2. 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 UK4/19/2014 PROTON Official Website
3. COLLABORATION/PARTNERSHIP
PROTON-MITSUBISHI PROTON SEPARATE PROTON + (?)
MISSED OPPORTUNITIES
1985 SAGA: 1.3 or 1.5
litre engines.
Simpler model of
the Lancer, a well-
established and
popular
Mitsubishi 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.
2004-2007
Discussions with global
automotive original
equipment
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.
4/19/2014 PROTON Annual Reports 2012
4. 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.
4/19/2014
5. 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
4/19/2014
6. INDUSTRY OVERVIEW-International
Market
COUNTRY
Cars Sold 1985 -2012
NUMBER %
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
4/19/2014
Source: (paultan.org - thestar.com.my- bernama.com.my- a4rzero.wordpress.com)
7. PROTON STRATEGY
As per its Official Website and Annual Reports, PROTON
listed the following values as its core strategy values:
1. Quality
2. Customer Focus
3. Innovation
4. Team Work
5. Speed
6. Caring
7. Honesty
High
Quality
and Low
Price!
4/19/2014 PROTON Annual Reports 2012
8. 4/19/2014
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
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 Power
The buyer will always choose the lower price car
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.
9. EXTERNAL STRATEGIC ANALYSIS
PORTER’S FIVE FORCES
PORTER’S
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.
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
4/19/2014
10. 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 Power
The 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.
4/19/2014
11. EXTERNAL STRATEGIC ANALYSIS :PESTEL ANALYSIS
POLITICAL
• 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
4/19/2014
Jane Terpstra Tong, Robert H. Terpstra, and Ngat Chin Lim, (2012)
12. 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
4/19/2014
Jane Terpstra Tong, Robert H. Terpstra, and Ngat Chin Lim, (2012)
13. INTERNAL STRATEGIC ANALYSIS
VALUE CHAIN
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Inbound
Logistics
Operations Outbound
Logistics
Marketing
And Sales
Service
MARGIN
Primary Activities
Support
Activities
4/19/2014
14. 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 Roadmap
Serves 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 Transfer
Proton’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.
Procurement
Supply chain ( raw materials, parts and components) from foreign a
well as local manufacturing
15. INTERNAL STRATEGIC ANALYSIS: PRIMARY ACTIVITIES
Inbound
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 Alam
Capacity is 150,000 units
MVF’s 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)
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
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
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)
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 in
2010 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*
4/19/2014
16. 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 2010
Global Styling – Pahlawan Series
Show Car
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.)
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
4/19/2014
17. 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 units
Engineering, 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
4/19/2014
18. 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] Motor Vehicle and Motor Vehicle Parts
and Supplies Merchant Wholesalers as
well as retail sales
Wholesale 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
4/19/2014
19. 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
4/19/2014
20. 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 3
High Quality – High
Price
Low price – Poor quality High – Price and High
Quality – by free
technologies
4/19/2014
21. 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.
4/19/2014
22. 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-
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
4/19/2014
