Prerna Shree

PROTON HOLDING BHD

Individual Assignment (BLB20058-M) Hand in Date:-14/Dec/2011 Hand out Date:-13/Oct/2011

Submitted To: -

Submitted By:-

Mr. Nidhi Khurana (Lecturer)

Prerna Shree (PTM1101002) st (MBA 1 year)

ASIA PACIFIC INSTITUTE OF INFORMATION TCHNOLOGY

Page 1

PROTON HOLDING BHD

This is to certify that is ―PRERNA SHREE‖ Roll No. PTM 1101002 of MBA stream

had completed her assignment on ―CASE STUDY ON PROTON‖ on 14 DECEMBER 2011.

Submitted To: Mr. Geetainder Handa (Lecturer)

Submitted By:Prerna Shree (PTM1101002) st (MBA 1 year)


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PROTON HOLDING BHD

I am very Thankful to Miss. Nidhi Khurana to providing such opportunity to prepare such type of assignment which helped me to enhance my skills. I had a lot of difficulty during my assignment but she guided me continuously and also helped me out to solve them. I would like to thank to A.P.I.I.T A.P.I.I.T SD INDIA for giving me an opportunity to work on this project. At last but not the least I would like to thank to everyone who helped me out to accomplish this project.

Warms & regard Prerna shree.


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PROTON HOLDING BHD

Sr. No.

Title

Page No.

1.

Acknowledgement

3-3

2.

Background

5

3.

Introduction

6-9

4.

Analysis ( Internal and External environment)

11-22

5.

Conclusion

27-30

6.

References

31-33

7.

Appendix

33-47


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PROTON HOLDING BHD

Strategic products are generally obtained from one supplier where the short and long-term supply is not guaranteed and represents high value in the cost price of the end product. The strategy is to strive for a partnership-like relationship with the suppliers in order to obtain significant improvement in quality, cost, delivery, product development and innovation. Before the establishment of PROTON the component parts manufactured locally were few and catered basically for the replacement market. However, with the introduction of specific localization programs for the industry, in the mid of 1980s, by PROTON through its Suppliers Development Program (PVDP), more components were produced to cater to the domestic as well as export markets. Many suppliers were born, and later developed and grew solely as a result of this PVDP. There were only 17 suppliers supplying 52 parts when PROTON commenced operations in 1985, most of which were low-tech traditional local parts like batteries, tires, and the like. To date there are 182 suppliers supplying more than 4, 000 parts to PROTON (Interview with the President PROTON Suppliers Association, 2006). In 1986, PROTON established the Procurement and Suppliers Development Division (PVD) whereby the objective is to develop its own group of suppliers in order to formulate and implement the local content program for the national car. It was envisaged that with the implementation of this local content program the automotive parts industry would expand. This expansion was much needed not only by PROTON in its end favors to build a strong industrial base to depend on, but also by the Government as a source of employment absorption and reduction of imports.

OBJECTIVE OF STUDY To evaluate whether the proton‘s new strategic plan can boost its competitiveness.


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PROTON HOLDING BHD

PROTON

PERUSAHAN AUTOMOBIL NATIONAL BERHAD

INCORPORATED

7 MAY 1983

TYPE

PUBLIC SECTOR

HEADQUARTER

SUBANGJAYA AND SHAH ALAM

MANAGING DIRECTOR

MR.SYED ZAINAL ABIDIN

REVENUE

RM8.23 BILLION MYR

SUBSIDIARIES

LOTUS

PROTON

MALASIYA‘S FIRST CAR

MAIN PLANT

SAHA ALAM

CAPACITY

80000 UNITS PER YEAR

VISION STATEMENT

Proton has their vision to have a very strong presence in the domestic market. As ja car Manufacturer in a national economy you must dominate that economy.

MISSION STATEMENT Driving Malaysia‘s transformation into a leader in technology and quality. Proton are a

passionate group of people working together, creating exhilarating products and services for global markets, synonymous with great styling, innovation and leading technology.


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PROTON HOLDING BHD MARKET OF PROTON Proton Holdings Berhad is the holding company which is listed on the Bursa Malaysia. It exports cars to the United Kingdom, South Africa, and Australia and the company is aggressively marketing its cars in several other countries including the Middle East. It has never succeeded to export their car to the US, because the cars required many changes to meet American safety standards in order to secure coverage from auto insurers and satisfy legislative requirements. In some countries,

Proton‘s cars suffer somewhat from a poor

public image because of their designs.14,706 Proton cars were exported in 2006 to other countries. Proton cars have also been exporting a small volume of cars to other countries like: Singapore, Brunei, Indonesia, Nepal, Sri Lanka, Pakistan, Bangladesh, Taiwan, Cyprus and Mauritius.

LIST OF PRODUCTS 

PROTON SAGA (1985 - 2011):- Among all products proton, The Saga is the longest surviving model, soldiering on for nearly 22 years. The Saga continued to receive minor updated until 2008, when a second generation Saga was introduced as a sub-compact model instead.



PROTON INSPIRA- (2010-2011)



PROTON WIRA - (1983 - 2006)



PROTON SATRIA GTI - (1994 – 2007)



PROTON PERDANA - (1995 - 1998)



PROTON TIARA - (1996 - 2007)



PROTON JUARA - (2001 - 2003)


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PROTON HOLDING BHD PROTON NEEDS TO REVAMP ITS STRATEGY BECAUSE



Proton is facing pressures by Asean Free Trade Agreement (AFTA) and World Trade Organization (WTO) in which Malaysia is a member of these two organizations on the issues of lowering or removing tariffs and other non-trade barriers.



Proton is unable to match the quality of foreign competitors - something the exposed with the lowering of import barriers.



Proton cars are facing competition arising from import tariffs.



Proton is unable to compete without the shield of tariffs due to its low technology.



Proton is unable to improve its entire network’s ability to operate in a more productive to reduce wastage or unnecessary cost.



It has lost its Chinese joint venture as of in 2006 it has four joint venture with Chinese partners.



By 2002 Proton had a market share of over 60% in Malaysia, which was reduced to barely 30% by 2005 and is expected to reduce further in 2011 when AFTA mandates reduce import tariffs to a maximum of 5%.



Proton is unable to communicate with its consumer about their expectations from car.



Company is lacking in their R&D, quality, innovation and also product differentiation in comparison to other competitors.


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PROTON HOLDING BHD Apart from the mentioned current strategy we can say that Proton is not working properly in all of the above areas i.e. up to the benchmark that is why it is losing its market share. After analysis of overall performance of proton, we found that it is very poor. We have shown it in the figure given bellow:

SUCCESS CRITERIA

PERFORMANCE (COMPARISION WITH COMPETITIORS)

HIGH

LOW

√

MARKET SHARE COST STRUCTURE

PRODUCTQUALITY

√ √

FINANCE DISTRIBUTION

√ √

OWN BRAND

√

OVERALL EVALUATION

FALL DOWN TO 80% GOES UP TO 30% 77% LESS THAN OTHERS 60% MORE THAN OTHERS 20% MORE SUPPLIERS

√

TECHNOLOGY

JUSTIFICATION

FALL DOWN TO 70%

100% IN HOME COUNTRY

PERFORMANCE IS VERY POOR

COMPETITION The existence within a market for some good or service of a sufficient number of buyers and sellers such that no single market participant has enough influence to determine the going price of the good or service. (E, Robert. 2009) (On the basis of porter‘s five forces framework i.e. entry of competitors, threat of substitutes,

bargaining power of suppliers, bargaining power of buyers and rivalry)(Appendix-4) ASIA PACIFIC INSTITUTE OF INFORMATION TCHNOLOGY

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PROTON HOLDING BHD THE MAJOR COMPETITORS OF PROTON ARE DOMESTIC COMPETITIORS

GLOBAL COMPETITIORS

1. Perodua.

1. Daimler AG

2. Nissan

2. Fiat S.P.A

3. Mitsubishi

3. Ford motor company 4. Toyota 5. Suzuki

6. Honda

90,000

80,000

70,000

60,000 Jan – June 2009 50,000

Jan – June 2010 Jan – June 2009

40,000

Jan – June 2010 Vehicles

30,000

Sales Unit Market Share

20,000

10,000

0


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PROTON HOLDING BHD

All external environmental forces which can affect how a company operates but which are beyond its control. These includes: political, Economical, social and technological. (H, jones, 2009)

PEST ANALYSIS: - A PEST analysis is one of them that is merely a framework that categorizes environmental influences as political, economic, social and technological forces. Sometimes two additional factors, environmental and legal, will be added to make a PESTEL analysis, but these themes can easily be subsumed in the others. The analysis examines the impact of each of these factors (and their interplay with each other) on the business. The results can then be used to take advantage of opportunities and to make contingency plans for threats when preparing business and strategic plans (R, Duand. 2009)

PEST ANALYSIS (APPENDIX (1) POLITICAL

One of the important factors to consider is the presence of AFTA or ASEAN Free Trade Area. Currently, most of ASEAN region are free trade or 96% of the entire ASEAN trade.

AFTA was established in January of 1992 in order to eliminate tariff barriers among the Southeast Asian countries. It planned to reduce tariffs to zero to 5% in 15 years among the six nations through a common effective preferential tariff (Ghani & Zainuddin 2008). Because Malaysia has two national carmakers which are Proton and Perodua and the government wants to protect their interests. Unfortunately, they said development could prove to be a temporary solution. If we are going to check on the high selling prices of the national cars of Malaysia because of high production costs and lack of vendor efficiency , there is a big possibility that the local market will be ruled by imported cars. As a result, there will be increase in the number of the vehicles on the road and there will be a glut of used cars in the market, because people will tend to trade their cars for cheaper and imported brands. On the other hand, the issue regarding the environment is vital because it is considered as one of the most talk about topics in the world. The environmental regulation in Malaysia can be traced ASIA PACIFIC INSTITUTE OF INFORMATION TCHNOLOGY

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PROTON HOLDING BHD back during the colonialism of British which introduced the environmental standards about the mineral and agricultural resources to Europe. AND In terms of international trade, Over 5 years, Malaysia more than doubled its exports from US$29.416 billion. Historically, the United States has long been one of Malaysia's largest trading partners, its exports to the United States reaching 21.9 percent in2010. ECONOMICAL

The vehicle sales in the country are expected to fall by 12.4% due to different economic aspect, primarily the issue of global financial crisis, which affected the local financial status of the country (Asean One Monitoring 2009). As a result, the government of the

country is expecting a slow economic growth for the country, which can affect the buying behavior of the customers . Furthermore, due to the AFTA, it had increased the competition,

which will impact the performance of Proton. However, the performance of the automobile industry will be maintained and managed due to the huge total labor force. Despite of the slower economic growth in the unemployment rate can be reduced to only 3.5%, which can shows

an

almost

full


em

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PROTON HOLDING BHD SOCIAL

The growing population in the country is one of the factors which can affect the automobile industry. In 2010, the country had a total of 27.5 million citizens (US Department of State n.d.). This will give a greater number of markets. Furthermore, the ratio of car ownership in the country is somewhat high or total of 1:5, which signifies that people are considering cars as important things in their lives. Furthermore, people will also set on bigticket

items or consumers

are

expected

to

put

off

buying

different

motor

vehicles because of the employment market uncertainty because of the global and local

financial crisis. Another factor to consider is the growing knowledge and concern of the people regarding different environmental issues . Furthermore, the impact of the image to

the loyalty of the customer is also another factor. TECHNOLOGICAL

Technology is considered as one of the most important factor in the automotive industry. Due to the increasing competition, the development in technology is growing and affecting the performance and position of each and every company in the automobile industry. It is also important to consider the maturity of technology, together with the maturity and capacity of manufacturing, which affect the innovation process of any company. The

intellectual property is also important factor, 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


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PROTON HOLDING BHD After PEST analysis, these are the opportunities and threats of Proton:

On the basis of Porter’s diamond model ( Appendix 6)

OPPURTUNITIES

THREATS



Available government support



Slow growth



Economic of scale



Economic crises



Available technological innovations



Change in the consumer lifestyle



New product development to



Changing technology



New competitors entering the

improve the capability of the existing models 

Strategic alliances



Improve customer service



Brand image, and Building world-

market 

Threat of substitute product



Threat of trade disputes

class vendor


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PROTON HOLDING BHD

The conditions, entities, events, and factors within an organization that influence its activities and choices, particularly the behavior of the employees. Factors that are frequently considered part of the internal environment include the organization's mission statement, leadership styles, and its organizational culture. (S.Janat,.2009)

According to ‘value chain’ (Appendix -

2), we can identify strengths and weakness of

proton. STRENGTH 

strong support from the government









Experience of exporting cars



Availability of funds Popular in domestic country

Over reliant on the government Lack of successful operation internationally

Proton has over 20 years of experience



WEAKNESS



Limited product line



Quality constraint



Less human resource



Lack in R&D

CORE COMPENTENCIES CORE COMPENTENCIES refers to strengths or strategic advantages of a business. Core competencies are the combination of pooled knowledge and technical capacities that allow a business to be competitive in the marketplace. (Johnson, at el, 2008)


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PROTON HOLDING BHD

BUILDING SENARIO


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PROTON HOLDING BHD

Expertise PROTON expertise is focused around three axes: An industry/sector view, a geographic view, and a functional view.

1. Industry/Sector Areas of Expertise Proton Advisors has working knowledge in these two business sectors: Financial Services

It is expertise in the global securities markets; including deep expertise in all aspects of electronic trading, market data, order routing, execution management, order management, order matching and execution. We also have substantial expertise in independent/automated research technologies, including internet technologies such as semantic search and analysis. We have worked for market data and information vendors, brokerages, stock exchanges, and asset managers, advising on and delivering solutions for electronic trading. Networking and Telecommunication

It has extensive experience in global telecommunications, with a strong focus on business-tobusiness IP services and low latency networking for high-speed trading strategies. We have worked for network and telecommunications companies, been customers of those companies, and have advised network and telecommunications companies as well as network and telecommunications hardware and software suppliers.

2. Geographic Expertise Proton Advisors has worked with clients to deliver solutions around the world, with particularly strong experience in the major financial markets.

3. Functional Expertise Proton Advisors has working experience in the following functional areas: Business Strategy


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PROTON HOLDING BHD The foundation of your success is a business strategy that recognizes the strengths

that you

bring to the marketplace, and deploys your assets optimally to exploit those strengths. We can help you develop and refine your strategy.

Operational Execution

It doesn‘t matter how brilliant your strategy is unless it is effectively executed. Your goals

and objectives must flow from that strategy, and be supported by the right measurements, reward systems, and business processes. We can help you implement your strategy and troubleshoot your current operations.

Marketing Strategy and Product Development

A core element of any strategy is an understanding of what the market will pay for, and an ability to deliver products that customers will value.

We can help you implement an

effective, market driven product development methodology, and develop an effective go-tomarket approach.

Information Technology and Business Process

Underlying the success of any business strategy today is a set of information systems that are driven by and aligned with your business goals. You must have effective systems to manage your order-to-cash cycle, your customer service interactions, and to provide you with the information you need to support timely and quality decision making. We can assess your information technology systems, business processes, and organization, and recommend how to improve them so that they effectively support your business goals. PROTON was focusing on the above area before 2006(PERODUA entered in market) but now the scenario has been changed because it is not working up to the benchmark. So, at this point of time we can find that proton does not have any core competencies.

BUT, in order to get a sustainable competitive advantage, proton should go for: (On the basis of Competitive advantage Appendix-5) Vehicle Development Vehicle Development includes strategic alliance, value added partnership with Lotus, MV Agusta and Mitsubishi. ASIA PACIFIC INSTITUTE OF INFORMATION TCHNOLOGY

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PROTON HOLDING BHD

Innovation Capacity Building at PROTON - It includes Engineering and R&D Process, Skill Building, Knowledge Management, Manufacturing, Quality Certification as per standards. 

Knowledge Sharing Culture:



Proton Engineers



Technical Partners



Venders Suppliers

Flexible Production 

Attained through optimizing the resources



Standardized Work- Implemented by JIT and ‗Pull‘ system

Overall Equipment Effectiveness (OEE) Monitoring-That includes availability, performance and quality of PROTON cars throughout at optimum level. Proton is also working on LEAN MANUFACTURING Lean Manufacturing is the process of improvement and waste elimination undertaken by PROTON by avoiding unnecessary processes in car manufacturing and unnecessary stock.

Fuel efficiency Proton knows the price of fuel isn‘t getting any cheaper. The Proton Savvy uses just 5.7

liters per 100km combined city and highway driving (as per ADR81/01)

Customer service All new Protons come with a competitive warranty to give you added confidence. All Proton vehicles are backed by a comprehensive 3 year warranty. Plus you will also receive free roadside assistance in the case of a breakdown. Proton also guarantees your car against corrosion. Each Proton vehicle comes with a minimum 5 year comprehensive corrosion warranty for peace of mind against corrosion. Proton vehicles undergo a Pre Delivery Inspection by its Proton Dealer in accordance to the recommended inspection schedule set by Proton Cars.


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PROTON HOLDING BHD

TOWS ANALYSIS TOWS Matrix is a relatively simple tool for generating strategic options. By using it, we can look intelligently at how we can best take advantage of the opportunities, at the same time that we minimize the impact of weaknesses and protect us against threats. Used after detailed analysis of threats, opportunities, strength and weakness, it help us to consider how to use the external environment to our strategic advantage, and so identified some of the strategic options available. (Johnson, et al, 2008) The TWOS Matrix is an important matching tool that helps managers develops four types of strategies: SO strategies — use a firm‘s internal strengths to take advantage of external opportunities. WO strategies — are aimed at improving internal weaknesses by taking advantage of

external opportunities. ST strategies — use a firm‘s strengths to avoid or reduce the impact of external threats. WT strategies — are defensive tactics directed at reducing internal weaknesses and avoiding

external threats.


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PROTON HOLDING BHD

TWOS MATRIX OF PROTON INTERNAL STRENGTH

INTERNAL WEEKNESS

1. Commendable experience of 20 years.

1.Over reliant on the government

2. Government support.

2.Lack of successful operation

3. Experience of exporting cars.

internationally 3.Limited product line

4. Availability of funds

4.Quality constraint 5.Less human resource EXTERNAL OPPURTUNITY

1. Worldwide demand of product 2. Collaboration with Asian companies may boost up the sales. 3. Proton is evaluating a plan to

SO

WO

1. They can enter in new global market because it has good experience. (INTERNATIONAL

4. Economic of scale

while

working

operation.

on

worldwide

(international

level

strategy)

level strategy)

built a manufacturing plant is Egypt.

1. Try to increase the production

2. The manufacturing plant in 2. It has government support, so

Egypt may increase its product

they can provide quality service at

line.

best price. (BUSINESS level

( International level strategy )

strategy)

3. Company can go for joint venture or collaboration. (INTERNATIONAL level strategy) EXTERNAL THREAT

ST

WT

1. Try to manufacture fuel efficient

1. Reduce the price of cars as much

car to increase sales. ((operational

so it can be affordable for every

level strategy)

customer.

2. By their well qualified and

(Business level strategy )

technical R&D department they can

2. Always try to increase the sales

attract more customers and can lead

as it has good experience in export .

4.Changing technology

in terms of quality, cost and

(Business level strategy)

5.New competitors entering the

innovation

1. Slow growth 2.Economic slow down 3.Change in the consumer lifestyle

amongst

their

competitors.(operational

level


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PROTON HOLDING BHD market

strategy)

ALTERNATIVE STRATEGY: Here we are referencing the method and direction of strategic development beyond the scope of TWOS matrix but within the scope of company‘s

direction. 1. CAPTURE THE MARKET

Proton can capture the market, but competing at a local level should not be the concern for Proton thus for competing at a global level it should have some strategy that involves its strengths and opportunities so that it can overcome its weaknesses and threat.

2. MAINTAINING COST LEADERSHIP

It needs to have a cost cutting strategy so that it can invest in global market as it can also manage low cost of its car

3. ATTRACT CUSTOMERS

It can also have some expert people to build some international strategy to know the customs and attract the customer segment of the countries in which it is going to expand its market.

4. UNIQUE DESIGN

In order to sustain in the current scenario of market, Proton must move towards unique design. It will give an advantage to compete with its domestic as well as global competitors.

5. HYBRID CAR

Proton should go for hybrid as it will lead to low cost with a product differentiation in terms of product development as presently their products are not going well and with the help of well experienced and trained employees they can generate economies of scale by examining customer needs.


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PROTON HOLDING BHD

CURRENT STRATEGY

1. Vehicle Platform This department is responsible for vehicle development programmers covering: 

Product Strategic Planning.



Styling.



Supplier Development Programmer.



Natural Gas Vehicles (NGV)



Hybrid car


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PROTON HOLDING BHD

2. Prototype Centre Its

leading-edge

facilities

and

high

precision

tools

allow

error-free

prototypes to be built with extremely short lead times. The prototype centre is made up of the following:

Clay Modeling



3D scale models allow designers and engineers to conduct feasibility studies on preliminary designs.



Rapid Prototyping



Extremely fast production of prototype samples is possible during the development timing.



Prototype Shop .Full functioning prototypes are developed, as per vehicle design specifications. This enables testing to be carried out. ASIA PACIFIC INSTITUTE OF INFORMATION TCHNOLOGY

Page 24

PROTON HOLDING BHD 3. Engineering Development & Services This Department will help proton to perform a regulatory and management function: 

Vehicle Architecture



Maintaining a product engineering parts database for Vehicle Development plan



Managing data communication related to engineering designs with vehicle programs and PROTON vendors

4. Proton lifecycle management (PLM) As PROTON grows beyond the local market, we continue to employ innovative technology which will help us to accelerate the development of our products in a more timely, and cost effective manner. Product Lifecycle Management (PLM) solution is an initiative that PROTON has adopted, to manage the entire product lifecycle processes right from conceptual design through to after sales support. The program is being carried out together with the support of Hewlett-Packard (HP) and Siemens PLM.


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PROTON HOLDING BHD

After doing this study I found that among Proton‘s strategies, It should go for following

strategy: (1) Attaining cost leadership and differentiation strategies by improving the R&D sector and accelerating investment in product development. (2) Exploring new niche market and strategic alliance in order to expand the distribution channels. (3) Providing new brand images to accelerate public confidence and brand loyalty in the domestic and international market (4) Diversifying parts component sources and selecting reputable suppliers would help in achieving cost reduction effort of the company. (5) Creating strategic alliance to improve technical Capability as well as to penetrating new market and acquiring faster transfer of technology and technical-know-how. (6) It should go for more customers’ responsiveness . (7) To rationalizing its operations particularly in technological internalization efforts and on continuous improvement programs in Malaysia and Thailand it should increase its competitiveness.

(8) They should look at the possibility penetrating of direct exports to other assemblers outside and within ASEAN, such as Japan (possibly through strategic alliance with Katayama), and the growing markets such as in India and Turkey. (9)According to BCG Analysis Proton falls under Question mark in a result of which it can go for investing in new opportunities like Joint Venture. To be in capable of adapting the Lean Manufacturing it should go with Toyota.


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PROTON HOLDING BHD

This research conducted focused on the current and future strategy of proton with the objective of obtaining better understanding of the current practices in the Current market scenario of the Malaysian automotive industry.

COMPAY’S TIME FRAME


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PROTON HOLDING BHD

TIME FRAME This will help proton to identify the area of improvement

ACCORDING TO THE ANALYSIS OF TIME FRAME OF PROTON, JUST AFTER 3 -4 YEARS, COMPANY WILL BE ABLE TO BOOST ITS COMPETITIVENESS ACROSS THE WORLD.


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PROTON HOLDING BHD

STRATEGIC ACTIVITY MAP OF PROTON This is an activity mapping tools that allows you to plot lower & higher order thinking skills against application in a unit of work, a subject or cross circulation across several subjects. Then in predictable & unpredictable real world situation and scenarios which almost universally call on knowledge, process and skills from many area. This map can be helpful in informing managers what they can do to preserve and strategic capability.


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PROTON HOLDING BHD

Now, we can conclude that PROTON has indeed working very hard for total quality management, customer responsiveness, product development and strategic collaboration. Due to the hyper competition in market it will be important to focus on the Best Product positioning. To have this they must have a good R&D at their inbound logistic. In order to get sustainability in market they must focus on low cost or differentiation of the products. In order to maintain the process of engineering and designing passenger cars which will suit the taste and preferences of the customers this is affected by different demographics, economics and social factors. Apart from this, managing key risks and identifying emerging risks especially in export markets will also play an important role for being a major international player. Thus, Company should go for right product, at right place, at right price and right time.


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PROTON HOLDING BHD

BOOKS 

C,Sunil,M,Peter,and D,Kalara,2010,Supply chain management, 4th Edition,South Asia,Dorling Kindersley.



Kotler, P. and Keller, K.L, 2009, Marketing Management, South Asia, New Jersey, (pp 53, 77-84)



A. Pierre, et al 2007, International supply chain management, Canada, Nelson.



D, Garry and W, Margareta, .2007, The management of technology and innovation, 1st Edition, Canada, Nelson.



G,Vipin,G,Kamal,R.srinivasan.,2009,Business

policy

ad

strategic

management,India,PHI Pvt Ltd. 

H, Jones, 2009, Essentials of management, Canada, Nelson.

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seventh Edition , India, Dorling Kindersley 

K, Azhar., 2010,Strategic management and business policy,India,Tata Mc Graw.



K, Philip, 2009, Marketing management, 13th Edition,South Asia,Dorling Kindersley.



NL, Charles. 2010,.Integrated approach to strategic management, South Asia, Pearson.



Prahalad, C. K, and Hamel, .1990, The core competence of the organization. HARVARD BUSINESS REVIEW, (90, 79 – 93)



R,Duane et al, 2009,Strategic management,Canada,Nelson.



S, Janat, 2009, Supply chain management, South Asia, Pearson.



S, Robbins,. 2007, Management, 9th Edition,Us,Prentice Hall.

 Tyagi.R., Available from: www.ProcessExcellenceNetwork.com/, [Accessed:

12th

Nov, 2011]( BALANCE SCORE CARD)


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PROTON HOLDING BHD

JOURNALS 

Garth, S, at el, 2008, Strategic Management , Delhi: John Wiley and Sons Inc.



Hax, A. and Wilde II, D, 2003, ‗The Delta Model- A New Framework of Strategy‘. Journal of Strategic Management Education ,vol. 1, no. 1. Available

fromhttp://pesona.mmu.edu.my/~wruslan/MISP2/Readings/detail/Reading-37.pdf. 

Kuemmerle, W., 2001, Home base and knowledge management in international ventures. JOURNAL OF BUSINESS VENTURING , 17, 99 – 122; Lorenzoni, G., &Lipparini, A. 1999.



Prahalad, C. K., and Hamel, G, 1990, Thecore competence of the organization, Harvard Business Review, 90, 79 – 93.

ARTICLE 

2003, LG CNS Automotive Consulting Service



2010, ―Market Watch 2010‖,The Malaysian Automotive and Supplier Industry, p34- 46.



Abidin A.S.Z., 2011, Exploratory Study: Design Capabilities Development for Malaysian Vendors in Automotive Industry,Proceedings of the 2011 International Conference on Industrial Engineering and Operations Management Kuala Lumpur, Malaysia, p45-46.



Abidin, A., 2011, Proceedings of the World Congress on Engineering, Assessing Proton and Vendors Design Capabilities towards Internationalization, 1 (2), p5-6.



Arshad, S., 1996, The history of the Malaysian automotive industry, p67-69.



Mokhtar, M., 2010, Proton Annual Report.


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PROTON HOLDING BHD

WEBSITE



Strategic Management, Available from:http://www.emeraldinsight.com/products/journals/journals.htm?id=jsma, [Access ed- 11thOct, 2011]



Business Strategy, Available from: http://tutor2u.net/business/strategy/ansoff_matrix.htm[Accessed- 25th Oct, 2011]

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Proton, Available from: www.proton.com, [Accessed-17th Oct, 2011]

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Proton, Available from: www.proton-edar.com.my, [Accessed- 23th Oct, 2011]

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Investopedia, Available from:http://www.investopedia.com/terms/v/valuechain.asp#axzz1daBEIoBh, [Accessed- 01stNov, 2011]

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Businessdictonary, Available from: http://www.businessdictionary.com/definition/capability.html, [Accessed- 07th Nov, 2011].

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Proton, Available from: http://www.hoovers.com/proton-holdings/--ID103957- /freeuk-co-factsheet.xhtml, [Accessed-26nd Oct, 2011].

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PROTON HOLDING BHD

Appendix-1 PEST ANALYSIS Factors

Could include

Political

e.g. International trade, the euro, taxation policy, government trade regulations

Economical

e.g. Interest rates, exchange rates, national income, inflation, unemployment, stock market,

Social – cultural factors

e.g. Ageing population, attitude to work, income distribution

Technological

e.g. Innovation, new product development, rate of technological obsolescence , R & D

Environmental

e.g. Global warming, environmental issues, waste disposal, energy consumption

Legal

e.g. Competition law, health and safety, employment law, product safety


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PROTON HOLDING BHD

APPENDIX-2 V a l u e c h a i n a n a l y s i : Value Chain Analysis describes the activities that take

place in a business and relates them to an analysis of the competitive strength of the business. Influential work by Michael Porter suggested that the activities of a business could be grouped under two headings: (1) Primary Activities - those that are directly concerned with creating and delivering a product (e.g. component assembly); and (2) Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities. Value Chain Analysis is one way of identifying which activities are best undertaken by a business and which are best provided by others ("out sourced"). Linking Value Chain Analysis to Competitive Advantage

What activities a business undertakes is directly linked to achieving competitive advantage. For

example,

a

business

which

wishes

to

outperform

its

competitors

through differentiating itself through higher quality will have to perform its value chain activities better than the opposition. By contrast, a strategy based on seeking cost leadership will require a reduction in the costs associated with the value chain activities, or a

reduction in the total amount of resources used. Primary Activities

Primary value chain activities include: Primary

Description

Activity

Inbound

All those activities concerned with receiving and storing externally sourced


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PROTON HOLDING BHD logistics

materials

Operations

The manufacture of products and services - the way in which resource inputs (e.g. materials) are converted to outputs (e.g. products)

Outbound

All those activities associated with getting finished goods and services to

logistics

buyers

Marketing and Essentially an information activity - informing buyers and consumers about sales

products and services (benefits, use, price etc.)

Service

All those activities associated with maintaining product performance after the product has been sold

Support Activities

Support activities include: Secondary

Description

Activity

Procurement

This concerns how resources are acquired for a business (e.g. sourcing and negotiating with materials suppliers)

Human

Those activities concerned with recruiting, developing, motivating and

Resource

rewarding the workforce of a business

Management Technology evelopment Infrastructure

Activities concerned with managing information processing and the development and protection of "knowledge" in a business Concerned with a wide range of support systems and functions such as finance, planning, quality control and general senior management

Steps in Value Chain Analysis

Value chain analysis can be broken down into a three sequential steps: (1) Break down a market/organization into its key activities under each of the major headings in the model;


Page 36

PROTON HOLDING BHD (2) Assess the potential for adding value via cost advantage or differentiation, or identify current activities where a business appears to be at a competitive disadvantage; (3) Determine strategies built around focusing on activities where competitive advantage can be sustained APPENDIX-3

SWOT analysis: SWOT analysis is a method for analyzing a business, its resources, and its environment.

SWOT is commonly used as part of strategic planning and looks at: 

Internal strengths



Internal weaknesses



Opportunities in the external environment



Threats in the external environment ASIA PACIFIC INSTITUTE OF INFORMATION TCHNOLOGY

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PROTON HOLDING BHD SWOT can help management in a business discover: 

What the business does better than the competition



What competitors do better than the business



Whether the business is making the most of the opportunities available



How a business should respond to changes in its external environment

The result of the analysis is a matrix of positive and negative factors for management to addre Positive factors

Negative factors

Internal factors

Strengths

Weaknesses

External factors

Opportunities

Threats

ss:



Are internal to the business



Relate to the present situation

Opportunities and threats



Are external to the business



Relate to changes in the environment which will impact the business

Using SWOT analysis

The key words are match and convert :

A key challenge for any business is to convert weaknesses into strengths. For example: Weakness

Possible Response


Page 38

PROTON HOLDING BHD Outdated technology

Acquire competitor with leading technology

Skills gap

Invest in training & more effective recruitment

Overdependence on a single product

Diversify the product portfolio by entering new markets

Poor quality

Invest in quality assurance

High fixed costs

Examine potential for outsourcing or off shoring

APPENDIX-4

Porter's Five Forces Model: analyzing industry structure Defining an industry

An industry is a group of firms that market products which are close substitutes for each other (e.g. the car industry, the travel industry). Some industries are more profitable than others. Why? The answer lies in understanding the dynamics of competitive structure in an industry. The most influential analytical model for assessing the nature of competition in an industry is Michael Porter's Five Forces Model, which is described below:


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PROTON HOLDING BHD Porter explains that there are five forces that determine industry attractiveness and long-run industry profitability. These five "competitive forces" are Threat of New Entrants

New entrants to an industry can raise the level of competition, thereby reducing its attractiveness. The threat of new entrants largely depends on the barriers to entry. High entry barriers exist in some industries (e.g. shipbuilding) whereas other industries are very easy to enter (e.g. estate agency, restaurants). Key barriers to entry include 1. Economies of scale 2. Capital investment requairements 3. Customer switching cost Threat of Substitutes

The presence of substitute products can lower industry attractiveness and profitability because they limit price levels. The threat of substitute products depends on: 1.The

relative

price

and

performance

of

substitutes

2.The costs of switching to substitutes Bargaining Power of Suppliers

Suppliers are the businesses that supply materials & other products into the industry. The cost of items bought from suppliers (e.g. raw materials, components) can have a significant impact on a company's profitability. If suppliers have high bargaining power over a company, then in theory the company's industry is less attractive. Bargaining Power of Buyers

Buyers are the people / organizations who create demand in an industry There Buyers

are

few

dominant

buyers

threaten

to

integrate

and

many backward

sellers into

in

the the


industry. industry

Page 40

PROTON HOLDING BHD Suppliers

do

not

threaten

to

integrate

forward

into

the

buyer's

industry.

The industry is not a key supplying group for buyers. Intensity of Rivalry

The intensity of rivalry between competitors in an industry will depend on: The structure of competition - for example, rivalry is more intense where there are many

small or equally sized competitors; rivalry is less when an industry has a clear market leader The structure of industry costs - for example, industries with high fixed costs encourage

competitors to fill unused capacity by price cutting Degree of differentiation - industries where products are commodities (e.g. steel, coal) have

greater rivalry; industries where competitors can differentiate their products have less rivalry Switching costs - rivalry is reduced where buyers have high switching costs - i.e. there is a

significant cost associated with the decision to buy a product from an alternative supplier Strategic objectives - when competitors are pursuing aggressive growth strategies, rivalry is

more intense. Where competitors are "milking" profits in a mature industry, the degree of rivalry is less Exit barriers - when barriers to leaving an industry are high (e.g. the cost of closing down

factories) - then competitors tend to exhibit greater rivalry. APPENDIX-5 Competitive Advantage: A competitive advantage is an advantage over competitors gained

by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices. Competitive Strategies: Following on from his work analyzing the competitive forces in an industry, Michael Porter suggested four "generic" business strategies that could be adopted in order to gain competitive advantage. The four strategies relate to the extent to which the scope of businesses' activities are narrow versus broad and the extent to which a business seeks to differentiate its products. ASIA PACIFIC INSTITUTE OF INFORMATION TCHNOLOGY

Page 41

PROTON HOLDING BHD The four strategies are summarized in the figure below:

The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments. By contrast, the differentiation focus and cost focus strategies are adopted in a narrow market or industry. Differentiation

This strategy involves selecting one or more criteria used by buyers in a market - and then positioning the business uniquely to meet those criteria. This strategy is usually associated with charging a premium price for the product - often to reflect the higher production costs and extra value-added features provided for the consumer. Differentiation is about charging a premium price that more than covers the additional production costs, and about giving customers clear reasons to prefer the product over other, less differentiated products. Examples of Differentiation Strategy: Mercedes cars; Bang & Olufsen Strategy - Cost Leadership

With this strategy, the objective is to become the lowest-cost producer in the industry. Many (perhaps all) market segments in the industry are supplied with the emphasis placed minimizing costs. If the achieved selling price can at least equal (or near)the average for the market, then the lowest-cost producer will (in theory) enjoy the best profits. This strategy is usually associated with large-scale businesses offering "standard" products with relatively ASIA PACIFIC INSTITUTE OF INFORMATION TCHNOLOGY

Page 42

PROTON HOLDING BHD little differentiation that are perfectly acceptable to the majority of customers. Occasionally, a low-cost leader will also discount its product to maximize sales, particularly if it has a significant cost advantage over the competition and, in doing so, it can further increase its market share. Examples of Cost Leadership: Nissan; Tesco; Dell Computers Strategy - Differentiation Focus

In the differentiation focus strategy, a business aims to differentiate within just one or a small number of target market segments. The special customer needs of the segment mean that there are opportunities to provide products that are clearly different from competitors who may be targeting a broader group of customers. The important issue for any business adopting this strategy is to ensure that customers really do have different needs and wants - in other words that there is a valid basis for differentiation - and that existing competitor products are not meeting those needs and wants. Examples of Differentiation Focus: any successful niche retailers; (e.g. The Perfume Shop); or specialist holiday operator (e.g. Carrier) Strategy - Cost Focus: Here a business seeks a lower-cost advantage in just on or a small

number of market segments. The product will be basic - perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumers. Such products are often called "me-too's".Examples of Cost Focus: Many smaller retailers featuring own-label or discounted label products. Culture and attitudes. APPENDIX- 6 Balance score card: This method is very much effective to analyze the position of Proton

when compared to its competitors on different scale like holdings from share holders, customer satisfaction level. According to balance score card (appendix) it is important for proton to revamp its strategy as in many a cases Proton is stronger but in some it is weak too. It has a good position in share market but it is losing it because of Perodua‘s low cos t product and with good quality.


Page 43

PROTON HOLDING BHD Balance

Shareholder Look

Operational

Organizationa

Effectiveness

l Learning

Volume, revenue, gross

Wholly-owned

% of sales from

Customer market share by

margin by technology

subsidiary Lotus

new technology

tier

segment and market

Engineering UK –

and models;

Profitability by customer

segment

leading automotive

Training as a % of tier

Revenue and turnover by

engineering

sales;

geographical segment

consultancy company

(Asia, Europe, Middle

Application of

East, Africa and Pacific)

Information

Score

Customer targeting

Card Proton

Customer satisfaction by tier

Technology in the R&D Strategic

Volume, revenue,

Number of clients

Customer satisfaction;

and

turnover, gross margin

on each country

Joint

Integrated

by individual client

and partner;

turnover

Partner

Year over year sales and

Return on

complementary

companies

turnovers growth by

investment on

relationship

individual clients;

collaboration

Relationship

Cost to serve clients;

revenue

and from

tools per selected clients; Body

Volume, revenue,

Time needed in order to

Cost

of

Shopper

turnover, gross margin

complete thetransaction

collaboration tool

channel;

by individual clients;

from start to finish per

in

Customer satisfaction on

Return on investment per

model or project;Return

facilitate transfer

the models, relationship

head;

on investment on

of knowledge

and cost of products.

% revenue and sales

collaboration;Direct

from new clients

selling.

order

the

to

Cost to serve clients per

APPENDIX-7 Porter Diamond Model

According to Porter, as a rule competitive advantage of nations is the outcome of 4 interlinked advanced factors and activities in and between companies in these clusters. These can be influenced in a pro-active way by government. PORTER argued that a nation can create new advanced factor endowments such as skilled labor, a strong technology and knowledge base, government support, and culture. PORTER used a diamond shaped diagram ASIA PACIFIC INSTITUTE OF INFORMATION TCHNOLOGY

Page 44

PROTON HOLDING BHD as a basis of a frame work to illustrate the determinants of national advantage. The diamond represents the national playing field that the countries establish for their industries. The points of the diamond are described as follows 1. FACTOR CONDITIONS- a country creates its own important factors such as skilled resources and technological base. These factors are upgraded / deployed over time to meet the demand. Local disadvantages force innovations. new methods and Hence comparative advantage. 2. DEMAND CONDITIONS -A more demanding local market leads to national advantage. A strong trend setting local market helps local firms anticipate global trends. 3. RELATED AND SUPPORTING INDUSTRIES -Local competition creates innovations and cost effectiveness. This also puts pressure on local suppliers to lift their game. 4. FIRM STRATEGY, STRUCTURE AND RIVALRY- Local conditions affect firm

strategy. Local rivalry forces firm to move beyond basic advantages. APPENDIX-8 The Boston Consulting Group Box ("BCG Box")

BCG MATRIX OF PROTON

MARKET SHARE HIGH INSTITUTE OF INFORMATION LOW ASIA PACIFIC TCHNOLOGY

Page 45

PROTON HOLDING BHD

H G I H H T W O R G T E K R A M

STARS

QUESTION MARKS

Proton can use its cash cow position

Proton can invest in increasing its

to reach up to this category as it has

market share in that country where the

now started to bring on new

growth of market is high as currently

technology to increase its market

does not fall in this category to move

share in new global market.

itself to STAR.

CASH COW

DOG

Proton should work to get position in In this category Proton should invest this cell. It has less percentage in this more on those product that are very old

W O L

cell as the growth of other

in technology and have poor

automobile industry has now started

performance, as it is bringing up new

increasing and the holding market

version of Exora (Exora 2)

share.

Using the BCG Box (an example is illustrated above) a company classifies all its SBU's according to two dimensions: On the horizontal axis: relative market share - this serves as a measure of SBU strength in

the market On the vertical axis: market growth rate - this provides a measure of market attractiveness

By dividing the matrix into four areas, four types of SBU can be distinguished: Stars - Stars are high growth businesses or products competing in markets where they are

relatively strong compared with the competition. Often they need heavy investment to sustain their growth. Eventually their growth will slow and, assuming they maintain their relative market share, will become cash cows. Cash Cows - Cash cows are low-growth businesses or products with a relatively high market

share. These are mature, successful businesses with relatively little need for investment. They need to be managed for continued profit - so that they continue to generate the strong cash flows that the company needs for its Stars. ASIA PACIFIC INSTITUTE OF INFORMATION TCHNOLOGY

Page 46

Prerna Shree

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