INTRODUCTION

PROTON HOLDINGS BERHAD

Proton is a Malaysian automobile manufacturer with its headquarters in Shah Alam,
Selangor. Proton also operates a manufacturing plant in Tanjung Malim, Perak. It was
established in 1983 as the only national car company in Malaysia, but until the advent of
Perodua in 1993. Proton is a short form from the words Perusahaan Otomobil Nasional
Sendirian Berhad. Proton rely fully on its domestic market that is currently undergoing
structural and internal changes as the evident in the appointment of a new owner,
partner, chairman and the launch of various models in an effort to gain an international
presence and increase the profitability. The first car made by the company was called
as Proton Saga was launched on 9 July 1985 and the latest or new models by Proton is
called as Suprima S.

PERODUA
Perodua is an acronym taken from the words Perusahaan Otomobil Kedua Berhad is
the second automobile manufactures that comes after Proton. Perodua was established
in the year of 1992 and the first models Perodua came out with is called as Perodua
Kancil that was launched on August 1994 and the latest models the company had is
Perodua Alza. Perodua mainly produces minicars and superminis and the company did
not have any models in the same market segmentation as Proton. As in 2012, Perodua
had sold over 189,000 vehicles, which is its highest point in sales records. UMW
Corporation Sdn Bhd holds 38% stake of the shares in Perodua as 20% was held the
Daihatsu Motor Co. Ltd. Another 20% was with MBM Resources Bhd, 10% with PNB
Equity Resources Corporation Sdn Bhd, Mitsui & Co. Ltd holds 7% and the remaining
5% is with Daihatsu Sdn Bhd.


PROTON: ISSUES AND CHALLENGES
Rivalry from other MNCs.
Competition among the same industry makes it more complicated issue to Proton.
Competitions come from different parties. The first one would be the competition
between Proton and domestic competition, Perodua Malaysia (partnered with Daihatsu).
This has compounded Protons problems by coming up with this second national car to
add variety for consumers but actually contributed to the problem because the two
government-funded carmakers cannibalize each other. Besides, Proton is also facing
competition with foreign countries. For example, it has been struggling to match its
Japanese and South Korean rivals, and has seen its share of the domestic market fall
dramatically. In addition, Proton is likely to find it even harder to maneuver through the
bumpy road that lies ahead because it is now easier for these countries to penetrate the
local market as import duties are lowered. Some of these cars are cheaper, have better
features and are technologically advanced. Nissan and Hyundai in particular have
chipped away at Proton's market share by introducing locally produced models at
competitive prices. Moreover, Mitsubishi, who once had a joint venture with Proton has
now returned to add more misery to its former trainee. It is back with a vengeance in the
Malaysian market with familiar models such as the Lancer and Colt, which once flooded
the streets of Malaysia in the 1980s, in addition to its Evo IX raising competition to
Proton.







High production costs
Secondly, Proton continues to struggle with high production costs that make local cars
relatively more expensive than many foreign cars without tax and tariffs despite the
protection. Proton spends a significant amount on research and development (R&D)
and royalties paid to Mitsubishi for the use of its engine. Still producing only 200,000
units after 15 years, its volumes are too low to support stand-alone operations (Chee,
2003). Also, although Proton has a huge pile of cash reserves, these are being used up
for research and development, some of it via its Lotus design arm in the United
Kingdom. Such Research and Development (R&D) costs have to be spread over a
relatively small production output, raising the cost per unit. Losing this competitive edge
when facing up against global giants will cause Proton to face huge problems in
penetrating foreign markets and meeting exacting standards. In the past, it has had to
sell its cars at close to cost to try and gain a foothold in these markets.
Introduction of AFTA
For automobile industry, all the components and parts that are needed to the car
industry will be affected. Malaysia has used high import duty and local content policies
to protect national cars, domestic assemblers and component part makers. With the
introduction of AFTA, all trade barriers will be removed and this is turn can have the
negative implications for Malaysian automobile industry. Domestically, Proton has the
advantage in terms of dominant market share and a well-established distribution and
service network. Mentioned situation will remain for the next three years at least,
following Malaysias deferment to 2005 of market opening measures for the auto sector
under the AFTA agreement and Malaysias commitment to WTO. But the situation
concerning the Protons dominance in the local market after the 2005 can be
threatened. Removal of all the trade barriers can result the following of foreign
competition, which can pose serious threat to the future development of the local
automobile industry. Next is an outside pressure on the local market from other
manufacturers in both component and finished products, and last one is collapse of the
inefficient and weak firms at the expense of stronger ones.
PERODUA: ISSUES & CHALLENGES
Supply problem
Perodua had a serious problem regarding their supply of part that is needed for making
a car. This supply problem happens in the year 2011 on March. This problem arises due
to the massive earthquake and tsunami that happen in northeast Japan. The shortage
of the part that is needed for producing car had made a disruption to Perodua. Perodua
cannot meet their customers demand because of the lack of part that is needed in the
car making process. This disruption also had brought delaying in launching a new car to
the second half of the year. All this disruption become a pressure to Perodua in order to
introduce new models to booster sales and maintain leadership in Southeast Asias
largest passenger car market and competition from domestic rival Proton. In order to
settle down all this, Perodua, which is partly owned by Japans Daihatsu Motor Corp
had talks with Daihatsu and other vendors to resolve the problem, which it described as
a temporary setback.
Quality Issue
As a number one car manufacturer in Malaysia, Perodua also have problems regarding
their car producing. Even the international and famous car manufacturer also having the
same problem just like Perodua. Some of the problem that Perodua face is that alarm
system not functioning, central locking not functioning, cabin light switch problem,
strange sounds from door hinges, steering vibration under braking, water leaking into
the passenger cabin and reverse sensor malfunction. This are the main problem that
the user always complaining when they buying the Perodua car. Even Perodua had
operating for a long times, they still fails to overcome with these entire problem. If this
problem are still fails to be settle down, it will be difficult for Perodua to sell their car
internationally. This quality issue will make customers dont have any interest to use
Perodua car. Therefore, Perodua will have a problem on selling their car out of
Malaysia.

Rising of competitors
As Perodua go globally, their rivals also will be globally. It means that when Perodua is
entering a new market that is out of Malaysia, the number of competitor that they have
also will be increased. There is a lot of car producer around the world such as Honda,
Toyota, Nissan, Audi, Mitsubishi, Isuzu, Lexus and many more. Perodua need to
compete with this entire global car manufacturer as Perodua gone globally. It will
become a big challenge for Perodua because all the international brand of car
manufacturer are strongly established and globally known. Perodua need to have a
good strategy in order to compete with all the competitor and success in the global
market.
Rising in Production Cost
President and CEO of Perusahaan Otomobil Kedua Sdn Bhd (Perodua), Datuk Aminar
Rashid Salleh said that the year 2014 will be a challenging year for the automotive
industry due to rising of production cost in the automobile sector. Price for producing
one car is going to increase in the year of 2014. This is due to the rising of price of raw
material used in producing a car. It is impossible for Perodua to maintain their car price
in the market if the costs of raw material are keeping increasing. The production cost
has become a major problem for Perodua in order to keep them survive in the
automobile sector in the next year. If price of raw materials are continuously increasing,
Perodua going to have a big problem because they need to keep their car price as low
as they can in order to compete with the other car manufacturer brand around the world.
Rising in Oil Price
The oil price is keep rising in the recent years. The rising had made serious challenges
for Perodua in producing and exporting their car. From year 2000 to 2014, there is a
fluctuation in the oil price. Oil price are not stable in the year 2000 to year 2014. The
highest price stated in the year 2008 that is almost $150USD/bbl. Even though the price
is coming down in the year 2009, but it starts rising back after the year 2009 until now.
The current price of the oil is almost $110USD/bbl. The price is quite high and will bring
a lot of problem to the automotive sectors especially Perodua.
The first problem is that Perodua will face a high cost in producing cars. Increasing in
the oil price will make the entire raw material price to increase. This is due to the cost of
transportation increasing when the oil price is increase. As the result, cost for producing
one car will be higher than before. The problem is that when the cost of producing car is
increasing, Perodua will need to increase their car price. If their car price is high, it will
be difficult for Perodua to compete with the other car brand when Perodua export their
car out of Malaysia. The competition will be very high and Perodua may fall in the
competition because Perodua are competing with the other global and strong brand that
only have small effect on the oil price.
The second problem is that when the oil price is rising, people tend to reduce the use of
oil. So they will use other alternative to move from one place to the other place such as
using the bicycle, taxi, car pooling and others. When there are using these alternative,
they will tend to less buying a car. The result is that Perodua sale will drop because the
numbers of people who are tend to buy a car is decreasing. The number of car user in
the world will drop because of the oil price.
Electronic Power steering (EPS) Problem
As a car manufacturer, Perodua also did not miss out from the quality issue regarding
their car producing. In March 2011 to March 2012, Perodua face a big problem
regarding their car produce. The problem is that their Electronic Power steering (EPS)
column is not function well. Perodua discovered that the problem can be detected when
the EPS indicator is lit, after which, drivers might feel a slight steering heaviness at
speeds between 30 and 40 km/h. As the result, Perodua had issue a statement that is
calling back 74, 000 Perodua Myvi that were manufactured between March 2011 to
March 2012. This calling back intended to replace the Electronic Power steering (EPS)
column that is not functioning well. Although the problem can temporarily be fixed by
switching off the engine and restarting the car, Perodua prefer to tackle the issue
permanently and without any cost to users. The replacement process will take around
80 minutes to be completed and owners of the Perodua Myvi models are welcome to
visit any of 170 Peroduas service centre to get it done.
CONCLUSION
In conclusion, every multinational corporation encounters issues and challenges. None
of them can run away from it including automobile sector. In automobile sector, main
issues will be arising in cost of production. This is due to increasing cost of raw
materials and increasing in price of research and development (R&D). Moreover,
increase in number of competitors would also be the challenge for them. Examples of
competitors are Honda, Toyota and Nissan. Besides, in automobile sector, quality will
be one of the preferences a consumer will looked on when buying a car. Thus,
automobile companies need to improve their cars quality time by time to achieve
customers loyalty. Sometimes, natural disaster also can be a challenge to the
company. For example, Perodua who partner with Daihatsu, having problem with the
supply of part when massive earthquake and tsunami hit northeast Japan. Last but not
least, AFTA is a big challenge for Malaysian automobile industry. AFTA will remove all
trade barriers involving components and parts that needed in the car industry. Thus, this
will harm Malaysian automobile industry directly. As mention earlier, every multinational
corporation in any types of industry will faced issues and challenges. The way they
react and handle the issues and challenges will determined where they company will
land on either will be top of the world or vanished from the world.








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