Summary
Tesla is one of the most well-known brands in the world. Founded and managed by the talented engineer and entrepreneur Elon Musk, Tesla is the global leader in the production and sales of electric vehicles. The company’s annual revenue has been growing for a decade, but it has not yet managed to make a profit. However, Tesla is exemplary in its Corporate Social Responsibility strategy. It prioritizes communities, customers, and employees over investors and government. The strategy is manifested in the fact that the company’s mission is not to maximize profit but to make electric cars affordable. This paper will provide background information about Tesla and discuss how it encourages responsible business standards.
Company Background
Tesla is an American electric vehicle company founded in July 2003 in California. One of the co-founders of the company is the American engineer and investor Elon Musk (Bhardwaj et al., 2020). Tesla specializes in the production of electric vehicles and the development of technologies for the efficient use and storage of electricity. The name of the company is a tribute to the famous Serbian physicist Nikola Tesla (Bhardwaj et al., 2020). Since 2005, the company has released four models of Tesla-branded electric vehicles – Model S, Model X, Model 3, and Model Y (Bhardwaj et al., 2020). Tesla is also expanding its international electric charging network – Supercharger.
In 2014, the capitalization of Tesla was $28 billion, but over the past five years, it has reached the $350 billion mark. In 2018, Tesla’s revenue amounted to $21.4 billion, but over the entire period of its existence, the company has never finished the year with net profit (Tesla, 2020). The loss for the past 2019 has almost reached $900 million (Tesla, 2020). Elon Musk, over the years as the company’s CEO, has become famous for his careless, questionable, and often controversial comments on Twitter.
The Securities and Exchange Commission (2018) accused the businessman of fraud and an attempt to raise the stock price using his Twitter posts. After legal proceedings in September 2018, Musk was removed from his position as chairman of the board of directors, paid a $20 million fine, and was forced to agree to coordinate his social network activities (Securities and Exchange Commission, 2018). Despite the mentioned struggles, Tesla is one of the most relevant companies in the automobile industry today.
Relevance to the Industry
When Tesla first started, it was not perceived as a complete car manufacturer. The company’s prototype was based on the Lotus Elise platform, and the market anticipated Tesla to be a shop rather than an independent car company (Perkins & Murmann, 2018). Tesla’s first car was delayed several times and was released two years later than the first anticipated date. The primary issues were related to the fact that Tesla was only a startup, which consisted of 20 people (Perkins & Murmann, 2018). It is not possible to massively produce safe and reliable cars without an established engineering and quality assurance process.
While having a small team that allowed Tesla to integrate innovative solutions quickly, it was challenging to resolve issues when they arose (Perkins & Murmann, 2018). Today, however, Tesla is the best-selling electric car manufacturer in the world, with more than 48 thousand employees worldwide (Tesla, 2020). It is developing an international network of recharging stations to promote the use of electric vehicles (EV) (Tesla, 2019). Moreover, Tesla’s cars look and are operated the same way as traditional gas-powered automobiles. Therefore, the company can compete not only with other EV manufacturers but also with established companies, such as Mercedez.
Tesla has responded to market demands well, and with the rise in the popularity of SUVs, Musk’s company released Model X. Tesla is looking into other car segments too – currently, a truck and a roadster are under active development (Tesla, 2020). The company’s primary factory in Fremont is expected to deliver more than 600 000 units per year (Tesla, 2020). There is one factory in China, and two other plants are being built in the United States and Germany. As Tesla’s revenue increases and the company is expecting to make a profit in the coming years, it is reasonable to believe that it will look into expanding to other regions of the world.
Responsible Business Standards
Tesla’s mission is two-fold and affects both the consumer and the environment. When founding the company, Elon’s idea was to make electric vehicles and the technology available to all strata of the population. He reinforced his intention when he stated that Tesla would allow others to use its patents so they can contribute to the affordability and availability of electric vehicles and associated systems. According to their Corporate Social Responsibility (CSR) strategy, the stakeholder group is led by communities and followed by customers, employees, and finally, by investors and government (Tesla, 2019).
Tesla (2019) aims to build the safest car for consumers and make the production process the safest for its employees. To achieve these objectives, the company is spending its revenue on researching autonomous systems and developing codes of conduct for its suppliers and controlling the chain to make the products safer and the process of making them harmless.
The other side of Tesla’s mission is to facilitate the transfer to sustainable energy to reduce carbon emissions and the volume of greenhouse gases. This goal can only be achieved if technologies behind EVs become accessible to all people around the world. Therefore, Musk realized that the primary goal is to make technologies more affordable. The fact that investors do not have the highest priority of the corporation’s CSR strategy indicates that profit-making is not the main business objective (Baffour-Awuah, 2020).
Tesla (2019) promotes its responsible business standards by sourcing responsibly, caring for employees and consumers, and encouraging the communities to participate in the process of transferring to sustainable energy. Besides attracting and retaining diverse talent, Tesla is contributing to education. The company has a 12-week program for students that want to gain the technical expertise to start their careers in Tesla (2019). Despite being criticized by some of the financial experts, Musk is leading the energy revolution of today.
Conclusion
While the majority of car manufacturers tend to prioritize profit maximization, Tesla is taking a different approach. The goal of the company is to transfer the world to sustainable energy by making such products accessible to broader audiences. Tesla controls the supply chain so that providers follow the code of conduct during the process. The company is a leading electric vehicle manufacturer in the world and is planning to strengthen its position by investing more in the research and development of sustainable technologies.
References
Baffour-Awuah, D. (2020). Essence of corporate social responsibility: Case study of Tesla Inc. SSRN. Web.
Bhardwaj, S., Pandey, R., Sharma, S., Sejal, S., Iyer, G., Sharma, S., Ranjith, P.V., & Kulkarni, S. (2020). Problems Faced by Automobile Industries: Case Study on Tesla. International journal of Tourism and hospitality in Asia Pasific, 3(2), 78–88.
Perkins, G., & Murmann, J. P. (2018). What does the success of Tesla mean for the future dynamics in the global automobile sector? Management and Organization Review, 14(3), 471–480.
Securities and Exchange Commission. (2018). Elon Musk settles SEC fraud charges. Web.
Tesla. (2019). Impact report. Web.
Tesla. Q2 2020 Update. Web.