As ethical business standards become the societal norm and goal, the debate rises that following such strict ethical rules most likely leads to the loss of profit for companies. This profit loss may come from a variety of different factors such as the use of higher quality supplies, the increase of minimum wage for laborers , and the necessity to run additional tests of products to ensure its safety. All this is costly, which is which, by logic, it is easy to predict the loss total net profit. However, it was later made evident that a company’s determination to follow ethical business rules that are community and environmentally friendly doesn’t necessarily mean the company is losing profit and thus, failing.
Shoe company TOMS promises to give away a pair of shoes to charity for every purchase that is made from their store, using their catchphrase “one for one” (TOMS, 2017). With their community friendly business ethics it would be expected to say that TOMS would have a hard time making profit; However,from the year 2006 to 2014 TOMS to have sold 35 million pairs of shoes; thus, giving another 35 million to charity while till making profit (Anderson E., 2015). TOMS is just one example of a company who was successful at maintaining good business ethics as well as liquidizing their finances.
Electric-car maker Tesla Motors Inc., on the other hand, is an example of a company who intends to follow good business ethics by revolutionizing the car industry to a more environment-friendly one. This at the moment is causing huge drawbacks on Tesla‘s margin with all the research, supplies, and testing that is being put into the future of the car. In 2016, Tesla reported a quarterly loss of nearly $300 million (C. Owens, 2016). Despite the large amount of loss of profit, Elon Musk states that Tesla Motors “is not in the money-losing business” (C. Owens, 2016). This is made evident by the fact that Although Tesla Motors Inc. sold a significant amount less cars than competitor Ford and suffers from profit loss (Ford sold 2.6 million and made $4.6 billion, while Tesla sold 76 thousand and lost $675 million), Tesla is worth more than Ford (i.e Tesla’s stock is worth more than Ford’s)( B. Lee, 2017), What Tesla is doing is investing in the future by aiming to be the Apple of the car business (B. Lee, 2017). Tesla is betting on the environment-friendly future of cars. It’s investing in the future by locking its supply of their cars’ key components such as batteries as electric cars need a significant amount of lithium ion batteries (B. Lee, 2017). In order to better understand Tesla‘s goal, think about how Nokia dominated the cell-phone market until the release of the revolutionary Iphone back in 2007.
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References:
Article: Owens, J. C. (2016, August 04). Elon Musk: Tesla is not really a ‘money-losing business’. Retrieved September 27, 2017, from http://www.marketwatch.com/story/elon-musk-tesla-is-not-really-a-money-losing-business-2016-08-03