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Proton Holdings Bhd Case Study

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Question:

Discuss about the Case Study for Proton Holdings Bhd.

 

Answer:

Introduction

This paper describes the various aspects of the Proton holdings. The objective is to evaluate the depth analysis of the Proton car in Malaysia. It enables to determine the key issues, mission, vision & objective statement, environment analysis, internal analysis, evaluation of current strategies, TOWS analysis, proposed of alternative strategy and strategy evaluation. Proton missions is to become a leader in products, service and solutions that fulfill our requirement. Proton vision is to provide a clear picture of doable and what we design to achieve. Asia is a big market for the Proton car at the current situation.

Background:

Proton Holding is a Malaysian car producer company that headquarter located in Subang Jaya, Selangor(Malaysia). It was founded in 7 May 1983. It operates in at least 26 nations. It delivers cars and car parts in Malaysia market. (Proton 2016). It was sold right hand drive market in New Zealand, Singapore and the United Kingdom. Proton has commissioned CKD plants in Vietnam, Iran, Philippines, China and Indonesia. Share price down is main challenge of the Proton car and Proton launched new model of car to survive in the market that indicate good sign of its growth and development in the market. (Davidson 2015).

Vission, Mission and Objective statement:

The vision of the Proton is to” know for innovative services, responsiveness, reliability and exemplary conduct”. Proton's mission is to “committed to a culture that promotes strong business ethics in all stages including competitive costs, delivering quality services, action, dealing with our vendors and employees”. The objective statement is to “spearhead the automotive industrialization process and production sectors”, along with upgrade technology within the Proton car in Malaysia. Proton objective is the SMART because they are helpful to survive in the current comepetitve automotive sector. (Fuller et al 2009).

 

Key challenges or issues:

These are the significant key challenges or issues in Proton car that described below:

The key issues with Proton car is that its share price fell to 21.2% in 2012 from 26% in 2011. In 2014, Proton’s share price slid to 19%. So, they desire to launch new car model to raise their sales in the current competitive market. (Davidson 2015).

The Toyato and Honda is the main competitive in the market that is big challenges for the Proton to survive in the competitive market. (Mahalingam 2014).

Proton brand is notorious for sales growth. They were recalling close to 100000 of its vehicles from the Preve, Suprima, and Exora model, due to a cooler hose issues in the car model. (Ahmad 2016).

External business environmental analysis:

It will determine the PESTEL and SWOT analysis of the Proton car.

PESTEL Analysis: It covers the political, economical, social, technological, environmental and legal factor that affected the Proton car in Malaysia that is described below:

Political: It is the significant factor that affected the Proton sales in the current competitive market. Proton prices are kept lower to a foreign producer by protectionism. It is possible by the political certainty in Malaysia. The environmental regulation in Malaysia can be found during the British colonialism that presented the environmental standards about the agriculture and mineral to European countries. Further, political certainty is the significant part of the Proton that affected the growth of it. The Malaysian country has a good political condition as well as business growth perspective. (Davidson 2015).

Economic: Proton sales are fall year by year due to different economic condition, the worldwide financial crisis affected the Malaysian financial status in the automotive sector. The Malaysian government is expecting a slow economic growth for the nation that can affect the buying behavior of the customers. Due to the AFTA, it has raised the competitive in the market that will impact the performance of the Proton. Proton’s created a car as per consumer segmentation. The Proton car sales are expected to fall by 12.4 percent in 2009 due to economy uncertainty. (Davidson 2015).

Social: It is the another significant factor that affected the Proton holding. The population is the significant factor that affected the automobile industry. In 2008, the nation has a total of 27.5 million citizens. It will provide a huge market for the Proton car. The ratio of car ownership in the nation is high that presents that people are taking interest to buy cars in their lives. Malaysian purchasing power parity is an approximately $525 billion in 2013 that raise the sales of it. (Chapman 2015). Further, it is a national brand that is popular in our local market. So, customer prefers to buy the Proton’s car. It has well-established transport network such as rail, road and air network that affected the social factor of the Proton car. (Ahmad 2016).

Technology: Technology is the significant factor that affected the Proton car. The development in technology is the beneficial for the performance and position of the company. Technology is the demand of the current market that affected the sales of the Proton car in the automotive sector. (Ahmad 2016). Further, Proton has high potential to grow in the competitive market due to technological innovation. Proton technology requires permission from the Malaysia Ministry of Science, Technology and Innovation (MOSTI). MOSTI focuses on five fields such as sea to space, industry, ICT policy, biotechnology, core science, and technology. (Felker, Jomo & Rasiah 2013).

Environment: Proton holding environment affected the car segment sales and growth in the current competitive market. It is the significant factor of the Proton car. Different environment culture affected the future of the Proton car. A positive environment affected the Proton car business model in the competitive market. (Proton 2016).

Legal: It is the significant factor of the Proton car. Malaysian country has to follow many legal activities that to run their car business in the market. A legal procedure helps to survive Proton car business in the Malaysian market. Proton’s committed for safety and environmentally friendly cars. (Davidson 2015).

 

SWOT Analysis:

It covers the strength, weakness, opportunity and threat of the Proton car.

Strenght: Malaysian people are familiar with its brand. So, the car manufacturer has support from the government that is considered as the significant entity in any business environment. It has a huge distribution network that helps to raise the sales of the Proton cars in Malaysia market. It delivers varieties of product car in the market that attract new customer of it. (Davidson 2015).

Weakness: It has a low brand image in the local market that is the signifcant strength of it. Proton used high technology in their car manufacturer. So, it is costly for the customer that is a weakness of it. Proton has different kinds of issue in their inability to retain and cultivate talent. Due to this reason, the Proton is lacking in abroad operations. It is the lack of original products and limited products due to an innovative model of it. (Proton 2016).

Opportunity: It has a high demand of the product in the market that is the significant opportunity of it.  It has a good opportunity to expand their business in international market.  Malaysian government supports the automotive sector. So, the Proton has good future in the market. (Davidson 2015).

Threat: Proton has a lot of competition in local and abroad market that is a threat of it. Proton has a lot of substitute products in the market that is another significant threat of it. Proton has fast and advances technology changes that are threat of its fast growth in the market. The economic downturn is a decreasing car sale of it. (Davidson 2015).

Strenght

Weakness

ü  Variety of products

ü  Good corporate governance

ü  Good support from government

ü  A huge distribution network

ü  Low brand image in local market

ü  High cost due to advance technology operation

ü  Vulnerable to raising material cost

Opportunity

Threats

ü  Expand business in worldwide market

ü  High demad for the products

ü  Malayasian government support

ü  Rivalry- local and abroad products

ü  Huge substitute products in market

ü  Fast and advanced technology changes

(Source: Fuller et al 2009)

Internal business environment analysis (Porters 5 five forces):

It covers the following parts that are described below:

The power of buyer: Proton’s buyer will select the lower price car. It is the significant five forces industry analysis. Protons have a high quality car that is success reason behind it. Customer prefers to buy the car due to low high quality with lower price. (Ahmad 2016).

The power of suppliers: Few dominant suppliers is the significant forces of the Porters five forces. Proton doesn’t face serious issues from the supplier sides. It has secured channels through the government. An automotive industry is connected to safety and quality of life that is possible by the suppliers. (Fuller et al 2009).

The threat of new entrants: It has a significant factor of the Porters five forces in the industry. New organizations are coming on the market that is the main threat to the Proton’s growth and development. It has high capital and investment is needed for an automotive industry. Lack of availability of the distribution channels is the significant part of the Proton’s car. (Ansari 2016).

The threat of substitutes: Sometimes automotive sector has the main threat with a substitute of the same segment products. Proton’s car has few substitutes in the market that reduce the growth and development of the organization. It is the significant threat of substitute that helps to survive in the competitive market. (Plunkett 2008).

The threat of existing rivalry: The competition is raised due to high exit and human resource. Proton car has a lot of competition in the market. So, they are unable to popular in the whole market leader. (Ahmad 2016). Protons has some more competition in the market due to their competitor's companies such as Toyota and Honda that are described below:

Category

Brand

Luxury

Executive

Family

MPV

Compact

Proton

-

Perdana

Waja

Exora

Savvy

Toyota

Camry

Altis

Vios

Avanza

Wish

Yaris

Honda

Accord

Civic

City

Stream

Jazz

(Source: Chapman 2015)

VRIO analysis: Internal analysis of the Proton covers the value chain analysis that is described below:

Proton’s value chain analysis (VRIO analysis) is a range of activities carried out in order to take products and services from design, customer, and production. Proton has the caliber to import quality parts from its strong abroad suppliers. An automotive industry has allowed the organization to develop distribution networks within Malaysia. They should outsource this operation to vender to become a more complex organization in this industry. It ensures that they are able to distribute products to remote regions that are a source of competitive advantages. (Shuman 2016). Further, Proton brand allows the organization to enjoy low demand for marketing. Proton has the caliber to develop a strong brand name and public relation due to their partnership, sponsorship, and quality product offering. The proton quality and brand image allowed it to develop the stronger brand image. (Proton 2016).

VRIO framework will analysis that how it is managing its resource. The analysis will cover the Proton human, financial, physical and intangible assets. This analysis is performed with the valuable and organized in its use of this resource. (Plunkett 2008).

Resource

Valuable

Rarity

Imitability

Organization

Remarks

Human asset

ü   

û   

ü   

û   

Average

Financial

ü   

ü   

û   

û   

Very good

Physical assets

ü   

ü   

ü   

ü   

Excellent

Intangible asset

ü   

û   

ü   

û   

Average

(VRIO Framework, Source: Plunkett 2008)

 

Evaluation of current strategies:

Proton’s adopted several significant strategies in the areas of product & services, research & development, manufacturing, quality management, shareholders, human resource, business associate and sales & distribution. Product & service includes customer oriented and developing new innovative strategies. Research & development includes conduct projects by collaboration with Malaysian, development of new low cost and raised fuel efficiency. (Gin 2009). Manufacturing includes a flexible system and a joint venture with other national. Quality management includes three stage line inspection such as fitting exterior and interior car, dynamic appraisal of drivability and final inspection to deliver customers. Shareholder strategies include investor relations program. Human resource strategies include reward, retain the best staff and development communication of policies that affected staff. The business associated strategy includes alliance opportunities that deliver ideas into Asian, South American, North American and European market. Sales and distribution strategy of the Proton includes strengthening of domestic sales, improve customer service and international expansion plants. (Chapman 2015).

Ansoff matrix: Ansoff matrix is composed of four strategies such as penetration, product development, market development and diversification. Market penetration is related to existing automotive market with car model. Product development is related to existing and new car product of the Proton. It occurs when strategy is developing a new product in same market. Market development is related to existing and new market product of the Proton that occur when the Proton car is tweaking the product to new consumers. Diversification is related to new market and new product of the Proton car. (Stone 2001).

[Ansoff Matrix, (Source: Hanlon 2013)]

Strategic clock: It is helpful to analysis the competitive position as compare to offerings of competitors. It presents eight strategies in four quadrants through axes of price and added values. This strategy is helpful in Proton car because it helps to survive in the competitive market as compare to other car organizations. (Chapman 2015).

[The strategy clock, (Source: Chapman 2015)]

Merger & acquisitions (M&A) strategy: It will help the growth process of the Proton car. It will helps Proton to get new technology, operations and market to reduce cost. The risk of failure is a proper planning and analysis to handle the Proton holding business. (Stone 2001).

Benchmarketing for automotive sector: Benchmarking is the process that provides best practices from other organizations in the perspective of the quality, time and cost. It identifies the best organization in the automotive sector on the basis of three years benchmarketing survey.

(Source: Automotive Tax Insight 2013)

Proposed of alternative strategy:

Proton should develop the innovative car to raise the sales of it. It will help to increase the share price in the competitive market. Proton should maintain coordination between the mission, vision and statement objective to survive in the competitive market. (Anand 2016). Further, it helps to handle the uncertainty of the Proton car sales and development growth in the future. If the Proton will face a lot of competition in the market. Then, the proposed alternative strategy will help to improve in it. So, the proposed alternative strategy will help to survive in the current competitive market. Proton changed its strategy from cheap cars to world standard car manufacturer that would be beneficial for the organization growth and development. It is a beneficial strategy for the future growth of the Proton car due to deliver cars as per customer requirement. (Tan 2007).

 

Conclusion

From the above analysis, it can be concluded that clear key issues, mission, vision & objective statement, environment analysis, internal analysis, evaluation of current strategies, proposed of alternative strategy and strategy evaluation as well as high ability to adopt new technology in Proton can help it to maintain its competitive position in the Malaysian market. Proton has worked with the philosophy of producing the right car at right market, at the right cost and at the right time. Proton is one of the first car manufacturers in Malaysia that established strong identification in the automotive market. Feasibility is related to Proton finance that came from total revenue of the Proton car sales. Acceptability is related to stakeholder that engage in the Proton business. Suitability is related to the Proton proposed strategy address that will help to survive in the competitive market.

Recommendation:

These are the significant recommendation for the Proton car that is described below:

Proton should be independent with strategic partners who will provide technologies for improve quality and reduce the cost of the car. Proton technology helps to fulfill customer desire or needs. (Anand 2016).

Proton should increase the export of manufactured cars to the AFTA members such as Philippines, Singapore, Indonesia, Brunei, Thailand, Myanmar and Vietnam. It will raise the sales of the Proton. It will help to raise the sales of the Proton car outside the Malaysian market. (Ahmad 2016).

Proton should adopt repositioning strategy to diversity from existing market by uncovering new applications. Repositioning means Proton can segment the situation to become realistic. (Anand 2016).

Proton should develop a new product line that innovative for the provider as opposed to the marketplace. It will satisfy the different kinds of the customers. (Plunkett 2008).

 

References

Anand, R, 2016, After Five-Year Slide, Proton At Risk Of Loasing Second Spot To Honda, View 27 July, 2016, from: https://www.themalaymailonline.com/malaysia/article/after-five-year-slide-proton-at-risk-of-losing-second-spot-to-honda

Ahmad, A, 2016, Proton CEO: 150000 Sales Possible If New Models Launched On Time, View 27 July, 2016, from: https://www.nst.com.my/news/2016/06/151821/proton-ceo-150000-sales-possible-if-new-models-launched-time

Ansari, A, 2016, Story Of Proton And Its Love/Hate Relationship With Malaysians- Auto Insider, View 27 July, 2016, from: https://www.themalaymailonline.com/what-you-think/article/story-of-proton-and-its-love-hate-relationship-with-malaysians-auto-insider

Automotive Tax Insight, 2013, 2013 Tax Rate Benchmarketing Study For The Automotive Sectors, View 27 July, 2016, from: https://www.pwc.com/us/en/tax-services/newsletters/automotive-tax/assets/pwc-automotive-tax-rate-benchmarking-study.pdf

Chapman, G, 2015, Car Emblems: The Ultimate Guide to Automotive Logos Worldwide,

Chartwell Books, Kuala Lumpur.

Davidson, JS, 2015, Indonesia's Changing Political Economy, Cambridge University Press, New York.

Felker, G, Jomo, KS, & Rasiah, R, 2013, Industrial Technology Development in Malaysia: Industry and Firm Studies, Routledge, New York.

Fuller, T, Hartnig, C, Ramani, V, Uchida, H, Gasteiger, HA, Cleghorn, S, Strasser, P,

Gin, OK, Ooi, KG, & Gin, 2010, The A to Z of Malaysia, Rowman & Littlefield, Kuala Lumpur.

Gin, OK, 2009, Historical Dictionary of Malaysia, Scarecrow Press, Kuala Lumpur.

Gomez, E, 2003, Political Business in East Asia, Routledge, New York.

Hanlon, A, 2013, Using The Ansoff Matrix To Identify Growth Opportunities, View 27 July, 2016, from: https://www.smartinsights.com/marketing-planning/create-a-marketing-plan/ansoff-model/

Lopez, L, 2016, Najib- Mahathir Clash: Proton In For A Bumpy Ride, View 27 July, 2016, from: https://www.straitstimes.com/asia/se-asia/najib-mahathir-clash-proton-in-for-a-bumpy-ride

Mahalingam, E., 2014, Proton Must Develop New Technology, View 24 July, 2016, from: https://www.thestar.com.my/business/business-news/2014/06/03/brokerage-proton-must-develop-new-technology/

Proton, 2016, Proton, View 27 July, 2016, from: https://www.proton.com/

Plunkett, JW, 2008, Plunkett's Automobile Industry Almanac 2009: The Only Comprehensive Guide to Automotive Companies and Trends, Plunkett Research, Ltd, Singapore.

Shuman, V, 2016, Shame On You For Hiding Your Issues, Proton, View 24 July, 2016, from: https://www.freemalaysiatoday.com/category/opinion/2016/02/18/shame-on-you-for-hiding-your-issues-proton/

Stone, P, 2001, Make Marketing Work for You: Boost Your Profits with Proven Marketing Techniques, How To Books Ltd. Kuala Lumpur.

Sturgeon, T, Biesebroeck, J, & Gereffi, G, 2008, Value chains, networks and clusters: reframing the global automotive industry, Journal of economic geography, p.lbn007.

Tan, J, 2007, Privatization in Malaysia: Regulation, Rent-Seeking and Policy Failure, Routledge, New York.

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