Background of the study Malaysia is basically a domestic market-oriented and in four wheeler section it is basically a passenger car market

because the economic status is not so good so that people can have luxury cars. The objective of this study is to find the reason why Proton could not survive in the market after the entry of its local rival and the reason it lost its core competency and then suggesting some measures to build its core competencies again with some suitable strategy. Introduction PROTON was established on May 7, 1983. Till 1993 it remained the sole Malaysian Automobile manufacturer and then there was an existence of its only local rival Perodua. Proton has a head-quarter in Subang Jaya and Shah Alam and a manufacturing plant in Tanjung Malim, Perak. Its main products are the Waja, Iswara, Arena, Satria GTi, Wira Inspira, Exora, Saga FL, Persona. SAGA was and is still the famous product. The current capacity of its main plant is 240 000 vehicles per annum. Source-http://www.slideshare.net/mandalina/marketing-plan-proton The key management people are Syed Zainal Abidin (Managing Director), Dato Sri Mohd Nadzmi Mohd Salleh (Chairman), Dato Michael Lim Heen Peok (Independent NonExecutive Director), Dato and Mr. Behara Venkata Rama Subbu, (Independent NonExecutive Director). It currently has operation in 27 countries across the world that includes Australia, China, South Africa, and the United Kingdom. Its total revenue (profit) on last quarter (30th June, 2011) was around RM4.55million.

The vision and mission of proton The PROTON's vision is to become a regionally competitive automotive company, creating value by earning customers' trust through the quality and innovation of our products and people. To realize this vision they are aligned to engage more and more innovative people who are fresh and ready to produce new ideas. The mission of Proton is to facilitate each and every employee of Proton a retirement benefit to its members through their savings.
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Goals and objectives The main goal of Proton is to further strengthen its global presence in the world automobile market. One of the main objectives for the creation of Perusahaan Otomobil Nasional Berhad (PROTON) was to propel Malaysia into the 21st century and it is still aligned to achieve it. Forecast from proton PROTON is forecasting to command at least a 4% share of Bruneis car market with the Total Industry Volume (TIV) in 2011 projected at between 12,000 and 13,000 units. It is also going to launch its hybrid vehicle with revised technologies (Dato Haji Syed Zainal, 2011). Key issues When Proton was new to Malaysia it was very successful even with its old and repeated technology as it has no local competitor till then but as the competition became global and its local rival entered the Malaysian market it failed in the merger with Lotus, Mitsubishi and many others only because of its old and poor technology transfer and old R&D. and higher price of its products also increased competition for it as the customers were attracted to Perodua, its local rival that produced comparative lower price cars with a good average in quality. It also launched and established many subsidiaries to grow its market but again it was a failure. The need to revamp the strategy As all of its merger and acquisition failed because of its poor technology transfer and all of its subsidiaries didnt work, it really needs to revise its strategy because gone are the days when people loved there old same technology now a days they are more demanding and it has increased the competition and even take it to the global level. There was a 94.6% year-onyear drop in net profit if compared to last year (net profit of RM84.68mil). These all above thing shows that Proton should and must revamp its strategy if it really wants to be sustainable in the market.

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EXTERNAL ANALYSIS OF ENVIRONMENT PROTONS competitors Competitors are those organizations which provide similar goods or services to the same set of customers or that vie for the same resources needed by the organization. Most organizations have at least one competitor (usually more than one) and must consider all potential competitors. (Miller Frederic P, 2009). After 10 years of Proton establishment its new local rival entered the market with good fuel efficient cars. That was a big threat to Proton. It provided multipurpose vehicles to fulfill the different needs of Malaysian customers. It also had an engineering legacy from Daihatsu which is a Japanese car manufacturer. Market research proved that Perodua was a little ahead in quality in upholstery, engine efficiency and reliability of electronics compared to Proton. Other than local rival Toyota is its global competitor who is the only one in automotive industry which is having LEAN manufacturing Now it becomes very much important to formulate some strategy for Proton so that it can survive in the market.

PEST ANALYSIS Political: Government of Malaysia is trying to restructure their automotive industry market by encouraging the production of a large number of cars to meet growing demand of consumers. Government of Malaysia is also providing a 50% refund on excise tax for domestic automakers. Other than that Malaysia has some political policies in favor of car producers: 1) AFTA: that maintains the tariffs barrier of the Southeast Asian countries. 2) Export Policy: to protect local car manufacturer. 3) Protectionism policy: to protect local car manufacturer from an unhealthy competiton from outside the domestic boundary.
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ECONOMIC: 1) Deregulated market 2) The ever increasing cost of manufacturing and raw materials 3) Limited resources: increases price 4) Negative GDP ( -2.8 in 2011), Source: http://www.tradingeconomics.com/malaysia/gdp-growth 5) Increased inflation (3.4 in 2011), Source: http://www.tradingeconomics.com/malaysia/inflation-cpi 6) Increased monetary policy (3.4 in 2011), Source-http://www.centralbanknews.info/2011/03/monetary-policy-week-in-review12-march.htm 7) Unemployment rate is increased (3.3 in October 2011) Source-http://www.tradingeconomics.com/malaysia/unemployment-rate

Social: The growing population in the country is one of the factors which can affect the automobile industry. The total population of Malaysia is 28,728,607 (July 2011). This will give a greater number of markets. The ratio of car ownership is high as people consider cars as important thing in their lives. People are expected to put off buying different motor vehicles because of the employment market uncertainty because of the global and local financial crisis. The impact of the image to the loyalty of the customer is also another factor. TECHNOLOGY: Intellectual property: because it is considered as a sign of authenticity and uniqueness. Due to the different technologies, primarily the help of computer and the Internet, the potential for innovation and development is increasing. Technologies that help to survive in competition. PEST analysis is the tool to know the current opportunities that can be utilized or the threats that can be overcome.

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OPPORTUNITIES An opportunity provides what exactly a business wants to survive in the given environment. High Demand for Fuel Efficient Vehicles, Opportunity to grow globally. Future economies of scale and innovation through cooperative ventures. Strategic alliances and joint ventures.. The entry of Danish vehicle tuner Kleeman could provide a boost for the premium Vehicle segment.

THREAT Threats are key impediments to the firm's current or desired position. Costly Raw Material, Price war between competitors. Competitors - local & international brands. Legal and Political Framework, Economic downturn decrease of car sales, Increased bargaining power of key buyers or suppliers,

INTERNAL ENVIRONMENT ANALYSIS: STRENGTHS Strength is a resource advantage which is only with you and not with your competitors. Financial background of proton is strong. Extensive nationwide distribution network. Good corporate governance. Influence of patriotism as Proton is national car-maker. Government support. Strong brand

Weakness
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A weakness is a "limitation or deficiency in one or more resources or competencies relative to competitors that impedes a firm's effective performance". Reputation of poor product performance and functionality. High cost to expand their operation by advanced technology. Spare parts are expensive. Vulnerable to increasing material cost (steel, etc). After sales, service is poor. Limited product line. It has some debts,

CORE COMPETENCIES With about ten-year history of carrying out a variety of projects, V-ENS distinctly differentiated itself with superior technology, wide-ranging experience, cutting-edge infrastructure, and a broad distribution network. In addition, it had world-class car engineering experts with exceptional expertise and a wealth of hands-on background but after the entry of its local rival it faded over time and Proton lost its core competency as core competency is a thing which cannot be copied by anyone else and it helps in sustaining long term competitive advantages over rivals. It becomes very clear that Proton currently has no core competency it only has noncore strategic capabilities that indicates it should move on to have new strategy to convert its capabilities into core- competencies.

STRATEGY ALTERNATIVE AND RECOMMENDATION TOWS Analysis: (Figure 3) A TWOS Analysis is a strategic planning tool used to evaluate the Threats, Opportunities and Strengths, Weaknesses, involved in a project or in a business venture or in any other situation requiring a decision.
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http://mba.zainbooks.com/terms/management/threats-opportunities-weaknesses-strengthstows-matrix.shtml Internal environment Internal Strengths 1) Financial background of proton is strong 2) Extensive nationwide distribution network 3) Influence of patriotism as Proton is national car-maker. Internal weakness 1) Reputation of poor product performance and functionality 2)High product cost 3)Spare parts are expensive No fuel efficiency, gas linkage, 3) If cost is low quality automatically becomes low, 4) Lack of R&D. 5) Bad international connections. External opportunity SO (strengths and opportunities) WO (weakness and opportunities)

External environment

To grow their business 1) Develop and produce the products 1) Proton should collaborate with globally through the TQM (reduce the cost other company to improve its and increase the quality at greater product performance. High demand of the products (BUSINESS LEVEL speed), R&D development STRATEGY) 2) Financially strong background of proton helps to develop its R&D. 2) It has the opportunity to produce 1) Opportunity to develop new new less fuel efficient car market in Egypt. (FUNCTIONAL LEVEL (Functional level), 2) To have partnership in those STRATEGY) country where raw materials 2) With the high demand of product are comparative low in price, Proton can sell its product 3) globally.(INTERNATIONAL LEVEL STRATEGY) External threats Economic downturn decrease of car sales. A lot of substitute products in market. Threats of new entrants, at local as well as global level, Expansion in technology, ST (strength and weakness) Due to down turn in economy the sale of automotive products decrease and to enhance the sale of its products proton has to decrease the price of its product its cant effect much to proton because it is financially strong. (BUSINESS LEVEL
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WT (weaknesses and threats) Tie up with another company to launch a hybrid Car. (BUSINESS LEVEL STATEGY) By joint venture with another company proton can improve the quality of products, it helps to build a broad network.

STRATEGY) Due to patriotism in Malaysia market its substitute products could not affect much to Protons sale..

According to TOWS analysis: The main concern of proton is to compete globally so it can have some strategy to overcome on threats and weakness by using strengths and opportunities. Alternative strategy generation Here the reader did some more different analysiss like Gap analysis, BCG matrix, porters 5 forces framework, key drivers of changes to produce clearer result in formulating strategy and these are: Tows matrix: To attract customers at local and global level proton needs to have a cost cutting strategy to sell its products at low price as it is financially strong it cant effect much to proton but its sale enhance in this period of economic downturn period. Pest (figure 1): As per PEST analysis Proton must have a specific market development by introducing new improved product to the new market and also by providing it to local market too to hold a command on local it and it involves investment to have a new product line up. BCG matrix (appendix 3): According to BCG matrix proton fall under question mark (problem child) stage .After studying the strategic position of proton the reader came to know that its market is growing but its market share is not increasing too much. Due to some weakness (lack of technology, quality prospective, lack of attractive design, financial prospective,) the market is not growing rapidly.

like having joint venture with Toyota to know about the secret involved in its lean manufacturing as TOYOTA is the first one to introduce this strategy and it took almost 10 years. This is the key for TOYOTAS success.

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Porters 5 forces (appendix 4): According to this Proton can have multi domestic strategy (international level) that could further involve lean manufacturing. This could help in achieving high local responsiveness by providing customers what they exactly want and thus cost cutting by the help of lean manufacturing to reduce initial cost that would help in having a good savings. Balance score card: Balance score card suggests that Proton should have product development by the help of new technologies and changing its older one then again providing them to general public to achieve maximum growth.

RECOMMENDED STRATEGY Protons current strategies that could not help it to survive in increasing competition are: maiden multi-purpose vehicle, Total product Management, Electric Vehicle, Now the main objective of this paper after having all the analysis would be formulating a strategy that could not only support its current strategy to further improvement but also helps it to have a competitive advantages over its rival that would include converting its capabilities into core-competencies.

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It would be recommended to proton that it should have a lean manufacturing that would not only help it in waste management throughout the production process but also help it to make a base for further future strategy as it changes all the initial process of production hat can lead to waste of money, time, energy and resources. For having this strategy Proton can have a joint venture or partnership with TOYOTA, as it would take a long time and more money to have a lean manufacturing by oneself. TOYOTA took almost 10 years to introduce it. So Lean manufacturing would be the best suitable option for Proton to improve its current position it can also use other defined strategy to have a little support.

CONCLUSION Proton was considered as the national car manufacturer of Malaysia. However due to the different factors, primarily the implementation of AFTA, the sales and market share of the company declined. In details, the growing competition enabled the Malaysian market to have a wide choice of cars to be availed. On the other hand, due to the strong support of the government, as well as the strong position of the company in the market, it can be said that the company failed to focus on the most important aspect of a company in order to maintain competitive advantage, and that is innovation. A side from that, the company is also having a problem in their supply chain, which results to high pricing of Proton's car compare to other international brand in the market. In order to solve the current situation of the company, it will be important to focus on lean manufacturing process. It would also be important to focus on the HR aspect of the company in order ensure that the company has talented and skilled staffs to develop new and better products that will suit the ever changing preferences of the consumers. Even if Proton has changed its product line up very impressively, but it would include much work for it to avail strong competitive advantage over its rival. A total of 240 acres of land area is being developed for Proton Manufacturing Plant in Phase- It would be necessary to have a good R&D to have new improved passenger cars that would suit the customer preferences, it will also be important to focus on differentiation of the products having a good watch to its competitors so that it can keep itself updated.

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REFERENCES BOOKS AND JOURNALS 1. Chung, W., & Kalnins, A. (2001). Agglomeration effects and performance: Test of the Texas lodging industry Strategic Management Journal, 22, 969988. 2. Hax, A. & Wilde II, D. (2003). The Delta Model- A New Framework of Strategy. Journal of Strategic Management Education, vol. 1, no. 1. Available from: http://pesona.mmu.edu.my/~wruslan/MISP2/Readings/detail/Reading-37.pdf. 3. Kotler, P. and Keller, K.L. (2009). Marketing Management (pp 53, 77-84) New Jersey: Pearson Prentice Hall 4. Nijssen, E. J. & Frambach, R. (2000). Creating Customer Value Through Strategic Marketing Planning: A Management Approach. Springer 5. Prahalad, C. K., and Hamel, G. (1990). The core competence of the organization. Harvard Business Review, 90, 7993. ONLINE JOURNALS 1. Strategic Management, Available: http://www.emeraldinsight.com/products/journals/journals.htm?id=jsma Last accessed: 25th Oct,2011

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ARTICLES AND PRESS RELEASES 1. Measures To Increase Competitiveness, Available: http://www.miti.gov.my/cms/content.jsp?id=com.tms.cms.article.Article_e88902127f000010-16251625-e40fbc3f Last accessed 07th Nov,2011 2. Official Press Release, Available: http://www.protonbrunei.com/12-05-2011-officialpress-release-proton-appoints-united-motors-as-its-new-importer-and-reseller-inbrunei/396/ Last accessed: 10th Oct,2011 3. Proton Considering Hm Plant To Assemble, Available: http://www.cardekho.com/india-car-news/proton-considering-hm-plant-to-assemblecars-in-india-3528.htm Last accessed 07th Nov,2011 4. Value Chain Analysis Of Proton, Available: http://www.oppapers.com/subjects/value-chain-analysis-of-proton-holding-berhadpage20.html Last accessed: 05th Nov,2011 WEBSITES 1. Annual Reports, Available: http://www.proton.com/pdf/AnnualReports/2010AnnualReport.pdf Last accessed: 15th Sept,2011 2. Business Strategy, Available: http://tutor2u.net/business/strategy/ansoff_matrix.htm Last accessed: 06th Sept,2011 3. Proton, Available: www.proton.com Last accessed: 25th Aug,2011 4. Proton, Available: www.proton-edar.com.my Last accessed: 25th Sept,2011

APPENDIX EXTERNAL ENVIRONMENT ANALYSIS APPENDIX 3: SWOT Analysis Internal analysis: SWOT

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STRENGHTS: Financial background of proton is strong Extensive nationwide distribution network Influence of patriotism as Proton is national car-maker Leading car market in Malaysia, It has developed a hybrid vehicle technology on its own,

WEAKNESSES Reputation of poor product performance and functionality High product cost Spare parts are expensive It has some pending Litigations Failure in technology transfer, fuel efficiency is very bad, THREATS Economic downturn decrease of car sales. A lot of substitute products in marke Threat of new rivals entering the market, Slow market growth,

OPPORTUNITIES To grow their business globally High demand of the products R&D development Demand of Fuel Efficient Vehicles,

APPENDIX 4: Porters 5 Forces Framework Due to competitive environment and economic recession proton has threat from new and existing rivals. The demand for cost efficient car is increase and by collaboration with another company to produce hybrid cars, helps proton to overcome to its competitors. PORTERS FIVE FORCES TO ANALYSE PROTON: Threat of New Entry, Threat of Substitutes, Bargaining Power of Suppliers, Bargaining Power of Buyers, Intensity of Rivalry:
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The structure of competition new rivals entering into market. The structure of industry costs competitors have cost cutting and provides comparative low cost cars. Strategic objectives its new competitor does not have any aggressive growth strategies as it needs a lot of investment. Degree of differentiation differentiated product have a big demand. Proton can have a less rivalry by differentiating its product (Hybrid, electric cars) Exit barriers for an automobile industry barriers to leaving is much high and thus it can produce more rivalry

APPENDIX 5: BCG Matrix One of the most common and long-standing way of conceiving of the balance of portfolio of businesses is in terms of the relationship between market and share and market growth identified by Boston Consulting Group (BCG). (Gerry/Kevan/Richard,2008).

MARKET SHARE HIGH STARS Market growth is high but market share is low so not in this category. But it can use its question mark position to reach up to this level.
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LOW QUESTION MARKS Car market is increasing but market share of Proton is not increasing thus it falls under this category, it can invest more to cut its cost so that it can increase its market share to move itself to STAR.
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CASH COW HIGH Market growth is high and market share is low, so it does not fall into this box.

DOG In this category Proton should invest more on those product that are very old in technology and have poor performance, as it is bringing up new version of Exora (Exora 2)

MARKET GROWTH

LOW

LOW Type

INTERNAL ENVIRONMENT ANALYSIS: APPENDIX 7: Benchmarking

Description

HIGH

Most Appropriate for the Following Purposes

Strategic Bench marking

By having lean manufacturing to improve overall performance.

A newly shifted American strategist would help it in long term growth.

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Performance Bench marking Process Bench marking

By having a successful merger or acquisition with the help of new technology transfer. Lean manufacturing that includes a betters R&D to change its entire production process to achieve short term benefits in short period of time.

By closing performance gap.

Waste management and cost cutting.

Functional Bench marking

Cost reduction through improved R&D or by introducing lean manufacturing.

Competitor cannot easily copy it as it involves a lot of money as well as time.

Internal Bench marking External Bench marking

A good improved staffs communication Good training to all the staff of the so the access to sensitive data and information would be easier. Analyzing its competitors position to work accordingly and by utilizing opportunities when they knock the door. By having partnership with other good car manufacturer. organization

International Bench marking

By finding other business partners outside the domestic boundary as there is a less chance to find good one inside the domestic side.

By globalization of its product that involves market development.

APPENDIX 14: Balance Score Card Analysis

Balance Scoreca

Shareholder Look

Operational Effectiveness
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Organizational Learning

Customer targeting

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rd Proton a)A good shareholder number as every single person in Malaysia has the car from Proton. b) Revenue and turnover by geographical segment (Asia, Europe, Middle East, Africa and Pacific). c) Revenue from businesses such as capital, industrial and government. Strategic and Integrated Partner companies a) Volume, revenue, turnover, gross margin by individual client b) Year over year sales and turnovers growth by individual clients. c) new improved technology a) Costly to have a new technology b) cost to serve clients. a) Number of clients on each country and partner. c) Return on % revenue on the center of excellence establishment a) Customer satisfaction by good quality at a comparative price, b) Joint revenue and turnover from complementary relationship a) a new developed technology, b)first to introduced its own design, b) Technology in the R&D and auto development a)new technology has increased its percentage sales, b) providing training to all of its staff to improve further. a) enhancing after sale services, c) Customer satisfaction by taking feedback from the to improve

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