Business Strategy Analysis of Tesla Motors: PESTLE, SWOT, VRIO

This report provides a strategic analysis of Tesla Motors, an automotive and energy company specializing in electric car manufacturing. It begins with an introduction to business strategy, emphasizing the importance of aligning actions with goals to gain a competitive edge. The report then delves into a macro-environment analysis using the PESTLE framework, examining political, economic, social, technological, environmental, and legal factors impacting Tesla Motors. Following this, an internal analysis is conducted using SWOT and VRIO models to assess the company's strengths, weaknesses, opportunities, threats, and internal resources. The report highlights Tesla's strengths, such as its cutting-edge technology and strong brand image, while also acknowledging weaknesses like limited production capacity and high vehicle costs. The analysis also explores opportunities like the growing demand for sustainable products and threats such as competition from other automotive companies. Finally, the report concludes with a discussion of strategic options available to Tesla Motors based on the analysis.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
P1. Framework for macro-environment analysis...................................................................3
P2. Framework for internal analysis.......................................................................................6
P3. Industrial analysis.............................................................................................................8
P4. Selection of a strategic option along with rationale.......................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
The strategic series of processes, activities, actions or decisions aimed at attainment of
goals and objectives in a timely manner is referred to as strategy. Such course of actions assists
an enterprise in undertaking a competitive edge in market place so as to enhance the present
market positioning and profitability of company (Brewster, 2017). Business strategy is designed
by senior executives and enforced by middle management to ensure that all the activities and
processes being executed within organisational premises are aligned with it. The following
assignment consists of the strategic analysis of Tesla Motors that is an energy and automotive
company having specialisation in manufacturing of electric cars. The report contains internal and
external analysis with the help of frameworks and models. Also, it includes strategic options
available to the entity along with strategic management plan.
P1. Framework for macro-environment analysis
It is essential for a business organisation to constantly analyse and evaluate its external
environment along with its influence upon business in order to devise strategies in accordance
with that. With the help of effective strategies, company can easily attain growth and ensure
timely accomplishment of goals and objectives. This provides assistance to entity in gaining
knowledge of the threats to overcome them shortly so that an edge can be gained over rival firms
prevailing in market place. In this regard, Tesla Motors has also conducted a macro
environmental analysis with the help of PESTLE. This will help the respective enterprise to gain
knowledge of the related opportunities and threats (Cavusgil and et. al., 2014).
PESTLE
It is an assessment and evaluation tool that provides guidance to an organisation in
gaining information about the macro environment. Tesla Motors, being an international
corporation and a leading automotive brand, realises the need to determine the outcome of
external environment so that opportunities can be capitalised and threats can be dealt with
appropriately. In this relation, PESTLE of Tesla Motors is presented as follows:-
Political: This consists of policies and procedures stipulated by government of the nation,
such as taxation laws, trade regulations, political stability etc. The strong and stable political state
of UK government holds opportunities for Tesla to feasibly grow and expand its operations
within this nation by acting within the jurisdiction of national policies. However, factors such as
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BREXIT, political instability, trade wars, terrorist attacks may pose threat to sustainability of
company. This impacts upon Tesla Motors' inventory management strategy in a negative manner
and to deal with it, the entity focuses upon maintenance of enough stock at all times so as to fulfil
the needs and demands of customers in any political situation.
Economic: It consists of inflation, interest and savings rate, economic growth etc. In this
regard, it can be said that the rising prices of fuel-engine automobiles have given rise to the
demand of sustainable cars which tends to act as a lucrative opportunity for Tesla Motors to sell
eco-friendly cars and gain trust of customers. Further, the adversities such as recession, BREXIT
may hold threat for the demand of cars of company within the UK market place. This impacts
upon company's business strategy in a significant manner and facilitates the firm to adopt
economic pricing model which is consistent with all the income groups as well as the high tech
features of its vehicles (Chang, 2016).
Social:
Change in trends, beliefs, practices, lifestyles, attitudes and behaviours of consumers
comes under this element of PESTLE. With changing time, customers have now become aware
of the environmental concerns and thus demand vehicles which pose least threat to society or
environment. This presents opportunity for Tesla Motors to tap advantage of the rising demand
for rendering sustainable offerings to people. However, there are many companies present within
the market place that possess the material, labour and funds to come up with eco-friendly cars
which can disrupt the market and automotive industry (Mittal and Dhar, 2015). This can act as
the biggest social threat for Tesla Motors. This impacts upon new product development strategy
of organisation and facilitates it to launch innovative, high tech and latest car designs at rapid
intervals of time, to appeal to customers effectively and retain them for long term.
Technological:
This aspect consists of latest trends, techniques and technologies which possess the
capability to change the face of market. Tesla Motors has always been an organisation which has
come up with models based upon hydrogen fuel and having latest and distinguished features.
This has instilled expectations in its loyal customer base and such people expect better with
every upcoming model. This put pressure upon the organisation, to deal with which, the
corporation should develop unique and innovative offerings for customers. Further, the existence
of rival firms in market such as General Motors, Ford, Nissan, Audi, Volkswagen pose threat to
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the market positioning of Tesla as these companies can launch vehicles that may out-power all
other car models, thereby gaining the leading position in market (Chen and Jermias, 2014). This
facilitates the entity to adopt a product development strategy which focuses upon utilisation of
innovations and latest technologies while launching new products into market place.
Environmental:
Each business organisation in the modern era intends to operate in the interest of
environment so as to gain recognition from government, customers and legal bodies. In this
regard, Tesla Motors ensure least carbon emissions at the time of production and has also taken
measures to promote sustainable development within the organisational premises. The usage of
paper in the company is reduced and corporation intends to launch new eco-friendly offerings for
people in upcoming time. However, the premium pricing strategy adopted by organisation for
such models poses threat to market dominance of entity. This impacts upon the long term
corporate strategy of Tesla Motors and fosters it to adopt a strategy of value or economic pricing
as per business situations, to significantly appeal to majority of the income groups.
Legal:
Every company operating within the corporate world has to abide by certain laws and
legislations that guide the sector in which it operates. In this regard, Tesla Motors abide by health
and safety regulations, employment regulations, Automobile Laws etc. Further, the regulations
executed by government in relation to go green movements are carbon tax, green policies and so
on which serve as opportunity for Tesla to invest in them, thereby gaining the trust of customers.
However, there are certain tax policies on green businesses which pose threat for the respective
company. It has a significant influence on the sustainability strategy or policy of Tesla Motors as
it makes the firm carry out its operations in a manner that it remains aligned with go-green
requirements and associated tax policies.
On the basis of above external analysis, it can be said that there are various opportunities
for Tesla Motors such as launching innovative and eco-friendly vehicles, anticipations of
expectations and demands of people and investing in go-green movements that should be duly
taken into account by entity to expand its share in global market. However, it has also been
acknowledged that there are certain threats such as taxation policies for green businesses,
anticipation of customers’ preferences by rivals before Tesla Motors, political instability of
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nation, rising competition that must be dealt with in a timely manner so that they do not cause
much harm to company (Goffee and Scase, 2015).
P2. Framework for internal analysis
It is essential for business organisation to gain knowledge of their internal environment in
order to design and develop strategies accordingly. In this regard, Tesla Motors has made use of
SWOT and VRIO to carry out internal analysis.
SWOT
It is a strategic framework used by companies for examination of internal environment of
entity with an aim to devise effective strategies for smooth functioning. SWOT analysis of Tesla
Motors is given below:-
STRENGTHS WEAKNESSES
 Tesla has been renowned for adopting
cutting edge technologies and
techniques. Many large scale
organisations use the technologies of
Tesla such as Daimler uses battery
packs and Mercedes Benz uses
powertrain of this company (Tesla
SWOT Analysis, 2019).
 This entity has obtained optimum
support from government. It gained
$465 billion for energy management
projects under the US Department of
Energy (Tesla SWOT Analysis, 2019).
 Tesla operates as a monopoly within
the segment of hydrogen and electric
cars (McCahery, Sautner and Starks,
2016).
 Tesla recognises the significance of
distribution and thereby maintains its
 The respective company produces cars
in only one plant situated in California.
It owns a capacity to make 500,000
vehicles at one point of time and the
production capacity of entity is also
confined to this limit (Klettner, Clarke
and Boersma, 2014).
 The cost of vehicles developed by this
entity are way more costly than the
ordinary automobiles. In fact, the cars
manufactured by Tesla rank among the
premium priced vehicles.
 The sales network of Tesla is dependent
upon its supercharger owing to which
revenues of this entity are relevantly
low (Chen and Jermias, 2014).
 The operational and manufacturing cost
are found to be high at Tesla which
inflates the overall cost (SWOT
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own distribution system. Analysis: Tesla Motors, Inc., 2019).
OPPORTUNITIES THREATS
 The rising demand for sustainable
products tends to generate demands for
electric and energy cars manufactured
by Tesla.
 New technologies such as green cars,
battery operated automobiles, hybrid
vehicles, electric cars and self-driven
autonomous cars generate opportunities
for Tesla Motors to enhance its
customer base.
 Tesla Motors faces threat owing to the
presence of large number of rival firms
such as General Motors, Ford, Fiat
Chrysler Automobiles within the
automotive sector.
VRIO
For ascertainment of internal resources and capabilities, Tesla has used this model as
follows:-
Resources Valuable Rarity Imitable Organized What is the result?
Strong brand
image
Strong brand
image
- - - Competitive
Disadvantage
Offering Offerings Offerings - - Partially competitive
System
software
System
software
System
software
System
software
- Competitive advantage
for temporary basis
Personnel Personnel Personnel Personnel Personnel Competitive advantage
Valuable
The valuable elements of Tesla Motors are:
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Strong brand image: This organisation has a strong market presence as well as brand
image that provides it assistance in providing value to customers in order to attain maximum
satisfaction from them.
Offerings: This corporation offers high quality and trending offerings as per the needs
and demands of customers.
System software: Tesla Motors makes use of Retalix Systems which are specifically
designed for the effective execution of activities of company in a timely manner.
Personnel: The workforce of the respective company is skilled and competent and makes
use of their potential to assist the entity in attaining organisational goals.
Rarity
The rare components of company are:
Offerings: The offerings of this entity are found to be rare as they are made by making
use of latest technologies.
System software: Retalix Systems used by the respective company is developed and
designed as per the specifications of entity and is suitable only for this particular organisation
(Goffee and Scase, 2015).
Personnel: The workforce of this company possesses the necessary skills and
competence with which they can conduct business operations suitably (Jeston, 2014)..
Inimitable
The inimitable resources of this company are given below:
System software: The system of software applied by Tesla within the premises is relevant
to the entity and can only be used within the company (Davies, 2016).
Personnel: Staff is provided with regular training so that they can deal with complex
situations in an effective manner.
Organised
The organised factors of Tesla Motors are explained below:
Personnel: The individuals working within the company are organised such that they can
deal with complex situations (Laudon and Traver, 2016).
P3. Industrial analysis
To design and develop an optimum strategy which can aid the organisation in enhancing
its market positioning and gaining a competitive edge, industrial analysis is done by a business
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entity. In this regard, Tesla Motors has also executed the same to gain holistic knowledge of the
sector in which it operates to decide upon the future course of action that can aid the enterprise in
establishing a strong brand name and image among people. This has been carried out with the
help of Porter Five Force Analysis.
PORTER FIVE FORCE
This is an analytical tool which provides guidance to an organisation so that it can devise
effective strategies to get ahead of rival firms present within same industry. In this regard, this
analysis has been done upon Automotive Sector for Tesla Motors, as follows:
Threat of New Entrants
The magnitude of this force is found to be very low owing to the high amount of funds
that have to be invested as capital to gain access to this sector. This tends to generate opportunity
for Tesla Motors to launch new and innovative designs of cars which possess the capability to
disrupt the industry and become a market leader. With the help of this, the respective
organisation can build a base of people who are loyal and dedicated to the brand for its quality
and innovative offerings. Further, this corporation has the chance to constantly invest in R&D for
anticipating the latest trends and expectations of people and meeting them in a timely manner to
attain maximum satisfaction from consumers (Jocovic and et. al., 2014).
Level of rivalry within sector
The extent of this force with respect to automotive industry is found to be extremely
high. This is because a large number of vehicle manufacturers are present within the specified
sector. The examples of dominant market players are Ford Motors, Toyota, General Motors,
Nissan, Volkswagen etc. Although the companies which deal in electric vehicles are found to be
very less yet the well established position and customer base of before mentioned brands pose
serious threat to Tesla Motors (Klettner, Clarke and Boersma, 2014). To effective tackle this; the
respective organisation possesses the resources as well as manpower to come up with unique and
innovative offerings that are beyond the expectations of people.
Threat of Substitutes
The influence of this force has been found to be immensely high for automotive sector.
However, even though this power is high for other companies prevailing in market, the influence
is found to be relatively lower for Tesla Motors as the number of high tech electric car
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manufacturers across the globe is low. This presents opportunities for the respective organisation
to invest more in this product segment and adopt differentiation to distinguish itself from electric
automobile producers. Further, by adopting a customer-oriented approach, Tesla can
significantly enhance its share in global market place, thereby becoming the market leader with
biggest and most loyal customer base.
Bargaining Power of Suppliers
The influence of this factor in context of automotive industry is ascertained to be low
owing to the increasing awareness among people of modern era regarding the features and
attributes of high design and stylish vehicles. Tesla Motors possesses the potential to form
coalition with a number of small and large-scale suppliers to enhance its existing level of sales
and profits (Jeston, 2014). Also, the corporation can get involved in experimentation with a
number of designs, features and attributes to come up with vehicle offerings that have the
potential to gain maximum satisfaction from people. This will aid the entity in raising the
negotiation power possessed by suppliers in automotive market.
Bargaining Power of Buyers
The degree of influence possessed by this force upon automotive sector is found to be
high. This is so because many large scale companies dealing in same product category are
available within the market place. However, owing to relatively lesser number of automakers
dealing in electric cars, Tesla Motors possess the opportunity to grab a larger market share by
enhancing the features and quality of its offerings in the upcoming time so that a feeling of trust
is instilled in customers and they intend to stay connected with company for long term. With this,
Tesla will be able to have a control over the bargaining power of purchasers (Klettner, Clarke
and Boersma, 2014).
P4. Selection of a strategic option along with rationale
Ansoff growth matrix refers to strategic technique which is being used by organisation in
order to identify best strategy through which growth can be attained by them. The framework
includes certain growth strategies such as Market penetration, market development, product
development and Diversification. It has been analysed that top management team of team of
TESLA is planning to expand their business for enhancing their profitability in effective manner.
With reference to TESLA, it has been analysed that the company is conducting this analysed the
company is focusing on using this framework for improving their business performance at
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marketplace in effective manner. All of the strategy of this framework is described as below in
detailed manner:
Market Penetration: This strategy clearly focuses on selling existing product at existing
marketplace. In context of Tesla Motors, it can be said that the company can easily use this
strategy by selling existing models of their car in the already captured area. It has been analysed
that, marketing team of Tesla Motors can easily influence interest of customers by using this
strategy as they are aware of their interest and liking. As a result, the strategy helps them in
attaining sales target in easier manner.
Market development: With reference to Tesla Motors, top management team of this
company can use this strategy by introducing existing model at new geographical locations such
as Bellevue, Chicago, IL for the purpose of grabbing attention of new customers in order to
improve their sales performance.
Product development: According to this growth strategy, it can be said that it is
essential for business organisation like Tesla Motors belongs to Automotive industry to introduce
fresh car model with innovative features in existing marketplace. This new model is required to
develop by considering requirement of customers and people of that area. As a result, with the
help of this strategy growth of Tesla Motors can easily be raised with the help of improvement in
sales performance of the company (Laudon and Traver, 2016).
Diversification: This growth is seen as the riskiest strategy for all businesses. In context
of Tesla Motors, it can be said that this strategy will going to be risky for Tesla Motors because
if they introduce new model at new geographical location, then there are probable chances that
the strategy can fail. As a result, company can face huge loss.
On the basis of above discussed framework, it has been analysed that Tesla Motors
should adopt product development strategy of this growth matrix. In this, they are required to
introduce new model with highly innovative feature within the already established region for the
purpose of growth. It can be said that, it would be easier for marketing team to influence interest
of customers with new product as the model is designed and developed according to the
requirement of customers only (Lawton, 2017).
Strategic Management Plan
The strategic management plan made by Tesla Motors is presented as follows:-
Vision: “To become a leader in automobile sector across the globe.”
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Mission: “To speed up the global transition to sustainable energy by offering high
quality products of same category (About Tesla, 2019).”
Objective: To enhance the share in existing market by 10% by the end of 1 year.
Strategy: Tesla Motors will make use of product development strategy to launch new as
well as innovative models within established markets in order to enhance the customer base and
profitability of entity.
Tactic: Tesla Motors will make use of value addition to differentiate itself from other
rival firms and simultaneously meet the needs and requirements of customers to gain high
satisfaction from them.
CONCLUSION
The above discussion reaches to the conclusion that strategies are the foundation upon
which the activities and processes of business are based. Also, it is comprehended that company
possess the resources to launch eco-friendlier vehicles. PESTLE analysis demonstrates that that
the organisation is facing threat from BREXIT, tax policies on green businesses and increasing
competition. Industrial analysis depicts that immense competition prevails in automotive sector
and substitution effect also generates demand for entity to introduce differentiated vehicles.
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REFERENCES
Books and Journals
Online
Tesla SWOT Analysis. 2019. [Online]. Available Through:<https://bstrategyhub.com/tesla-swot-
analysis/>.
SWOT Analysis: Tesla Motors, Inc. 2019. [Online]. Available Through:
<https://bstrategyhub.com/tesla-swot-analysis/>.
About Tesla. 2019. [Online]. Available
Through:<https://bstrategyhub.com/tesla-swot-analysis/>.
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