Well written, structured and argued response Effective synthesis and use of quality research Application of key concepts and frameworks in the analysis of the contemporary business environment Problem solving real-world scenarios within the external business context (PEST) by persuasively arguing your outlook Understanding and analysis of ethical and social considerations ! !

Article Etter, L. 2015, Texas isnt open for Teslas direct auto sales, Abbott says, Bloomberg Business, 15 July, viewed 10 August 2015, Summary Etter (2015) reports on Teslas challenges in extending their direct sales model into Americas second largest market, Texas. Franchise regulations only allow vehicle sales through dealerships, preventing the EV manufacturer from selling through their own showrooms. This article follows failures by Tesla to persuade Texan lawmakers to change the policy, however Tesla has indicated that they will continue their efforts, targeting current lawmakers.

Application of concepts This article relates to the political and regulatory environment due to the limitations placed on Teslas sales model by Texas laws. These laws highlight the challenges of the federalist model, specifically policy differentials between states over matters of commerce. Americas federalist model was premised on the notions of diffused powers and competition between the states, thereby minimising the power of interest groups, as economic interests would differ between competing states (Easterbrook 2013, Gillette 2012). Here, Tesla has been constrained by policy variables between Texas and other states, with Texan laws underpinned by the faulty assumption that direct sales will unfairly compete with dealers through threats to undercut prices (Crane 2014). This comes despite studies finding that built-to-order models in fact lead to better consumer outcomes than dealerships (Bodish 2009).

Teslas response to the franchise legislation, lobbying, further connects this story to the political environment. A form of non-market activity, lobbying reflects a situation where private actors seek (cf. take) regulation (Stigler 1971). Stigler (1971, p.5) proposes that every industrythat has enough political power to influence the state will seek to control entry [and] retard the rate of growth of new firms. Franchise legislation, itself emerging from lobbying over the 1930s-1950s (Crane 2014), continues to attract lobbyists and Tesla has found its entry into Texas stymied by lobbyists who have spent $U780,000 in 2013, more than twice Teslas spend (Henry 2013).

!

Analysis Teslas outlook in Texas hinges on its ability to overcome regulatory capture by dealer interest groups through lobbying, an area of discourse highlighted in the third of Coen, Grant and Wilsons debates (2010). It is anticipated that Tesla will be unable to match the efforts of the dealer lobbies, forcing them to sell only in neighbouring states and rendering government a threat. Powerful incumbents have an advantage against Tesla due to their negative posturing against change, with McKay (2012) finding that efforts of one negative lobbyist equates to 3.5 lobbyists pushing for change. These incumbents also benefit from their status as a pre-existing coalition (Lux, Crook and Leap 2012). Finally, maintenance of the status quo is likely as more conflicted debates leave conflict-averse representatives reluctant to act (Price 1978).

However, this does not fundamentally undermine Teslas long-term position. Their very participation in lobbying shows promise, following findings by Chen, Parsley and Yang (2015) suggesting that lobbying expenditure is positively associated with financial performance. Further, shareholders have been found to value corporate political activity, both lobbying and contributions (Hill et al. 2013). Nevertheless, at present levels Tesla cannot be expected to succeed in their lobbying efforts, irrespective of the value assigned to lobbying by shareholders. Chen, Parsley and Yang (2015) add a further nuance by finding that only firms with high lobbying intensity will outperform their rivals. With better resourcing being a predictor of lobbying success (Hojnacki and Kimball 1998, Schlozman and Kierney 1986), and with widening losses in Q2 (Tesla Motors 2015), Tesla is unlikely to succeed in this conflict in the short term.

CSR Teslas CSR could be argued to be of high centrality (Burke and Logsdon 1996) as objectives are tethered to a product displaying the characteristics of elegant disruption (Bendell and Thomas 2013). Specifically, their mission is to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible (Musk 2013), highlighting the link between their product and sustainability and reflecting an ethical approach to CSR (Garriga and Mel 2004). Whether this means their CSR is sound is debateable, however, given the mismatch between the visibility of their vision and their CSR. Indeed, both their website and recent annual report lack content dedicated to CSRS, making their sustainability claims difficult to assess and distinguishing them from the majority of listed firms (Holder-Webb et al. 2009, Gomez and Chalmeta 2011). Nevertheless, some allowances can be made for Tesla given that smaller firms make fewer online CSR disclosures than larger firms (Holder-Webb et al. 2009). Further, the 2014 release of their IP drew compliments from many in environmental circles (Rimmer 2014 p. 43) setting them apart from their competitors.