TECHNOLOGY PARK MALAYSIA
STUDENT NAME: TOH KIM AIK
STUDENT ID NO.: TP041780
MODULE CODE: BM045-3-3-SMGT
LECTURER NAME: MARGARET A/P SUBRAMANIAM
INTAKE NUMBER: UC3F1805IBM
SUBMISSION DATE: 20th AUGUST 2018
Table of Contents
TOC o “1-3” h z u 1.0Introduction PAGEREF _Toc522287504 h 32.0 Internal and External Environment Analysis PAGEREF _Toc522287505 h 42.1 Perodua PEST Analysis PAGEREF _Toc522287506 h 42.1.1 Political PAGEREF _Toc522287507 h 42.1.2 Economic PAGEREF _Toc522287508 h 62.1.3 Social PAGEREF _Toc522287509 h 92.1.4 Technology PAGEREF _Toc522287510 h 112.2 Perodua Porter 5 Forbes Analysis PAGEREF _Toc522287511 h 132.2.1 Threats of New Entrants PAGEREF _Toc522287512 h 132.2.2 Threat of substitution PAGEREF _Toc522287513 h 142.2.3 Bargaining Power of Suppliers PAGEREF _Toc522287514 h 152.2.4 Bargaining Power of Buyers PAGEREF _Toc522287515 h 162.2.5 Rivalry among Existing Firms PAGEREF _Toc522287516 h 172.3 Perodua Value Chain Analysis PAGEREF _Toc522287517 h 182.5 Perodua SWOT Analysis PAGEREF _Toc522287518 h 222.4.1 Strengths and Opportunities Strategies PAGEREF _Toc522287519 h 222.4.2 Weaknesses and Opportunities strategies PAGEREF _Toc522287520 h 252.4.3 Strengths and Threats strategies PAGEREF _Toc522287521 h 262.4.4 Weaknesses and Threats Strategies PAGEREF _Toc522287522 h 272.6 Perodua Challenges PAGEREF _Toc522287523 h 28
IntroductionPerodua Automobiles which is the abbreviated version of Perushan Otomobil Kedua Sendirian Berhad and was established in 1993 as the second largest automobile manufacturer’s brand after Proton in Malaysia. Perodua started its business as a second national car company, which mainly manufactures small-compact cars and first launched its own car, Perodua Kancil, in 1994. Currently, Perodua has developed into one of the top-selling brands in Malaysia and its models are known for their quality.
The mission of Perodua Automobiles is to be a world class automobile company renowned for excellent quality and reliability. They are committed to winning customer satisfaction with honesty by tailoring their products and services to meet their customers’ personal lifestyle. It also highlights the company’s role in empowering employees and partners through industry-training and skills transfer. Perodua is headquartered in Sungai Choh, Rawang, Selangor including R;D test laboratories, vehicle test tracks, manufacturing, and engine factories.
Even since then the company has had many successful brands such as Perodua Aixa, Alza, Kembara, Myvi and many other products until their latest products is Perodua Bezza in 2016. The successes are due in the great part to the fantastic team at Perodua, who are passionate about the company and they work they do. Perodua company recorded an annual turnover of RM682 million and had approximately 10,000 employees in 2016. By 2016, Perodua has maintained its top position in this industry for 11 years and became the best-selling car company with highest ever market share in Malaysia CITATION Chi17 l 2052 (Chips, 2017).
2.0 Internal and External Environment Analysis2.1 Perodua PEST Analysis2.1.1 PoliticalPolitical factors play an important role and have a direct impact on the profitability of the automotive industry. In addition, import rules and taxes vary from country to country. Changing government systems and political regulation of the market may cause favourable or unfavourable fluctuation from time to time CITATION Abh17 l 2052 (Pratap, 2016). Therefore, government policies have largely affected the fortunes of auto companies.
The existence of AFTA otherwise ASEAN Free Trade Area is one of the important issues to be considered. Presently, the majority of ASEAN territory are free trade otherwise 96% of the entire ASEAN trade. In January 1992, AFTA was established with the aim of eliminating tariff barriers amongst the Southeast Asian countries. Since Malaysia has two nationwide vehicle manufacturers which are Proton and Perodua as well as the government’s policy to defend its interests, it intends to reduce taxes in 15 years amongst the six states during an ordinary effectual special tax period.
Unfortunately, this hypothetical growth might prove to be only a temporary solution. There would be a great opportunity for imported vehicles to facilitate the current local market if we are about to ensure on the high selling prices of Malaysian cars because of the high production costs as well as inefficiency of vendors. As a result, the increase in the number of vehicles on the road also led to a surplus of used cars in the market, as people tend to buy their vehicles for a lower price and also importation products.
The Malaysian government has also taken several measures to protect the local automotive industry, including high tariffs, licensing systems and import quotas, such as Approval Permits on imported vehicles. Approved Permits is a mechanism to control imported cars, it was under the Malaysian Customs Act 1967, meant to protect the National Car CITATION MIT18 l 2052 (MITI, 2018). This policy makes many foreign automakers disappointed, but the government claimed they have the right to implement policies in order to protect local automakers. According to this policy, people need to obtain an approved license to import cars. In addition, import duties between 140% and 300% will be charged for purchasing a foreign-made car CITATION Leo15 l 2052 (Leow & Husin, 2015)In view of the global challenges and competitive in the automotive industry, the Malaysian government considers it necessary to review the strategic direction and policy framework of the domestic automotive industry. This shift to lower regulatory policies is critical to maintaining the competitiveness of the domestic and international automobile industry and making it viable in the long run. Therefore, the government launched the National Automotive Policy (NAP) in March 2006 with the main purpose of gradually achieving market liberalization. In 2014, the NAP was revised to expand its current implementation to cover other aspects of commercial vehicles and mobility. This policy ensures long-term sustainability of the domestic automotive industry and provides a safety, comfort and environment-friendly features in the vehicles CITATION Ber17 l 2052 (Bernama, 2017).
In order to develop the national capabilities of the automotive industry in a sustainable but competitive manner, the Malaysian government provides protect that allows local automakers to withstand some of the early environment downturns CITATION Ess13 l 2052 (Essays, 2013). In Malaysia, there is no import tariff on cars from ASEAN countries, and a 30% import tariff on cars from non-ASEAN countries. Car prices are further escalated due to tax rates and excise taxes imposed. According to the Malaysian Automobile Association (MAA), in addition to the 10% sales tax, the consumption tax on cars ranges from 65% to 105% CITATION Iri13 l 2052 (Lee, 2013).
However, most consumers are dissatisfied with the excessive taxation of Malaysian cars, and the government is generally affected by the above anger. Most Malaysians are more prefer the quality and comfortable of a foreign brand car. Despite the frequent complaints about the excessively-priced vehicles, consumers are remarkably generous spenders in their car purchases CITATION Dan13 l 2052 (Augustin, 2013).
2.1.2 EconomicIn the context of the automotive industry, economic factors are also of particular importance. The world economy is growing rapidly especially in Asian region is leading in this regard. Therefore, the global economic situation has a major impact on the profitability of the automotive industry in various markets and also affects the employment condition of any country. A better economic situation means a higher level of employment, which in turn means higher customer purchasing power CITATION Abh171 l 2052 (Pratap, 2017). The higher the purchasing power of the people, the better the sales of the automotive industry.
The Malaysian economy is currently the 4th major economy in Southeast Asia and the 38th largest economy in the world. In 2017, Malaysia’s economy accelerated at a faster pace with the GDP grew 5.9% with a value of RM1173.6 billion at constant prices and RM1352.5 billion at the current price. The automotive industry contributed 4% or RM40 million to Malaysia’s GDP and employs more than 700,000 people across the nation’s ecosystem. Besides that, GDP per capita (PPP) of Malaysia stands at US$9813 and private consumption will drive economic growth, particularly in the short-term as the recent Goods and Services Tax (GST) rating is zero.
ITR is the annual interest rate charged by a creditor to a borrower in order for the borrower to get the loan. Band lending can affect car sales through various liquidity effects. If financial banks offer lowing lending rates, this will encourage current and future economic activity CITATION Ong13 l 2052 (Ong, 2013). CITATION Sha09 l 2052 (Shahabuddin, 2009) conducted a study to predict car sales and the result prove that ITR is negatively correlated with car sales. High band lending rates discourage investors and have a negative impact on their ability to make investment. The consumers loans are very sensitive to interest rates, which means that the lower the interest rate more will be the demand of vehicles through financing. This is because consumers will take instalment credit into their consideration when purchasing durable goods. However, Bank Negara Malaysia is constantly striving to improve the quality of loans, which would may make it difficult for low-income families, young buyers and SMEs to obtain loans, thus affecting the total industrial volume this year CITATION Ade18 l 2052 (Willy, 2018). As a result, the higher the ITR, the less intention for a consumer to buy a car because they pay more.
Gross Domestic Product (GDP) is defined as the total market value of all final products and services produced by a country in a given year, and GDP per capita is used to measure a country’s economic performance. According to, GDP per capita will be positively related to the competitiveness of the automotive industry through demand and supply channels CITATION Hun00 l 2052 (Hunya, 2000). The higher GDP per capita indicates increases economic growth and productivity, which increase demand for products.
Therefore, economic development and growth of country do affect the growth of motor vehicles through supply and demand. High economic performance has improved people’s living standards, thus creating more vehicle demand. In 2017, GDP per capita Malaysia was US$9,813, which was $439 higher than 2016 and was US$9,374. As a result, the higher the per capita GDP, the stronger the purchasing power of people stimulates consumer spending and promotes growth in various industries. Additionally, the automotive industry will be the first to benefit from the new Malaysian government’s plan to abolish the Goods and Services Tax (GST), which is expected to boost consumer’s willingness to buy CITATION HoS18 l 2052 (Ho, 2018). In other words, automotive industry is expected to achieve great sales during 0% GST period before Sales and Service Tax (SST) has official implement in this coming September of 2018.
2.1.3 SocialThe world’s automotive industry affects society as a whole. It employs millions of people directly, tens of millions indirectly. Its products have changed the society, bringing unimaginable levels of mobility, changed the way people live and work, and have even been able to easily connect with others who are far away. The automotive industry can play a role in helping to develop the mobility of such countries and can be achieved at the social costs acceptable to the state, preparing to learn the necessary lessons and make necessary investments from those who have gone through this route.
The socio-cultural factors that influence the development and growth of the automotive industry include population growth rates, education levels, lifestyles, safety issues and cultural differences. Besides that, society’s habits and tastes are changing. People are more aware of the importance of the environment and becoming ‘green consumers’. The trend of social factors will affect the demand for the company’s products and the way the company operates. Therefore, companies may change various management strategies to accommodate these social trends.
Changing social trends such as preference can also have a direct impact on the brand’s business. Nowadays, environmental protection and electric vehicles are becoming more and more popular. Their sales have grown rapidly over the past few years. Some automotive companies are planning to start mass production of electric vehicles by 2020. The growth of the automotive industry depends on customer preferences, and most of them need to purchase cars for families. They consider the available space, safety, and price of the car.
The population of ASEAN region are more than 500 million people. Malaysia, which located in a strategic place in ASEAN region provide good opportunities for the worldwide automotive manufacturers. Malaysia’s active working-age population is expected to grow by 1.6 percent in the next decade, one of the highest in the region. With a literacy rate of 95 percent, widely spoken English and an ever-increasing number of higher education graduates, Malaysia offers a significant pool of talent for potential investors in automotive industry CITATION Har17 l 2052 (Handley, 2017). As such, Malaysia is also increasingly being chosen by newcomers to Asia as their ASEAN hub.
By 2018, Malaysia has a population of 32 million which could provide a large sum of markets. The population of Malaysia is growing at a steady rate, which is an important factor affecting the automotive industry. Since the public transportation system has not developed as well as other economically developed countries, the country’s car ownership is quite high at a ratio of 1:5. This shows that citizens are considering vehicles as important things in their lives. In addition, Malaysians are more willing to loyal to their national products such as choose to buy domestic vehicles as a sign of patriotism.
In Malaysia’s market economy, consumption is the main indicator of social stratification. A smartphone, fashion clothing and gold jewellery can all indicate a high rank in Malaysian social order. Given the mobility of Malaysian society, the brand of a person’s vehicle marks a class position that even exceeds home ownership. Anyone who drives a nice vehicle is considered wealthy. Consumers feel better when driving a nice or new car, if make them feel better about themselves (Kim, 2007). Therefore, each family will have at least one of transportation and consider motor vehicles is necessary to participate in contemporary Malaysian social life.
2.1.4 TechnologyTechnology is considered one of the most critical factors in the automobile industry. Due to increasingly fierce competition, the continuous development of engineering technology has improved every project and affected the performance as well as position of each company in the automobile industry. It is also important to consider the maturity of technology, together with the capabilities and maturity of the manufacturing, which can affect the innovation process of any company. This is because it could affect the novelty of any business. The potential for innovation and improvement is increasing due to the assist of different technologies, primarily personal computers, and the internet.
In this ever-changing marketplace and globally competitive world, digital is revolutionising the manufacturing process across industries, so companies need to flexible and quickly adapt their corporate strategies or adopt new technologies to enable them to gain competitive advantage over other companies. Give the challenges facing Malaysian automakers, they must take digital solutions to elevate their production processes to the next level CITATION Ada16 l 2052 (Yee, 2016). For example, with the manufacturing data is centrally consolidated and updated in real-time, plant operators can better understand the factory’s process. By planning and improving efficiency, automotive manufacturers can reduce overall costs and ensure product quality.
Uber was introduced to Malaysia in January 2014 and Grab Car was introduced in May a few months later. These two applications have only changed the public transport industry in Malaysia in just over three years after its launch. They also created economic opportunities for many Malaysians. Automakers engage in research and development to attract owners to trade updates, safer, more reliable models with more creature comfort CITATION DrT17 l 2052 (Hughes, 2017). Buyers who wish to have vehicles for many years are willing to pay extra for cars that meet their expected needs. This is because passengers are satisfied with each trip and can provide feedback and flag the driver if there are problems. Simply put, commodification will become a threat to the survival of the automotive industry as we know it today.
Technology and innovation have become important determinants of the automotive industry’s market share. The more innovative a company is, the higher its market share. In view of this fact, all major players have invested heavily in research and development. Companies are investing in low-emission and environmentally-friendly vehicles such as Toyota, Hyundai and Ford CITATION Abh17 l 2052 (Pratap, 2016). Toyota even plans to launch driverless cars in the next few years. Not only that, but major technology players are trying to enter the industry. In recent years, technological innovation has remained the main basis for the differentiation of automakers. This is because the customer’s attention turns to vehicles with high fuel efficiency and high mileage. Sales of low-emission and fuel-efficient vehicles are always high. It shows that technology is one of the most important factors affecting the sales and profitability of the automotive industry.
2.2 Perodua Porter 5 Forbes AnalysisAccording to the theory of industrial economy, CITATION Por80 l 17417 (Porter, 1980) believes that by understanding the dynamics of the five key forces affecting an industry structure, one can best understand the profitability of an industry. The five major competitiveness are the threat of new entrants, the threat of alternative products or services, the bargaining power of suppliers, the bargaining power of buyers, and rivalry among existing competitors. For an external perspective, Perodua competitors are those organisations that offer similar goods or services to the same customer or compete for the resources needed by the organisation. Most organisations have at least one competitor (usually more than one) and must consider all potential competitors.
2.2.1 Threats of New Entrants
This is how easy (or not) it is for new companies to enter the industry, which affects the profitability of the industries and the competitive position of the company. If an industry is profitable and there are few barriers to entry, then competition will soon intensify. When more organisations compete for the same market share, profits begin to fall. Existing organisations must create high barriers to entry for new entrants.
The automotive industry has high level of barriers to entry. It requires specific machinery, facilities, human resources, technical equipment, distribution channels, etc. Due to market saturation, the threat of new entrants in Perodua’s home market is extremely unlikely and the capital required to build new manufacturing facilities for automotive are relatively high. Besides that, the existing distribution channels in Malaysia mainly serve two national brands and it is not easier for foreign brands to enter these distribution channels. As the Malaysian government’s protection of its National Car Projects, the National Automotive Policy (NAP) continues to create an unlevelled competitive environment for foreign-branded automakers to penetrate the same market segment of Perodua automakers. With all of these factors in mind, it assumed that the barrier to entry into the Malaysian auto maker are very high, or that the threat of new entrants is low.
2.2.2 Threat of substitution
According to Porter (2008), all firms in an industry compete with other companies which have products with similar functions. Those products with similar functions are called “alternative products”. The cloning of products and the potential for alternatives to enter the market is a real threat to the industry as it could limit the potential returns of firms in the industry, especially if the alternatives have better quality and lower prices. However, the threat of alternatives is moderate because automotive products are different, even though they have the same purpose. Due to product differentiation, customers have an opportunity to choose products such factors such as price, quality and design.
In Malaysia, the threat to automakers is not only that customers purchase different brands of vehicles, but also that potential customers use other modes of transportation, including buses, trains, taxis or planes to reach their destination. Currently, the main threat to the “alternative” of the domestic market is that The Land Public Transport Commission (SPAD) proposes to allow any foreign and local car models to be used as taxis CITATION Kum16 l 17417 (Kumar, 2016).This will further promote the sales of the national car Perodua. While switching costs are relatively low for customers to switch other forms of transportation, the comfort and convenience level offered by these substitute products are low. According to a survey conducted by CITATION Pra17 l 17417 (Prasarana, 2017), public transport use in the capital city of Kuala Lumpur, accounted for only 25% of total motorized travel. The low usage rate of public transportation and the high usage rate of cars make the threat of replacement very low. In other words, the quality and performance capabilities of alternative products are considered to be inferior to private cars. Overall, the threat of alternative products is low.
2.2.3 Bargaining Power of SuppliersThe bargaining power of suppliers will affect the intensity of competition in the industry. Suppliers can reduce the potential profit of producers by increasing prices or reducing material quality thus both actions would increase the production costs. When the number of suppliers in the industry is dominated by a few firms, the bargaining power of suppliers is considered powerful. They can apply pressure on the company by charging higher prices, adjusting product quality or controlling availability and delivery timelines. When suppliers find that they offer unique products or services and when they have built up switching costs, it affects the competitive environment and directly affect the company’s profitability.
Due to the government’s promotion of industrialization, about 350 companies supplying components for vehicles in Malaysia, so the bargaining power of suppliers is very low. Malaysia’s automotive industry is an oligopolistic market, with only two major national automotive firms accounting for more than 50% of the market. However, due to the growth of the supply system and its specialization, with the support of new technological advances, manufacturers may refuse to provide materials due to poor quality. Since Perodua is a state-owned company, it is unlikely to face any forward integration threats from suppliers. In addition, Perodua’s limitation also limit their choice of local suppliers. This means that suppliers have little bargaining power, and when other suppliers offer cheaper prices, higher quality or service, major automotive companies can switch to other suppliers. However, in order to reduce reliance on suppliers and reduce bargaining, Perodua is building strategic alliances, collaborations and partnerships with local and international suppliers, which is a strategic plan for their success and expansion in the global marketplace CITATION Har16 l 17417 (Harman, 2016).
2.2.4 Bargaining Power of BuyersAccording to Porter (1980), strong buyers can pressure sellers to lower production prices or improve quality products and services to provide a better service. As a result, their bargaining power would be high, making the industry more competitive and reducing the seller’s profit potential. On the other hand, weak buyers dominated by sellers in terms of quality and price have reduced industry competitiveness and increased profit potential for the seller.
Buyers and customers are one of the biggest push bargaining powers in any industry. The usual bargaining chips are of higher quality and lower prices. The protectionist policies supported national automakers and limit the number of competitors in the market. By lowering prices or imposing higher tariffs on non-domestic vehicles, the government has increased demand for domestically produced vehicles CITATION Mah04 l 17417 (Mahidin ; Kanageswary, 2004). In a survey by Jomo, consumers claim that these policies force them to accept poor quality domestic cars and limit their choices CITATION Jom09 l 17417 (Jomo, et al., 2009). For car dealers, if they want to convert suppliers, there should be little or no cost. However, these car dealers are unlikely to switch suppliers because Perodua is a government-owned company that does not want to be blacklisted by the government. Overall, the buyer’s bargaining power was assessed to be lower.
2.2.5 Rivalry among Existing FirmsCompetition among competing other companies in an industry is not uncommon occurrence. Rivalry occurs because some existing firms are trying to improve their products and services or lower prices to achieve better market position. A competitor’s strategic initiative can only succeed if the initiative provides a competitive advantage. However, when competitor companies take counter-strategic measures to retaliate, such as lowering prices, conducting aggressive advertising, providing high-quality products, providing service guarantees, and so on.
Any competitor’s competitive actions may have a significant impact on the competition in the entire automotive industry. Because local and global competitors are few (in numbers), competitors will pay close attention to each other in order to match competitors’ new move with a countermove CITATION Joh14 l 2052 (Johnson, et al., 2014). Perodua has a relatively small number of competitors, and other national brands are major competitors. In Malaysia, compared with luxury cars, Malaysia’s affordable cars also have greater sales potential. The fixed costs and storage costs for automakers are assessed as high, which may increase the intensity of competition. In addition, Perodua is often lacking in differentiation and was deemed to be inferior to other brands in terms of quality and safety.
Coupled with the relatively low conversion costs of switching to other national brands, it is likely to increase the intensity of competition. Competition among automakers is focused on meeting customer needs in terms of lowering prices, more efficient distribution strategies, and stronger business relationships with supply systems. Finally, Perodua as a National Automotive Project (NAP) and a government-owned company, it has a high barrier to exit. As of the 2015 Malaysia’s market share, Perodua has a market share of 36.1%, whereas No. 2 is a proton with 17.3%, and the third is not far from Honda, with a market share of 16% CITATION Chi15 l 2052 (Chin, 2015). As a result, Perodua’s home market is already quite saturated and its growth rate is slowing.
2.3 Perodua Value Chain AnalysisPerodua’s value chain analysis (VCIO) is a range of activities carried out in order to take products and services from design, customer, and production. Perodua has the calibre to import quality parts from its strong abroad suppliers. An automotive industry has allowed the organization to develop distribution networks within Malaysia. They should outsource this operation to vender to become a more complex organization in this industry. It ensures that they can distribute products to remote regions that are a source of competitive advantages. (Shuman 2016). Further, Perodua brand allows the organization to enjoy low demand for marketing. Perodua has the calibre to develop a strong brand name and public relation due to their partnership, sponsorship, and quality product offering. The Perodua quality and brand image allowed it to develop the stronger brand image.
Inbound Logistics (Primary Activities)
This part of the value chain involves activities related to raw materials, processing, warehousing, inventory control and transportation, while also receiving, storing and distributing inputs internally CITATION Whe10 l 2052 (Wheelen ; Hunger, 2010). Perodua has a good relationship with suppliers, and the company provides an Electronic Supplier Information and Management System (e-SIMS) to reach its suppliers. Inbound logistics uses a JIT (instant) production system because it reduces inventory costs. Perodua uses the Just-in-Time system to manage raw material supply and optimize supply and production processes and minimize wasted or unused parts inventory. Through the excellent facilities provided by the Perodua plant, the activities required to receive, store and propagate inputs are completed smoothly. IQM has been a supplier to Perodua since 2002. Over the years, Perodua and IQM have built a strong relationship based on trust, quality and absolute endless loyalty to both parties CITATION Goh18 l 2052 (Howe, 2018). This strong and close partnership will enable long-term cooperation with key suppliers and distributors for mutual benefit.
Operations (Primary Activities)
In terms of the value chain framework, operations will be one of the biggest keys to change, second only to marketing and sales. Operation is the process of putting raw materials together and producing the final product. Perodua Manufacturing Sdn Bhd is the company responsible for manufacturing Perodua vehicles. In this case, Perodua’s operational processes are carried out in the company’s owned plants. The plant currently has the capacity to produce 250,000 units per year in a two-shift cycle with a factory area of ??64,000 square meters and all operations are specialized.
On the other hand, Perodua Engine Manufacturing Sdn Bhd is responsible for the assembly of vehicle engines and the manufacture of selected engine components. The company believes that the system is localized, so the production plant can handle the value-added process itself. Value activities such as engineering, manufacturing, and quality control belong to Perodua’s operations because these transformation activities convert inputs into outputs. Product development and styling and technology development ensure high-quality cars, while process improvements involve reducing the overall vehicle bed by minimizing the impact of increased material costs on car prices and considering cost improvement activities even during the design phase.
Outbound Logistics (Primary Activities)
This part of the value chain includes activities such as collecting, storing, distributing and transporting assembled and/or finished vehicles to customers. Perodua controls the entire vehicle distribution process from the factory to the various branches throughout the country to ensure that the final product is delivered at the right place at the right time. Parts distribution management supplies service parts from the factory to the service centre. It supports the production and shipping preparation of service parts, including containerization and overseas transportation. Perodua Logistics uses road transport and large trucks to transport ready-to-use products. In addition, Perodua carefully selected its dealers and gave them strong support. Dealers keep stocks of Perodua cars, show potential buyers, negotiate prices, close sales, and service cars after sales. After the operation process is completed, the final product will be transferred to the retailer, the wholesaler, and finally to the final customer. At present, PSSB has 41 sales branches and 139 sales agents nationwide, providing customers with efficient transportation and training of highly trained personnel.
Marketing & Sales (Primary Activities)
Perodua Sales Sdn Bhd, PSSB is responsible for the sales, marketing and distribution of all Perodua vehicles as well as after-sales and spare parts operations. The Perodua Sales and Service Center provides trained salespeople and promoters to sell their vehicles and provide information to individuals. In order to achieve their sales goals, Perodua also carries out various promotions to help sell Perodua, for example up to RM 2000 discounts, free gifts as sterling locks and touch and go cards.
Sales include direct sales to customers through showrooms available nationwide and authorized dealers. In addition, Perodua offers special offers to enable local customers to purchase brand new cars through loans or instalments. On the other hands, Perodua regularly promotes its products in different types of media, such as television, internet and billboards, especially during public holidays such as National Day, Lunar New Year, Deepavali and Hari Raya Puasa. Perodua also works with banks to promote its products and provide panel of finance and insurance for customers.
Services (Primary Activities)
Perodua guarantees that products or services are effectively serviced to customers after sales and delivery to achieve exceptional after-sales service. Auto Assist is a 24-hour mobile assist system for all Perodua owners to provide roadside assistance to customers in any unexpected accident. To date, Perodua has 46 service branches and 117 service outlets throughout the country to serve customers efficiently. In addition, Perodua also offers body repair and coating centres placed nation-wide for customer convenience. Its official website provides customers with service information and service packages that enable customers to complain directly to Perodua in a timely manner to resolve issues.
Procurement (Support Activities)
This part of the value chain includes procurement activities and Perodua’s work to get the resources needed for operations, including finding suppliers and negotiating optimal prices. Perodua purchases raw materials, parts and components from local foreign manufacturers as an effective supply chain management. Perodua uses the Electronic Supplier Information and Management System (e-SIM) to implement e-commerce and contact its suppliers to negotiate the best prices. e-SIM aims to effectively and efficiently respond to supply chain technologies, build smart business partnerships, and develop more opportunities locally and globally. Besides that, the objectives and requirements of e-SIMs is to improve communication between Perodua and suppliers in a collaborative environment. Through improve planning and scheduling capabilities to ensure accurate and faster processing of transactions. In addition, Perodua improves communication with internal employees to improve operational efficiency.
Technology Development (Support Activities)
This part of the value chain includes design engineering, testing and R;D practices. The core value of Perodua’s R&D is to maintain technical support and always maintain technology, investing amount in manpower and IT software for its R&D activities. Its research and development department focus on developing capabilities in automotive technology, from basic testing, design and styling engineering to manufacturing engineering skills. The main activities include the styling of future models, concept car development and the ability to undertake major facelifts.
The other R&D facilities are further subdivided into safety technology, styling technology development, certification testing, vehicle platform and powertrain development. The main purpose of establishing a certification test is to conduct a security test. Safety testing is done in the areas of component, material, strength and safety (CMSS) laboratories, emission development laboratories, noise labs and test tracks, shower testing and hand brake testing. The Safety Technology Initiative is known as 360-degree safety and is done through stimulation and real-life crash testing to test the limits of the car in terms of safety. In addition, Perodua Management worked closely with GE Fanuc to use the Shop Floor Control System (SFCS) to ensure data integrity of vehicle production information. Besides that, the CIMPLICITY software is pre-installed in the Perodua body, assembly and painting shop. The CIMPLICITY Viewer node is installed on the desktop of production engineers and managers, enabling them to monitor and control production status in real time. Perodua turned to GE Fanuc Automation for help in making their vision a reality.
Human Resource Management (Support Activities)
Having the right people at the right place and at the right time is key to any business performance (Tyson,2006). The foundational values of Perodua’s management are that efficient human resources are critical to achieving the company’s mission. Committed to Perodua’s long-term success, encouraging teamwork and employees to propose and develop ideas for increase efficiency and productivity. Therefore, Perodua focus on the development of their human resources by ensuring that regular specialised training is provided for success through quality human resource. The training provided by Perodua is Perodua Technical Education System (PTES) and Perodua Technical Education System (Advance) rewards employee performance by continuously reviewing and upgrading company benefits, enabling Perodua employees to generate new ideas for the next generation cars.
Firm’s Infrastructure (Support Activities)
Strong leadership accounting, legal, administrative and general management department form the infrastructure of Perodua. The research and development test lab and styling studios, vehicle test tracks, manufacturing plants, engine plants, pre-delivery inspection area, vehicle distribution yards and parts warehouses. The factory covers an area of 64,000 square meters and has set up service centres in multi-location to provide services and solve problems for customers. Like any other organisation, Perodua manages a centralized hierarchy and top-down management system approach. Although research and development are kept centralised as much as possible. The IT systems such as HPE technology help Perodua management optimize performance, reliability, availability and disaster tolerance CITATION HPE15 l 2052 (HPE, 2015)2.5 Perodua TOWS Matrix
A SWOT analysis is widely used in the business world and could be identified as a strategic planning method to assessing strengths, weaknesses, opportunities, and threats involved in a project or business CITATION Dav18 l 2052 (Parrish, 2018). It will also be a useful tool for developing and identifying goal plus marketing strategies can be carried out for a product, industry, or person. It involves a clear goal of the business venture and identifies the internal and external factors that are favourable and unfavourable to achieve the goal. The degree to which the internal environment of the firm matches the external environment is expressed by the concept of strategic fit.
The TOWS Matrix is an important matching tool that helps managers develop four strategies:
SO (strengths-opportunities) Strategies WO (weaknesses-opportunities) Strategies
– Use a firm’s internal strengths to take advantage of external opportunities.
– Aim at improving internal weaknesses by taking advantage of external opportunities.
ST (strengths-threats) Strategies WT (weaknesses-threats) Strategies
– Use a firm’s strengths to avoid or reduce the impact of external threats. – Defensive tactics directed at reducing internal weakness and avoiding external threats.
https://parsonscollegemuseum.com/free-essays/automotive-industry-and-car/https://www.academia.edu/16586291/PRODUA_SWOTTOWS Matrix Internal Strengths
S1: Successfully manufacture affordable and economic car brand
S2: Excellent reliability and build quality
S3: Impressive standard equipment specification
S4: Strong marketing and promotion Internal Weaknesses
W1: Low productivity
W2: Low research and development
W3: Lack of low safety standards
O1: Buy Malaysia Product Campaign
O2: Inefficiency of public transport
O3: High technology from Japan
O4: High demand for compact car SO
SO1: Increasing promotion to respond government campaign to buy Malaysia product (S4, O1)
SO2: Offering affordable prices to those who are often using public transportation (S1, O2)
SO3: Introducing a compact car with impressing standard equipment specification (S3, O4) WO
WO1: Analyse car technology from Japan to encourage research and development in Malaysia (W2, O3)
WO2: Increasing product due to high demand of compact car (W1, O4)
T1: Go Green Campaign
T2: Aggressive marketing and promotion of another automobile company
T3: Unemployment rate increase ST
ST1: Introducing a compact car with impressing standard equipment specification and green technology (S3, T1) WT
WT1: Offer training and job employee to increase productivity (W1, T3)
WT2: Increasing promotion of compact car (W3, T2)
2.4.1 Strengths and Opportunities Strategies1) Increasing promotion to respond government campaign to buy Malaysia product (S4, O1)
Promotion are activities that promote the merits of a product and persuade the target customer to decide to purchase it. The company uses regular promotional tools, advertising personal selling, sales promotion, direct and online marketing tools, and public relations to reach customers CITATION Mar142 l 2052 (Martin, 2014). The two main considerations are the target market and cost. The best way to attract customers is to advertise. Every feature and product created by Perodua must be advertised to the public. Advertising is communication relayed from the company to convince customers in order to purchase Perodua’s product.
Perodua can communicate through a various form of paid media, such as television and radio advertising, print advertising, and product placement. It can easy and simple to attract new tries and also increase the volume of the sales. The advertisements are placed where the advertisers believe that they will reach and achieve most relevant customers CITATION Geo17 l 2052 (Mentis, 2017). Therefore, Perodua uses advertising to drive the consumption of their products. Due to the high cost of advertising, and many manufacturers are concerned that profit cannot afford the cost. However, a successful promotion can increase sales, thereby spreading other costs across larger outputs. Increasing promotion activities are a sign of responding to issue such as competitive activities. It encourages Perodua to develop a secession of messages and is extremely cost-effective. Perodua can use the direct marketing and techniques to maintain a relationship with its buyers before, during and between purchases. It treats advertising as a form of advertising that provided consumer with physical marketing materials to communicate the information and details of products or services created by Perodua.
2) Offering affordable prices to those who are often using public transportation (S1, O2)
Perodua offer a variety of payment methods to benefits their customers such as Perodua can accept credit card for the deposits, cheques and bank transfers also acceptable to replace cash as a safe method. Perodua also provides car loans ranging from 2.7% to 3.7% interest from 5 to 9 years, therefore customer only need to pay a few hundred ringgits for instalment payments CITATION iMo18 l 2052 (iMoney, 2018). For example, Perodua can work with banks to reduce loan interest so that low-income people can also purchase a car. Perodua also offer consumers some free gifts and more customers services, such as repair and maintenance for five years from the date of purchase.
3) Introducing a compact car with impressing standard equipment specification (S3, O4)
New generations of sub-subcompact cars on the marketplace today, with each one showing that smaller dimensions do not necessarily required smaller expectations. Generally, they do so with lower starting process, higher fuel-economy ratings and nimbler driving dynamics that many of their bigger rivals. Showing the wide range of choices available, list showcases entries from mainstream and luxury brands, with sophisticated power trains, including all-electric and hybrid setups and some of the industry’s hottest technologies like 4G LTE connectivity with mobile Wi-Fi service.
Perodua has gone strength to strength and continues to increase its market share. The main virtue of value for money, excellent reliability and build quality, plus the impressive standard equipment specification and latest generation technology apparent in models such as the Myvi and Axia are all major factors in the company’s continuing success. Perodua network of dealers covers the whole of the UK and Channel Islands. Since the 1994 introduction of the little Kancil, Rusa, Kembara, Kenari, Viva, Alza and of course the massively popular, Myvi and Axia. In the span of 20 years, Perodua has sold an overwhelming 2,500,000 vehicles to Malaysian to date.
As a example can take Axia car. The Axia due to be launched in September 2014, looks set to add to that number significantly, if the pre-launch bookings are anything to go by. Impressive aspect of the Axia is the quality of materials and tactile feel. No, it is not a Lexus, but again given the classification, it is all put together very nicely. One of the greatest achievements a carmaker can accomplish is to make a cheap car that does not look and feel cheap. That is what Perodua has done with the Axia.
2.4.2 Weaknesses and Opportunities strategies1) Analyse car technology from Japan to encourage research and development in Malaysia (W2, O3)
Japan is well known as a country which has high technologies in many fields. One of the technologies is in car manufacturing and development. It includes the technologies in car design, manufacturing, and safeness the engine development. They always come with new technologies in car development rather than other Europe countries which also have high car technology. It shows that Japan is stress on research and development to be high technology country.
Perodua should seek advice from Japan to develop a car with their technologies and also make Japan technologies as a guide for Malaysia care development. From the high technology in Japan, it can encourage and motivate the research and development department to analyse the technologies and implemented in their own product. From here, Perodua can successfully product the new product with high technologies like Japan.
Price of car produces by Perodua may be less than the imported car from Japan. For people those more interested in car with Japan technologies, can reduced their cost by buying the Perodua car rather than imported car.
2) Increasing product due to high demand of compact car (W1, O4)
Increase number of employees
Perodua should increase number of their employees in order to meet the high demand of customers. Currently, the compact care especially Perodua’s products are much famous among Malaysian. Therefore, increase number of employees is important to maintain and increase the production, demand and meet custoemrs’ satisfaction.
Increase number of factories
In order to meet the high demand of Perodua’s products, Perodua should increase the number of their factory. With this action or strategy, Perodua could be increase company’s production and meet customers’ satisfaction. Besides that, it gives comfort to the employees to work in conducive environment.
Acquire or merge or cooperate with another potential automobile company
Perodua can acquire, merge or cooperate with another potential company in order to increase the productions of company. Besides that, with this strategy, Perodua can absorb other technology to meet the demand and customers’ satisfaction.
2.4.3 Strengths and Threats strategies1) Introducing a compact car with impressing standard equipment specification and green technology (S3, T1)
In the most countries all carmakers are engaged in fierce competition. Tit-for-tat price slashed, ad campaign and product developments keep them on the edge e.g. innovation and profitability. Margins are low and pressure between rivals is high. All major car-producing nations experience this intense rivalry. This obviously includes the US, Japan, Italy, France, the UK, Germany, China, India and more. State-owned car manufactures like Perodua in Malaysia experience less rivalry but are still under pressure from imports. Group to improve a hybrid vehicle proficient of running on both gasoline and electricity and others special projects that are concentrate on technology development. This program direct to raise high the technology to a level that is on par with their global rivals by creating an alternative vehicle for the future which provide customers with less fuel consumption, decrease emanation and uncompromising performance.
Perodua is committed to producing environmentally friendly cars. We continually strive to minimize the negative effect of Perodua cars on the environment through improved technology and the sue of materials suitable for recycling. Perodua’s End of Life Vehicle (ELV) program has now been launched, in connection with Cartakeback.com Ltd, and is set to provide Perodua owners with a reliable way to hand over and End of Life Vehicle at no cost, subject to qualifying conditions. In order to comply with current legislation, End of Life Vehicles must be recycled at an authorized treatment facility.
2.4.4 Weaknesses and Threats Strategies1) Offer training and job employee to increase productivity (W3, T6)
– Hires efficient and effective employees
Perodua should hires efficient and effective employees for the company’s benefits. Efficient and effective employees will cut costs, save times and increase the productions or income.
Provide 6 months training before job confirmation position
Perodua can provide 6 months of training with allowance for new employees or staffs before confirmation of position. With this strategy, it will increase the quality of work of Perodua’s employees.
2) Increasing promotion of compact car (W5, T5)
While many people do not buy more than one vehicle at a time, companies often do. By offering a percentage off on a vehicle when more than one is purchase, bulk sales will flow into dealership. A discount can provide an extra form of marketing that will drive larger volume sales.
Free Car Wash
Potential customers will literally bring their vehicle into your lot. Offering a great trade-in program at this time can boost sales greatly. Another option is to offer a paid car wash where all of the proceeds go to charity. This is great way to help the local community and bring in sales at the same time.
Maintenance Classes and Discounts
Every vehicle owner will want to know how to maintain their auto. By providing classes, it will be possible to drive potential clients into your showroom. Ideally, these classes will be held on a monthly basis and will be free. To further encourage students, offer a gracious discount if they purchase a vehicle. Since potential client is already at your location, take advantage of the situation and promote to them after each and every class.
Make your recommendations on the implementation of your chosen strategies proposed in the TOWS matrix. Your recommendations should thoroughly discuss and evaluate the implications and consequences resulting from the recommended strategies.
3.0 Recommendations and Conclusion
-changing structure of demand to smaller and more fuel-efficient vehicles
-slowing growth of demand due to diminishing consumer confidence and stringent financing
-sustaining margins at times of increasing costs and competitive pressures
-volatile currency rates adversely impact operations and margins
In order to increase market share
= upgrade production technology in order to improve efficiency and quality of the cars, improve efficiency means ability to produce more cars with consistent quality
= maintain small car segment with up-to-date technology
= Train and develop human resource