PROTON Holdings BerhadStrategic Management (N14M07 MY) (AUT 13-14)Dr. Avvari V Mohan

Prepared By:

Arman KulchmanovVeronika YerembessovaRasha Zohour AdiAdeline Gan Hwee Ling

04/08/2023

FACTS

• Profile of the company• Year-founder-size of production-revenue

Name Perusahan Otomobil Nasional Berhad (PROTON)Year Founded 1983

Founder Mahathir Mohamad

Subsidiaries 11 Subsidiaries and 11 associated companies manufacturing, research and development, sales and service activities.

Adopted Technology Technology and parts from Mitsubishi Motors

First Car Proton Saga 1985

First Plant Shah Alam

Actual Size Of Production 350,000 units per year two plants combined

Revenue For 2010 8227 million RM

Average Revenue From 2006 Till 2010

6571 million RM

International Market Right hand drive market: New Zealand, UK as well as the Middle East, South-East Asia and Australasia, but it was mostly successful in UK

04/08/2023 PROTON Official Website

COLLABORATION/PARTNERSHIPPROTON-

MITSUBISHIPROTON SEPARATE PROTON + (?)

MISSED OPPORTUNITIES

1985

SAGA: 1.3 or 1.5 litre engines. Simpler model of the Lancer, a well-established and popularMitsubishi model for the mass market

2001 WAJA: its first home-designed model.

To expand its sales internationally and domestically, Proton need to improve its technology.

2004-2007Discussions with global automotive originalequipment manufacturers (OEMs), including General Motors (GM), Peugeot and, more recently, Volkswagen AG went nowhere as none.

2004 Mitsubishi sold off its stake in Proton. Purchased by the Malaysian government

EFFECT:• Deteriorating quality of proton products. Customers

perceived the quality of proton vehicles to be better when they were still produced in partnership with Mitsubishi

• Eventually, Mitsubishi agreed to form another alliance with Proton, but only on a project basis.

04/08/2023 PROTON Annual Reports 2012

INDUSTRY OVERVIEW PROTON was Malaysia's

dominant auto manufacturer until the establishment of PERODUA, in the year 1993.

Now the Malaysian auto market is dominated by Malaysia's national cars, PROTON and PERODUA which jointly accounted for 90 per cent of the vehicles sold annually.

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INDUSTRY OVERVIEW-Local Market

• Competitors• Market share

37%

26%

12%

8%

10%

4%

3%

Market Share for each Manufacturer in Malaysia as of Feb. 2013

(Maybank Research Sector Update March 2013) Perodua

Proton

Toyota

Honda

Nissan

Hyundai

Volkswagen

04/08/2023

INDUSTRY OVERVIEW-International Market

COUNTRYCars Sold 1985 -2012NUMBER %

Malaysia 3,500,000 92%United Kingdom 151,421 4%

China 85,922 2%Australia 32,936 1%

Singapore 23,950 1%TOTAL 3,794,229 100%

Summary : only 8% of all sold cars were exported and 92% were purchased in internal market

04/08/2023Source: (paultan.org - thestar.com.my- bernama.com.my- a4rzero.wordpress.com)

PROTON STRATEGY

As per its Official Website and Annual Reports, PROTONlisted the following values as its core strategy values:

1. Quality 2. Customer Focus3. Innovation4. Team Work5. Speed6. Caring7. Honesty

High Quality

and Low Price!

04/08/2023 PROTON Annual Reports 2012

04/08/2023

2-Threat of New EntrantLow:-high capital and investments are needed for such industry-Lack of availability of the distribution channels especially as proton is supported by government-brand loyalty of the customers of proton as it has been for a long time in the market as the only optionHigh:-As government is working towards reducing taxes on imported automobiles of foreign manufacturers, and as friendly import laws are more considered, the threat is very high of preferring the foreign brands if prices are in the same range with other brands being more favorable

3-Threat of Substitutes There is a high threat from the competitor Perdoua, as prices are more affordable. Motorcycles are also highly considered as a substitute

4-Supplier Power-few dominant suppliers-Since established, proton does not face serious problems from suppliers and moreover, it has secured channels by the government and supported very well. -because the industry is directly connected to safety and quality of life of the customers. The most important factor which add up to the influence of the suppliers is the high cost of switching.

5-Buyer PowerThe buyer will always choose the lower price car

1-Competitive RivalryAs a local manufacturer who

advantages of high import taxes on foreign automobile brands, and who is

selling prices are affordable, there is only Perodua which does not even compete to proton in certain car

types.

EXTERNAL STRATEGIC ANALYSIS PORTER’S FIVE FORCES

PORTER’S Five Forces

1-Competitive RivalryAs a local manufacturer who advantages of high import taxes on foreign automobile brands, and who is selling prices are affordable, there is only Perodua which does not even compete to proton in certain car types.

2-Threat of New EntrantLow:-high capital and investments are needed for such industry-Lack of availability of the distribution channels especially as proton is supported by government-brand loyalty of the customers of proton as it has been for a long time in the market as the only optionHigh:-As government is working towards reducing taxes on imported automobiles of foreign manufacturers, and as friendly import laws are more considered, the threat is very high of preferring the foreign brands if prices are in the same range with other brands being more favorable

04/08/2023

PORTER’S Five Forces

4-Supplier Power-few dominant suppliers-Since established, proton does not face serious problems from suppliers and moreover, it has secured channels by the government and supported very well. -because the industry is directly connected to safety and quality of life of the customers. The most important factor which add up to the influence of the suppliers is the high cost of switching.

5-Buyer PowerThe buyer will always choose the lower price car.

3-Threat of Substitutes There is a high threat from the competitor Perdoua, as prices are more affordable. Motorcycles are also highly considered as a substitute

EXTERNAL STRATEGIC ANALYSIS PORTER’S FIVE FORCES Cont.

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EXTERNAL STRATEGIC ANALYSIS :PESTEL ANALYSISPOLITICAL

• AFTA *(Asian Free Trade Area) (eradication of tax barriers (+&-))

• National Automobile Policy (NAP)

ECONOMICAL• Highly competitive

Automotive Market• Effect of financial crisis• Pure consumer

segmentation

SOCIAL• Growing concern toward

the environmental issues• Growing Population• Customer loyalty-

“Proton is National Brand”

TECHNOLOGICAL• Poor introduction of new

technologies• Intellectual property• Potential for

development

LEGAL• Commitment for safety

and environmental friendly cars

• Government protection• New tariffs

ENVIRONMENTAL• Growing concern toward

the environmental issues

04/08/2023Jane Terpstra Tong, Robert H. Terpstra, and Ngat Chin Lim, (2012)

Asean Free Trade Area (AFTA)

The establishing of AFTA council has raised challenges and opportunities for PROTON:

Challenge:Lose their Shares on Local Market

Opportunities: • Entrance To External Markets• Increase Export

04/08/2023Jane Terpstra Tong, Robert H. Terpstra, and Ngat Chin Lim, (2012)

INTERNAL STRATEGIC ANALYSISVALUE CHAIN

Firm Infrastructure

Human Resource Management

Technology Development

Procurement

Inbound Logistics

Operations Outbound Logistics

Marketing And Sales

Service

MARGIN

Primary Activities

Support Activities

04/08/2023

INTERNAL STRATEGIC ANALYSIS :SUPPORT ACTIVITIES

Firm Infrastructure

• Manufacturing plants, operating divisions - domination in a local market• Geographical location- opportunity for global investment and integration in business environment• Government protection

HR Management

• Collaboration with Universities (ratio of MS’s and PhD among Employees), • Skills Development and Training (overseas trainings – RESULT – create new models and built new

Hybrid Engines)• PIIC - Proton Innovation & Invention Competition 2010 (annual event which enables PROTON staff to

generate new ideas and interest in creating next generation cars among employees)

Technology Development

• PTAC - Proton Technology Advisory Council .Task - timely preparation and risk mitigation of technology acquisition based on the information given by the panels. Purpose -advise and provide recommendation to PROTON on current, future technologies and global automotive directions.• PTR - PROTON Technology RoadmapServes as a blueprint for the Company in shaping PROTON’s car of the future. It forms an integral part of the decision making process of the technologies that should be acquired so as to remain competitive and profitable in the domestic and global market within a ten year time frame. • Technology TransferProton’s engineers were attracted in Saudi Arabia’s project - Develop the plan of totally automotive development and manufacturing capability. That project was run by King Abdulaziz City for Science and Technology (KACST), an independent scientific organisation in Saudi Arabia. Result :the prototype car was successfully completed by 22 October 2010 and was showcased during the Riyadh Motor Show from 4 – 9 December 2010.

ProcurementSupply chain ( raw materials, parts and components) from foreign a well as local manufacturing

INTERNAL STRATEGIC ANALYSIS: PRIMARY ACTIVITIESInbound Logistics

Operations Outbound Logistics Marketing and Sales

Service

In 2005:• 287 vendors• 3000 sub-

suppliers• 5000

components• Only 10% of

them hold “Grade A” ranking

RESULT:• 60% defects –

because of poor quality of suppliers

CHANGE STRATEGY:• Reduce number of

vendors to 180• Increase inbound

control

In 2010:1 ) ENGINEERING SERVICES** (comments in next slide)

2) MANUFACTURING

• PROTON Shah AlamCapacity is 150,000 units MVF’s capacity is 50,000 Total capacity of200,000 units per year. • PROTON Tanjung MalimAnnual capacity of 150,000 units. PROSPECTSplan to deliver 189,900units up to 91%.

3) QUALITY CONTROL**Strategy vision:Quality Improvement – as a cost reduction** (see comments next to eng. services comments)

In 2012 2 CLASS-es(The Centre for Logistics, Allocation, Storage and Services )

ACCOMODATION CAPACITY

• Sijangkang – 7.000 cars• Tanjung Malim – 6.000 cars

service internal market and preparing cars for shipment to the export

RESULTThe CLASS process enables to reduce a host of problems, including multiple handling by 40%, unnecessary waiting time to a maximum of three days, secondary defects and excess inventory at staging points

In 2005 special category of “dealers” — theApproved Permit (AP) holders.In 2009 National Automotive Policy (open APs would be phased out by 2015 andfranchise APs by 2020)

EXPECTATION Without open APs, most used car dealers would not be able to operate

Pre-purchasing customer Financial service ( agreement between Proton and CIMB) [5] Government support (loans in2010 were available for less than 2–3% per annum)

A genuine Proton service guarantees

(Service, design,consultancy, and maintenance centres which located in Kuala Lumpur, Selangor, Kedah, Perlis, Kelantan, Penang, Terengganu, Perak, Pahang, Melaka, Sembilan, Johor, Sarawak, Sabah, WP Labuan) 3*

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INTERNAL STRATEGIC ANALYSIS:PRIMARY ACTIVITIES cont.

PRODUCT & DEVELOPMENT

STYLING & TECHNOLOGY DEVELOPMENT

PROCESS IMPROVEMENTS

In 2009

Proton continues to improve and made new models:SAGA and Inspira.

In 2010Global Styling – Pahlawan Series Show Car

Product Lifecycle ManagementAn aggressive process improvement initiative for managing product developing (build the platform for collaboration and integration of business processes which help PROTON improve operational efficiency, refine product management and eliminate redundant processes.)

The Aim:Convince that Company able to produce high quality cars for internal and external markets as well

Vehicle Cost Reduction.Company’s main goals for achieve VCR are:1) Minimise effect of material cost increase to the car price.2) Consider cost improving activities even at designing stage.

ENGINERING PROCESS

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INTERNAL STRATEGIC ANALYSIS: PRIMARY ACTIVITIES Cont.

QUALITY CONTROL‘RIGHT CULTURE & RIGHT ATTITUDE in PEOPLE’

Customer Focus: Towards Quality Culture:

Innovative-Driven Quality:

Total Quality Ownership (TQO)

Quality Improvement Team

Quality Improvement Committee

All Innovation Matters (AIM)

All programs that were targeted to improve quality affected improving of supplier quality performance by 50%.

Within one year QIT represented by 560 employees implemented more than 300 improvements for problems that were provided by customers.

The Committee every week discuss, recommend and resolve Issues. are attended by all operational unitsEngineering, Group Procurement, Manufacturing, Quality and After Sales Division and chaired by Director of quality for achieve Company’s core values.

Plan-Do-Check-Action (PDCA) cycle involve all individuals for innovation activities. It provided Company almost 60.000 suggestions in 2010 which allowed to reduce cost by 50 mln. MYR

04/08/2023

INTERNAL STRATEGIC ANALYSIS: PRIMARY ACTIVITIES Cont.

SERVICEPerusahaan Otomobil Nasional

PROTON Shah Alam manufacturing complex

product development, styling and technology development, collaborations,

PROTON Tanjung Malim Sdn PROTON City industrial, commercial and residential activities

Proton Edar Sdn Bhd Distribution Service Centre ???? [3] Motor Vehicle and Motor Vehicle Parts and Supplies Merchant Wholesalers as well as retail salesWholesale And Retail Sale Of All Kinds Of Parts, Components, Supplies, Tools And Accessories For Motor Vehicles

Proton Parts Centre Sdn Bhd joint venture company between PROTON, EON and HICOM

Determined to be the logistic base company that engages in sourcing, warehousing and distributing of Proton genuine parts for PROTON's market in domestic as well as overseas

Miyazu(M) Sdn Bhd leading die provider for Proton cars speciallizing in Automotive Tooling Engineering, Design and Manufacturing services

Lotus Engineering Malaysia Sdn

Lotus Cars, Lotus Engineering and Lotus Racing

consultancy services

04/08/2023

Grow or DISAPPEAR?• The company doesn’t have a

choice but Increasing their Markets. (For this purpose they have to Develop external Markets (AFTA Countries)

• Developing technologies by attracting global automotive original equipment manufacturers could bring additional competitive advantage – by differentiation.

• And All THIS ACTIONS for:Increasing Quality by

Decreasing Cost!!!

CURRENT POSITION

Place where they HAVE TO

BE

Place where they COULD

BE

04/08/2023

RECOMMENDATIONS

Conqueror external markets (AFTA members - Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Cambodia, Myanmar, Laos and Vietnam).– increase export of manufactured cars!

1. Be independent : collaborate with strategic partners who will provide technologies for:

a) Improve quality: apply strict control over their suppliers in means of timing and quality level

b) Decrease COST!

Option1 Option 2 Option 3High Quality – High Price

Low price – Poor quality High – Price and High Quality – by free technologies

04/08/2023

CONCLUSION

After analyzing Proton’s strategy vision which is increasing quality along with decreasing cost, they will not be able to implement it because they still depend on acquiring external technologies which is too costly for them. However, their efforts for getting engaged with Global Automotive Original Equipment Manufacturers (OEMs) is one of the best available options for solving their issue.

04/08/2023

REFERENCES[1] Malaysia• http://paultan.org/2008/08/03/proton-produced-3000000-cars-since-1985/UK• http://www.thestar.com.my/story.aspx?file=%2f2009%2f10%2f1%2fbusiness%2f20091001141452&sec=business• http://a4rzero.wordpress.com/2012/11/29/proton-intl-sales/• http://bestsellingcarsblog.com/2013/02/01/uk-full-year-2012-now-with-top-350-all-models-ranking/China• https

://commons.wikimedia.org/wiki/File:Sales_of_Proton_Gen-2_and_Persona_%28EuropeStar_L3%29_and_EuropeStar_L5_in_China,_2010_-_mid_2013.png

Australia• New straits time- banks team up in money changing business 26/8/1996 Newspaper• http://news.google.com/newspapers?id=lQhPAAAAIBAJ&sjid=WRUEAAAAIBAJ&pg=4135,582145&dq=proton+australia&hl=

en• http://www.bernama.com.my/bernama/v3/news_lite.php?id=256973• http://bestsellingcarsblog.com/2013/01/05/australia-full-year-2012-mazda3-leads-again-in-record-market-no-local-model-o

n-podium-for-the-first-time-since-1930s/

Singapore• http://a4rzero.wordpress.com/2012/11/29/proton-intl-sales/• http://media.straitstimes.com/coe1/annual_registration.html

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REFERENCES Cont.

• 1. Ir.chartnexus.com. 2013. Proton Holdings Berhad - Annual Reports 2011. [online] Available at: http://ir.chartnexus.com/proton/flash/ar_2011/index.html [Accessed: 13 Nov 2013]

• 2. Careers-proton.com. 2013. Careers at PROTON. [online] Available at: http://www.careers-proton.com/workingforproton.html [Accessed: 13 Nov 2013]

• 3. http://www.servicecenter.com.my/proton-service-centre-list• 4. http://alpha-auto-service.com/service/ • 5. http://www.proton.com.au/about-proton/aftersales/service/• 6. http://www.freemalaysiatoday.com/category/business/2013/09/23/sales-down-for-perodua-proton-in-august/• 7. 1st sustainable conference (pdf)

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