1FOREIGN MARKET ANALYSIS Table of Contents Introduction......................................................................................................................................2 Determination of external business factors......................................................................................2 Determination of the industry competiveness.................................................................................5 Identification of the risk sources......................................................................................................6 Pricing strategy................................................................................................................................7 Promotional strategy........................................................................................................................7 Recommendations............................................................................................................................8 Conclusion.......................................................................................................................................8 Reference.......................................................................................................................................10
2FOREIGN MARKET ANALYSIS Introduction Tesla is having the requirement for tapping the ever growing Asian markets in order to enhance their global business presence. This is due to the fact that currently they are limited to the United States, Canada and China. Hence, the more will be the global market operation for Tesla, the more will be their business revenue and volumes. Favorable economic factors in this country will help Tesla in gaining the foothold1. It should be noted that Tesla is the leading electric carmaker in the world with offering the most practical forms of electric mobility. The existing products of Tesla consist of performance oriented electric vehicles and thus busting the myth that electric vehicles cannot be better in performance. Currently, they are having their only manufacturing facility in the United States and exporting different countries2. This report will discuss about the market environment in Saudi Arabia that will be faced by Tesla in doing business in the country. In addition, the major risk factors will also be discussed from the perspective of Tesla. The overall corporate strategy of Tesla in doing business in Saudi Arabia will also be analyzed along with offering a few recommendations. Determination of external business factors Political factorsTesla will face challenges in terms of political risks in Saudi Arabia due to the reason that Middle Eastern region is one of the most disturbed regions in the world3. Terrorism will be another major factor. This is because terrorism 1Stringham, Edward Peter, Jennifer Kelly Miller, and Jonathan R. Clark. "Overcoming barriers to entry in an established industry: Tesla Motors."California Management Review57.4 (2015): 85-103. 2Hardman, Scott, Eric Shiu, and Robert Steinberger-Wilckens. "Changing the fate of Fuel Cell Vehicles: Can lessons be learnt from Tesla Motors?."international journal of hydrogen energy40.4 (2015): 1625-1638. 3Wilson, Peter W., and Douglas F. Graham.Saudi Arabia: The Coming Storm: The Coming Storm. Routledge, 2016.
3FOREIGN MARKET ANALYSIS will pose challenge for Tesla in having their operational facility in the country. However, the diplomatic relation of Saudi Arabia with other countries will help Tesla to manage other markets as well. Saudi Arabia is governed by royal family and thus the risk in changing of the political regime is low. This will also enable Tesla to manage their uniformity in terms of their business processes4. Economical factorsIn the recent time, the economy growth rate of Saudi Arabia got negative. It is reported that they faced -0.7 percent gdp rate as per 2017. Hence, Tesla will find it difficult in getting economic viability in doing business in Saudi Arabia. However, the competition in the automobile market of Saudi Arabia is low and thus Tesla will have largely untapped market. Thetaxincentivesofferedbythegovernmentforelectric mobility will also ensure that customer attractiveness for Tesla will be more. Social factorsPreferences for the electric cars are gaining traction in Saudi Arabiaalsoasinglobalmarket.Thisisposingmore opportunities for Tesla5. Average social preferences for extravagant products in Saudi 4Buchan, James. "Secular and religious opposition in Saudi Arabia."State, Society and Economy in Saudi Arabia (RLE Saudi Arabia). Routledge, 2015. 108-126. 5Niblock, Tim, ed.State, Society and Economy in Saudi Arabia (RLE Saudi Arabia). Routledge, 2015.
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4FOREIGN MARKET ANALYSIS Arabia will also drive the sales for Tesla. However, social conservations regarding the car driving norms mayaffectTeslaintargetingboththefemaleandmale customers6. Technological factorsSaudiArabiaissteadilybecomeaccessibletowardslatest technologies and this will help Tesla in gaining the same. However, they will face challenge in transferring their existing technologies from the United States to Saudi Arabia7. Saudi Arabia is also not having proper infrastructure for electric mobility such as supercharging stations. This can also pose challenge for Tesla in terms of the potentiality8. Environmental factorsTeslawillbemostbenefitedfromtheenvironmental perspectives due to their low emission vehicles. Tesla will not have to face the environmental concerns of the gasoline charged vehicles9. Thus, they position their products alternate and green options for customers already affected from pollution. Legal factorsSaudiArabiahavingafewstringentlawsduetotheir monarchical structure and conservative approach. This can pose 6Thompson, Mark.Saudi Arabia and the path to political change: National dialogue and civil society. Vol. 159. IB Tauris, 2014. 7Khan, Habib Ullah, Shafiq Ahmad, and Mali Abdollahian. "Supply chain technology acceptance, adoption, and possible challenges: A case study of service organizations of Saudi Arabia."2013 10th International Conference on Information Technology: New Generations. IEEE, 2013. 8Adgaba, Nuru, et al. "Socio-economic analysis of beekeeping and determinants of box hive technology adoption in the Kingdom of Saudi Arabia."J Anim Plant Sci24.6 (2014): 1876-1884. 9Alshehry, Atef Saad, and Mounir Belloumi. "Energy consumption, carbon dioxide emissions and economic growth: The case of Saudi Arabia."renewable and Sustainable energy reviews41 (2015): 237-247.
5FOREIGN MARKET ANALYSIS challenge for Tesla in maintaining their global practices in the country. However,SaudiArabiaisalsohavinglowerintensityof bureaucracy, which will help Tesla in doing their business in the country. Determination of the industry competiveness Bargaining power of the buyersBargaining power of the buyers is high Theyarehavingotheroptionsfromdifferentcar brands Priceisamajorfactorforthemandthuscost competitiveness is important Value proposition for Tesla should be adaptable to market trends of Saudi Arabia Bargainingpowerofthe suppliers Bargaining power of the suppliers is moderate Tesla is having backward integration in their home operation but they have to source locally to price competitively, which will increase their bargaining power Material cost will influence the end pricing of the cars of Tesla Threat of new entrantsThreat of new entrant is moderate. New players will find it difficult in gaining the capital
6FOREIGN MARKET ANALYSIS and infrastructure to challenge Tesla However, the existing conventional car maker such as Toyota and Volkswagen can have electric cars in less time Conventional car makers are having more expertise compared to Tesla Threat of substitutesThreat of substitute is high Customers can have conventional vehicles over the electric ones Othermodesoftransportalsoposeindirect substitution challenge for Tesla Competitive rivalryCompetitive rivalry is high Market is limited Price wars are important for the gaining volumes. Identification of the risk sources One of the major risks for Tesla will be competition as increase in the competition will reduce their potentiality in the market. Moreover, the offering of more advanced products by the competitors will reduce the viability of Tesla. Economic risk is also relevant for Tesla due to the reason that emergence of economic slowdown in the country will reduce the market potentiality for Tesla and their return on investment will be affected10. Operational risks can also get emerged due to the lack of determination of the local cultural factors. For example, issues in the customer 10Born, Benjamin, and Johannes Pfeifer. "Policy risk and the business cycle."Journal of Monetary Economics68 (2014): 68-85.
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7FOREIGN MARKET ANALYSIS delivery process can get emerged. Country risks will also be faced by Tesla due to the reason that political turmoil and instability will reduce the chance of positive return on investments for Tesla. Hence, these are the major sources of risks that can get emerged from the operation of Tesla in Saudi Arabia. Pricing strategy The pricing strategy of Tesla will be premium as they are in the United States. This is due to the reason that Tesla will cater to the premium niche segment with low volume and high profitability approach. Moreover, the initiation of the premium pricing strategy will be in line to their global strategy. This should be noted that Tesla will not launch market specific products in Saudi Arabia rather the existing cars of them will be introduced. Hence, the same pricing strategy will be followed11. In addition, exporting strategy will be used as the market entry mode, which will involve addition of tax and tariffs. This will also increase the end price of the cars. Hence, it can be concluded that the premium pricing of Tesla will be complementing the premium and niche positioning of them. Promotional strategy Omni Channel promotional strategy will be initiated by Tesla in Saudi Arabia to involve the maximum available mediums in reaching out to the customers. Social media platforms such astwitterwillbeusedwiththeSaudiArabiaonlyverifiedaccount.Thiswillhelpto communicate directly with the target customers and gaining their feedback12. On the other hand, electronic media will be used to gain the maximum market reach in the country. 11Davcik, Nebojsa S., and Piyush Sharma. "Impact of product differentiation, marketing investments and brand equity on pricing strategies: A brand level investigation."European Journal of Marketing49.5/6 (2015): 760-781. 12Manser Payne, Elizabeth, James W. Peltier, and Victor A. Barger. "Omni-channel marketing, integrated marketing communications and consumer engagement: A research agenda."Journal of Research in Interactive Marketing11.2 (2017): 185-197.
8FOREIGN MARKET ANALYSIS Recommendations It is recommended that if the market scenario for Tesla is favorable and having long term viability, then they can have their assembly facilities in Saudi Arabia. This will enable them to import the completely knocked down (CKD) units with lower tax and tariffs and assembling them in the country. Thus, the end price will be more competitive with this strategy. The product and pricing strategy should be standardized but the promotional activities should adaptable to the local market. This will help to cater and target the local customers of Saudi Arabia. This will also ensure that Tesla is gaining enough market penetration in Saudi Arabia. It is also recommended that third party retailers should be outsourced about the retailing activities in Saudi Arabia. This will help to gain the extensive market reach in the country that Tesla not having currently. In addition, this will also help to regulate cost to be incurred in the retailing activities and average cost of operation can be reduced. Conclusion Thus it can be concluded that there are number of challenges as well as opportunities to be faced by Tesla in doing business in Saudi Arabia. In this report, the market environmental factors in the country are being identified and analyzed. It is also identified that the intensity of competition in the country will be more for Tesla. There are number of potential risks also identified from the perspective of Tesla. This report concludes that premium pricing and Omni Channel promotional strategy should be initiated by Tesla in Saudi Arabia. A few recommended
9FOREIGN MARKET ANALYSIS steps are also being discussed in this report that can further help them to gain competitiveness in the country.
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10FOREIGN MARKET ANALYSIS Reference Adgaba, Nuru, et al. "Socio-economic analysis of beekeeping and determinants of box hive technology adoption in the Kingdom of Saudi Arabia."J Anim Plant Sci24.6 (2014): 1876-1884. Alshehry, Atef Saad, and Mounir Belloumi. "Energy consumption, carbon dioxide emissions and economic growth: The case of Saudi Arabia."renewable and Sustainable energy reviews41 (2015): 237-247. Born, Benjamin, and Johannes Pfeifer. "Policy risk and the business cycle."Journal of Monetary Economics68 (2014): 68-85. Buchan, James. "Secular and religious opposition in Saudi Arabia."State, Society and Economy in Saudi Arabia (RLE Saudi Arabia). Routledge, 2015. 108-126. Davcik,NebojsaS.,andPiyushSharma."Impactofproductdifferentiation,marketing investments and brand equity on pricing strategies: A brand level investigation."European Journal of Marketing49.5/6 (2015): 760-781. Hardman, Scott, Eric Shiu, and Robert Steinberger-Wilckens. "Changing the fate of Fuel Cell Vehicles:CanlessonsbelearntfromTeslaMotors?."internationaljournalofhydrogen energy40.4 (2015): 1625-1638. Khan, Habib Ullah, Shafiq Ahmad, and Mali Abdollahian. "Supply chain technology acceptance, adoption, and possible challenges: A case study of service organizations of Saudi Arabia."2013 10th International Conference on Information Technology: New Generations. IEEE, 2013.
11FOREIGN MARKET ANALYSIS Manser Payne, Elizabeth, James W. Peltier, and Victor A. Barger. "Omni-channel marketing, integrated marketing communications and consumer engagement: A research agenda."Journal of Research in Interactive Marketing11.2 (2017): 185-197. Niblock, Tim, ed.State, Society and Economy in Saudi Arabia (RLE Saudi Arabia). Routledge, 2015. Stringham, Edward Peter, Jennifer Kelly Miller, and Jonathan R. Clark. "Overcoming barriers to entry in an established industry: Tesla Motors."California Management Review57.4 (2015): 85- 103. Thompson, Mark.Saudi Arabia and the path to political change: National dialogue and civil society. Vol. 159. IB Tauris, 2014. Wilson, Peter W., and Douglas F. Graham.Saudi Arabia: The Coming Storm: The Coming Storm. Routledge, 2016.