Business: Automobile and Proton Essay

This assignment contains about business environment. Business environment refers to different forces or surroundings that affect business operations. Such forces include customers, competitors, suppliers, distributors, industry trends, substitutes, regulations, government activities, the economy, and social and cultural factors. Others are innovations and technological developments. We choose Proton Holdings Berhad because we think this local company is the best company for us to do this business environment assignment because this company use this include Macro, Micro and Internal Environment. PROTON COMPANY BACKGROUND Proton Holdings Berhad (stylized PROTON) is a Malaysian automobile manufacturer. It is headquartered in Shah Alam, Selangor and operates an additional manufacturing plant in Tanjung Malim, Perak. The company was founded in 1983 and was the sole vehicle manufacturer in Malaysia until the establishment of Perodua in 1993. Proton is a Malay acronym for Perusahaan Otomobil Nasional Sendirian Berhad. (English: National Automobile Company Private Limited). Proton was largely a manufacturer of badge engineered vehicles from Mitsubishi Motors between 1985 and the early 2000s. The company has since produced several indigenously designed vehicles and operates in at least 26 countries, of which the majority are in Asia. Proton was formerly owned by Khazanah Nasional, the investment holding arm of the government of Malaysia. In January 2012, it was taken over by DRB-HICOM, a Malaysian conglomerate in a transaction amounting RM1. 2 billion. Proton, predominantly reliant on the local industry is currently undergoing major structural and internal changes, as evident in the appointment of a new owner, partner, Chairman and the launch of various new and upcoming models in an effort to gain an international presense and increase profitability. PROTON produced Malaysia’s first car, the Proton SAGA which was commercially launched on July 9, 1985 by Malaysian Prime Minister, Dato’ Seri Dr. Mahathir Mohamad who conceived the idea of a Malaysian car. One of the reason of this achievement is due to the introduction of new models with higher profit margins, stronger sales volume, savings from group-wide cost-reduction initiatives, income from the sale of rights for use of Intellectual Property Rights relating to a vehicle platform (for the China market) as well as the R&D grant. For the year 2008, PROTON’s focus would be in the core areas of product, quality, cost efficiency and distribution network. PROTON aims to have a strong product portfolio by introducing â€Å"the right car, for the right market, at the right price and at the right time†. This was reflected in the organisation’s newly introduced Exora, Persona and Saga Models, with the latter powered by the new CamPro IAFM engine. PROTON has also continued to update and refresh existing product lines to entice and attract customers. PROTON cars are also known internationally as competitive and innovative automobiles. PROTON now is being exported to 50 countries like United Kingdom and continental European markets, thereby realizing its goal of being an internationally successful Malaysian automobile manufacturer. The first PROTON car was exported in 1986. The number has increased steadily and in 1998, Malaysia exported a total of 18,422 units to countries and areas, including Argentina, Australia, Bahrain, Bangladesh, Belgium, Brunei Darussalam, Chile, Cyprus, Egypt, Fiji, Germany, Jordan, Kuwait, Lebanon, Libya, Maldives, Mauritius, Oman, Philippines, Qatar, the Russian Federation, Saudi Arabia, Singapore, Slovenia, Sri Lanka, Taiwan Province of China, Turkey, United Arab Emirates and United Kingdom. The models being exported include Wira, Sedan/Aeroback, Satria and Putra. PROTON’s exports are the most successful in the United Kingdom due to its competitive pricing strategy and its buyback arrangement with car rental companies in the country. PROTON also benefited from the Generalised Preferences Scheme that made it easy for them to enter the United Kingdom market. PROTON has introduced a few upgraded models with higher engine capacity and sporty design to establish its presence internationally. PROTON is focusing to be more customer-oriented and by producing competitively priced and innovative products. It is therefore contributing to the Malaysia’s attainment of Vision 2020. Main Body. Macroenvironment a) POLITICAL FACTORS Currently, most of ASEAN region are free trade or 96% of the entire ASEAN trade. Asian Free Trade Area was established in January of 1992 in order to eliminate tariff barriers among the Southeast Asian countries. It planned to reduce tariffs to zero to 5% in 15 years among the six nations through a common effective preferential tariff (Ghani & Zainuddin 2008). If we are going to check on the high selling prices of the national cars of Malaysia because of high production costs and lack of vendor efficiency, there is a big possibility that the local market will be ruled by imported cars. In Malaysia, PROTON prices are kept comparatively lower to foreign manufacturers through protectionism. Protectionist policy has largely been blamed for PROTON ‘s stagnating performance. b) ECONOMIC FACTORS The vehicle sales in the country is expected to fall by year by year due to different economic aspect, primarily the issue of global financial crisis, which affected the local financial status of the country (AseanOneMonitoring 2009). As a result, the government of the country is expecting a slow economic growth for the country, which can affect the buying behavior of the customers. Furthermore, due to the AFTA, it had increased the competition, which will impact the performance of Proton. c) SOCIAL FACTORS The growing population in the country is one of the factors which can affect the automobile industry. Furthermore, the ratio of car ownership in the country is somewhat high or total of 1:5, which signifies that people are considering cars as important things in their lives. Furthermore, people will also set on big-ticket items or consumers are expected to put off buying different motor vehicles because of the employment market uncertainty because of the global and local financial crisis (AseanOneMonitoring 2009). d) TECHNOLOGICAL FACTORS Due to the increasing competition, the development in technology is growing and affecting the performance and position of each and every company in the automobile industry. It is also important to consider the maturity of technology, together with the maturity and capacity of manufacturing, which affect the innovation process of any company. Due to the different technologies, primarily the help of computer and the Internet, the potential for innovation and development is increasing. Microenvironment * Suppliers The supplier has a neutral power over the industry. This is because there are few dominant suppliers in the industry who are well known for quality and brand image. Provide the resources to produce goods and services. Treated as partners to provide customers service. Proton Supplier, AV Ventures steering, wiper and washer and window regulator systems. Ichikoh, Head lamp, mirror (also for Toyota, Nissan, and Subaru). * Other stakeholders Proton’s key stakeholders are the Environment, the Malaysian government, the Malaysian public, car owners as well as its vendors and suppliers. The Malaysia Government owns 52% of Proton shares through Khazanah, Petronas and ValueCap. ValueCap is a government investment arm. The government also heavily subsidizes the production of proton cars by giving grants and exemptions/tax credits. But despite that, Proton continues to make loses. The Malaysian public is the indirect shareholder through EPF (Employees Provident Fund), government unit trust funds Amanah Saham Bumiputera, Amanah Saham Malaysia) and Lembaga Tabung Haji. Together these funds hold around 20% of Proton shares. Additionally, it is the public that pays the tax, which then is used to provide grants and tax credits. Proton also involves in sponsorships in the area of education and sports as well as donations to the needy. Customers or car owners can’t find the exact figures of active Protons cars currently being driven all over Malaysia but I would estimate the figure to be around 3 million (assuming no cars have been fully retired). The figure is justified since I can still see many first generation Proton Saga cars on the road. Environment also externality factor to be considered by having almost 3 million proton cars on our road (most of the cars produced are sold locally in Malaysia !! ). Moreover, the earlier generations of Proton are nearing retirement and may need to be sent to scrap yard and contribute to our ever increasing waste disposal problem. Vendors and Suppliers More than 80 per cent of Proton components are currently produced or supplied by automotive component manufacturers and suppliers. Proton’s network of 287 vendors and approximately 3,000 sub-vendors currently supply more than 5,000 individual components and parts for its cars. * Intermediaries We continued to work with our distributors and dealers in a number of ways, most importantly, on programs designed to enhance the sales and service experience for our customers. The strengthening of the domestic sales and service network remain our key focus to improve customer service and maintain our market share. Proton Cars Australia recorded retail sales of 1,388 units, an increase of 55%. This was the second largest increase in percentage terms of any OEM in Australia. The higher sales were attributed to the success of the Jumbuck (Arena) which accounted for 786 units. Proton Cars UK managed to retail a total of 507 units of Jumbuck (Arena), which represented 80% of the sub one ton single cab petrol pick-up market. Total sales however, recorded a decline of 14% with the gradual phasing out of the old products. Proton has continued to achieve excellent results in the 2004 UK J. D. Power Customer Satisfaction Survey. Proton tied for 10th position in the Overall Top Brand Category out of 33 brands and was placed second in Dealer Service Satisfaction, just behind Lexus. Further inroad into the neighbouring Asean markets is expected in 2005 with the establishment of Proton Edar Indonesia and Proton Singapore. * Competitor The big competitor in Malaysia in term of automobile companies and affordable car is PERODUA. The competitive environment as we can see roughly in Malaysia is affordable car where all citizens in Malaysia can buy it and the car maintenances also cheap. Here, the porter four are been applied for more clearly because the competitive environment not only about the competitor. It can be about the economic recession, natural disaster and etc. i) Competitive Rivalry In Malaysia, there is not too much competitor around affordable car. The low cost car as I mentioned above (cheap maintenance) is not have a lot of competitor in generally. The affordable car in Malaysia also, gets more potential to sell compared to luxury car. The luxury car is only certain people used. As we see the environment in Malaysia, 1 family will have more than 1 car. For sure, the first car they will choose the cheaper car and affordable car. ii) Threat of New Entrant (high) The economic recession will be a big threat for PROTON. As we know, all big company will facing over budget or does not achieve the sale for that year. The government will lose a lot of money cause of policy and shareholders. By the way, economic down turn actually comes suddenly without notice. iii) Threat of Substitutes (high) Substitutes also will be a big threat for PROTON. Malaysia has to national car. The First automobile is PROTON and secondly PERODUA. The substitutes will high in term of car model (some of car model looks similar), and car spare part. iv) Buyer Power Buyer will choose the low cost car for the first car and buyer also actually are fragmented. So, it will not has much influence. * Customer Customers are the source of our income. We deliver on our promises to our customers’ satisfaction. The process in identifying the consumer target for new Proton Exora 2 is important due to the fact that consumers tend to have different brand knowledge structures and thus they will perceive differently for the products or services. Proton has successfully identified their target market, according to the segmentation bases namely behavioral, demographic and psychographic factors. INTERNAL ENVIRONMENT Marketing The company used to segment its market on variables such as behavioral, demographic, and geographical differences. Behavioral Segmentation: Behavioral segmentation is based on the customer’s needs and subsequent reaction to those needs or toward the purchase of intended products and/or services. Demographic Segmentation: Demographic segmentation refers to a wide study of the potential customers. Since the company is targeting its market to more economy class customers, demographic segmentation is employed by the company. Geographical Segmentation: Geographical segmentation is done by dividing people (markets) into different geographical locations. The company targets markets of different countries other than Malaysia. Production PROTON’s model products include WAJA, SATRIA, GTi, WIRA, ISWARA, ARENA, PERDANA V6, JUARA, PERSONA and EXORA. The range of 1. 3, 1. 5, 1. 6, 1. 8 and 2. 0 litre engines satisfies a wide spectrum of customers both locally and abroad. PROTON’s model products include WAJA, SATRIA, GTi, WIRA, ISWARA, ARENA, PERDANA V6, JUARA, PERSONA and EXORA. The range of 1. 3, 1. 5, 1. 6, 1. 8 and 2. 0 litre engines satisfies a wide spectrum of customers both locally and abroad. Based on technology and parts from Mitsubishi Motors, production of the first model, the Proton Saga began in September 1985 at its first manufacturing plant in Shah Alam, Selangor. The 100,000th Proton Saga was produced in January 1989 and latest model is Suprima S. Finance Proton maintained huge financial profit thought the 1980s till 2000 due to their high market share in Malaysia. But with the launch of an arch rival Perodua in 1993, Proton was about to have a big run for its money and this came to reality in the 2000s. Proton’s market share dropped in 2006 to 30. 4% for the Malaysian market. Their generated revenue of 7,796 ( Million in Malaysian Ringgit) in 2006 was the second lowest in the last seven years as the company have always hit the billion Ringgit mark in the previous 7 years. This fall allowed Perodua to overtake Proton as the country’s largest passenger carmaker for the first time in history, with a 41. 6% market share while Proton fell from 40% in 2005 to 32% in 2006. Their market share continued to reduce down to 23. 1% in 2010 mainly due to new government policies. For example, under AFTA, Malaysia has reduced import tariffs, admittedly after having secured a two-year deferral from ASEAN. Import tariffs on completely built-up (CBU) unites were reduced from a band of 70 – 90 percent to 20 percent at the start of 2005. However, it is important to understanding that Proton losing its market share to Perodua, another Malaysian automobile that was formed a decade after full operation of Proton could hint some gaps in their management system. In other to justify these claims, it is necessary to have a look at their in-depth financial performance since the 2000s and how they have coped with loses in relation to their internationalization project. Personnel The overall thrust of our Human Resource strategy is to recruit, reward and retain the best employees. During the year, a number of recruitment road shows were conducted in Malaysia as well as the UK among leading engineering and business universities to meet our growing requirement. The response was overwhelming and more such road shows are being planned for the coming year. An internship program for graduate trainees was implemented during the year to meet the growing needs of the business. The Human Resource Management Group has continued to be the key forum for the communication of policies and issues affecting the employees. The Group comprising representatives from the Senior Management and the Proton Workers Union meet on a monthly basis to discuss strategic human resource issues affecting employees. It is a unique program that allows regular communication and prompt resolution of issues as well as participation by the Union in the development of policies affecting the employees. Research & Development The Group continues to research new technologies with the ultimate aim to put these innovations into production through partnerships with Tier One Suppliers or OEM customers. Two such advancements likely to see production are engine technology AVT (Active Valve Train) and chassis technology VVA (Versatile Vehicle Architecture). The Group has also invested significantly on the development of new innovative products to meet the challenges of the market place. During the financial year, the Group invested RM542. 9 million (2003: RM413 million) in research and development. For 2004, total development expenditure increased significantly with work focused on the development of new models on a number of platforms including the leading edge Versatile Vehicle Architecture (VVA). The VVA reduces the time it takes to bring a new product to market and helps meet changing demand more quickly. Globally, we are moving towards shared technologies so that vehicles can be differentiated while using common components. The reduction in development time will create greater efficiency and the standardisation will also lead to greater economies of scale in purchasing components. Development has also begun on an aluminium-bodied vehicle built on the VVA platform. Increased fuel efficiency and power through weight reduction and material recyclability are key factors that have conspired together to promote the use of aluminium in vehicle body structures for high volume production. CONCLUSION Proton is aiming to become one of the strong competitors of the automobile companies in market. So, as other existed competitors challenge the other proton company, they were inspired by them to develop a quality business for the customers. Competitive advantage is what they are targeting for company and there are business motivational is about the capabilities in automobile companies . Even they are realizing that there are some existed competitors have their own abilities in the automobile, they are also have the buyer Power. The buyer will choose the cheap car for the first car and buyer also actually are fragmented. Therefore, it will not have much affecting. Besides that, they are always finds a way to make the market being effective with their strong distribution network. However, the companies of proton is the most famous company in Malaysia as we know and they will try the best to ensure that damage will occur. Moreover, proton also is one of the companies which give a inspiration on all people and race in Malaysia irrespective early age or that old. Everyone knows, that Proton has various product automobile with the design distinctive. Some, from revenue scooped the great of benefits had rival that high with others automobile company. Even though, it still will ensure that Proton companies will always stable with economy and in terms of from product aspect is that best and high quality.