Analysis of Tesla's Business Strategy: Macro and Micro Environments

This report provides a comprehensive analysis of Tesla's business strategy, focusing on both its external and internal environments. The report begins with an introduction to business strategy and an overview of Tesla as a company. It then delves into the macro-environmental factors affecting Tesla, utilizing PESTEL analysis to examine political, economic, social, technological, environmental, and legal factors in the United Kingdom market. The report further investigates Tesla's internal environment and capabilities through SWOT and VRIO analyses, identifying strengths, weaknesses, opportunities, and threats, as well as valuable, rare, inimitable, and organized resources. The analysis covers Tesla's unique design, supply chain, proprietary battery technology, and skilled employees. The report aims to provide a thorough understanding of Tesla's strategic positioning and its ability to achieve its goals.

Business
Strategy

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
P1 ................................................................................................................................................3
TASK 2............................................................................................................................................5
P2 ................................................................................................................................................5
TASK 3............................................................................................................................................9
P3 ................................................................................................................................................9
TASK 4..........................................................................................................................................11
P4 ..............................................................................................................................................11
CONCLUSION .............................................................................................................................13
REFERNCES.................................................................................................................................13

INTRODUCTION
Business strategy is define as combination of competitive actions as well as practices
which are used by business for attracting user, enhance as well as strengthen performance, gain
competitive advancement and attain goal (Blackburn, Hart and Wainwright, 2013). Through this,
an organisation is able to develop proper guideline which help them in carrying business
operations successfully for attaining desired goal. There are major three basic business strategy
adopted by a firm such as differentiation strategy, cost leadership and focus. Organisation
selected for respective report is Tesla that is a public organization operating in automotive as
well as energy retention industry. It is launched by Martin Eberhard, Marc Tarpenning, J. B.
Straubel, Ian Wright and Elon Musk at 2003. Headquarter of the company is located at Palo,
Alto, California, United State and it provide its products and services at worldwide level. There
are several subsidiaries of this firm such as Solar city, Tesla Grohmann, Automation and
Maxwell Technologies. Respective document will include information about the effect as well as
determinant of macro environment on organisation, evolution of company's internal environment
as well as capabilities. In addition to this, this report will also consider application of porter's five
force model and strategic plan which use to evaluate environmental factor.
TASK 1
P1
It is necessary for an organization to do proper investigation of macro environmental
factors because it will help them in developing proper decision accordant to the situation of
country and company. By this, they also gain competitive advancement at the marketplace by
conducting effective business operations as well as function (De and Kotlar, 2014). For
respective aspect, an organisation may follow several methods and techniques for example
PESTEL analysis. In context of Tesla, its junior strategy manager conduct macro environmental
evaluation through PESTEL in order to determine United Kingdom marketplace. Explanation of
which is given below:-
PESTEL:
 Political factor - United Kingdom is consider as country which is running under
determination of parliamentary system. It is a fair as well as stable nation having numbers
of opportunities for enterprises or company. In context of Tesla, it is opportunity for it to

expand as well as run its business operations at United Kingdom in effective and
successful manner as the country has stable political condition. Along with this, the
government of country also support to those firms which create products and service that
are eco friendly which is also seems as an opportunity for respective firm.
 Economical factor - United Kingdom have strong economic position in comparison of
other nations. They also have high gross domestic product with very few issues (Fox,
2012). Respective nation have large number of population which allow small market to
become profitable. This is essential for this organization to create goods by considering
economy of nation at which company is operating because if they not do so they may
face loss. Such as if Tesla launch expensive cars in low economy market then their will
be very limited audiences who purchase their vehicle due to which they may face decline
situation.
 Social factor – In context of United Kingdom there is high social standard which help
companies in running their business effectively. Their is also high standard of leaving
that will be seems as opportunity for Tesla because they can sell their vehicle properly at
respective nation. Along with this society of this nation is also attracted towards highly
advance technology which provide chance for respective firm to operate successfully. It
is also essential for this organization to regards social factors during creating or designing
their vehicle because it will help in develop vehicle in respect of customer's requirements
and need.
 Technological factor – The United Kingdom is MEDC (More Economically Developed
Country) which have high access to technology (An Example PEST Analysis of The UK,
2019). Respective nation peoples are also have quality innovate skills and capabilities
which have expertise in IT and science. Along with this, UK also have proper rules and
regulations which help company in conducting business effectively and securely. In
context of Tesla, it is opportunities for them to conduct its business operations effectively
at United Kingdom because respective company offer highly technology based products
which can be effectually sold at UK marketplace.
 Environmental factor – Environmental factors of a country can be get affected through
its economic condition but United Kingdom have made appropriate improvements so that
they can reduce its negative impact (García and et. al., 2013). The respective nation

sometime faces issues related to weather condition which impact on many firm's
production or manufacturing. In context of Tesla, the respective factors not much affect
them because they have proper indoor set ups for manufacturing auto mobiles. But
weather of United Kingdom may impact on its supply chain and make delay in delivery
of products.
 Legal factor – It is the last factor of PESTEL analysis which help companies in doing its
business operations in proper and legal mode. United Kingdom's government develop
various legislations that aid companies in doing its business in impressive style. In
respect of Tesla, during directing their business strategies as well as functions, it need to
follow various laws and regulations in order to avoid legal actions or punishments. For
example The Employment Act 1996, The Equality Act 2010 and many more (PESTEL
analysis of the UK, 2017).
Through this analysis, Tesla management able develop proper strategies and plan of
action that will help it in conducting its enterprise transaction as well as role in effectual mode
for attaining goal as well as objective.
TASK 2
P2
This is necessary for every organization to do proper investigation of its inside
environmental and capabilities because it aid management in creating proper business action plan
that leads to attainment of goal. Internal environment as well as capabilities of a firm can be
determine by various methods, approaches or techniques (Gilligan and Hird, 2013). In respect of
Tesla, junior strategy manager conduct internal analysis so that they can determine its strength,
weakness, capabilities and so on that help in developing appropriate strategies. For this,
respective company use SWOT analysis and VRIO analysis, which explanations is given below:-
SWOT Analysis- It is define as technique of strategic planning that is adopted by an
individual or a company in order to identify its strength, threat, weakness and opportunities that
are related to business competitive strategy and planning of project. SWOT analysis of Tesla is
mentioned below:-
Strength Weakness
 Top employer firm- It is a top  Complications during

employer company. It appear as an
ideal organization for its employees
because of its innovative, encouraging
and diverse culture. Respective
company also faced at Forbes as a
“America's Best Employer 2019”.
 Developing automotive company-
The respective firm is a leading
automotive company which attract
numbers of customers with innovative
design. It also consider as company
which left behind some of the very
exclusive automotive company such as
BMW and Mercedes.
 Innovative firm- Tesla is consider as
highly innovative company. It recently
developed world's first semi truck that
is fully electric and new sports car.
Through this respective company also
gain competitive advancement.
manufacturing- The respective
company produce high innovative
vehicle due to which it face numbers of
challenges while manufacturing auto
mobiles. Such as during manufacturing
of Model X, respective company faced
various challenges related to its battery
due to they launch respective model
delayed.
 Unable to fulfil demand- Tesla is
highly experimenting company as well
as they adopt complicated process due
to which sometime they faced
unbalance in supply and demand which
leads to not meeting of production
requirement. Such as Tesla deliver
63,000 cars in first quarter of 2019 that
is seems as 31 % decline in comparison
of last quarter of 2018 (Tesla SWOT
Analysis, 2019).
Opportunities Threat
 Develop less expensive car- Cars or
auto mobiles developed by Tesla are
expensive because it is based on
innovation. Due to which not all
potential customers able to afford them
so it is opportunity of this organisation
to create less expensive car which can
also be afford by middle class peoples
(Granados and Gupta, 2013).
 Competition at market- The respective
company face competition from both
section of automotive industry i.e.
Secondary fuel transport (like hybrid,
fully electric, plug in hybrid and so on)
and Self Driving car. Some of major
competitors of Tesla are Mercedes,
BMW, Lexus, Audi, Volvo, General
Motors, Ford, Toyota and many more.

 Enhance sales in untapped
marketplace- The main opportunity
for respective company is that they can
expand its business at Asian Market
because it is unsaturated in the sector of
renewable energy and automotive
market. So in this situation Tesla can
expand their business operations and
function in respective areas market.
 Confidence of long term
sustainability- For every company, it is
essential to assure long term retention
because it help in creating public image
as well as maintain moral of company.
In respect of Tesla, due to their unstable
production situation they face various
complain in which public complain
about vehicle long period of time
existence.
VRIO Analysis- It is define as technique which is adopted by a firm for conducting
analysis of its resources so that it can analyse and identify its competitive advancement. VRIO
refers to value, rare, imitable and organize factors. Evaluation of Tesla's resources through
respective method is mentioned below:-
Resources Valuable Rare Imitable Organized
Unique or
futuristic design
Yes - - -
Supply Chain Yes Yes - -
Proprietary
battery
Yes Yes Yes -
Skilled
Employees
Yes Yes No Yes
 Valuable- It refers to those resources which are valuable for an organisation because
these will help it in attaining its goal and objective impressively (Johnson, 2016). For a
company, there are various valuable resources such as its employees, technology,
process, resource and so on. In respect of Tesla there valuable resources are-

 Unique or futuristic design: The respective company develop unique and futuristic
design which help it in attracting numbers of customers as well as it also aids in gaining
competitive advancement.
 Supply Chain: It is valuable for respective organisation because through it they able to
supply their products and services in effective manner and at proper time to their
potential customers at targeted marketplace. This will also help them in fulfilling
customers need or requirement so that they earn high profit.
 Proprietary battery: The respective company developed battery which is based on high
technology and innovation that help firm in gaining competitive advancement as well as
they also have trademark on it which make it valuable.
 Skilled Employees: It is one the main valuable resource of Tesla because through these
peoples, it is able to attain its goal and objective. Moreover, employees of respective firm
are skilled, knowledgable and innovative.
Rare- It refers to those resources of a firm which are rare for other at particular industry and it
will help company in attaining competitive advancement at its potential marketplace (Khalili and
et. al., 2013). In respect of Tesla, its some resources are not rare such as Unique or futuristic
design because there are several other competitive company that also design same innovative
kind of products. But, it also have various rare resources which are mentioned below-
 Supply Chain: This resource of respective company is rare because they adopt advance
and innovate supply chain in comparison to its competitors. This will help them in fulfil
customers required in proper time with high quality.
 Proprietary battery: It is rare for respective organisation because it will help them in
manufacturing high quality auto mobile which attract customers and fulfilling their
expectations. Along with this they also have proprietary on it so that it can't be copied by
other competitive firms.
 Skilled Employees: Employees of Tesla are skilled, knowledgable and capable which
help them in attaining goal as well as they are always encouraged to adopt new
technology and innovation so that they can develop quality products.
Imitable- It is define as those resources of a company that are not copied by any other company
or its competitors (Li-Hu and Lu, 2013). In respect of Tesla there some resources are imitable
like Unique or futuristic design and Supply Chain. This is so because these resources can be

easily adopted or copied by other competitive company. There are several resources of Tesla
which are not imitable and those are mentioned below-
 Proprietary battery: Battery developed by respective company are every innovative and
advance technology based which can not be copied by other competitive firm easily as
well as it is also proprietary based. This resources also help them in attaining goal and
objective impressively.
 Skilled Employees: This resources of respective firm is not copied by any other firm
because Tesla staffs are loyal to their organisation and they give their full efforts to
conducting work in effectual manner.
Organized- It is define as those resources which required to be organised in several small
aspects so that an organisation can conduct their operations and functions properly for attaining
objective. In respect of Tesla there are various resources which are need to be organized in little
aspect such as Unique or futuristic design, Supply Chain and Proprietary battery as well as there
are some resources which didn't required to be organized, that is mentioned below-
 Skilled Employees: The staffs of Tesla are very skilled, knowledgable and capable who
know how to conduct work in effective manner (McGrath, 2013). This resource only
need to organized when respective firm adopt any change in operation or technology.
By conducting analysis through SWOT Tesla able to conduct its internal environment
that help in determining strength and weakness. Along with this by conducting VRIO analysis
respective company management able to know their capabilities which help them in attaining
objectives ads well as goal.
TASK 3
P3

Porter's five force model refers to the technique which is generally adopted by a
company in order to evaluate and determine competition level at marketplace. Through this,
management of a firm will also be able to conduct proper planning which help them in attaining
goal as well as objective successfully along with this, it will also help in dealing with suppliers
and buyers (Palepu and Healy, 2013). In context of Tesla, they conduct porter's five force model
in order to analyse competitive forces at its potential marketplace, explanation of this is given
below:-
 Threat of new entry: It is consider as situation in which any company can enter into
particular industry easily due to less rules and regulations. In context of Tesla, threat of
new entry is low because automotive which are developed by respective company i.e.
premium and high performance cars are limited to small range of customers as well as it
is not easy for small or new enterprises to develop same kind of products in less time.
 Threat of substitute: It refers to the situation at which there is huge availability of
products and services which are offer by particular organisation (Porter and Lee, 2013). If
there is high threat then, buyers may switch from one company to another for getting
quality products at low price. In respect of Tesla, respective factor is low because at
marketplace there are very less companies which offer same kind of automotive products.
There are also very less firms who offer or manufacture such kind of innovative and
technology based vehicle.
Illustration 1: PORTER’S FIVE FORCES
(Source: PORTER’S FIVE FORCES, 2015)

 Bargaining power of suppliers: It is consider as situation in which supplier of a firm
have power to manipulate price of the product according to situation. If the power will
high then supplier may demand for huge amount for low quality products. In respect of
Tesla, suppliers bargaining power is high because it relies on suppliers for premium
materials, technology and resources (Tesla: Five Forces Analysis, 2019).
 Bargaining power of buyers: It is describe as a condition at which customers can mould
the price or cost of the products and services according to them. If the power of
customers will high, then they can ask for quality products at low price and if buyer's
power will be low they have to purchase low quality products at high price
(Scholes2015). In context of Tesla, bargaining power of buyer is low because vehicle
offer by respective firm are highly technology based as well as they also have targeted
group of customers who are loyal to respective company.
 Competitive rivalry: It is a situation at which there will be various other companies who
offer same products and services that are offer by particular firm. According to this
organisation can know its strength and weakness which help in decision making. In
respect of Tesla, competitive rivalry is strong because there are several other companies
which offer same variety of products or auto mobile such as Audi, BMW, Mercedes,
Ford and many others.
After conducting respective analysis, management of Tesla will be able to determine their
position in competitive market which help in developing proper strategies which aid in attaining
goal properly and successfully.
TASK 4
P4
There are various type of theories, concept and model which are adopted by a company in
order to develop proper strategic planning. In respect of Tesla, they adopt two model i.e. Ansoff
matrix model and Porter's Generic Model because it will help them in developing appropriate
strategies planning which leads to attainment of goal properly. Explanation of these strategies are
mentioned below:-
Ansoff Model

This is called as strategic planning tool which assist manager in future growth of firm. It
was developed by Ignor Ansoff in 1957. There are four strategies of respective model which are
mentioned below:
Market Penetration- It is the strategy where firm achieve growth and success in existing
market with same product (What is the Ansoff Matrix, 2019). Tesla has opportunity to use its
capabilities and resources for success and growth. It can also helps in increasing market share
and profitability of firm. This carry less risk as market and product both are known to customers.
Market Development- It is the strategy where firm grow by selling existing product in
new market. In this stage Tesla has opportunity to sell their same product at different market in
order to increase profits, market share and others.
Product Development- In this strategy, new product is developed by firm at existing
market. They produce product for their target customers (Sia, Soh and Weill, 2016). This type of
strategy carry high risk as product is fresh in market which may or may not be like by
consumers. For this Tesla need to do market analysis so that they produce new product at
existing market.
Diversification- It is defined as the strategy where product and market both are new to
consumers. In this strategy, Tesla has to do market analysis in proper way so that they can fulfil
need and demand of consumer. This is so because this method carry high risk then other
strategies as well as it provide high return if product is liked by consumers.
After analysis of all above strategies, it is suggested that Tesla should adopt market
development and for this they can expand their business at Asian countries like Tajikistan. This
is so because through it they able to expand their customers base as well as it also enhance
profitability ratio.
Porter's Generic Model
It is defined as model which focus on achieving competitive advantages across chosen
market scope. There are three types of competitive advantages which are described below:
Cost Leadership- In this strategy, firm become low cost producer at market. It includes
economies of scale, technology, preferential access to raw materials (Porter's Generic
Competitive Strategies (ways of competing), 2016). This helps in achieving cost advantage for
respective firm. Tesla has an opportunity to achieve cost leadership for increasing market share
and profits.

Differentiation- In this strategy, firm become unique and provide high value to their
buyers or users. Tesla has opportunity to adopt such strategy by adding unique features in their
products for users to meet their need and demand. The price is charged for uniqueness of
products.
Focus- It define on the choice of competitive scope within industry. This factors is
divided into two forces which are mentioned below:- Cost Focus- In this strategy, respective organisation has to focus on achieving cost
advantages in target segment. It mainly focus on providing products at low cost to gain
benefits (Verbeke, 2013).
 Differentiation Focus- It is the strategy where respective organisation has to seek
differentiation in target segment. They can add uniqueness and develop different products
and services for their consumers.
As Tesla already using differentiation strategy by implementing innovative ideas in order
to attaining maximum competitive advantage. Thus they can apply cost leadership strategy
taking actions to lower costs and ultimately perhaps total ownership costs easily. Moreover this
will also beneficial for middle and upper middle class family because they also able to afford
respective company vehicles.
CONCLUSION
By evaluation of above discussed points it can be analyse and summarise that business
strategy is very essential because it enable firm to develop proper strategies which help in
attaining goal and objective. For this, a company need to conduct market and organisation
analysis because it will help in identifying proper or accurate situation. In order to analyse
internal environment, company may conduct SWOT or VRIO analysis and for external factor
analysis they can adopt PESTEL. After evaluating micro and macro environmental factors,
company need to analyse its competitive market and for this they may adopt Porter's five force
model. Along with this, in order to conduct appropriate strategic planning company management
can adopt various theories, models or techniques such as Ansoff Matrix and porter's generic
model.
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