TESLA Business Strategy: Environmental Analysis and Strategic Planning

This report provides a comprehensive analysis of Tesla's business strategy. It begins with an introduction to the company, its mission, vision, and objectives. The report then delves into the strategic context, exploring the macro environment through stakeholder and PESTLE analyses. It assesses the internal environment using SWOT analysis and the McKinsey 7-S model, and evaluates organizational capabilities with the VRIO framework and benchmarking. The competitive environment is examined using Porter's Five Forces. The report further explores strategic directions, recommending growth platforms and strategies for Tesla. Finally, it presents a strategic management plan with objectives and tactics. The report concludes with a summary of findings and recommendations, supported by relevant references.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
LO1 .................................................................................................................................................1
The strategic context...............................................................................................................1
Analytical framework for macro environment.......................................................................2
Environmental analysis..........................................................................................................3
Organisational Audit..............................................................................................................5
LO2..................................................................................................................................................6
Organisation internal environment and capabilities...............................................................6
VRIO framework to acknowledge organisational capabilities...............................................7
Benchmarking strategic capacity............................................................................................1
Analysis of competitive environment using porter's five forces............................................1
LO3..................................................................................................................................................3
Different kind of strategic directions available to organisation.............................................3
Justification and recommendation of most appropriate growth platform and strategies........5
LO4..................................................................................................................................................5
Strategic management plan with strategies, objectives and tactics........................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business strategy is defined as the set of decision or course of action that benefits an
business owner in attaining desired business objectives. This will helps them in gaining
competitive advantage over rival companies in an advantageous manner. This assignment is
written in context with TESLA which is a America based automotive company, headquartered in
California. Company offers electric vehicles to its customers and operates multiple assembly and
production plants. This report is going to cover impact and influence of macro environment on a
company and its strategies. Beside this, porter's five forces is used to evaluate competitive forces
and range of concepts, models and theories are applied to device strategic plan for company.
LO1
The strategic context
Mission of TESLA
Company has a mission to enhance the preference of people towards sustainability and
sustainable energy.
Vision of TESLA
Organisational vision of Tesla is to develop most compelling electric vehicles so that
customers can widely accept them.
Objectives of company:
 Sustaining a long term awareness of brand and increasing organisational reputation.
 Satisfying customers of organisation to build a customer referrals and increase their
loyalty.
 Driving up sales of electric vehicles and cars produced by Tesla
Business strategy: It is a plan which is used by management of a company to gain a
strong position within marketplace (Amran and et. al., 2016).
Role of business strategy in attainment of objectives
With the help of effective business strategy, TESLA can give tough competition to rivals
in terms of revenues and profits. Appropriate strategies will be able to gain the attention of
customers in a proper manner, due to which sales of company will increase. These increased
sales will allow the company to achieve their business objectives in a desired way.
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Different strategic planning techniques
 Benchmarking: It is referred as the comparison of metrics with a rival or with entire
industry. By this, TESLA will acknowledge about its market position and will be able
able to formulate a strategic plan to achieve its aims and targets.
 Business analysis: By analysing business in a proper manner, TESLA will be able to
identify their strengths and weakness in a proper manner so that right decisions can be
taken to get advantage over rivals.
Analytical framework for macro environment
Stakeholder analysis: It is defined as a systematic evaluation of stakeholders so that they can
engage, prioritise and managed in a proper manner. It is a systematic manner by which interest
and power of stakeholders can be acknowledged in the desired way. Different steps by which this
analysis can be performed in TESLA is mentioned below:
Identifications of stakeholders: It will include all those individuals which are impacted
or impact the working procedures of company. In context with TESLA, potential stakeholders
are government, senior executives, suppliers, employees, customers, interest groups, alliance
partners, interest groups, contributor, key advisors, future recruits etc.
Prioritising stakeholders: In this step different stakeholders can be prioritised in
accordance with their interest and power.
 High power high interest people: These stakeholders must be fully satisfied. In context
with TESLA, these stakeholders are customers, alliance partners, investors etc.
 High power, less interested people: For Tesla, these shareholders are government,
suppliers etc.
 Low power, highly interested people: These stakeholders in respect with TESLA are
employees, contributors etc.
 Low power, less interested people: These individuals hold very less power and they do
not have much interest in working of TESLA such as future recruits, interest groups etc.
Understanding of key stakeholders: In this stage, needs of different stakeholders
according to their priority and interest is identified. Here, business strategies are formulated so
that their expectations can be satisfied in a proper way.
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Environmental analysis
PESTLE analysis of TESLA
PESTLE analysis is a framework which is used to analyse external business environment
in a detailed manner. This analysis will helps the manager in company to take strategic decisions
that will benefits company in attaining high profitability. In context with TESLA, PESTLE
analysis is carried out below:
 Political factor: There are different political aspects which potentially impacts the auto-
mobile factors. Political factors that can impact TESLA are corruption, bureaucracy, tax
and trade tariffs, freedom of press at regional and national level etc. Different home
marketing practices of government and other trade controls also impacts working of
TESLA in different regions. In order to attain high revenues, company is required to
operate in those regions which are politically stable for example UK. If company will
operate in war prone and unstable regions like Middle East Asia, it can results in loss of
revenue and business failure (Bharadwaj and et. al., 2013). In case of US, government is
giving wide support to build electric and hybrid cars that are environmentally friendly, in
this respect TESLA has been given loan of around 465 million dollar subsidised loan. It
is beneficial for firm to operate in those regions where tax rate, tariffs are low so that high
profitability can be attained.
 Economic factor: These factors are related with economic growth in alternative energy
industries and cost increment due to hiked fuel prices. Economic factors include GDP,
interest rate, inflation rate, growth rate, purchasing power of people etc. Changes
associated with foreign currency exchange is the major factor that can impacts TESLA.
Fluctuation in interest rates also impacts the working of organisation. For example, 10%
change in Interest rate in US can increase expenses of company by USD7.6 million.
Government tax incentives given to electric cars can positively impacts the business of
TESLA. Availability in Zero Emission Vehicle in California is another economic factor
which impacts company in a positive manner. Operating in region with less labour cost
and easy availability of resources will benefits TESLA in earning high profit margins.
 Social factor: These factors impact trends and condition of a company through investors,
customers and employees (Drnevich and Croson, 2013). These aspects aligns with
lifestyle and preference of people living in a region. As People in UK are environment
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friendly and modern, products offered by TESLA i.e. electric vehicles are going to
achieve high popularity. Electric vehicles are less costly in comparison with running cost
and maintenance of traditional cars due to which social factors are in favour of TESLA.
As vehicles offered by company are environment friendly, operating at global context is
very advantageous as it will results in wide customer base and high sales.
 Technological factor: It is essential for a business organisation to update their
technology on a timely basis so that exceptions of customers can be complete in a timely
manner. People in UK prefers to purchase those products which are technologically
advanced, in this respect TESLA is required to bring new technology in market which is
not used by rivals companies. Having access to modern technology can impacts the
market shares and revenue of company in a positive manner. If company will not focus
on updating their technology, their products will became outdates and customers will
change their preference towards other products.
 Legal factor: These are one of the essential factors that are required to be considered by
an organisation before initiating business operations in a country. Changes in law can
impacts a business and their operations in a considerable manner (Ghezzi, 2013). In case
of TESLA, manager of company is required to take decisions and formulate policies in
context with Companies Act, 2006 so that all work of company can be performed in legal
manner. If company will not follow these laws, it can results in payment of heavy fines or
business failure.
 Environmental factor: Government in UK has formulated various environmental
standards that can impacts profit margins of TESLA in both positive and negative
manner. To show their concern towards environment, company shows active
participation in reducing use of fossil fuels and carbonated materials. In this respect,
company offer hybrid and electric vehicles to their customers which are environment
friendly and follow environment laws formulated by UK government. If company will
not consider these environmental factors and laws, it will decrease the image of company
along with paying heavy fines and taxes.
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Organisational Audit
SWOT analysis of TESLA
SWOT analysis is a strategic planning tool which benefits an organisation in identifying
their strengths and weaknesses so that stable position in market can be sustained. Beside this, it
will specify potential threats and opportunities that can impacts business performance of TESLA
in a considerable manner. In this respect, SWOT analysis is mentioned below:
Strengths Weaknesses
 Main strength of company is innovation
in technological advancement. High
technology offered by TESLA such as
Tesla battery pack, Tesla power train,
Tesla motors is used by other
companies to maintain strong place in
market.
 As TESLA provides electric vehicle,
high support from government is
enjoyed by company in the form of
subsidies and loans (Grover and Kohli,
2013).
 Company has a monopoly in market as
it targets a niche segment that is
alternate and electric energy cars.
 Company has a poor liquidity ratio and
have 3 billion USD which is very less
amount as compared with competitors.
This can endanger the survival of
company in marketplace.
 Vehicles of TESLA are manufactured
at a single plant and capacity of
company is limited to only 500,000
which is low as compared with rivals.
 Company offers innovative products
that are advantageous for environment.
But customers are not aware about the
specialities of their vehicle so they feel
reluctant in buying them as they are
costly.
Opportunities Threats
 Company can expand business in fields
like battery operated cars, green cars,
self-driving automatic cars etc. to
enhance their customer base and profit
margins at new height.
 Company can adopt cost reduction
initiatives to reduce their expenses on
 Automotive sector is very competitive
and rival of company such as Nissan,
Daimler etc. are offering luxurious cars
with less combustion engine in same or
less amount. This can be a big threat for
company.
 Another threat for company is debt. At
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manufacturing vehicles. In this respect,
company is planning to build
gigafactory that will build vehicle
battery at less cost.
present, company has less debt but it
can impacts the working of company in
future.
LO2
Organisation internal environment and capabilities
Strategic capabilities: It is referred to the procedure of conducting a research on
business organisation and its internal operating environment so that effective business strategies
can be formulated.
Mc Kinsey 7's model
This framework is use to evaluate internal organisation. It is a tool to help business
owners and managers to know how well their organisation is aligned and which are the areas
they need to improve. In business like Tesla, if the company uses this tool, it will help them in
facilitating the organisational changes, implementing new strategy, mergers of organisation and
to focus on different different areas of the organisation. By adopting this tool Tesla will also be
able to look on 7 factors consisting of hard and soft elements and are explained below -
Strategy : Here, Tesla business strategy should be based on expanding the use of electric
cars across the globe and to produce sustainable energy.
Structure : It represent the way in which the division of the business units are organised.
Company like Tesla should refer this to have unique organisational structure as having complex
structure may leads to confusion and duplication of work.
System : Tesla should consider this to have a systematic way of performing task such as
its recruitment system, selection system , team management system etc.
Shared values: these are the core component of McKinsey model as it describe the
norms and standards that guide the employee behaviour in the organisation. By adopting this
Tesla , and come up with the strong organisational culture , ethics and norms which will help
them to maintain the harmonious relationship in the organisation.
Skills : In reference to Tesla ,this would help them to identify the skills of their
employees and their capabilities to perform in the organisation.
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Staff : Tesla should adopt this to identify that what type of employees are required to be
hired with specific skills in the organisation to increase their productivity.
Style : Company like Tesla should involve this is the organisation to identify the working
style of the employees , to know the flows of information and to apply the leadership style
suitable for the organisation.
VRIO framework to acknowledge organisational capabilities
VRIO is a strategic tool which is used by business organisation to acknowledge their
internal capabilities and resources so that high advantages can be gained in this competitive
market. VRIO stands for value, rareness, imitability, and organisation. It will benefits TESLA in
identifying their available resources so that targets can be attend desirably (Hoejmose, Brammer
and Millington, 2013). In context with TESLA, analysis is carried out below:
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Illustration 1: VRIO of TESLA

(Source:Applying VRIO Framework to Tesla, 2018)
 Valuable: It is essential for an organisation to have access to valuable resources so that
strategies to attain high returns can be applied in an effective manner. If company will
have some valuable resources, it can bring wide opportunities for company. In case of
company, there are many resources which are highly valuable such as Tesla battery pack,
power train, motors etc.
 Rareness: It is essential for an organisation to acknowledge if their product is rare or
not. Rare products have more chances to gain competitive advantage in market. In
respect with TESLA, products which are manufactured by them are rare due to
technology advancement, innovation and environmental sustainability. Company uses
direct sale approach which is also a rare way to sell products (Köseoglu, and et. al.,
2013).
 Imitable: Every organisation aims that their resources should not be copied by rival
companies. If resources of a company will be imitable, then it can reduce the sales and
profitability of a company. In case of TESLA, company has a strong position in market
because company introduce new technology and innovative products which are hard to
copy. This is a big advantage for company in sustaining a strong position in market.
 Organisation: It is essential for TESLA to manage and coordinate their available
resources in a proper manner. If materials and resources in a company are managed in an
organised way then it will became easy for company to gain competitive advantage.
Company is required to use their available resources in an optimal manner so that high
profitability can be attained against rival competitors.
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Benchmarking strategic capacity
Benchmarking is an effective tool which is used to compare the performance of their own
company's processes and products from the another companies. It is essential for the companies
to adopt because it is very important to know how successful your company's performance from
the another companies. It is also very beneficial to the TESLA company, by adopting this tool
they can search best opportunities that leads them to give superior performance and obtain higher
position in the market. There are various others use of this strategy tool which are described
below:-
 To reveal the successful business processes: This tool helps TESLA to identifying
about the process, skills, and competences of other companies. By applying same
practices in their company they can also increase their productivity and profitability
which helps them to cover a big area in the market.
 To facilitate knowledge sharing: It is also help TESLA to transferred other business
acquired knowledge in their own business which will helps them to enhance their
knowledge regarding to the production.
 To gain competitive advantage: From this tool TESLA company can know that which
strategies are applied by the another businesses to sustain in the market, so they can also
apply those strategies in their business and get success in the market. TESLA company
can beat their competitors easily by helping of this toot because they can apply the best
strategies from others companies to its own company which help them to get higher
position in the market.
Analysis of competitive environment using porter's five forces
Porter's five forces is a framework which analyse and identifies different competitive
forces which shapes up different industries and helps them in acknowledging their competitive
edge in market place. Competitive edge of company is identified with the help of strengths and
weaknesses enjoyed by company. In respect with TESLA, porter five forces is mentioned below:
 Threat of new entry: In order to start a business in auto-mobile sector that will give
tough competition to TESLA, heavy funds and money is required. It is not possible for a
new company to arrange high technology to fight against TESLA as it will be very
expensive. Due to these reasons threat of new entry for TESLA is very less (Li and Tan,
2013).

 Threat of substitution: At present, this force is medium for the company but in
upcoming years, it can became high and impact the productivity of company in a
negative manner. Exiting large scale companies in auto-mobile sector can further expand
into hybrid and electric vehicle field due to which products offered by TESLA can be
easily replaced.
 Bargaining power of supplier: In respect with TESLA, this force is very high. This is
because auto-mobile is a highly competitive sector and it is difficult for organisations
even large organisation to arrange all the parts which are required to manufacture vehicle.
Rise in demand of electronic components by different companies have make supplier
very strong due to which they raise prices as per their choice.
 Bargaining power of buyer: Due to different high and low factors, this force is medium
in context with TESLA. As there are less alternatives for electric cars, in this case
bargaining power of buyers is less. But there are some customers which buy vehicles of
TESLA to show off their status. For these kind of customers, bargaining power is high.
 Competitive rivalry: At present, there are less substitutes for electric cars but this
condition is changing quickly due to advancement in technology. This force is medium in
context with today but it can became high in some years that can impact the business of
TESLA in negative manner (Maté, Trujillo and Mylopoulos, 2012).
Balanced scorecard to align organisational objectives
The balance scorecards are developed as a strategic management and planning systems
which will helps in aligning an organisation behind shared vision of growth, training employee
to work on right things. A balance scorecard is a system which comprises of processes,
technology, processes and people. To formulate scorecards, TESLA will be required a
disciplined framework. It is a performance measurement framework that group existing measures
into categories. Other than this, it is a strong organisation wide strategic management, planning
& communication system. Due to this, work done by employees in TESLA is aligned with
strategy and vision of company. Due to this, it will became easy for company to achieve their
organisational goals in a desired manner. This will benefits them in accomplishing their
objectives in a timely and proper manner.
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