Proton Automobile Company (Essay Sample)

Proton Automobile Company
Name:
Institution:
Assessment One:
Introduction: History and Background.
Proton Holding Berhad is an automobile manufacturer based in Malaysia. The company was first started in 1983, which was after the wishes of the former Prime Minister of Tun Mahathir Mohamed. The name PROTON came from PeRusahaan OTOmobile Nasional that is translated as National Enterprise in Malaysian. When the company was starting, part of the technology came from Mitsubishi although it later became an independent company. The company produced its first model in 1985 that was called Proton Saga. Soon after, the company was able to start exporting its products to Bangladesh by 1986 and by 1987 it had made more than 50, 000 units. During the same year, PROTON Company made a contract with a UK dealer to enable shipment of Sagas to the British Isles, but the agreement materialized in 1989. After the contract was valid, around 150, 000 units were produced. New models were produced the following years where Proton Ishwara was launched in 1992, Wira in 1993, Proton Satria in 1994, and Proton, Tiara in 1996. It is therefore clear that the company was able to grow constantly over the years (Benneth, 2013).
With this kind of financial power, Proton Company was able to get into several partnerships with other automobile companies. By this time, the company was able to sell its products to more than 31 countries across the world. In the year 1996, the company purchased Lotus technologies, which was a breakthrough to its success in the technology infusion it required. For the first time in 2001, the company announced its first sports model, the Proton Ultimate. Similarly, there was another partnership with Volkswagen AG in 2004, which enabled the Malaysian company to gain access to the German technology. It was thus able to offer its facilities in the foreign countries for manufacturing. Unfortunately, the two companies separated in 2006 after Volkswagen announced that they were both unable to agree on terms and conditions. Proton Company also suffered a huge drop in sales in the same year that caused a loss in profit amounting to $169 million.
Innovative, Risk-taking and Proactive Aspect of Proton Automobile:
Proton’s Success.
During its rise, the government of Malaysia had a strong support for the company, which led to its success in the market. The company has therefore become an icon of both personal and national success in the country. Since the company started its manufacturing process, it has grown from nowhere to become the predominant force in the vehicle industry of the country. For instance, the Saga model was able to capture 74% of the total car sale in Malaysia in 1994 from a mere 11% in 1985. After the adjustment for inflation in 1988 that led to the swelling of the middle class with a population of 19 million, Malaysian economy grew by an average of 8% per year (Benneth, 2013). This was a loophole for the company to gain better access to the market and create dominance. Again, the swelling of the middle class was also a good avenue for the company to increase its sales thus widening its market.
A question of concern is whether the new toll roads and highways contributed to the success and expansion of the business. Once there is good infrastructure, leisure, travel and businesses are opened up. What results is the demand for automobiles to serve the ready market. The Proton Company seemed to realize this niche in the market and increased its manufacturing process for new automobiles. In addition, it was able to develop new models to fit the wider market and different preferences in the market. The demand for cars became so strong that there was always a waiting list for new Protons. As the company expands, it has new plans for a new plant in Malaysia, which would increase the total capacity to more than 560, 000 units per year. The company has increased its sight into expanding the market up to Asia and the Pacific countries as well as Europe.
Market Opportunity and Analysis/Target – Proton Automobile:
Proton Company had a vision to internationalize its products into the UK market. The company has continually worked towards this goal where it has expanded its international market to over 27 countries in South-East Asia, Middle-East, China, South Africa and the United Kingdom. The move has greatly influenced the company’s brand awareness across different countries. However, the environment under which the company operates is very competitive since there are numerous existing and arising brands. The rise in different players in the market has resulted to adopt different business opportunities in order to maintain their turnover and thus retaining their market share (Richardson, 2014).
Proton Company is thus not an exception in this. The company has internationalized in order to create more markets for its products around the globe. By gaining new experience as it operates in different markets, the company’s strategy is to remain competitive in the auto-mobile industry. In fact, the objective has been attained as the company has been able to make its products available in Asia, Africa, Europe, Middle East, South America and Australia among other markets. Through the internationalized process the company can conduct automobile related research in the countries involved and then combine the ideas to be used in developing a more competitive company, team, and brand.
The rise of economy in UK in 1985 triggered the success of proton Company and its expansion. The GDP per capita of United Kingdom rose to about 298% at constant market in 1900 while between 1980 to 2000 it experienced the most dramatic and rapid increase. Further, during the same time, the cost of petrol was considerably low, which added to the advantage of the company expanding its market share. Most things seemed to run in favor of the company as the government increased its expenditure in infrastructure that aided the use of automobile in the UK (Richardson, 2014). The above three factors were able to give Proton company an appropriate environment for it to constantly expand its market. Additionally, the company seems to have based its decision on factual knowledge of the state of the market in the UK. Thus, there was a good chance to increase the market share and at the same time remain competitive in the global automobile industry.
The management team in Proton Company must have used critical strategies in venturing into the market of automobiles. The process of entry and partnership with other companies show a lot of entrepreneurial skills where the company was able to identify the niche in the market. Further, the company was able to make maximum use of the available resources in expanding its market share. For instance, the increased government expenditure in infrastructure made the company increase its production since there would an increase in the demand of automobiles. On the other hand, the company made use of the rising GDP per capita, especially in the UK and the low cost of petrol. The company was able to make a lot of profit and thus able to expand the market.
External analysis of the company reveals factors that affect the operation of Proton company and other major players in the market. PEST analysis is used which represents the political, economic, social and technological factors. Political factors comprise of the Asian Free Trade (AFTA), and different environmental policies. On the economic factors there is global and local economic crisis, slowing growth of Malaysian economy, poor consumer sentiment and changing buying behavior of the consumer, and the competitive market. social factors affecting the external environment of the company include the huge population, car ownership, which is at the ratio of 1:5, growing knowledge and concern of the people towards the environment, impact of the brand image, and the decreasing buying pattern of the consumer. Lastly, there are the technological factors, which include competing development in technology, its maturity, intellectual property, potential for innovation and development, and the capacity of manufacturing.
Political factors: Currently, the Asian region has free trade. The free trade area was established in order to eliminate tarrif barriers to zero through a common effective tariff. Considering the high selling price of the Malaysian cars, it is clear that the local markets may be ruled by imported cars. Proton car prices in Malaysia are kept comparatively lower to foreign manufacturers through protectionism, which has been greatly blamed for the stagnating performance of the company (Kotler, and Keller, 2009).
Economic factors: The sles of vehicles in Malaysia is expected to fall year by year because of different economic aspects, especially, the issue of global financial crisis that affect the local financial status of the country. the buying behavior of the customers will thus be affected as the slow growth sweep through the country.
Social factors: One of the factors that can affect the automobile industry in the country is the growing population. The car ownership ratio is high, 1:5, which signifies the preference of cars as more important things in their lives.
Technological factors: Increasing competition is pushing in the automobile industry is pushing for development in technology thus affecting the performance and position of every company in the industry. Further, the maturity of technology and capacity for manufacturing affects the innovation process of the company. Thus, the potential for innovation and development is increasing, primarily because of the help of computers and the internet.
Key Business Model of Proton Automobile Company:
Proton Automobile Company has already gained a better quality product and value for money product positioning, which makes the company ...