PRINCIPLE OF MANAGEMENT

(COEB432)
COMPANY NAME: PROTON HOLDINGS

NO NAME SID NO
1 Nagaraja Rupan A/L Panneerchelvan EP098308
2 Jeevan A/L Sinappan EE098239
3 Praveen A/L A. Ganeson EP098709
4 Muhammad Ammaruddin bin Moh Azmi EE096985

Section : 04

Lecturer : Madam Rusnita bte Alimun

Submission Date : 28th August 2017

INTRODUCTION

PROTON Holdings Berhad, (PHB; informally Proton) is a Malaysia-based corporation active

in automobile design, manufacturing, distribution and sales. Proton was established in 1983 as
the sole national badged car company until the advent of Perodua in 1993. The company is
headquartered in Shah Alam, Selangor, and operates additional facilities at Proton City, Perak.
'PROTON' is a Malay acronym for Perusahaan Otomobil Nasional (National Automobile
Company).

Proton was originally a manufacturer of rebadged Mitsubishi Motors (MMC) products in the
1980s and 1990s. Proton produced its first indigenously designed, non-badge engineered car
in the year 2000, and elevated Malaysia as the 11th country in the world with the capability to
design cars from the ground up. Since the 2000s, Proton has produced a mix of locally
engineered and badge engineered vehicles. Proton cars are currently sold in at least 15
countries, the majority of which are in Asia.

Proton was originally owned in majority by HICOM, with minority stakes being held by
Mitsubishi Group members. By 2005, Mitsubishi had divested their stake in Proton to
Khazanah Nasional, and in 2012, Proton was fully acquired by DRB-HICOM. Proton has been
the owner of Lotus Cars since 1996. In May 2017, DRB-HICOM announced plans to sell a
49.9% stake in Proton and a 51% stake in Lotus to Geely Automobile Holdings.

Proton, predominantly reliant on its domestic market, is presently undergoing a transformation

process as part of a long-term turnaround plan, with hopes of returning to profitability and
regaining an international presence.
EXTERNAL FACTORS THAT INFLUENCES BY
PROTON HOLDINGS

External factors is a strategy framework that provides corporations with clear analysis of their
competitive strategies. Proton has its own external factors with the total of 5 which are known
as industry competitors. As a local manufacturer who advantages 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. Next would be the threat of substitutes. There
is a high threat from the competitor Perodua, as prices are more affordable. Motorcycles are
also highly considered as a substitute. Moving further, the next external forces influence by
Proton is the supplier power.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. Furthermore, the buyer power is also known as one of the external force influence
by Proton. The buyer will always choose the lower price car. Last but not least, threat of new
entrant in Proton also known as the external force influence by Proton. The threat of new
entrant can be categorized into 2, which are Low Threat and High Treat. Under low threat of
new entrant, high capital and investments are needed for such industry to avoid 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.
For the high threats of new entrant, as government is working towards reducing taxes on
imported cars 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 favourable.
ENVIRONMENTAL ANALYSIS USED BY PROTON
HOLDINGS
Environmental analysis is a strategic tool. It is a process to identify all the external and internal
elements, which can affect the organizations performance. The analysis entails assessing the
level of threat or opportunity the factors might present. These evaluations are later translated
into the decision-making process. The analysis helps align strategies with the firms
environment.

Robert Grant, author of the book, Contemporary Strategy Analysis, categorizes

environmental influences as either source or proximity. Grant explains that sources include
political, economic, social and technological factors, these factors form whats known as a
PEST analysis. The business is not always in a position to control these variables, it can only
plan for them and make decisions accordingly. Companies use an environmental analysis to
prepare for a variety of potential scenarios. For instance, an organization may prepare for a
downturn in the economy by drafting several production schedules that are contingent on
different levels of consumer demand.

There are many strategic analysis tools that a firm can use, but some are more common. The
most used detailed analysis of the environment is the PEST analysis. This is a birds eye view
of the business conduct. Managers and strategy builders use this analysis to find where their
market currently. It also helps foresee where the organization will be in the future.

PEST is an acronym for Political, Economic, Social and Technological. This analysis is used
to assess these four external factors in relation to your business situation. Basically, a PEST
analysis helps to determine how these factors will affect the performance and activities of the
business in the long-term.

According to Proton Holdings, under political role of analysis, 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. As a result, there will be a glut of used cars in the market, because of people will tend to
trade their cars for cheaper and imported brands. On the other hand, the issue regarding the
environment is vital because it is considered as one of the most talk about topics in the world.
The environmental regulation in Malaysia can be traced back during the colonialism of British
which introduced the environmental standards about the mineral and agricultural resources to
Europe.

Proton also implement Association of Southeast Asian Nations Free Trade Area in 2005.
Proton needs the move to survive as it faces increasing competition. Under AFTA, Malaysia
has agreed to cut import tariffs on foreign cars from up to 300 percent to between 0 percent
and 5 percent by 2005. All car components and parts will be affected. As a result, sales of the
Proton, which represent 60 percent of the local market, are expected to drop and the company
needs to prepare for this reality.

Under economic role of analysis, primarily the issue of global financial crisis, which affected
the local financial status of the country. 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, it had increased the competition, which will impact the performance of Proton.
However, the performance of the automobile industry will be maintained and managed due to
the huge total labor force.

Next, under the role of social analysis, the growing population in the country is one of the
factors which can affect the automobile industry. This will give a greater number of markets.
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. Another factor to consider is the growing knowledge and concern of the people
regarding different environmental issues. Furthermore, the impact of the image to the loyalty
of the customer is also another factor.

Lastly, under the role of technologies analysis, technology is considered as one of the most
important factor in the automotive industry. 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. The intellectual property is also important factor, because
it is considered as a sign of authenticity and uniqueness. Due to the different technologies,
primarily the help of computer and the Internet, the potential for innovation and development
is increasing.
As a summary of environmental analysis gone through by PROTON HOLDINGS:
HOW DOES PROTON RESPOND TO THE
ENVIRONMENT?
Proton Holding responds to the environment by adapting to the environment in such way it
undergoes the economic environment. Proton has exported their automobiles to several
continents around the globe but the countries that Proton exports is categorized based on the
types of economic systems which consist of Market Capitalism & Centrally Planned
Socialism.

Market Capitalism is an economic system in which individuals and firms allocate resources
and production resources that are privately owned. In others words, the economic systems
allows private ownership and operate privately. One of the country that belongs in this
economic system that Proton exports its product is United Kingdom, Belgium, Germany and
Singapore. The distribution channel for Proton to export their automobiles will be smoother
because there are no government intervention and also additional taxes added. Besides that, the
quota of entry will not be as strict and it will mostly be based on the demand by the customers
in the country. Due to this fact, Proton can coordinate their unit of sales from time to time and
decide whether to increase the unit of export or otherwise. By doing so, the element of
efficiency will be present as the percentage of loss for the company will be reduce since the
coordination of sales is done from time to time and moreover, more units can be exported if
the customers demand for more which can eventually increase the percentage of revenue
(Keegen and Green, 2016). Recently, Proton ventured into Latin America by following the
ratification of the Malaysia-Chile Free Trade Agreement on the year of 2013. In July 2015,
Proton signed a distributor agreement with Andes Motor, and the first left-hand drive Preve
and Exora evaluation units were shipped to Chile in November. On 1 March 2016, Proton
commenced the first official shipment of 50 Prev units, the first of an anticipated 1,000
Chilean bound Protons this year.
Next, it will be the Centrally Planned Socialism . It is known as a type of economic system
where the state has broad powers to serve the public interest as it sees fit. One of the country
that Proton exported its automobiles is China. The advantage that Proton had by creating
business ties with China was during the first half of 2010s where the Chinese market has
become the largest contributor to Protons export revenues.
Proton not only received revenue for their unit of sales but
also received royalties for the use of their platforms and
Campro engines. Chine basically knows the fact that most
of their citizens prefers Protons automobiles and took an
effective steps by employing more units into country and
serve their citizen with the number of units that they think fit. By doing so, they will be a mutual
benefits that will be received by both of the country and also Proton.
CONCLUSION

After analysing Protons strategy vision which is quality along with decreasing cost, they will
not be able to implement it because they still depends 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 issues.

References
1. https://www.slideshare.net/RashaZohorAdi/proton-strategic-analysis-presentation
2. https://www.slideshare.net/AyadiAkmal/proton-13530442
3. https://www.slideshare.net/KalaimuugilanSathiya/international-marketing-of-proton-
holdings
4. https://www.academia.edu/8056000/Proton_Case_Study?auto=download
5. https://en.wikipedia.org/wiki/PROTON_Holdings