Report: Tesla's Business Strategy and Environmental Factors

This report provides a comprehensive analysis of Tesla's business strategy, examining both its macro and micro environments. It begins with an introduction to business strategy and its application to Tesla, an American-based electric vehicle and energy company. The report then delves into the impact of the macro environment, utilizing PESTLE analysis to assess political, economic, social, technological, legal, and environmental factors influencing Tesla's operations. The internal environment is evaluated through SWOT analysis, identifying Tesla's strengths, weaknesses, opportunities, and threats. Furthermore, the VRIO model is applied to assess Tesla's internal capabilities and competitive advantages. The report also incorporates Porter's Five Forces model and explores strategic planning theories and concepts relevant to Tesla's business model. The analysis covers the electric vehicle market, including its growth and the challenges and opportunities faced by Tesla. The report concludes with a summary of key findings and recommendations for Tesla's future strategic direction, including the adoption of new technologies and the expansion into new markets. The report aims to provide a detailed understanding of Tesla's strategic approach and its position within the automotive industry.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Impact and influence of the macro environment and its strategies........................................3
TASK 2............................................................................................................................................5
P2 Internal environment and capabilities....................................................................................5
TASK 3............................................................................................................................................8
P3 Porter’s Five Forces model....................................................................................................8
TASK 4............................................................................................................................................9
P4 Theories, concepts and models, interpret and devise strategic planning...............................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategy is defined as set of priorities for organisation and management team
which helps in attracting and retaining talented workforce that is required in firm (Bentley, Omer
and Twedt, 2014). This is collection of actions and moves of competition that helps in attracting
consumers, competing successfully, strengthening performance and achieving goal and
objectives of organisation. It helps in outlining about how business should carries activities in
order to reach desired ends. The respective report is based upon Tesla which was founded in
2003 that deals in manufacturing of electric vehicles, car and auto-mobile. It is American based
organisation that focus on automotive and energy. The report covers micro and macro
environmental factors such as SWOT and PESTLE that assist in running business successfully. It
is essential to analyse capabilities of business in effectual manner with use of VRIO model.
Porter's five force model and strategic direction are available for respective organisation.
TASK 1
P1 Impact and influence of the macro environment and its strategies
It is the responsibility of each and every organisation to analyse market in which they are
going to operate their business for accomplishment of set goal and objectives. Here, Tesla has
examine macro environmental factors and their impact on business for making decisions. It aid
in knowing about various components of external market for making business strategies.
PESTLE analysis has performed which is described in context of Tesla. They are mentioned
below:
PESTLE Analysis
It is the tool which is used for identification of macro environment which is faced by
organisation (Cavusgil and et. al., 2014). This is also called situational analysis which assist in
identifying changes taken place at macro environment for strategic management. PESTLE
analysis of Tesla are described below:
Political Factors- It is the defined as political condition of any country which directly
and indirectly impact functioning of business. This includes interest rate, political instability and
so on. Tesla is regarded as forefront of electric vehicles that uses both gas and electricity as fuel.
The drivers of Tesla are using electronic stations in order to refill cars rather than gas stations. In
order to purchase such vehicles, tax credit is provided by Colorado, Virginia which is $5000.

These factors has direct impact on economic level of nations, rise in employment and so on. If
there is political stability then it leads to economic stability and provide higher prosperity and
economic activity. Similarly, on hand other, if there is political instability, then it creates
disruption and instability.
Economic Factors- With rise in income level of people leads to emergence in sales for
electric cars. According to data of 2017, the world economy has grown by 3.5 percent (PESTLE
Analysis of Tesla Inc.: The growth of the eco-friendly electric car, 2019). There is electric
development in Asia, United States and Europe. From 2016 to 2017, there was jumped of electric
cars which is 30 percent. Tesla is getting benefits as there is declination in price of materials.
This can positively impact in rise of sales in effective and efficient manner. The respective
organisation manufacture luxury vehicles with latest gadgets as large number of consumer are
investing in BMWs and SUVs. Therefore, there is increased in economy which leads to more
purchase of Tesla products by consumers.
Social Factors- There is change in current trends that leads to alter need and demand of
customers (Veit, and et. al., 2014). The social factors includes demographic such as age, income
of people, employment, distribution level and so on. Nowadays, people loves more electric cars
who have friendliness in mind. There is elimination of fuel in electric cars which is better for
customers and environment. Tesla is regarded as environment sustainable which has
manufactured luxury and power boosting vehicles. It has performed amazing job in order to
maintain places in minds of people by manufacturing electric cars. It is focusing on brand
transition that provide greener, fuel efficient, better and sustainable future. It has assist world in
saving billions which have spent on fossil fuels.
Technology Factors- This includes research and development, innovations and so on
(Gupta, 2012). Tesla has enter into artificial intelligence and automation technology in order to
manufacture new and innovative products for their customers. This has helped to maintain
competitive advantage at market place by producing fuel efficient in order to make future
usability and sustainability. All the vehicles and auto-mobile has manufactured through using of
innovative technology. As Tesla depends upon technology for manufacturing vehicles which is
positive aspect for business to earn maximum profits and gains. With the adoption of technology,
there is rise in sales from 2015 to 2016. Therefore, technology is the important determinant for
rise in profits and sales of businesses.

Legal Factors- This includes all legal laws and legislation which are required to run
business at marketplace such as patent right, copyright and so on (Kellermanns, Dibrell and
Cruz, 2014). As Tesla is expanding their business at other marketplace so it has to keep up to
date for international patents in order to avoid legal issues. The labour law, environmental laws
and others can directly effect on business and their activities and operations. In case of lack of
following legal laws by Tesla, government can impose penalty it. Therefore, respective
organisation focus on eco- friendliness which helps in promoting energy and car efficient and
ensures to be abided by international environmental regulations.
Environmental Factors- This includes weather, climate, temperature which are required
for running business and their activities. Tesla is regarded as environmentally friendly as it uses
more electricity than gas. The respective organisation follows environmental regulations for
manufacturing of vehicles. It has increased brand value and recognition because of producing
carbon free and eco- friendly vehicles for market and customers.
Therefore, these analysis helps in making effective decision for business in order to
achieve goal and objectives. It also identify each and every factors for better outcomes.
TASK 2
P2 Internal environment and capabilities
It is very important for organisation to identify their internal environment and capabilities
of business in effectual manner (Lehmann, 2016). Here, internal environment is determined with
help of SWOT analysis and capabilities is identified by the use of VRIO model which are
described below:
SWOT Analysis
It is defined as tool which helps business to develop strategy for existing company as
well as building new start-up at marketplace. This helps organisation or person to identify their
strengths, weaknesses, opportunities and threats. They are described in context of Tesla such as:
Strengths Weaknesses
Innovative Systems and Process- Tesla has
strength for adopting sustainable and
innovative manufacturing process. It has used
innovation in vehicles, solar energy, storing
High Prices- The vehicles brands of Tesla is
costlier than other brands such as Ford, GM,
BMW, Toyota and ranked in the category of
premium vehicles. The high prices charged for

system all are sustainable and innovative.
Recently, it has launched Model S and X
which are electric in nature and high
performing (Shuen, 2018).
Brand Recognition- Tesla is known and
renowned brand at global level which is
strength for it. The respective organisation
has attracted customers through publicity and
heavy recognition due to differentiation in
business model. Brand recognition is
regarded as significant factor which helps in
generating high sales for business.
vehicles is weakness for Tesla as it has lowered
sales because all people cannot afford to
purchase high premium brands. Model X and S
are more costlier than Model 3 which cannot be
affordable by all customers.
Capacity Issues- The manufacturing done by
Tesla lies in single plant which are situated at
California, Fremont. This plant has capacity to
manufacture 500,000 vehicles whereas
maximum vehicle production is limited that
makes difficult for manufacturer for increasing
targeted sales volume.
Opportunities Threats
Global Expansion- Tesla has an opportunity
to expand their business at Asian and
Chinese market. With the help of supply,
maintenance network, sales, Tesla can grow
their brand in other region at faster speed.
The respective organisation has initiated
construction of Gigafactory Shanghai that
assist in reduction of cost and attracting large
number of consumers in both Chinese and
Asian market (Tesla Swot Analysis, 2019).
Growing Demand for Electric Cars- With
the rise in need and demand of customers,
there is increase in electric cars. This is
opportunity for Tesla as it has made plan for
releasing electric cars which is fully
automated that consists of self driving
hardware and provide high level of
Competition- There are some threats which are
faced by Tesla in terms of competition. It is
facing competition from both aspects such as
luxurious automotive brands and environmental
friendly brands such as Ford, Volkswagen,
Toyota and so on. As the manufacturers are
holding high premium brand, manufacturing
affordable vehicles which will take time to break
such images from mind of customers.
Legal and Regulatory Requirements- These
regulatory and legal requirements are very costly
for business and leads to increase in cost. In
current scenario, Tesla is operating their
business in various countries which leads them
to deal with political and legal rules and
regulations within market place. Therefore,
before enter into different country, Tesla has to

satisfaction to the people in effective and
efficient manner.
follow rules and regulations of US States and
other countries.
With the SWOT analysis, Tesla can identify their strong and weak points and make plans,
strategies and policies accordingly so that better outcomes can be achieved in appropriate
manner.
VRIO Model
It is considered as part of Resource-Based View (RBV) which examines the connection
among internal characteristics and performance of company (Malerba and et. al., 2015). This is
business framework that helps in evaluating resources of business and finding competitive
advantages. VRIO stand for Value, Rare, Imitable and Organised. Tesla has used VRIO model in
order to determine capabilities of business over competitors which are described below:
Resources/Capabilities Valuable Rare Imitable Organised Impact of Competitive
Advantage
Futuristic Design Yes - - - Competitive
Disadvantage
Long Range Batteries Yes Yes - - Temporary competitive
advantage
Supercharger Yes Yes Yes - Unused competitive
advantage
Advanced Technologies Yes Yes Yes Yes Long term advantage
Valuable- It is defined as component that are most valuable in nature and required by
business for running their activities and operation in effectual mode (McGrath, 2013). The
valuable resources includes futuristic design, long range batteries, supercharger and advanced
technologies. These all are required for business to conduct performance at marketplace. The
products manufactured by Tesla carry unique and innovative design. Batteries used in vehicles
are long lasting which is required for enterprise. Electric cars and vehicles has supercharger
network which helps in charging battery very fast. It is using advanced technology in order to
manufacture products for users.

Rare- It is referred as those capabilities and resources that are rare for other in order to
achieve competitive advantages. The rare resources includes long range batteries, supercharger
and advanced technologies. The batteries and supercharger used by Tesla is highly advanced as it
is rare for others. In order to manufacture vehicle, it is using advanced technologies for users.
Imitable- It means capabilities and resources that cannot be copied or traced by other.
The imitable resources includes supercharger and advanced technologies. The charger used by
Tesla takes few hours to charge battery that cannot be copied by other firm. Similarly, in order to
manufacture vehicles and electric, respective organisation is using highly advanced technologies
which is required most in business.
Organised- The resources has to be arranged in proper manner for better outcomes
(Mellat-Parast and et. al., 2015). Here, Tesla has to organise each and every factors for
achievement of goal and objectives. The resources which is organised by Tesla is advanced
technologies for their functioning and operation of business.
Therefore, VRIO model has helped Tesla for identification of internal capabilities and
resources to achieve competitive advantages in effective and efficient way to accomplish their
set goal and objectives.
TASK 3
P3 Porter’s Five Forces model
In order to expand business in other marketplace, it is very important for Tesla to
identifies and analyse about competitive forces which helps in shaping industry and determine
strengths and weaknesses of industry. This tools assist in analysing competition of business at
marketplace. They are explained here:
Threats of New Entrants- The auto-mobile and electric vehicles industry requires high
entry barriers as they requires large capital investment (Porter's Five Forces, 2014). Tesla carry
low threats for new entrants because of various requirements to be fulfilled for entering into new
markets. The current producer of auto-mobile are extending their production capabilities as they
focus on same products and China market is protecting local electric vehicles manufactures.
Therefore, it helps Tesla to conduct their business activities and operations properly for positive
outcomes.

Threat of Substitute- Tesla is facing moderate threat of substitute products as majority
people are using public infrastructure for travelling. There are other ways through fully electric
cars can be purchased by customers which is not provided by respective organisation. The first
commercial fuel cell car is about to be released in market. With these points, it has cleared that
respective organisation is facing moderate threat for substitute.
Bargaining Power of Supply- The supplier of Tesla has high bargaining power as they
can charge any price because of limited in number and they are using advanced technology for
their resources and raw materials. They focus on continuous improvement in quality and aligning
with value chain. Therefore, respective organisation is facing high bargaining power in terms of
suppliers or providers.
Bargaining Power of Buyers- The buyers of Tesla has low bargaining power because
quality provided by respective organisation is premium valued and customer wants advanced
products and services manufactured through high innovative technology (Palepu and Healy,
2013). It is opportunity for Tesla to charge high price for products to earn maximum profits and
gains.
Competitive Rivalry- Tesla is facing moderate competition as it is market holder in
luxury electric cars and easily adopt automotive industry. It is renowned and famous brand at
marketplace which is known by each and every customers who wants high premium valued
goods and services. This is alliance with local Chinese manufacture to get materials whenever
required.
Therefore, with the help of such model, it assist Tesla in identification of their exact
position at market place in order to develop proper plans and strategies for achievement of goals
and objectives.
TASK 4
P4 Theories, concepts and models, interpret and devise strategic planning
For strategic planning, different theories and models are used by organisation. Tesla has
applied Ansoff and Porter's Generic Model in order to implement strategies and plan that are
mentioned below:
Ansoff Model

This is strategic planning that was developed in 1957 by Ignor Ansoff (Porter and Lee,
2013). It provide guidelines to marketers, manager for implementation of strategies to grow in
future time period. The strategies used by Tesla are described below:
Market Penetration- This is the strategy where business trade with same product and
market. For adoption of this strategy, Tesla has to make proper use of resources and capabilities
to increase revenues and market shares. It is easy to adopt this strategy as carrying less risk due
to known of product and market to users.
Market Development- When existing product is sold in new market then it is called
market development (Russo and Minto, 2012). In order to increase market shares and profits, it is
essential for Tesla to adopt such strategy. Market research is required more in respective
strategy.
Product Development- When new product is manufactured in existent market then it is
called product development. Tesla can adopt such strategy for their specified group of people.
Such strategy carry high risk because product may or may not consumed by users.
Diversification- This is referred as strategy where market as well as product are fresh for
users. This strategy carry high risk and generate more profits for business.
From above analysis, it has concluded that Tesla has to apply market development
strategy for expanding business at Tajikistan for enhancement of profits as well as customer
base.
Porter's Generic Model
It is defined as that model in which organisation explains how they can accomplish
competitive advantage from particular market scope. They includes the following:
Cost Leadership- Whenever organisation is regarded as low manufacturing then it adopt
cost leadership strategy which includes technology, economic of scales and so on (Sanden,
2014). The respective organisation has an opportunity to adopt such strategy for increasing their
stock of business, profits and cost advantages.
Differentiation- It is the strategy where business is serving high premium quality and
innovative products to consumers in effectual manner. The respective organisation can adopt this
strategy for manufacturing new and innovative featured products in order to customer's
requirements.

Focus- This means to accomplish competitive edge for specified area which include
following: Cost Focus- Tesla has an opportunity for accomplishment of cost advantages by focusing
their target consumers. This uses of providing goods at low cost to get benefits.
 Differentiation Focus- If Tesla can form unique and innovative products for their
particular market then they can use such strategy.
After analysis of various strategies, it can be concluded that Tesla has to apply cost
leadership for manufacturing of products such as electric cars and vehicles in order to increase
profits and sales and every users can purchase it. This leads to rise in revenue and brand value.
CONCLUSION
The above presented report indicates that business strategy provide guideline to
organisation to conduct their activities and operations in an effective and efficient manner. It is
essential to analyse market to know about exact situations of business. Here, internal
environment is analysed with SWOT analysis and capabilities and resources are known through
VRIO model. The PESTLE model helps in knowing about various factors so that they can
conduct their activities and operations in competitive market. Along with it, Porter's five force
model assist in making decisions for business for accomplishment of goal and objectives.
Therefore, it is very important for organisation to make strategic directions in order to expand
their business in other place and perform innovation in effective manner.

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