PROTON Holdings Berhad

Strategic Management (N14M07 MY) (AUT 13-14)

Dr. Avvari V Mohan

Prepared By:

Arman Kulchmanov
Veronika Yerembessova
Rasha Zohour Adi
Adeline Gan Hwee Ling
2/19/16

FACTS
Name

Perusahan Otomobil Nasional Berhad

(PROTON)

Year Founded

1983

Profile of theMahathir
company
Founder
Mohamad
Subsidiaries
11 Subsidiaries
and 11 associated companies
Year-founder-size
of productionmanufacturing, research and development,
revenue
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
PROTON Official Website
Australasia, but it was mostly successful in UK

2/19/16

COLLABORATION/PARTNERS
HIP
PROTONPROTON SEPARATE
PROTON + (?)
MISSED
OPPORTUNITIES

MITSUBISHI
19
85

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

200
1

WAJA: its first

home-designed
model.

200
4

Mitsubishi sold off

its stake in Proton.
Purchased by the
Malaysiangovern
ment

To expand its sales

internationally and
domestically, Proton
need to improve its
technology.

2004-2007

Discussions with
global automotive
original
equipment
EFFECT:
Deteriorating quality of proton products. manufacturers
Customers perceived the quality of proton (OEMs), including
vehicles to be better when they were still General Motors
(GM), Peugeot and,
produced in partnership
with Mitsubishi
2/19/16
PROTON Annual Reports 2012
more recently,
Eventually, Mitsubishi agreed to form another

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
2/19/16
PERODUA which

INDUSTRY OVERVIEW-Local
Market

Competitors
Market share

2/19/16

INDUSTRY OVERVIEWInternational Market

COUNTRY

Cars Sold 1985 -2012

Malaysia

NUMBER
3,500,000

%
92%

United Kingdom

151,421

4%

China
Australia
Singapore
TOTAL

85,922
32,936
23,950
3,794,229

2%
1%
1%
100%

Summary : only 8% of all sold cars were exported and 92% were
purchased in internal market
2/19/16

Source: (paultan.org - thestar.com.my- bernama.com.mya4rzero.wordpress.com)

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

1.
2.
3.
4.
5.
6.
7.

Quality
Customer Focus
Innovation
Team Work
Speed
Caring
Honesty

2/19/16

PROTON Annual Reports 2012

High
Quality
and
Low
Price!

2-Threat of New Entrant

Low:
3-Threat of Substitutes
-high capital and investments are needed for such
industry
There is a high threat from the competitor
-Lack of availability of the distribution channels
Perdoua, as prices are more affordable.
especially as proton is supported by government
Motorcycles are also highly considered as a
-brand loyalty of the customers of proton as it has been
substitute
for a long time in the market as the only option
High:
1-Competitive
Rivalry
-As government is working towards reducing taxes
on
imported automobiles of foreign manufacturers,
and
as
As a local manufacturer who
friendly import laws are more considered, the threat is
advantages
very high of preferring the foreign brands if prices
are in of high import
taxes
on
foreign automobile
the same range with other brands being more favorable

brands, and who is selling

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

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.
2/19/16

5-Buyer Power
The buyer will always choose the lower price car

EXTERNAL STRATEGIC ANALYSIS

PORTERS FIVE FORCES
1-Competitive Rivalry
As 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.

PORTER
S Five
Forces

2-Threat of New Entrant

Low:
-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 option
High:
-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

2/19/16

EXTERNAL STRATEGIC ANALYSIS

PORTERS FIVE FORCES

Cont.

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

PORTER
S Five
Forces

-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 Power
The buyer will always choose the lower price car.

2/19/16

EXTERNAL STRATEGIC ANALYSIS

:PESTEL
ANALYSIS
POLITICAL
ECONOMICAL

ECONOMICAL
AFTA *(Asian Free
Highly competitive
Trade Area)
Automotive Market
(eradication of tax
Effect of financial
barriers (+&-))
crisis
National Automobile
Pure consumer
PolicySOCIAL
(NAP)
segmentation
Growing concern
TECHNOLOGICAL
toward the
Poor introduction of
environmental
new technologies
issues
Intellectual property
Growing Population
Potential for
Customer loyaltydevelopment
Proton is National
LEGAL
Brand
Commitment for
safety and
ENVIRONMENTAL
Growing concern
environmental
friendly cars
toward the
Government
environmental issues
2/19/16 protection
Janetariffs
Terpstra Tong, Robert H. Terpstra, and Ngat Chin Lim, (2012)
New

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
2/19/16

Jane Terpstra Tong, Robert H. Terpstra, and Ngat Chin

Lim, (2012)

INTERNAL STRATEGIC
ANALYSIS
VALUE CHAIN
Firm Infrastructure
Human Resource Management

Support
Activities Technology Development

Procurement
Inbound
Logistic
s

MARGIN

Operations

Outbound
Logistics

Marketin
g And
Sales

Primary Activities
2/19/16

Service

INTERNAL STRATEGIC ANALYSIS :SUPPORT

ACTIVITIES
Firm
Infrastruct
ure
HR
Managemen
t

Manufacturing plants, operating divisions - domination in a local market

Geographical location- opportunity for global investment and integration

in business environment
Government protection

Collaboration with Universities (ratio of MSs 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)

PTAC - Proton Technology Advisory Council .

Technology
Developmen
t

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 Roadmap
Serves as a blueprint for the Company in shaping PROTONs 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 Transfer
Protons engineers were attracted in Saudi Arabias 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.

Supply chain ( raw materials, parts and components)

INTERNAL STRATEGIC ANALYSIS: PRIMARY

ACTIVITIES
Inbound
Logistics

Operations

Outbound
Logistics

Marketing
and Sales

Service

In 2005:

In 2010:

In 2012

1 ) ENGINEERING
SERVICES*

2 CLASS-es

In 2005
special category of
dealers the
Approved Permit
(AP) holders.
In 2009
National
Automotive Policy
(open APs would be
phased out by
2015 and
franchise APs by
2020)

Pre-purchasing
customer
Financial
service
( agreement
between Proton
and CIMB) [5]
Government
support (loans in
2010 were
available for less
than 23% per
annum)

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

A genuine Proton
service
guarantees

287 vendors
3000 subsuppliers
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

2/19/16

* (comments
slide)

in

next

2) MANUFACTURING
PROTON Shah Alam
Capacity is 150,000 units
MVFs capacity is 50,000
Total capacity of
200,000 units per year.

PROTON
Tanjung
Malim
Annual
capacity
of
150,000 units.

PROSPECTS
plan
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)

(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
RESULT
The 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

(Service,
design,consulta
ncy, and
maintenance
centres which
located in
Kuala Lumpur,
Selangor, Kedah
, Perlis,
Kelantan,
Penang,
Terengganu,
Perak, Pahang,
Melaka,
Sembilan, Johor,

INTERNAL STRATEGIC ANALYSIS:PRIMARY

ACTIVITIES cont.
ENGINERING PROCESS
PRODUCT &
DEVELOPMENT
In 2009
Proton continues to improve
and made new models:
SAGA and Inspira.

STYLING &
TECHNOLOGY
DEVELOPMENT
In 2010
Global Styling Pahlawan
Series Show Car

PROCESS
IMPROVEMENTS
Product Lifecycle
Management
An 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.)

2/19/16

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

Vehicle Cost Reduction.

Companys main goals for
achieve VCR are:
1) Minimise effect of
material cost increase to the
car price.

INTERNAL STRATEGIC ANALYSIS: PRIMARY

ACTIVITIES Cont.
QUALITY CONTROL
RIGHT CULTURE & RIGHT ATTITUDE in PEOPLE
Customer
Focus:

Towards Quality
Culture:

InnovativeDriven Quality:

Quality
Improvement
Team

Quality
Improvement
Committee

All Innovation
Matters (AIM)

The Committee
every week discuss,
recommend and
resolve Issues. are
attended by all
operational units
Engineering, Group
Procurement,
Manufacturing,
Quality and After
Sales Division and
chaired by Director
of quality for
achieve Companys

Plan-Do-CheckAction (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

Within one year QIT

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

2/19/16

Total Quality
Ownership
(TQO)

All programs that

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

INTERNAL STRATEGIC ANALYSIS: PRIMARY

ACTIVITIES Cont.
SERVICE
Perusahaan 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]

Proton Parts Centre

Sdn Bhd

joint venture company

between PROTON, EON and
HICOM

Motor Vehicle and Motor Vehicle

Parts and Supplies Merchant Wh
olesalers
as well as retail sales
Wholesale And Retail Sale Of All
Kinds Of Parts, Components,
Supplies, Tools And Accessories
For Motor Vehicles
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

Lotus Engineering Mala Lotus Cars, Lotus Engineering

ysia Sdn
and Lotus Racing
2/19/16

speciallizing in Automotive
Tooling Engineering, Design and
Manufacturing services
consultancy services

Grow or DISAPPEAR?

The company doesnt

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.
2/19/16
And All THIS ACTIONS

Place
where they
HAVE TO
BE
Place
where they
COULD BE

CURRENT
POSITION

RECOMMENDATIONS
Conqueror external markets (AFTA members Brunei, Indonesia, Malaysia, Philippines, Singapore,
Thailand, Cambodia, Myanmar, Laos and Vietnam).
increase export of manufactured cars!
Option1

Option 2

Option 3

High Quality High

Price

Low price Poor

quality

High Price and

High Quality by
free technologies

1. Be independent : collaborate with strategic

partners who will provide technologies for:
a)
b)

2/19/16

Improve quality: apply strict control over their suppliers

in means of timing and quality level
Decrease COST!

CONCLUSION
After analyzing Protons 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

2/19/16

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-mar
ket-no-local-model-on-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
2/19/16

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.careersproton.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-inaugust/
7. 1st sustainable conference (pdf)

2/19/16