Socio-Economic and Legal Environment Assessment Report: Tesla

This report provides a comprehensive analysis of Tesla's socio-economic and legal environment. It begins with an executive summary and introduction to Tesla, a leading electric vehicle and energy storage company. The report explores the company's business model, technological disruptions, and the impact of socio-economic and political factors. A literature review examines drivers of change, the knowledge economy, and the effects of technology on the automotive industry. The analysis includes the impact of political and legal frameworks, macroeconomic dimensions, and the firm's performance. The report also discusses the role of the knowledge economy and the influence of technological and socio-economic dynamics. Recommendations and conclusions are provided, summarizing the key findings and implications for Tesla's future. The report also includes an analysis of the political and legal environment and their influence on the company. Overall, the report assesses the factors influencing Tesla's success and offers insights into its position as a disruptive brand in the automotive sector.

Running head: SOCIO ECONOMIC AND LEGAL ENVIRONMENT
Socio Economic and Legal Environment
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Table of Contents
Task 1...............................................................................................................................................2
Introduction......................................................................................................................................3
Literature review on several drivers of change and knowledge economy.......................................4
Impact of political factors and legal framework............................................................................12
Recommendations and conclusions...............................................................................................15
References......................................................................................................................................17
Task 2.............................................................................................................................................22
Introduction....................................................................................................................................22
Discussion......................................................................................................................................22
Conclusion.....................................................................................................................................25
References......................................................................................................................................26

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Task 1
EXECUTIVE SUMMARY
This paper intends to examine the social economic and legal environment of the one of the
disruptive brand Tesla. One of the renowned brand in the electric vehicle industry of the US. The
technology driven firm structure the business model on the basis of new and emerging
developments. This paper analyses the legal and political environment of the firm. In addition, it
also finds out the impact of the socioeconomic and technological factor on the performance of
the Tesla. This paper also focus on drivers of change related to technological, socioeconomic and
demographic on the electric vehicle industry and Tesla.

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Introduction
Tesla Inc. is based in Palo Alto, California and the automaker of the United States
specialized in solar manufacturing and energy storage. Though, the world has already witnessed
the revolution in the automotive industry, Tesla is probably the dawn in this revolution
(Tesla.com 2020). The organization founded by the Marc Tarpenning and Martin Eberhard in
2003. Later, the founders like JB Straubel, Elon Mask and Ian Wright joined the organization.
One of the main inventors of the organization is Elon Mask and he also invested 98% of the
funding of the company. Therefore, he was the chairman of the board and later became CEO of
the firm. Thus, the inspiring business model of the Tesla spread in lithium-ion battery, residential
solar panels, electric cars and energy storage (Teece 2018). Tesla is considered as one of the
disruptive brand of the world, which can be examined on the basis of analyzing the legal and
socio-economic environment of the company.
The firm continued its research in the field of making affordable electric vehicles for the
less privileged customers. To analyze the performance of Tesla in the field of the electric cars
and energy storage, the legal and socioeconomic factors will be assessed. Another crucial factor
that has profound effect on the business of the Tesla is Technology. In addition, four major
factors that may shape the organizational growth such as economic, socio, technological and
political factors. Hence, Tesla is chosen from the lists of 25 disruptive brand. Thus, the effects of
these four factors on the selected firm will be examined (Mercure et al. 2016). The
socioeconomic factors may influence the actions of the consumers. As a result, the
socioeconomic beliefs and status varies the priorities and tastes of the consumers. The trends in
the socio-economic field is vital for the firm like Tesla. Therefore, it can be stated that business
model and structure of the organization can be influenced by this socio-economic trend. In this

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paper, the organization Tesla is selected to assess its socioeconomic trends. Here, mainly the
relationship between the social and economics behavior will be checked. The trends in public
buying is shaped by the emerging popular sentiments, norms on the consumer behavior, social
ethics and other social philosophies. Hence, this paper investigates all these factors to understand
the impact (Agnew and Dargusch 2015). The potential results may arise from the changes to the
society or economy because of history, other politics and social sciences and current events. It
needs to check that whether these factors brings positive or negative consequences for the firm.
As these factors have vital contribution in the development and growth of the firm. In 2019,
Tesla awarded as bestselling plug-in passenger and battery electric car maker due to its robust
performance. The initiatives taken by the by the Tesla to transform the market of the electric cars
has spread significance footprints on the life of the consumers.
Literature review on several drivers of change and knowledge economy
When an innovation transforms the behavior of the industries, consumers and businesses,
then it is known as technological disruptions. The technological disruptions are common now-a-
days in different business models. The firm Tesla is also considered as technological disruptor in
the field of energy-based electric vehicles, which need to be scrutinized with the help of various
factors (Asplund et al. 2019). Technological disruption is also spikes the drivers of industrial
change. The cheap computing power and mobile internet drastically changed the way industries
performed earlier. Other than this, the impact of the factors like demographic, socioeconomic
and technological will also checked on the business model and structure of the organization. In
recent years, the automobile went through major transition through the technological
improvements. The technological developments also changed the working environment of a
firm. The technological changes and socioeconomic trends influenced the business of the

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automotive startup Tesla dramatically (Imd.org 2020). The launch of an electric sports car named
Roadster in 2008 is considered as the first great success of the Tesla. Though, the growth
trajectory of the firm continue to take upward trend. It hit by losing around 2 billion US dollars
in past two years despite the huge sale of the all-electric Model 3 in 2017, which led to the rise in
valuation of the firm by above 53 billion US dollars. In order to transform the automobile
industry of the world, the contribution of the Tesla is significant.
However, it is important to analyze whether this adoption of the technology leads to
disruptions or not. The main objective of the firm is to shift the business from small batch car
producers to mass producers to cater larger numbers of customers (Johnson and Reed 2019). The
up gradation of the firm can be done through additional investment of 1.5 billion US dollars.
While, the debt level of the Tesla already stood at 10 billion US dollars in 2017. Therefore, it
would be difficult for the Tesla to undertake the up gradation process. However, evolution of the
software and hardware technology may boost the firm to dominate the market of the automobile
vehicles and sustainable energy consumption in the future (Inners and Kun 2017). Thus, the
traditional definition of the technological disruptions may not fit into the organizational structure
of the Tesla. In addition, the transformation of the industry may take several paths such as
changing buying patterns of the consumers through offering superior and expensive products,
industry closure from the long period of higher revue and lower profits, providing blue ocean
alternatives to redefine the expectation of the consumer, application of reincarnation for the
proposition of new value. Though, the substitute products offered by the new entrants are of
inferior quality, it usually charge lower price than the mature incumbents in the market under
technological disruptions. In the long run, the disruptor may or may not able to catch up with the
industry trend, which determines the future action of the new entrants (Pengyue et al. 2016). In

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this regard, the rapid evolution of the technology plays a crucial role as it produces substitute
products that are better and cheaper. Hence, the utilization of the capabilities of the disruptive
tech and changing economics may divert the preference of the consumers from mature
incumbents to new incumbents. The concept of knowledge economy, which is related to the
economy that uses knowledge to produce goods and services, is widely application in the present
business models of the companies. The application of the knowledge economy in an organization
required high-skilled workforce for the production of the goods and services.
Moreover, the application of the knowledge economy highlights the importance of the
skill in a service economy. One of the major factors of production of the Tesla is skilled laborers
under the knowledge economy (Rahdari, Sepasi and Moradi 2016). Therefore, trade facilitation
can be obtained from the information technology which is supported by the digital economy.
Furthermore, the important non-physical capital of the Tesla is information, which defines the
role of the information economy. The growth trajectory of the Tesla shaped under the influence
of the information economy and digital economy. Previously, the model of the economy was
relatively closed one, which shifted later. The revised approach of the company in favor of open
innovation may also modify the industry pattern. It led to the competitive advantage for the Tesla
to stay ahead of the rivals. Tesla was able to dominate the world market of the electric vehicles
as open innovation enabled the market anticipation for the firm. In this case, the macroeconomic
dimensions of the business will be taken into consideration. The essential factors that influence
the aggregate economy such as aggregate saving, total investment, aggregate consumption and
national income in turn determines the macroeconomic dimensions of the business. Therefore,
the study of these macroeconomic variables are pivotal to analyze the macroeconomic dimension
of the Tesla (Moritz et al. 2015). The future of the automotive industry is shaped by the

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knowledge based economy as well as technological evolution. The adoption of the electric
vehicle of the Tesla lowered the level of petroleum consumption in the US, which is a vital
macroeconomic dimension of the business. US is one of largest importer of the petroleum
worldwide, 40% of the total petroleum is imported to US in 2012. Whereas, the consumption of
the automobile industry represents 27% of the total consumption (Wroldsen 2015). The reliance
on the import of petroleum is scaled down due to development and introduction of the electric
vehicle in the US. The electric vehicle manufactured by the Tesla largely contributed in reducing
the greenhouse gas emission in the environment. It helped to negate the effect of the global
warming and create a balance in the environment.
According to the estimation, the continuous research and development of the Tesla in the
field of electric vehicle will drop down the petroleum import of the US by 38% by 2030. The gap
of the balance of payment of the US can be plunged by the lower import of the petroleum.
Moreover, it is estimated that the growth of the electric vehicle industry, will bring employment
opportunities (Agusdinata et al. 2018). In the US, there will be around 130,000 net job gains and
around 350,000 additional jobs by 2030. The reducing level of greenhouse gas emission may
also plummet the health cost of the US government by around 210 billion US dollars. There are
also negative influence of the macroeconomic dimensions of the Tesla on the automobile
industry. As the preference of the customers will move towards the electric vehicle, it may
increase the competition in fuel-based vehicle industry. Therefore, the overall growth of the
industry will be effected due to the growth if the electric vehicle industry. As the adoption of the
electric vehicle has grown undoubtedly, it may hit the technology take up because of the current
grid capacity of the automobile sector. The consumption of the energy by the electric vehicles is
equal with the consumption of the energy of an average household. The use of higher numbers of

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electric vehicles required excess supply of energy, which may lead to damages or outages of the
power transformers (Brown and Laurier 2017). As a result, it aggravates the chances of
deteriorating the power quality. It is essential to take the path of higher electrical production to
mitigate the crisis of the automobile industry because of technological changes. Though, the
business model of the firms like Tesla largely dependent on the revolution in technology
(Beauregard and Ghandi 2015). In addition, the technological and socioeconomic dynamics
brought drastic changes in the automobile industry, the application of the disruptive technology
by the Tesla is difficult to determine. There was presence of electric vehicle in the market for
long time, no new technology is adopted to make it better or cheaper when comparing with
internal combustion.
There was no role of the battery density on the exponential improvements in digital
technology according to the data provided by the Tesla. To make the battery performance
compatible with the fossils fuel, possibly another year will be required. The autonomous vehicle
of the Tesla is also take the same channel (Nykvist and Nilsson 2015). It is also required plenty
of time to develop fully-automated manufacturing unit through the betterment in artificial
intelligence, robotics and other disruptors. There is also doubt in terms of Tesla being the winner
of the automotive race. To take the assessment of the Tesla in terms of technological disruptions
to the next level, the role of the investment is pivotal. The level of investment in the automobile
industry by the big firms are much higher than the Tesla. The competition of the market also
induced due to the same supplier of the components in some cases. Tesla open sourced its
patents in 2014 and decided to not claim for the proprietary inventions. The firm may consider as
the disruptor due to its presence as powerful brand in the market and recognition of the brand as
luxury and sustainability (Vynakov, Savolova and Skrynnyk 2016). However, the market of the

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automobile is concentrated with the premium brands like Lexus, Volvo, Mercedes and BMW.
Tesla is driven by serving high-end version of commodity products and getting robust loyalty
from customers through its visionaries. Some channels of the firm still required development
such as repair, distribution and retail. In order to be true disruption, the firm must have strong
manufacturing, service and distribution platform. As a result, in short period, the supply chain of
the incumbent industry was scrambled. The revenues collected from the mature products may
also helped in further experimentation. Furthermore, the high-end product manufactured by the
firm like Model 3 was available in the market at a competitive rate. The customers of the Tesla
also faced difficulties in terms of replacing the hardware of the vehicle because of the battery
technology offered by the firm currently (Hidalgo et al. 2018). The uncertainty over substantial
government subsidies may hamper the performance of the firm. It is also seen in market that it
impact the willingness of the consumer to pay premium price.
The government subsidies also brought other problems for the Tesla such as drop in
sales. In countries such as Hong Kong and Denmark, the sale collapsed by 90% due to the denial
of the government subsidies. Moreover, the firm after launching the Model 3 in 2016, signed up
300,000 customers. Tesla also needed to deliver the pre-ordered Model 3s y end of 2018.
However, it was getting difficult for the firm to cope up with manufacturing gap and deliver all
the pre-ordered vehicles. The cash-strapped organization faced waning sales in a reinvented
transportation industry (Sousa et al. 2018). Thus, it is difficult to call Tesla a sustainable leader
in this regard. The fade from the respective field as incumbents may assist the firm to achieve
disruptive revolution. Demographics is crucial in the model of economic growth. There were
various economic factors including job distribution, labor market polarization and labor supply
that may affected by the socioeconomic shifts through the evolution in the automotive industry.

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The socioeconomic shifts also influenced by the demographic shifts. As a result, there was a shift
in large number of population from the fuel based cars to electric vehicles offered by the Tesla.
Therefore, the economic challenge may scale up due to the demographic and socioeconomic
shifts arises from technological disruption in the automobile industry. To understand the
demographics offered by the firm, it is essential to focus on average household income
(Tettamanti, Varga and Szalay 2016). In general, those who opted for the electric vehicles are
older and high income people. One of the major factor of the environment is to control the higher
emission level due to the global warming, which can be controlled with the help of electric
vehicle. Therefore, higher emission control may cause the shifts in the demographic and
socioeconomic factors. The technologies and game changing innovations led to the transition of
the automobile industry. Hence, it can stated that the electric vehicle industry is shaped and
improved by the technological disruptions through remodeling the planning, delivery and
management system.
The core business of the Tesla is underpinned by the technological change. The
manufacturing of the electric vehicle and battery energy storage got easier because of new and
emerging technologies. The advent of technological drivers shaped the way industry operates
earlier such as Internet of Things, artificial intelligence, big data, block chain and machine
learning. The firms harnessed the opportunities led by the rapid changes in technology. Another
determinants of the technological disruption is incentives (Ivanov, Tsipoulanidis and
Schönberger 2017). There exists an asymmetry in case of incentives of entrants and incumbents.
Furthermore, a profitable market should be established by the business model driven by new
technology to be a true disruptor. However, the business model of the Tesla may get affected
because of lack of competencies and assets. As the opportunity cost of the established firms

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remained high, it may get difficult to allocate the resources sufficiently. The entrants may get
encouraged by the small niche market and start investing more. Thus, it enables in gaining
momentum for the firm. In general, there was delay in advent of emerging technologies by the
incumbents. Though, Tesla offers attractive high end and high margin electric vehicles to the
consumers, which may result in disruption. The presence of the big rivals in the market such as
Mercedes and BMW will prevent the firm to grab the position of the true disruptor
(Surakitbanharn et al. 2018). The development of the electric vehicle industry may result from
substantial resource allocation by the incumbents to beat Tesla. It is more likely that the battle of
the competition will win by the established firms. To strengthen the above argument, the
assumption should be inculcated that the main stakeholder consumer will decide the level of
resource allocation by the entrants and incumbents. In order to survive and boost the confidence
of the investors, cash flow from the consumer is required for the firm.
The factor that may influence the position of the Tesla is auto dealers those who are less
interested in the electric vehicles offered by the Tesla. It was difficult for the Tesla to circumvent
the dealers and sell their products directly to the customers, which resulted in extensive
turbulence (Siljković, Denić and Rakić 2017). The lobby of the dealers led to the banning of the
Tesla business in various states of the US. Hence, it can stated that the financially robust interest
groups have a big impact on the small entrants such as Tesla. The presence of these dealers
provided a competitive edge to the existing rivals for last several decades. On the contrary, they
were unable to offer products directly to the customers. In this regard, the explanatory value of
the theory applied should be considered. The way the competitive dynamics of the industry
changed in regards to adoption of new technology is explained by the theory. Tesla never
adopted the pressure sales approach to sale a new car instead of believe in servicing of the old