Managing in Global Economy

The report discusses the external factors of Malaysia and South Africa and evaluates the countries based on those factors. It concludes that Malaysia will be the more favourable country over South Africa for Tesla. The report also discusses the market entry strategies and concludes that joint venture strategy will be most effective for Tesla in doing business in Malaysia.

Running Head: MANAGING IN GLOBAL ECONOMY
Managing in global economy
Name of the student
Name of the university
Author note

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MANAGING IN GLOBAL ECONOMY
Executive summary
The aim of this report is to discuss about the potentiality of Tesla in doing business in Malaysia
and South Africa. This report has considered a few factors in analysing the business
environments of both Malaysia and South Africa. It is identified that Malaysia is well ahead of
South Africa in majority of the factors. Thus, this report concludes that Tesla will have more
potential market in Malaysia than in South Africa. In addition, this report also discussed about
number of market entry strategies and concluded that joint venture strategy will be most effective
for Tesla in doing business in Malaysia.

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Table of Contents
Introduction......................................................................................................................................3
Determination of the external factors of Malaysia..........................................................................4
Determination of the external factors of South Africa....................................................................7
Evaluation of the country.................................................................................................................9
Market entry strategy.....................................................................................................................10
Direct exporting.........................................................................................................................10
Joint venture...............................................................................................................................11
Greenfield investment................................................................................................................13
Recommendation...........................................................................................................................15
Conclusion.....................................................................................................................................16
Reference.......................................................................................................................................17
Peer evaluation...............................................................................................................................20

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Introduction
In the current business scenario, entering in the foreign market is becoming more
important for the business organization. This is due to the fact that with the entrance of new
competitors, domestic market is becoming more saturated. Thus, business organizations are more
opting for foreign countries to enhance their market share beyond their domestic boundaries.
However, prior to the entry in foreign markets, it is important to identify the positive and
negative factors associated (Laufs & Schwens, 2014). Different countries are having different
external factors that will have influence on the business effectiveness of the organizations. On
the other hand, it should also be noted that different entry strategies are applicable in different
situations. Thus, it is important for the business organizations to determine the external factors of
the foreign countries and design their market entry strategies accordingly (Coeurderoy &
Murray, 2014).
In this report, Tesla Model 3 is selected as product and Malaysia and South Africa re
selected as the potential countries. Malaysia and South Africa are selected due to the reason that
both these countries are leading emerging economies in the world. Both these countries are
offering immense opportunities for the foreign business (Stringham, Miller & Clark, 2015). Both
these countries are witnessing steady electrification of transport systems. On the other hand Tesla
cars are now mainly available in the United States. Hence, they are also having the need for
market expansion and entering in the emerging countries will help them to increase their sales.
This report will discuss about the external business factors to be faced by Tesla in
operation in Malaysia and South Africa. Based on the analysis, one country will be selected. In

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accordance, market entry strategy of Tesla will be discussed. This report will conclude with a
few recommendations for Tesla to have effective foreign market operation.
Determination of the external factors of Malaysia
Political factors  The business friendly approach of the present Malaysian
government under the Barisan Nasional has paved a strong
business outlook for developing and investing in business in
Malaysia (TheGlobalEconomy.com, 2018).
 It can be argued that the policy of Tesla to manufacture eco-
friendly vehicle is also similar to the Malaysian government policy
towards environmental sustainability.
 As far as the political stability index of Malaysia is concerned it
can be argued that the political stability of the country is moderate
with a value of 0.1 in 2016 (weforum.org, 2018).
 Therefore, Tesla can get better opportunities in terms of political
stability in Malaysia.
Legal factors  In terms of the Legal elements that influence business in Malaysia
it can be argued that political accountability is high and corruption
is low in Malaysia that facilitates a transparent and better business
environment for Tesla.
 However, the Malaysia is having more complex and extensive
legal formalities that may cause issues for Tesla in their business
operation.

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 The legal proceedings in Malaysia is prolonged and based on a
strong basis therefore it is not possible for the business
organisation to continue illegal practices.
 Government effectiveness may not be effective in some areas and
in automobile sector, it will have more impact.
Economic factors  The leading Economic Index in Asia showed that Malaysia is
doing progress in its economic development. The economic
growth is slow but steady that will be an opportunity for Tesla to
establish its business in Malaysia.
 Exchange rate of Malaysia n currency against dollar is more than
MR. 4.13 against 1 dollar. Thus, the return on investment for Tesla
will get affected (TheGlobalEconomy.com, 2018).
 In case of inflation Malaysia experiences the lowest inflation rate
in 2018 with 0.2 percent that was reached 4.3 percent in 2017. This
proves to be a better economic opportunity for the Tesla.
 Due to the low inflation rate it will be beneficial for Tesla to invest
more in the Malaysian market.
Ethical factors  In the global Corruption Perception Index 2017 it can be argued
that Malaysia scores 10 in the Asia-Pacific region and 62nd in the
global ranking (transparency.org, 2018).
 This denotes the evidence of corruption in Malaysia business
scenario. Tesla will find it difficult in coping up with corruption in
operating in the Malaysia n market.

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 In terms of FDI confidence index, Malaysia is having the score of
1.65 that denotes that Malaysia is a country with moderate
confidence (TheGlobalEconomy.com, 2018).
 Risk of business for Tesla will get increased in Malaysia market.
Cultural factors  Malaysia is one of the steady developed countries in the world in
terms of economy and GDP. Thus, Tesla will have the more
market opportunities in targeting larger population (Huang &
Sarigollu, 2014).
 Customer awareness regarding the electric vehicles is increasing
that is another positive factor for Tesla.
 However, the higher class difference and power distance in
Malaysia will pose challenge for Tesla.
 According to the UNESCO report on Malaysian literacy rate, the
country enjoys 93.12% adult literacy rate and the female adult
literacy rate is also quite impressive and it reached 90.75% in 2010
(Unesco.org., 2018).
Competitive factors  Malaysia scored 5.17 out of 7 in the Global Competitiveness
Report 2017-2018 published by the World Economic Forum
(TheGlobalEconomy.com, 2018).
 This denotes that Tesla is will have low intensity of competition in
the market (Sgroi et al., 2014).
 Malaysia is in the primary stage of electrification of transport
systems. Thus, competition in this sector is also less for Tesla.

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Technological
factors
 In terms of the Global Technological Development Index 2017
Malaysia ranked 63 with a global score of 6.38 (itu.int, 2018).
 This will have moderate impacts on the sales of Tesla cars.
 However, Malaysia is having lower ranking in availability of latest
technologies (weforum.org, 2018). This is will pose challenge for
Tesla in getting access to new technologies.
Determination of the external factors of South Africa
Political factors  Political risk in South Arica is more compared to Malaysia and thus,
the risk of instability for Tesla will be more in South Africa.
 South Africa is having the ranking of 74 in terms of transparency in
policy making. Thus, Tesla will not have favourable political
environment in South Africa.
 Burden of government regulations states that South Africa is having
the ranking of 89. Tesla will have more impact.
Legal factors  South Africa is having the score of 56 in terms of property rights.
This denotes the moderate ranking that will cause Tesla to have
moderate legal environment.
 South Africa is having the score of 36 in judicial independence that
will provide favourable legal environment for Tesla (weforum.org,
2018).
 South Africa is having the ranking of 21 in strengths of investor

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protection. This shows that Tesla will be able to secure their
investments.
Economic factors  South Africa is growing at the rate of 3.5 percent currently. Thus,
Tesla will have increased market opportunities in South Africa.
 South Africa is having ranking of 31 in taxation rate. This will also
pose challenge for Tesla in pricing their products competitively.
 Higher rate tax rate is one of the major problematic factors in doing
business in South Africa.
Ethical factors  Corruption is identified as the most problematic factor in doing
business in South Africa.
 South Africa is having the ranking of 44 in Transparency
international. This denotes the moderate intensity of corruption.
 In terms of FDI confidence index, South Africa is having the ranking
of 1.7 that denotes that moderate intensity. Thus, Tesla will have
moderate impact on their business.
Cultural factors  South Africa’s population is much fewer than that of Malaysia. Thus,
opportunity will be less for Tesla.
 However, South Africa is having higher literacy rate of over 90
percent. This will have advantages for Tesla.
Competitive
factors
 South Africa is having the ranking of 44 in terms of intensity of local
competition (weforum.org, 2018). Thus, Tesla will face moderate
impact of competition.
 South Africa is also in the nascent stage of electrification of their

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transport mediums. Thus, competition will be less.
Technological
factors
 South Africa is having the ranking of 45 in terms of availability of
the latest technologies.
 They are having the ranking of 50 in terms of quality of roads that
will help in increasing demand for cars (weforum.org, 2018).
Evaluation of the country
It is recommended that Malaysia will be the more favourable country over South Africa.
This is due to reason that Malaysia is having more market potentiality than South Africa. In
addition, Malaysia is also having lower political risks compared to South Africa (De Villa,
Rajwani & Lawton, 2015). This will help Tesla to target more customer sections along with
having favourable business environment. It is also reported that government of Malaysia is
targeting to convert their conventional vehicles in electric within the next decade. Thus,
Malaysia n market poses huge opportunities for Tesla. Malaysia is also ahead of South Africa in
terms of government effectiveness and rule of law. Thus, Tesla will have more favourable
business environment in Malaysia.

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Market entry strategy
Direct exporting
Applies to
product/se
rvice
Politi
cal
Le
gal
Econo
my
Cult
ure
Competi
tion
Technol
ogy
To
tal
Adv 1
Local
knowle
dge
YesNo
because
popularity
of the
Malaysian
market
 x  x  x 3
Adv 2
Share
Costs
YesNo
because
high
competitiv
eness
   x x x 3
6
7
Unsustainable

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Disadv
. 1
Risk of
tech
control
going
to
partner
YesNo
because
first time
entry in
the
Malaysian
market
x x     4
Disadv
. 2
shared
Owner
ship-
conflict
YesNo
because
there is no
such issues
yet
x x   x  3
Direct exporting marketing strategy is resembled with the penetration in the market
through export services. Big companies try to develop a market orientation in the foreign market
with the help of entering into the market through export rather than establishing infrastructure in
that foreign country (Wei et al., 2914). In case of Tesla, this marketing strategy will be a
beneficial strategy for the company to capitalise the Malaysian market. However, there are
number of risks factors for the Malaysian market that can create obstacles for Tesla to choose
direct exporting strategy. For an example, Malaysia is a developing country with limited
purchasing power of the customers. The exporting of the Tesla Cars will lead to an increase in
the market price. The company wants to take over the Malaysian market more rigorously but the

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initial costs of the Tesla cars are accounted RM. 6,60,000 for the Tesla Model X and Tesla
Model Y at a rate of RM. 5,00,000. Further shipping cost will escalated the price to such a level
that it could be detrimental for the company to capitalise the market (Bai, Krishna& Ma, 2017).
Joint venture
Applies to
product/se
rvice
Politi
cal
Leg
al
Econ
omy
Cult
ure
Competi
tion
Technol
ogy
To
tal
Adv 1
Local
knowle
dge
YesNo
because
popularity
of the
Malaysian
market
   x  x 4
Adv 2
Share
Costs
YesNo
because
high
competitiv
eness
   x  x 4
8
Sustainable

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Disadv
. 1
Risk of
tech
control
going
to
partner
YesNo
because
first time
entry in
the
Malaysian
market
x x    x 3
Disadv
. 2
shared
Owner
ship-
conflict
YesNo
because
there is no
such issues
yet
0
The dynamics of the Malaysian market encapsulates a number of indigenous companies
to hold the market profoundly. In this context, Proton, Perodua and Honda Malaysia are the
leading indigenous car manufacturing companies. Joint venture is not a new phenomenon in
Malaysia rather this practice is prevalent in the Malaysian market extensively. For an instance
the collaboration between Honda and DRB-Hicom Bhd created an epic phenomenon in the
Malaysian market with enough success. Therefore, it will be an effective measure for Tesla to go
for the joint venture option. Moreover, the joint venture option is also considered as a risk
effective measure because the native company has a deep insight in the indigenous market (De
Villa, Rajwani& Lawton, 2015). Therefore, the foreign counterpart faces less resistance in the
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market. Furthermore, the knowledge sharing process is identified as a strategic measure for the
Tesla Company in order to maximise the market Capitalisation in Malaysia. In fact, the
Malaysian government also endorses such policy of technology exchange where the indigenous
company is able to develop its manufacturing process with the help of the advance technologies
provided by the foreign company. Cultural competency is also considered to be an important
aspect in this regard. It takes enough time for a foreign company to understand the purchasing
behaviour and the customer attitude of a new country (Meschi, Phan&Wassmer, 2015). Joint
venturing strategy will lead the Tesla to get a clear understanding of the market insights and
customer attitude due to the help form its Malaysian counterpart.
Greenfield investment
Applies to
product/se
rvice
Politi
cal
Leg
al
Econ
omy
Cult
ure
Competi
tion
Technol
ogy
To
tal
Adv 1
Local
knowle
dge
YesNo
because
popularity
of the
Malaysian
market
0
Adv 2
Share
Costs
YesNo
because
high
competitiv
eness
 x  x x  3
3
Unsustainable

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Disadv
. 1
Risk of
tech
control
going
to
partner
YesNo
because
first time
entry in
the
Malaysian
market
x x     4
Disadv
. 2
shared
Owner
ship-
conflict
YesNo
because
there is no
such issues
yet
x x   x  3
Greenfield involvement is related to the direct appearance in the new market. In other
words, it can be argued that that often the foreign companies enters a new overseas market by
investing directly for the development of infrastructure and manufacturing unit in the new
country (Anderson& Sutherland, 2015). This is known as a robust international business strategy
but the strategy will not be effective in a high competitive market. In case of the Malaysian
market, there are plenty of foreign car manufacturers like Toyota, Honda and Volvo that are
encapsulating the market predominantly. Moreover, the Honda Company recently introduced a
Greenfield strategy in 2009 after having enough experience of 24 years in the Malaysian market.
It proved that direct investment is not easy to implement in the Malaysian market due to its high
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competitiveness. It requires ample experience and profound knowledge and capitalisation of the
market. Therefore, besides costing huge expenses it will also be a negative impact for the Tesla
Company to encapsulate the Malaysian market with Greenfield entry strategy as a new entrant
(Stepanok, 2015).
Recommendation
In course of the above discussion, it can be identified that the joint venture strategy is
supposed to be the best possible option for Tesla in order to enter in the intensely competitive
Malaysian market. In this regard, there are some strategic advantages for Tesla by implementing
the joint venture in Malaysia. The recommendations are as follows,
 Joint venture paves the way for the organisations to get a healthy environment in the
newly entered market. In case of Tesla, the Malaysian market is comprised with many
international and domestic companies that possess high capability to give a strong
competition to Tesla. It can be obviously stated that the joint venture will reduce the
competitiveness because the domestic partner can share the extra burden of penetrating
the Malaysian market extensively and effectively.
 On the other hand, the initial expenses are also being reduced due to sharing the burden
of the costs in marketing, accounting, investment and infrastructure.
 Moreover, the Tesla Company will also get accompanied with the culture and customer
behaviour through the glance of the marketing analysis taken by the indigenous
counterpart. The legal constraints and opportunities are also included as an advantage.

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Conclusion
Thus it can be concluded that Malaysia and South Africa are having number of
potentialities for business organizations. In this report, it is identified that Malaysia is having
more market opportunities for Tesla compared to South Africa. It is also being identified that
joint venture will be the most effective market entry strategy for Tesla in doing business in
Malaysia. In this report, there are number of recommended steps are being discussed that can
further help Tesla in having effective business operation in the Malaysian market.

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Laufs, K., & Schwens, C. (2014). Foreign market entry mode choice of small and medium-sized
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Meschi, P. X., Phan, T. T., &Wassmer, U. (2016). Transactional and institutional alignment of
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Sgroi, F., Di Trapani, A. M., Testa, R., & Tudisca, S. (2014). Strategy to increase the farm
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transparency.org. (2018). Corruption Perceptions Index 2017. Retrieved from
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Peer evaluation
As a team member of the Tesla Company in Malaysia, my responsibility was to analyse
and evaluate the development with the Malaysian colleagues. In course of the analysis period, I
came to know about the culture and the perception of the Malaysian customers that is more
resembled with the price of the products rather than taking more concern about the holistic or
benevolent features of the product. Moreover, at first we had faced a series of difficulties with
our partner company because if having different culture. In course of time, we were able to
create a bonding based on understanding and trust. However, Tesla mainly focuses on innovation
whereas our Malaysian counterparts were interested to manufacture cars with affordable prices to
maximise the market.