Tesla Strategic Report: PESTLE, Porter's Five Forces and Strategy

This report provides a comprehensive strategic analysis of Tesla, examining both its external and internal environments. The external analysis utilizes PESTLE and Porter's Five Forces models to assess political, economic, social, technological, legal, and environmental factors, as well as competi...Read More

TESLA STRATEGIC
REPORT

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
1. External analysis......................................................................................................................3
2. Internal analysis.......................................................................................................................7
Strategy that Tesla implemented recently .................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Strategies is one of the best things which has been implemented by any company just to
achieve their goals and business objectives. With the help to making new plans or strategies
company will grow more and more in business world (Aaij and et.al., 2016). Strategies shows
organizations strengths, resources, opportunities, vulnerabilities etc. The present report is based
on Tesla company that implement strategies for growth and success. This report explains
external analysis tools and internal analysis tool and also clarifies the strategy which has been
chosen by firm to increase profit and to generate revenue.
TASK
1. External analysis
PESTLE analysis-
PESTLE is one of the best strategic tool that help to identify set of threats and
opportunities, business environment etc. it is the framework used by marketers to identify and
monitor macro environmental factors that affect on any company in industry. There PESTLE has
been used for Tesla Inc. that develop, design and manufacture electric vehicles, storage program
and energy generation.
Political factor- This factor include fiscal policy, tax policies, trade tariffs, labor laws,
foreign trade policy, environmental low etc. these factors determine stage to which country
government influence certain industry or economy (Victoria and et.al., 2014). Government
imposes the new tax or duty due to which as whole revenue making structure of any company
change. Government levy all the political factors around fiscal year which may impact business
environment to some great extent. Tesla sold their products outside the US in which they need to
concern about all the regulations. European Union has been proposed new regulations that need
to be followed by the whole industry. EU new rules play significant role as change manner that
vehicles are certified for compliance in Europe. They made new regulations which affect
industry production program as whole. If Tesla Inc, follow the new rules of European Union they
will grow more and more in industry rather than the now that is one of the biggest opportunity
for them. According to rule they need to focuses on batter safety which is one their best
possibility to expand their business in all over the world.
Economic factor- It has significant affect how a company does business and also how
profitable they are. Economic growth, exchange rates, interest rates, disposable income of

customers, inflation etc, are the economic factors that may affect industry or business
environment the most. Tesla is an American electronic car manufacturing company that
manufacture their products in Japan (Cadle, Paul and Turner, 2014). Due to this, there is
transaction between Japan yen and US dollar, now the difference between yen and dollar is
causing fluctuation. These differences impact on industry profit margin and market share which
turn into threat and negatively affect their business. Fluctuation in values of Japanese yen
against US dollar is one of the threat that influence on selling cost of firm more and more.
Social factor- Populations growth, customers demand, career attitudes, age distributions
etc, are the social factors that may affect industry or business environment as whole. These
elements are of specific interest as they have straight influence on how marketers understand
consumer and what drives them. Increasing popularity of low carbon lifestyle is one of the social
factor that impact industry or business environment as whole, but on the other side is one the
opportunity that help to grow and build reputation in marketplace. Tesla Inc. has an opportunity
to boost up their financial performance based on rising popularity of low carbon lifestyle. They
manufacture their vehicles according to the popularity or demand of low carbon lifestyle which
helps to grab the attention of people and generate revenue more.
Technology factor- These factors consider rate of technological development and
innovation that may affect industry or market. Changes in mobile or digital technology, research,
automatic development etc, are the technology factors. These elements pertain to innovation in
technology that affect automotive car industry operations (Aithal, Shailashree and Kumar,
2016). High rate of technological changes is a threat for industry which leads to creation of high
competition and affecting the market share of Tesla Inc. The technological changes in
automotive car industry that introduce computerized and self driving cars that are fully electrical
will posses high risk of threat of road accidents. Self driving cars causes risk of accident which is
very harmful for human lives. People will not be able to control self driving cars while they feel
some issues in it.
Legal factor- Emission Laws and environmental laws are considered in Legal factors
which affect automotive industry. Tesla Inc. has been passed on emission law because they
already manufacture fuel efficient vehicles which does not produce pollution. This has been one
of their opportunity that helps to increase profit margin more and more. In future it is one of the
best opportunities to them which they can sustain or grab for longer time period. They focus on

providing the best quality products to their customers under legal process that helps to run their
business effectively and build good image in marketplace.
Environmental factor- Within country often states have various liability law and
environmental laws which may impact on automotive car industry. To generate fuel efficient and
eco friendly vehicles is one of the biggest opportunity for car manufacture industry. Most of the
people prefer to buy fuel efficient vehicles because they feel it is valuable and cost effective. By
offering goods according to customer needs industry also garb the attention of people the most.
Porter's five forces model-
It is the strategic management tool or framework which helps to analyze Tesla Inc, and
understand underlying levers of profitability in industry. Porter five forces support to understand
how five competitive factors impacted profitability and develop strategy for boosting Tesla Inc.
competitive advantages. There are the following Five forces,
Threat of new entrants- New entrance are new companies which affect Tesla Inc,
environment and determine performance of industry. The threat of new company into alternative
fuel vehicles production industry is moderate (Neumüller and et.al., 2015). One of the main
challenges for electrical products is compromise or bargain between their cost and performance.
On one side all major automaker such as General motors etc build electric cars that is not much
expensive, but work of these cars is compromise. On the another side, Tesla Inc. has been able
to manufacture their Model X, Model S etc, that are amply electrically charged and fully
advanced with technological characteristics such as long mileage and high speed in single charge
which is one of their strength. As Tesla had already faced the limitations this is the main reason
behind the success of Industry against to their new competitors.
Bargaining power of suppliers- Bargaining power of supplier is very high with Tesla
Inc. Many companies are struggling to get all the parts that they need because of rise in wants of
many electronic parts needed to produce or manufacture electrical car vehicles. This growth in
demand is giving a lot of power to suppliers and have utilized that power already by raising
costs. As automotive industry they have to used electronic components in their products which
become more desired and popular in which suppliers of these things will have more and more
power. Tesla Inc, buy its raw materials from various suppliers, which power is high and they can
use their negotiating power to infusion high prices from companies in Auto manufactures.

Bargaining power of Buyers- Bargaining power of customers is moderator because
mix of low and high factors. Current minimum number of substitutes for electric car low power
of buyers. Many consumer are stay connected with Tesla Inc. because they need an electric cars,
but there is other type of consumer that also be considered. Some of industry clients are
consumer just because they need high end vehicle and have means to purchase one. Most of the
customers chosen Tesla Inc, products over anther's because of their fuel efficiency and good
quality, but it is not only the things which moderate power of buyers, Tesla Inc, also focuses on
customer safety which is one of the reason that consumer do not switch to another auto
manufacture industry and consistently buy their products. As it possess Tesla. Inc strength.
Threat form substitute products- When new services and products meets similar
consumer needs in various ways, any industry profitability suffers in which they have to face
many difficulties. Threat of substitute goods or services is low because as discussed above new
companies need to face many challenges and then make electric cars, but it is more easy for
Tesla Inc, as they are pre existing car manufacture industry which already expand their business
in world and provide electric cars into market. They released their version of electrical cars and
expressed their plans which they do to so in future that is difficult for new entrance to match
their level of quality. Tesla Inc design products according to customers need which is one their
strength. New entrance cannot be able to offer their electrical cars or vehicles just like Tesla Inc
do, so that is the reason for low threat from substitute services or goods. By understanding core
demand of consumer more than what they buy, industry will grow more and more and generate
high revenue and increase profitability.
Rivalry among existing competitors- Rivalry among existing competitors is high due to
competitive advantages. Rivalry among present competitors is high than it will drive cost of
products and minimize overall productivity and profitability of Tesla Inc. existing players and
Tesla Inc both efforts to make money and raise their position in marketplace better than each
other. Existing competitors will make plans to manufacture quality products and offer the
valuable things to customers (Sealy and et.al., 2014). Just like another Tesla Inc also try hard to
beat another industry and gain more profit, that is reason of high level of rivalry among existing
competitors. The automotive industry is highly competitive within all the companies give their
efforts to fulfill the needs of customers in which more and more organizations invest money in
manufacturing electric cars.

2. Internal analysis
Resources of Tesla-
Products and brand recognition-
Tesla is an American automotive and energy firm based in California, they are
specialized in manufacturing electrical cars and through their solar city subsidiary. There are
many resources which enhance the productivity and profitability of firm more than the another in
industry (Sandhu, Dudley and Kazi, 2015). They develop, design and sell high performance
fully electric vehicles that grab the attention of customers. Organization is well recognized bard
because of their products quality which they offer to its customer. Apart from their electrical
vehicles, they are also known for biggest range of another types of sustainability goods. A brand
has increase high reputation and international recognition through their services and products.
They have attracted heavy publicity and recognition based on their differentiated organizational
or business model. With the help of brand recognition company generate revenue more than
another firms in automotive industry. They are not focusing on marketing cars, their mission is
much higher than it, as they need to revolutionized driving experience of consumers. Tesla chose
one of the best way which make their business at high platform as they offer customer range of
electric cars that many people like to buy as compare to other vehicles.
Human relation-
Tesla pays good wages to their employees, they offer the best facilities while those who
are working with them. Company create healthy working environment which helps to make all
the staff members comfortable in workplace. They provide health and safety benefits to workers
that assure about company concern. Organization give importance to their worker which is one
the reason behind their greater success in marketplace. Success of any company is depended on
good human relations through organizational structure. Staff appreciation based on their
performance in which company has to give rewards to them, by following this process Tesla will
build good relationship with their workers that helps to build good position in business world.
Sustainable innovation-
Tesla adopts sustainable innovation model or concept in their business it is one of their
critical strength that increase profitability as compare to another in industry. From company
vehicles to energy storage programs and solar energy, all of their electrical products are
connected to sustainability. The centering is on contributing the global transition towards better

and energy efficient world. They manufacture Model S and Model X which is fully electrical,
included exceptional functions and high performance vehicles. Apart from company range of
vehicles, they make solar power systems which grab the attention of authority and helps to
increase brand recognition. Tesla electrical vehicles and other products are highly equipped and
innovative with the best in technologies and within having great exceptional functionalities.
Financial statement-
Tesla provides super charge networks facilities to their customers that play important role
in their success and business growth. With the help of serving good quality and range of
electrical products company financial budgets get increase day by day more than the another pre
exciting companies in automotive industry. In 2010 company do not increase much profit but
after the coming years they improve their performance and will grow more and more. In 2018
organization earn $21,461 million as compare to another. Company will be able to manufacture
the best quality electric products or cars which attract people the most. They fulfill the needs of
consumer that is one of the reason behind high generated revenue.
High costs of vehicles- Tesla offer high costs electrical vehicles to their customers rather
than ordinary vehicle and in this context company rank among premium category vehicles. Apart
from their Model S, model 3 and other model are costly and therefore some people will not be
able to afford, due to high costs middle class customers cannot buy their cars. High prices of
their products is one of their weakness that has kept company sales from growing fast.
Competences-
VIRO is one of the best framework or tool helps company to protect and uncover
capabilities and resource that give longer term competitive advantage. It is the acronym based on
four question frameworks such as value, rarity, Imitability and organization. These components
typically approached in style of decision tree.
Value- This stage shows capability of company for offering value added resources to
customers. It refers to value of assets used how expensive is it, is it simply available, should it be
rented, purchase or leased (Taylor, 2017). Should the products be too expensive or not. Tesla
offers the best resources to their customers, they provide better electric cars vehicles to consumer
which meets with their needs. Company will be able to perform effectively and increase brand
reputation and recognition in market better than its competitors.

Rarity- Resource that only be acquired by few or one organization are considered to be
rare. Tesla has capabilities to manufacture rare or unique products, they can be able to produce
range of electrical cars and also provide fuel efficient cars that helps to generate profit and
increase their market share. They design unique futuristic cars along with excellent performance
that will rival even most powerful gasoline high-powered cars.
Imitability- Tesla imitate with products they produce similar goods to customers at some
extent, but in competitive environment they try to redesigned their manufacturing process as
whole and designed or develop products according to customers needs.
Organization- Tesla will be able to designed or manufacture unique or different products
that will be very beneficial for their business growth. They used good quality material for
manufacturing electrical vehicles. If they consistently work under this strategy, company gain
more profit which is one of their competitive advantage.
Value chain-
It is set of activities that company operating in particular industry performs in way to
deliver valuable services or products for market (El-Sayed, Dickson and El-Naggar, 2015).
Value chain is based on five activities that is necessary in adding value and making competitive
advantages and they are:
Services- Tesla serve its best services to their customers, they include all the necessary
activities or resources which is required to keep services and products work effectively.
Marketing and sales- Tesla does marketing of their products perfectly, marketing
department of company make effective plans or strategies to introduce their fuel efficient cars
and solar energy systems.
Operations- Company manager or leaders manage each operation of firm effectively
which helps to run business faster in business world.
Human Resource management- HRM of company recruit or hire talented people in
Tesla which contribute to grow business more than the another.
Technological development- Tesla include many technologies in the process of
manufacturing electrical vehicles, that helps to gain competitive advantages in market. Designing
fully electrical vehicles and they also continue with this process in future which is one their best
strategy that supports to increase profit.

Strategy that Tesla implemented recently
Suitability- Fully electrical vehicles is one of the Tesla the best strategy that helps to beat
competitors in marketplace (Nykvist and Nilsson, 2015). They will be able to work according to
its strategy or plan that possess as their strength. The production of full electrical vehicles that
meets with consumers requirements raise the position of company.
Acceptability- Fully electrical vehicles' strategy is acceptable by the stakeholder of
Tesla. Employees of company affected by this strategy, they need to work hard more than now
and perform well. Investors need to invest money after the decision of strategies and before
implement it in business structure. Customers is also included in Tesla stakeholder, they get
affected by implementing this strategy, many people like the concept and prefer to buy their new
products.
Feasibility- Tesla has able to implement new strategy in their business, company have
the most talented and skilled staff which helps to raise the standards of firm. They will be able to
invest money in process of implementing new strategy.
CONCLUSION
The present report disused about Political, legal, social, technological and other factors
that impact positively on Tesla and some extent they affect negatively. It has been concluded
high, low and moderate power of five forces that impact on business growth and success. The
current study cover all the information in context of company resources which helps to grow
business more and more. This report discussed VRIO and Value chain as the best tool that helps
to reflect organization capabilities and strengths that support to gain competitive advantages.
Furthermore, by adopting fully electrical vehicles' strategy company increase high profit and
generate high revenue as compare to another in automotive industry.

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Online
VRIO Analysis, 2017.[Online] Available through : <https://www.toolshero.com/strategy/vrio-
analysis/>