Analysis of Tesla's External and Internal Environment Strategy

This report provides a detailed analysis of Tesla's business strategy, focusing on its external and internal environments. The report begins with an introduction to business strategy and its importance, followed by an analysis of the macro-environment using the PESTEL framework, examining the impact of political, economic, social, technological, environmental, and legal factors on Tesla's operations and strategies. The analysis highlights the influence of government policies, economic stability, social trends, technological advancements, environmental concerns, and legal regulations on the company. The report then delves into Tesla's internal environment and capabilities, employing a SWOT analysis to assess the company's strengths, weaknesses, opportunities, and threats. Strengths include technological advancements, strong brand image, and strategic partnerships. Weaknesses include limited manufacturing capacity and financial constraints. Opportunities include the growing market for electric vehicles and favorable government incentives. Threats include competition and economic instability. The report also touches upon Porter's Five Forces model to evaluate the competitive forces within the automotive market. Overall, the report offers a comprehensive overview of Tesla's strategic position and factors influencing its success.

Unit 32 Business
Strategy

INTRODUCTION
Business strategy is an effective process to attract the customers, strengthening
performance, achieve company’s goal or objectives and compete successfully. It is a set of
actions or process to improve the company’s performance and gain company’s objectives. It is a
set of decisions or the course of action which help the organization to achieving business goals.
The business strategy is created by their company to complete the local and international market.
It is great picture of desired image, destination and direction of the company. The business
strategy is developed by the company for various purposes such as: achieving effectiveness,
mobilizing resources, meeting threats and challenges, secure an advanced position in the market,
utilizing and perceiving opportunities, directing behavior and efforts, generating the command
over uncertain situation. It determines the essential activities of business to reach up to the
desired level. Tesla is an energy company and an automotive company that specializes in
manufacturing of electric cars. This report will include the analysis of external environment and
its impact on Tesla and its strategies. It includes the analysis of internal environment and
capabilities of Tesla. This report will also highlight the porter’s five forces model and evaluation
of competitive forces of the market of company.
MAIN BODY
LO1
P1 Analysis the impact and influence of the macro environment on a Tesla
organization and its strategies
A company operates within external boundary. The PESTEL analysis is a great and
strategic tool to identify the impact of macro environment of the company. PESTEL analysis
involves Political, economic, social, technological, environment and legal factor. Changes and
variations in the macro environment factors can largely influence the not only the Tesla company
but also influence the others organization in the market (Johnson., 2016). For identify the
external factors of the company, Tesla requires overcoming challenges that are connected to this.
It is strategic management tool that describes the impact of the organization’s macro
environment or remote on the company.
Tesla includes the macro environment of the automotive industry, energy storage industry
and energy generation industry. These external factors can affect the other determinants of the
company’s business, community, etc. The Tesla’s customer and market share fully dependent on

the various factors such as technology’s cost effectiveness. Tesla Company has a strong brand
image and enhancing profitability can increase its long term success (Thompson, Strickland and
Gamble., 2015). Tesla organization will largely focus on the industry’s external factors such as
PESTEL analysis. If the macro environment or the remote environment changes, the company
will have to alter its strategies accordingly. Tesla has many competitors in the market like Honda
motor, General motor, Volkswagen, BMW, etc. Tesla includes battery, solar panel and electric
automobile sales revenue are enhancing, despite competition with big companies. Tesla’s
PESTEL analysis is diverse because of the several types of organization’s products types and
large target market of the industry. The best solution for manage these varieties is strategic
management.
Political factors of the Tesla’s business
The political factors include the various government impacts on the Tesla’s business and
their operations. It also impacts on the business’s macro environment or their remote
environment (Akter and et.al., 2016). The main force that generates their huge impacts on the
company’s business is government entities. For example, the government trade policies can
reduce the company’s revenue and industry’s performances. There are many significant political
external factors that impact on the Tesla and energy solution and automotive industries such as -
the several agreements of new international trade, government incentives for the industry’s of
electric automobiles and the political stability of the related industry market.
By the government incentives, Tesla organization will gain the opportunity to improve
their financial performance and strength their position in the whole market. All the external
elements of the political factors directly linked with the decreased carbon emissions of the Tesla
products and operations. The government policies of the free trade agreements give as huge
opportunity to the company to expand their functions and operations globally. The political
stability of the industry’s market develops a favorable macro environment for the Tesla’s
intensive growth strategies and its generic competitive that involves market penetration (Higgins,
Omer and Phillips., 2015). The political factors of the automotive industry create a huge
opportunity foe developing the Tesla.
Economic factors
The PESTEL analysis includes the economic factors, that has a large impacts on the
Tesla’s business and its functions. The economic factors involves currencies, market growth and
various others variables that impact on the automotive industry’s business. For example, the
growth rate of the solar energy market describes the opportunities of growth of the organization’s
solar Panel business. There are several economic factors that create their huge impacts on the
automotive market such as – issues of economic stability, reducing battery costs and reducing
costs of renewable energy. Form the lower battery cost, the performances of the Tesla’s business
is increasing. The reducing renewable energy cost makes the company’s products more likable

and attractive. The improvement in the company’s products make the company more popular
and famous. The economic stability can also influence the Tesla’s company eliminates the
various issues or threats related to the company’s financial performances. The economic
instability in the macro environment of the Tesla company can generates various threats for the
company.
Social factors
The variables of the employees, investors and customer’s trends and special conditions
can influences Tesla’s business performances ands operations. The analysis of social factors
helps The Tesla’s business to create various development programmed by identifying several
social trends in the specific target market. The various social factors that plays a major role in the
business of Tesla such as enhancing wealth distribution in great markets, enhancing preference
for new car development and enhancing popularity about the new products of the company. The
organization will analysis various opportunities to expand their multinational business. The
attractiveness towards the low carbon lifestyles creates a better opportunities for the Tesla’s
company. In the PESTEL analysis framework, all the external factors of the company improve
the market demand of electric vehicles and various products of the company. According it, Tesla
has a big opportunity to expand their market base and enhance its financial performances through
enhancing wealth distribution in expanding market. This can enhance the number of potential
customers of the organization’s expensive cars. By gaining the various opportunities from social
factors, Tesla can expand its business internationally.
Technological factors
It described the impacts of number of technologies that can influences the Tesla’s macro
environment. The great advancement of Tesla’s energy and automotive solution business totally
dependent on technologies in the market (Amran and et.al., 2016). For example, the material
engineering technologies of the Tesla will define the cost efficiency of the batteries of company.
Various technological external factors play a effective role in the development of company’s
business such as great advancement in technological changes, enhancing automation in the
Tesla’s business and the high level of acceptance of online mobile systems. The advancement in
technology is a threat and also an opportunity for the company ‘s business. The available
products technologies in the market creates a huge opportunity for expand company’s business
globally. The trend of business automation creates large opportunity for the company by
adopting several technology. By accepting this opportunity, Tesla uses automation technologies
in their business process. The huge trend of online mobile systems promote the company’s
business internationally. Tesla can enlarge their business by adopting technological
advancement.
Environmental factors

The various environmental factors can influence the company’s business deeply.
Nowadays people are very conscious about the environment protection and safety. They prefer
the specific company who uses environment friendly products. Several factors can largely
influence the Tesla’s business such as climate change, increasing awareness regarding waste
disposal and rising environmental programs (Lieder and et.al., 2017).
The Tesla has various opportunities to expand its electric vehicles according to the focus
on climate change, increasing awareness regarding waste disposal and rising environmental
programs. The company’s solar panels, batteries and electric vehicles are suitable in concerning
these external factors related to environment and business sustainability.
Legal factors influencing Tesla’s business
Laws and many legal systems directs the company’s business development and
managerial decisions. The regulatory factors can largely influence the business’ operations and
external activities. for example, If the company’s marketing mix established within the legal
constraints (Moseley III., 2017). There are various legal factors that can impact company’s
strategies such as the regulations of energy consumption, the protection of increasing
international patent and the regulation of dealership sales in the UK.
As a opportunity, Tesla can enhance its business overseas through the protection of
enhancing patent protection. For expanding the company’s energy solution products and electric
vehicles they can use the energy consumption regulations. The organization can also expand
their business internationally through direct sales. This factor also has a threat, that various other
state of UK do not allow the direct sales and applied the strict regulation of acquisition of
dealership to deal with customers. It is a lengthy process and creates a lot difficulties for the
business.
LO2
P2 Analysis of the internal environment and capabilities of a Tesla company
The impact of the internal environment and capabilities of a Tesla company will be
analyzed by SWOT analysis. SWOT analysis highlights the strategic capabilities of a company
and major problems from external environment of the organization. All these elements can
largely impact on strategic development of their company. The SWOT analysis also assist the
business to effectively development in future Courses of actions and strategic options.
Strengths
There is numerous strength within the Tesla Company that assist the business to compete
in the global market and gives a high competition to the automotive industry. The Tesla
Company gives their full concern on outsourcing of secondary parts or components that reduce

the products cost and assist to keep low cost of products that creates a huge customer base. The
company mainly focus on the technological advancement. The Tesla’s upgraded research and
development department creates a advance productivity electric power train and battery systems.
Their high technologies will make the company able to stand against various competitors in the
market. The Tesla wins motors trends car of the year award 2013 (Strategy., 2017).
Tesla use lean management system to encourage their employees to work together. It will
directly increase the productivity and performances. This also creates a simplify process of
decision making, eliminate writing proposal, its submission and give direction by the chain of
command (Dahlberg, Hokkanen and Newman., 2016). It developed the relationship and trust
between managers and employees. Company has acquired various well established company’s
investors like Google and also develop the great strategic partnerships with Toyota motors,
Panasonic and Daimler. The successful partnership generate a huge benefits for Tesla company
because they share their expertise in specific field and improve the technologies and production
process. It also creates huge trust of customers and investors on the Tesla’s operational and
production activities. The effective partnership increase the Tesla’s brand recognition.
Tesla has numerous stores and distribution channels that provide good distribution of
their products. It create a high traffic of retail locations to improve company’s interaction with
customers, linked with digital marketing and e commerce. It save money, enhance sale efficiency
and remove franchise dealership (Hart, Sharma and Halme., 2016). The Tesla has strong
financial structure to tackle any critical and complex issues of external factors. The company
also has a ability to compete the automotive industry in a very efficient way.
Weaknesses
Tesla’s major weakness is the lack of liquidity. In the 2013, Tesla have lost approx 70
million because of the huge debt. in this situation, Tesla had decreased its power to control
operational cost and gain planned reduction of cost. The Tesla has limited capacity of
manufacturing, they have only Fremont factory for manufacturing activities, so that company
become failure to meet high customers demand and unable to fulfill the customer’s expectations
according to their requirements and desires. Tesla also suffers with the shortage of lithium
battery cell and huge reliance on distributers. This activities can harm company’s brand image
and reputation due to failure in delivering vehicles delay. For that delayed delivery, customers
get depressed.
In 2003, Tesla motors founded and in that time, company having shortage of operating
history, limitation of expertise in industry of auto- manufacturing and less brand recognition in
the market.
Opportunities

The external environment factors of the company creates various opportunities for the
Tesla (Eaton and Kilby., 2015). Now a days, customers are very aware about the significant
benefits of electric car because it doesn’t requires fuel, petrol and unnecessary expenses. It has
other benefit also, it enhancing the customers concern about the global warming and
environment pollution so that its is a very great opportunity for the company to create high
demand for its automotive products and vehicles (Pisano., 2015). The UK government developed
various subsidy programs and offers loan to green energy industries. It helps the companies to
make additional investments on their business and expand business internationally.
Various government incentives for the companies who support ‘green’ and also
encourage huge customers base towards the Tesla organization and purchase this types of eco
products. The Tesla uses market segmentation to identify the customer’s choice and desirers. All
these opportunities can enhance the company’s performers and productivity of more vehicles. It
also increase huge market share and more profitability for the Tesla.
Threats
The major threat of Tesla is huge competitors in the automotive industry. There are many
manufactures enters the market with high technologies and technological advancement. Their
great capacities of economic scale and high experience in this industry can reduce the Tesla’s
market share and reputation. So that, company will have to decrease its products costs and create
lower profit margin. It can reduce the customer base (Theoharakis, Bicakcioglu and Tanyeri.,
2019). Customers are very attractive towards the automatic car; it will encourage more
competitors in the automotive industry. Several issues relating to the electrical car like catching
fire by smoke will discourage customers for purchase of electrical vehicles.
McKinsey 7 S
Strategy- tesla strategy is completely based on producing electric cars. They want to transform
automobile sector. Also, company want to accelerate world transition to sustainable energy.
Hence, this strategy is suitable to tesla goal.
Structure – the company structure is designed for single category. It is because they only
manufacture electric car so similar to divisional structure is followed by them. Here, it include
division like energy, HR, marketing, etc.
Systems – as company is highly innovative the systems used by them are advance and highly
technical. For example- BIS, KMS, etc. are system used by them.
Staff – the staff hired by tesla possess high skills and knowledge. They are usually specialized in
respective field. Moreover, there is specific process followed to provide training to staff.
Skills – the company focuses on providing training to employees so that electric cars can be
produced. They sharpen their skills and knowledge.

Shared values – the business main objective is to maintain sustainability in auto sector. The
managers and owner share common value of innovation.
Style- tesla organization culture shares common norms. They focus on improving social life of
people. The management style followed is flexible.
VRIO
Value- The firm have the production process called coefficient production. Its most potential
value is CEO Elon musk. The vision and skills will allow company to become global leader.
Rarity- Firm is also producing rare products that is electric car as it is the only firm that focuses
on using technology. They are having powertrain technology and most advance manufacturing
plant.
Imitability '- its resources and innovative design can not be imitated. It means tesla produce
innovative design cars that allow them to stay ahead of rivals.
Organisation- business model of tesla is aligned with global expansion. They own sales and
service centres.
LO3
P3 Porter’s Five Forces model for evaluating the competitive forces of a Tesla
organization
Porter’s five competitive forces model is used in the strategic analysis. Strategic analysis
is used for generating attractiveness towards the company and searching a effective strategic
innovation that can enhance the company’s profitability and improve their performances.
The threat from new entrants – In the automotive industry, the major threat is entrance of new
competitors. In the 2003, the entering of the competitors of electric automotive industry is very
high. Tesla faced various challenges as a new entrant in the market. They faced various financial
troubles such as lower capital investments, limited distribution channels and unable to build
company’s brand because of huge competitors (González-Rodríguez and et.al., 2018). The
company has less capabilities and less support of government programs will reduce productivity
of electric vehicles.
The bargaining power of buyer – The high bargaining power of the customers can generate
diverse impact on the company’s performances. Tesla’s partnership with the Toyotas and
Daimler is very important because it is very beneficial for Tesla, it creates market share and
profit for the company. For maintaining that relationship, Tesla had reduces it bargaining power.

The various government policies like government incentives gives tax credit deduction to
customers, that can reduced bargaining power.
Threat of Substitution – The threat of substitution is low in automotive industry because of
limited choices in the electrical cars (Razak and et.al., 2016). In the automotive industry, there
are very less substitution available in the market. Biking or walking can be substitutes of this, but
it is very inconvenient and uncomfortable for long distance. Thus, much transportation like
buses, subways and trains are substitute which are appropriate for distant and local travelling. So
that, for the convenience people, they prefer own car for travelling.
The bargaining power of suppliers – the Company largely dependent on the suppliers that can
enhance the power of suppliers. For the various materials and parts, Tesla highly depends on the
suppliers. It will encourage the suppliers to increase their cost or prices, that diversely reflect on
company’s reputation or image. The Tesla deals with about 200 suppliers across the world for
purchase many components. For the Tesla, Many suppliers are single source of material or
components.
The intensity of Rivalry in the industry – In the automotive industry, the rivalry is very
competitive. In the electrical vehicles market, the position of Tesla is varies. Rivalry is modest,
because many competitors indulged in eighteen different current models (Buckley, Burton and
Mirza., 2016). These models such as Nissan leaf, Chevrolet volt and Ford focus BEV. The
market of car companies is very attractive and developing very fast. The many companies
including Audi, Volkswagen and BMW has entered the market with their advance technologies
and effective plug in models. Various companies in that industry trying to develop their niche
and creating many alternatives like environmentally friendly cars and turbo diesels for small
performance, biodiesel cars and hybrids. So that. Tesla will require to keep improving,
innovative and create more better cars.
Porter’s five forces effectively help the company in their future growth and development.
It is favorable for enhancing company’s performances and productivity for a long term period.
The market of automotive industry is very competitive and very attractive for competitors or big
players in the market. The porter’s five forces used in the Tesla Company to recognize various
impacts of competitors on the business of Tesla organization. It can help the company to develop
their stability in the whole automotive market (Balon and et.al 2019). It is effective model that
can assist the business to enhance their performances by providing important facts. The porter’s
five forces model used by the Tesla to identify the impacts and influences of developed
competitors of automotive industry. It makes the company’s structure more strong so that their
business can stand against several competitors in the market and create their unique image in
market. It also attracts the huge customer base and encourages them towards the company and its
products.

LO4
P4 Range of theories and concepts in strategic planning
Vision To create most compelling car company of 21st century
Mission To accelerate world’s transition to sustainable energy
Core value Tesla core value is to do the best to use technology in effective way. Also,
they want to encourage people to respect environment.
Objectives  To expand into global market and generate revenue of 15%
 To increase customer base up to 20%.
Strategies Porters five force
The threat from new entrants - In the automotive industry, the major
threat is entrance of new competitors. In the 2003, the entering of the
competitors of electric automotive industry is very high. Tesla faced various
challenges as a new entrant in the market.
The bargaining power of buyer – The high bargaining power of the
customers can generate diverse impact on the company’s performances.
Tesla’s partnership with the Toyotas and Daimler is very important because
it is very beneficial for Tesla, it creates market share and profit for the
company.
Threat of Substitution – The threat of substitution is low in automotive
industry because of limited choices in the electrical cars. In the automotive
industry, there are very less substitution available in the market.
The bargaining power of suppliers – the Company largely dependent on
the suppliers that can enhance the power of suppliers. For the various
materials and parts, Tesla highly depends on the suppliers.
The intensity of Rivalry in the industry – In the automotive industry, the
rivalry is very competitive. In the electrical vehicles market, the position of
Tesla varies. Rivalry is modest, because many competitors indulged in
eighteen different current models.

Ansoff matrix Ansoff matrix- this strategy can be implemented by tesla which will enable
them to expand in new markets. There are many strategies in it.
Product development- it is a strategy in which company can develop new
products and sell them in existing market. It will help in attracting new
customers and increasing sales.
Market development- it is a strategy where firm can expand in new market
with its existing products. this allows business to attract more customers and
generate revenue from new market.
Market development -here, company focus on expanding into new markets
with existing products. the aim is to generate revenue and attract new
customers.
Diversification – in this strategy business expand in new market with new
products. the main aim is to business expansion. A high risk is involved in
this
Tactics
(marketing mix)
As TESLA tends to offer wide range of products at the low cost, by focusing
on the focusing on the product and price elements of the marketing mix.
TESLA also focused on the remaining 4 P's i.e. product, process, promotion
and place.
Marketing mix Product – the product offered by company is electric car which includes
highly innovative features and design.
Place – the electric car can be provided at stores of tesla in different
countries.
Promotion – there are various platforms through which product can be
marketed. It includes social media, website, TV, newspaper, etc.
Price – the price of electric car can be offered at low cost as compared to
competitors.
Implementation/
Control
(resource allocation
The resource allocation and control measures explain how the resources are
allocated for the betterment of the organization and what control measures
are adopted in order to effective utilization of the resources in the