Introduction

The core company from develop countries always make a agreement or joint venture with
periphery company from developing countries to gain more profit but at the same time less
money to invest in that partner. This situation happen around the world in any sector, such as
banking, automobile, farming, electronic and electric. The company from periphery side
(developing countries) try to gain their ability to become like core company.
But the problem that they had to face is the company from core side (develop countries)
will make sure that they still want maintain the monopoly for their survival for a long-term. In
this case, we took example to give a figure about this situation. The company that we will discuss
is Mitsubishi Group from Japan which is represent as core company and Proton from Malaysia
which is represent as periphery company.
We will try investigate how dependency Proton to Mitsubishi Group to produce a
automotif (car) for a Malaysian market and international market. We also can see what make
Proton still rely to Mitsubishi Group to make sure Proton still survive in market (especially
Malaysian market).
This study are quite important for student whose take International Political Economy
subject especially student from Bachelor of International Affair Management. It will give more
information about the dependency of periphery company to core company. Students can more
prepare to work in the real world before they involve seriously in international corporation.

Mitsubishi Group Background

Mitsubishi were establish by Yataro Iwasaki in 1870 and started as shipping company
only. Then, in 1884, the first Japan steel Steamship were produce by Japan government with
cooperation Mitsubishi company. Mitsubishi company invested their money in paper industri
with by Kobe Paper Mill which is todays Mitsubishi Paper Mill. Later, Mitsubishi company
involve in other industries such as machinery, electrical equipment, and chemicals.
In year 1916, Mitsubishi started involve with seriously in heavy industri and emerged
Mitsubishi Heavy Industries. Mitsubishi Heavy Industries produce and develop buses, tanks,
aircraft and automobile. Then, Mitsubishi electric were emerged and become a leader in home
appliances and electrical machinery. But in 1946, the old Mitsubishi ended because Heavy
industries were disband by Alliance (Western Countries) unto all Japan company.
Then, in 1954, Mitsubishi reestablish with named Mitsubishi Corporation. Later, the
Mitsubishi Heavy Industries reunited back in 1964. Mitsubishi Corporation play as one of the
main important player when Japan raise up back from Second World War especially in 1950s and
1960s. Mitsubishi famous in automotif field when their car uses by people around the world.
But, actually Mitsubishi has so many subsidiary for different field and industries. For
example Asahi Glass, Mitsubishi Chemical, Mitsubishi Estate, Mitsubishi Materials, Mitsubishi
Plastics, Nikon, Mitsubishi Gas Chemical, Mitsubishi Paper Mill, Mitsubishi Aluminium,
Mitsubishi Motors, Mitsubishi Research Institute, Mitsubishi UFJ Securities Holdings,
Mitsubishi UFJ Trust and Banking, P. S. Mitsubishi Construction, Meiji Yasuda Life Insurance,
Mitsubishi Fuso Truck & Bus and etc.

Proton Background
Perusahaan Automobil Nasional Sdn. Bhd or famous name is Proton were establish in
1983 but the concept of Proton already planned by Tun Dr. Mahathir bin Mohamad, the former
Prime Minister of Malaysia with the goal of enhancing Malaysian industries. In 7 May 1983, The
Malaysian Cabinet approved the National Car Project which is bring to official founding of
Proton. That company totally owned by government of Malaysia and was founder by Tun Dr.
Mahathir himself.
Later on, Proton try to approached Mitsubishi Motors between 1983 and 1984 and bring
to a joint venture between both companies for produce the first Malaysian Car. Proton Saga was
the first Malaysian Car were produce by Proton with cooperate with Mitsubishi Motors and were
launched on 9 July 1985 with copy from second generation 1983 Mitsubishi Lancer Fiore and
with for door, the car engine powered by 1.3L Mitsubishi Orion 4G13.
Since then, Proton produce many new car models such as Wira, Iswara and Satria but
many of that model were copy from Mitsubishi Motors car Model (the previous car model were
already used by Japan). Proton listed on the Bursa Malaysia (Malaysian Stock Share) to gain
money from public and started January of 2012, that company share were purchased by DRMHICOM and become majority of stake holder with 42.74% stake. The new name of Proton is
Proton Holding (since hold by DRB-HICOM).
Proton just focus on the Car industries (not like Mitsubishi Group) and mostly depend
unto government assistance. The car were produced by Proton usually for Malaysian market but
at the same time, they also export their cars to other countries such as Indonesia, Australia, South
Africa, Egypt, Saudi Arabia, China, Pakistan, Nepal, Turkey, Taiwan, Sri Lanka, Oman, Yemen,

United Arab Emirate, Thailand and Britain. However, the export quantities are not huge for
foreign market countries because the main focus is Malaysian market. That why so many model
that were produced by Proton looks like just focuses on low price car, cheap and affordable car
for middle class and lower class.

THE FIRST CHALLENGES: IN TERM OF EXPLOIT WORKERS

Have several challenges will face by both of corporation either Mitsubishi or Proton.
Mitsubishi Group through Mitsubishi Motors try to exploit the cheap labour wage during 1980s
to get more profit since they make a joint-venture with Proton. For reply of that project (the first
Malaysian national car which is Proton Saga), Mitsubishi get a huge profit when they do not
need to hired more local worker but just using Proton local worker to make Proton cars.
Even if Proton used their own labour to produces the new car models, but the reality,
many of Mitsubishi Motors engineer are involve in that process. Mitsubishi Motors can exploit
more local engineer (Malaysian engineer in automotif) to work for them at their overseas
factories such as Thailand, Japan, United States of America, Philippines, Netherland, Indonesia
and Brazil.
The challenges for CEO of Mitsubishi Motors is to maintaining their exploits in
developing countries such as Proton (Malaysia) for their survival in South East Asian market.
They had to face the reality that the Proton now try to reducing their dependency on Mitsubishi
Motors. For Proton CEO, they have to struggle to call back the local talented engineers to return
to Proton and as well to decrease their reliance to core company from develop countries such as
Japan (Mitsubishi Motors).
The low cost labour are needed by Mitsubishi Motors to reduce the cost of high-skill
labour payments. That why countries like Malaysia, Thailand, Indonesia and Philippines are
important for Mitsubishi to sustain get that human resources. The advantage of the Mitsubishi
can offer to local high-skill labour such as engineer is the low rate of payment by local company
like Proton.

Proton Engineers

If the CEO of Proton do not have a good leadership to prevent the local engineer to
switch core company like Mitsubishi Motors and others foreign company from core countries,
perhaps it difficult for Proton to get a talented engineers work for them. At the same time, the
Mitsubishi Motors want sustain the comfort zone with get more and more talented engineers
work for them especially from developing countries for cut the labour costs.
The CEO from both companies had to think at the future for more critical thinking about
how to make sure their interest are be achieved.

Osmu Masuko : The CEO of Mitsubishi Motors

Datuk Seri Mohd Kamil Jamil : The CEO of Proton

THE SECOND CHALLENGES: IN TERM OF CAPITALIST BANKING

The next challenges that we want to discuss is, are Proton make a monetary loan from
Mitsubishi Bank or any foreign banking? It quite important to know that Proton get money from
any foreign resources especially Mitsubishi. If true that Proton make a loan from Mitsubishi
Bank for support their operation, maybe for the long-term period, Proton have to do something to
prevent it from bad become to worst.
As far as I know, the biggest loan that make by Proton Holding is around RM 1.32 billion
or 270 million pound sterling. That money purposed for make Research and Development work
at England through Proton subsidiary, Lotus Cars Ltd. The loan that were purposed to six
different financial institutions, they are CIMB Bank Bhd, Malayan Banking Bhd, OverseasChinese Banking Corporation Ltd, Export-Import Bank of Malaysia Bhd, Affin Bank Bhd dan
EON Bank Bhd.
The bank that Proton make a loan

Based on the list above, only one foreign bank give that loan to Proton Holding, which is
Overseas-Chinese Banking Corporation. As we known, Mitsubishi Group have a subsidiary on
monetary field which is Mitsubishi Bank. However, Proton Holding never make a loan from that
company.

Bank of Tokyo Mitsubishi UFJ

So, from this study we know that actually, Mitsubishi Bank not give provide any loans to
Proton Holding since the Proton were establish. Even if Proton Holding did not make any loan
from Bank of Tokyo Mitsubishi UFJ, usually they make a loan with local financial institutions.
The challenges of the CEO of Proton still burdened to make sure Proton Holding still in a right
track to develop a new model cars while paying the interest bank for loan that they made before.
It can be a burden to anyone whose become the CEO of Proton to settle that loan. That is
not easy to control and make a negotiation with the local and foreign financial institutions for a
long-term benefits.

THE THIRD CHALLENGES: IN TERM OF RAPID TECHNOLOGICAL INNOVATION

Technology is one of the important elements in produces heavy industries, including car
industry. Since the Proton make joint-venture with Mitsubishi, the majority of technology were
used by Proton assigned by Mitsubishi Motors. The contract said that the cooperation between
Proton and Mitsubishi Motors will continue about 20 years since that agreement were agree by
both side since 1983.
There are lot of Mitsubishi technologies were used by Proton actually from Mitsubishi
Motors. For example, Proton Waja that produced by Proton actually based on Mitsubishi
Carisma model. Not only that, the engine of Proton Waja also from Mitsubishi Motors, which is
4G18 engine model.

Proton Waja

4G18 Engine

Another example is Proton Sateria were produced in 1995 by Proton. The modul that car
are based on Mitsubishi Mirage Cyborg model. The engine for that car are 1.3L (4G13 I4) and
1.5L (4G15I4). Both of that engine based on Mitsubishi Orion model.

Proton Satria

4G13 l4 engine

Not only that, Proton Perdana also based on Mitsubishi Galant Eterna (7th Generation)
using 4G63 SOHC engine, Proton Wira based on Mitsubishi Lancer/Colt model while using
4G15 l4 engine, Proton Saga based on Mitsubishi Lancer Fiore model and engine 4G13 l4. The
last technology transfer were given by Mitsubishi Motors before Proton and Mitsubishi rescind
their contract is Proton Inspira. That model based on Mitsubishi Lancer GT model and the engine
4B10 1.8 L DOHC I4 (also from Mitsubishi Motors).

As we can see, many of car models were used by Proton actually from Mitsubishi and not
from their own origin idea. The dependency of Proton unto Mitsubishi Motors is undeniable and
if they still like this, we can see the technologies transfer actually failed for Proton. They not
develop a new technologies from their own idea. This situation give a huge profit to Mitsubishi
Motors because they just sell their technology to Proton. Moreover, the technologies that they
give to Proton actually already outdated at Japan.
The challenges for the CEO from periphery company like Proton, they must reduce their
dependency on core company like Mitsubishi Motors. They have develop their own technologies
for a long-term benefit. Maybe they can learn from core company with send their engineer to
develop their skill, information and critical thinking at Japan. But the question is, are they
(Mitsubishi Motors) allowed that happen to Proton whose from periphery company which is
origin from developing countries?

THE FOURTH CHALLENGES: IN TERM OF GLOBAL RESOURCES

Resources is one of the important elements in producing any product. Without the
resources such as raw materials, impossible for any company or countries to produces a good
products in market. Regarding to the topic that we have been discussing, have another question,
which is Is that true that Proton were manipulated by Mitsubishi Motors since they joint
venture in term of resources?.
The answer for that question is quite hard to explain but may be that theories were right.
Malaysia is rich in term of resources, especially raw resources during 1980s until 1990s. For
example, Malaysia is the largest producer of natural rubber in the world at that time. Mitsubishi
Motors is company from Japan and as we know that Japan don not have enough raw material
such as rubber.

Natural Rubber

Tires

Mitsubishi Motors can take advantage from this joint-venture to get enough natural
rubber to supply the demand of tires. Not only that, Mitsubishi Motors also can spread their
automotive market in Malaysia through this cooperation with Proton. That is one of the strategies
of Mitsubishi Motors to get a raw material in easy way while get a huge profit with transfer their
outdated technology especially engine and model cars to Malaysian market (through Proton).
The challenges for the CEO of Proton represent periphery side, should take a self
initiative to negotiation with local government to make sure the local resources could not flow
out from Malaysia easily by core company side such as Mitsubishi Motors. They have no choice,
weather they (Proton) had to face the problem to get raw materials in their own countries or
competitive return in term of resources.
This situation not only happen to Proton only, but all the periphery company. The
challenges for the CEO of Mitsubishi Motors is to maintain their monopolies in term of global
resources at the developing countries such as Indonesia, Thailand, Philippines, Malaysia and
Brazil.

The need and want by core and periphery in term of global resources.

THE FIFTH CHALLENGES: IN TERM OF CAPITALIST STATE

Government is the institute that ruling in specific area, which is country or state. The role
of government is to make sure the interest of public or people whose live under their territories in
a good condition. While, the company is institute where their target is to gain profit as much as
they can. They collect the raw materials and combine them to produce products or services to
their customers.
Proton is the company where produce product where the final product is cars, and they
have to be effective company to ensure their

successes in local competitive and also in

international arena. But the main problem that they had to face is the influences of Malaysian
Federal Government unto them. This is not the new issue or problem because everybody know
that government have their own interest in Proton since that company were existed in 1980s.

The former Prime Minister of Malaysia, Tun Dr. Mahathir Mohamad is the person who
bring the idea to establishing Proton. So, we can see Proton have to follow the order from
government before produce any model of cars. The intervention if government at internal
management of Proton, make Proton cant be more effective, competitiveness, advance and
innovative like others core companies such as Mitsubishi Motors.
Tun Dr. Mahathir bin Mohamad

For the early period, maybe it good because Proton like a baby in automotif industries,
but after more than 20 years, Proton still depend on government to survive in local automotif
industries. In fact, the government find strategic partner for Proton in produce any model cars
(just several car were produces by Proton team).
Proton Holding cant be more comprehensive and advance in term of innovation when
Proton Management Team have to follow the order from government in any aspects. So, the
challenges for CEO of Proton is to reduce the influences of government in Proton management.
Maybe they cant vanish that influences at all but at least, they can make their own decision in
term of management and Research and Development Section to be more innovative and
competitiveness in local market as well international market.

As we can judge, even if Proton Holding buy Lotus Cars, they still cant be the main
competitors in international market, as well Malaysian market. Lotus Cars is one of the most
advance automotif companies in the world in term produce sports and racing cars. At the same
time, the local engineer and worker (British) together involve to produces the new car models for
Proton. But, still the result is same.
Lotus Cars Logo

For the CEO of Mitsubishi Motors, their challenges is to make sure the intervention of
Malaysian government in Proton Holding will give advantage to them for ensure Proton cant be
their competitor. That is the Challenges for both of CEO for their perpetuity at the future. Their
leadership have to be advance from time to time. The government make it more difficult when
actually the government just take a profit when Proton get a huge sales but not help properly
when that company in crises.

CONCLUSION
As conclusion from the studies that we just have been discusses, we can see how huge the
Proton Holding depend on Mitsubishi Motors before to produce their own cars. This is not a easy
job to anyone whose sit on the CEO chair in Proton to handle it. The dependency of Proton is
undeniable, but they can reduce that for competitiveness and creativities of Proton Holding at the
future.
The five management challenges that were listed above can give a guide to any
International Affair Management Students to gain more knowledge about this matter. The reality
of periphery company from developing countries such as Proton Holding from Malaysia. The

student have be learn how to handle it before they enter in job market especially at international
company level.
The challenges such as the exploit worker, capitalist bank, rapid technological
innovation, global resources and the intervention of capitalist state must been studied by
International Affairs Management (BIAM) students before become a CEO in any company,
especially company belong to periphery group.

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