Tesla's Strategy: Macro, Internal Analysis, and Competitive Forces

This report provides a comprehensive analysis of Tesla's business strategy, examining the impacts of the macro environment, including political, economic, social, technological, legal, and environmental factors. It delves into Tesla's internal environment, utilizing a SWOT analysis to identify strengths, weaknesses, opportunities, and threats. The report also applies Porter's Five Forces model to evaluate the competitive forces within the automobile industry, assessing the intensity of competition, the potential for new entrants, the power of suppliers and customers, and the threat of substitute products or services. Furthermore, the report explores strategic planning concepts and theories, culminating in a discussion of strategic management plans with tactical objectives. The analysis highlights Tesla's innovative approaches, strong brand image, and potential for global expansion while acknowledging challenges such as high prices, supply chain limitations, and increasing competition. The report concludes by synthesizing these findings to offer insights into Tesla's strategic positioning and future prospects.

Business Strategy Unit
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Table of Contents
INTRODUCTION...........................................................................................................................3
P1 Impacts and influence of macro environment on Tesla..........................................................3
M1 Analyse macro environment in taking decisions..................................................................4
P2 Internal environment and capabilities of Tesla using SWOT................................................5
M2 Strength and weakness in relation to internal structure........................................................6
P3 Porter's five forces model for evaluating competitive forces.................................................6
M3 strategies to improve competitive advantage........................................................................8
P4 Models, theories and concept to understand interpretation of strategic planning..................8
M4 Strategic management plan with tactical objectives.............................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11
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INTRODUCTION
For every business it is required to develop effective strategy to remain competitive in
complex environment. So, strategy is developed by analysing internal and external factors. This
is because any change in internal or external factor highly impact on strategies and goals.
Strategies provide a roadmap to attain mission and vision (Goode and Negoro, 2018). However,
strategies are changed as per market situation. With help of it, companies are able to grow and
develop. The goals are formed on basis of type of strategies.
This report will describe about external and internal factors that is impacting Tesla. Also,
it will discuss on SWOT. Pestle and porter five force model. Moreover, it will be described on
theories and concepts to develop a strategic plan.
P1 Impacts and influence of macro environment on Tesla
An organisation operates in macro environment that includes many factors such as
political, economic, etc. These are those factors in which changes occur highly impact on
company goals. Also, the factors are not in control of business. Thus, macro analysis of Tesla is
as follows :-
Political – They are those factors related to change in political situation, government, trade or
tariff regulations, etc. so, any change in these directly impact on company operations. For
example- change in policies of trade limit automobile industry revenue (Iamratanakul, 2018). As
tesla operate in few countries like US, UK, etc. thus political stability of major country is stable.
Hence, company can effectively expand in those countries. It has opened varied platforms for
them to operate globally.
Economic – It is related to GDP, inflation rate, currency rate, income level of people, etc. these
factors contribute in economic stability of nation. In this main economic factor is decrease in
battery cost which has enabled people to buy electric cars. Also, government is putting efforts to
make battery more affordable and accessible. Moreover, in developing countries the focus is on
using renewable energy. Thus, it is great opportunity for Tesla to expand at global level. There
are some emerging markets as well where business can grow.
Social – These factors consist of taste and preference, needs, trends, lifestyle, etc. of people. Any
change in these factors impact on company growth and development. Now, people needs are
changed, they want pollution free ecosystem and affordable automobile. Moreover, people are
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becoming more environmental friendly. Due to this there is change in social cultural living.
Hence, it is great opportunity for Tesla to offer electric vehicle to people. It will help in reducing
pollution and maintaining sustainability. Furthermore, people needs are varying. They require car
that is of low price and can be easily maintained.
Technological- It is related to advancement in technology. Any change in it, affect company
operations. Moreover, developing countries are effectively focusing on using advance
technology (Acquaah and Agyapong, 2017). Also, government is supporting to bring
technological advancement through advance IT infrastructure. As Tesla is innovative company
and use advance and high technology so change in this factor is beneficial for them. Company
can expand in developed countries where advance technology is used. So, with revolution in
technology company is able to grow rapidly.
Legal- They are those factors in which change in related to employment law of nation, etc. So,
any change in it impact on company operation. Tesla is operating in different countries so they
have to follow employment laws. On basis of it, policies and laws are formed. In auto mobile
sector employment laws are constantly changed. So, it forces companies to form ensure health
and safety, compensation, etc. Hence, it can highly impact on Tesla operation as they have to
comply with legal laws of nation. For this new laws will be formed, etc.
Environmental- The laws are related to environment, issues related to it, etc. the nation
emphasis on protecting ecosystem and reducing pollution. So, changes are made in it and new
laws are been formed. Each country is having their own laws. Tesla exists in various countries so
they have to follow environmental laws related to it. There are strict laws formed by government
that is to be comply by auto mobile industry. Therefore, Tesla operation will be impacted due to
change in environmental factors.
M1 Analyse macro environment in taking decisions
From above it can be analysed that change in political and social factors provide a platform
for Tesla to grow and expand at global level (Rugman and Verbeke, 2017). Thus, management
can take decision to enter in new market. By entering in developing countries company can
provide EV to people to fulfil their needs. Beside it, advancement in technology will also benefit
enterprise. Here, strategic decision can be taken to set charging stations on roads. Likewise,
many governments have formed strict policies and laws related to environment. Hence, a
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decision can be taken to interact with government and follow those policies. The decisions taken
will be beneficial for firm to create a strong brand image
P2 Internal environment and capabilities of Tesla using SWOT
An internal analysis shows the strength, weakness, etc. of a company. It is micro
environment that exists within organisation so any change in it is controlled. But there is impact
of this on business goals as well. The SWOT of Tesla is as follows :-
Strength
Tesla has recently introduced first electric sport car, Moreover, Tesla in always known for its
innovative approaches in the automotive sector. The company has strong brand name &
innovative image in the market of auto industry, thus due to strong brand name it is easy for
Tesla to attract and retain customers easily (Quenum and et.al., 2019). It is having diversified
and integrated policies. Tesla has a strong centralized administrative system and its vertical
integration proved that it has a very highly controllable production process. Furthermore,
company is having its own battery production plan in US. Thus, due to this operational cost is
reduced to 30% which result in rise in revenue. In addition, company is known as innovative as
they use advance technology.
Weakness
Due to rapid economic development in the overseas market Tesla has suffered due to its high
price whereas its competitors are delivering the same service at a low price. As Tesla has its most
of the presence in the markets of US and a very less in some developing countries. Moreover,
due to very low presence in the overseas market, the company has faced various issues of limited
supply chain. They are not having a strong network of supply chain at global level. So, it restricts
to compete with rivals. Apart from it, company is having lack of experience in developing new
products.
Opportunity
It is analyzed that there are vast number of growth opportunities exists for Tesla. First is overall
growth of company can be increased by its expansion of global sales and its supply chain in the
entire market. Global supply chain of automobiles proved to be its significant image in the
industry. Company can attract customers by reducing use of fossil fuels. In this way they enter in
developing markets. Beside this, by offering EV at low price a large customer base can be
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developed (Agrawal, 2016). They can also merge with third parties for increasing battery
production. However, it will reduce operating cost and rise profits.
Threat
At present Tesla is focusing on its electric vehicles which is having comparatively low
competition than that of general petroleum cars. So, in future company can face stiff competition
from rivals like Tata, Suzuki, etc. as they are also manufacturing electric vehicles. It can highly
drive competition in automobile sector. Another threat is there may occur more defects in cars
produced by Tesla. Hence, it can harm company brand image in the market. In future the main
threat is from self driving cars. It can highly impact on Tesla growth and development.
Fluctuation in the prices of the material required in the production is also the biggest threat faced
by the company. As Tesla directly sold out its cars to the consumer rather than delivering from
any dealer, which increase its automobile costs.
M2 Strength and weakness in relation to internal structure
The major strength of company is they are known for its innovative and diversified
products. Also, it is having own batter plant in US. This benefit in reducing 30% cost in
operations. Thus, innovative company tagline has enabled in hiring skilled and experienced
employees. The staff are capable to perform complex tasks and attain goals. Here, activities are
performed with help of new tools and techniques. Employees are given effective training on
basis of their skills and capabilities. Furthermore, management has formed structure according
to roles and responsibilities (Morgan and Vorhies, 2018). Therefore, Tesla is are able to
maintain diversified culture and policies. But in supply chain and R&D company are not having
skilled staff.
P3 Porter's five forces model for evaluating competitive forces
This is another model which is used to analyse internal environment. It is used to evaluate
competition within specific industry. Basically, it used five forces to identify it. The model is
explained as below :-
Competition in the industry
This force shows the level of competition that exits within industry. It means that more
the number of companies intense is competition and vice versa. A highly competitive industry
results in generating low profits. Also, in this competition is based on price set by companies on
products. Alongside it, profit margin is low and revenue is highly dependent on sales. In
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automobile sector there are large number of organization exists. Thus, rivalry among them is stiff
as well. So, due to high level of competition each company is having inadequate market share.
Similarly, Tesla operate in same environment and industry.
Potential of new entries into the industry-
It is related to barriers of entry and exit. In every industry there are particular barriers that
has to be followed. In auto mobile sector there are many barriers that restrict new companies to
enter within sector. This is because it requires huge investment and a lot of planning and
facilities to set up a company (Lohmann and Spasojevic, 2018). Another barrier is intense
competition within industry which restricts new entrants. Likewise, brand image and equity is
barrier due to which new firms do not enter. Apart from it, there are strict rules and regulations
that are to be followed. So, this is also a major obstacle. Thus, it can be evaluated that threat of
new entrant is weak. Tesla can easily operate in it.
Power of suppliers
It refers to power of supplier that can drive cost of input within an industry. It means
large number of suppliers, they possess less power so, firm can easily switch from one supplier
to another. But with few suppliers then company have to highly depend on them. Thus, supplier
have more power to drive prices. In auto mobile sector power of supplier is weak. This is
because there are more number of supplier. Therefore, company can easily switch. It is not
difficult task for them to do so. Furthermore, suppliers have to provide raw materials as per rules
set by firm. Tesla can also easily switch from one supplier to another. The raw materials can be
purchased from different supplier.
Power of customers
It is ability of customer to drive prices of products. Usually, it depends on how much
customer base of company is. A large customer base contains less power to drive price. Whereas
a small base allows individual to negotiate for price. The auto mobile sector is having a large
customer base. In that each company is having moderate client base. Thus, it allows individual to
bargain for low prices. They can easily switch from one company to another. Hence, no
organization is having a large customer base. Therefore, power of customer is moderate. Tesla
needs to focus on customer and offer car at low price. It is because customer can bargain for
product (Amran and et.al., 2015).
Threat of substitute products
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This force state the number of substitute available for a particular product. The product
which does not have any close substitute allows company to increase prices. But when substitute
are available, customer have an option to buy that. Hence, it shows weak power of company. So,
in auto mobile industry the close substitute are less, thus companies have more power to drive
price of product. In case of Tesla there are substitute available like diesel and petrol car.
Therefore, customer is having option to buy them instead of electric vehicle.
M3 strategies to improve competitive advantage
It is important for Tesla to gain competitive advantage in auto mobile industry. This is
because it will enable them to survive for long term (Anderson, 2019). For this it is required to
devise effective strategies. Thus, company can gather market data and analyse it. With help of it,
they will be able to set price of cars and attract people. Another strategy that can be used is
producing self driving cars which will help in increasing customer base. Also, people will find it
cheaper than other cars.
P4 Models, theories and concept to understand interpretation of strategic planning
A company has to take effective strategic decisions for growth. The strategies are base as
it sets a blueprint for them. However, with help of strategies mission and vision is accomplished.
For it both short and long term goals are included in it. Moreover, for strategic planning it is
required to use several models and concepts. They are described below :-
Ansoff matrix
Market development
It is a tactic that is used to expand in other market. Here, a firm enter in new market and
provide similar products to them. This strategy enables them to attract more customers and
generate revenue. It consists of more risk as compare to other strategy as launching of product in
new market may fail.
Market penetration – this is a strategy in which a firm focus on existing market with existing
product. This means that they try to increase market share and rise customer base. It enables
them to grow and develop and gain competitive advantage. This strategy is less risky as the
chances of failure are less.
Product development – The strategy refers to developing new products and offering it in
existing market. In this some extra features can be added or changed to develop new product. It
is then launched in the market (Shields and Shelleman, 2015).
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Diversification – In this strategy new product are introduced in new market. It allows companies
to attract more customers by offering new goods. The main goal is to expand in different market
and establish large customer base. This is useful in generating sales and revenue. There is high
risk involved in it as new product can fail in new market.
Strategic management plan
A strategic management plan consists of goals and objectives that are to be attained. It
provides a direction for organisation to grow and expand. With this they are able to implement
specific strategies for particular market.
Goals – the main goal of Tesla is to enter into new markets and sell electric vehicles. Also, to
operate worldwide by developing a large customer base.
Strategies – Here, company can use market development strategy (Roig-Tierno and Ribeiro-
Soriano, 2015). This is because as company manufacture electric cars, so it will be easy for them
to enter in new market. There are many emerging markets in different countries where company
can enter. Thus, they will be able to attract new customers. Moreover, this strategy is less risky
as company is already operating in some countries where they are successful. However, they
have to promote and advertise it in effective way in order to generate awareness.
Monitoring- It is essential to monitor strategic plan so that goals are achieved. The plan will be
monitored by comparing sales with goals. Also, profits will be calculated and compared with
previous month.
M4 Strategic management plan with tactical objectives
Tesla strategic plan contain strategy of market development. Here, the goal is to expand in
other markets where opportunity exists. The tactical objectives are defined below :-
 To rise 10% sales within 3 months.
 To increase revenue from 20% to 30%.
 To gain 13% market share in Indian auto mobile sector.
So, these are tactical objective through which company can compete at global level with
rivals (Goode and Negoro, 2018). Moreover, by selling electric cars in emerging markets, huge
profits can be earned. By attaining objectives Tesla can achieve mission and vision.
CONCLUSION
It can be summarised that Tesla is a technological based automobile company operating in
several countries. Any change in external factors benefit firm as they are engaged in e vehicles.
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Also, its strength is use of advance technology and weakness is ineffective network of supply
chain at global level. There are number of opportunity for Tesla like expand in other countries. In
porter five force, competitive rivalry is high, power of supplier is weak and customer power is
moderate. For strategic planning organisation can use Ansoff matrix. In that market development
strategy can be applied by them to enter in new market. Through it, they will be able to attain
goals and objectives.
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REFERENCES
Books and journals
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nonfamily businesses in an African economy. In Academy of Management
Proceedings (Vol. 2017, No. 1, p. 10737). Briarcliff Manor, NY 10510: Academy of
Management.
Agrawal, H.O., 2016. An Approach to Business Strategy. In Handbook of Research on
Promotional Strategies and Consumer Influence in the Service Sector (pp. 154-182). IGI
Global.
Amran, A. and et.al., 2015. The impact of business strategies on online sustainability
disclosures. Business Strategy and the Environment. 24(6). pp.551-564.
Anderson, P.L., 2019. Business strategy and firm location decisions: testing traditional and
modern methods. Business Economics. 54(1). pp.35-60.
Goode, S. and Negoro, T., 2018. Can Competitive Strategy and Open Business Strategy
Coexist?.
Iamratanakul, S., 2018. A conceptual framework of implementing business strategy for the NPD
process. Review of Integrative Business and Economics Research. 7(1). p.116.
Lohmann, G. and Spasojevic, B., 2018. Airline business strategy. In The routledge companion to
air transport management (pp. 139-153). Routledge.
Morgan, N.A. and Vorhies, D.W., 2018. The Business Performance Outcomes of Market
Orientation Culture and Behaviors', Innovation and Strategy.
Quenum, A. and et.al., 2019. Resilience of business strategy to emergent and future
conditions. Journal of Risk Research. pp.1-19.
Roig-Tierno, N. and Ribeiro-Soriano, D., 2015. New Context of the Strategy in Economics and
Business. International Journal of Business and Economics. 14(2). p.127.
Rugman, A.M. and Verbeke, A., 2017. Global corporate strategy and trade policy. Routledge.
Shields, J. and Shelleman, J.M., 2015. Integrating sustainability into SME strategy. Journal of
Small Business Strategy. 25(2). pp.59-78.
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