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Thivasini A/P Ganesan 960830235086 Date: 27/10/2019

Tutor Marked Assignment (TMA)

Semester/Year 2019
Student’s Name THIVASINI GANESAN
Student’s ID No: 071170017
Course Code BMG306/05
Course Title Introduction to International Business
Class Code 7IIB1
TMA No: 2
No. of pages of this 11
TMA (including this page)
Tutor NG SIAW CHEEN
Course Coordinator KAJARI A/P B.SHANKAR
T-DF TMA Declaration Form (version #002/2017)
Question 1
a)

Tesla is a first mover of electric car manufacturing company. They are the pioneer in the market has

involved in the electric vehicles sector since it was founded. Tesla electric vehicles manufacturing involved

very advanced technology compare to other automobile companies such as Jaguar, Volkswagen, Nissan and

many. This type of company is based on internet thinking where company workers have gained valued

experience to build electric vehicles and understand in details. To be first over in business as in chess can make

or break a company. In 2008 tesla develop first premium electric car rated Model S and become the best car in

its class in every category (about tesla: Tesla, 2019). Now Tesla looking to leverage that success into a board

portfolio of automotive and battery products.

If tesla maintain first mover advantage in the electric vehicle market it requires technological leadership.

The first mover tends to have the high technology skills in the market because they need to innovate and add

more value to their companies. So, later entrants will spend more money on the technology development. In

addition, the first mover can apply the patents for their innovation and technology. Tesla produce model S and

model X with technology and does not rely for fossil fuel vehicles. The vehicles improved in term of weight,

battery performance and software applicable. This type of technologies is difficult to other companies to enter

the electric vehicle field to build good electric vehicle. Tesla only continue to improve the technology based on

real world data. As first mover Tesla can produce their product as the industry standard, make it more difficult

for follower to gain customer acceptance.

Moreover, to maintain as first mover advantage Tesla should have strong capital to invest. They have to

Increase switching costs because the first mover will enjoy the benefits that come from customer switching

costs because it will be inevitable for customers to change their shopping habits. So, the first mover can gain an

advantage with the increasing switching costs. Since Tesla electronic charging vehicle the company need to

spend money to build charging system. The resources and component should be prepare for everyone who

owns tesla electric vehicle car. To develop their product tesla need to continuing spend a particular cost.
 Furthermore, tesla company goal is to offer customers a higjly intergrated ecosystem installing solar

roof and solar panels, installing power walls serving as batteries to store the energy that generated by solar roof

and panels. At the moment there none of other automobile company intend to offer similar ecosystem. This is

the advantage to maintain as pioneer in the market.

In additional, to maintain as first mover tesla must have solid and strong management team to drive

them to accomplish their goals. Tesla business principles focus on sustainability. Elon Musk is thee CEO and

mojor investor who become most influcer in the globe had nonstop success, appearances on talks and

conferences. Those charismatic personality and leadership aided him to recognizable public image and build

strong management. This is extra key point asset for Tesla in the long run.

b)

There are few advantage for conventional manufacturer of automobile have advantage over Tesla

because it’s hard for customers to accept new innovation products because they do not make sure it works or

not. After all, no one is willing to take the risk of trying something new first. So, unfamiliar of customer is

difficult might find difficult to use. Tesla being pioneer electrical automobile it have to heavily persuade

customer to try new product. Even though some companies were not first mover in their respective markets but

they now grown become some of biggest companies in the world such as Google, Starbucks and Southwest

airlines. Generally, people don’t trust or understand a product that never proven to work. In order to attract

customer Tesla have target their audience in term of why customer should want, what problem it solve and how

they should it. Sometimes customer markets are limited where the acceptance level will be less.

Moreover, investment in removal of friction is tricky. Tesla has invest in creating support infrastructural

of charging points for a world of electric cars. The firm create infrastructure that is well controlled and can be

subsequently owned and licensed. Removal of frictions is often at odds with any form of control.

Tesla facing aggressive competition both conventional vehicles and self-driving technology. Many

automotive brands in luxury segment such as BMW, Mercedes, Lexus, Audi and economy segments like

Toyota, Volvo, Ford getting heavy competition. Many automobiles launching their environment friendly, self-

driving technology and offering them at a comparably lower price. Even though pricing is an advantage for
other automobile it is threat doe Tesla which thrives on its unique value for innovative car which expensive and

unavoidable to many.
c)

Now the world driving towards future, in past century automobiles companies depends on petrol or

diesel to drive. According to McKinsey, 2020s will be decade of electric car getting high demand because with

all good advance technology there changing of customer taste. It’s something like smartphones in the past

decade, colour TVs in the 1970’s, or even gasoline cars in the early 20th century.

Petroleum companies that support the conventional automobile industry be affected in the near future and to

remain viable the companies need to need more charging points. On September 2018, According to Zarina

Zakariah about 3,000 charging stations for electric vehicles (EVs) will be set up by the end of next year

nationwide to cater for the rising interest in EVs. In Europe, 79% of the public charging station is operated by

utilities and oil companies.

Moreover, petroleum companies can add service centre for electric vehicle. For example, Royal Dutch Shell’s

purchase of Greenlots, a start-up offering software and services for electric vehicle charging network. As per

British Dutch Greenlot technology which combines software to optimize battery charging and grid balance

services in on charging platform to build the foundation of its electric vehicle in North America. According to

BNEF, the company expenses about $1 billion a years and including the acquisition of 30,000 charging stations

in Western Europe as well as $31 million investment into electric charging set up ample in 2018.

Furthermore, petroleum companies can offer G2mobility, which offers electric vehicles to have renewable

energy, power trading, energy storage, retail electricity sales or electric vehicle charging. On 2018, France close

a deal for G2mobility for $1.7 billion for direct energy making it a major electricity retailer in the country. Even

at Europe’s biggest oil firms now offerings storage, retail electricity, grid management and power trading. This

method will help every petroleum companies for survive in the sector.

In other hand, petroleum companies form partnership and pooling knowledge on look into existing driving

patterns to find the places most need recharging stations. This method is followed by California and they called

as Fuel Cell Partnership. Through the state’s Air resources board they team up and share information that

amounts to their consumers of what type’s people would buy fuel cell vehicles. This type of collaboration is

proven very useful at the national level.

Lastly, petroleum companies do not liaise with one product meanwhile they have to boost on their research and

development. This is biggest obstacles to develop technology due to high cost. When technology improves and

manufacturer grow to the point where they can achieve economies of scale, those prices tend to drop. Electric

vehicles requires batteries and there are several types of connection them working it. Petroleum companies can

develop several types of electric charging points according to vehicle types.

Question 2
a)

The first reason investor use the foreign exchange market is to currency conversion. Investors,

companies and government want to be able to convert the money to another currency. If Malaysia company

sells a large numbers of bags to a customer in Australia. The Australia customer will pay dollars through bank.

The bank will do exchange curries for them because Malaysia selling price based on ringgit not dollars. Every

companies should convert to local currencies when they undertake foreign direct investment. A company

purpose for wanting to convert currencies is to pay or receive money for goods or services.

Second reason is currency hedging where the foreign exchange risk involves on increase or decreasing

amount direction than anticipated. It refers to the technique of protecting against the potential losses that result

from adverse changes in the exchange rate. For example, a retail store in Singapore imports or buys computers

from Malaysia. The Singapore firm has ninety days to pay Malaysia firm. To protect itself the Singapore firm

enter into a contract with its bank to exchange the payment in ninety days at the agreed on exchange rate. This

way Malaysia firm is clear about the amount to pay and protects itself from a sudden depreciation of the dollars.

If the dollar depreciation, new dollar will be required to purchase the same ringgits, the deal will more

expensive. So by hedging the company locks the rate. This way will lessen the risk of international transfer and

reduce the exposure in transaction where a time lag exists between billing and receipt of payment.

Third reason is currency arbitrage where immediately and instantaneous sale and purchase of a currency

for a profit. Interest arbitrage is the profit motivated purchase and sale of interest paying securities denominated

in different currencies. The companies use advance technology system to capture higher interest rates aboard in

government treasury bills, government bonds, corporate and bank deposits.

Last reason is currency speculation refers the purchase or sale of a currency within its expectation value

will change the result in a profit. The shift in value might be expected to occur suddenly or over a longer

period. Foreign exchange trader may bet that a currency’s price will raise or falls in the future. It is risk than

arbitrage due to the value or price of curries is volatile and is affected by many factors. Currency speculation

practiced by foreign exchange specialist’s rather than the mangers of firms engaged in other actions.

b)
 The World Bank’s main function is to encourage global economic growth by providing low interest,

long-term loans to developing countries for major projects. Neither of these institutions normally support

economic growth in developed countries. According to Andra Picincu (January 22, 2019), world bank founded

in 1944, where the bank works with international institutions, region banks and national governments to reduce

deficiency. This organization covers global sectors from finance, education till climate change. World Bank

helped people in more than 100 developing countries. The World Bank initially tasked with rebuilding the

economies of Europe. Today the bank maintains more than 2600 projects.

The role of World Bank is to develop a countries’ economic growth to achieve sustainable development.

They supporting long term economic develop a country through policy advice, research and analysis and

technical assistance. The World Bank will identify the failures in international markets and end poverty. It

granting loans zero interest credit and low interest loans or investments with advice and training. This helps to

promote foreign investments and capital flow cross countries and to foster international trade. World Bank

assistance usually will be long term and it funded by both member country contributions and through bond

allocation (The IMF and the World Bank 2019, February 25).

Moreover, World bank supporting for a country finance reconstruction and development of territories of

members by facilitating the investment of capital for productive purposes, including the restoration of

economies destroyed or disrupted by war, the re-conversion of productive facilities to peacetime needs and the

encouragement of the development of productive facilities and resources in less developed countries. It to

promote economic and social progress in developing countries by helping raise productivity so that their people

may live a better and fuller life.

Apart from that, World Bank role is to improve competitiveness and increase exports. The policies as a

donor have help improve the ability of some countries to secure global revenues for basics commodities. For

example, at Rwanda reforms transformed the country’s coffee industry and increased exports. Kenya has

expanded its exports of cut flowers, and Uganda has improved its fish-processing industry. World Bank efforts

have also helped African financial companies develop.

 Furthermore, World Bank improving efficiency in diverse industries and leveraging the private sector.

The World Bank has worked closely with businesses in the private sector to develop local infrastructure,

including power, transportation, telecommunications, health care, and education. In Afghanistan, for example,

small dams are built and maintained by the locals themselves to support small industries processing local

produce. Even over 30yeards, World Bank engaged with Malaysia decreased high poverty rates and reduce

income inequalities. This purpose is to attain high income status by 202 while ensuring that growth is

sustainable. They were engaged with government and private sector in policy reform such as digital economy,

digital adoption, connectivity, entrepreneurship and taxing the digital economy.

The World Bank role as in Malaysia has acted as global and regional convener on economics and

development topics. Convened 50 government officials from 8 South East Asian countries for a technical

workshop for the Planning Community of Practice in national economic planning.  The workshop focused on

Operationalizing Planning. Supported ASEAN Capital Markets Framework by promoting the ASEAN green

bonds standard and issuance; and building the pipeline for green and sustainable finance in Malaysia and the

regions organized various platforms for policy makers to deploy Waif model to address developmental

challenges and discuss Islamic Finance solutions to support Sags.

Lastly, World Bank role providing stabilizing assistance. According to MR Alzetta(n.d), spotlighted the

bank in battle afflicted countries. It support international efforts to assist war ravaged populations, resume

peaceful development and protect relapse into violence.

According to Saylor’s (n.d), on 1939 there was great depression, worldwide where the world economic

downturn. The great depression caused drastic decline in output, increased of unemployment rate and acute

deflation in almost every country of the world. On 1944 International Monetary Fund (IMF) was established to

eensure exchange rate stability and encourage its member countries to eliminate the exchange restriction that

hindered trade. This system based on US dollar. IMF is a cooperative institution to maintain systematical

payments and receipts between nations.

c)

According to Saylor’s (n.d), role of IMF is to promote international monetary through a permanent

institution which provides the machinery for consultation and collaboration on international monetary

problems. It also make smooth international trade, promote employment and sustainable economic growth and

helps to decrease global poverty (The IMF at a Glance 2019, March 22).

Second role according to Article I of IMF to facilitate expansion and balanced growth of international

trade to the promotion and maintenance high levels of employment and real income and to the development of

the productive resources of all members as primary objectives of economic policy. IMF helps to utilize natural

resources and to into productive channel.

According to Saylors, IMF key roles is to promote exchange stability orderly exchange arrangements

among member, and avoid competitive exchange depreciation. Exchange rate is a two way street where the

value to avoid competitive exchange depreciation. (Money Matters, an IMF Exhibit -- The Importance of

Global Cooperation, Introduction to the IMF, n, d).

Moreover, IMF key role is to support in the formation of a multilateral system of payments. This system

is current transaction between members and in the exclusion of foreign exchange restriction which hamper the

progress of world trade. This will help to reduce debts burden of the low income countries to achieve their

country development goals.

Apart from that, IMF key role is to give confidence to members by making the IMF’s general resources

temporarily available to them under sufficient safeguards. Therefore, providing them with opportunity to

correct faulty adjustment in their balance of payments. This will give confidence among the member countries

by coming up their protect from any crisis by providing temporary monetary help.

On the other hand, IMF role to shorten the duration and lessen the degree of disequilibrium in the

international balances of payments of members countries. Growth of international trade is useful to promote

international trade by removing barriers and maintaining equilibrium in the balance of payment.

In addition, IMF was charged with conducting surveillance according to Articles of Agreement in 1978.

Surveillance function is the primary responsibility for overseeing the international monetary system and the
policies of its members. This include bilateral surveillance, which is the regular monitoring and peer revive by

other members of economic and financial developments and policies in every countries.

IMF have leading functions to address the specific circumstance of diverse membership. OMF known as

financial institution that provides resources to member countries experiencing temporary balance of payments

issues. Growth of international trade is useful to promote international trade by removing barriers and

maintaining equilibrium in the balance of payment.

IMF provides technical assistance and training to help member countries to create better economic and

strengthen human capacities. They proving loan to the member countries is a core responsibility of IMF. The

capacity development include designing and implementing policies for taxation and exchange rate.

To sum up, IMF not only concerned on economic problem of individual member countries, it also

working with international monetary system as a whole.

Reference

The IMF and the World Bank. (2019, February 25). Retrieved from
https://www.imf.org/en/About/Factsheets/Sheets/2016/07/27/15/31/IMF-World-Bank.

Wade, L. (2018, January 10). Tesla's Electric Cars Aren't as Green as You Might Think. Retrieved from
https://www.wired.com/2016/03/teslas-electric-cars-might-not-green-think/.

(n.d.). Retrieved from https://www.bloomberg.com/features/2016-ev-oil-crisis/.

Pattidomm. (2018, March 2). Electric vehicles: The little industry that could take a bite out of oil demand.
Retrieved from https://www.cnbc.com/2018/02/28/soon-electric-vehicles-could-cause-an-oil-crisis-.html.

[]. (n.d.). 4 Ways Government Can Support the Transition to Alternative Fuel Vehicles. Retrieved from
https://www.govtech.com/fs/4-Ways-Government-Can-Support-the-Transition-to-Alternative-Fuel-
Vehicles.html.

Coren, M. J. (2019, February 7). Oil companies and utilities are buying up all the electric car charging startups.
Retrieved from https://qz.com/1542499/oil-companies-and-utilities-are-buying-up-all-the-electric-car-charging-
startups/.

Conference notes IRRI-KIIB. (n.d.). Retrieved from

http://www.egmontinstitute.be/content/uploads/2014/01/The-role-of-the-World-Bank-in-global-
development.htm.

IMF and the World Trade Organization. (2019, March 18). Retrieved from
https://www.imf.org/en/About/Factsheets/The-IMF-and-the-World-Trade-Organization.

FIRST-MOVER ADVANTAGE. (n.d.). Retrieved from

https://www.referenceforbusiness.com/management/Ex-Gov/First-Mover-Advantage.html#ixzz63HkJC25h.