Business Strategy Report: Tesla Motors Macro and Internal Analysis

This report provides a comprehensive analysis of Tesla Motors' business strategy, examining its macro environment using PESTEL analysis, which identifies political, economic, social, technological, environmental, and legal factors impacting the company. It delves into the internal environment using SWOT and VRIO frameworks to assess strengths, weaknesses, opportunities, threats, and core capabilities. The report also applies the McKinsey 7S model to evaluate organizational design and utilizes cost-benefit analysis to inform business decisions. The analysis covers Tesla's vision, mission, objectives, and strategic direction, offering insights into its competitive advantage and market positioning within the electric vehicle industry. Furthermore, the report explores strategic planning tools and the role of strategy in achieving business goals and objectives.

UNIT 32 BS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Use appropriate framework to analyse the impact or influence of the macro environment...1
TASK 2............................................................................................................................................3
P2. Internal environment and capabilities....................................................................................3
TASK 3............................................................................................................................................6
P3. Porter's Five Forces model....................................................................................................6
TASK 4............................................................................................................................................8
P4. Range of theories and concepts.............................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategy is the combination of various actions and plan which help the
organization to understand and assist the business to achieve their business goals & objectives
(Ali, Warren and Mathiassen, 2017). It is also called master plan which is used by the
organization in order to enhance their efficiency as well as effectiveness for the competitive
advantage. Tesla Motors Inc. selected for the better understanding of this concepts. It is
American automotive company based in Palo Alto, California and founded in 2003 by the Martin
Eberhard, Elon Musk. This report includes the various topics such as impact & influence the
macro environment. Analyse the internal factors or their capabilities, porter's five force model to
evaluate the market outcomes. In addition, apply various theory to understand the strategic
direction of the organization.
TASK 1
P1 Use appropriate framework to analyse the impact or influence of the macro environment
Tesla Motors Inc. Plc is an automotive company which develop the electronic cars which
helps in increasing customer experience. Company founded in 2003 by the group of various
engineers who develop glorious cars which provide better or driving fun. Tesla Motors Inc. win
the world's best car manufacturing company in the 2018 (Boshyk, 2016).
Vision: To become most compelling car manufacturing company of the 21th century with
the help of producing electronic cars.
Mission: To transform the world from transition to sustainable transport through
attracting marking opportunity for the best results.
Objectives: Primary objective is to generate the demand of their products and develop
brand awareness along with customer base.
Strategy: It is the method which include the plan, actions, achievements, goals and
solutions for the problems. For the completion of every task, manager have to build strategy for
the successful outcomes.
Role of strategy to achieve business goals & objectives:
 It provide the framework for the operational planning.
 Clarity in the work which helps in completing their task to achieve business goals “&
objectives.
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 It will increase organizational efficiency.
Strategic intend: It describe that, how organization use their resources or energy to
achieve their business goals & objectives in order to increase productivity as well as profitability.
Strategic direction: It incudes the central forces which help the business to achieve their
objectives. Vision, mission, strategy etc. are used to develop the strategic direction which
followed by the whole organizations.
Strategic planning tools: It is the process which includes the development of strategy,
direction or action plan which help the business to achieve goals & objectives. It will also
analyse the internal as well as external factors.
Macro environment: It includes the external factors which affect the organization in
terms of their productivity as well as profitability. With the help of PESTEL analyse, manager of
Tesla Motors Inc. identify the external factors which affect the organization and it will be
discussed below:
Political: In the Tesla Motors Inc. Plc, government incentives for the electric auto-
mobiles are the opportunity for the organization. Because it will minimise the carbon emission of
the company. Expending free trade agreement also opportunity for the Tesla Motors Inc.
company so they can expand their business globally and political stability also impact in positive
way which helps in increasing productivity as well as profitability (Gorla, Chiravuri and Chinta,
2017).
Economic: This factor affect the business in term of their performances which includes
the decrees in battery cost which become opportunity for the company. Along with this, reduce
the cost of renewable energy which help the Tesla Motors Inc. to increase their profit margin. In
addition, economic stability issue become barrier for the company and affect the production as
well as profitability.
Social: This factor provide various opportunities for the company such as increase
popularity in the low carbon lifestyle, preference of renewable energy and improvement in the
wealth distribution for the development of market. With the help of social factors, Tesla Motors
Inc. boost their financial as well as operational performances.
Technological: In the Tesla Motors Inc. Plc, company is very flexible to adapt changes
which is opportunity for the organization. Due to potential rapid obsolescence of technology,
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company affect it and it will become barrier for the organization. Increase in automation business
and popularity in online mobile system become opportunity for the company.
Economical: Company have opportunity to promote electronic vehicles which is based
on climate change. Along with this, expending environmental progress or rising standard for the
waste material both are opportunity for the organization.
Legal: Tesla Motors Inc. Plc has opportunity to expand international patent protection for
their products and energy consumption regulation. Both factors positively affect the organization
which further helps in increasing productivity as well as profit margin in the organization
(Graham and Kaye, 2015).
TASK 2
P2. Internal environment and capabilities.
SWOT Analysis: SWOT analysis is a technique which is used to evaluate competitive
capacity of a company. SWOT is an abbreviation for Strength, Weakness, Opportunity and
Threat. It analyse about all these things regarding any organization in existing economy.
A table for SWOT analysis of Tesla Motors Inc. is as under:
Strengths Weaknesses
 Tesla Motors Inc. motors is providing
luxury electronic cars to its customers.
 Tesla Motors Inc. motors is deriving a
huge monetary support from US
Department of Energy (Hentrich and
Zdun, 2016).
 Tesla Motors Inc. motors is spending a
lot of money on research and
development.
 Tesla Motors Inc. motors' revenue is
highly increases but profit is low
because of the expansion.
Opportunities Threats
 With the help of giga factories,
company can fulfil the targets.
 The cars developed by Tesla Motors
Inc., are environment friendly.
 Tesla Motors Inc. motors has to face
so many competitors.
 The organization have a huge amount
of debt and its assets are on leases.
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VRIO framework is used by mangers of Tesla Motors Inc. to uncover as well as protect
resources along with capabilities which helps in achieving long term competitive advantage
(Jogaratnam, 2017). It is a combination of value, rare, imitation and organised. VRIO analysis of
Tesla Motors Inc. is as follows:
Capabilities Value Rare Imitable Organised
High manpower ✔ ✗ ✗ ✗
Plant and machine ✔ ✔ ✗ ✗
Market share ✔ ✔ ✔ ✗
Brand image ✔ ✔ ✔ ✔
Value: The four valuable items of Tesla Motors Inc. are plant and machinery, high man
power, market share and brand image. All these are considered as valuable aspects as they help
in conducting operational activities in effective manner.
Rare: Manpower of Tesla Motors Inc. is not rare as other companies within the same
industry also possesses skilled manpower for the purpose of providing new ideas or opinions.
Plant and machinery is rare as they organisation uses updated and advanced automated machines
for manufacturing products. Market share of Tesla Motors Inc. is rare as the large consumer
segment is being retained by such company and captured a larger area of the market. Brand
image of the organisation is also rare as it has been established by offering good quality products
to potential customers..
Imitable: High man power along with plant and machinery of Tesla Motors Inc. are not
inimitable as by putting higher efforts any organisation can hire large number of employees and
making more investments special machines can be purchased by firms. Market share and brand
image are inimitable as it is very tough to maintain such elements for a long duration of time
period. A single mistake based on product quality can harm the market share and image of the
products (Julien, 2018).
Organised: Brand image of selected company is organised as managers have made
possible tasks to establish positive image in the competitive market. At the same time,
manpower, plant and machine, market share are nor organised as there are several competitors
who acquire skilled manpower by paying more and purchases machines at low prices. There are
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various companies who offer same type of products at low cost which results in unorganized
market share of selected firm.
McKinsey's 7s model: It is a management tool which helps in analysing organizational
designs with the help of key internal elements such as strategy,structure, system, style, staff, skill
and shared values. For application of such model at Tesla Motors Inc., it is necessary to
understand the alignment of all such key elements to achieve objectives and goals. Application
includes following steps:
Step 1. Identification of the areas which are not effectively aligned.
Tesla Motors Inc.'s main strategy is to expand its shares in the market. The company
follows structure of functional based hierarchical organisational structure where functional
teams are involved to perform international as well as domestic operations. System followed is
transactional processing system. Firm wants to expand its staff and evolve shared values. It has
been identified that strategy, structure and system are effectively not aligned with style, staff,
skill and shared values (Kumar Basu, 2015).
Step 2. Determining optimal organization design.
In order to implement the strategy, executives of Tesla Motors Inc. has designed various
aspects by setting goals and preparing action plan. They wants to recruit new staff with
innovative skills and adopt new style as to improving shared values. For such purpose, they have
adopted benchmarking strategies such as functional benchmarking and competitive
benchmarking. Functional benchmarking is used by Tesla Motors Inc. managers to make
comparison with available resources or practices to identical or similar practices with other
immediate industries. Competitive benchmarking is used by managers of selected company to
make comparisons with products or services within the automotive industry. The company has to
change its system in order to expand its market share to building customer relationship.
Step 3. Changes.
The executives of Tesla Motors Inc. recruits staff by using internal sources or recruitment
as well as external sources of recruitment in order to get personnels with specialized skills in the
automotive industry at the same time adopts effective style of leadership. The shared values are
improved within organisational members (Mutandwa, Taremwa and Tubanambazi, 2015).
Step4. Implementation of changes.
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Implementation means putting plans into actions. At this phase, staff members are hired
and system is adopted based on formal system in order to maintain formal communication at
workplace. The skills of existing as well as new members are improved. The shared values are
improved with the help of motivating people to perform in teams. Transactional leadership style
is adopted where main focus is on supervision, management as well as performance at Tesla
Motors Inc.
Step 5. Review.
At this stage, all the systems are aligned at review is done. After making implementation
it has been reviewed that strategy is market penetration, structure is functional organisational
structure, system is customer management system. On the other hand, staff members are
motivated by providing rewards as well as training programmes, skills includes presentation
skills and information technology skills, shared values are warmth, team work, style adopted is
Transactional leadership style (Najam, Runnalls and Halle, 2016). Hence, strategy, system and
structure are aligned with style, staff, shared values and skills in order to achieve Tesla Motors
Inc.'s objectives.
Cost benefit analysis: It is an approach where business decisions along with system,
values and project are analysed to achieve benefits for the organisation. It is used by Tesla
Motors Inc. managers to compare costs associated with different projects and to take decisions
for the betterment of the company. Analysts sums various benefits of actions and subtracts
various costs such as direct cost and indirect cost at the time of taking actions. This analysis
helps in assigning monetary values for investments by comparing with other investments. It
helps in estimating strengths as well as weaknesses and to identify alternatives to determine best
approaches to attain benefits at the time of preserving savings.
TASK 3
P3. Porter's Five Forces model.
Porter's 5 Forces Analysis: This analytical theory is developed by Michael Porter. It
represents the 5 type of threats or forces that are liable to create or analyse the situation of any
organization in any economy (Schmiedel and vom Brocke, 2015). Tesla Motors Inc. uses Porter's
five forces analysis to analyse the competition power of the competitors situated in the market.
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This technique also assists the organization in determining corporate strategies and increasing
attractiveness.
Analysis of Porter's five forces for Tesla Motors Inc. is as under:
Threat of new entrants: Tesla Motors Inc. Motors Inc. motors is a well known name in
the manufacturing business of electronic cars. This industry needs a huge investment to start a
new setup. Other competitors of Tesla Motors Inc. Motors Inc. like Toyota, ford, Mercedes etc.
are giving a tough competition to Tesla Motors Inc. but still their technology is a bit low.
Providing a fast speed luxury electronic car with last long batteries will be hard for new entrants.
Hence, threats of new entrants are low for the Tesla Motors Inc. Motors, inc.
Bargaining power of buyers: Bargaining power of the buyers is very high for Tesla
Motors Inc. motors. There are so many reason behind it. Firstly, there are so many companies
available in the market which are providing alternative products like Jaguar, Audi, BMW and
others. Second thing that is increasing the bargaining power of the buyers is the switching costs
are absent. There are so many products available in the market with the same cost and qualities.
Buyers can switch on the other products without any hesitation. These factors can force the Tesla
Motors Inc. motors to decrease its prices (Tukker and Tischner, 2017).
Bargaining power of suppliers: Almost all auto mobile manufacturing companies
purchase the raw materials from the suppliers in the market. There are a few number of suppliers
are available in the market relating to this industry. They are in the dominant position and may
affect negotiation capacity of the Tesla Motors Inc. Motors. There are so many competitors and a
few suppliers in the existing market hence the efficiency of suppliers to bargain is very high.
This situation can reduce the profitability of Tesla Motors Inc. Motors.
Threat of substitute products: When a similar product exists or enters into the market, it
affects profitability of the firm. There are so many electronic cars available in the market within
the same price range like I-Pace, Mission E-Cross, E-Tron and others which are at the same price
as Tesla Motors Inc.'s Model 3. But Tesla Motors Inc. is providing other luxury electronic cars
which are providing fast speed with long lasting batteries which are not providing by the other
companies. On the basis of market research, it can be said that threat of substitute products is
moderate for Tesla Motors Inc. Motors.
Rivalry among existing firms:Tesla Motors Inc. Motors is known as the first company to
introduce electronic cars in the market. Tesla Motors Inc. is providing luxury electronic cars as
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well. Although Tesla Motors Inc. is recognizable brand in the industry, all the major auto mobile
manufacturing companies in this field have announced to pay their attention in this sector. They
are compromising with the cost and performance for now but they will provide the same
qualities as Tesla Motors Inc. as soon as possible. They are also adopting the cutting edge
technology of Tesla Motors Inc. So rivalry among existing firms in electronic cars and vehicle
industry is very high.
TASK 4
P4. Range of theories and concepts.
Porter's generic strategies: It is competitive strategies model that can be adopted by an
organisation in order to obtain competitive advantage. Basically this strategy is extent to scope of
an organisation in long run. The fundamental basis of this strategies is to determine the potential
and sustainability of a firm in long run period. Tesla Motors Inc. can be adopted this model of
porter's generic strategy of cost leadership and differentiation as per its demand of the product in
long run.
Following are the porter's generic strategies:
Cost leadership strategies: This model is based on acquiring competitive advantage by
high sales of the product and keep away the other business entities. There are two way to lead
the cost: first one is increasing the profit of company by diminishing the cost while competitor
have average price of the same product or goods (Whelan and Meaden, 2016). The other is
increasing the percentage of market share by maintain the low price of goods. Tesla can be adopt
this strategies when they have enough profit in long run.
Differentiation strategies: This strategies based on product and services are different
from other or unique then those of competitor. Brand image, features, attractiveness is the key to
look different from other. Tesla Motors Inc. can be adopt this strategies to survive in long run as
its product are unique and attractive.
Cost focus: This model helps to a business in long run survive as organisation simply
target its customer with very low price of the goods and services. This is called niche market as
well. Tesla can be adopted this strategies to be in the market with attractive price of its product.
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Differentiation focus: If a organisation follow niche marketing means sells its product at
very low margin then Its product must be unique or having attractive feature to stay in long run.
Tesla can be adopted this model in order to having some advance feature in its product.
Among the generic strategies of porter's model It is recommended to Tesla to adopt the
differentiation strategies to survive in the long run as its unique product makes it more
effective (Boshyk, 2016).
Strategic Plan: It is a document which include the action plan of the organization and it
will include the objectives, vision, mission etc. It will help the manager of Tesla Motors Inc. Plc
to perform their further activities as per the plan. Along with this, it includes the other critical
elements which developed for the execution of plan. With the help of strategic plan, organization
execute their plans into action which increase the productivity or profitability.
Objectives: Main objective of the company is to increase their profit margin up to 15%
by 2020. For this, organization have to execute their strategic in effective manner.
Vision: Vision of the company is to become most demanded brand in the car
manufacturing companies.
Mission: To increase their customer base which help the Tesla Motors Inc. Plc to attract
more opportunity to expand their customer base in the world (Julien, 2018).
Research & development: Company have to done intense research to identify the future
opportunities and threats. Manager will develop their strategy after the findings of research
because it will help them to execute their plans for the successful completion of their goals &
objectives.
Promotion: Company use the online as well as offline mode of promotion which help the
Tesla Motors Inc. to increase their demand among the customers which further increase the
productivity and profitability.
Arrangement of Funds: Tesla Motors Inc. Plc arrearage the funds from the various
sources and it can be for short term or long term duration. In the market, there are various
sources which help the organization to fulfil their monetary requirement. Tesla Motors Inc. Plc,
arrange the funds from banks as a loan for the longer time period ans sell company's assets which
fulfil the short term requirements.
STP Analysis: It is a marketing plan which help the organization to measure various
elements which required for the improvement. It includes the segmentation, targeting and
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positing of products in the market or customers mind. With the help of this analysis, manager
build effective stargate and then execute in proper way.
Segmentation: It is the division of market into sub sections which choose by the
organization and than give their efforts to achieve them. Tesla Motors Inc. Plc focuses on
building brand identify where they develop car for the premium price range for the high class of
people by using gross marginal method. Basically, organization develop a product and then sell
on high price for the upper categories peoples (Najam, Runnallsand Halle, 2016).
Targeting: Company target the rich people who are able or willing to spend high price
for the products. Tesla Motors Inc. sell luxury cars such as SUV which is well known electric car
and deliver the 100000 vehicle in the 2017. Electronic cars are costly so they target the high class
people to sell their products and they also sell the technology.
Positioning: Tesla Motors Inc. Plc develop effective marketing strategy which help the
organization to fix their brand name or product in the customers mind. Electronic car is
expensive so Tesla Motors Inc. relate their products with status symbol. So they build their
marketing or proportional strategy as per the rich people who going to buy this product to show
their high class status.
Diversification strategy: It is the strategy used by the organization for the development
of business and it will include the wide scope where different products sell in the different
market. It will be consider as a new marketing strategy because organization entered in the new
market to sell exclusively new product. It is also called growth strategy which help the Tesla
Motors Inc. to grow in the other markets. Under this strategy, manager is Tesla Motors Inc.
develop new product and target the new market for expansion of their brand name in the global
market (Hentrich and Zdun, 2016).
Horizontal integration: It is the process where organization increase their production
level with the same level of supply. It will be done with the help of internal expansion or merger
or acquisition. This strategy can lead the monopoly if organization capture the waste market size
of the products & services. So Tesla Motors Inc. can adopt this strategy to increase their market
size with the help of merger or acquisition.
CONCLUSION
From the above discussion, it has been analysis that business strategy help the
organization to formulate various strategy in order to achieve their business goals & objectives.
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In the business environment, there are various internal or external factors affect the business in
terms of profitability. So manager use the SWOT or PESTEL analysis for the effective
implement which helps in providing market growth. In addition, strategic plan helps in
identifying future aspects which followed by the organization to achieve their business goals &
objectives.
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