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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.
APIIT SD INDIA 1
000 and 13. 2011). 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 didn’t work. 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. 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. It also launched and established many subsidiaries to grow its market but again it was a failure. and higher price of its products also increased competition for it as the customers were attracted to Perodua. 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. It is also going to launch its hybrid vehicle with revised technologies (Dato’ Haji Syed Zainal. its local rival that produced comparative lower price cars with a good average in quality. Forecast from proton PROTON is forecasting to command at least a 4% share of Brunei’s car market with the Total Industry Volume (TIV) in 2011 projected at between 12.6% year-onyear drop in net profit if compared to last year (net profit of RM84. Mitsubishi and many others only because of its old and poor technology transfer and old R&D.000 units. There was a 94. These all above thing shows that Proton should and must revamp its strategy if it really wants to be sustainable in the market. APIIT SD INDIA 2 .Goals and objectives The main goal of Proton is to further strengthen its global presence in the world automobile market.68mil).
Market research proved that Perodua was a little ahead in quality in upholstery. After 10 years of Proton establishment its new local rival entered the market with good fuel efficient cars. Most organizations have at least one competitor (usually more than one) and must consider all potential competitors. Government of Malaysia is also providing a 50% refund on excise tax for domestic automakers. 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. 2009). engine efficiency and reliability of electronics compared to Proton. 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. It also had an engineering legacy from Daihatsu which is a Japanese car manufacturer. 2) Export Policy: to protect local car manufacturer. That was a big threat to Proton. (Miller Frederic P. It provided multipurpose vehicles to fulfill the different needs of Malaysian customers. APIIT SD INDIA 3 . 3) Protectionism policy: to protect local car manufacturer from an unhealthy competiton from outside the domestic boundary. 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.EXTERNAL ANALYSIS OF ENVIRONMENT PROTON’S 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.
The total population of Malaysia is 28. APIIT SD INDIA 4 . The impact of the image to the loyalty of the customer is also another factor.3 in October 2011) Source-http://www. PEST analysis is the tool to know the current opportunities that can be utilized or the threats that can be overcome. Due to the different technologies.ECONOMIC: 1) Deregulated market 2) The ever increasing cost of manufacturing and raw materials 3) Limited resources: increases price 4) Negative GDP ( -2. Source-http://www.info/2011/03/monetary-policy-week-in-review12-march.com/malaysia/gdp-growth 5) Increased inflation (3. primarily the help of computer and the Internet. Source: http://www.tradingeconomics.tradingeconomics.com/malaysia/inflation-cpi 6) Increased monetary policy (3.607 (July 2011).tradingeconomics. Technologies that help to survive in competition. The ratio of car ownership is high as people consider cars as important thing in their lives.com/malaysia/unemployment-rate Social: The growing population in the country is one of the factors which can affect the automobile industry.htm 7) Unemployment rate is increased (3.728. the potential for innovation and development is increasing.8 in 2011). This will give a greater number of markets.4 in 2011). TECHNOLOGY: Intellectual property: because it is considered as a sign of authenticity and uniqueness.4 in 2011).centralbanknews. Source: http://www. People are expected to put off buying different motor vehicles because of the employment market uncertainty because of the global and local financial crisis.
Strategic alliances and joint ventures. Influence of patriotism as Proton is national car-maker. Extensive nationwide distribution network. Costly Raw Material. Opportunity to grow globally. Economic downturn – decrease of car sales. THREAT Threats are key impediments to the firm's current or desired position. Strong brand Weakness APIIT SD INDIA 5 . The entry of Danish vehicle tuner Kleeman could provide a boost for the premium Vehicle segment.OPPORTUNITIES An opportunity provides what exactly a business wants to survive in the given environment. Competitors . Price war between competitors. Financial background of proton is strong. Future economies of scale and innovation through cooperative ventures. Government support. Good corporate governance. High Demand for Fuel Efficient Vehicles..local & international brands. 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. Legal and Political Framework.
cutting-edge infrastructure. STRATEGY ALTERNATIVE AND RECOMMENDATION TOWS Analysis: (Figure 3) A TWOS Analysis is a strategic planning tool used to evaluate the Threats. It has some debts. CORE COMPETENCIES With about ten-year history of carrying out a variety of projects.A weakness is a "limitation or deficiency in one or more resources or competencies relative to competitors that impedes a firm's effective performance". and a broad distribution network. APIIT SD INDIA 6 . Reputation of poor product performance and functionality. In addition.competencies. Limited product line. 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. Weaknesses. Spare parts are expensive. V-ENS distinctly differentiated itself with superior technology. High cost to expand their operation by advanced technology. 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. wide-ranging experience. Opportunities and Strengths. etc). Vulnerable to increasing material cost (steel. After sales. service is poor. involved in a project or in a business venture or in any other situation requiring a decision.
zainbooks. Threats of new entrants. 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. Proton can sell its product 3) globally.http://mba. R&D development STRATEGY) 2) Financially strong background of proton helps to develop its R&D.(INTERNATIONAL LEVEL STRATEGY) External threats Economic downturn – decrease of car sales. (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. A lot of substitute products in market. 3) If cost is low quality automatically becomes low. (BUSINESS LEVEL APIIT SD INDIA 7 WT (weaknesses and threats) • Tie up with another company to launch a hybrid Car. at local as well as global level. 5) Bad international connections. 4) Lack of R&D. High demand of the products (BUSINESS LEVEL speed). (BUSINESS LEVEL STATEGY) • By joint venture with another company proton can improve the quality of products.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.com/terms/management/threats-opportunities-weaknesses-strengthstows-matrix. 2) It has the opportunity to produce 1) Opportunity to develop new new less fuel efficient car market in Egypt. Internal weakness 1) Reputation of poor product performance and functionality 2)High product cost 3)Spare parts are expensive No fuel efficiency. it helps to build a broad network. . gas linkage. 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 can’t effect much to proton because it is financially strong. Expansion in technology.
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. porter’s 5 forces framework.. BCG matrix. Due to some weakness (lack of technology. quality prospective.) the market is not growing rapidly. Alternative strategy generation Here the reader did some more different analysis’s like Gap analysis. 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 can’t 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.STRATEGY) Due to patriotism in Malaysia market its substitute products could not affect much to Proton’s sale.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. This is the key for TOYOTA’S success. lack of attractive design. APIIT SD INDIA 8 . BCG matrix (appendix 3): According to BCG matrix proton fall under question mark (problem child) stage . financial prospective. 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.
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. 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.Porter’s 5 forces (appendix 4): According to this Proton can have multi domestic strategy (international level) that could further involve lean manufacturing. 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. Total product Management. Electric Vehicle. APIIT SD INDIA 9 . RECOMMENDED STRATEGY Proton’s current strategies that could not help it to survive in increasing competition are: maiden multi-purpose vehicle.
and that is innovation.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. However due to the different factors. A total of 240 acres of land area is being developed for Proton Manufacturing Plant in Phase. TOYOTA took almost 10 years to introduce it. APIIT SD INDIA 10 . 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. 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.It would be necessary to have a good R&D to have new improved passenger cars that would suit the customer preferences. On the other hand. the growing competition enabled the Malaysian market to have a wide choice of cars to be availed. but it would include much work for it to avail strong competitive advantage over its rival. it will be important to focus on lean manufacturing process. the sales and market share of the company declined. In details. A side from that. due to the strong support of the government. which results to high pricing of Proton's car compare to other international brand 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. energy and resources. time. primarily the implementation of AFTA. as well as the strong position of the company in the market. In order to solve the current situation of the company. CONCLUSION Proton was considered as the national car manufacturer of Malaysia. as it would take a long time and more money to have a lean manufacturing by oneself. Even if Proton has changed its product line up very impressively. 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. For having this strategy Proton can have a joint venture or partnership with TOYOTA. the company is also having a problem in their supply chain.
79–93. K. (2003). no. Chung.my/~wruslan/MISP2/Readings/detail/Reading-37. C. D. vol. Nijssen. G. and Hamel. (1990). Prahalad. 77-84) New Jersey: Pearson Prentice Hall 4. & Frambach. J. Creating Customer Value Through Strategic Marketing Planning: A Management Approach.htm?id=jsma Last accessed: 25th Oct. Marketing Management (pp 53. 3. 22. (2009).A New Framework of Strategy’.mmu.edu. A. & Wilde II.com/products/journals/journals.. Available from: http://pesona. R. ‘The Delta Model. Strategic Management. The core competence of the organization. & Kalnins.pdf. A. Hax. 1. Kotler.. 969–988.L. 1. Springer 5. 90. Harvard Business Review. P.2011 APIIT SD INDIA 11 . W. Available: http://www. (2000). E.REFERENCES BOOKS AND JOURNALS 1. (2001). Journal of Strategic Management Education. K. ONLINE JOURNALS 1. 2.emeraldinsight. and Keller. Agglomeration effects and performance: Test of the Texas lodging industry Strategic Management Journal.
Proton.ARTICLES AND PRESS RELEASES 1.com/india-car-news/proton-considering-hm-plant-to-assemblecars-in-india-3528.jsp?id=com.tms.2011 4.Article_e88902127f000010-16251625-e40fbc3f Last accessed 07th Nov.2011 APPENDIX EXTERNAL ENVIRONMENT ANALYSIS APPENDIX 3: SWOT Analysis Internal analysis: SWOT APIIT SD INDIA 12 .proton-edar.my/cms/content. Business Strategy. Available: http://www.html Last accessed: 05th Nov. Annual Reports. Official Press Release.my Last accessed: 25th Sept.cms.2011 WEBSITES 1. Available: www.2011 4.htm Last accessed 07th Nov.2011 2. Proton. Value Chain Analysis Of Proton.proton.article.htm Last accessed: 06th Sept.com Last accessed: 25th Aug. Available: http://www.miti.protonbrunei.net/business/strategy/ansoff_matrix.proton.oppapers. Proton Considering Hm Plant To Assemble.2011 3.gov.2011 3. Available: www. Available: http://www.cardekho.com/12-05-2011-officialpress-release-proton-appoints-united-motors-as-its-new-importer-and-reseller-inbrunei/396/ Last accessed: 10th Oct. Available: http://www.pdf Last accessed: 15th Sept. Measures To Increase Competitiveness. Available: http://tutor2u.com/subjects/value-chain-analysis-of-proton-holding-berhadpage20. Available: http://www.com/pdf/AnnualReports/2010AnnualReport.2011 2.com.
PORTER’S FIVE FORCES TO ANALYSE PROTON: Threat of New Entry.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. helps proton to overcome to its competitors. Threat of Substitutes. fuel efficiency is very bad. 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. Intensity of Rivalry: APIIT SD INDIA 13 . The demand for cost efficient car is increase and by collaboration with another company to produce hybrid cars. APPENDIX 4: Porter’s 5 Forces Framework Due to competitive environment and economic recession proton has threat from new and existing rivals. OPPORTUNITIES • • • • To grow their business globally High demand of the products R&D development Demand of Fuel Efficient Vehicles. Slow market growth. THREATS • • • • Economic downturn – decrease of car sales. Bargaining Power of Suppliers. Bargaining Power of Buyers. A lot of substitute products in marke Threat of new rivals entering the market.
Proton can have a less rivalry by differentiating its product (Hybrid. it can invest more to cut its cost so that it can increase its market share to move itself to STAR. APIIT SD INDIA LOW QUESTION MARKS Car market is increasing but market share of Proton is not increasing thus it falls under this category. (Gerry/Kevan/Richard. But it can use its question mark position to reach up to this level. 14 . 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.The structure of competition – new rivals entering into market.2008). MARKET SHARE HIGH STARS Market growth is high but market share is low so not in this category. 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).
CASH COW HIGH Market growth is high and market share is low. DOG In this category Proton should invest more on those product that are very old in technology and have poor performance. A newly shifted American strategist would help it in long term growth. 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. so it does not fall into this box. APIIT SD INDIA 15 .
By having partnership with other good car manufacturer. Waste management and cost cutting. Competitor cannot easily copy it as it involves a lot of money as well as time. 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 globalization of its product that involves market development. By closing performance gap.Performance Bench marking Process Bench marking By having a successful merger or acquisition with the help of new technology transfer. 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 competitor’s position to work accordingly and by utilizing opportunities when they knock the door. Functional Bench marking Cost reduction through improved R&D or by introducing lean manufacturing. 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. APPENDIX 14: Balance Score Card Analysis Balance Scoreca Shareholder Look Operational Effectiveness 16 Organizational Learning Customer targeting APIIT SD INDIA .
b)first to introduced its own design. c) Return on % revenue on the center of excellence establishment a) Customer satisfaction by good quality at a comparative price. b) Revenue and turnover by geographical segment (Asia.rd Proton a)A good shareholder number as every single person in Malaysia has the car from Proton. turnover. c) new improved technology a) Costly to have a new technology b) cost to serve clients. Middle East. c) Revenue from businesses such as capital. industrial and government. Europe. gross margin by individual client b) Year over year sales and turnovers growth by individual clients. b) Joint revenue and turnover from complementary relationship a) a new developed technology. b) Technology in the R&D and auto development a)new technology has increased its percentage sales. a) Number of clients on each country and partner. c) Customer satisfaction by taking feedback from the to improve APIIT SD INDIA 17 . a) enhancing after sale services. Africa and Pacific). Strategic and Integrated Partner companies a) Volume. b) providing training to all of its staff to improve further. revenue.
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