Business Strategy Report: Tesla Motors' Competitive Environment

This report provides a comprehensive analysis of Tesla Motors' business strategy. It begins with an introduction to business strategy and Tesla's position in the electric vehicle market. The first task involves a PESTLE analysis, examining the political, economic, social, technological, legal, and environmental factors impacting Tesla. A SWOT analysis is also conducted, identifying the company's strengths, weaknesses, opportunities, and threats. The report then delves into a competitive environmental analysis using Porter's Five Forces model, assessing the bargaining power of buyers and suppliers, the threat of substitutes and new entrants, and the rivalry among existing players. The second task evaluates different types of strategic directions, offering recommendations and outlining a strategic management plan. The report concludes with a summary of the key findings and a list of references.

Business strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
PESTLE and SWOT analysis of the company............................................................................1
Competitive environmental analysis of Tesla..............................................................................4
TASK 2............................................................................................................................................6
Evaluation of different types of strategic directions....................................................................6
Recommendation.........................................................................................................................6
Strategic management plan..........................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business strategy can be defined as a set of competitive actions & business model that is
being used by companies in order to attract customers and compete successfully. This present
study is based on Tesla Motors that is an American automotive company whose headquarter is in
Palo Alto, California, US. This company is specialize in electric car manufacturing. This
company was founded by Martin Ebenhard, Marc Tarpenning, Elon Musk and J.B. Straube on
July 1, 2003. It builds all electric and infinity scalable clean energy generation & storage
products. This study is going to tell about external macro environmental factors like political,
social, technological, economical that have impact on this automotive company to the great
extent (Wen, 2016). With the help of PESTLE analysis it makes itself able to analyse positive
and negative impacts of all external factors and then take corrective actions accordingly.
Competition is also increasing rapidly and by using Porter's 5 forces model it analyses
competition factors and see its current position in the market. Strategic plan also plays an
important role as it helps this company to strengthen all those areas which required to be
improved for achieving its goals.
TASK 1
PESTLE and SWOT analysis of the company
PESTLE analysis: Tesla produces a variety of products and operates in different
countries so it has to face various problems and there are various external factors that impacts on
its performance and operations. It has been stated that this company is a reflective and
appreciated because of its way of addressing and handling all external factors in the industry
environment.
Political: It is being stated that national and state government is encouraging this
industry and for that it has taken initiative. This initiative which has been taken by the
government, Tesla company can take opportunity and have positive impacts on its performance
and can increase its sales of electric vehicle. There are political stability in various markets for
the auto mobile industry which is also beneficial for Tesla company as it makes environmental
situations favourable (Gary and Heiko, 2015). Tesla organization have some opportunities from
political factors such as new global trade agreements and political stability in several developing
1

countries where it operates. Political stability give opportunity to the company to the great extent
as it helps them in market penetration and take competitive advantages.
Economical: There are various economic factors in which some have positive impacts
and other have negative impacts on its activities. Increment in the global economy has positive
impact as it is rising the sales of electric vehicles. There is a dip in the prices of electric batteries
in order to make all electric vehicles affordable for people which can increase the profitability of
Tesla company by achieving 30%v profit on its flagship Sedan models. Economic stability issues
are threat for the company. On the other hand renewable energy costs are decreasing which is an
opportunity for the company because this company is more famous for its renewable energy
solutions.
Social: Tesla is famous for its electric cars, nowadays more people are becoming eco-
friendly which is good for Tesla motor company. By producing more electric cars it can satisfy
social needs as well as environmental needs because it eliminates the use of fuel. Electric cars
are affordable also as it does not require maintenance and running cost that makes this company
more sustainable. More customer are preferring to buy renewable energy that is an opportunity
for Tesla company. Increasing interest of people of different countries can increase their sales
and profitability.
Technological: Changes in the technology in this industry have positive and negative
impacts as well. By investing in more in research & development and in advanced technology it
can make its products advanced and innovative. It can also make its strong position in the
market. On the other hand investment in technology can increase its overall cost which is not
good for the company (Phadermrod, Crowder and Wills, 2019). High rate of technological
change is an opportunity and threat somehow. If this company has strong financial stability then
this factor can give them opportunity. On the other hand, instability of finance can increase their
cost. Increasing automation in business is also opportunity for the company.
Legal: There are various laws and regulations has been imposed by various governments
that are related to auto mobiles standards which put pressure on this company to follow all
standards with effectively. Sometimes it has negative impacts on its performance level. It has
been stated that due to some laws Tesla sales was temporarily blocked directly from
manufacturer to its consumers by many states. It is important for the company to comply with all
regulations in order to run business activities smoothly. Dealership sales regulations in the US is
2

somehow threat and opportunity for the company. On the other hand it has some opportunities
from legal factors to safety expand its business and considering expanding international patent
protection.
Environmental: There is increasing concern towards greenhouse gas emission which is
being produced by auto mobiles manufacturing processes. For being in the competition and
satisfying environmental needs it is important for Tesla motor company to focus on this issue
and reduce wastes. In the context of environment impacts, Tesla motor has improved its brand
image by focusing on making its supply chain to be more energy efficient. Rising standards on
waste disposal also provide opportunity to Tesla motor company. Now Tesla is more focusing on
increasing environmental friendly products in order to become sustainable business. It can help
them in increasing their profitability by improving brand image.
SWOT analysis: SWOT stands for strengths, weaknesses, opportunities and threats.
Tesla company has vision and mission statement & objectives as it wants to speed up the world's
transition to sustainable energy. For achieving its objectives and set vision it is very important
for Junior strategic manager to identify its core strengths and weaknesses. By identifying and
analysing strengths it can make itself able to get and achieve opportunities from this industry. On
the other hand by analysing weaknesses and threats it can make changes in its strategic planning
and strategy to remove all weaknesses and can become the market leader in automotive industry
(Fozer and et.al., 2017). SWOT analysis is the best tool of achieving objectives and increasing
strengths. Some core strengthen, weaknesses, opportunities and threats of Tesla company are
described as below:
Strengths: Strengths refers capacity and the ability of doing all the things with productively and
effectively. A set of strengths of Tesla company are:
 The main strength of Tesla motor company is it has the highest level of customers
satisfaction by providing the best quality products and services to them.
 It has shown its superb performance in the new and developing markets which has also
helped this company to build a new revenue stream.
 The other main strength of this company is it has strong and powerful brand portfolio
over the years which helps them in attracting a larger number of customers towards
buying its products.
3

Weaknesses: Weakness can be defined as a state of being weak and a lack of strengths in some
areas. Some weaknesses of this company are:
 The main weakness of Tesla motor company is it lacks in forecasting about products
demands by which it has to lose several opportunities (Widya Yudha, Tjahjono and
Kolios, 2018).
 The other weakness of this company is it has high attrition rate in its work force as
compared to its competitors in this particular industry. Due to this, it has to invest more
on training and development programme which increases its overall cost and time.
 Its organizational structure is not that much effective as it is only compatible with current
business model, so it can limit expansion in adjacent product segments.
Opportunities: An opportunity is a situation and a set of circumstances that makes a company
and an individual able to do something which they want to do. Tesla company has some
opportunities which includes:
 The most important benefits and opportunity for this company is new taxation policy
because this policy positives positive impacts on its activities as it makes it able as well
as ease the way of doing things.
 It has adapted new technological standards that has provided opportunity to this company
to enter a new emerging market and increase sales (Phadermrod, Crowder and Wills,
2019).
Threats: A threat is something that can cause damage and danger. Threats of this company are
as follows:
 Rising pay level in this industry is a threat for Tesla motor company.
 The demand of those products that give its high profits are mostly seasonable.
Competitive environmental analysis of Tesla
As a Junior strategy manager, it is important to analyse all factors that are responsible and
increasing competition for the company. There are mainly 5 factors and forces that increases
competition level in this particular industry. With the help of Porter's 56 forces analysis tool,
Junior strategy manager can effectively analyse competition factors which includes:
Bargaining power of buyers: Customers plays an important role in this industry as they
are the main direct factor that can influence and determine company's sales revenues. There is an
increasing of low switching cost which is good for customers to purchase cars from other
4

providers and it is not good for Tesla company because it can decrease their sales. Price
sensitivity also affects customers' buying bargaining power. For buying products and cars at
affordable price they have ability to go for substitute products and those provider which provides
cars at lower prices (Gary and Heiko, 2015).
Threat of substitutes: This industry is increasing rapidly and for earning money most of
the businessman is switching their business in this industry and provide substitute products. Low
switching cost make competitors and other providers able to offer their products and being in a
competition. When customers find the product which has similar benefits and characteristics
with affordable prices, then they prefer to purchase those products which is not good for existing
and Tesla motor company.
Bargaining power of suppliers: All type of businesses and Tesla motor is wholly
depend on the reliability of suppliers. Suppliers in this industry have a low level of forward
integration. There are various types of suppliers as some of them choose and take help of third
party to sell their materials to Tesla while rest of them directly sell to the company and this factor
imposes a moderate force on the company. This bargaining power has negative impacts on Tesla
motor company.
Threats of new entrants: There are various new firms are increasing in this industry
which is increasing competition level. But it also can be said that it is difficult to compete with
Tesla. It has high cost of brand development and also has popularity. This company also has high
costs which is a barrier for new entrants and good for existing and Tesla corporation. There is a
less chances of having negative impacts of this factor on the performance of Tesla.
Rivalry among existing players: Tesla motor company is operating in a highly
competitive market as it is strongest and recognizable brand for electric vehicles. There are
various companies in this industry that are increasing competition such as BMW, Volkswagen,
Jaguar etc. Electric cars are increasingly gaining popularity and becoming more and more
affordable by which all existing players in this industry in focusing on producing electric cars
(Schawel and Billing, 2018). It is not good for Tesla motor company because it can decrease
their profitability and sales as well.
5

TASK 2
Evaluation of different types of strategic directions
There are various type of strategy which can be adopted by Tesla in order to take
competitive advantages and increasing sales. Some different strategies include growth strategy,
product differentiate strategy, price skimming strategy, market development strategy and
acquisition strategy. With the help of Ansoff matrix different strategies can be evaluated. It has
mainly 2 approaches for developing a growth strategy by seeing that what is sold and who is sold
to like market growth and products growth.
Market development: Market development is a growth strategy as in this strategy
company seek the new market for selling and introducing its existing products to new customers
and market. It includes various strategy by which an organization can easily approach new
market by exporting its products and services to a new country. By using new and innovative
distribution channels and also using different pricing strategy for attracting different customers
(Huizingh and McCarthy, 2015).
Market penetration: It is also a growth strategy in which the company need to focus on
selling its existing products in existing market where it is operating already. For market
penetration there is a requirement for Tesla company to achieve some objectives which includes:
To secure dominance of growth market, to increase usage by existing customers, for that it can
develop loyalty scheme.
Product development: In the product development strategy, company requires to
introduce its new products into existing markets. For making this strategy successful there is a
need of development of new competencies & business to develop its new and modified products.
By focusing and investing in research and development, Tesla can develop its new products.
Diversification: It is a complex and risky strategy because in this strategy company
needs to launch and develop its new products in new markets. For making this strategy
successful and for achieving its goals the company must have a clear understanding and idea
about what it wants to achieve from the strategy and also need to assess all the risks which can
have impacts on it (Rommer and et.al., 2015).
Recommendation
From the study it can be recommended that Tesla motor company should focus on market
development approach of Ansoff matrix. By focusing on market development it can reach
6

globally and can attract more customers towards their products. It is a risky strategy than the
market penetration because there is a need of targetting a new market which can take a lot of
time and cost but an effective strategy for increasing sales. This company should also focus on
expanding its business globally in order to take opportunities of free trade agreement and also
focus on increasing its marketing aggressiveness with the main aim of increasing its market
shares. Tesla motor company must focus on addressing all those factors that have negative
impacts on its performance for maintaining and improving its competitiveness. It should also
improve its multinational presence by providing new facilities in high potential developing
countries. By more focusing and investing in research and development it can make its products
advanced and sustainable company.
Strategic management plan
Strategic management plan is a document that is being used by Tesla motor company to
communicate its goals, operation and others thing within the organization. As it wants to focus
on market development so it is important for Tesla to make a strong strategy. It also helps them
in ensuring that all the workers are performing towards achieving a common goal. Tesla makes
the best strategy plan in which uses various tactics which includes:
Vision: Vision of Tesla motor company is to create the most compelling car company of
the 21st century by riving the world's transition to electric vehicles. The meaning of this vision
statement is to develop and integrate advanced technology in its products for expanding its
operations.
Mission: Mission of this company is to accelerate the world's transition to sustainable
transport. The meaning of its mission statement is it wants to make its position and have
expectations of become successful dominance in the global market for electric auto mobile.
Organizational culture: In the context of culture it uses the best corporate vulture which
has various characteristics. Its culture encourages its employees to increase their strengths and
generate new and creative ideas and solutions as well. It can be said that it has an innovative
problem solving culture that provides it various opportunities and make it employees able to
think like an owner (Kerzner, 2019).
Strategic direction
Tactics: In the context of tools and tactics it uses marketing mix that includes products,
promotion, place and price. The main control of this company is on maintaining all components
7

of its marketing mix. This control and maintenance increase its effectiveness to reach its target
customers. 4P's of this company are being described as below:
Products: This component of marketing mix identify Tesla's products that it wants to sell
to its target market. It sells various products which provide value to customers for which they
pay like auto mobiles, batteries, electric vehicles power train components.
Place: This component shows the place and venue that is being used by Tesla motor
company in order to reach its target customers. In the context of place it sells its products
through its official Website, Its owned stores & galleries and its owned all service centres.
Promotion: This element of marketing mix cover and analyse tactics & strategies which
are being used by this automotive company. It uses various promotional strategy and marketing
methods such as viral marketing, personal selling, sales promotion, direct marketing & public
relations (Lee and et.al., 2018).
Price: It analyses and covers pricing strategy which is being used by the Tesla motor.
This company uses premium pricing strategy. This pricing strategy of this company uses the high
prices points because it is based on the uniqueness. Customers do not hesitate to pay high prices
for Tesla auto mobiles because it provides valuable and eco friendly products.
Implementation: It also makes use of 5 M's which helps them in achieving its pre
determined goals. It includes man, materials, machine, money and methods. There are some
important components without that the company can not think about to run their business.
Man: In the management man refers human resource. Without this implementation and
component, it is not possible for Tesla motor company to flourish and perform all functions.
Material: Materials can be defined as ingredients that is required for manufacturing of
products. Materials includes raw materials by which the company produces their final goods.
Machine: The basic and important tool for producing and generate services are
machines. It helps the company in enhancing efficiency and also save their production time.
Money: Money is the important component that plays a vital role in management of
Tesla's operations. Without money it is not possible to carry out further processes. For producing
products there is a requirement of material and man and without money, the company can not
buy materials and pay to man and employees.
8

Methods: The way of doing and performing functions and activities are called method.
Tesla company uses the best and appropriate methods for producing products and provides it to
their customers.
So it can be said that Tesla motor company uses the best strategy which make it able to
increase its profitability and sales.
CONCLUSION
From the above study it can be summarized that internal and external analysis played a
vital role for any type of company as it helped them in analyse all business environmental factors
that have impacted on the performance and activities of their business. It has various external
factors that impacted to the company in a positive and in a negative manner and with the help of
PESTLE analysis it made itself able to decrease all negative impacts of that factors and take
opportunities of those factors that have positive impacts on it. Further this study has shown some
strengths, weaknesses, opportunities and threats of automotive industry which hindered and
fostered from internal factors. Strategic plan also played a significant role as with this help it
reduced its weaknesses and those factors which has become barrier in the path of its success.
9

REFERENCES
Books and journals
Fozer, D. and et.al., 2017. Life cycle, PESTLE and multi-criteria decision analysis of CCS
process alternatives. Journal of cleaner production. 147. pp.75-85.
Gary, J.E. and Heiko, A., 2015. The future of foresight professionals: Results from a global
Delphi study. Futures. 71. pp.132-145.
Hardman, S., Shiu, E. and Steinberger-Wilckens, R., 2015. Changing the fate of Fuel Cell
Vehicles: Can lessons be learnt from Tesla Motors?. international journal of hydrogen
energy. 40(4). pp.1625-1638.
Huizingh, E. and McCarthy, K.J., 2015. The Innovation Portfolio Risk Matrix: An Empirical
Test. In ISPIM Conference Proceedings (p. 1). The International Society for
Professional Innovation Management (ISPIM).
Kerzner, H., 2019. Using the project management maturity model: strategic planning for project
management. Wiley.
Lee, G.Y. and et.al., 2018. Machine health management in smart factory: A review. Journal of
Mechanical Science and Technology. 32(3). pp.987-1009.
Olson, E.M. and et.al., 2018. The application of human resource management policies within the
marketing organization: The impact on business and marketing strategy
implementation. Industrial Marketing Management. 69. pp.62-73.
Phadermrod, B., Crowder, R.M. and Wills, G.B., 2019. Importance-performance analysis based
SWOT analysis. International Journal of Information Management. 44. pp.194-203.
Rommer, P.S. and et.al., 2015. 7-Tesla MRI demonstrates absence of structural lesions in
patients with vestibular paroxysmia. Frontiers in neuroanatomy. 9. p.81.
Schawel, C. and Billing, F., 2018. Ansoff-Matrix. In Top 100 Management Tools (pp. 31-33).
Springer Gabler, Wiesbaden.
Wen, W., 2016. Automation of electric vehicle and development prospects.
Widya Yudha, S., Tjahjono, B. and Kolios, A., 2018. A PESTLE policy mapping and
stakeholder analysis of Indonesia’s fossil fuel energy industry. Energies. 11(5). p.1272.
10