company has delivered 90,700 vehicles by achieving
revenue of $21 million at the end of the year 2018 which shows that it has achieved a
competitive position in the dynamic marketplace.
Threat of new entrant: In automotive and energy industry, new entrants can not easily
enter as it requires huge investments and hence threat to new entrant for Tesla is low. Another
reason for low threat is presence of small number of companies who manufactures competing
vehicles. Moreover, there are various other companies who have collaborated with chosen
business in multinational countries for the purpose of developing capabilities as well as strategic
management decisions.
Threat of substitutes: Substitutes are the products which are available in place of others.
Threat of substitute availability for Tesla is low as only few choices are available for substitution
of electric cars. Substitute available in place of cars are cycles or walking, mass transport such as
buses, subways, trains and so on. But people in changing scenario are using own vehicles which
are most preferred or suitable for them (Scholes, 2015).
Bargaining power of buyer: Bargaining power of buyers at Tesla is moderate as Tesla is
dependent on companies such as Daimler and Toyota as partners. Such partnership helps in
supplying aggregates high profit share as well as creates demand for organisational products in
competitive market place by making their powers high.
Bargaining power of supplier: Bargaining power of suppliers of Tesla is very high as
chosen business relies on few suppliers. Tesla managers build close partnership with suppliers
such as Panasonic as well as works together with Lotus supplier’s chassis. Suppliers are single
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