Tesla Sustainable Environmental Competitive Advantage - Case Study Example

Introduction

Companies in the global setting are dedicated at achieving the sustainability goals notwithstanding the economic challenges that face many parts of the world, the social challenges such as unemployment, and the environmental problems such as the climate changes. The companies that are embracing the green strategy have increased in the recent years and have reached 62 percent. Even though sustainability involves the three main categories of sustainability, that include economic development, social development and the environment, the environmental issues have been taken seriously. The environmental factors include pollution and the greenhouse effect that leads to global warming and thus climate change. Sustainability boosts the outcome of the companies in terms of profitability. This involves cutting costs and boosting revenues by generating markets for new products and services in which innovation plays the major role. Innovation is the main factor for change in which it solves all issues of sustainability. This is achieved through simple efficiency in processes such as the making of narrow nozzles to conserve water. Moreover, the companies could also change their cultures to those that encourage environmental sustainability (Johnson, 2011). Furthermore, innovation can be involved in the logistic sector in which large amounts of goods are delivered inform of raw materials and manufactured goods. Innovation can improve the planning of the supply chain distribution by selecting the distribution lines that enables optimization of collecting and distributing products.

Nevertheless, innovation leads to the development of alternative technology and source of energy that leads to reduction of pollution of the environment and depletion of the natural resources. Such innovations involve development of electric driven vehicles, use of natural gas instead of the fuel, and use of nanotechnology that has resulted into smaller products that reduces the amount of material and energy used. Sustainability is useful to most companies because it creates the public appeal that leads to the more demand of its products compared to those of the competitors and thus profitability. In order to understand the conservation of the environment there is need to use the theoretical lenses that provide an understanding of the topic. Therefore, as the managers and directors get the insight revealed by the theoretical lenses, they synchronize it with the business strategies that enables them reduce the costs and risks involved in business operations and uniqueness in products that generates more profit for the company. This is attained due to the implementation of modern technology and acquiring of competent employees or offering real-time training to the existing employees so that they help in innovation. In this paper, the ability for Tesla Company to create a sustainability competitive advantage is analyzed using the lens of the Legitimacy Theory.

Legitimacy Theory

The theory suggests that organizations are striving to ensure that they are always operating under the control of the norms of the society in which they operate. Legitimacy is a generalized assumption that the deeds of the organizations are preferred, good, or appropriate within the customs, principles, beliefs, and definitions of a given society. The organizational legitimacy is not a steady state but varies continuously. The legitimacy theory is used to examine the social and environmental practices and is the most used theory in these settings.

The theory is important because it provides an understanding through a powerful mechanism that the theory provide in understanding the social and environmental disclosures. However, the use of the term has been unfairly as could be theoretically identified but its application is also problematic. Most of the researchers employ the term but a few of them are able to define because they are not able to understand it properly. Legitimacy is divided into two parts. These include the institutional level and the organizational level.

The first type of legitimacy deals with how the organizations have gained acceptance from the society. The second level is known as the organizational level, that suggests that an organization maybe in the in one of the four phases. The first phase involves establishing legitimacy that involves the early stages of the company. The company at this stage faces issues like competence, like finances and needs to take care of the socially constructed standards of value and appeal in order to undertake operations in conformity to the standards of expertise (Krebs, 2016). The second phase is maintaining legitimacy in which most companies expect to be operating at this point. The activities at this phase include continued performance role and symbolic assurances that all is well. Furthermore, companies opt to prevent all the possible challenges.

The third phase involves extension of legitimacy in which a company enters new market or changes its current market. The management at this phase is active and tries to win the confidence of the stakeholders. The last phase involves defending of legitimacy, which can be threatened by the external or internal threats. The management in this case tends to defensive as it tends to be defensive. This is because for a company to gain legitimacy it must win the society’s needs and acquire competence.

Analysis of Tesla Company’s sustainability competitive advantage

Tesla Company is at the second stage and the use its corporate social responsibility to maintain its legitimacy by the development of the environmentally friendly cars that does not consume oil. The company was developed in 2003. Its first car was sold in 2008 and it is currently worth more 27 billion. The framework can be used to solve the sustainability problems that Tesla Company faces (Bhattacharyya, 2016). The company’s dream and mission shows that the company’s sustainability is at the core of its culture because the company is working towards creating a sustainable transport and energy consumption through the production of the best cars in the world and the development of the energy storage systems. Furthermore, the company employs the best and competent individuals who enable the company to realize its mission.

The company is able to maintain the legitimacy by making use of a four-quadrant framework that is shown below. Development of the sustainable value requires the companies to address all sets of drivers. The sustainable value framework analyzed through the different sets of business lenses is important to the firms because it provides them with opportunities for the firms to improve the sections of the shareholder value.

The four categories displayed in the framework are used to analyze the sustainability of the company (Hart &Milstein, 2015). The first one involves growing of profits and the reduction of risks through prevention of pollution. This result from the problem of material consumption, the waste products, and pollution of the environment related to the industrialization. These provide an opportunity for the company to reduce the costs and risks by developing skills and competences that enable the company to prevent pollution. Tesla has done intensive research on the problem posed by the burning of fossil fuel, which includes global warming that result in the rise in the water level due to the melting of the ice. Most of the carbon emissions result from the burning of petroleum. The company has innovated a supercharger, that is free, and that uses solar energy as well as battery swap which, which makes the company to be unique because the charging station is the fastest in the world. Furthermore, the company has also developed the powerwall, which is a home battery, which is charged using the power generated through the solar panels. This results from the idea of the automotive battery technique. The strategy is also important because it enhances prevention of pollution through the burning of fossil fuel by the vehicles it has developed. This is because; the solar energy is an environmentally friendly form of energy. In addition, solar energy is useful because it could lead to reduction of over dependency on the oil and thus preventing the depletion of the natural resources. This leads the company to follow its mission for sustainability of the environment, which leads to environmental efficiency. Furthermore, the solar energy results into fewer wastes or no wastes that means better use of the input material. As a result, there are reduced costs for the raw materials and reduced risks.

Additionally, Tesla could maintain its reputation and legality over product stewardship. The company does not focus on pollution that focuses on the internal operations only, but engages at product stewardship that goes beyond the limits of the company and covers the whole life cycle of the company. This includes starting from the access of the raw material to the dumping of the used products. Product stewardship includes the requirement of the stakeholders into the business processes by relating with the external influence like the demand of the customers and suppliers, the community at large, the private organizations like the NGOs that assist in positive operation of the business. The marketing related to the cause are interesting to the customers who feel an urge to buy the products; that are socially and environmentally friendly. The costs and benefits of the products are also calculated ranging from the production of the raw materials to how consumers dispose the products. The firms could research through competent employees on the best way to recycle and dispose the waste product. For example, since the products of Tesla Company are environmentally friendly they are demanded more. These include the model x 2016, and model 3, which is to be produced in 2017. The company also plans to develop a large factory that could be powered with renewable materials. The factory is aimed at generating more than 50GWh energy for batteries in the next four years, which is sufficient for more than a half a million cars. This shows that the continued mission of the firm towards sustainability (Service, 2015). In addition, the company promotes teamwork with other parties including individuals by allowing free use of the company’s technology at improving the sustainability of transport. However, there is no significant purchase of the products. This is because the sales of the environmentally friendly products for the company accounts for a small percentages. However, the future projection indicates that there could be an increase in the sale of the environmentally friendly products in future. This is supported by the AAA announcement that Tesla’s car was their best car of the year 2016 among many other electric cars from competitive companies. Likewise, the company’s products particularly the wrightspeed engine is made in such a way that it could run a big vehicle hence avoiding use of oil. This could lead to reduction of CO2 by a great percentage. These technologies are new and were used in Wellington in move to solve the problem of electric buses that provided the city council with more expenses to maintain it. The products provide stiff competition to other similar products from other companies like the Mercedes Company because they are made in a way that uses the battery sparingly that makes them economically sustainable for future.

Tesla Motors also hastens innovation, through clean technology. This involves the innovations that jump the usual routines and understanding. The company does not simply seek to minimize the negative impacts of their operations but rather strive to provide solution to social and environmental effects by internal development or through obtaining new capabilities that face the sustainability challenges directly. This involves the company’s core competences. The company is good at organizing the range of production skills and incorporating many streams of technologies. The company also manages multiple fundamental competences instead of set of business parts. To achieve this the company has the best skilled employees with entrepreneurial attitude capable of building the sustainable fundamental competences (Tilling, 2016). Tesla Motors’ solar energy integration in running its products is the major development of clean technology in the current world. However, the technology is expensive to acquire, there is projection that it could boost economic growth in future.

Furthermore, Tesla Motors should develop the company’s growth trajectory through sustainability vision. The company should utilize the separation between the rich and the poor as well as the unmet needs of the poor people who are the majority in the world’s population. Tesla should use these unfortunate people so that it could open up new trails in the new markets. Thus a sustainability vision is required to improve thoughts by developing a pathway to future business provides direction to workers through priorities, development of technology and proper resource allocation. As provided by the problem interactive matrix Tesla Motors, the introduction of the vehicles that use batteries enables the company to control climate change that is the major cause of drought in some parts of this world. This drought causes poverty among people. Therefore, by decrease of the pollution the company reduces poverty and thus breaching the gap between the poor and the rich. In addition, poverty can emerge due to dirty water that could result in diseases that individuals in the poor areas encounter. Tesla Motors Company has planned in ways through which it guarantees the poor people to be accessed to the clean water and thus reduces this gap. The company has also created awareness on the need for proper disposal of waste products, because it leads to the loss of biodiversity. As a result, the fertility of the soil is lost and thus results in famine that makes people poor.

Solution to the problems

In the application of the solution strategies to the problems facing sustainability by Tesla Motors, the weaknesses that the company includes high barriers to entry due to other companies that face the stiff competition of the company (Yang, Li, Tang & Lin, 2013). These has been solved by Tesla Company through marketing that shows the improved technology used in the manufacture of its products and the safety with which it provides the environment through the use of solar energy. For example, the company has developed a feature that is instilled in the cars, which filters the air and thus making the air inside the car to be clean. Thus the danger of bioweapons is highly prevented by the cars. Additionally, the other challenge involves the need for the company to exploit the market through high prices of the products compared to other companies segregates Tesla Motors. This resulted in a minimum sales realized by the company in which it sold 1 percent of the environmentally friendly cars. The company solves this problem by reduction of other services it provides such as free and fast charging stations in the world. These initiates provide advantage for the customers of the cars and lure other individuals who would like to take part in regulation of the environmental pollution.

Nevertheless, the lack of sufficient charging system throughout the country is the main obstacle to the sale of the company’s products. The customers purchase the other types of cars due of the problem of traveling to long distances in order to meet the charging station and thus this kills their morale of buying the new environmentally friendly cars. With time, the company should develop many charging stations in order to increase its market. However, the company has made a step towards solving the problem of lack of charging stations by development of products that use both batteries and use of oil. Such that, in case the battery is depleted of its energy then the owner of the car could use the fuel until he or she gets to the next charging system (Carlson, 2013). This reduces the environmental pollution in the sense that less fuel is used especially at times of emergencies.

In addition to the charging challenge, the electric vehicle technology has its own challenges of slowness. This is because despite the company having the fastest charging system in the world compared to other companies in the world; the charging issue is still slow because charging batteries takes hours. Therefore, this also pulls back customers as they think of the problem they could face due to the elongated time related with the new products and thus opt to use the fuel driven vehicles. The long time required, the scarcity of the charging stations, and the cost for acquiring the cars make the cars to be in appropriate for many people and thus the need to protect the environment against pollution is not fully met by use of the electric vehicles. The elongated time leads to lateness for individuals and thus the need for the company to look for other means to solve the problem. For example, the company should ensure that the problem for the long time used to charge the batteries should be solved through the development of replaceable batteries. In this case if one is depleted with energy is should be easily replaced with another filled one. These problems could be handled properly if the company employs experts and competent individuals who could be innovative.

Conclusion

The company is highly recommended in the production of the environmentally friendly products, and though expensive, it is the duty of the NGOs and other organizations to create awareness for the individuals to foregoing today’s expenses for the better tomorrow. Green consumerism should be in build within the people so that pollution on the environment by the human acts could be reduced largely. People should be educated on the by real danger and be involved in the solution of the environmental, social, and economical sustainability.

The legitimacy theory needs to be understood properly in order to be able to apply it. Thus through proper understanding of the theory, the wide range of disclosures could be realized fully. This includes the environmental disclosure that involves facing the specific threats to the company such as pollution discussed above. Through the model and the framework provided above the company is able to create appeal to the community’s norms by engaging the people in the environmental conservations activities. Thus it could obtain the legal requirement as provided by the community and thus be able to sell its products to the people. This could in turn result into profit and a sustainable environment in future.