The automobile market is highly labor and capital intensive. In the 21st century competitive landscape, traditional conditions and factors advantage are still there but to a lesser extent as compared to the past (Stauffer, 1999). This decline of advantage is caused due to global resource sharing and a common international strategy. One of the outcomes of these conditions is a significant amount of excess capacity. In fact, it seems that over capacity is the norm in a host of industries. To improve the quality of decisions across event and time, firms must develop the capability to change rapidly. A key challenge to developing this capability in fostering an organizational environment where learning and experimentation is encouraged (Pascale & Miller, 1999).
In the words of Lee Sage, the global leader of Ernst & Young LLP’s automotive consulting practice, “the Internet is going to have as much of an impact on the automobile industry as Henry Ford’s mass merchandising and production methods did in the 1920s” (Kirsner, 2000). One reason car companies are intrigued by the internet potential is that, by following some of the principles that Michael Dell thinks could be used usefully by automobiles manufacturers.
The top executives of most of the companies appreciate the need of change, but many hesitate to do so. In the words of European CEO of a major US company, “ it is more reassuring for all of us to stay as we are, even though we know the results will be certain failure…..than to jump into a new way of working when we cannot be sure it will succeed” (Ghoshal & Bartlett, 1995; p. 96).
Proton is the number one automaker of the Malaysian market. This company was founded in 1985 and belongs to Proton Edar group that also owns 80% of British sports brand Lotus since 1998. Proton is present on many markets in the world. In Europe, it is present in the UK, Turkey and Cyprus.
Proton was born of the political will of Prime Minister Mahathir bin Mohamad of Malaysia to develop a national car manufacturer and lock the domestic auto market. The nationalism of the Prime Minister was also reflected in the logo of the brand, which reproduced the Malaysian flag (since the logo is more "commercial"). It was launched with the support of foreign manufacturers, the first of which Mitsubishi Motors. The Japanese automaker, also a capital participation 16%, provided the manufacturing process models (identical to his own), as well as engines. In the 1990s, Proton has produced the Citroen AX in his own likeness.
This political control is still present in the allocation of capital. Furthermore Khazanah Nasional Berhad, the public industrial and financial holding which holds 31.63%, there are many Malaysian companies, both public or semi-public, like the Petronas oil which owns 6.50%.
PROTON is facing financial and commercial problems and, thus, is the subject of several rumors of acquisitions or partnerships with General Motors, Volkswagen and PSA Peugeot Citroën. Some of the important models of the company are:
· Proton Iswara, sold in the UK
· Proton Saga, the first model of the brand
· Proton Arena
· Proton Gen-2
· Proton Perdana
· Proton Juara
· Proton Satria, Proton called 300 in continental Europe.
· Proton Wira, Proton called 400 in continental Europe.
· Proton Putra
· Proton Pert
· Proton Waja
· Proton Tiara
· Proton Perdana
· Proton Savvy
PROTON finally signed a partnership agreement with Honda but this agreement will not solve the problem of competitiveness. The agreement on "technological innovation, design of new products and infrastructure sharing" production. Proton also assembles and distributes vehicles and parts from the Japanese manufacturer in Malaysia. This agreement will not suffice, however, to make it viable too focused on its constructor (small) domestic market and lack attractiveness of its vehicles. Proton also started to export in the 90s Mitsubishi restyled vehicles, particularly to Europe but the poor quality of vehicles quickly sounded the death knell of these tendencies.
Any organization’s relationship with its customers is strengthened when it is committed to offering them superior value (Peppers, Rogers & Dorf, 1999). Receiving superior value enhances customer’s loyalty to the firm that provides it. Evidence suggests that loyalty has a positive relationship with profitability (Stewart, 1999). It is a challenge for organizations to decide on which special needs of their customers they should focus. The ongoing competition between different automobile companies give many attractive options to the customers and many organizations emphasized on the skill that how they can manage all the aspects of their relationship with their customers (Seybold, 2001). Such organization which have global presence are in a better position to appreciate all their customer’s needs in the present, technologically advance and sophisticated global economy.
Porter is of the opinion that it is the differentiation strategy of the company which decides how an organization is different from its competitors. This differentiation can come either from the brand imaging of the company, or from technological advancement of the company, or by unique features of the product or from state-of-the-art customer service. The differentiation status of the company enables it to get better Return on Investment and protect it from price sensitivity. Customers tend to be loyal purchasers of products that are differential in ways that are meaningful to them. As their loyalty to a brand increases, customer’s sensitivity to price increases is reduced. The relationship between brand loyalty and price sensitivity insulates Proton from competitive rivalry. Although Proton value its customers but, it is true that company needs a drastic change in its management. It is said that the division between the decision making process and their execution is actually the root cause of present problems of Proton.
PEST Analysis of Proton
PEST is a large-scale albeit a comprehensive means of envisioning multifaceted interrelationships of marketing aspects of the companies. While several theories have attempted to provide a structure for analysis, PEST became a popular framework that resolves the limitations of marketing.
Politics, has affected the success and growth of automobile business by affecting the decision-making processes as revealed by the studies of decision-making. Politics in this means the political environment going around the exiting country. Politics opens ways of gaining information that the formal communication setups do not offer. Politics usually involves answering questions of who gets what, when and how and sharing and allocation of resources. There are many vested interests of political parties in the public projects. Political considerations play a major role in public decisions-making processes.
Proton’s presence in Malaysia as we as in multiple countries of Europe compelled the company to not only watch the political environment of these countries closely but also to adhere to the laws and regulations of these countries which is related to trade, commerce, investment, production etc. . The company headquartered in Malaysia which makes it necessary for the company to watch closely all the related laws and regulations of Malaysia as well as monitor change in the political situation of Malaysia.
Historically, the era of production is characterized by a low competitive environment, an exclusive focus by managers in industrial and technological aspects, and a lack of effort supported commercially, selling the products themselves due to an excess effective demand versus reduced supply (Church, 1999). Subsequently, the era of the sale had essentially characterized by the need to implement business methods aggressively - linked to adverse economic conditions resulting from the crisis of 1929 – methods supported by an effort on marketing research and advertising. The era of marketing, finally, is characterized by the development of sophisticated methods to take into account the expectations of customers, from the World War (Church, 2008).
Proton Company is facing difficulties due to the poor quality of its vehicles and the competition its faces which results in the stagnation of its sales volume and its very low growth in value. In a tough economic climate, people are more sensitive to the price criterion. Thus, customers realize the majority of their purchases during sales or promotions, when margins are low. The introduction of floating balances will reinforce this trend.
The international presence of the company has increased its rivalry with other international automobiles companies which results in a frantic search of enhanced price competitiveness (lower labor costs, the price of components, the exchange rates of currencies) while improving performance on other factors of competitiveness: quality (the sense of non-acceptance), integrity in the use of product innovation and range expansion to increase the variety and find new niches of profit.
Growth of volume remains the key to productivity given the increasing weight scale yields in the car (with the growth of R & D in particular), hence the search for new markets, starting with those of emerging countries of high growth but also high volatility. Pressure from financial markets helps to accelerate these developments, including the development of operations of mergers and acquisitions.
Preoccupation with information and knowledge as an organizational and societal resource is stronger today than at any other time in history. The company shows potential for rapid development as a source of economic growth. Liberalization of the sector aims to put the Malaysia automobiles in other continents by improving the quality and accessibility of production. Proton has to initiate and launch their operations related to manufacturing and distribution in other countries also.
The steps taken by the company for technological advancement of the sector has created a favorable climate of competition among different automobile companies. Universal contracts and peering agreements will continue to dominate the automobile sector in many emerging countries of the world. Proton has undergone significant changes associated with the evolution of technology, but also the gradual liberalization of the market. With the technological advancement, Malaysia becomes an importance place for automobile sector in Asia. Many other automobile companies see the technological advancement and the automobile sector as a major asset development across the region at the professional level.
The automobile industry is not threatened with competition, but it is basically the number of suitable alternatives available that serve as a key threat to their progress. In these competitive times Proton has to introduce measures that can bring creativity in the way they market and advertise it. In order to fulfill this objective, the importance of exclusivity has enhanced phenomenally in contemporary business. One of the basic benefits that this element helps in obtaining is that Proton is able to cater its own niche target market through the way it intends to advertise its market.
Secondly, it is the exclusive nature of the automobile sector and the company’s market strategy that entices different demographic segments to know about the brand and its dynamics. Third and most important is that such measures collectively help in increasing the revenues that are produced by the organization which is the most important in contributing to the success and development of the organization (Dwyer & John, 2006).
One of the prime challenges for Proton is that the customer’s expectation has been changed and competition has been enhanced in automobile industry. Car manufacturers seek to improve their competitiveness through customization; another factor is transforming the consumer sector: technological innovation. New technologies, including social networks and websites for customizing products, offer to customers unprecedented access to information, which improves productivity and makes working more close and making more informed decisions.
The high unionization and involvement of government produces other economic effects as reducing the incentive to invest in physical and R & D capital. Indeed, insofar as the businesses fear that government will appropriate the future profits generated by investment, so there will be less incentive to invest. The investment is the engine of economic growth. If there is less investment, there will be less innovation, less production, fewer jobs and income generation and less prosperity. In a dynamic perspective, a strong union presence thus ends up having adverse effects not only on employment but also potentially on economic growth (Clarke & Clements, 1999). Flexible labor relations serve to create an environment which is more dynamic economically. This dynamism has the effect of increasing the demand for labor by companies and therefore increases the value of work and remuneration. The workers benefit by first finding a job more easily, but also receiving good wages according to their skills and productivity rather than their union membership.
Proton has to work on multi-pronged strategy in order to survive and succeed in such troubled conditions. They have to devise series of strategies to attract younger buyers, all essential to maintaining growth and smart investments. When a client maintains a trustworthy relationship with a vendor, he buys more. Customers today have new expectations; Proton has to strive to offer a comprehensive service.
In the present situation the main problem for an automobile company is how to make itself known to its customers? While simply being better than all its competitors, and excelling in marketing. In order to become profitable Proton must have strong marketing and selling strategies. It has to understand the competitive environment of automobile sector and then quickly adopts the culture and business strategies suitably to make money (Kotler & Armstrong, 2001).
The low cost strategy seeks a form of imbalance differentiation of sufficiently strong price down in exchange for an offer stripped of any quality. To offer this advantage price, it needs to reduce costs across the value chain of the product or service concerned. This strategy can be viable if there are clients willing to accept the lower quality to pay less, that is to say, customers sufficiently sensitive to the price for not willing or able to move towards offering better. If the Proton Company adopts cost differentiation strategy then its vehicles will gain good capacity to fight against competitors especially those with undifferentiated strategy. However, the disadvantage of the strategy is that the costs of production and communication are very high because there are a large number of products.
Before deciding upon the different ways through the help of which Proton can be promoted it is also important to have a thorough idea about the nature and quality of the product. It is basically the nature of the product that determines the target audience and niche market to which the product can cater and interest to. In order to filter the demographic segment of this target segment and make it more customized, it is important that the nature and type of automobile is being created and marketed is also worth considering that will ultimately determine the demographic and psychographic segments of the target population.
It is important to develop and incorporate features through the help of which the facility of interaction with customers can easily be promoted. In order to fulfill this objective it is important that the vehicles of Proton do contain and encompass features through the help of which it can easily facilitate this practice. As cost differentiation policy is suggested for Proton, hence its target market is middle or lower class families with 4 to 6 members.
In a competitive environment there are many influences and factors that need to be considered when planning the promotion of a product. First and foremost an important factor that comes into play in this situation is that the product that has been made caters to the need and requirements of the niche market for which it has been manufactured. It is yet again important to mention here that promotion is an integral constituent of the promotional mix that is required for the marketing of a product. When considering the influences of external nature it is important that the demographic and psychographic composition of the target market is well studied and analyzed before the organization initiates its operations in the particular region.
In contemporary corporate mainstream some of the novel media that have emerged to play pivotal role in the field of advertising is the social media and networking. Facebook, Twitter and MySpace have emerged as hot beds of advertising as well as for the effective conduction of promotional campaigns for any venture that the business is going through. With the help of these venues and frontiers a business can also easily track the traffic that is arriving at the website as Google provides this facility in the form of Google analytics. By means of the traffic that is arriving at the website and the place which is attracting massive attention the company can take subsequent steps in formulating their very own corporate strategy and hence can target their new designer’s bag at the correct niche market and as per their requirements (Paul, 1997).
It is necessary that the advertising media should reach but not overreach the present or desired market. From among the many media available, Proton has to choose those that will provide the greatest return for the advertising dollar. Selection of the right combination of advertising media depends upon the type of business and its governing circumstances. In this particular case Television, Internet, magazines, billboards and newspapers are the most appropriate mediums for advertising.
The analysis of the trajectories and performance of automobile manufacturers in the Twentieth century has updated two essential conditions for profitability. The first is the relevance of "profit strategy" to the "growth mode" countries in which the firm operates. The second is the construction of a "compromise of corporate governance" between key actors to implement means consistent with the profit strategy, in other words, to invent or adopt a "productive model" (Boyer et al, 2010).
For marketing for other segments, Proton has to follow the innovation and flexibility strategy while targeting the teenagers and technology savvy people for whom the cost is least important. Proton will gain market of these two segments by applying and introducing latest designs in cars and manufacture cars embedded with latest technology toys (Anderson & Narus, 2010)
In order to achieve competitiveness in the market, Proton faces the constraint of presence in emerging markets, whose growth rate is high. Indeed, the growth of the sector of small and low cost cars in economies like India, Pakistan, Sri Lanka, Bangladesh, is enormous. Homogenized in a market, Proton will avail the benefits of high volume production with a worldwide supply. Such a configuration would allow a division of labor across the world to specialize sites and areas of activities for which they offer comparative advantages and cross-flow generating assets and services in a liberalized world trade. This implies that the convergence of the request is made possible by the reduction of differences in development levels between countries, a relative homogenization of lifestyles (urbanization, highways) and shared cultural references. The heterogeneity of the world would be more than the specific resources.
Proton has to adopt low cost strategy to attract persons of middle and lower income groups. The price would cover all marginal or incremental costs- that is, those costs specifically incurred to get the added business. In the long run, however, all overhead costs must be covered as well (Haynes, 1962). Customers typically choose products and services that give them the greatest value. Thus, Proton will position its cars on the key benefits that it offers relative to competing models.
Technological Advancement Strategy
To optimize customer relationships, Proton has to ride the wave of the web by offering its customers a new 100% online service, available both through a Facebook page and a portal. The service has to be based on intelligent search engine which allows users to quickly get answers to their questions, regardless of the formulation used. If these answers do not satisfy them, customers can then place a call or email customer service for more information or further assistance.
For too long, companies are experimenting with communication activities on social networks, rather haphazard and uncoordinated, which serve neither the company nor its customers. Proton will redefines best practices in managing customer interactions. Internet users go on social networking sites when looking for fair deals or otherwise to share their bad experience towards a brand. By integrating the solution to its Facebook page, Proton will be able to quickly and easily respond to questions from its competitors. It is also advisable that Proton will create a mobile application that allows customers to ask questions to customer service via their smartphones. This application is integrated into the overall infrastructure of the customer service of the company.
Proton is facing difficult times due to the competitiveness of automobile market as well as the poor quality of its products. Nevertheless, it is possible for Proton to become profitable by adopting a proper business plan. First of all, it has to develop strategies for regional integration not only from their market servant, but by setting up in other parts of the world. In a regionalization scenario, the question that immediately arises is then the implications. It can be a simple multiregional strategy, which have been adopted by Ford and General Motors in the 60s and 80s, based on the management of autonomous regional subsets from each other. The strategy must coordinate the presence in multiple regions to take advantage and strengthen the competitive position of the firm (Schaffer & Earle, 2008). Apart from that it also has to adopt a series of strategies to attract younger buyers, all essential to maintaining growth and smart investments.