Market Analysis Report: Tesla's Potential in Malaysia and South Africa

This report assesses the viability of Tesla expanding its operations into Malaysia and South Africa, focusing on the potential of the Tesla Model 3 in these emerging markets. It delves into the external factors influencing business in both countries, including political, legal, economic, ethical, cultural, competitive, and technological aspects. The analysis reveals that Malaysia presents a more favorable environment for Tesla due to its greater market potential and lower political risks. The report further explores various market entry strategies, recommending a joint venture approach for Tesla in Malaysia. This strategy allows Tesla to leverage local expertise and navigate the complexities of the Malaysian market effectively. The report concludes with recommendations for Tesla to ensure successful foreign market operations, highlighting the importance of understanding and adapting to local conditions. Desklib offers a wealth of similar solved assignments and resources for students.

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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