Socioeconomic and Legal Environment Assessment Report: Tesla Inc.

This report provides a comprehensive socioeconomic and legal assessment of Tesla, examining its business model, political factors, and legal framework. It delves into the impact of the knowledge economy, technological disruptions, and consumer behavior on Tesla's performance. The report analyzes macroeconomic dimensions, including the electric vehicle industry's influence on petroleum consumption and job creation. It also explores challenges like grid capacity limitations and competition. The analysis covers Tesla's innovation strategies, including open-sourced patents and brand representation. Furthermore, the report provides a literature review on knowledge economy and various drivers of economic change. The assignment is completed by a student to be published on the website Desklib, a platform which provides all the necessary AI based study tools for students.

Running head: DISRUPTIVE BRAND AND DRIVERS OF CHANGE
Disruptive Brand and Drivers of Change
Name of the Student
Name of the University
Author note

1DISRUPTIVE BRAND AND DRIVERS OF CHANGE
Table of Contents
Task 1...............................................................................................................................................2
Introduction......................................................................................................................................3
Literature review on knowledge economy and various drivers of economic change......................4
Impact of legal framework and political factors............................................................................11
Conclusions and Recommendations..............................................................................................15
References......................................................................................................................................17
Task 2.............................................................................................................................................22
Introduction....................................................................................................................................22
Discussion......................................................................................................................................22
Conclusion.....................................................................................................................................25
References......................................................................................................................................26

2DISRUPTIVE BRAND AND DRIVERS OF CHANGE
Task 1
EXECUTIVE SUMMARY
This paper intends to analyze one of the disruptive brands in terms of legal and socio-economic
aspects. Here, the chosen case study organization is Tesla, one of the famous American
multinational company that operates in manufacturing of electric vehicle and battery energy
storage. This paper examines the political factors and legal framework of the organization to
assess the performance of the organization. The anti-trust laws and informal and formal legal
systems influences the economic growth and development of the organization. Moreover, it also
emphasizes on technological and socio-economic factors that influences the business model of
the organization. These factors also affects the behavior of the consumers and their purchasing
patterns. The macro-economic dimensions of the business of Tesla also taken into consideration
in this regard.

3DISRUPTIVE BRAND AND DRIVERS OF CHANGE
Introduction
One of the largest clean energy and electric vehicle companies of the United States (US)
is Tesla, Inc. The American multinational company is based in Palo Alto of California, US. In
order to examine the socio-economic and legal environment of the organizations, this paper
chosen a disruptive brand called Tesla (Tesla.com 2020). The areas of specialization of the
organization include battery energy storage and manufacturing of electric vehicle. In addition,
the battery energy storage works in home to grid scale with the help of acquisition of
manufacturing of solar panel, SolarCity and solar roof tile. The organization was founded in July
2003 and the founders are Marc Tarpenning and Martin Eberhand. However, the organization
was named after the electrical engineer and inventor Nikola Tesla (Nichols 2019). The 98% of
the initial funding came from the Elon Mask, who was the chairman of the board. Presently, Elon
Mask is serving as the CEO of the company, which is known as independent automaker and a
technology company. The main objective of the company is to provide affordable electric cars
for the average consumers worldwide.
The role of the socio-economic trends is essential for any organization. It influences the
structure and business model of the organization significantly. Here, the analysis of the impacts
of the socioeconomic trends for the Tesla is undertaken. It mainly focuses on relationship
between the economics and social behavior (Schiller et al. 2018). It investigates the impacts of
the social ethics, emerging popular sentiments, other social philosophies and norms on the
consumer behavior and how it shapes the trends of public buying. The prediction of the potential
results from changes to the economy or society can be done on the basis of current events,
history, other social sciences and politics. Therefore, these factors may bring positive and

4DISRUPTIVE BRAND AND DRIVERS OF CHANGE
negative consequences for the organization. It is vital for the economic growth and development
of the organization as well.
Hence, the assessment of the socioeconomic and legal factors will help to understand the
performance and growth of the Tesla. The technological factors are also major determinants of
the growth of the Tesla. Furthermore, this paper examines the impact of the political and
technological factors on the chosen organization. It also finds out the effects of the socio and
economic factors on the performance of the Tesla. The actions of the consumers are manipulated
because of these socio-economic factors (Nygaard 2019). The priorities of the consumers
changes with their socio-economic status and beliefs. The outstanding performance of the Tesla
helped it to rank as best-selling battery electric and plug-in passenger car manufacturer of the
world in 2019. Tesla also taken into consideration various new initiatives to improve the market
of the electric cars for the passengers. In this paper, the role of all these factors on the consumers
will be scrutinized.
Literature review on knowledge economy and various drivers of economic change
One of the significant drivers of the industrial change is technological disruptions in
recent years. The existing business models are majorly dependent on the growth in mobile
internet and cheap computing power. Along with technological factors, the socio-economic and
demographic models also have strong impact on the organizational structure and business model
(Valentin 2019). Furthermore, the application of the technology also brought drastic change in
automobile industry. It also modified the work practices of the digital age in an organization.
Here, the socio-economic and technological changes that affected the Tesla will discussed. The
organization has started an automotive start-up and shown progress in terms of business. In 2017,
the number of all-electric Model 3 sold by the company remain 500,000 (Hbr.org 2017). The

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robust earnings due to the sell led to the increase in valuation of the company by more than 53
billion US dollars. Though, the company lost around 2 billion dollars in the last two years. The
tech-based company took several steps in order to transform the entire automotive industry.
However, there exists conflicts in regards to the innovative idea adopted by the company.
As of 2017, the debt of the company had crossed 10 billion US dollars. Moreover, as the
company decided to expand the business from the small batch car manufactures to mass
production. It required an additional funding of 1.5 billion US dollars to upgrade the expansion
of the business on mass scale. There is a possibility that the company may dominate the future
market of the sustainable energy consumption and autonomous vehicles (Christensen 2013). It
may easily able to upgrade itself due to the presence of the software and hardware that evolved.
The performance of the company may not comes under the traditional definition of the disruptive
innovation. In case of disruption, the new entrants usually offer product at a cheaper rate than the
mature incumbent, although these substitute products are inferior in quality. However, the
disruptor either may improve the performance to catch up with the industry unknowingly or
unable to catch up with the industry.
There are several paths to transform the industry, which include offering expensive and
superior products to change the buying pattern of the consumer, the closure of industry due to the
long period of decreasing profits and increasing revenue, redefining the expectation of the
consumer to create a new market through providing blue ocean alternative and proposition of
new value through reincarnation (Purificato 2014). The disruption may also result from the rapid
evolution of the technology that produces cheaper and better substitute products and the
changing focus of the consumers from mature incumbent to new incumbents through utilizing
the changing economics and capabilities of the disruptive tech. When an economy produces

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goods and services using the knowledge, it is known as knowledge economy or knowledge-based
economy. It mainly uses the high-skilled workers to produce those products. In a service
economy, the importance of skill is identified by the knowledge economy. In case of Tesla, the
role of the knowledge economy is significant (Pow 2019). Here, the digital economy supports the
intensity of the information technology, which facilitates trades.
In addition, the company also focuses on the concept of the information economy, where
information is considered as the non-physical capital. Both of these digital economy and
information economy brought changes in performance of the Tesla (Imd.org 2020). The model
of the economy also shifted from the closed one to relatively open one. The future development
of the industry is influenced by the approach of the company related to open innovation. Thus, it
supported the company to achieve competitive advantage and stay ahead of the competitors.
Therefore, Tesla was able to anticipate the market of the electric vehicle that enabled the
organization to dominate the market worldwide. The analysis of the macroeconomic dimension
is essential in this regard. The macroeconomic dimensions of the business largely depends on the
behavior of the aggregate economy in terms of total investment, aggregate saving, national
income and aggregate consumption.
The in-depth study of the macroeconomic variables helps to understand the
macroeconomic dimension of the organization. The technological evolution along with
knowledge-based economy shaped the future of the automotive industry, especially in US
(Hardman, Shiu and Steinberger-Wilckens 2015). Here, the macroeconomic dimension of the
business of Tesla reduced the consumption of the petroleum dramatically in US. The 40% of the
total consumption of the petroleum was imported by the US in 2012, where 27% of the total the
total consumption was from vehicle industry. The introduction and development of the electric

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vehicle reduced the reliance of the country on the import of petroleum. The contribution of the
Tesla is considerable in this regard. It also scaled down the level of harmful emissions in
environment, which proved beneficial to control the menace of global warming. The further
development in the electric vehicle industry will bring down the level of import of petroleum by
38% in the US by 2030.
The lower import of the petroleum helped to control the balance of payment of the
country (Chen and Perez 2018). Another impact of the electric vehicle industry include a
significant net job gain around 130,000 and additional jobs of around 350,000 in the US by 2030
as per estimation. In the US, it may also plunge the health cost around 210 billion US dollars by
reducing the greenhouse gas emission. However, the macroeconomic dimension of the also
brought a wide range of adverse impacts for the entire automobile industry. The electric vehicle
offered by the Tesla may create pressure on other industry players in the non-electric vehicle
segment. The growing demand of the electric vehicle industry may influence growth of the
overall industry (Bruijl 2017). The current grid capacity of the automotive industry may hamper
or slow-down the technology take-up as the adoption of the electric vehicle increased worldwide.
The energy consumption of the electric vehicle is equivalent with the total consumption of a
household. Thus, excess supply and use of the electric vehicle may lead to outages or damages of
the power transformers, which in turn may degrade the quality of the power. Though, the
industry shifted towards the electric vehicles with the help of technological innovations adopted
in the companies like Tesla.
It needs to emphasis on higher electrical production to negate the crisis of the automotive
industry because of technological changes. Though, industry went through drastic changes in
terms of socio-economic and technological dynamics, it is difficult to determine the usage of the

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disruptive technology by the Tesla (Lehtinen 2015). In comparison with the internal combustion,
there was no such changes in the technology related to getting cheaper or better, whereas, the
presence of the electric vehicle was there for a long span of time. As per the data of the Tesla, the
exponential improvements in digital technology was not driven by the density of the battery. It
may take another years for the battery performance to be compatible with fossil fuels. It also
applicable for the autonomous vehicles by the Tesla. Moreover, the improvements in the
robotics, artificial intelligence and other disruptors for the development of the fully-automated
manufacturing will also take enormous time. The chances of the Tesla to be winner of the race of
the automotive technology is also in doubt. In this case, the investment plays a major role and the
big players of the market start investing heavily for the automotive technology.
In some cases, the suppliers of the components are remained same, which aggravated the
competition of the market (Dijk, Wells and Kemp 2016). The organization have not claimed for
the proprietary inventions through adoption of open-sourced its patents in 2014. However, the
main feature of the company remained a powerful brand that represents sustainability and luxury,
which may consider as the disruption. Though, there are several premium brands present in the
automotive industry such as Volvo, BMW, Lexus and Mercedes. The organization is led by the
visionaries, where importance is given to the strong loyalty from customers and high-end version
of commodity products. The organization is still working on the channels of retail, distribution
and repair (Bell and Seong 2017). Even, the price offered by the Tesla for the Model 3 was very
competitive. It would be difficult for the customers of the electric vehicle to replace hardware of
the vehicle through current battery technology used by the Tesla. In other words, the
requirements of the successful disruptor include a robust distribution, manufacturing and service
platform. It enables to scramble the supply chain of the incumbent industry in short duration. In

9DISRUPTIVE BRAND AND DRIVERS OF CHANGE
addition, it also supports further experimentation through the fund collected from the revenue
generation from mature products.
In case of the Tesla, the scenario is different because of the uncertainty over substantial
subsidies of the government. It may influence the consumers’ willingness to pay the premium
price of the company profoundly as seen in some markets. The company also faced difficulties in
some countries in terms of sales due to government subsidies (Kane and Whitehead 2017). The
sale of the Tesla collapsed by more than 90% as government subsidies withdrawn in the
countries like Denmark and Hong Kong. Tesla launched the Model 3 in 2016 and in just two
weeks signed up first 300,000 customers. By the end of 2018, the company needed to deliver
Model 3s that were pre-ordered. It was difficult for the organization to overcome the
manufacturing gap and deliver all the pre-ordered cars. In a reinvented transportation industry,
the position of the Tesla as a sustainable leader remain in doubt due to waning sales as the
organization is cash-strapped.
The organization may achieve the disruptive revolution through fade from the field as
incumbents. In the model of economic growth, demographics plays a key role (Schulze, Paul
MacDuffie and Täube 2015). The socioeconomic shifts due to evolution in the automotive
industry affected several economic factors such as labor market polarization, job distribution and
labor supply. The demographic shifts also aggravated the problems of the socio-economic shifts.
A large population moved from fuel to electric vehicles because of disruptive innovation led by
the Tesla in the automobile industry. Hence, this socio-economic and demographic shifts may
increase the challenge for the economy as a whole. The reason behind this is average household
income is key factor to understand the demographics of the vehicles offered by the company.

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The average household income of the electric vehicle owner remained very high and the owners
are relatively older.
The shifts in socio-economic and demographic also resulted from the higher emission
control in case of electric vehicles. However, there may exists some environmental impacts of
the electric vehicles (Dobbs, Manyika and Woetzel 2016). The transformation in the automotive
industry caused by the game-changing innovation and technologies. The technological disruption
in the electric vehicle industry improved and shaped delivery, planning and management of the
industry. Here, the technological drivers of change underpinned the core business of the Tesla.
The emerging and new technologies helped the organization in battery energy storage and
manufacturing of the electric vehicles. The way the industry operates changed with the advent of
technological drivers such as big data, Internet of Things, artificial intelligence, machine learning
and block chain. The opportunities brought by the rapid changes in the technology was harnessed
by the organization. In this regard, incentives can act as a tool to determine the level of
disruption caused by the Tesla (De Pin 2015). The argument is related to the asymmetry of
incentives between incumbents and entrants. In order to be a true disruptor, the applied
technology in the business model should cater to establish a profitable market for the incumbent.
Though, the lack of assets or competencies may not affect the business of Tesla.
It may face the consequences in terms of not being able to allocate sufficient resources
for the disruptive projects as the opportunity cost remained high for the established organization.
The presence of the small niche market may encourage the entrants to invest more. As a result, it
helps them to gain momentum (Tesla 2017). However, the advent of the new technology by the
incumbents usually get delayed. On one hand, Tesla offered attractive package of high-margin
and high-end product for the consumers that may cause disruption. Whereas, the presence of

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established players such as BMW and Mercedes in the market of automotive industry prevents
Tesla from being truly disruptive. Hence, it is expected that to beat Tesla, substantial resources
will be allocated by the incumbents, which will be a great contribution to the development of
electric vehicle. According to the theory, the battle of competition will win by the established
organizations. The above argument is strengthen by the assumption that the allocation of the
resources by the incumbents and entrants are influenced by the main stakeholder consumers.
The firms gets the major cash flow from the consumers to boost the confidence of the
investors and to survive in the market. Another important factors of the automotive industry
called auto dealers are less enthusiastic for the offerings of the Tesla (Taffel 2018). Thus, the
extensive turbulence has caused by the steps taken by the Tesla such as selling directly to the
customers by circumventing the dealers effectively. In various states of the US, the car dealers
banned the business of the Tesla by lobbying against it. Hence, the small entrant like Tesla faced
daunting challenge due to the influence of the financially strong interest groups. The existing
established automobile firms gained competitive edge for past several decades from these
dealers, although these established firms unable to sell directly to the customers. Here, the
explanatory value of the mentioned theory is considerable (D'Elia et al. 2016). The role of theory
is not only limited to explain how competitive dynamics of an industry has shaped by the advent
of new technology. In addition, the organization never applied pressure sales approach, it always
offers servicing of their cars instead of purchasing a new one. Therefore, Tesla implemented the
concept of the knowledge economy to act as a drivers of economic change, which shapes the
business model and organizational structure entirely.