Foreign Market Analysis: Tesla's Business Strategy in Saudi Arabia

This report conducts a foreign market analysis for Tesla, focusing on the potential for expansion into Saudi Arabia. It begins with an introduction outlining Tesla's global expansion goals and the relevance of the Saudi Arabian market. The report delves into the determination of external business factors, including political, economic, social, technological, environmental, and legal aspects, providing insights into the opportunities and challenges Tesla may face. It assesses the industry competitiveness, analyzing the bargaining power of buyers and suppliers, the threat of new entrants and substitutes, and competitive rivalry. Key risk sources are identified, encompassing competition, economic downturns, operational issues, and country-specific risks. The report further examines Tesla's proposed pricing and promotional strategies, advocating for a premium pricing approach and an omni-channel promotional strategy. Finally, it offers recommendations, such as establishing assembly facilities and adapting promotional activities to the local market, concluding with a summary of key findings and strategic considerations for Tesla's successful entry into the Saudi Arabian market.

Running head: FOREIGN MARKET ANALYSIS
Foreign market analysis
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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 factors  Tesla 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
1 Stringham, Edward Peter, Jennifer Kelly Miller, and Jonathan R. Clark. "Overcoming barriers to entry in an
established industry: Tesla Motors." California Management Review 57.4 (2015): 85-103.
2 Hardman, 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 energy 40.4 (2015): 1625-1638.
3 Wilson, 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 factors  In 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.
 The tax incentives offered by the government for electric
mobility will also ensure that customer attractiveness for Tesla
will be more.
Social factors  Preferences for the electric cars are gaining traction in Saudi
Arabia also as in global market. This is posing more
opportunities for Tesla5.
 Average social preferences for extravagant products in Saudi
4 Buchan, James. "Secular and religious opposition in Saudi Arabia." State, Society and Economy in Saudi Arabia
(RLE Saudi Arabia). Routledge, 2015. 108-126.
5 Niblock, Tim, ed. State, Society and Economy in Saudi Arabia (RLE Saudi Arabia). Routledge, 2015.

4FOREIGN MARKET ANALYSIS
Arabia will also drive the sales for Tesla.
 However, social conservations regarding the car driving norms
may affect Tesla in targeting both the female and male
customers6.
Technological factors  Saudi Arabia is steadily become accessible towards latest
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 factors  Tesla will be most benefited from the environmental
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 factors  Saudi Arabia having a few stringent laws due to their
monarchical structure and conservative approach. This can pose
6 Thompson, Mark. Saudi Arabia and the path to political change: National dialogue and civil society. Vol. 159. IB
Tauris, 2014.
7 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.
8 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.
9 Alshehry, Atef Saad, and Mounir Belloumi. "Energy consumption, carbon dioxide emissions and economic
growth: The case of Saudi Arabia." renewable and Sustainable energy reviews 41 (2015): 237-247.

5FOREIGN MARKET ANALYSIS
challenge for Tesla in maintaining their global practices in the
country.
 However, Saudi Arabia is also having lower intensity of
bureaucracy, which will help Tesla in doing their business in the
country.
Determination of the industry competiveness
Bargaining power of the buyers  Bargaining power of the buyers is high
 They are having other options from different car
brands
 Price is a major factor for them and thus cost
competitiveness is important
 Value proposition for Tesla should be adaptable to
market trends of Saudi Arabia
Bargaining power of the
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 entrants  Threat 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 substitutes  Threat of substitute is high
 Customers can have conventional vehicles over the
electric ones
 Other modes of transport also pose indirect
substitution challenge for Tesla
Competitive rivalry  Competitive 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
10 Born, Benjamin, and Johannes Pfeifer. "Policy risk and the business cycle." Journal of Monetary Economics 68
(2014): 68-85.

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
as twitter will be used with the Saudi Arabia only verified account. This will help to
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.
11 Davcik, Nebojsa S., and Piyush Sharma. "Impact of product differentiation, marketing investments and brand
equity on pricing strategies: A brand level investigation." European Journal of Marketing 49.5/6 (2015): 760-781.
12 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 Marketing 11.2
(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.

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 reviews 41
(2015): 237-247.
Born, Benjamin, and Johannes Pfeifer. "Policy risk and the business cycle." Journal of Monetary
Economics 68 (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, Nebojsa S., and Piyush Sharma. "Impact of product differentiation, marketing
investments and brand equity on pricing strategies: A brand level investigation." European
Journal of Marketing 49.5/6 (2015): 760-781.
Hardman, 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
energy 40.4 (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 Marketing 11.2 (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 Review 57.4 (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.