Tesla: Business Strategy, Macro Environment and Competitive Analysis

This report provides a comprehensive analysis of Tesla's business strategy. It begins with an introduction to business strategy and its importance, followed by an examination of the macro environment impacting Tesla, utilizing PESTLE analysis to assess political, economic, social, technological, legal, and environmental factors. The report then delves into Tesla's internal environment using SWOT analysis, evaluating its strengths, weaknesses, opportunities, and threats. Further, it applies Porter's Five Forces model to analyze the competitive landscape. Finally, the report incorporates strategic management theories to recommend a suitable strategy for Tesla, concluding with a summary of findings and references.

Unit 32

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Impact of macro environment on Tesla.......................................................................................1
Internal Environment Analysis....................................................................................................2
Competitive Force Analysis of Tesla...........................................................................................5
TASK 2............................................................................................................................................7
Strategic Management Theories..................................................................................................7
Recommended Strategy for Tesla................................................................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business strategy may be defined as a combination of various actions and decisions taken
by company in order to achieve the targets of the organisation and to make competitive position
in a market. It is considered as foundation of the business and also acts as a roadmap for the
organisation in order to achieve common goals (Mourdoukoutas, 2015). Business strategy
should be formulated in such a way that it should suit to the organisational objectives. With high
level competition, importance of business strategy has been increased. This also resulted in
increase in types of business strategies which can be used by the organisation. In this report
Tesla is taken as an organisation, which is electric car manufacturing company of United States.
This report discusses about the impact and influence of macro environment on Tesla and
analysing its internal environment and its capabilities. Present report also discusses about the
Porter's five force of Tesla and their outcomes and includes the application of theories, concepts
and models in order to devise strategic planning of the organisation.
TASK 1
Impact of macro environment on Tesla
Macro environment is the environment which is present outside the organisation and is
totally out of control of the organisation (Najafizadeh and Kazemi, 2019). In order to understand
the impact and influence of macro environment PESTLE can be applied in a following way:
Political factors: There are range of political factors which can have an impact on the
automobile manufactures and it also has huge impact on Tesla such as:
Positive impact: One of major political benefit for Tesla is that UK's national and state
government are formulating polices which encourages the manufacturing and sale of electric
vehicles in the country which may prove beneficial for Tesla.
Negative impact: Brexit may have negative impact on the sales of Tesla in the countries as
Tesla is US company, it would have to face some restrictions in operating business in UK.
Economic Factors: It is also one of the major factor which have an impact on the organisation
such as:
Positive impact: Increase in economy will lead to increase in purchase of Tesla cars.
Negative impact: With the increase in demand there will rise in prices of electric batteries will
make more expensive which may decline the sale of company.
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Social Factors: This factor also plays an important role in the success of the business and its
impact can be explained as:
Positive impact: The idea of electric car is fascinating for the people particularly for those who
are eco-friendly and people in UK want eco-friendly environment and surrounding which may
increase the sales of the organisation.
Negative impact: Some people may not prefer electric cars as they think there are many issue
associated with it like, low power, recharging issue etc which may decrease the sale of cars.
Technology Factors: For Tesla this factor plays an important role for formulating the business
strategy and have impact on the performance on the company which includes:
Positive impact: Due to improvements in technology, Tesla model will be equipped with driver
less technology which gain company a competitive advantage.
Negative impact: There is a chance of getting technology obsolete in the future which is used by
Tesla.
Legal Factors: This is major factor which have impact on the organisation such as:
Positive impact: UK' is planning to shift from tradition cars to electric cars by 50 percent in
2050 which will be major positive impact on sale of Tesla models in UK in the future.
Negative impact: There may be increase in the standards and regulations in electric cars will
prove challenging task for the organisation.
Environmental factors: It impacts the organisation in following ways:
Positive impact: Environmental factors are the key opportunities for Tesla as its cars are
environmental friendly which could rise the sale of the company.
Negative impact: Maintaining the standards of low or zero emission is challenging task for
Tesla.
Internal Environment Analysis
The micro environment factors are the factors which are present inside the business
organization and can be controlled by organization (Cortimiglia, Ghezzi and Frank, 2016). A
organization internal environment can be analysed by SWOT analysis.
SWOT Analysis
Strengths
Tesla is well known brand on international level which is known for its innovative
approach towards the product development. The Tesla is known for its innovation in auto mobile
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industry. It holds the expertise in four wheeler manufacturing. The CEO of Tesla is famous
personality with good and attractive track record. The distribution network of Tesla is technically
different from other company which are using traditional way of distribution. This technically
advance way of distribution provides the advantage to the Tesla motors to gain competitive
advantage in market. Tesla is also known as the first automotive company who developed the
fully functional electric vehicle in industry (Akter and et. al., 2016). The methods and machinery
used in Tesla is advance in its category. This high class production technology provides edge to
Tesla. The accuracy and precision of Tesla is high this provide high consumer satisfaction. Tesla
is consists of young, energetic and highly skilled people who belies in innovation and
advancement of technology. This all strengths of organization improves its capabilities. Highly
educated and highly skilled staff provide great strength to Tesla to introduce innovation in
company product and procedure. Employees are always ready to work with new technology.
This thing make Tesla a efficient and growing brand.
Weaknesses
A organization without any weakness is not possible. After the performance of Tesla it
also has some weaknesses which are preventing the same actions and plans of company which
are related to implement innovation in technological use. The different weaknesses of Tesla are-
the CEO of Tesla and SpaceX is same person this reduce the organization process handling. It is
difficult for a single person to handle two organization. As it is a young and emerging company
its infrastructure is not fully grown and developed. The set up of electrical car assembly line is
still under development and this is going to take huge time cause electrical vehicle technology is
still under development. As a first company to develop electrical luxurious car the company have
high pressure to set benchmark for other companies. The other weakness of Tesla is consumers
are still in confusion with electrical car technology and worry about efficiency of this
technology. This is huge trouble for Tesla to improve the confidence of consumers. This is new
and expensive technology so the price of electrical is higher than average. This is reduce
affordability of company product (Olson and et. al., 2018). This is new technology and
customers are still worry about use and implementation of this technology for routine use this
can reduce the sales of Tesla. These are the problems for Tesla to make a approach to make
affordable product to increase the market share. These weaknesses prevent the company to go on
high level of production.
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Opportunities
The technological base use by Tesla is highly sustainable and ethical for environment.
This creates larger opportunity to Tesla. Technology used by Tesla is pollution free and
environment friendly. This is increasing awareness and environmentalism in customers. Tesla is
first in category of electrical car manufacturing company this provide huge opportunity to
company to spread business on global scale. No other company is as developed as Tesla so there
is no other high level competitor in market. So, company has great scope to go for global
business (Higgins, Omer and Phillips, 2015). The company can also approach the upper middle
class by working on lower cost vehicles in international market and this will improve the
business of company. Tesla also can use the latest technology to improve the battery capacity to
improve the efficiency of electrical vehicle . Many countries are worry about the pollution and
environment so they are preferring the technology which is environment friendly and this can be
considered as emerging market for Tesla. This opportunity can help the company to develop the
business by business expansion in other countries.
Threats
The main threats of Tesla in market or industry is the well settled company which are
working in the business for long time and have huge scope and capital to work on electrical
automotive vehicles. Tesla is new in market and other companies like Kia and Volkswagen are
providing this electrical cars on cheaper price so they are threats for business of Tesla. In the
legal process it is important for the company to take permission from legal body to use new
technology in vesical. This process of approval is longer and this can cause larger damage top
the company (Pisano, 2015). This lawsuit also can prevent or delay implementation of
innovation in Tesla cause of technical testing by technical department of government who ensure
safety ans security of vehicle. The taxes on the electrical products are high and they are causing
huge cost to company this increases the price of company product so this is also threat to
company. These threats of Tesla slow down and prevent innovation in company. Company need
to think and work as government policies terms this prevent decisions of Tesla.
This is how internal factors of Tesla motors influences the internal environment of
company. This internal factors can be managed by Tesla by making adaptable technology in
vehicles.
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Competitive Force Analysis of Tesla
In global market for better performance and productivity of organization company
authorities have to perform study of different market elements and accidents to minimise losses
and improvement of marketing policies (Lieder, 2017). To know the market positioning of Tesla
Porter Five Force model can be used.
Threat of new Entreats
As a new entry in market a company can face many problems in developing market
share. There are many other companies in market and most of market is occupied by them it is
very difficult to get attention of customer towards the product of company. In market Tesla is
only functioning company that is manufacturing and selling electrical vehicle. So, there are no
any competitor companies in market so the threat as new entrant the threat is low. Company does
not have to put extra efforts in market to gain customers (Leonidou, and et. al., 2015). So power
is in hand of Tesla. As there are less competitors in market Tesla can use different strategy to
attract customer to by company product. There are only few choice customers have and this
provides advantage to Tesla to expand market share.
Threats of substitute Product
There are a lot of companies are looking to Launch electrical vehicle in market of E-
vehicles. The product provided by this company will be substitute for Tesla. This is a threat to
Tesla Motors. Companies like Renault, BMW and Kia are also providing electrical vehicle but
most of the market of electrical cars is occupied by Tesla company. The range of product and
services provided by Tesla is so important to perform good in market. There are less other choice
provided by companies and this is providing advantage to Tesla in international market.
Company already have advantage in market but the new substitute could be a trouble for
company (Buckley, Burton and Mirza, 2016). This issues can be solved by using different
techniques and strategies. Company can work on technology to develop product on less price to
target more customers who are currently not able to buy electrical cars of Tesla.
Bargaining Power of Buyer
there are many products in markets and customer are free to select or buy any product of
their choice. If there are multiple choice of product are available in market then the bargaining
power of consumer will be high. In this power customer can ask company to reduce the price of
product and if there are less option of product in market then bargaining power of customer will
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be lower. In case of Tesla there are only few companies who are providing electrical car and
Tesla is one of the biggest manufacturer and supplier of E-vehicles. Market share of Tesla is
high this provide more power to company instead of consumer (Chang, 2016). To keep power at
end of company Tesla can improve the quality of electrical cars and related services on less cost.
Better services and product quality will force the consumer to prefer product of Tesla.
Bargaining Power of Supplier
Meaning of bargaining power of supplier means that supplier can sale raw material on
higher price to Tesla. If there are less number of supplier company then no other supplier can
provide same raw material to company. In this case power is in hand of company and power is
on supplier end. The other condition is there are many supplier company have who can provide
same kind of raw material to company, for this condition power is at company end and it will
allow the company to keep buying product on cheaper price. For Tesla there are only few
supplier are available who can supply electrical components which are used in electrical vehicle.
So here power is in hand of suppliers (Wheelen, and et. Al., 2017). To take on this power on
company hand Tesla can increase number of supplier which will reduce the threat of supplier
switch.
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Illustration 1: Porter Five Force Model
(Source: Sukant Kumar, 2019)

Rivalry Among competitors
In the competitive market there are many competitors are present in market. It is possible
that two companies become rivals and go for bad competition. It is really not good for both
companies. In this type organization starts fighting for positioning in market. To attract more
consumer and reduce the marketing share of competitor company can use different bad
strategies. This strategies of consumer are reduce the benchmark of pricing to attract more
customer and this can lead to huge loss of capital and resource. For the Tesla the other
companies don't have that much technology and machinery to develop electrical vehicle. So, this
kind of rivalry is not that effective for Tesla (Schaltegger, Hansen and Lüdeke-Freund, 2016).
But to prevent this kind of rivalry company can use specific standards to maintain performance
in market.
TASK 2
Strategic Management Theories
Bowman Strategic Theory
This strategy is used by different companied to find the marketing position of
competitors. This is considered as one of the best model which can be used by any company to
compare its positioning against their products. There are two dimensions are used in bowman
clock one is price of product and other one is perceived value. Eight strategies are suggested
through this model (Buckley and Ghauri, 2015). Any of this strategy can be used by Tesla to
gain competitive advantage in market place.
Low Price and Low Added Value
this is not the most competitive position in the bowman's clock. This is the worst policy
or strategy a company can use to gain competitive advantage in market. In this strategy price of
product and consumer also want product at low price. This can be used in only condition where
Tesla want to gain competitive advantage in market from other competitors.
Low Price
This method is used by the companies which are producing product in high quantity and
sale it on low cost. This can cause huge loss to company because the margin of product cost and
selling price is not too much so profit on each product by selling is too low. This products are
also valued by customers. By using this strategy company still can gain profit by selling product
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on high level. High productions and high selling can provide good profit to Tesla. But it is not
feasible for product like electrical car where high precision and accuracy is required.
Hybrid
In this method the company offers product with high value at low price. The consumer
wants the product of high class and the company focuses on low price manufacturing. The high
quality of product attract more consumer towards company and the company try to develop high
quality product on price to gain more profit (Galpin, 2019). So, hybrid strategy suggested from
bowman model best for any organization.
Differentiation
In this strategy the company focuses on high quality of product and provide this product
on an average price. The target behind this is to satisfy the needs of consumer by offering them
best quality product with average price. This will be best strategy for the premium companies.
Customers thinks that if the price of product is high then quality of product will be also good. In
this strategy company also focuses on promotion of product to gain higher number of customers
and generate high revenue.
Focused Differentiation
In this strategy is used by top luxurious brands. In this strategy the company focuses on
the high quality of product at high cost. The target segmentation and promotion is used by the
organization to generate high profit. By spending on promotion and quality of product the
company target the premium buyers to set market. The profit margin in this strategy is higher.
This strategy suggest better and positive market competition.
Risky High Margins
In this type of strategy the company offer average quality product at high price. There is
huge risk in this strategy cause the consumer wants better quality product. If the cost of product
and service is high and quality of product is average then consumer will feel less satisfied or not
satisfied with company product . This will force the consumer to move on to other product or
other company. So this is not a good approach for longer term.
Monopoly Pricing
This type of strategy is used by the companies which are dominating whole market cause
they are the only one who are providing specific product or service to customer. In this condition
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of monopoly the price of company product is decided by company and consumer have to buy
this product on that price.
Loss of Market share
In this type of strategy is used by the company which sell the product of unique and not
of consumer value and pricing of the product is also high so customers stay away from this type
of products.
From above strategies Tesla can use Hybrid strategy to gain competitive advantage in
market. In this strategy Tesla can offer high class product at average price to retain and gain new
customers. This is the best kind of strategy for Tesla (Eaton and Kilby, 2015). In this technology
Company can use different new techniques and technology to offer high quality product at
optimum price.
Recommended Strategy for Tesla
There are different strategies are explained in bowman's clock are good for different
types of organizations but for Tesla Motors the best strategy for marketing and pricing is focused
differentiation. In this strategy company can focus on segmented people to earn higher profit. In
this company can focus on promotion and marketing to gain high marginal profit.
CONCLUSION
This report is concluding the business environment of Tesla Motors. The impact of
external and internal factors on the business environment of Tesla company is analysed in report.
The porter five force analysis is used to conclude marketing positioning of organization. The
different strategies are learned to learn the best strategy to conduct a business with high
productivity and higher profit.
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REFERENCES
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Online
Sukant Kumar, Porter’s Five forces analysis, 2019. [Online]. Available through :
<https://medium.com/product-gyaan/porters-five-forces-analysis-868945aa5846>.
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