Analysis of Tesla's Corporate Strategy and Business Environment

This report provides a comprehensive analysis of Tesla's corporate strategy. It begins by examining the business environment, identifying opportunities and threats using PESTLE analysis, and assessing the competitive landscape through Porter's Five Forces. The report then delves into Tesla's internal resources and core competencies, evaluating its strengths and weaknesses, including its technological advancements, strong leadership, and control over production. Furthermore, the report discusses the importance of VRIO analysis in identifying core competencies. The analysis encompasses the external factors influencing Tesla, such as political, economic, social, technological, environmental, and legal aspects. The report concludes with an assessment of Tesla's overall strategy and its effectiveness in navigating the complex automotive and energy markets.

CORPORATE STRATEGY

Contents
INTRODUCTION...........................................................................................................................3
MAIN ANALYSIS..........................................................................................................................3
1. Discuss business environment and identify a number of Opportunities and threats..........3
2. Analyses of the resources and important competencies of the Tesla.................................6
3. Assessment of the Tesla’s strategy.....................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Corporate strategy is the vital concept for business organisation which needs to be
considered to formulate strategies or action plan to accomplish business goals or targets. Strategy
means standard or regulation with help of which firm can accomplishes its defined goals or
objectives in the stated period of time (Funk and Hirschman, 2018). In changing business
scenario, external & internal analysis of an environment play necessary role to develop strategies
which would help business firm to accomplishes business targets even given stated time. This
report will be carry on the TESLA plc, which is the American automotive and energy Company
based in the Los Angeles, USA. The firm is well known for manufacturing electric car, solar
energy, manufacturing solar panel. Apart from this, report will cover external analysis (business
environment and an industry) and resources and key competencies of an organisation, including
matter of core competencies. Along with this, report will also cover discussion of VRIO analysis
to take care and identifies core competencies of the business.
MAIN ANALYSIS
1. Discuss business environment and identify a number of Opportunities and threats.
Business environment is an overall process or structures in which firms are operating to
build correct outcomes and accomplishes business objectives in an efficient manner. Especially
in an environment, where automotive units are operating and processing chances of threats &
opportunities has its own existence (Formentini and Taticchi, 2016). In context of TESLA,
external environment such as political ups down in the UK environment has major impact,
economic fluctuation such as exchange & inflation rates have major impact on business strategic
action planning or goals preferences. During explanation of this assessment, Pestle analysis will
be led to point to point discussion along with opportunities and threats of each factor's of the
Pestle analysis. The major purpose behind discussing Pestle to identify threats pertains to Tesla
and opportunities to overcome all these issues. Also, it would help to structure right strategy to
led Tesla to accomplish corporate goals or targets into the right manner. The discussion is as
given above:
Political: There are wide range of political factors such as strict government regulation
on import & outsourcing that would impact's on this leading auto-mobile maker. Also, there are

other political factors for Tesla include such as freedom of press, rise in the corruption &
influences of the bureaucracy in local markets would impact's this firm to lead business
operation. Moreover, UK market lobbying activities by the governments & wrong trade controls
generally belong to all kind of the political factors that would affect Tesla.
Threats: Closure of business operation, being in risk of legal cases, bang to strongest
brand image are some of the threat which would impact business of the Tesla.
Opportunities: Making strict regulation against corruption, trade policy, less government
influences etc., are some of the opportunities which would scope for Tesla to develop it-self in
the market.
Economic: Range of economic factors such as inflation, exchange rate and fluctuation
into the currency would affect Tesla may be diverse (Minár, 2016). Alteration of the currency
exchange rates in comparison to pound will be noteworthy economic factors for Tesla. As, this is
because of international burden on Tesla business operations to cut down prices of the fuel
vehicles.
Threats: Decline into profit earning capacity along with economical debt burden would
be major issues in this regard.
Opportunities: Making of a financial policies as part of corporate strategy could be best
solution for this firm to overcome all these threats along with revising existing policies.
Social: Social trends such as increase in number of car vehicles for increasing social
status would effects firm’s macro-environment through employees, customers, investors etc. Due
to increase in using cars, Tesla is in pressure to expand its production process which would
simply cause’s pollution.
Threats: Increasing pollution and burden on people per capita income will be major issue
with the Tesla.
Opportunities: Improving wealth distribution along with giving preferences for using of
renewable energy is suitable strategy for Tesla.
Technology: Rise of the technological preference such as specific engines, advance tech
usage etc., Tesla is highly forced to takes change into their idea of car and solar products. Using
higher technology will be burden for this leading auto-mobile to maintain cost of manufacturing
to maintain durability of a business profits.

Threats: High rate of the technological change, in which firm needs to be spend more or
might be lack of sufficient resources could be another option.
Opportunities: Increasing automation in business & increasing popularity of the online
mobile system will be suitable option for Tesla to overcome these issues.
Environment: Increasing environmental influences such as protection of the pollution,
creation of less gaseous environment etc., led impact on Tesla to invest money to ensure that
environment should be protected in an effective manner (Keyes, 2016). Cost fluctuation & down
of profitability would be impact of environmental factors.
Threats: Cost expansion & profit decrease would be threat for Tesla which they needs
has to be focused upon.
Opportunities: Environmental protection program, climate change and rising of standard
to protect wastage would be taken as a strategy to have control on cost.
Legal: Rise in a legal regulation such as filing of the taxation, imprisonment, if founded
illegal matter etc. can be considered as critical factor no which focus is need to be taken consider
to led business function in an effective manner. This is important for Tesla to consider this as
serious concern.
Threats: Increase into dealership sales regulation can be considers as threats which is
cost issues for the Tesla.
Opportunities: Expanding international patent protection and energy consumption laws
& regulation can be best strategy to be considers to takes on an effective decision.
Porter five forces model:
Bargaining power of buyers: Bargaining power of buyers in electric vehicles industry is
low. Cost for customers is low, if switch from Tesla’s Model 3 to another electric vehicle such as
Jaguar’s I-Pace, Porsche’s etc. The absence of switching costs increases buyer bargaining power
to a considerable extent. Level of risk is moderate here.
Threat of New Entrants: The threat of new entrants into electronic fuel vehicles
manufacturing sector is low (Rugman and Verbeke, 2017). One critical challenges for electric
care is the bargain among their performance, efficiency and cost. On one side, major auto-motive
such as General Motors, Ford, Toyota, BMW etc., has entered into electric cars segment that are
not very expensive, but performance has been seen compromised. Generally, electric vehicles are

well known for being slow speed as compared to traditional cars and also power did not last for
long.
Rivalry among existing firms: Rivalry among existing firms in electric car industry has
become high. Also, Tesla is the most renowned brand for electric automotive, major auto-mobile
companies has declared to increase their focus in this segment. For example, GM, BMW,
Volkswagen, Mercedes-Benz etc., have all announced plans to invest billions for developing of
mass market electric car.
Bargaining of the suppliers: Suppliers are high in automobile sector, who are specialised
to sell accessories or automotive parts or units. Suppliers are huge in number and are looking to
demand high margin (Furnham and Gunter, 2015). This is a time, when they would go for switch
other buyers. In that situation, risk to business is higher and severe, due to this, Tesla may lose its
strong brand image.
Threat of competition: Increased competition from Ford, BMW, Mercedes etc., are
becoming tough to deal in automotive matter, as they are tough competition in giving automotive
support on greater extent. Now a days, customers are price sensitive and focus on cheap car.
Hence, risk of competition is high and severe for Tesla to control it in adequate point of time.
2. Analyses of the resources and important competencies of the Tesla.
Analyses and evaluation of the internal business environment is the combination of all
those factors which affects the company directly or indirectly from the internal forces. Such
forces are generally controllable because it depicts the internal happening and non happening.
The analyses of internal business environment is important because it helps in knowing the
internal strength and weakness of the company (Herrera, 2016). Before developing or
implementing any strategy for the success of the company, it becomes essentially important to
know the strength and weak points of the company. Apart from this, internal environment aware
about the available resources with the company and then analyses can be done effectively and
efficiently. For this purpose, the company will put emphasis on identifying the strength and
weaknesses of the company such that the business objectives can be accomplished effectively
and efficiently.
Strength
The term strength means power, therefore, it will depict those resources which are power
or strength of the company. Every business organisation has certain level of power or strength

which helps the business enterprise in fulfilling the business objectives and enhances the further
growth and development of the company (Mollan and Tennent, 2015). So, Tesla also owns
certain set of strength which are treated as crucial internal factors and this will have positive
impact upon the company. The following are strength of the Tesla discussed below:
 Technology: Tesla has used the most advanced and outstanding technology in its
products and services. With this strength, the company is able to produce the innovative
and extra ordinary products (Watson, 2015). Apart from this, its advancement in
technology is so successful that many other companies are putting emphasis on using the
same technology which has been adopted by the Tesla. Some of the common examples of
Tesla which has depicted the strong level of technology are Daimler because it makes use
of Tesla battery packs, Mercedes Benz uses it in power train, etc.
 Strong leadership and team building: The CEO of Tesla is greatly famous all over the
world due to its strong leadership and team spirit. This is one of the most important
strength of the Tesla which depicts that it has strong and expertise workforce who works
collectively for the fulfilment of business goals and objectives. The leader is so
influential that it makes people work effectively and efficiently towards the business
goals and objectives. Furthermore, they are so passionate that it has the ability to make
people understand regarding working in team will generate better results. So it has strong
team members who are able to work on innovative products and services.
 Strong control on production procedure: The firm is highly organised in each and
every aspect. Tesla has strong control over its production process where it works
effectively to minimise the waste. It is possible due to the vertical integration,
centralisation and hierarchy structure of the organisation. For instance, the company is
involved in manufacturing auto mobile which reduces the chances of problems faced by
the third parties (Lozano, 2015).
Weakness
The term weakness in the internal business environment is related to identification and
analyses of those internal strategic factors which has created or restricted the business from its
growth, expansion, profitability, etc. It depicts the internal weak points which has negatively
affected the company. Therefore, some of the internal weaknesses of Tesla are discussed below:

 Lack of customer awareness: The Tesla is involved in producing those products which
provides sustainability in the environment and such products are not presently required to
majority of the customers (Neugebauer and et. al., 2016). Apart from this, such products
are for future and customers are not sure enough in present that whether they will need or
invest in such products or not.
 Blazing through cash: Tesla is facing the obstacle of cash from the past several years.
This has adversely affected the company due to various huge investments made by the
organisation in research and development department, innovation, technologies, etc.
which are not able to generate the expected returns to the company. So for this, the
company has reported negative cash flows.
 Restricted market reach: The Tesla has restricted market reach because the company
has confined its operations to the US market only and several other countries or market
are still untapped where people are unaware of the brand. Therefore, the company is more
dependent on the US market for its profitability due to which it has created negative
impact on the company’s growth and expansion to the various different markets.
VRIO Model
The VRIO model was created by Barney J.B. in the year 1991. The purpose behind
developing this model was to measure the organisations resources which exist in the internal
business environments and the capabilities so that the business organisation can find that whether
this resources are capable enough to gain the competitive advantage at the market place or not.
According to this model, it has been analysed that the resources must be valuable, rare, costly to
imitate and organised to capture value (Hahn and et. al., 2015). If all these criteria are met by the
internal resource of the company then such resources are very powerful and strong and have the
potential to attain the competitive advantage. Therefore, the VRIO analyses of Tesla is discussed
below:
Valuable: The first element in the VRIO analyses is concerned with depicting the value
of the resource. It signifies that how much worth the available resource has, to identify it it adds
importance to the organisation in exploring the opportunities and meeting threats effectively and
efficiently. Therefore, Tesla is containing several different types of resources which carries the
potential to be treated as valuable resource for the company. The battery packs which are

manufactured by the Tesla are highly valuable resource through which the company will be able
to achieve the competitive position in the market.
Rare: The term rare it means that unique or different. Therefore, this element is related to
identifying the rare resource which the company have in order to achieve the business goals and
objectives. This is strategic internal factor and due to advancement in technologies the rare
resources can be copied by the competitors easily. Therefore, Tesla has the rare resource of
expertise workforce who have the potential to develop such battery packs which can be used
effectively and efficiently. Furthermore, the work force has strong knowledge and skill through
which the company has developed strong research and development department.
Costly to imitate: The term imitate means to copy, therefore, this element signifies that
the organisation must have such internal resources which cannot easily be copied or imitate by
the other competitors (McCaheryand et. al., 2016). Therefore, the battery packs which are
manufactured by the Tesla are one of the product which is very difficult to copy and even if
competitors or other organisation tries to do it then it will require high skilled workforce, huge
amount of investment, etc. Thus, this is one of the internal resource of the company which has
gained the competitive advantage in the global market.
Organised to capture value: If the internal resource is worthwhile, has unique attributes
and is difficult to imitate then such resources are treated organised to capture value. So, the
battery packs which are produced by Tesla are supported by the organisation strategies,
procedures, and gains competitive advantage. It is one of the most crucial internal strategic factor
which can help the company in long run for achieving business goals and profitability.
3. Assessment of the Tesla’s strategy.
In business organisations, the company adopts different types of strategies which will help the
company in proper planning, organising, allocation of resources, defining estimated budgets, etc.
so that business can attain the desired objectives effectively and efficiently. The Tesla is entirely
concerned with the production and manufacture of electric vehicles for the purpose of achieving
sustainability stakeholders (Babafemi, 2015). For this purpose, the Tesla has merged with solar
city in June 2019 where the deal between the two companies took place where the primary aim
of the CEO of Tesla is combine the electric care with solar energy organisations. This is the
recent and latest strategy and it has been evaluated by using SAF evaluation method.
SAF evaluation

The term SAF stands for suitability, acceptability and feasibility. It is the SAF model which
was created by Gerry Johnson and Keven Scholes (Foucault and Frésard, 2018). This model was
created for the purpose of identifying and analysing that the respective strategy is appropriate for
the company or not. The discussion on suitability, acceptability and feasibility (SAF) is as
follows:
Suitability: When talking over suitability, question raises that strategy are aligned to
external environment such as Pestle, porter forces model etc. There are several tool competitor,
customer, market condition etc. These will also say that what strength and weakness mapped and
would need to be considered. Determining threats or weakness would part of discussion of this.
This majorly deals with internal and external capabilities of a firm. This need to be considered
when business go for any merger or acquisition.
Acceptability: When looking at the strategic option from the perspective of an acceptability,
many aspect would need to be consideration such as profitability option, financial risk and also
influences from any environment (Adamides, 2015). This would say’s how strategy taken would
impacts on stakeholder’s on the proactive side or manner.
Feasibility: Within the perspective of the feasibility, its consideration is to checking of
whether strategic option is considerable or not with an organisation. During number of factors
are need to be considered such as financing option, realistic expectation, right resources, ethical
consideration, checking of any legal barrier’s.
With perspective of Tesla case study:
Merger of Tesla with Solarcity is the strategic door for this leading automobile to expand its
foot in Solar panel by giving 2.8 billion dollar to this financially struggled firm. This will give
financially burden to Tesla in initial stage, but for long term, this strategy of merger is suitable to
get access to easy resources and wide customer’s base of solarcity (Kim, 2015). Customer of this
firm is all big corporate and they would be get affected in positive manner such as like getting
wide range of solar energy product with more improvement and getting technology support of
Tesla. In Lump sum way, customer would be affected in positive manner. Application of the
SAF is very much applicable here, to check about external environment this overall strategic deal
for Tesla.

CONCLUSION
From this report it has been analysed that corporate strategies are very useful and play vital
role in shaping and building the organisation. The use of corporate strategies helps the business
organisation in analysing the external and internal business environment. By doing this, the
company will be able to learn about the external threats and opportunities for the company and
internal strength and weakness as well. With this, the company will be able to properly plan the
policies and procedures in order to attain the competitive advantage. Apart from this, with the
help of Porter model the company will be able to analyse the attractiveness of the industry which
will help the business in further expansion.

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<https://www.strategicmanagementinsight.com/tools/porters-five-forces.html>