Tesla's Business Strategy: Evaluating Competitive Forces and Planning

This report provides a comprehensive analysis of Tesla's business strategy, focusing on the impact of the external environment through PESTLE analysis, and evaluating the internal environment and capabilities using SWOT and VRIO frameworks. It assesses competitive forces using Porter's Five Forces model and develops a strategic management plan for Tesla. The analysis covers political, economic, social, technological, legal, and environmental factors influencing Tesla's operations. The report also examines Tesla's strengths, weaknesses, opportunities, and threats, alongside its valuable, rare, inimitable, and organized resources. Finally, the competitive landscape is evaluated to provide a holistic understanding of Tesla's strategic position and future direction, all of which can help students with similar assignments, with more resources available on Desklib.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Impact and Influence of External Environment on Tesla.....................................................1
TASK 2............................................................................................................................................4
P2. Internal Environment and Capabilities.................................................................................4
TASK 3............................................................................................................................................7
P3. Evaluation of Competitive Forces........................................................................................7
TASK 4............................................................................................................................................8
P4. Strategic Planning.................................................................................................................8
Strategic Management Plan.........................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business Strategy refers to effective actions and procedures adopted by an organisation to
appropriately ensure a long-term sustaining and competitive advantage within the market.
Furthermore, it also allows a firm to expand their customer base and expand their presence
within their niche as well as global market (Akter and et. al., 2016). The following report is
based on Tesla, which is an American energy and automotive organisation. It includes analysis
of influence of external environment within the firm and analysis of its internal environment and
capabilities. Apart from this, the report also takes into account the application and evaluation of
competitive forces of Tesla's market sector along with determining its strategic direction.
Alongside this, a strategic management plan has also be developed for Tesla which would help
the firm in achieving its strategic objectives.
TASK 1
P1. Impact and Influence of External Environment on Tesla
External environment of an organisation includes all those factors and elements which is
essential for an organisation to effectively and essentially communicate within their workplace.
In addition to this, all these external factors influence business organisations in setting up their
effective strategies which could help them in ensuring sustainability (Higgins and et. al., 2015).
In context of Tesla, there are several external factors which has a wide impact on the firm
and influence the organisation in taking up effective business related decisions. To further
analyse the same, PESTLE analysis is used which is a detailed framework used for analysing the
effect which all the external environmental factors have on the company. These factors in respect
to TESLA are described below:
 Political Factors:
These factors determine the impact of political scenario and governmental actions on an
organisation. Government is one of the most effective and essential factors which has an impact
on any business and is quite a strong societal force. With respect to Tesla, there are various
opportunities available for the company within the marketplace. With various political
integrations happening around the world, the firm has vital opportunity to expand its business
further. Moreover, the government of the USA as well as many other developed and developing
countries provide incentives for electronic vehicles. This has quite a positive impact on Tesla in
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relation to enhancing its financial performance (Tesla, Inc. PESTEL/PESTLE Analysis &
Recommendations, 2019). However, there are some areas which might cause hurdles for the
organisation. For instance, Brexit, within UK, is a significant event which could cause hurdles
for Tesla in expanding its business further due to political instability. This in turn would allow
the firm in effectively enhancing its business operations in the company. Despite this, UK and
the US have effective political ties which might reduce this issue to an extensive rate.
 Economic Factors:
All the economic conditions prevailing within the market and overall economic
performance of a nation has a very evident and long-term impact on an organisation and its
strategies. There are several factors which are included in this aspect such as trade, currencies,
market demand and all the economic variables which could impact businesses. For Tesla, there
are again ample opportunities within the market on economic front. For instance, there is an
expectation of almost 3% growth in global economy in 2019 and 2020. Thus, it presents
appropriate business opportunities for Tesla to manufacture and sell its vehicles globally. In
addition to this aspect, electric vehicle market is subjected to reach almost $1.5 Trillion by 2025
(Tesla Pestle Analysis, 2019). Such factors positively influence the company and encourage its
operations within different developed markets.
 Social Factors:
This factor is one of the most effective factors which influences the company and its
decisions. It includes beliefs, lifestyles as well as attitudes of customers within markets in which
the firm operates. In context with Tesla, there is a drastic shift within the lifestyles of individuals
and car owners. Lately, it is witnessed that individual lifestyle is more inclined towards having
vehicles and other technological possessions which generate low-carbon footprint. In addition,
people are preferring using renewable energy, which is again, a crucial opportunity for Tesla.
Thus, social factors are enhancing the business opportunities for the firm to keep up with its
consistency of producing low-carbon and energy efficient vehicles.
 Technological Factors:
All the technological advancements are involved in these factors. Currently, the global
business environment has been subjected to effective and robust advancements and
improvements in existing technologies. Automation and Artificial Intelligence (AI) are being
adopted by industries and being effectively delivered to the customers as well. Tesla produces
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products which are technologically sound with latest engineering processes and equipments. This
has helped Tesla in enhancing its product portfolio (Eaton and Kilby, 2015). Moreover, with
driverless technologies, Tesla could obtain a firm competitive edge within the market which
would allow the firm to accomplish its business objectives. These changes in technologies bring
quite a positive impact on the organisation. However, its impact could be challenging as well as
continuous advancements in technologies require the firm to keep upgrading its offerings within
the marketplace.
 Legal Factors:
These factors include all the legislations and legal frameworks which influence working
of companies and their actions within the market. Within the business environment, there has
been an effective expansion in business opportunities related to patent protection. Thus, it has a
positive impact on Tesla in enhancing its business overseas. Furthermore, there are several
legislations such as Environmental Protection Act, 1986,, which have effected the company in
developing and delivering products that are in alignment to this legislation. However, quite
recently, there are two crashes in Tesla cars, due to which, the firm is subjected to several
lawsuits and intervention from Transportation Safety Board and National Highway Traffic
Safety Administration. However, there are several opportunities on the company such as
adherence to safety legislations such as Road Safety Act, 2006, which would allow the firm to
enhance its business operations effectively (Burlton, 2015).
 Environmental Factors:
These factors include all the aspects related to the environment and its probable influence
on Tesla's operations. The environmental scenario of all the countries are quite effective in
relation to greenhouse gas emissions from auto-mobiles. Moreover, there is a huge demand of
electrical and hybrid cars in the market which work completely on bio-fuel or electricity. This
has positively impacted Tesla as all the offerings delivered by the company are environmental
friendly and appropriately utilise electricity. Moreover, environmental regulation such as
Environmental Act, 1986, also influence the firm in developing offerings which are in
compliance with such legislations. Thus, this factors are an opportunity for the company to
produce more environmental friendly products in the future.
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TASK 2
P2. Internal Environment and Capabilities
Internal Environment:
Internal environment of an organisation comprises of all the internal resources and
processes, which are necessary to be taken into account while taking up effective business
decisions (Evans and et. al., 2017). Furthermore, these aspects also have a very deep impact on
the strategies opted by the company and their success depends heavily on support of these
resources.
To analyse the impact of internal environment, SWOT analysis is being used which is a
framework through which the firm would be evaluating its strengths, weaknesses, opportunities
as well as threats. This framework is mentioned below:
STRENGTHS WEAKNESSES
 One of the biggest strengths of Tesla is
that it focuses on differentiation as its
product strategy (Rosemann and vom
Brocke, 2015).
 The firm's offerings are in accordance
with the preference of customers and
according to market conditions.
 The firm is overspending on research
and development which is causing
mismanagement in their profits.
 Its manufacturing force is quite smaller
than that of other car manufacturing
companies in the US.
OPPORTUNITIES THREATS
 There is a growth in the market in
relation to electrical cars and vehicles
with low carbon emissions.
 With technological advancements like
AI and Automation, the firm has ample
opportunities related to building
driverless vehicles.
 There is a high competition within the
market with firms like Ford and
Toyota, who are also working on same
concepts and have effective R&D
department for giving tough
competition to Tesla.
 The firm has limited supplier network,
which might hinder its performance in
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foreign markets.
Internal Resources and Capabilities:
It is of vital importance for Tesla to effectively determine their internal resources which
makes the firm enable of accomplishing its business objectives (Schaltegger and et. al., 2016).
Furthermore, these are also crucial for the firm to position itself strongly within the market.
Illustration 1: Tesla's estimated U.S. market share from January 2018 to December 2018
(Source: Tesla's estimated U.S. market share from January 2018 to December 2018, 2019)
Currently, Tesla has witnessed quite a raise in its market share last year, which reflects
essential and effective use of its capabilities and internal resources (Mellat-Parast and et. al.,
2015). However, it is very crucial for the company to determine their internal capabilities for
which, VRIO Analysis is being used which is discussed below:
Factors Valuable Rarity Inimitable Organized Result
Financial Financial - - - Non-
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Resources Resources Competitive
Infrastructure Infrastructure Infrastructure - - Partially
Competitive
Futuristic
Design
Futuristic
Design
Futuristic
Design
Futuristic
Design - Temporarily
Competitive
Manufacturing
Capability
Manufacturing
Capability
Manufacturing
Capability
Manufacturing
Capability
Manufacturing
Capability
Competitive
advantage
The analysis of VRIO Analysis and Internal Resources of the firm is mentioned below:
Valuable: Financial Resources: Financial resources available with Tesla are quite valuable for the
company which enables the firm to invest into R&D activities and further develop
effective products according to needs and wants of the marketplace (Kossyva, 2015). Infrastructure: The firm's infrastructure is quite effective and valuable which is inclusive
of setting up a framework for each of the organisational department to work upon. Futuristic Design: The organisation's futuristic designs in its vehicles are valuable as it
allows the firm to experience an effective and sustaining competitive edge.
 Manufacturing Capability: Tesla has an effective and competent manufacturing
department, responsible enough for building one of the most preferred car segments in
the market and hence, is valuable to the company.
Rare: Infrastructure: It takes immense investment and adequate professionals to set up
infrastructure which supports high end manufacturing of top class vehicles, which makes
it very rare for the company. Futuristic Design: It is very rare that an organisation consistently perform effective
forecasts on which they develop future-oriented designs.
 Manufacturing Capability: Such effective manufacturing capability which allows the
firm to present designs and products according to market preference is quite rare.
Inimitable:
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 Futuristic Design: Tesla presents designs which could be sustained in the future and due
to their strong patent portfolio, are quite impossible to imitate (Bocken and et. al., 2016).
 Manufacturing Capability: A specific set of skills, knowledge and experience is required
by manufacturing departments of other organisations which is very difficult to imitate.
Organised:
 Manufacturing Capability: The firm has human resources which are highly skilled and
contains effective experience, making its manufacturing department quite organised.
TASK 3
P3. Evaluation of Competitive Forces
It is essential for an organisation to appropriately evaluate competitive forces which
influences the strategies taken by Tesla. In addition to this, it would also make it capable enough
to determine its industrial effectiveness. For this aspect, Porter's Five Force Analysis is being
applied which is described in detail below: Suppliers' Bargaining Power: These individuals or organisations are the ones which
supplies raw materials to the company which they use for developing their final offerings.
In context with Tesla, this organisation has numerous suppliers for different raw
materials for their products. However, despite of them being numerous, the firm has a
weak supply network, which enhances their negotiating power overseas. Moreover, there
is not a vast range of suppliers who modifies their production and enters into a specific
production unit for Tesla. Thus, bargaining power of suppliers is quite high in context
with the company. However, the firm must work towards building effective supply chain
management as a result to reduce this bargaining power. Buyers' Bargaining Power: These individuals are the one which buy companies
offerings and are a reason for its existence. As for Tesla, the buyers have been a constant
factor in determining designs within the organisation and its products. In addition to this,
with low switching costs between vehicles, these individuals and organisations find it
quite easy to switch organisation. Furthermore, there is high inclination within
millennials lately to use public transport rather than owning up vehicles. All these aspects
enhances their bargaining power in relation to the firm and its offerings. To tackle the
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same, however, the firm must effectively ensure a large and loyal customer base and
present them innovative and exclusive offerings which reduces this power. Threat of New Entrants: It is very complex for new organisations to invest effectively to
compete with Tesla. Another barrier for new organisations is that Tesla is renowned
globally and is trusted worldwide, which further enhances the barriers for themselves.
However, there are various organisations which are planning to enter the auto-mobile
market and are willing to manufacture electrical and low-emission cars. Thus, it makes
this threat moderate for the company; and to cope with the same, the firm must innovate
its products and build economies of scale to stay ahead of this threat (Soltanizadeh and et.
al., 2016). Threat of Substitutes: There are various substitutes such as public transport which
promotes safety and convenience to customers and plus, are light on their pockets.
Moreover, with high preference of millennials on these modes of transport, private
companies like Tesla are quite in a fix. Thus, threat of substitute is quite high for the firm.
To stay ahead of the same, the organisation must be service oriented and produce more
effective products which are not too costly.
 Competitive Rivalry: There are various auto-mobile companies operating in large scale
like Toyota, BMW, Mercedes Benz, etc., which are developing auto-mobiles similar in
nature to Tesla. Furthermore, such long orientation of these firms and effective presence
makes threat of existing competition high. Sustainable differentiation is one of the tactics
which could be applied by the company to beat the competition and stay ahead in the
market.
In my opinion, I think that Tesla has the internal capabilities to overcome competitive
market forces as the firm is quite effective in relation to producing products which are at ease. In
addition to this, there are certain elements which, according to me, are important for the
company to follow in relation to build an effective advantage over its competitors in the market.
For instance, the firm must work effectively work towards building a strong and effective supply
chain for the organisation to ensure adequate suppliers worldwide for their products.
Furthermore,continuous inclination towards innovation could help the firm enhance its
competitive edge within the market.
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TASK 4
P4. Strategic Planning
Evaluation of competitive forces are quite effective in relation to determining the
industrial position of the company. However, its outcome made it quite evident that the firm
must adopt several effective strategies with respect to improving their current state and further
succeed in the market. For this purpose, it is essential for the firm to determine its strategic
direction, for which Ansoff's matrix has been used which is described as under: Market Penetration: According to this strategy, existing products are sold in existing
markets. The purpose for which this strategy is used is to increase customer base within
niche markets. Through this strategy, Tesla could work towards enhancing their brand
awareness. Furthermore, it would also help the organisation in gaining a better
competitive advantage in their existing market. Market Development: Within this stage, the firm sells its existing products within new
markets. With such global presence of the company, this strategy could be effectively
used by Tesla to expand its market overseas. Furthermore, this would allow the firm to
ensure trust within the new market as with enhancements in market research, its
performance in its local market would precede its position in new markets as well.
Furthermore, this strategy would work effective in countries like UK and India where
there is a demadn for energy efficient products. Product Expansion: In this, focus of a company is on providing new products within
existing markets. As for Tesla, the firm is quite inconsistent in engaging in new product
development. The reason for the same is that there is a high investment associated with
development of new product. However, through this strategy, firm could expand its
customer base as its new products would be according to customer preference, which
would help the firm in strategically beating competition in its local markets.
 Diversification: In this strategy, new offerings are provided in new markets. It is quite
risky, firms might be at risk of losing customer support in locations which is quite unique
for their offerings. Furthermore, it would be very expensive for the company as new
locations would require new markets as well, which is ineffective for Tesla. However, the
firm continues to diversify its operations within different energy related sectors (Habib
and Hasan, 2017).
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The firm, out of all these strategic directions, must opt for market development, as new
markets with existing products would allow the firm to introduce new concepts with the
organisation.
Furthermore, to ensure an effective direction, the firm could also implement horizontal
and vertical integration which are mentioned below: Horizontal Integration: Growing through this integration, the firm would be aiming at
acquiring a similar organisations within the current industry it is operating in. It could be
used for effective diversification, enhance its size, attain effective economies of scale,
decrease competition, etc.
 Vertical Integration: In case Tesla opts for this type of integration, the strategy which the
firm would be the acquisition of an organisation which functions in the same industry and
in production process. This would allow Tesla to appropriately strengthen its supply
chain, capture effective profits, enhance their distribution channel as well as decrease cost
of production.
Tesla, in order to appropriately grow within the market could effectively opt for vertical
integration. Reason for the same is that, the firm would experience effective benefits in relation
to its supply chain, which would be beneficial for the firm in relation to gain a firm competitive
position within the market and appropriately enhance its internal capabilities for a sustainable
and continuous growth.
Strategic Management Plan
Through the above analysis, it is quite certain that the firm must opt for developing a
strategic management plan, which would allow the firm to work on development and
implementation of their strategies. Following is the strategic plan for Tesla:
 Aim:
Tesla's aim is to effectively produce latest and technologically advanced products which
would allow the firm to expand its operations in new markets.
 Vision:
Tesla's vision statement states creation of most compelling car organisation of 21st
Century by driving world's transition to electric vehicles.
 Mission Statement:
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Its mission statement states acceleration of world's transition to sustainable transport
(Wirtz and et. al., 2016). Through effective leadership and appropriate working with latest and
renewable sources of technology, the firm is planning to effectively become one of the best auto-
mobile companies.
 Values:
In context with Tesla, the firm aims at both individual and customer benefit and works
effectively in ensuring a professional and effective working environment of its employees
through which, the organisation provide effective, latest, comfortable and environmental friendly
auto-mobiles.
 Strategies and Tactics:
For tactics, Tesla must work upon its pricing while selling its new range of cars and other
energy resources. Furthermore, the firm must also develop effective products in relation to
fulfilling the market gap. For strategy, organisation must adopt market development as a strategy
which would make it capable enough to enhance its global presence (Ghemawat, 2016).
CONCLUSION
Thus, from the information in the above report, it is evident, that business strategy is a
crucial aspect which must be adopted by an organisation to formulate processes and actions in
ways which ensures its long term sustainability and consistent growth. Internal and external
environment are very important to identify in relation to effectively determine their impact on
influence on operations of the company. Furthermore, it is very necessary to determine
competitive forces using Porter's Five forces model. In addition, Ansoff's Matrix could be
effectively used by organisations to determine their strategic directions. Lastly, strategic plan
allows a company in deciding an implementation pathway for their set strategies for growth.
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