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International Trade Assignment: Opportunities Of Tesla

Question

Task: Write international trade assignment for a national business on opportunities in international trade and how these can inform strategy and how risks can be mitigated.

Answer

Executive Summary
The concept of international trade examined in the present context of international trade assignment refers to trade of companies in foreign lands to explore demand and become more profitable, more productive and more innovative. With the help of internet and technology, companies enable mass customers to understand the product and its features, now it has become very much easy for companies irrespective of any size to make profit through international trade. A lot of research has been done in the past which has shown that there is a lot of scope of companies who trade internationally. Tesla's main goal is to produce affordable and high-quality electric vehicles by being a dominant in electric car industry. Since global warming is one of the great issues concerning the world climate. Tesla introduce electric car. It is considered to be a world's greatest innovation with a view of bringing electric cars into the market There is a lot of possibility that product will exceptionally grow in foreign market as compared to domestic market, that depends upon the size of market and the growth there to. Government support can be observed for environmentally friendly vehicles due to increase in concern about climate change. Transport and logistics services facilitate international trade and play an important role in the growth and development. To successfully trade in international market the most important factor is efficiency of logistics structure. The main problem Tesla is facing is having its own showrooms, galleries, service stations and charging stations. Maintaining everything and facilitates customers’ needs in foreign market require proper infrastructure and logistic structure. It enhances in Supply Chain Difficulties as not giving authority to any distributors only effect Tesla’s sales in international market.

As stated in this , every business organization has aim to earn profits. Through international trade companies go to foreign lands to explore demand and become more profitable, more productive and more innovative. In other words, International trade refers to trading of goods and services between the countries which can be Electronics, apparels, capital goods, food etc. With the help of internet that enables people to understand the product and its features, now it has become very much easy for companies irrespective of any size to make profit through international trade (R. Banga. 2014).

Main risks attached with international trade are logistics issues, Government policies, regulations and norms (including other country), tariffs and taxes imposed by other countries, Lack of warehouses, competition. With rapid Globalization of market, it has pulled apart all the hurdles in trading internationally.

In this report on we are discussing about opportunity of Tesla, Inc. a US based automobile company that has a core mission of transitioning the world to sustainable energy by having a vision of designing, manufacturing and selling electric vehicles in the international market. The objective of this report on is to analyze Tesla' goals, opportunities & strategies used in foreign market, risks involved and problems that should be solved.

A lot of research on has been done in the past which has shown that there is a lot of scope of companies who trade internationally. Tesla's main goal is to produce affordable and high-quality electric vehicles by being a dominant in electric car industry. This unique business model integrates many aspects as auto maker, tech advance company, growth in regulations on safety & vehicle emissions and most importantly sustainable environment which makes market for fully electric vehicles to expand majorly and is famous for its incredible & strategic vision. Tesla's electric car is a great innovations and Tesla is not afraid to face any obstacles others found impossible to execute and bring it to international market as there is no competition in the market at present.

With no competition in the market of electric vehicles and with lot of focus has already been given to climate control (Business Insider, 2018).

1.Opportunities- Tesla is an electric car company which is traded publicly. It is considered to be a world's greatest innovation with a view of bringing electric cars into the market.

Government support can be observed for environmentally friendly vehicles due to increase in concern about climate change. In this ther benefits involved are subsidies, tax breaks and incentive schemes provided by various other governments to bring Tesla to their country. For example- in countries like Malaysia and Hong Kong, zero-emission electric cars like Tesla are fully tax exempted.

The advantage to trade in foreign land is you may be able to make potential customers and bring good revenue from international platform. The 2016 FedEx Trade Index, survey has been conducted between 1004 businesses, that indicated those business who are trading in international market are growing faster than those who stay in domestic market. Further it may increase a scope in international market when there is no competition in the respective country which you may have in domestic market (ECD, 2013).

2. Strategies - Successful strategies of Tesla can be seen through stock that has been increased around 700 percent in the last 2.5 years to just under $213 a share at press time. The company possesses revenues of $1.24 billion and claims strong guidance for future deliveries.

The study developed within this illustrates that one of the strategies of Tesla is making customized cars to attract foreign customers with no distributors in between and having its own showroom and make direct sales to the clients. When companies go global it faces number of logistics challenges. Make effective plans, controlling the movement & managing the warehouses for storage of goods are few strategies that company must contemplate before initiate trading internationally ( Kamkaum.C.2018)

Transport and logistics services facilitate international trade and play an important role in the growth and development. Tesla to mitigate logistic issues will soon open a factory in China to avoid impact of international transport, duties and taxes.(CNBC,2018)

3. Possible Risks- To successfully trade in international market the most important factor is efficiency of logistics structure. Written by Paul Simpson, it’s an interesting account of how Supply Chain issues can stymie a company, even if that company and product have huge positive brand association. 

As per the research on , with only about 164 stores internationally, Tesla is far behind its main competitors. To satisfy customer requirements it needs to increase the number of charging stations and for that it needs to maintain proper coordination between countries. Further poor customs clearance process at the ports, inadequate transportation related infrastructure, delays in tracking and tracing consignments, can be proved as adequate barrier in international trade.

What are the possible outcomes in International Trade Market mentioned in this international trade assignment?
Global warming is one of the hottest eco issues concerning the world climate. There is a lot of possibility that product will exceptionally grow in foreign market as compared to domestic market, that depends upon the size of market and the growth there to. As there may be a chance that Tesla will be selling more cars in China as compare to U.S. because Chinese market is so huge and Chinese government is doing so much to support electric vehicles. China Government constantly motivating environmentally friendly measures therefore there is a lot of scope of Tesla in China market.

In countries like India, where there is huge population and no competition in Electric Vehicles product like Tesla can generate good revenue because of less competition. Moreover, it is clear on this that there is an advantage of trading in foreign land is, one can sell surplus stock or outdated technology in countries where there is no such product. With a competitive market in U.S., there is lot of technology coming daily; there is a less scope in Developed markets as compared to under developed market where technology may take certain time to develop. With going global with Tesla, it has greater scope in market where India as compared to U.S.

Unlike other auto makers who sell through franchised dealerships, Tesla motivates direct sales to the customers & operate service centre without any third-party interference. It has created company owned showrooms and galleries which is resulted in supply chain difficulties of Tesla to bring customized cars on road. The main reason of Tesla is having more logistics problems in international trade than other auto makers who simply sell to dealers. Logistics issues in Tesla trading electric vehicles in international market has created major financial blocks as customized vehicles will move from the factory until the scheduled delivery date and revenue will only be generated once the delivery made to customers. Delivering the vehicles faster to customers would only improve Tesla’s financials. Company's growth in international trade depends upon the efficiency of trade services that is proper logistics including factories and warehouses (Bae.S.H. 2017).

Actions to mitigate risks
The main problem Tesla is facing is having its own showrooms, galleries, service stations and charging stations. Maintaining everything and facilitates customers’ needs in foreign market require proper infrastructure and logistic structure. As discussed in this it is important to build a network of charging stations to solve one of the greatest issues in dealing with electric vehicles. For eliminating issues of having adequate number of charging stations and maintaining warehouse and meeting customers need in foreign market, it is important to have lots of acquisitions or Joint Ventures internationally. It is important to have rapid market entry, proper distribution system and instant customer access to gain revenues efficiently.

China being a huge market for Tesla it is important to mitigate all unnecessary taxes & duties which can be mitigated through opening factory over there. There is an import duty of about the 25 percent on U.S. cars to be sold in China versus a 2.5 percent duty on Chinese cars coming to the U.S. market. With a great deal of having a factory in Shanghai, this clause of paying pointless duties will get dismissed (Rapier.G.2020).

For improvement in trade it is essential that logistics issues are properly governed. Efficiency of trade logistics depends upon well designed government policies. As provided in this it is necessary to adopt those countries for international trade which are more flexible to accept foreign trade as compare to those who apply lot of restrictions in trading.

International trade is basically an economic transaction, which are made between countries. To survive in international market, it is important to bring compelling product which attracts client interests towards it. Bringing electric vehicle is actually bringing sustainable product in the market, which can be seen as the one of the great inventions or best business model to get into the international market.One of the advantages of international trade is if the domestic market is experiencing low in the economy then one has option to survive in some other market, which helps in becoming less dependent in single market. Another advantage of international trade outlined in this is company gets leverage of export financing. Government generally motivates businesses to explore foreign land in trading, for its government gives finances to motivate companies to generate revenue in foreign exchange.

Further, it is also noted in the that every company would want that the customer will get the product securely and it will be done in cost effective way in minimum time. That is why Tesla aims at having its own showrooms and service stations to provide customer satisfaction and in cost effective way as there is no third party as a distributor even in international market.

Recommendations
Policy recommendation to improve trade competitiveness based on Trade theories
Product life cycle theory- The studies considered in order to prepare this signifies that it is important to maintain a graph of product life in international market. It is necessary to understand the graph of product life cycle as it first develops then introduce then grow, then mature and then decline. To survive in international market company needs to compete on a daily basis with another better technology. In order to maintain the graph, it is important to take appropriate actions as it can give you a chance to specialize in different areas to serve the market.

First thing noted herein which Tesla should adopt is multiple distribution networks and indulges new warehouses and transportation options that can guarantee flexibility in achieving customer satisfaction.

With a view to reduce supply chain difficulties or logistics issues that Tesla is facing, Tesla must use data sharing process and demand planning across departments. Turn into Cloud based software for collecting of data and sharing of information to effectively identify and address and visible gaps. The policy to invest in logistics infrastructure and service or software can positively influence international trade ( ECD,2013).

Theory of mercantilism- It is important to make strategies successful, and to draw remarkable managerial implications. To grow in revenues is important but to grow revenue with national economy is also important. Increase in exports is essential but it is also to be taken care that import is managed. Tesla needs to export more to those countries form which imports are majorly done. So that export import can be managed in same currency.

As Tesla's main import of electronic parts are done from China, it is important to have a major export in that foreign exchange. Being exposed to outside domestic market, it is important to have regular innovations, upgrades and increase in the efficiency of product so that the company will be able to survive in the competitive market as there is always a risk of copy the idea of the product.

Absolute advantage - With a view to meet climate change strategies, now everyone is aware of transitions in sustainable environment. Being Tesla is the first innovation in electric cars it has market reputation of its own and has loyal customers as well. To maintain the competition which will prevail eventually in electric vehicles, it is important that Tesla must meet the foreign requirements of have adequate service stations and adequate charging stations. With a standard of maintaining customized product it is further required to have sufficient factories in foreign land. It is recommended in the that Tesla must hire any organization in respective foreign land as a distributor so that customer needs can be fulfilled, and services can be provided easily.

References
Arvis J.F,Mustra.M,Ojala.J,Shapgerd.B and Saslavsky.D.(2012).Connecting to Compete 2018. Trade Logistics in the Global Economy.20-63

B.A. Blonigen, W.W. Wilson. (2013). The growth and pattern of international trade. Maritime Policy and Management, 40 (7), 618-635

Bae.S.G and Park.J.D.(2018) Gaps in Performance between the Levels of Inter-corporate Relationships in Port Logistics Processes. The Asian Journal of Shipping and Logistics.Vol-34(3)209-217.

Bae.S.H.(2017). Empirical Relationships of Perceived Environmental Uncertainty, Supply Chain Collaboration and Operational Performance: Analyses of Direct, Indirect and Total Effects.Asian Journal Of shippind and logistics.Vol33(4)263-272.

Benoit.C.(2020). China must increase imports of US-made cars, Tesla Likely key beneficiary. Retrieved From. https://electrek.co/2020/01/23/china-must-increase-imports-of-us-made-cars-tesla-likely-key-beneficiary/

Business Insider (2018). Tesla isn't facing a wave of competition because there isn't any competition in the electric car market. Retrieved From. https://www.businessinsider.in/stock-market/tesla-isnt-facing-a-wave-of-competition-because-there-isnt-any-competition-in-the-electric-car-market/articleshow/65734526.cms

CNBC (2018).Tesla and China Trade War. Retrieved From https://www.cnbc.com/2018/04/04/tesla-and-china-trade-war-elon-musk-has-tough-tariff-riddle-to-solve.html

ECD. (2013). “Trade facilitation indicators: the potential impact of trade facilitation on developing countries trade”, Trade Policy Paper (55-83).

Gani.A.(2017). The logistics Performance Effects in International Trade. The Asian Journal of shipping and Logistics.Vol33(4), 279-288

HAUSMAN, W. H., LEE, H. L, and SUBRAMANIAM, U. (2012). “The impact of logistics performance on trade”, Production and Operations Management, Vol. 22, pp. 236-252.

https://www.researchgate.net/publication/322750674_TESLA_International_Business_Strategies

Kamkaum. C. (2018) Tesla Internation Businees Strategies. ResearchGate. Retrieved From. https://www.researchgate.net/publication/322750674_TESLA_International_Business_Strategies

Kumparak. G, Escher. A & Matt. B.(2015).A Brief History of Tesla.TechCrunch, Retreived from https://techcrunch.com/gallery/a-brief-history-of-tesla/

Banga. (2014). Linking into global value chains is not sufficient: do you export domestic value-added contents? Journal of Economic Integration, 29, pp. 267-297

Rapier.G.(2020). Elon musk says Tesla will export cars from his new China Factory and that could help it avoid further trade war pain. Business Insider.Retrieved From https://www.businessinsider.in/finance/news/elon-musk-says-tesla-will-export-cars-from-its-new-china-factory-and-that-could-help-it-avoid-further-trade-war-pain/articleshow/73142501.cms

Wieder.C.(2018).Logistics Infrastructure along the belt and road initiative economies.World Bank Group.Retreived from http://documents.worldbank.org/curated/en/259561545148936579/pdf/133058-MTI-Practice-Note-5-Final.pdf

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