2014

Cardiff Metropolitan University

Strategic Management of Proton

Malaysia

ASSIGNEE:
STUDENT ID:
SUBJECT:
LECTURER:
SUBMISSION:
MODULE:

ABDUL SAMI NASRAT

0116DOEDOE0414
STRATEGIC MANAGEMENT
DR. SUM HING NIN
29 DECEMBER 2014
RESIT SM-ASSIGNMENT

MASTER OF BUSINESS ADMINISTRATION (MBA)

Contents
1.

Introduction: ............................................................................................................................ 2

2.

Literature review: .................................................................................................................... 2

2.1.

Proton Background and Performance History: .................................................................... 2

2.2.

Industry Analysis: ................................................................................................................ 3

Porters Five Forces in the Automobile Industry Malaysia: ............................................ 3

2.2.1.
2.2.1.1.

Threat of new entrants: ................................................................................................. 4

2.2.1.2.

The Bargaining Power of Buyers: ................................................................................ 4

2.2.1.3.

The Threat of Substitute Products: ............................................................................... 4

2.2.1.4.

Supplier Power: ............................................................................................................ 5

2.2.1.5.

Competitive Rivalry: .................................................................................................... 5

2.3.

PROTON CAR SWOT Analysis ......................................................................................... 5

2.3.1.

Strengths ........................................................................................................................... 5

2.3.2.

Weaknesses ...................................................................................................................... 6

2.3.3.

Opportunities .................................................................................................................... 6

2.3.4.

Threats .............................................................................................................................. 7

2.4.

Automobile strategic triangle (Proton) ................................................................................ 7

2.4.1.

The Strategic Triangle ...................................................................................................... 7

2.4.2.

Aligning Organization Wide Strategies ........................................................................... 8

2.4.3.

Adaptive Processes ........................................................................................................... 8

3.

Recommendation ..................................................................................................................... 8

4.

Conclusion ............................................................................................................................... 9

5.

References ............................................................................................................................... 9

Strategic Management Decisions on Improving Proton Passenger

Cars Performances
1. Introduction:
One of the most important and substantial strategic industry in Malaysia is the automotive
industry in the sector of manufacturing (Rosli, 2006). Malaysia is mostly a traveler auto (car)
market and the business is considered as local business sector arranged (ESCAP, 2010). The
essential motivation behind why traveler consideration business sector is unmistakable in the
nation is a result of the monetary status of the nation (Brandt & Lim , 2013). The destination of
this paper is to concentrate on the instance of Proton regarding confronting diverse situations in
the neighborhood and worldwide auto industry. Besides, it will utilize the Delta model as a part of
request to dissect the execution and prescribe distinctive activities to be carried out so as to keep
up the position of the organization in the business sector (PMPROJECT, 2010).

2. Literature review:
2.1. Proton Background and Performance History:
Proton or substitute for Persusahaan Otomobile Nasional Berhad was merged on 7 May
1983 in order to fabricate, assemble and trade varieties of automobiles and other associated
products, which was including spare parts, accessories and other related components
(PMPROJECT, 2010). In light of the innovation and parts from Mitsubishi, the creation of the first
model or the Proton Saga started in September 1985 at its first assembling plant in Shah Alam
Selangor by the Malaysian Prime Minister Dato' Seri Dr. Mahathir Mohamad (PMPROJECT,
2010). From the get go, the greater part of the segments of the auto were totally made by
Mitsubishi, however the neighborhood part has possessed the capacity to be utilized, as
innovations were exchanged and abilities were picked up. In January 1989, the 100,000th of Proton
Sage was delivered (PMPROJECT, 2010). In 1993, Proton Wira was introduced which was
carrying the engineering and design of Mitsubishi Lancer/Clot where 220,000 units were sold in
the years 1996 and 1998. Proton Company sold off its share to MV Agusta to another company
related to Italy because of heavy debt by MV Agusta. During the year Proton Company declared
their planned partnership with Volkswagen AG of Germany. This partnership will enable both of

the companies to take advantages of their strengths, where the Volkswagen Company will share
expertise, knowledge and technologies, but soon after this partnership failed due to variety of
reasons in 2006 on the terms and conditions offered by Proton. Proton got the highest Malaysian
market share of 60% in the year 2002. Due to some economic and social reasons, Proton share was
dropped to 30% by 2005. The said number will further decrease in the following years because of
the AFTA which commands lessen tariffs to most extreme of 5% (MINISTRY OF
INTERNATIONAL TRADE AND INDUSTRY, 2014).
2.2. Industry Analysis:
2.2.1. Porters Five Forces in the Automobile Industry Malaysia:
P5F is also known as porters Five Forces, and always can examine the way of
attractiveness of an industry. These Five forces are the determinants of profitability in an industry
(Patterson, 2011).

Figure No. 1: Porters Five Forces Model

Figure 1 demonstrates the business examination of the automobile industry. As per Porter, there
are 5 vital elements which determine the appeal or estimation of the structure of the industry as
following: (Patterson, 2011).

2.2.1.1.

Threat of new entrants:

In the manufacturing industry of automobile, the threat of new entrants is very low.
Components to inspect for this danger incorporate all obstructions to entrance, for example,
forthright capital necessities (it costs a considerable measure to set up an auto fabricating office!),
brand value (another firm may have none), enactment and government approach (think wellbeing,
EPA and outflows), capacity to appropriate the item (Alfa Romeo has been out of the US since the
early 90s generally because of the powerlessness to re-secure a merchant system. Anyhow on the
off chance that you are taking a glance at Singapore, for instance, one and only Alfa Romeo
merchant is required) (Patterson, 2011).
2.2.1.2.

The Bargaining Power of Buyers:

Even though in US no one should purchase an auto without bargaining. In 2009

particularly, US merchants were giving incredible arrangements to purchasers to get the business
moving. While amount a purchaser buys is typically a decent component in deciding this power,
even in the auto business when purchasers just normally buy one auto at once, despite everything
they influence impressive force. Nonetheless, this may be distinctive in different markets. In
Singapore it beyond any doubt is lower than in the US, making a more ideal circumstance for the
business however not the purchasers. Generally, then again, its protected to say the clients have
some buying power; however it relies on upon the market (Hax & Wilde II, 2003).
2.2.1.3.

The Threat of Substitute Products:

In the event that purchasers can look to the opposition or other equivalent items, and switch
effortlessly (they have low exchanging expenses) there may be a high risk of this power. With new
autos, the exchanging expense is high in light of the fact that you can't offer a shiny new auto at
the same cost you paid for it. A P5F investigation of the auto business covers the new market, not
utilized or second-hand. At the same time shouldn't we think about the danger of substitute items
before the purchaser makes the buy? You have to know whether the business you are investigating
has a lot of people great plan B to new autos. A lively utilized auto advertises maybe? Utilized
autos debilitate the new market. What about a decent mass-transportation framework? (Patterson,
2011).

Item separation is critical as well. In the auto business, ordinarily there are numerous autos
that are comparative - simply take a gander at any mid-range Toyota and you can undoubtedly
discover a fundamentally the same Nissan, Honda, or Mazda. Notwithstanding, on the off chance
that you are taking a gander at land and/or water capable autos, there may be little risk of substitute
items (this is an amazing illustration) (Histomobile, 2010).
2.2.1.4.

Supplier Power:

The supplier has an unbiased control over the business. This is on account of there are few
prevailing suppliers in the business who are well known for quality and brand picture. This is
influenced by the high part of value and administration in the business, on the grounds that the
business is specifically associated with security and personal satisfaction of the clients. The most
paramount variable which signifies the impact of the suppliers is the high cost of exchanging.
2.2.1.5.

Competitive Rivalry:

The aggressive contention relates on the power of competition among the rivals in the
business. It is imperative to consider the enhancing item separation because of the far reaching
exertion of every single car organization on the planet to wind up special and have the stronger
business position in the business (Zandi, et al., 2013). This is the significant effect of the extensive
number of firms of association contending in the worldwide business including nearby players
from Korea, China and Japan which result to differing qualities of societies and authoritative
practices of the opponents. The low exchanging expense starting with one brand then onto the next
increases the opposition in the business sector and pushes the majority of the major and minor
players to concentrate on R&D and advancement forms so as to enhance their general execution
in the business sector. Most importantly, the opposition is expanded because of high passageway
obstructions because of the human asset and offices (Ghani & Zainuddin, 2008).
2.3. PROTON CAR SWOT Analysis
2.3.1. Strengths
One of the imperative qualities of the organization is its notoriety or solid brand picture
because of the long years it had stayed in the business. As a result of that, the Malaysia individuals

have ended up natural and steadfast to the brand, beside the way that Proton had turned into the
national auto mark in the nation. Because of that, the auto maker has a solid help or move down
from the administration (Sabaradin, 2013).
2.3.2. Weaknesses
There are additionally diverse shortcomings which must be enhanced by the organization
keeping in mind the end goal to keep up their position in the administration. Initially is the absence
of R&D or advancement and in addition absence of unique items and restricted items due to the
powerlessness of the organization to present genuine new models, which lead them to tear apart
their destroyed line of items (Buildboard n.d.). This is on the grounds that a percentage of the items
or models of Proton were focused around the model of other global heading brand. It is likewise
paramount to consider that the organization is deficient in global operation, because of the diverse
components, principally due to immense rivalry in the worldwide business. In light of all these
reasons, the organization is inadequate in global operations. Most importantly, because of its over
dependence to the legislature, without the solid backing from the administration, Proton could miss
out to significant players in the business that can result in genuine effect on the diverse inventory
network (ASEANAFFAIRS, 2011).
2.3.3. Opportunities
The backing of the legislature to the organization is an imperative open door, in light of
the fact that the administration considers the organization as their accomplice; hence dominant part
of autos required by nearby and national government will be Proton. Besides, the organization can
likewise exploit the distinctive innovative improvements, especially the diverse Information
Technology (IT) or Information System or IS which can help the organization to deal with their
data that can help them in the choice making methodology. Entering new markets will likewise
help the organization to extend their business regarding size; accordingly can help to increase more
turnovers (Ghani & Zainuddin, 2008). It is additionally vital to consider the continuous notoriety
of e-business or internet offering of merchandise. This will help the organization to target more
market in more solid, quick and savvy way. Moreover, the changing viewpoint and concern of the

individuals towards the nature's domain additionally made open doors for distinctive auto industry,
and that is to offer diverse "Green" autos or half and half autos.
2.3.4. Threats
The most pivotal dangers to be confronted by the organization are the worldwide
budgetary emergency which influences the economy of Malaysia, and influence the way of life
and purchasing conduct of the purchaser. Accordingly, as of October of 2008, new-vehicle
conveyances snuck past 13% from 42,915 of a year ago to 37,512 units (Chrysler 2008). The
changing and developing of the innovation is additionally an alternate vital variable to consider,
together with the growing number of contenders who are entering the business sector, which result
to the value wars. The primary purpose for this circumstance is the AFTA which concentrate on
lessening levies from zero to 5% in 15 years among the six countries through a typical viable
special levy it wanted to lessen taxes to zero to 5% in 15 years among the six countries through a
typical compelling particular duty (Ghani & Zainuddin, 2008).
2.4. Automobile strategic triangle (Proton)
2.4.1. The Strategic Triangle
There are three choices that are spoken to in Triangle which is considered as the beginning
stage of the dialog for the advancement of a solid vision (Hax & Wilde II, 2003). Because of the
current state of the organization with respect further bolstering their good fortune which relates on
the nature of their items, it will be imperative to concentrate on the Best Product situating. This is
a result of the way that the most ideal approach to draw in, fulfill and hold clients is through the
natural attributes of the item itself. The position is fairly internal and tight, based upon the
predominating item financial matters. Subsequently, the major key main thrusts are the
advancement of an effective inventory network that will promise ease base; a demonstrated inner
capacity for new item improvement. In the meantime, it will help the correct restoration of the
current product offering that will help to secure the appropriation channels that will help to
exchange the items to the focused on business sector portions (Hax & Wilde II, 2003). This will
concentrate on the R&d and development process for the organization. With a specific end goal to
keep up the methodology of building and planning traveler autos which will suit the taste and

inclination of the clients this is influenced by diverse demographics, financial matters and social
elements. Because of the becoming issue of worldwide financial emergency, it will be essential to
concentrate on ease or separation of the items (PMPROJECT, 2010).
2.4.2. Aligning Organization Wide Strategies
In this phase, it will be critical to concentrate on authoritative change, on the grounds that
it will concentrate on rebuilding the current business tenets and strategies towards the methods of
the organization. On account of the organization, it will be paramount to concentrate on the solid
item base, robust production network framework and additionally inward advancement capacities
to match (Hax & Wilde II, 2003).
2.4.3. Adaptive Processes
As a result of the way that the procedures of the organization concentrate on the R&d
methodology of Proton, it will be imperative to concentrate on the Innovation as the key errand. It
guarantees a constant stream of new items and administrations with a specific end goal to keep up
the future practicality of the business. It likewise serves to assemble the greater part of the
imaginative assets of the firm which incorporate the specialized, generation and capacities in the
promoting field to create a creative framework for the business. Besides, the organization should
not restrict itself to the quest for the distinctive interior item advancement, however must center
the wellsprings of development from the suppliers, clients and key complements. It keeps up the
concentrate on the reestablishment of the business to keep up its preference and additionally
prevalent monetary execution (Hax & Wilde II, 2003). In this phase, it will be vital for the
organization to know the responses and notions of the Malaysia clients with respect to the
configuration of their models, especially the issue of very nearly indistinguishable outline of each
one model (Hax & Wilde II, 2003).

3. Recommendation
It will be imperative for the association to concentrate on the Delta model demonstrate
currently arranging and executing their strategy. The Delta model is a technique schema that was

produced by Dean Wilde together with the parts of Dean & Company and Arnoldo Hax of
MIT/Sloan School of Management (Hax & Wilde II, 2003).

4. Conclusion
Proton was considered as the national car manufacturer of Malaysia and considered as the
major player in the industry (Histomobile, 2010). However due to the different factors, primarily
the implementation of AFTA, the sales and market share of the company decline (Ghani &
Zainuddin, 2008). In details, the growing competition enables the Malaysian market to have a wide
choice of cars to be availed. On the other hand, due to the strong support of the government, as
well as the strong position of the company in the market, it can be said that the company failed to
focus on the most important aspect of a company in order to maintain competitive advantage, and
that is innovation (Hax & Wilde II, 2003). Most of the customers are saying that the company is
no longer offering real new models of cars. Aside from that, the company is also having a problem
in their supply chain, which results to high pricing of Proton's car compare to other international
brand in the market. In order to solve the current situation of the company, it will be important to
focus on innovation or R&D process. This can be done by focusing on applying new IT or IS to
speed up the process of designing. It is also 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 (Histomobile, 2010).

5. References

ASEANAFFAIRS, 2011. Save our Planet, Bangkok: TIME Green Consulting.

Brandt , T. & Lim , M., 2013. The Malaysian Automotive and Supplier Industry. Market
Watch 2012, March, p. 15.

ESCAP,

2010.

[Online]

Available
http://www.typepad.com/services/trackback/6a00e00987fe5188330147e02265ce970b
[Accessed 27 DECEMBER 2014].

at:

Ghani, K. & Zainuddin, Y., 2008. AFTA Effect on Malaysia Economy. Journal of
Management and Social Sciences, 4(2), pp. 134-141.

Hax, A. & Wilde II, D., 2003. The Delta Model - A New Framework of Strategy. Journal
of Strategic Management, 1(1), p. 37.

Histomobile,
Available

2010.
at:

Strategic

Management

of

Proton,

Malaysia.

[Online]

http://www.histomobile.com/dvd_histomobile/histomo/63/history2.asp

[Accessed 27 DEC 2014].

MINISTRY OF INTERNATIONAL TRADE AND INDUSTRY, 2014. Malaysia

Supports Chinas Initiative On Free Trade Area Of The Asia Pacific (FTAAP). [Online]
Available

at:

http://www.miti.gov.my/cms/content.jsp?id=com.tms.cms.article.Article_970ab17cc0a81573-5c5766b1-29ee6ce7
[Accessed 24 DECEMBER 2014].

Patterson,

A.,

Available

at:

2011.

Porter's

Five

Forces

Analysis.

[Online]

http://porters-5-forces.blogspot.com.au/2011/11/porters-5-forces-in-

automobile-industry.html
[Accessed 27 DEC 2014].

PMPROJECT,
Available

2010.
at:

The

History

Of

Proton.

[Online]

http://ivythesis.typepad.com/term_paper_topics/2010/11/strategic-

management-of-proton-malaysia.html
[Accessed 27 December 2014].

Rosli, D. M., 2006. Journal of Economic Coopreation. The Automobile Industry and
Performance of Malaysia Auto Production, 1(27), pp. 89-114.

Sabaradin, R. Z. R., 2013. Malaysias automotive industry. General and Restricted (EXIM
BANK), 1113(4), pp. 1-6.

Zandi, G., Sulaiman, M., Al Atiyat, H. M. & Naysary, B., 2013. A Comparative Empirical
Study of UMW Toyota Motor and Chemical Company of Malaysia. Asian Social Science;
Vol. 9, No. 9; 2013 , 9(9), pp. 185-196.

10