Business and Business Environment

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Introduction

Companies that have global ambitions have to consider a multitude of factors and barriers that can possibly influence their success in the market. Tesla Inc. as one of the companies that have recently emerged as a global car seller is an example of such a company. The economic environment is one of those factors that can dramatically change the company’s performance and influence its success. Therefore, an appropriate response is needed to withstand the challenges of the macro-and microeconomic situation. The current report is going to explore the key impacts of micro-and macroeconomic factors on Tesla Inc. using PESTLE and SWOT analyses.

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Positive and Negative Impacts of Macro Environment (P4)

The macro-environment is the environment in which businesses operate and, specifically, the factors on which businesses have limited or no influence (Bansal & DesJardine 2014). For instance, Tesla has a major competitor in the face of Nissan and its electric car, the Nissan Leaf. Tesla Inc. cannot undo its competitor and is unlikely to buy the competitor company in any reasonable situation under normal circumstances. For Tesla Inc., it may be a negative impact because Nissan Leaf is a highly popular and cheap electric vehicle that occupies a considerable portion of the market. On the other hand, for a customer, such a situation where a single car producer cannot change global competition in its favor is a positive circumstance. Competition usually creates lower prices, higher quality, and a variety of options.

However, there are other examples of macro-environment such as natural forces. Tesla cars like any other electric vehicles are very dependent on charging stations. If, as a result of a storm, certain power stations are offline, Tesla clients will be left without support. Therefore, companies have to plan such situations in advance and be mindful of the macro environment.

PESTLE model Applied to Tesla’s Macro Environment (M3)

Political Macro-Environmental Factors

Little Influence on the Result of Possible Reforms
weakness
How does this situation affect Tesla Inc.? In the political domain, Tesla inc. has rather limited power. Despite the fact that the company is a major taxpayer in the U.S., the support or opposition of certain economic reforms such as, for instance, repatriation tax recently changed by Donald Trump’s administration possibly had little influence on the result.

The company becomes more vulnerable to the political decisions of the country leaders.

Influence on Tesla Inc.’s business objectives and decision making? Due to this fact, the company’s decision-making has to be mindful of the current and near-future political climate. Tesla Inc. has to readjust its objectives and decisions in conjunction with the US’s position on renewable energy.
Possible Tesla Inc. response Tesla Inc. may wait for Energy Protection Agency to decide on Clear Power Plan to see if the energy trends shift towards the oil and gas industry and then proceed with expansion in the domestic region.
Stable World Political Climate
Opportunity
How does this situation affect Tesla Inc.? The absence of wars opens virtually any borders for Tesla Inc. to conduct trade. The company can openly establish a relationship with any country, in which it has a business interest. The influence of such an environment is positive.
Influence on Tesla Inc.’s business objectives and decision making? It also opens a vast field for decisions in terms of cross-border agreements and lets Tesla Inc. set wider business objectives. Such a situation is best for expanding on the world market.
Possible Tesla Inc. response Tesla can establish partnerships with new regions of interest such as OAE, or other countries of the Arab Peninsula as the political situation is rather stable there.

Economic Macro-Environmental Factors

Growth of Annual Household Income in U.S.
Opportunity
How does this situation affect Tesla Inc.? This is a positive macro-environmental factor for Tesla. The company orients primarily on wealthy and middle-income families, and the growth of income means new customers for it.
Influence on Tesla Inc.’s business objectives and decision making? With the stable growth of incomes in the U.S. Tesla Inc. receives more freedom in experimenting with introducing new models as the number of customers grows.
Possible Tesla Inc. response Tesla Inc. can increase and reduce the number of its workforce, regulate the price of its products more freely, which affects the economic situation on the labor market and in the car industry on the whole.
Growth of the U.S. Dollar Price
Opportunity/Threat
How does this situation affect Tesla Inc.? On the one hand, the situation decreases the price of imported components to produce Tesla cars. On the other, the company makes a large portion of its sales abroad, and it means that the cars can become more expensive and less competitive.
Influence on Tesla Inc.’s business objectives and decision making? This situation has a direct influence on short-term and long-term objectives as Tesla Inc. now has to elaborate new ways of reducing the price of its vehicles to remain competitive. Decisions need to be made with a constant look back to the price of the dollar.
Possible Tesla Inc. response Due to such changes, Tesla may reconsider its domestic production and may think of outsourcing production.

Social Macro-Environmental Factors

Substantial Media Influence
Strength
How does this situation affect Tesla Inc.? This is a positive social macro-environmental factor for Tesla. The company has built a positive media image that it can use to its advantage.
Influence on Tesla Inc.’s business objectives and decision making? The main objective must not change, as it is a large part of Tesla’s media image. Decision-making also needs to align with Tesla’s goal to build a renewable future (About Tesla n.d.)
Possible Tesla Inc. response Tesla Inc. can increase its presence in the media by making claims and hosting sustainable energy events to further increase its media influence.

Technological Macro-Environmental Factors

Strong Competition with Gasoline Cars
Threat
How does this situation affect Tesla Inc.? This is a negative factor that undermines Tesla’s position on the market. Certain regions are dwelling on conventional gasoline or diesel cars that limits the possibilities of Tesla’s sales there.
Influence on Tesla Inc.’s business objectives and decision making? With such competition, Tesla’s business objectives may stay the same but will require additional solutions. Decision-making in countries with strong gas and oil positions needs to be changed.
Possible Tesla Inc. response Tesla Inc. can base its sales strategy purely on the ecological aspect as oil-and-gas producing countries usually have issues with it.
Innovative Battery Technology
Strength
How does this situation affect Tesla Inc.? This situation has a positive influence on the company as it holds leadership in this area of technology.
Influence on Tesla Inc.’s business objectives and decision making? The dominance in technology gives the company an opportunity to stick to its current short-term objectives and decision-making strategy, but in the long run, it has to ensure the leadership continues.
Possible Tesla Inc. response Tesla Inc. can sell its batteries to other car manufacturers for additional profit.

Legal Macro-Environmental Factor

Dependence on Other Countries’ Regulations
Threat
How does this situation affect Tesla Inc.? This is a negative factor that undermines Tesla’s positions on foreign markets. A swift change in property rights or customer protection in one of the countries can force Tesla to withdraw its operations there.
Influence on Tesla Inc.’s business objectives and decision making? At all times, the company has to maintain its business objectives even if it fails to operate in a certain country. Decision-making has to be adapted to the current legal practices as long as they do not contradict the company’s aim for a sustainable future.
Possible Tesla Inc. response Provided the regulations in a foreign country allow Tesla to sell its cars in the region it needs to continue to do so.

Environmental Macro-Environmental Factor

A Global Shift Towards Sustainable Energy
Opportunity
How does this situation affect Tesla Inc.? This is a positive factor that enhances Tesla’s positions on foreign and domestic markets. This means that the company’s products will be in high demand.
Influence on Tesla Inc.’s business objectives and decision making? The company’s current objectives align with global trends and do not need adjustments. Decision-making also appears to stay unaffected by the global trends, except for the fact, that the company will have to use 100% recyclable materials.
Possible Tesla Inc. response Tesla needs to continue to expand its product range and sell more sustainable solutions in addition to solar panels and batteries.
Increasing Competition on Environmentally-Friendly Solutions
Threat
How does this situation affect Tesla Inc.? The company will be negatively impacted by other companies’ offering their electric cars to customers. Tesla will have to spend more resources on keeping up with competitors and making its cars even more sustainable.
Influence on Tesla Inc.’s business objectives and decision making? The objectives will largely be the same. Decisions may change to suit the upcoming environmental protection laws and Clean Energy Plan.
Possible Tesla Inc. response Tesla Inc. has to be ready for new players to enter the market and revise its selling points to make sure its products stay competitive and do not harm the environment in any possible way.

Impact of Macro and Micro Factors on Objectives and Decision-Making (D2)

Given such limited influence that Tesla Inc. has on the global macro environment, it has to adapt to all PESTLE factors and utilize micro factors to its advantage. An informed objective statement is one of the practices that can help Tesla prevail on the market. Both macro and micro factors are of significance in the process of forming an adequate objective statement. For instance, Tesla Inc. should consider macro-environmental economic factors such as the presence of major competitors in the face of BMW, Nissan, Audi, and others. Given the fact that, in the nearest future, these companies will not leave the market for electric vehicles, Tesla’s objective planning needs to include strategies of effective competition.

Micro factors such as limited distribution options abroad also need to be kept in mind. Tesla has no production capacities abroad and it has to serve the international demand through worldwide shipments, which incur additional costs. Such a burden influences the company’s ability to compete with electric vehicles produced by BMW in their domestic region such as the EU. The objective should, therefore, include strategies to address this issue. This example appears to explain the utmost significance of micro factors for an objective statement. Both micro and macro factors influence decision-making. A decision guided by one of the factors alone could be ill-chosen and lead to substantial losses. In addition, the company needs to view all possible PESTLE micro and macro factors to be successful (Ho 2014). Such an approach will allow informed decision-making. However, the limitation of such an approach lies in the fact that it consumes time and resources to gather necessary information. In addition, the information about macro factors can rapidly become irrelevant. Nonetheless, macro and micro factors assessed in full complexity can help Tesla make adequate goals and decisions.

SWOT analysis of Tesla (P5)

SWOT is a powerful tool that can grant a comprehensive outlook on a company providing information on its strengths, weaknesses, opportunities, and threats. It can assist decision-making by outlining areas where the company needs improvement inner structure improvement. In addition, it can tell if some external factors may influence its performance.

Strengths

Media Image
Tesla is quite well known for its innovative approach to car business and ambitious goals.
Automatized Production Lines
Tesla Inc. has its cars and batteries assembled automatically, with people only controlling the smoothness of the cycle (Moritz et al. 2015).

External macro factors can influence these strengths in a variety of ways. For instance, public opinion as a result of political interference could shift in favor of hybrid cars, which will make electric ones unpopular.

Weaknesses

Distribution Network
Tesla’s distribution network is tied to the availability of charging stations.
Rigid Decision-Making Structure
The CEO and the board make most of the decisions from the head office in the U.S, which limits the initiative in other regions.

Tesla’s weaknesses are linked with external macro factors such as competition. The company is vulnerable in other regions outside America as the complications with distribution and decision-making can impede its ability to adapt and change.

Opportunities

Developing Market
Among key opportunities for Tesla is the developing market for cheap electric vehicles for family use.
Growing Usability of Solar Energy
The power one can extract for solar panels and their growing physical rigidity gradually increase which enables Tesla to sell more of them (Yang, Kim & Alexe 2018).

Tesla’s weaknesses are linked with external macro factors such as competition. The company is vulnerable in other regions outside America as the complications with distribution and decision-making can impede its ability to adapt and change.

These opportunities are also the external factors that contribute to Tesla’s potential success. If the company management is able to allocate sufficient resources and effort, it could gain a substantial advantage and claim another niche in both car and energy markets.

Threats

Global Expansion of Oil Extraction
Tesla’s products are not cheap, and with cheaper oil and, consequently, gasoline, it will be tough to compete with gasoline-powered cars.
U.S. Government Support for Oil Companies
The same can be said about the domestic region. The backward shift from sustainable energy might affect Tesla’s positions at home (Moritz et al. 2015).

In such political and economic circumstances, Tesla risks its market to shrink under the influence of conventional cars, as they will be even cheaper in operation with lower prices on gas. Such a macro situation needs an advanced strategy to reduce this influence.

Interrelation of Strengths and Weaknesses with External Macro Factors (P6)

Strengths and weaknesses mainly represent the company’s internal attributes. Strengths are in the available resources the company could use to withstand the pressure of the factors that it cannot possibly influence. Weaknesses include the underused or underdeveloped areas of the company’s affairs that can potentially become useful tools in addressing external macro factors. The latter, in turn, can hinder or boost the performance of the company depending on Tesla’s ability to manage its resources and take a guided approach to decision-making and planning.

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For instance, Tesla could utilize its main strength such as a positive media image to advocate globally for the advent of electric cars. Thus it could, to some extent, manipulate public opinion in order for this macro factor to become the contributor to Tesla Inc.’s success. Due to such advocacy, electric cars and Tesla will become linked in the minds of potential customers. By addressing its key weakness of charging stations through collaborating with local energy companies, Tesla could also link its name to bringing electric cars to a specific region and promote its cars more effectively. Again, public opinion and competition as macro factors could be turned in the company’s favor.

SWOT and Decision Making (M4)

Given the examples mentioned above, SWOT provides a range of opportunities for decision-making (Benefits and limitations of SWOT analysis 2016). This type of external-internal factor analysis allows making informed decisions based on the data gathered within the company, applied, and compared to the data about the environment. A decision guided by such a holistic model provides Tesla with an opportunity to tailor it to the current market situation, political, social, and other environments judging from the resources it has available and those that can possibly be available. Such a model considerably enhances planning capabilities as it presupposes reinforcing strengths and addressing weaknesses in order to counter threats and seize opportunities.

In addition, decisions guided by such a model are more likely to comprehensively predict and address near-future adverse events and profit from positive ones. For instance, Tesla could advance its products for the profitable middle-class segment in the regions with less competition due to its ability to produce charging stations.

Conclusion

All things considered, external factors could rarely be influenced by companies. Yet, utilizing SWOT and PESTLE analyses, a company such as Tesla Inc. could take advantage of and adapt to almost any situation, drawing upon its strengths and minding its weaknesses. External and internal factors are tightly linked and need to be considered in the process of decision-making in order to have a strategic advantage in the market.

Reference List

About Tesla n.d., 2018, Web.

Bansal, P & DesJardine, MR 2014, ‘Business sustainability: it is about time’, Strategic Organization, vol.12, no. 1, pp. 70-78.

Benefits and limitations of SWOT analysis 2016, Web.

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Ho, JK 2014, ‘Formulation of a systemic PEST analysis for strategic analysis’, European Academic Research, vol. 2, no. 5, pp. 6478-6492

Moritz, M, Redlich, T, Krenz, P, Buxbaum-Conradi, S & Wulfsberg, J 2015, ‘Tesla Motors, Inc.: pioneer towards a new strategic approach in the automobile industry along the open source movement?’ in Management of Engineering and Technology (PICMET), 2015 Portland International Conference, Portland, OR, pp. 85-92.

Yang, M, Kim, D & Alexe, M 2018, ‘Flexo-photovoltaic effect’, Science, Web.

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