1.0 Introduction
Tesla Motors is a highly innovative and reputable American automotive company. It uses advanced technology, outstanding design and sophisticated manufacturing processes to produce high-quality electric vehicles and energy storage systems for global customers(Mangram, 2012). It was founded in Silicon Valley in 2003 by a group of enthusiastic scientists and researches led by Elon Musk, both the founder and the C.E.O of the company. In this new era, many researchers realize that traditional energy types such as fossil fuels are depleting very fast. Besides, they will also generate very heavy air pollution such as carbon monoxide, sulfur dioxide and other toxic gases due to the incomplete combustion（Yoo el al., 2014. The release of greenhouse gases (GHGs) is also major cause of the problem of global warming(Greene, Baker&Plotkin, 2010). As such, it is highly necessary and essential for traditional carmakers to look for new and clean energy source to replace gasoline and diesel. Electricity is certainly an ideal alternative to fossil fuels but electricity-powered vehicles are long criticized for covering very limited distance as compared with gas-powered cars. The energy storage and capacity of electric vehicles cannot sustain a distant journey. In addition, it is also very difficult for EV users to find charging stations but gas stations are still readily available for traditional car drivers. Elon Musk and his team wish to show that electric vehicles can be even better than standard gas-powered cars (Vance&Sanders, 2015). The company’s name is inspired by Nikola Tesla, who was a forerunner and reputable scientist in developing modern technologies.
Part One
2.0 External Environmental Analysis
PEST model is often used to investigate the external or so-called macro-environmental impact on a company’s key business operations and activities. PEST stands for political, economical, socio-cultural and technological factors.
2.1 Political Factor
At the political level, the United Nation announced 17 Sustainable Development Goals (SDGs), also known as the Global goals in 2015(Biermann, Kanie&Kim, 2017). The 13th goal is “climate action”. It means that all UN member states are agreed to reduce the GHGs emission and prevent global warming. Besides, many government in the world have decided to fight against air pollutants and GHGs emission by introducing or subsidizing electric vehicle products(Hong, Koo, Jeong&Lee, 2012). According to the statistics published by the Energy Information Administration of the U.S(2019), transportation accounts for nearly one third of all energy consumption in the world. Therefore, the U.S government has taken concrete stances to improve the development of electric and hybrid engines to reduce the consumption of fossil fuels by standard gas-powered cars. For instance, U.S consumers are offered with a special tax credit if they decide to purchase an electric vehicle. In Virginia and Colorado, the local governments offer a state tax credit up to $5,000 for each electric vehicle sold（Tal& Nicholas, 2016). In China, the central government also makes a critical decision to develop and promote more electric vehicles in order to reduce the consumption of fossil fuels(Yang, 2010). China’s government tries to attract foreign Electric vehicle producers to set up manufacturing lines through providing cheap land cost and subsidies. It is also the major reason why Elon Musk decides to build the tesla’s Gigafactory in Shanghai to produce and sell Electrical vehicle especially the Model S series(Kesler, 2017). Besides, China’s government also notices that EV customers are potentially facing the difficulty of finding electricity charging station. Shanghai and other regional government of China’s major cities decide to build a network of Tesla’s supercharges all across the country to support Tesla’s EV products(Tesla, 2018). In can be observed that Tesla’s development is dependent on the attitude of policymakers in different countries toward electric vehicle industry.
2.2 Economic Factor
Different countries have very distinctive economic status. Therefore, it is important for Tesla to analyze the economic factor very comprehensively in order to secure business success in respective markets. According to the tradingeconomics, the gross domestic product per capita (GDP per PPP) in China keeps increasing from USD$9,072. 3 in 2010 to USD$16,186.8 in 2018 as shown in figure 1 below. It implies that the disposable income of average Chinese people have remarkably increased during the past decade. The middle class is also getting larger and larger. Therefore, it is necessary for Tesla to segment the local market accurately based on different income groups. As more and more Chinese people are able to afford electric vehicles with premium quality, it is no longer necessary for Tesla to target too much at the low income group and the low-end EV market.
Source Credit: Traditingeconomics.com
Fig 1: GDP per Capita of China from 2010 to 2018
2.3 Socio-cultural factor
The buying behaviors and preferences of consumers in the global automotive market are gradually changing in the past decade(Axsen&Kurani, 2013).. More and more consumers realize the importance of electric vehicles in replacing gas-powered cars. It is because electricity is a much cleaner energy than fossil fuels. It will generate less toxic gases and GHGs as compared with gasoline, diesel and other traditional energy types. For instance, nearly 45% of Chinese consumers believe that it is necessary to introduce more electric vehicles or hybrid cars to replace traditional cars(Tan et al., 2014).. Moreover, among all the GHGs including water vapor, carbon dioxide, ozone, etc, CO2 accounts for nearly 85% in leading to the problem of global warming (Florides&Christodoulides, 2009). Many environmentalists, scientists and non-for-profit organizations warn that global warming will lead to extreme weather condition which will threaten the normal life of human beings. Gasoline is a major energy source in powering traditional vehicles but meanwhile it will generate over 70% of carbon dioxide. World Meteorological Organisation also reports that the current emission of carbon dioxide reaches its historical height in the past 800,000 years(Rhodes, 2017).
When global consumers are sufficiently cognizant of the harm of GHGs and air pollution, it also provides opportunities for Tesla in expanding and exploring new market in the world. For instance, Tesla’s report reveals that there is an increasing popularity of low-carbon lifestyle and preference for renewable energy among Chinese customers. Therefore, it is highly advisable for Tesla to increase its production capacity and produce more EV products in China’s market.
2.4 Technological Factor
At the technological level, traditionally electric vehicle products have long been criticized for covering very limited distance due to poor energy storage capacity. However, recently Tesla and other EV producers have made impressive technological breakthrough in terms of energy storage. Tesla, for instance, has successfully invented an advanced power-train system for its Model S and X series which now can cover nearly 400 miles with its battery(Logan, 2019). Besides, it is also noticeable that customers get more and more used to online mobile systems when having a car ride. Car-sharing companies such as Uber have contracted drivers to provide ride-sharing or car-sharing services for target customers(Bellos et al., 2017). On the other hand, customers can also use their mobile apps to call a taxi or a shared car. In addition, due to the rapid development of human intelligence, now customers can easily use their mobile apps to control all the appliances and functions installed in a car such as air-conditioner, audio system, seat adjustment, etc.
The new technological trend will have a strong influence on Tesla’s electric products as well. First, in order to gain a competitive advantage in the EV industry, it is more recommendable for Tesla to continue to invest in developing and improving its energy storage system. If electric vehicles can cover the same distance or even longer than traditional cars, it is more possible for them to shift toward an EV product. Besides, Tesla company should also develop tailored or customized app for its users and drivers. Customers should believe that Tesla’s EV products are “Smart” enough to integrate different functions into one system.
Part Two: CSR
3.0 Relevance of Tesla’s CSR policy and influence on the decision-making process in business operations
The chosen topic in this essay is corporate social responsibility and sustainability. Business itself should not only be responsible for stakeholders but to the whole society as well. Generally speaking, CSR is about how companies manage the business processes to produce an overall positive image on the society(JAIN, 2013). It can be understood as a kind of responsibility of a company or an organization to contribute to a better society and cleaner environment. Corporate social responsibility mainly have four dimensions, including economic responsibility, legal responsibility, ethical responsibility and discretionary responsibility（Porter&Kramer, 2006). Economic responsibility is about producing goods and services to earn profit. Legal responsibility means that a company has to earn a profit within a legal framework in a respective country. Ethical responsibility implies that the company should have a license to operate in a target market. Last, discretionary responsibility is something like philanthropy. Companies often implement Corporate Social Responsibility strategies in order to enhance brand image or attain a company’s vision. CSR policies are revolving around the four above-mentioned dimensions.
There are three major types of CSR, namely ethical CSR, altruistic CSR, Strategic CSR（Lantos, 2001). Ethical CSR is about the responsibility to avoid harms or injuries for respective stakeholders. Altruistic CSR, on the other hand, is contributing to a common good at an expense of a cost with philanthropic or altruistic goals. Strategic CSR means that how a company manages to benefit both the society and the company itself through implementing CSR strategies.
Elon Musk, as the aforementioned, is a high reputable leader who is ambitious to establish a successful automotive company and meanwhile attain zero-emission of GHGs in its new products(Vance&Sanders, 2015). He reveals about his whole business idea to a local media. The short-term plan to achieve this goal includes four parts as follows,
Ø 1. Build Sports car
Ø 2. Use the money collected from the sales of Sports car to build more affordable Electric vehicle products
Ø 3. Use the money to reduce the cost of production and build more and more affordable cars
Ø 4. Finally achieve zero-emission for all Tesla’s vehicle products.
4.0 Evaluation of the effectiveness of CSR policy
Musk, as the CEO and founder of Tesla, is fully aware of the fact that Tesla has to survive first before finally attaining its environmental sustainability goal（Vance & Sanders, 2015). In this case, strategic CSR policy is highly relevant and effective. Tesla first clearly identifies five major stakeholders who can be targeted by the CSR strategy. According to Tesla’s Impact Report 2018, the five stakeholders include communities, customers, employees, investors, and governments(Tesla, 2018). Through implementing corresponding CSR policies, it is possible for stakeholder’s interests to be fully addressed.
4.1 Communities
Tesla Motors’ CSR policy does satisfy the needs of respective communities. For instance, in China, local communities demand that automotive companies should promote environmental conservation and sustainability in their business operations and activities. For instance, Tesla is currently implementing a corporate citizenship strategy which allows all communities in the world to use Tesla’s patents and advanced technologies to develop sustainable energy solutions (Tesla，2014). Tesla has many patents in regards to energy storage system. Tesla is not only limited with developing EV products but also investing heavily in the areas of energy storage and solar panels. Tesla allows all communities to generate and store electric power through its solar panels and energy storage system. As such, communities in China, U.S and other parts of the world do not rely solely on electricity produced by traditional and non-renewable energy sources such as coals. It tremendously reduces the emission of carbon dioxide and other toxic gases due to the combustion of fossil fuels. As such, it can be observed that Tesla’s CSR strategy is very effective in addressing the critical needs of respective communities.
4.2 Customers
Like the aforementioned, Tesla’s target customers care about environmental protection very much. According to Tesla’s Impact Report 2018, the automotive company gives the highest priority to customers as compared with other stakeholders through its corporate social responsibility programs(Tesla, 2018). Tesla’s EV products can have the same or even better performances than standard gas-powered vehicles. Besides, Tesla, as the company’s vision states, aims to produce more affordable vehicles to its target customers. Originally, Tesla purchases batteries from Panasonic to support its products. Lately, it decides to collaborate with Panasonic and develop its own power-train system. Majority of Tesla’s customers are satisfied with Tesla’s energy storage capacity. For instance, its new power train system can cover a distance longer than 400 miles (Logan, 2019). Besides, Tesla’s corporate social responsibility programs also notice that most users have the difficulty to charge their EVs. Therefore, it decides to increase the availability of charging stations through collaborating with local government. In major cities of China such as Shanghai, local government promises to build more “supercharges” available for Tesla’s drivers. Customers will find these charging stations readily available. They charge their electric vehicles at any time and place just as convenient as charging at the gas stations. However, in the U.S, it seems that it is still very difficult for Tesla’s users to find sufficient charging stations. It is largely because many customers are still stick with standard gas-powered cars. Local government is lack of incentives to build more charging stands as it is deemed as a waste of resources on non-functioning infrastructure. It takes time for Tesla to change the buying behaviors and preferences of American customers and persuade local government to subsidize and construct more charging stations or stands.
4.3 Employees
Besides, employees are also an very important stakeholder of Tesla. They can deeply influence the company’s business operations, performance, productivity and other decision-making processes. Tesla’s CSR programs such as HR program is very effective in developing employees’ professional and leadership skills. Employees can benefit from updating their skills for their future career and profession development. In addition, employees are also educated about the importance of environmental conservation and sustainability through green human resource management strategies. They are trained and educated to develop green awareness and reduce waste of energy in the daily production activities and business operations. Green HRM is a very novel concept in crafting corporate social responsibility programs. It is referring to all activities that are involved in developing, implementing and establishing a system which turns a company or an organization “greener”. Tesla requires all employees to be an active and contributing member in saving energy and resources.
4.4 Shareholders and Investors
Shareholders and investors are important in influence Tesla’s capitalization process. The major interests or needs of this group of stakeholders are lying in the profitability and business growth of the company. Tesla is fully aware of the social trend that more and more people become cautious about environmental conservation and sustainability. Environmental problems such as global warming make people worried about the extreme weather condition. The emission of Greenhouse Gases is one of the dominant factors which lead to the problem of global warming. Tesla’s sustainability and environmental-friendliness ideal is in line with the current trend. It is predictable that more and more customers will gradually shift toward purchasing EV products. In China alone, According to the Frost & Sullivan analysis, there are only 290,000 units sold in 2016 but it is predicted that this number will go up to 1,000,000 in 2020, almost three times the size than in 2016. China is also becoming the world’s largest EV market. Tesla’s managing team fully captures the market signal so it decides to build the so-called “gigafactory” there to manufacture EV products to meet the increasing demand in the local market. The CSR strategy thus is also expected to earn more profits for all shareholders and investors of Tesla.
Source Credit: Frost & Sullivan analysis
Fig 2: China’s EV market
In addition, like the above-mentioned, one important CSR strategy of Tesla is to allow other people or parties to use the patents of Tesla in developing environmental-friendly products. The strategy seems to be altruistic and philanthropic but in the longer term, customers’ buying preferences and behaviors will be guided through sharing Tesla’s advanced technology. In other words, when customers get used to electric vehicles and other products, Tesla can also develop more loyal customers in the global EV market.
4.5 Governments
The United Nations have specified 17 sustainable development goals (SDGs) as early as in 2015. The goals are not only designed for private companies but also viewed as responsibilities for all nations. In other words, Tesla’s environmental conservation and sustainability ideal is also in line with the sustainable goals of all countries. As such, the CSR program of Tesla is highly effective in meeting the needs and requirement of governments in the world as well. China’s government is eager and enthusiastic to replace standard gas-powered cars with electric vehicles. Over 80% of air pollutants in Being are caused by gas-powered cars. Major cities in China are also reported to have air pollution problems such as the PM 2.5(Zhang et al., 2016).. Fine particle matter and suspended particles in the air are extremely harmful to people’s health. Apparently, electric vehicle provides a viable solution to significant reduce the problem of air pollution and meanwhile also promoting environmental sustainability as it does not release any GHGs. Shanghai government subsidizes almost half of the cost to build Tesla’s factory in the city. Besides, the local government is also very active in providing skilled labor and civil engineers to help Tesla to build a factory within half a month(Heiskanen and Zhang, 2019). Musk is very impressed about the construction speed of his Gigafactory.
5.0 Recommendation and Areas for improvement
Even though Tesla is doing extremely well in proposing and implementing effective corporate social responsibility programs and strategies, there are sill many rooms for further improvement.
First, it is hardly deniable that electric vehicle drivers cannot find sufficient charging stations and stands to charge their cars. The poor availability of charging stands and respective infrastructures may hinder customers from purchasing EVs. In the U.S, the EV infrastructure is not fully prepared for the sophistical electric vehicles. Even though Tesla’s products are affordable and have very good quality, customers do not have incentives to purchase them due to this problem. Therefore, it is recommendable for Tesla to work closely with local governments to construct more charging stands. In China, Tesla demonstrates how it manages to work with local government and create a win-win situation for all parties. Shanghai, Najing, Wuhan and other major cities of China start to construct “supercharges” for Tesla and other automobile companies. When the supercharge network is established, customers will be motivated to purchase EV products. It will thereafter promote environmental sustainability when more EV products are purchased by them.
Besides, Tesla should continue to invest more on improving its energy storage system. It is true that the current power pack system of Tesla’s EV products are far better in terms of energy storage capacity as compared with other EV companies. It is still challenging for Tesla’s vehicles to cover a distant journey. Standard gas-powered cars can still travel a longer distance than EVs. In order to outperform traditional cars, environmental sustainability is just only one of the dimensions to change customer’s buying behavior. More efforts should be put on enhancing the product quality and function of electric vehicles.
Third, as the aforementioned, one of the major CSR strategy of Tesla is to make the EV products more affordable. As a matter of fact, it may not be effective for Tesla to ensure a business success in China’s EV market. Especially given the fact that China and the U.S are having a trade war on each other. A classic Model S electric vehicle in the U.S is only about $80,000 but costs more than $170,000 in China due to tariff increase. In other words, it is almost impossible for Tesla to compete with China’s domestic EV companies in the low-end EV market. However, currently, Tesla has a very significant advantage in the high-end and luxury EV market. As shown in Fig 1, China’s GDP per capita is increasing very fast. The size of middle class in China is also growing remarkably. It implies that price is no longer an important factor for Tesla to develop or produce its electric vehicle products. Instead, Tesla should focus more on the design and quality of its electric cars.
Last, in order to achieve the environmental sustainability and conservation goal, Tesla should also have a strong presence in the car-sharing business. So far, Uber, Didi, and car-sharing companies are taking a lead in this industry. Uber, for instance, notices that many private cars or taxis have a lot of vacant seats so it decides to reduce this waste of resources by matching customers with drivers through sharing a car ride. But tt is difficult for Tesla to seize market share from Uber and other car sharing companies. However, Tesla is now also developing driver-less or self-driving vehicles which have not been commercialized yet. In the next decade, Tesla should focus on constructing a new car-sharing network through selling its driver-less cars. Musk recently has proposed to construct a robo-taxi network so that customers can go to their respective destinations in an enviroinemntal-friendly and intelligent journey.
6.0 Conclusion
In conclusion, it is obvious that Tesla has a lot of business potentials and opportunities in its future business operations. At a macro-environmental level, there is a strong socio-cultural trend that more and more people start to realize the importance of environmental conservation and sustainability. Customers prefer to purchase environmental-friendly products. Besides, many governments also work very hard in reducing GHGs and air pollution in order to meet their sustainable development goals. Under such a context, it is predictable that the demand of Tesla’s EV products, energy storage systems , solar panels, etc, will increase quite significantly. Tesla’s vision is to achieve environmental sustainability and meanwhile make its products accessible and affordable for all target customers. Both in the short and long run, Tesla’s corporate social responsibility strategies does address the needs and interests of all stakeholders. However, it is still indisputable that Tesla should try to resolve several problems and difficulties in order to achieve business success in the global market. It should continue to invest in developing energy storage systems, working closely with governments to build more charging stations and infrastructures. Besides, Tesla should also have very clear market positioning. It should notice that not all of its target customers are price-sensitive. It should continue to focus on enhancing product quality and design.
Reference
Axsen, J., & Kurani, K. S. (2013). Hybrid, plug-in hybrid, or electric—What do car buyers want?. Energy Policy, 61, 532-543.
Biermann, F., Kanie, N., & Kim, R. E. (2017). Global governance by goal-setting: the novel approach of the UN Sustainable Development Goals. Current Opinion in Environmental Sustainability, 26, 26-31.
Bellos, I., Ferguson, M., & Toktay, L. B. (2017). The car sharing economy: Interaction of business model choice and product line design. Manufacturing & Service Operations Management, 19(2), 185-201.
Department of Energy (2019). Reducing Pollution with Electric Vehicles. Retrieved from: https://www.energy.gov/eere/electricvehicles/reducing-pollution-electric-vehicles
Deaton, J.,(2019). Everybody wants EV charging stations, but barely anyone is building them. Fast Company. Retrieved from:https://www.fastcompany.com/90321889/everybody-wants-
ev-charging-stations-but-barely-anyone-is-building-them
Florides, G. A., & Christodoulides, P. (2009). Global warming and carbon dioxide through sciences. Environment international, 35(2), 390-401.
Greene, D. L., Baker Jr, H. H., & Plotkin, S. E. (2010). Reducing greenhouse gas emissions from US transportation.
Hill, J., Polasky, S., Nelson, E., Tilman, D., Huo, H., Ludwig, L.& Bonta, D. (2009). Climate change and health costs of air emissions from biofuels and gasoline. Proceedings of the National Academy of Sciences, 106(6), 2077-2082.
Hong, J., Koo, Y., Jeong, G., & Lee, J. (2012). Ex-ante evaluation of profitability and government's subsidy policy on vehicle-to-grid system. Energy Policy, 42, 95-104.
Heiskanen, V., and Zhang, C., Y (2019). Tesla’s Gigafactory in China is set to go, with very optimistic targets. Business Day. Retrieved from: https://www.businesslive.co.za/bd/companies/retail-and-consumer/2019-11-07-teslas-gigafactory-in-china-is-set-to-go-with-very-optimistic-targets/
JAIN, L. (2013). Corporate social responsibility.
Kesler, D. (2017). Tesla's Gigafactory. ATEA Journal, 45(1), 8.
Lantos, G. P. (2001). The boundaries of strategic corporate social responsibility. Journal of consumer marketing, 18(7), 595-632.
Logan, B.,(2019). Tesla announced improved battery ranges for the Model S and Model X and brought back the lower-cost version of both cars. Business Insider. Retrieved from:https://www.businessinsider.com/
tesla-model-s-and-model-x-longer-range-battery-mileage-details-2019-4
Porter, M. E., & Kramer, M. R. (2006). The link between competitive advantage and corporate social responsibility. Harvard business review, 84(
Tesla (2019). Tesla Superchargers in china Retrieved from:https://www.tesla.com/findus/list/superchargers/china
Tesla (2018). Impact Report 2018. Retrieved from:https://www.tesla.com/ns_videos/tesla-impact-report-2019.pdf
Tesla (2014). All Our Patent Are Belong To You. Retrieved from: https://www.tesla.com/blog/all-our-patent-are-belong-you
Tan, Q., Wang, M., Deng, Y., Yang, H., Rao, R., & Zhang, X. (2014). The cultivation of electric vehicles market in China: Dilemma and solution. Sustainability, &