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The Competitive Strategy of Proton - Industry Analysis on Automobile Industry

Essay by   •  July 5, 2013  •  Case Study  •  3,736 Words (15 Pages)  •  4,263 Views

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1. Indentify a multinational company that involved in the automobile business in Malaysia. Go to the homepage of this company. Investigate the company, its activities and its mission statement but in particular, examine its different activities. What competitive approach are they pursuing? Justify your answer. What complementary strategic option(s) are they pursuing to support its competitive strategy?

Company Background

The national automobile company, Proton that was founded on 7 May 1983, and it sells motor vehicles and some other related products, which including accessories, spare parts and other components. The company was publicly listed on the Kuala Lumpur Stock Exchange (KLSE) in 1992. However, during the recent years, Proton had faced some major challenges which caused by new competition and deregulation in the industry. Especially for the recent years, Proton's focus will be in its core areas of product which are quality, cost efficiency and distribution network. So for overcoming these challenges, Proton aims to have a strong product portfolio by introducing "the right car, for the right market, at the right price and at the right time".

The Competitive Strategy of Proton

To be a successful leader in the industry, Proton is pursuing the overall low-cost strategy as its competitive strategy option in the automobile industry in Malaysia. This strategy is to help the organization to achieve a lower cost than their rivals and appealing to a broad spectrum of customers, usually by underpricing rivals and to be an industry's overall low-cost provider is a powerful competitive approach in markets with many price-sensitive buyers. A company achieves low-cost leadership when it becomes the industry's lowest-cost provider rather than just being one of perhaps several competitors with comparatively low cost (Thompson, A. A., Strickland lll, A. J. & Gamble, J. E. 2010).

For achieving a low-cost provider strategy, sales promotion, quality improvement and cost efficient control from the raw material seems much more important. From the activities of Proton shows in its annual report, Proton implements several approaches to assists them to support its low-cost provider strategy.

For Proton, their low-cost provider competitive strategy can be indicated from its policies first, their corporate mission in short-term is to provide the cars which are affordable, cost efficient and value for money. To achieve the cost efficient, Proton set up the policy to ensure and acquire technology and industrial skills within the automotive manufacturing industry and to strength the international competitiveness of Malaysia's in industrial capability (Proton's 2011 Annual Report)

To create a low-cost provider strategy, a company has two options to achieve this low-cost advantage over rivals into attractive profit performance. One is to use the lower-cost edge to underprice competitors and attract price-sensitive buyers in great enough numbers to increase total profits (Thompson, A. A., Strickland lll, A. J. & Gamble, J. E. 2010). For example like the Proton's sales promotion can be an indicator for their low-cost strategy. The following table shows the general information for the Proton's sales promotion.

Sales Promotions Selling Points

Drive for Cash Cash will be given to the lucky-draw of new Proton car owner

Proton X Change Old Proton car owner to trade-in their car with an additional RM5,000 cash voucher to purchase a new Proton car

(Sources: http://kereta.info/proton-xchange-programme-terms-condition-faq-info yarat/)

Proton has designed its sales promotions frequently for capturing the attention of the local consumers which is to help them implement its low-cost strategy. These kinds of sales promotions usually shows a success when Proton uses both the price-cut and value-added type of promotional designed. Especially, like the Proton's X Change program could provide the customers with a trade-in their Proton car on an additional RM5, 000 to own a new brand of their products. However, Proton usually engaged the customers to join their customer-franchise to design the promotions such as the car-testing and the demonstrations. And also their noncustomer franchise could get the promotions such as premiums. These promotional ideas could help the company to enhance the loyalty and attitudes of their customers for Proton and it also could help Proton to gain their brand equity.

By using the price cut, sales promotion and the cost control approaches, it helps Proton to gain their competitive advantage. So in conclude that the corporate strategy for Proton is the low-cost provider strategy which is to support its competitive advantage and gain the market position in the automobile industry in Malaysia.

Complementary strategic options for Proton

In order to support Proton's low-cost strategy, the company also uses few complementary strategic options to assisting it. For example, as shows in the company's annual report, employ strategic alliances and collaborative partnerships as one of its complementary strategic option.

A strategic alliance which is a formal agreement between two or more than two separate companies in which there is a strategically relevant collaboration of some sort, shared risk & control, joint contribution of resources and to create a dependence culture in their organization (Thompson, A. A., Strickland lll, A. J. & Gamble, J. E. 2010).

Proton has cooperated with CIMB bank Berhad which enables Proton could provide quality financing services to their customers. For Proton, this offers a competitive hire purchase loan financing packages to new Proton car purchasers through the Proton EDAR SDN BHD and EDARAN automobile national Berhad sales networks nationwide (Proton's 2011 Annual Report).

For their customers, this activity is not only to help the customer enjoy a better deal for car financing but also it could provide a value-added package which offers a combination of other financial products. And also this helps them to achieve its low- cost strategy for Proton and in order to assist Proton to build, enhance and sustain its core competence and competitive advantages.

However to achieve a low-cost provider is not an easy case for a company. As for Proton, it also uses the strategy that acquires the company LOTUS group which is a worldwide network that spans across 40 countries that works closely with clients to find

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