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Introduction
The automobile industry is one of the most profitable and influential economic branches in the world. As the overall global GDP is growing despite the recent lockdown, which has weakened peoples potency to buy products, more consumers are willing to invest in comfortable, safe, innovative, and reliable cars. However, there are multiple companies that specialize in a variety of automobiles, from high-end to cost-effective ones. While most corporations have a relatively standard business model depending on the targeted customers, one company, in particular, has revolutionized the automotive industry and the technological branch as a whole. Tesla is the brand that entered the market with a different objective and products compared to other companies. Instead of following the route of manufacturing standard automobiles, Tesla brought something completely nuanced to the table, which instantly brought attention to the then-new brand. Less than 20 years later, this brand is synonymous with innovation, sustainability, and global change.
Teslas mission is to change the automobile industry and, as a result, change the whole world through new technology and a revolutionary model designed to maintain sustainability and promote an environmental agenda. It is certain that this particular company has changed the way consumers view cars, specifically high-end ones. Tesla does not only allow consumers to engage in ethical environmentalism by reducing emissions (Holmberga & Erdemirb, 2019). Instead, the corporation has created a whole new trend that customers are willing to join not only because it is environmentally friendly but because it is critically innovative. The factors that elevate Tesla among competitors are the specialization in electric cars, the focus on customer-centered services, the significant investments in infrastructure, and the vision of a sustainable transportation system.
Socio-Economic Trends
The world is moving towards more sustainable practices, which is evident by the shift in terms of consumer behavior. Due to the environmental harm, which has been an issue since the beginning of industrialization, certain organizations and governments of different countries realize that there is an urgent need for change. The agenda, however, is not a concern in a global sense, which can be explained by the level of economic devolvement, technological industry, and GDP that differ based on the country. At the present moment, the leading states when it comes to investing in sustainable practices and promoting businesses with ethical, environmental objectives are the US and China. It is certain that developing countries do not have the same resources to support such initiatives. However, it is also essential to mention the market itself in terms of trends and new preferences. Developed countries have more potential customers who are able to invest in a high-end car. Tesla cannot mass produce automobiles, and due to the significant investments in innovations and infrastructure, the price of the cars is higher than the average on the market.
The socio-economic trend that directly affected Tesla and contributed to its success is the concern with more sustainable and environmentally friendly products. Researchers point out that Teslas vision is reducing the use of fossil fuels and switching to green energy (Matthews et al., 2020). It is certain that Tesla is not the only brand that builds and sells electric cars. Multiple other brands also chose to implement such products in their rage. However, it is important to mention that this particular company has made the most effort into shifting the consumers point of view in regards to cars worth investing in. Instead of targeting people who are most conscious about environmental issues, Tesla created products that most potential buyers tend to appreciate due to comfort and innovative technology. Thus, the environmental agenda does not take away from the cars appeal to the masses yet enhances it. Individuals who prefer these cars can have different lifestyles and objectives. Regardless, a vehicle created by Tesla will be an optimal choice.
Another trend is the increasing buying capability of the young population and the increase in the middle-income demographic in Asia. The young demographic is more interested in supporting ethical brands and seeking more advanced technology. Thus, they are more inclined to pay a higher price if the product is new and unique. This is precisely what Tesla has to offer, which is how it links the business model with the change drivers. Moreover, in regards to the growing middle class in Asia, Tesla also fits the criteria for trend. China specifically emphasizes the importance of the development of the electric transportation industry. Du (2021) points out that the regulations implemented by the Chinese government contribute to Teslas sales growth. Thus, several different countries are already interested in promoting such vehicles as an effective switch that can drastically improve the condition of the environment.
Literature Review
It is essential to examine relevant sources to examine the macro environment of Tesla, how it influences the company, and whether certain factors either benefit or have a negative impact on the corporations success. The macroeconomic dimensions that have to be discussed include the GDP, interest rates, consumer spending, and employment. Moreover, these aspects influence Tesla only in relation to the countries that the corporation is most active in, which means those in which most cars are being sold. It is certain that the brands primary market is the US since the whole vision and products are closely related to the technological trends of the states. However, Chinas agenda is also shifting towards more sustainable transportation. Moreover, researchers point out that China is becoming a significant market for Tesla. This is attributed to the increasing GDP and per capita income that allows potential buyers to invest in more expensive automobiles (Zhao, 2021). Tesla sells cars that cost more than usual automobiles, which is why the target consumers have to have the financial potency to support the brand with purchases. However, Tesla is unique in regards to being a brand that is seemingly less affected by macro factors. For example, the recent lockdown has significantly affected interest rates. While they were low, people were not able to invest in expensive products. However, researchers point out that from 2019, Tesla became a profitable business and has been having record sales despite the challenging economic situation, including aspects such as high unemployment (Maamoun, 2021). A global decrease in consumer spending, which was directly influenced by the pandemic and the lockdowns, did not negatively impact the brand.
Other macro-economic factors that influence Tesla in terms of objectives, vision, and outcomes include the demographic, socio-economic shifts, and technological drivers of change. Researchers have conducted a study that shows that most Tesla buyers are males between 35 and 40 years old with high income and higher education (Sovacool et al., 2018). However, the same research shows that any demographic, including women and seniors, are more likely to purchase Tesla cars if their income is high. This means that developed countries are more likely to become profitable markets for the brand. It is vital to refer to the fact that China, in particular, is developing at a fast pace in terms of economic growth, which, similarly to the same phenomenon in the US, correlates with higher carbon emissions (Wang et al., 2018b). The two macroeconomic factors highlighted in the research portray economic growth, which, however, is linked to environmental damage. This is exactly why the macro environment is beneficial for Tesla. On the one hand, more people are able to afford the types of products the corporation offers. On the other hand, there is an urgent need for different approaches when it comes to environmental causes. Thus, buying a more costly yet sustainable car is what can be the solution.
The economic shift is clear since most countries are currently on the path of development, and people have more disposable income. However, it is also crucial to take into consideration the social factor. Environmental causes have been recently taken seriously not only by certain organizations but also by entire governments. People are becoming more aware of the damage and ways to prevent it. Moreover, the more the income grows, the more people are able to invest in socially and environmentally friendly causes. Researchers point out that Tesla offers consumers the opportunity to make a better choice for the environment (Ashmore et al., 2018). The social aspect linked to the brand itself is more than solely being eco-conscious. Instead, the corporation became a symbol of innovation and technological advancement, which many people are willing to contribute to and support. Moreover, the technology that the brand shares and incorporates in their products is an entirely nuanced factor that draws attention to the organization and minimizes the risk for competition.
It is certain that the 21st century, in particular, is and will be centered around creating even more technological advancements similarly to the previous century. Technology is a major aspect within the macro-environment since it has become a significant part of every single industry and person in particular. Researchers point out that consumers are increasingly more interested in intelligent products and services (Lee et al., 2020). Thus, most companies within such industries are willing to maximize their products by investing in technology. It is not only productive in terms of the quality of the products but also addresses customer demand in terms of safety, comfort, and cost-effectiveness. Tesla is, certainly, an organization that is known for creating nuanced products. Everything from the fact that the cars are electric to the option of semi-automatic driving fits the criteria of consumer demand for improved technology. While multiple other brands manufacture electric cars, Tesla is the most well-known brand within this domain. This is possible due to the corporations investments in innovation, which is necessary since, with each release, potential buyers are waiting for something revolutionary.
There is room for improvement, one example being fully-automatic driving vehicles. Tesla is working on turning this vision into reality and changing the transportation industry fully. However, it is important to acknowledge other tech giants that also have the means to operate within this realm. Researchers point out that companies such as Google and Apple are also capable of investing and creating such products due to their technological advancements and significant financial potential (Teece, 2018). Thus, the macro environment is beneficial for Tesla, yet it is also harmful in terms of other tech companies taking advantage of current trends. This increases the risk for competition, which is especially dangerous due to the global influence those corporations have, unlike Tesla, which is not yet a global company.
Based on current literature and research, the macroeconomic environment is mostly beneficial for such companies as Tesla. On the one hand, the increasing demographic of people with middle income and the shift towards more ethical practices gives Tesla an opportunity to expand on the market and cover a more extensive customer base. However, since the aim to move towards technological improvements also aligns with the companys vision, it increases the risk for competition with tech giants that may want to capitalize on certain opportunities. Since such corporations do not have experience in the automotive industry and, so far, no effort has been put into monetizing the idea, which highlights that the competition is uncertain. This is why Tesla is a successful car manufacturer and, in the near future, has the potential to become the most profitable one. This depends on such factors as governmental regulations in regards to environmentally-friendly transportation and further technological development.
Impact of Legal Framework and Political Factors
Tesla is a car manufacturer, which already implies that legal and political frameworks impact the brand on multiple levels. Every company that makes and sells cars is to follow certain guidelines and rules that apply to the automobiles environmental impact, technological implications, and other important factors. The effect becomes even more significant when the car has the semi-automatic driving option. Thus, the legislative system must ensure that such features do not correlate with danger for the driver, the passengers, and other people. Moreover, Tesla cars do not operate similarly to regular automobiles. No fossil fuel is needed, which means that the car requires to be recharged. Thus, Tesla builds recharging stations, which also implies the link with certain local authorities. The political environment is also extremely important due to the vision of the company. Tesla aims to completely change the transportation industry, which some governments are willing to contribute to while others are not ready yet. It is essential to mention that the environmental agenda is not a primary concern for countries that are not as developed as the US and other major Tesla markets. Thus, while certain authorities encourage the brands aim and agenda through different political implementations, others do not.
The Influence of Political Factors
As mentioned prior, automotive companies are highly regulated since safety and environmental factors are on the line. Thus, governments are implementing certain policies to make sure the cars fit the criteria for being safe for drivers and the environment. However, while the safety standards are common, not every car brand is capable of being environmentally friendly, as shown by the several controversies which have been occurring. An example is Volkswagen, which recently has been a part of the scandal, evolving faking test results and hiding accurate gas emotion rates, was deceiving inspectors to pass the emission test required in the US (Gaim, Clegg and Cunha, 2019). Nonetheless, since Tesla makes electric cars, this factor is being directly minimized by the whole design of the car. The fact that the cars are not operating on fossil fuel is positive from a legal perspective also because the government is shifting towards more sustainable business practices. Thus, multiple countries are making an effort to create an environment in which electric cars are more common and affordable. There are multiple ways in which such an outcome can be achieved. According to Deng (2020), the two most effective ways are the narrowing of the price between regular automobiles and electric ones as well as investing in technology. Thus, governments have to center resources into making it easier for manufacturers to produce and sell such cars.
The US government is among those that implement specific legal regulations to shift consumer demand towards electric cars. However, since Teslas are expensive due to the innovative technology, some expenses have to be subsidized. This does not only apply to the company itself but also to buyers who support the initiative of the brand by making purchases. Tesla is entitled to take DOE loans and benefit from tax breaks due to the vision of turning the transportation industry into a more sustainable one. Moreover, each person who buys an electric car benefits (up to $7,500) from certain political regulations due to the Zero Emission Vehicle program (Perkins & Murmann, 2018). By doing this, the government takes political initiatives to encourage people to make the switch to electric vehicles without seeing critical financial differences or challenges. An example would be the difference between Germany and the states. Researchers point out that while Germany could become one of the biggest markets for Tesla due to the countrys high technological potential, the sales are much lower than in the US. This is attributed to the fact that the German authorities did not implement the necessary regulations and tax cuts to encourage people to make the shift (Meckling & Nahm, 2018). However, without the involvement, the automobiles would be less demanded by potential buyers, which highlights the importance of political implementations. Since Tesla operates in multiple countries and has the mission to change the entire industry, it is critical to examine the situation in other countries too.
China is another country that has recently focused on technological advancements and more environmentally friendly policies. Moreover, China is being considered a potentially excellent market to operate in, which is why most corporations would conduct business there. However, it is critical to mention the political situation in China since it is a significant disruptor. Democracy and stable political regimes are being considered the most proficient from a business perspective. This is attributed to the more private ways companies can operate without the involvement of third parties. An example is the countrys autonomous internet, which refers to the censorship that the authorities maintain through the limitations of businesses such as Google and Facebook (Lu et al., 2017). Thus, even big tech companies cannot always overcome the obstacles and enter one of the most profitable markets in the world. However, Tesla provides different products, which is why the political risks are being mitigated.
The environmental agenda that the Chinese government supports is in line with Teslas vision. Thus, switching to electric cars is a common objective that both entities are eager to achieve. Similar to the US, China has certain political implementations put in place to encourage consumers to purchase electric cars and Tesla in particular. According to researchers, the initiatives that are put in place by authorities have increased sales and have made Tesla a relatively successful corporation on the Asian market (Du, 2021). This, again, highlights the importance of politics in terms of how a brand develops and maintains high competitive levels. In the case of Germany, the efforts were not critical, which is why the results were not excellent. On the other hand, the US and Chinese markets have been proven to be profitable for Tesla in terms of operating and satisfying consumer and governmental demand.
Long-Term Implications for the Electric Automotive Sector
The automotive sector is constantly developing and improving as new technological advances appear. The fact that a new branch, which is the electric automotive industry, has appeared is direct evidence for this. It is certain that new trends will shape and give car companies reasons to change and alter their business model in the next decades. Tesla is innovative in terms of its products, how the company operates, and consumer-centered features. However, there is still room for improvement. First, it is important to mention the semi-automatic driving features the cars have. Thus, it can be safer due to the fact that the detectors help the car keep at a distance from other vehicles and obstacles. However, car manufacturers do not yet have the necessary technology to create a fully automatic automobile. Furthermore, it is certain that Tesla will come up with new models that will not require the presence of a driver in the near future. This is not only a comfortable but also a productive feature.
Logistics is a complex branch, and sometimes, transportation can either perfect or ultimately damage the end result. Based on certain factors such as the weather, the business model, availability of drivers, or specific emergencies, the products do not always arrive at the customers or actors of the supply chain on time. Thus, automatic transportation would minimize the risks and ensure that the supply chain manages to fulfill the objective, which is to deliver the goods to the customers. Stores, supermarkets, and diverse companies would invest in such automobiles and trucks. This will most likely become a revolution in the transportation industry, and Tesla can benefit from it since the semi-automatic feature is already the companys specialty.
Another trend that is directly linked to Tesla is environmentally-friendly vehicles. Since the brand operates in multiple countries already, the trend is already affecting the industry. However, electric cars are still the minority of vehicles that are being bought and used. While the environmental damage caused by burning fossil fuels is evident, people cannot invest in cars that are expensive and not always easy to operate. As mentioned prior, Tesla is costly compared to other similar vehicles on the market. Moreover, the fact that it is electric means that it needs to be charged, which is not always easily accessible in urban areas. Indeed, Tesla builds charging stations to ease their buyers experiences with the cars. However, there are certainly more gas stations than charging stations, which highlights that many individuals may perceive electric vehicles as inconvenient. The government is already doing its best to encourage brands like Tesla and people who are looking for new vehicles. In the near future, more affordable eco-cars will appear on the market, and managing them will become easier. It is certain that the future does not alight with fossil fuel-running automotive. This means that electric cars will be even more in demand. This is both a negative and a positive factor for Tesla. On the one hand, the brand will have more potential buyers and countries to operate in. On the other hand, more similar brands will appear, which creates competition.
Legal Systems and Anti-Trust Laws
Since Tesla is an American company, the brand has to follow US laws when it comes to manufacturing and selling vehicles in the states. The legal system is designed to limit car manufacturers in terms of monopolizing the market and engaging in unethical behavior when distributing automobiles. This is why certain anti-trust laws are put in place in multiple states. Such laws prohibit can manufacturers from directly selling their products to consumers. Thus, only private dealerships have the legal ability to do it. However, each state has different legislation that applies to Tesla and other car companies that work in the domain of electric transportation. For example, Michigan still prohibits Tesla from making direct sales, while Colorado passed legislation that allows direct sales only for car companies that manufacturers electric automobiles (Lao, 2021). This is another state initiative designed to encourage consumers to switch to more environmentally friendly measures. Thus, Tesla is able to avoid their cars being overpriced because of the dealerships. Moreover, it is beneficial in terms of managing and controlling the quality of the car from the time it is made to the time it arrives at the customer.
A law that is more informal due to the fact that the technology itself is relatively new is a regulation concerning the autonomous driving mode. As mentioned prior, Tesla cars have the feature that allows drivers to turn on the mode, which may lead to them being distracted. Since the option is new to the automotive industry, the legislative system does not have a formal way of approaching it. Instead, it is an informal law that each driver is to be as careful while using this feature as when they are driving without the automatic option. However, there is a need for written regulations that would consider semi-automatic driving as either a safety issue or a problem-solver in terms of possible accidents. At the present moment, no data exist that would refer to the number of accidents caused by this particular feature. Thus, it is unsure whether Teslas technology encourages safe driving or contributes to accidents on the road.
The US is not the only country implementing legal regulations to support businesses such as Tesla. Researchers point out that vehicles that emit exhaust are often the reason why political decisions cover environmental agendas (Mo & Wang, 2021). Certain international coalitions are specifically designed to minimize risks related to the extensive use of regular cars that operate due to fossil fuel. Electric Vehicle Initiative (EVI) is an example of a multi-governmental entity aimed towards encouraging people to switch to electric automobiles, and multiple countries are a part of the group (Zhang, Bai and Shang, 2018). Such countries implement certain state regulations that would minimize the gap between prices of cars, subsidize costs, and apply other policies that would increase the rate of individuals having a more environmentally friendly vehicle. Since Tesla operates in multiple parts of the world, such multi-national groups are beneficial from a political standpoint for the brand. Thus, the corporation is able to sell more vehicles and contribute to an overall healthier environment. Moreover, the more legal initiatives aimed towards eco-friendly transportation are put in place, the more success the organization will have in the future.
Recommendations
It is certain that Teslas vision for an environmental change towards more sustainable transportation is not only one of the current trends but also a way to monetize products. Moreover, all the political and legal implementations that support the case prove that the contribution is a critical factor that authorities are willing to support through regulations on a national and international level. However, certain things need to be considered to minimize the possible risks and continue growing as a company. Researchers point out that currently, electric carts cannot be mass-produced, which is why the prices tend to be higher, which creates a narrower customer base (Wang et al., 2018a). The factor is highly influenced by the current technological advances that cannot keep up with a larger-scale manufacturing process. However, investments can minimize the problem, which is why Tesla has to continue to invest in new innovations. The company has the potential to become one of the main car manufacturers in the world as the unique features continue developing. One example is creating fully-automatically driving trucks as parts of supply chains. Such vehicles are guaranteed to be an undoubted success due to the fact that all major companies will be interested in purchasing them and including them in the supply chain for timely delivery.
Tesla is already successful on the market of electric cars. However, it is critical to mention charging stations as a major inconvenience that many Tesla owners deal with. The infrastructure exists, but it needs to be maximized in order for potential buyers to have more convenience since purchasing a Tesla car does not correlate with a challenge in looking for a place where the vehicle can be charged. Moreover, since the brand is becoming more popular on the Asian market due to governmental initiatives, the issue related to the infrastructure is even more damaging. The only solution to the problem is focusing on building even more charging stations, especially in urban areas. This will reassure owners that the company is willing to make their experiences better and consider the difficulties while minimizing their impact. Moreover, there is a chance that in case the company invests in more charging stations, more potential customers will be interested in purchasing the vehicle in case they perceive the location to be comfortable to reach on a daily basis. These recommendations can help the brand reach new successes, continue growing, and minimize the risk for competition. Moreover, the profitability of the company can be maximized, and the overall sales can increase only if the cars become more affordable, easily accessed, and convenient for owners to keep.
Conclusion
Tesla is in a favorable position in terms of the current socio-economic drivers of change. Thus, the brand fits the criteria for an organization that follows current environmental, technological, and demographic trends. In terms of the environment, the electric cars that Tesla manufactures are much more eco-friendly compared to regular fossil-fueled automobiles. The technological advancements are also nuanced and unique. Some features that the brand is known for include semi-automatic driving, which is the reason why multiple individuals chose to invest in a Tesla car in the first place. On the other hand, living in an urban area implies that the vehicle has to be charged at a certain station, which is usually much less common than a regular gas station. However, it is certain that electric cars are the future, which is why multiple legislative and political measures are put in place to encourage people to pick such automobiles.
Currently, the US, which is the leading market for Tesla, has implemented multiple regulations aimed towards the increase of sold electric cars. The governments objective is narrowing the price between a regular car and an electric one, which by definition is more expensive due to the nuanced features and the inability to mass-produce the models. Moreover, the tax cuts that directly benefit the company are applied to encourage the car manufacturers to continue improving from a technological, productivity, and effectiveness standpoint. These measures have been proven to be effective, as implied by the overall success of the company in regards to the growing sales and profitability.
The US is not the only country willing to make the switch to electric vehicles. China, which is another major market, also has several legislative measures applied, which contribute to people choosing Tesla instead of other car manufacturers. Needless to say, there are also international environmental groups that have a similar agenda for reducing the damage and operate in other Asian and European countries. While Teslas vision and nuanced technological advances are not only effective but also ethical, there are certain factors that need to be considered. First, a productive initiative would be increasing the number of charging stations to provide consumers with an even more reliable and comfortable experience with Tesla vehicles. Moreover, the brand has to continue extensively investing in innovation. The automatic trucks are already a major plan in Teslas near future, and the potential of such solutions is significant. Tesla can become the leading car manufacturer that big brands use for delivery within the supply chain logistics. While the company is already revolutionary and changing the whole automotive sector, applying these recommendations can further maximize the positive outcomes and minimize potential threats such as competition and more affordable prices for fossil-fueled cars.
Reference List
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Deng, X. (2020) The development of EV and its impact on energy, environment and other socio-economic aspects, International Journal of Smart Grid and Clean Energy, pp. 975982.
Du, Y. (2021) The Impact of environmental regulation on technological innovation of automobile industry in Chinas market: A case by Tesla, Advances in Social Science, Education and Humanities Research, 607, pp. 19571963.
Gaim, M., Clegg, S. and Cunha, M. P. (2019) Managing impressions rather than emissions: Volkswagen and the false mastery of paradox, Organization Studies, 42(6), pp. 949970.
Holmberga, K. and Erdemirb, A. (2019) The impact of tribology on energy use and CO2 emission globally and in combustion engine and electric cars, Tribology International Volume, pp. 389396.
Lao, M. (2021) Need help with assignments?
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