Introduction
After the successful sale of Tesla Model S in the US, Europe, Asia and other parts of the world, it is the right time for the company to consider the emerging markets, especially in Asia. In particular, Indonesia seems to be the right target for the company. This paper seeks to persuade the company to consider the Indonesian market as the right target due to its favorite business environment defined by a growing economy, a relatively large population and a growing population of the people in the middle-income category. In addition, Indonesia does not have electric cars, which means that Tesla Motors will enjoy a competition-free market once established in the country.
The company
Tesla Motors has been designing, manufacturing and selling electric cars and powertrains and their components since its incorporation in 2003. With the sale of Roadster models in more than 31 nations in the world, the company achieved a huge benefit in terms of increased sales and corporate performance. In addition, the sale of the Roadster Model in the global market contributed to the expansion of the company in all aspects.
Before taking the model to Europe and Asia in 2012, the company had an annual sale of less than 10,000 and only 3,000 employees. However, by January 2014, the sale of the product in the foreign nations had contributed to the expansion of the company in terms of sales and size, achieving more than 30,000 sales per annum and over 6,000 employees. Thus, this is the right time to use Tesla Model S to expand the company in terms of sale, size and profitability.
The product
Initiated in 2008, Model S has been successfully sold in Europe, Australia, Hong Kong, China, Japan and North America. The model has two battery pack options for more than 420 km per charge, giving customers the opportunity to enjoy using the car for a long distance without recharging. Among other achievements, Model S has won the Motor trend Car of the year 2013 and the World Green Car 2013, which recognizes the model’s ability to transform the motor vehicle industry, especially in “going green”.
In addition, the 60D, 85D and P85D motor wheel drives that were released in October 2014 adds to the increasing advantages of the model to the consumers. These variants are set to meet the customer demands in terms of the car speed, efficiency and long life of the battery before recharging. Therefore, the model is set to increase its global sales once introduced in the middle-income nations like Indonesia.
The board of directors (audience)
This presentation seeks to address the board of directors at tesla Motors Inc. Established in 2003, the board of directors is the top executive body at Tesla Motors Inc. The board comprises of the CEO (Elon Musk), the Chief technical Officer, the chief designer, the chief information officer and the vice presidents in charge of world sales and service, manufacturing, business development, human resources and supply chain.
Overall, the team is a dedicated organ that has steered the growth and expansion of the company in all aspects, including the size, number of sales, market size and financial performance. As such, it is expected that the team will listen to this proposal, debate and adopt the idea in order to take the advantage of the unexplored Indonesian market before other companies decide to take their electric powered motor vehicles to the country.
Indonesia as a potential market for Tesla Model S
Economic factors
Indonesia has an estimated population of more than 250 million, which makes it the fourth most populous nation in the modern world. With a total GDP and GDP per capita exceeding $850 billion and $3,400 respectively, the economy of Indonesia is the 17th largest in the world (Ricklefs, 2013). In 2014, the work bank reported that the country’s economy had expanded significantly, reaching a GDP of more than $1 trillion and reducing its debt ratio to less than 26% (Ricklefs, 2013). By nominal GDP (based on PPP), the country is the 10th largest economy in the world. In addition, it contributes to more than 2% of the global economic output (Ricklefs, 2013).
Since 1970s, the economy of Indonesia has expanded significantly. Indonesia has the largest economy in the Southeast Asian region (Friend, 2013). In addition, it is a member of the G-20, making it a strategic market for major global corporations. Over 46% of the country’s economy comes from the industrial sector, making it a rapidly developing nation due to the reduction of overreliance of the agricultural sector (Ricklefs, 2013). The service industry employs more people than any other industry, accounting for more than 48% of the total labor force (Ricklefs, 2013).
The world trade organization reports that Indonesia is the 26th largest country in terms of exports (Thee, 2013). The main export markets include Japan, Singapore, the US, China and European Union. On the other hand, the country is a major market for a number of nations, especially China, Japan, Singapore, the United States, Australia and the EU.
Political and social factors
One of the major factors contributing to the rapid development of the Indonesian economy and market is the adoption of a democratic form of government. Since the end of the Surhato regime in 1998, the country has witnessed major economic and political reforms. The 1945 constitution has been reviewed several times. Currently, the new system allows the citizens to elect the president and the vice president for a five-year term (Ricklefs, 2013).
The president can only serve for two terms according to the national constitution. In addition to other factors, the political aspects of the country have improved the economic performance of the country. In particular, the Indonesian middle-income population has expanded since 2000 v. The revamped political system has also allowed the population to enjoy the income gained from the oil industry, which had previously been politically manipulated to benefit a few individuals.
In the modern system, the income gained from such industries as the oil and tourism sectors has contributed to the growth and expansion of the idle income population. The education sector has also improved over the last three decades. The country has a mandatory 12-year education system. Both private and public schools serve the population (Ricklefs, 2013).
Cultural factors (Hofstede’s cultural dimensions)
Viewed from Hofstede’s dimensions of culture, Indonesia is a relatively good environment for international business. Indonesia’s power distance is about 78, making third in the world. In addition, the country has Confucian dynamism of 61, individualism collectivism of 14, uncertainty avoidance of 48 and masculinity of about 46 (Ricklefs, 2013). Therefore, the culture allows the population to appreciate foreigners and foreign-made products.
The automobile Industry in Indonesia
The automobile industry is rapidly becoming a major sector in the country’s economy. The country has become a major market for global automobile corporations that seek to take the advantage of the large population, a growing economy and lack of competitive local manufacturers of automobiles. Between 2010 and 2013, the sale of domestic cars increased by more than 50%, hitting a record 1.12 million units (Ricklefs, 2013). More than 780,000 passenger cars are sold in the country every year (Global Business Guide 2014). In addition, more than 1.3 million cars are sold in Indonesia every year (Ricklefs, 2013).
The key factor contributing to the rapid consumption of these products is the reduction of the key inters rate set by the bank of Indonesia. In addition, an easy availability of credit for assets and cars has expanded the volume of sale of motor vehicles per annum. The minimum payment on loads from multi-finance companies and financial banks has been raised significantly. Currently, car buyers need to pay at least 30% of the total price, making it one of the best for cars in the region as well as the world (Global Business Guide 2014).
Although General Motors had shut its local manufacturing plants in 2005, it re-entered the market in 2013 after reopening its plant in West Java, where Chevrolet Spin models are made (Global Business Guide 2014). Toyota is the largest marketer of motor vehicles in the country, recording more than 160,000 sales per annum (Global Business Guide 2014). Other competitors include Suzuki, KIA, Ford, Mitsubishi, Honda and Nissan.
Conclusion
Despite the huge economic potential, Indonesia does not have any competitor in the electric motor vehicles. In fact, the major corporations making this category of vehicles have not shown an intention to enter the market. Most companies target China, Japan and South Korea as their major markets in the region, ignoring the market potential in Indonesia. As such, Tesla will take this advantage and develop a strong presence and a competitive advantage before the entry of competitors.
References
Friend, T. (2013). Indonesian Destinies. Cambridge, MA: Harvard University Press..
Global Business Guide. (2014). Indonesia’s Automotive Industry. Web.
Ricklefs, M. C. (2011). A History of Modern Indonesia since c.1300. London: MacMillan.
Thee, K. (2013). Indonesia’s Economy Since Independence. Jakarta: ISEAS.