Tesla PESTEL/PESTLE Analysis

TESLA PESTEL ANALYSIS

TESLA is now well known for its sustainable innovation business model.  Apart from technologically innovative vehicles, the brand also makes energy products. In this way it appeals to a large audience that likes sustainable products. There is a distinct market segment for such products. They do not just save energy but can also be of great help in terms of reducing the world’s dependence on fossil fuels and helping it transition towards a greener and more technologically efficient world. Tesla makes fully electric vehicles that come equipped with best in class technology and unique features. In 2016, the brand has seen its sales grow faster and there was a sizable increase from 2015 to 2016 in Tesla’s sales.

Now, Tesla is focusing on growing its network of vehicle stores and super charger network. There are challenges in its way and the two main challenges it must address are related to affordability and accessibility. Tesla operates in the global environment and therefore is subject to the effect of several forces which are analyzed in this PESTEL analysis.  PESTEL is an acronym for political, economic, social, technological, environmental and legal. These are the most important factors in the international environment and businesses operating globally are subject to related pressures. A  PESTEL analysis helps understand the challenges born of these pressures and also the risks and opportunities hidden in the international environment and how they can affect businesses.

Political:

The political environment of any nation affects its business environment directly and indirectly. It can have a direct impact on the economic environment of the nation and thus the level of economic activity and employment too. The political environment affects the regulatory environment too. If the political environment of a nation is stable, it also leads to economic stability and gives rise to higher economic activity and prosperity. On the other hand if there is political instability, it can result in economic instability and disruption. It can lead to business and operational disruption and thus financial losses. Especially in countries where a large part of the supply chain of an international business is located, political disruption or chaos can lead to disruption in the supply chain and then business loss.  Geopolitical issues and terrorism can also disrupt businesses and difficulties in political relationships between nations can also make business between the two difficult.

Economic:

Economic forces have a very important role in the business world and can affect the fortune of businesses in various ways. Tesla has seen its business rising fast in the past year. This has occurred due to several reasons.  However, increased economic activity since the recession is an important factor that has affected this growth. Since the recession has passed, economic activity has risen globally. With rising economic activity, the level of employment has also risen globally and that has led to higher spending on goods. Now more people are buying luxury vehicles and especially the demand for SUVs has increased. Tesla’s Model X is a full sized electric SUV with falcon wing doors.  The sales of its SUVs have also increased with higher economic activity around the world.  The rise of the middle class has been especially beneficial for the vehicle brands. However, if Tesla wants to tap deeper into the middle class consumer segment, it must release more lower cost models like its model 3. In this way, economic factors affect several things including demand for products. The demand for Tesla products has risen but to grow faster it needs to address the price challenge that is keeping it from reaching the middle class consumers.

Social:

Socio-cultural factors are just as important as the other factors and sometimes they can have a major influence on the demand and supply of certain products.  These factors impact how certain products are perceived in certain societies and the level of acceptance they can gain in specific cultures. The demand for sustainable products has risen globally and sustainability is not a passing fad. Now more people want products that are good for the environment. The environment is favorable for the sustainable brands. They have a better image in the market and the brands that are investing in environment are also more popular in the market. The demand for sustainable products has grown in the 21^st century as more people’ are now thinking of environmental protection. Tesla makes sustainable products and that is a major plus point for the brand. It helps at marketing the image of the brand and that works to improve sales.  Tesla’s focus is on helping the brand transition towards a better, greener, sustainable and more fuel efficient future.  This is good for the society and if Tesla’s plan is successful, it could help the world save billions that are spent every year on fossil fuels.

Technological:   

Technology is undeniably the biggest factor influencing the growth and marketing of businesses globally. It affects several things in the business world. From production to operations and marketing, in every department technology plays a very important role in business. It makes businesses efficient and also affects their competitiveness. Technology determines how competitive a brand is. Technological changes take place everyday and every brand is in a race to adopt the newest technology first. Tesla’s business also depends on technology and technological growth means sales growth in the 21^st century. Sustainable technology is even better because its popularity has grown very fast in the modern era. Technological brands are leading the market in terms .of growth and profitability. Tesla’s sales and profits too rose very fast from 2015 to 2016. So, technology can be a very important determinant of sales and profit for businesses. It is important for marketing as well as sales ad profitable growth.

Environmental:

Environmental factor are now also growing in importance in the context of business. Globally, the brands that have invested in environment have grown faster in popularity.  In terms of environmental impact Tesla has a very good reputation. From its electrical vehicles to the other energy saving products, everywhere the focus is on sustainability and saving energy.  So, overall Tesla has a very good reputation in terms of its environmental impact. It is also working on making its product and supply chain more energy efficient.

Legal:

Law is a very important force affecting businesses all over the globe. Legal factors have grown in importance in the 21^st century. From labor regulations to environmental and other kind of business regulations, law can have a direct effect on businesses.  While law has become friendly towards sustainable businesses, still any kind of hassle with law can make it difficult for businesses. Most countries have laws that are friendly towards the sustainable brands.  This makes Tesla’s task easier. However, there are several other laws too related to supply chain and labor that affect and lead to higher operational costs.

Sources:

Tesla Annual Report