12/24/2014

FACTS
Name

Perusahan Otomobil Nasional Berhad (PROTON)

Year Founded

1983

Mahathir Mohamad
Profile of the company
Subsidiaries
11 Subsidiaries and 11 associated companies
manufacturing,
research and development, sales and
Year-founder-size
of production-revenue
Founder

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
PROTON Official Website

12/24/2014

COLLABORATION/PARTNERSHIP
PROTON-MITSUBISHI

1985 SAGA: 1.3 or 1.5

PROTON SEPARATE

2001

litre engines.
Simpler model of
the Lancer, a well2004
established and
popular
Mitsubishi model
for the mass market

WAJA: its first homedesigned model.

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

PROTON + (?)

MISSED OPPORTUNITIES

To expand its sales

internationally and
domestically, Proton
need to improve its
technology.

2004-2007

Discussions with global

automotive original
EFFECT:
Deteriorating quality of proton products. Customers equipment
perceived the quality of proton vehicles to be better when manufacturers (OEMs),
including General Motors
they were still produced in partnership with Mitsubishi
(GM), Peugeot and, more
Eventually, Mitsubishi agreed to form another alliance
recently, Volkswagen AG
with Proton, but only on a project basis.
went nowhere as none.
12/24/2014

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.
12/24/2014

INDUSTRY OVERVIEW-Local Market

Market Share for each Manufacturer

in Malaysia as of Feb. 2013
Competitors
(Maybank
Research Sector Update
Market
share
Perodua
March 2013)
3%

Proton

4%

Toyota

10%
37%

8%

Honda
Nissan

12%

Hyundai
26%

12/24/2014

Volkswagen

INDUSTRY OVERVIEW-International
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
12/24/2014

Source: (paultan.org - thestar.com.my- bernama.com.my- a4rzero.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.

High
Quality
and Low
Price!

Quality
Customer Focus
Innovation
Team Work
Speed
Caring
Honesty

12/24/2014

PROTON Annual Reports 2012

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

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

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
1-Competitive Rivalry
favorable

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.

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.
12/24/2014

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.

PORTERS
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

12/24/2014

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

PORTERS
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.

12/24/2014

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 loyaltyProton 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
12/24/2014

ENVIRONMENTAL
Growing concern toward
the environmental issues

Jane 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
12/24/2014

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
Logistics

MARGIN

Operations

Outbound
Logistics

Marketing
And Sales

Primary Activities
12/24/2014

Service

INTERNAL STRATEGIC ANALYSIS :SUPPORT ACTIVITIES

Firm
Infrastructure
HR
Management

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
Development

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.

Procurement

Supply chain ( raw materials, parts and components) from foreign a

well as local manufacturing

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

* (comments in next slide)

(The Centre for Logistics,

Allocation, Storage and
Services )

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)

287 vendors
3000 subsuppliers
5000
components
Only 10% of
them hold
Grade A
ranking

RESULT:

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

60% defects
because of poor
quality of suppliers

PROTON Tanjung Malim

Annual capacity of 150,000
units.

CHANGE STRATEGY:

PROSPECTS

Reduce number of
vendors to 180
Increase inbound
control

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)

12/24/2014

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

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

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*

INTERNAL STRATEGIC ANALYSIS:PRIMARY ACTIVITIES

cont.

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

12/24/2014

STYLING & TECHNOLOGY

DEVELOPMENT

PROCESS
IMPROVEMENTS

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.

Companys 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.

INTERNAL STRATEGIC ANALYSIS: PRIMARY ACTIVITIES

Cont.

QUALITY CONTROL
RIGHT CULTURE & RIGHT ATTITUDE in PEOPLE
Customer Focus:

Towards Quality
Culture:

Innovative-Driven
Quality:

Quality Improvement
Team

Quality Improvement
Committee

All Innovation Matters

(AIM)

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
Companys 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

12/24/2014

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]

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
12/24/2014

Lotus Cars, Lotus Engineering and

Lotus Racing

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.
And All THIS ACTIONS for:
Increasing Quality by
Decreasing Cost!!!
12/24/2014

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)
12/24/2014

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 best
available options for solving their issue.
12/24/2014

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_Gen2_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-modelon-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

12/24/2014

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-in-august/
7. 1st sustainable conference (pdf)

12/24/2014