Business Strategies of Tesla Inc.: A Comprehensive Report

This report provides a comprehensive analysis of Tesla Inc.'s business strategies. It begins with an introduction to business strategies and the company profile. The report then analyzes the macro environment using the PESTEL model, examining political, economic, socio-cultural, technological, environmental, and legal factors influencing Tesla. Next, it delves into the internal environment, utilizing SWOT analysis to identify strengths, weaknesses, opportunities, and threats, and VRIO analysis to assess the value, rarity, imitability, and organization of Tesla's resources. The report further evaluates the competitive forces affecting Tesla using Porter's Five Forces model, including the threat of new entrants, bargaining power of suppliers and buyers, and the threat of substitution. Finally, the report concludes with an overview of the findings, highlighting key strategic considerations for Tesla's future.

Business Strategies

Table of Contents
INTRODUCTION...........................................................................................................................1
P1. Analyse the impact and influence of the macro environment on organisation ...................1
P2. Internal environment and capabilities of organisation..........................................................3
P3. Porter's Five Force model to evaluate competitive forces of organisation...........................5
P4. Evaluation of models to interpret and devise strategies planning for organisation.............7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business strategies can be referred as overall decision taking for organisation and its
operations (Akter and et.al, 2016). It includes combination of all strategies and decision making
for benefit of business. Effective business strategy leads to growth of company and earning of
high amount of profits. These strategies are consider as a backbone of company and provide a
road map for which help in leading towards desirable goals of company. Chosen company for
this report is Tesla,Inc. This organisation is an American automotive and energy company with
its headquarters located in California US. It is also known as Tesla motors and its is providing its
services worldwide. Tesla company was founded in July, 2003 by martin Eberhard and Marc
Tarpenning. This assignment consist of study of macro and micro factors of environment in
which business operates with their impact on business. This assignment also includes evaluation
and analysis of porters fiver force model with respect of chosen company. Different models has
been used to interpret and devise strategic planning for company.
P1. Analyse the impact and influence of the macro environment on organisation
Macro environment consist of all those factor of external environment which affect
function of Tesla company and overall functioning of business. To identify impact of these factor
PESTEL models is used which help in evaluating impact macro environment (Brewster, 2017).
Political Factors: Political Factors under PESTEL analysis usually includes the impact
of government policies and rules on business environment. Under UK market government have
interference and create various policies that effects working conditions under various business.
For instance Tesla is enormously affected with government policies on trade that has limited
industrial performance and overall company's revenue. Opportunity: New global trade policies agreements made by government act as major
opportunity of Tesla because this has company in expanding itself in other major parts of
country.
 Threat: High taxes and tariffs imposed by government have affected Tesla because this
actually results in reducing overall sales of company.
Economical Factors: These factors includes economic condition of country under which
business operation are performed. UK being a developed country has good economic conditions.
Factors covered under economic conditions are trade relations, market growth etc. Tesla
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company rules under UK market vehicle of Tesla do not produce carbon emission has compared
to traditional vehicles. Opportunity: Under economic factor major opportunity of Tesla is that is usually low
battery cost of vehicles. Furthermore this factor translate affordability for company's
auto-mobile products.
 Threat: Various government rules and regulations have created economic crisis for Tesla.
This is because government policies have affected operational efficiency and
performance of Tesla stores and created economic stability issue.
Socio-Cultural Factors: Socio-Cultural Factors under pestel analysis highlights
lifestyle , social trends and demographics that directly or indirectly affects working condition of
an organisation (DaSilva and Trkman, 2014). Tesla ensures under UK market strategies adopted
by company should maximizes business and benefit the company . Opportunity: Under Socio-Cultural factors Tesla has an opportunity to boost financial
performance of country by increasing overall wealth distribution. Moreover this wealth
distribution helps Tesla to potentially increase buyers.
 Threat: Tesla sales is majorly affected by purchasing power of customers. Therefore,
Tesla products are not easily affordable by every customer. Hence to overcome this threat
Tesla should try launching keeping in mind purchasing power of customer.
Technological Factors: Technological Factors under Pestel analysis usually covers
technology that a particular company adopts to stay in marketplace (Ghezzi, 2013). UK market is
highly advanced on technical grounds. Therefore, Tesla has adopted advanced technology for
providing best energy solutions to its ultimate customers. Opportunity: Popularity of online mobile system is an opportunity. Furthermore
company has integrate this system in its auto-mobile that have attracted new customers.
 Threat: High rate technological changes adopted by Tesla affects company. This
threatens company in terms rapid degeneration of technologies used in products.
Environmental Factors: This factor effects global business activities because it
includes climatic changes. Tesla ecological trends influence the accessibility of materials used by
company's production operations.
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 Opportunity: Tesla has opportunity to promote its electric vehicles based on climatic
changes. Moreover it can also expand environmental programs and raise standards on
waste disposal.
 Threat: Tesla produces electric cars that benefit environment, but these electric cars
requires additional resources and energy. Moreover large environmental footprints are
required.
Legal Factors: Under this part of pestel analysis basically laws and legal systems are
covered. It includes laws relating to discrimination laws, consumer protection laws, patent laws
and many more (Grover and Kohli, 2013). Tesla is expanding into several other markets so
hence they need to keep them up-to-date on their global patents. Opportunity: Major opportunity that Tesla can use is that their can safely expand its
business operations. Moreover this expansion should be used on international patent
protection.
 Threat: Threat for Tesla is that they do not consider direct sales of their products and
render dealership to sell its products in auto-mobile industry.
P2. Internal environment and capabilities of organisation
In order to analyse internal environment SWOT analyses can be use (Haley and Haley, 2013). It
will help in identifying strength, weakness, opportunity and threats of Tesla company.
Strength – One major strength of Tesla is their innovative system and process because
they always believe in adopting sustainable manufacturing process. From their vehicle of solar
energy to energy storing every product is innovative as well as sustainable. Along with this, their
sales growth of vehicle growing significantly at global level (SWOT analysis of Tesla, 2019). In
the fiscal year 2018 Tesla Motors delivered 245000 units, on the other hand in 2017 only
103,020 units were delivered.
Weakness – Tesla is offering products at high price in comparison of other brand i.e.,
Toyota, BMW, Ford and so on. Thus, high price vehicle is their major weakness as well their
products are not affordable by middle class customers. Along with this, they have capacity issue
also because there is one single manufacturing plant of respective organisation whose capacity is
to manufacture about 500,000 vehicles. It result in difficulty for manufacturer to target
increasing sale volume. Moreover, they have low market presence as Tesla are not supplying
their vehicle at global level.
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Opportunity – As discussed above that Tesla have low market presence, so they have
opportunity of global expansion in Asian market and there are some more opportunities hidden
for them in Chinese market. Along with this, they can also manufacture low cost vehicle for
middle class customers. It will be major opportunity for international growth of brand by
reducing their operational and manufacturing cost which help them in making affordable
vehicles.
Threat – Their is high level of competition within automotive industry and there are
several competitors of Tesla such as Ford, general motors, Fiat Chrysler Auto-mobiles and
several other technology organisations like Google. Along with this, legal and regulatory
requirement are turning out costly which result in increased cost. At present Tesla is operating in
several nations which simply means that company have to deal with legal as well as political
rules and regulation within those nations.
VRIO analysis of Tesla
VRIO analysis is used for evaluating importance of organisation's resources and
capabilities. Futuristic design, Brand awareness and Elon Musk are few resource & potential of
Tesla which is analysed in following table:
Resource/
Capabilities
Value Rare Imitable Organisation
Brand Awareness Yes No
Futuristic design Yes Yes Yes
Elon Musk Yes Yes No Yes
Valuable – All the three above mentioned resources/capabilities are valuable for Tesla.
This company may not have global presence but their name has good brand value at international
level. Designing of Tesla's cars are appreciated at by every experts in the industry and they are
very popular amount customers. Determining value of company's CEO, Elon Musk in monetary
terms is not possible but he is considered as the most important asset of organisation.
Rare – Futuristic design is a rare feature of cars sold by Tesla as none of the leading firm
of auto-mobile company has produced similar kind of cars till now. But brand awareness enjoyed
by enterprise is not rare as there are many firms who are recognized at global level. Elon Musk is
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undoubted a rare asset as his entrepreneurial skills and talent is unmatchable. Brand awareness
provide competitive parity to Tesla.
Imitable – Futuristic designs may be valuable and rare but they can be imitated by others.
Rivals cannot copy same design but launching similar designs in car is not a difficult task. Elon
Musk is a person and duplicating his personality is not possible. Futuristic designs are providing
temporary competitive advantage to Tesla.
Organisation – Elon Musk is most important person in the company and organisation is
utilising his capabilities in best way possible. Their are many automotive companies with deep
pocket but they do not have a human resource like him. He is going to provide long term
competitive advantage to Tesla.
P3. Porter's Five Force model to evaluate competitive forces of organisation
This model provide an analytical framework to company which represent five individual
forces that helps in determining the competitive landscape of an industry. Porter's five force
model was developed by Michael porter with aim of providing strategic management tool to
analyse industry as well as it helps in understanding underlying levers of profitability of
company in a particular industry (Hoejmose and et.al, 2013). This model will help Tesla
company in evaluating and identifying its competitive forces which help in earn more profits and
market share of company. Tesla company Porter's five forces which help in strategic planning
are as follows:
Threat of new entrants
Tesla have threat of new entrant in this industry as new company can offer more advance
products to customers. New company can use new and innovative technology in developing its
products. New entrant can have impact on overall industry environment as well as it affect
performance of Tesla company. This external factor have quite low impact on Tesla company as
new entry requires huge cost in operating its business activities. New company will take time to
build its brand image in market and customers mind. It is very difficult for new entrant to
generate huge profit and able to use more updated technology in its business (Klettner and et.al,
2014).
Bargaining power of suppliers
This organisation is quite reliable on suppliers for developing its products and effective
functioning of business activities (Loorbach and Wijsman, 2013). This force have moderate
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impact on Tesla as it shows how suppliers shape the industry environment. This aspect influence
the availability of raw material in environment of industry. Suppliers of Tesla company have low
level of forward integration which means that suppliers have limited control over distribution
and sales of this company products. This external factor imposes a moderate force as size of
suppliers is average and their impact is to limited degree only.
Bargaining power of buyers
This force consist the level or impact of customers on price and availability of customers
product in market. Customers are often very demanding and they wants best offerings available
at low price. This force have high impact on Tesla company as more powerful base of customers
will have high impact on bargaining power of customers and improve their ability of seeking
offers and heavy discounts from company. Vehicles are not very affordable for everyone so
buyers are very conservative with their spending. Customers wants to select best products
according to their budget and this can leads to switching to different companies products.
Threat of substitution
Tesla company is dealing in auto mobile industry and offering new and innovation
product to its customers. Company is have to deal with threat of substitution of its products in
market (Massa and Tucci, 2013). As customers are always looking for different option of
products with better offer and discounted price in market. Customers will switch to different
company if they are getting better deal of product. So this force have moderate impact on Tesla
company as it is offering innovative products and its products have different technology which
is not available to any other company in this industry. Customers have only moderate or limited
option availabilities in market as a substitute of Tesla products.
Threat of Rival companies
this organisation is dealing with highly competitive market and have to face high
composition in this working. Tesla company have many rival company in auto mobile industry.
This external force of competition have high impact on performance of this organisation as
better strategies and technology used by rival companies can have negative impact on Tesla
business. High quality performance of competitors company can leads to decrease in market
share of company and sales of products will also decreases. There is only few number of rival
companies existing in this industry environment but they are working with highly aggressive
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marketing and promotion of their products. So this force have most of the effect on profitability
of Tesla company.
P4. Evaluation of models to interpret and devise strategies planning for organisation
To develop an effective growth strategies for Tesla company can use Ansoff matrix. This
models helps company to determine all factors and build a strategy which leads to profitable for
company (Scholes, 2015). Ansoff matrix is a tool used by Tesla company helps to analyze and
plan their strategies for growth. This model have four different alternative strategies for
company that includes market penetration, product development, market development and
diversification strategies. These strategies with context of Tesla are explain below.
Market penetration
In this strategy company is focusing on improving its sales by offering current product in
existing market area. Market penetration refers to those strategies where company wants to serve
its existing products to existing market customers customer. Tesla can also use this strategy by
serving its current products like Model S, Model X Pwerwall 2 etc. in countries where it is
already operating.
Product development
Product development strategy consist of all those strategies by company which helps in
developing new and innovative products to serve its customers (Spender, 2014). Tesla company
can use this strategy by introducing new product in existing market area. Company can conduct
proper research to identify needs and requirement of customers and develop such product which
full customer demands to attract more customers.
Market development
This is strategy where company is focusing on introducing in new market area to target
new customers. In market development strategy Tesla will serve its existing products to new
market area. This strategies will helps company to expand its market area by targeting new
customers. By this Tesla company can export its products to new geographical area by targeting
new segment of customers and increase its new distribution channels.
Diversification
In diversification strategies company is introducing new product in new market (Teh and
Corbitt, 2015). This strategy is leads to growth of business by developing new products for new
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customers. For this strategy Tesla company needs to understand need and wants of new
customers and develop such product which help in achieving requirement of new customers.
This strategies is quit riskier than other and its requires proper research about new market area
and to new product of company.
Tesla company can use market penetration strategy to capture large market share of of
current market. Company can focus on improve in its marketing and promotion strategies. This
will helps in effective communication of features of company product to customers and attract
more customers towards company. Tesla can develop such strategies which leads to acquire
market area of competitors as well.
Porter's generic model
In order to get competitive advantage in market, company needs to develop such
strategies which help company to earn more profits and market share than its rival companies
(Thompson, Strickl and Gamble, 2015). Competitive advantage refers as an advantage of
company over competitors by gaining consumer grater value either by lower price or by
providing better products and services to customers. Tesla can use four different strategies to
gain competitive advantage over other companies. These strategies, cost leadership, cost focus,
differentiation leadership and differentiation focus are mention below.
Cost leadership
In this strategies company's objective is to produce product at lowest cost. Tesla company
using cost leadership strategy will more focus on developing product with minimum cost
consuming and offering discount to customer. By this strategy company can become cost leaders
of this industry as Tesla can serve products as lowest price in automotive industry. For this Tesla
can use technology which help in decreasing cost of manufacturing or can take advantage of low
cost available raw material for its business operations. Company can offering heave discount on
its product in order to attract more customer in market.
Differentiation
This strategy refers to all those strategies when company is planning to produce new and
innovative product for customers. In differentiation strategy company have focus on develop
such product which is different from competitors products and serve great value to customers.
Tesla company can develop product in new to customer and have features which attract
customers towards their product. For differentiation strategy Tesla can select one or more
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attributes that many buyers in this industry perceive as important and unique to meet needs of
customers. Differentiation strategies can lead Tesla to set premium price for its unique products.
Focus
Focus strategies of generic model majorly concentrate on particular niche market area.
This strategy consist two variants strategies that is cost focus strategies and differentiation focus
strategies. Tesla have to focus on particular segment or a group of people in which company will
provide its product and services. Cost focus strategies can be used when company is planning to
seek cost advantage in particular target segment (Verbeke, 2013). In differentiation strategy
Tesla can plan to provide its unique products only to target customer of niche segment of market.
With the use of this strategies Tesla can narrow scope of competition.
Tesla can use differentiation strategy to build competitive advantages in market area. It
can produce products which are new and unique to customers which help in attracting customers
towards company. Tesla can focus on developing product which are environmental friendly with
use on more updated technology. For developing different product from competitors Tesla needs
to conduct good market research and develop an innovative product. This product must have
ability to deliver high quality to customers and customer must receive great value after usage of
new product. This will help increase in sales and profitable of Tesla company.
CONCLUSION
For the above report it can be concluded that its is very important to develop effective
business strategies for business overall performance. These strategies will help in determine
future direction of business and helps in identifying company position in market. In order to
develop effective business strategies company needs to identify positive and negative impact
internal and external factors. Five porter model will help in analysing growth strategy for
business. Ansoff matrix will evaluate and interpret strategic planning for company.
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