Business Strategy Report: Tesla's PESTLE, SWOT, and Porter Analysis

This report provides a comprehensive analysis of Tesla's business strategy. It begins with an introduction outlining the report's objectives, followed by a PESTLE analysis to examine the macro-environmental factors influencing Tesla. A SWOT analysis is then conducted to assess Tesla's internal strengths and weaknesses, as well as external opportunities and threats. The report also applies Porter's Five Forces model to evaluate the competitive environment surrounding Tesla, including competitive rivalry, the threat of new entrants, the bargaining power of suppliers and customers, and the threat of substitutes. Furthermore, the report evaluates different strategic directions available to Tesla and recommends the most appropriate platform for growth. Finally, a strategic management plan is presented, including specific strategies, objectives, and tactics, concluding with a summary of the key findings and recommendations.

Business Strategy

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Pestle and Swot analysis of Tesla and analysis of its internal environment and capabilities.....1
With porter's five force model, analyses of competitive environment of Tesla.........................6
TASK 2............................................................................................................................................9
Evaluation of different strategic directions that are available to Tesla.......................................9
Recommendation of most appropriate platform for growth and strategies...............................10
Strategic management plan with strategies, objectives and tactics...........................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Business is taking different actions in order to attract the potential customers and to
compete in market(Soltanizadeh and et.al., 2016). These actions help the organisation to
strengthen its performance and achieve the respective business goals. Present study is based on
the company Tesla that is American automotive organisation founded in the year 2003. Company
is having its specialisation in electric car manufacturing. Report will analyse the impact and
influence of macro environment on Tesla and its strategies. Further report will analyse the
internal environment and capabilities of Tesla with the help of SWOT analysis. Report will also
apply porter's five forces model in order to evaluate the competitive forces with respect to Tesla.
At the end report will apply different theories and models in order to interpret strategic planning
for Tesla(Sia, Soh and Weill, 2016).
TASK 1
Pestle and Swot analysis of Tesla and analysis of its internal environment and capabilities
PESTLE analyses:-
It is a framework that is used to analyse the macro environmental factors that are
impacting Tesla in positive and negative ways.
Figure:- 1
Political:-
1
Illustration 1: Pestle analysis

There are different political factors that affects the business and basically include the
factors that government uses in order to influence the business. These factors include different
policies set by the government, foreign trade policies, labour law, environmental laws etc. There
are various incentives that the government is offering that is strengthening the financial
performance of the organisation. They are getting these incentives as the company is having
technology that is insignificant carbon emissions with respect to the vehicle. Tesla is also able to
expand its free trade agreements that helps the organisation to reach at different part of the globe.
The different markets in which Tesla is targeting is having political stability and this is helping in
the business growth. Political stability is also brining favourable environment for the
organisation's competitive strategy that results in intensive growth of Tesla. However, Tesla is
using cobalt as a raw material and 58% of cobalt comes from Democratic republic of Congo.
Recently rush for cobalt have increased due to which many conflicts raised for the organisation.
This political instability may affect the supply chain of Tesla(Ayala, 2016).
Economic:-
There are many economic factors that affects the business performance and strategies.
These factors are economic growth, exchange rates, inflation rates etc. As electric cars are
getting popularity in international market it directly links to global economy and this economic
factor brings opportunity for the organisation. Battery cost is having decrement and as battery is
the cost factor in the preparation of electric vehicle, company is having great opportunity to
increase its production with affordable EV. There is decline in material cost also, that helps Tesla
to come up with cost effective vehicles and to make its goals achievable. However, the change in
foreign currency exchange rates is the most important factor that affects Tesla. There is an
estimation that 10% change in interest rate would result to Tesla's interest expense(Wen, 2016).
Social:-
There are different social factors like norms, customs, population growth rate, lifestyle,
cultural barriers etc. that affects the business strategies of an organisation. As lifestyle and
believes of people are changing over the years and customers are becoming more eco-friendly, it
is brining opportunity for Tesla with respect to its idea of production of electric cars. It is
environment friendly and is also less expensive than traditional cars with respect to its running
cost and maintenance. These cars are sustainable for the environment and attracts the potential
customers that helps the business to earn their long term financial growth. However, it is tough
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for the organisation to deal with the cultural barriers as Tesla is producing globally. It requires
lot of research and patience in order to understand other countries culture and to target there
market. This factor is affecting the organisation and its strategies to achieve its respective
business goals(Ghez, 2019.
Technological:-
There are factors related to technology that affects the business and its strategies. Some
of these factors include research and development, technological changes, automation, awareness
of technology etc. There is rapid change in technology over the years and its is affecting the
Tesla both in positive as well in negative ways. The changing technology is helping the company
to manage the competitive edge and to enhance the portfolio of its products. The leaders of the
organisation are also working to bring driverless technology in future car models of the
organisation. These changing technology will bring competitive advantage to the firm. However,
These technological change may also affect Tesla as every technology becomes obsolete is some
period and for this organisation have to do deep research in order to update these obsolete
technology(SCHMIDT, 2018).
Legal:-
There are many legal factors that are overlapping with political factors and affects the
business and its strategies. Some of the factors include employment laws, copyright, patent laws,
health and safety laws etc. These factors are bringing opportunity for the organisation as Tesla
can use patent law and they can promote their vehicles in different countries with different
energy consumption regulations. However, these legal factors also affects the business
opportunity as two Tesla crashes occurred for which The national Highway traffic safety
administration is identifying the causes of these crashes. There are many states that have
temporarily blocked the sales of the organisation that is directly from manufacturer to the
respective consumers. With respect to these states, Tesla is required to engage any third party
and this legal conditions affects the car delivery. Having dealership in business makes it more
expensive that may affect profitability of the organisation(Velazquez Abad, 2017).
Environmental:-
There are some environmental factors that affects the business both in positive and
negative ways. These factors include scarcity of raw materials, carbon footprints etc. As Tesla is
manufacturing environment friendly cars, it is brining opportunity for the organisation and that is
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the reason organisation is having an effective brand image in market. Tesla is having its major
focus over sustainability and saving energy because of which it is having good reputation in
market. However, Tesla is using cobalt as raw material and recent rush for cobalt have resulted
in scarcity of raw material which can affect business and its strategies to achieve its goals(Ng,
2016).
SWOT analysis:-
SWOT analysis is a framework that is used by the organisations in order to identify there
competitive position and to have an effective strategic planning for business growth. It is used to
analyse both the internal and external factors so that future potential of Tesla is assessed easily.
Strength
 Tesla is a unique brand with good
position in market and is having high
product differentiation with the use of
electric power train technology.
 Diversification is seen in portfolio of
the products that Tesla comes with.
Tesla uses power-pack application in
order to produce its products in
domestic homes.
 It also has strong marketing policies
and is working to improve its customer
base. Service operations are controlled
effectively with better inventory and
warranty packaged.
 Tesla have come up with better
manufacturing process of battery at
Gigafactory and that is useful to attain
economies of scale. This helps the
organisation to have less operational
costs with increase in opportunity.
 (Afonso, 2018).
Weaknesses
 Tesla Cars are having high price as
compared with other brands like
Toyota, BMW etc. It is tough for
middle class customers to afford its
products and services. However, Tesla
Model 3 is affordable to the customers
as compared with Model S and
X(McCain, 2019).
 Tesla is having low market presence
and needs time and investment in order
to grow in market as it is dependents on
its supercharger networks.
 The operational cost is very high in
Tesla. However, company is working to
manage it with the help of Model X and
S. The research and development and
different regulations that company
follows increase the cost for business.
 It is tough for the manufacturer of Tesla
to increase its sales volume as company
is having single plant in California. The
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plat is having limited capacity that is
about 500,000 vehicles and this limits
its capacity. However, they have
modified there manufacturing process
of battery at Gigafactory.
Opportunity
 Tesla is having opportunity to expand
its business in global market with its
focus on supply and maintenance
network. For the same organisation also
have come up with construction of
Gigafactory Shanghai that helps the
business to attract its potential
customers with cost reduction(Li,
2018).
 As lifestyle of people are changing,
demand for electric cars have increased
in market. This brings opportunity for
Tesla. Company is also working on
project of self driving hardware for cars
in order to bring safety for its
customers. This innovation will bring
opportunity for Tesla in coming time.
 As organisation is engaged to reduce
operational and manufacturing cost, it
will bring opportunity for Tesla in near
future with affordable vehicles for
middle class people.
Threats
 There are many luxurious brands in
market like Toyota, Ford etc. and also
environment friendly brands from
which Tesla is having tough
competition. However, organisation is
having premium brand image in market
and they are working to reduce
manufacturing cost so that vehicles are
affordable to its middle class customers
as well.
 There are many legal and regulatory
requirements that is affecting business
cost. However, Tesla is dealing with
these political regulations in effective
manner(Mas, 2018).
 There are many product liability claims
and it is biggest financial blow for the
organisation. There were many
autopilot vehicle that were launched by
the organisation and they get failed.
Tesla also have faced lawsuits and
claims due to failure of its technology.
However, organisation is investing in
huge amount in research and
development because of which
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company was able to launch its new
models with success.
With porter's five force model, analyses of competitive environment of Tesla
Figure:- 2
Porter's Five forces model is a framework that is useful to analyse competitive
environment of the organisation by analysing competitive rivals, new entrants in market, about
the suppliers, customers and different substitutes in order to influence the profitability of the
organisation.
Competitive Rivalry:-
Tesla is having highly competitive market and in electric vehicles' rivalry is intensively
high. However, the company is having brand image in market for its electric vehicles, its
competitors like BMW, Jaguar, Nissan etc. have planned to invest in the development of mass
market electric vehicle.
In global market Tesla is competing with different energy products produced by AES
Energy storage, LG chem and Samsung. There are few numbers of operators in industry in
which Tesla operates and these firms make moves without getting notices because of which
rivalry is a weaker force of action in the industry in which Tesla operates. There are
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Illustration 2: Porter's Five force model

differentiable products in this industry in which Tesla is operating because of which it is tough
for the companies to extract customers of other firms. This makes the rivalry weaker force in this
industry. However, there are some competitors of Tesla that are having large market share and
they compete in effective manner in order to gain position and to become the market
competitors. This make its rivalry a string force of action in the respective industry(Jussani, And
et.al., 2015).
Strategies to improve competitive edge:-
 Company is required to make its offering differentiable so that activities of the
competitors will not affect the organisation as Tesla will have unique products and
services.
 Tesla have to grab new customers instead of just focusing on existing one as industry is
growing very fastly. Tesla also have to work on research and development in order to
understand the supply demand.
Bargaining power of Customers:-
Here bargaining power of the customers is weaker force within the industry in which
Tesla is operating as suppliers in this industry is more than the firms that produce these products
and services because of which the customers are having few firms to choose from. They are not
having control on pricing. However, the price sensitivity affects the bargaining power of buyers
as Tesla's products and services have high price and customers may choose
alternatives(Hoelzlhammer, 2018).
Strategies to improve competitive edge:-
 Company have to focus on innovation in order to make its products and services
differentiable in market so that customers are attracted towards the brand.
 As the bargaining power of company is low, they have to build large customer base.
Bargaining power of suppliers of Tesla:-
The suppliers for the industry in which Tesla operates are in huge number so they are
having less control on the prices and their bargaining power is having weaker force. However,
there are some products that are not having any substitutes and Tesla needs them compulsory
and here the bargaining power is a strong force within the industry. On the other hand, the
suppliers are providing less differentiated and low switching cost products that helps Tesla to
switch the products easily(Dana, 2018).
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Strategies to improve competitive edge:-
 Company have to purchase its raw material at a low cost and if not available then must
switch to other suppliers.
 They also can have different suppliers with respect to locations in which they operate.
Threat of substitutes:-
There are only few substitutes in this industry for the products and services that Tesla is
offering to its customers. These few substitutes are generally provided by low profit earning
organisation. So, threats of substitute product is having weaker forces in this case. However, this
low switching costs substitutes attract most of the customers and these external factors are
resulting as strong force for Tesla with respect to automotive industry(Sharma, 2016).
Strategies to improve competitive edge:-
 Company have to make its major focus on quality of products and services they are
offering to its customers.
 They have to work on differentiation of there products from other competitors in this
industry and have to conduct market research for the same.
Threat of new entrant:-
As differentiation in product is very strong in this industry, because of which the
organisations are working on standardised products. The buyers also search for differentiated
products and strong emphasis is on advertising. Therefore, for Tesla the threat of new entrants is
having weaker force in this industry. However, it is easy for new entrants to access distribution
network and come into this business as only few outlets are there to sell such offerings. These
factors are therefore making strong force within the industry and also for Tesla(McCain, 2019).
Strategies to improve competitive edge:-
 Tesla have to work on innovation and build strong identification for its brands as it helps
in retaining its potential entrants.
 As company is having a strong economy of scale with respect to the industry in which it
operates, therefore, Tesla have to take advantage of it and this firm can fight with its new
entrants with cost advantage.
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TASK 2
Evaluation of different strategic directions that are available to Tesla
There are different strategic direction for Tesla and with the help of Ansoff's matrix
organisation can make an effective strategic decision for the firm. There are four main strategies
that business can use to have growth in market.
Figure:- 3
Market penetration:-
According to market penetration strategy, organisations sells its existing products to the
existing market in which it is operating. Tesla also uses this strategy in order to launch its new
products in existing market by developing there existing products effectively(Tesla and
Microgrids, 2016). They are working to sell its electric vehicles like Model S, Model X and
Model 3 in existing market by developing and modifying its existing products. They also
relaunched energy storage products like Power-wall 2 and power-pack 2 in existing market. Not
only this they also launched different solar panels, electric hardware, inverters etc. in all the 29
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Illustration 3: Ansoff's matrix

countries in which there market exist. This strategy helped the organisation to extract the market
share and having effective positioning in the market.
Product development:-
With this strategy, organisations are developing their new products in order to sale them
in the existing market where they operate. In case of Tesla, they are not engaged in product
development as frequently as other firms do because of the cost involved in development of
electric vehicles and also in the various power storage devices that company is offering in
market(Galpin, 2019).
Market development:-
According to this strategy existing products are launched to new market by doing proper
research on new market and identifying new market for the existing products. Tesla is also doing
research in order to identify new market and with its strategically appropriate decision, company
is launching its existing products in these markets(Chen, 2019).
Diversification:-
According to its this strategy many firms are developing new products in order to launch
in new market. Over the past years, Tesla have used these strategies and extracted a huge market
share. They have launched different electric vehicles in different market all over the world. Not
only this they also entered in energy storage sector in 2016 and launched various new products I
new market(Akgün, 2018).
Recommendation of most appropriate platform for growth and strategies
From the above study it is been interpreted that, for Tesla the appropriate platform for its
effective growth is product development. As organisation is not working in this field and
competition is rising day by day, so they have to work with this strategy. As there are many
substitutes in market that are available at lower price and middle class buyer can easily afford
them, Tesla always have to work with strategy and have to launch its different models of cars at
reasonable rates. For the same organisation have to do proper research and development so that
they can come with standard products and compete with there substitutes with product
differentiation. As Model 3 is affordable to the customers as compared with other models like
Model X and Model S, organisation have to work to make this product more affordable for the
customers with effective research and development and launching in existing market where Tesla
is operating.
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Strategic management plan with strategies, objectives and tactics
Strategies:-
The different strategies for strategic management plan with respect to Tesla are as
follows:-
 Offer differentiable and standard products to the customers of Tesla in order to bring
competitive advantage and to fight with the substitutes in market.
 Do proper research and development in order to provide affordable products for the
middle class customers.
Objectives:-
The different objectives that Tesla have to set in order to have effective strategic
management plan are as follows:-
 To maximize the productivity of the business by minimizing the associated cost and also
satisfying quality expectation of the potential customers.
 To sell the products at a reasonable price so that middle class buyers are able to afford the
same.
Tactics:-
 Discover new platforms for the organisation in order to enhance products and have
effective communication strategy in order to make customers aware about these products
launch(Hague, 2019).
 Making customers satisfied by meeting its expectation with respect to quality of products
and services. Tesla is doing proper research and development for the same.
 Managing its supply chain as its supports manufacturing of the products, Tesla have to
make effective relationship with its suppliers.
CONCLUSION
From the above study it is been concluded that there are some internal and external
factors that are affecting business of Tesla and in order to analyse these factors Pestle and Swot
analyses of Tesla have been done in the given report. Report also concludes that Porter's five
forces are useful to analyse the competitive environment of Tesla so that organisation is able to
take proper measures in order to bring competitive advantage to the firm. Report also concludes
that different strategic directions that are available to Tesla can be analysed with the help of
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Ansoff's model and organisation have to use product development strategy as it is the appropriate
platform for growth of the organisation. Finally report concludes that Tesla have to use two main
strategies that are to offer differentiable and standard products to its customers and to do proper
research and development in order to provide affordable products for the middle class customers,
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REFERENCES
Books and Journals
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Energy?.
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of Business Strategy. 40(3). pp.43-51.
Ghez, J., 2019. The Power of Analysis. In Architects of Change (pp. 95-109). Palgrave
Macmillan, Cham.
Hague, P., 2019. The Business Models Handbook: Templates, Theory and Case Studies. Kogan
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Hoelzlhammer, A., 2018. A Strategic Audit of Tesla. pdf.
Jussani, A.C. And et.al., 2015. Electric car and Porter’s five Forces: Marketing Positioning in
the Automotive Industry (No. 2015-36-0486). SAE Technical Paper.
Li, Z., 2018. Strategic Audit on Tesla.
Mas, S.M., 2018. Tesla Motors. SWOT analysis and corporate strategy. GRIN Verlag.
McCain, C., 2019. A Strategic Audit of Tesla, Inc.
McCain, C., 2019. A Strategic Audit of Tesla, Inc.
Ng, S., 2016. Uber Technologies Inc. as a Disruptive Innovation.
SCHMIDT, D.K.M., 2018. Effects of Autonomous Driving on Cities and Their Urban Transport
Systems.
Sharma, S., 2016. The Tesla Phenomena A Business Strategy Report.
Sia, S.K., Soh, C. and Weill, P., 2016. How DBS Bank Pursued a Digital Business Strategy. MIS
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Tesla, E. and Microgrids, M.C.S., 2016. Select Microgrid-Related Articles by Mahesh P. Bhave.
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Velazquez Abad, A., 2017. Techno-economic and environmental comparison between battery
and fuel cell electric vehicles (Doctoral dissertation, University of Southampton).
Wen, W., 2016. Automation of electric vehicle and development prospects.
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lAhUA8XMBHYDEADEQ_AUIEigB&biw=1541&bih=810#imgrc=fAmkEdVqZzZrRM:
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