Masita Abu Bakar- G1510844

22 September 2016
Case of PROTON

Background of Edaran Otomobil Nasional Sdn. Bhd. (PROTON)

Perusahaan Otomobil Nasional Berhad (PROTON) was incorporated in 1983. PROTON

was the main automobile company in Malaysia which the function is to manufacture, assemble
and sell motor vehicles and related products. In 1985, Proton Saga has been produced as its first
Malaysia car model which the idea of national car has been triggered out by then Malaysian
Prime Minister, Dato' Seri Mahathir Mohamed.
Proton Holdings Berhad produced cars not only for Malaysian but it even exports the cars
in at least 26 countries of which the majority are in Asia. Proton has sold over 3,500,000 cars
between 1985 and 2013 in Malaysia alone. The United Kingdom is by far the company's most
successful export market in terms of cumulative sales volume, and at one point Proton set the
record for Fastest Selling Make of New Car Ever to Enter the United Kingdom. Saga was ranked
among the Top 20 best-selling cars in the U.K has made the record in 1992 which outselling its
primary competitors from Hyundai and SEAT. To ensure their cars are high quality that can give
the satisfaction to the customers, Proton Holdings Berhad has joint ventures with four different
international automobile companies which are Mitsubishi, French automobile manufacturer,
Citroen, China Youngman Automobile Group and Honda Motor Company.

The Industry
PROTON exports to over 26 countries and has over a dozen models. It produced its 3 millionth
care in 2008. The headquarters of PROTON located in Shah Alam, Selangor and it operates an
additional manufacturing plant in Tanjung Malim, Perak. The company was founded in 1983 and
was the sole vehicle manufacturer in Malaysia until the establishment of Perodua in 1993.
The success of PROTON was a national proud and the starting point of a heavy industrialization
effort. PROTON has difficult starting point since the first car got into the assembly line during a
recession. The first year 17,000 cars were produced. However the company only managed to
survive through government subsidies and tariffs that made other car prohibitively expensive.
At first, PROTON did not make profits. Sales was largely due to tariffs and nationalist pressures.
Fortunately, in the mid 1900s things were improved. There was a backlog for deliveries of
several months. When PROTON becomes profitable, it employed 4,800 people. In 1995,
PROTON produced 180,000 cars and more than 10,000 cars were sold in Britain. Locally
manufactured components also increased from 42 percent in 1985 to 80 percent in 1995. Because
of the high profitability, Proton built a second, $800 million plant in 2000 that tripled production
capacity.
Despite of the PROTONs success, its officials admit privately that negative public perception is
the greatest challenge to increase sales and penetrating foreign markets. They need to change the
mindset and improve after-sales service. They want to move away from this image saying they
are selling cars that are cheap, or even cheaper than cheap. In the face of the flood of imports,
PROTON aimed to bolster its bottom line by selling at least 100,000 vehicles abroad annually by
2008. Exports have doubled from a tiny 8,000 units in 2003 to 17,000 in 2004 and it has set a
goal to double overseas sales in 2005. However, the analysis by industry analysts says that
despite its plans, PROTON is slow on its feet, with a long time lag between new offerings. Also,
the poor quality of some models is hurting its overall reputation.

SWOT Analysis

SWOT Analysis

1. Proton is a Malaysian national automobile manufacturer.

2. Proton Holdings Berhad is the holding company which is listed on the Bursa
Malaysia.
3. 14,000+ Proton cars were exported annually to other countries
4. Proton exports cars to the United Kingdom, South Africa, and Australia and
the company is aggressively marketing its cars in several other countries
including the Middle East.
5. Proton cars has also been exporting a small volume of cars to other countries
like Singapore, Brunei, Indonesia, Nepal, Sri Lanka, Pakistan, Bangladesh,
Strengths

Taiwan, Cyprus, Mauritius

1. It lacks variety in its product portfolio

Weaknesses

2. Brand recall and market share is quite less as compared to global leaders

1. Acquisitions of strategic brands

2.Emerging markets and expansion abroad
3.Increasing demand for hybrid electric vehicles
4. There is opportunity to benefit from over 100 patents held through
subsidiaries
5. It can get into hybrid vehicles, as they have already made investments in the
Opportunities

technology

Threats

1. Low cost substitutes being marketed by Chinese manufacturers

2.The macro-economic situations are leading to lower sales for all automobile
manufacturers
3.Since it was previously a govt. owned company it still suffers from

bureaucratic issues

Competition

1. Toyota
2. Honda
Competitors

3. Nissan Motors

Related Issues
We can observe that there are two issues that circulated in this case study.
1) Management of Customers Perception
2) Quality of Proton Saga
As the first ever product to be launched by PROTON, the Proton Saga should be ready and
prepared for all the unexpected things. Rumors that saying Proton Saga has bad quality which
unable the vehicle to climb up the hill showing that PROTON team was not prepared. They are
not fully testing the real ability of the car. They might be too excited to launch the product to the
public without proper preparation. Adequate preparation is very important in managing the
perception of the customers in seeing and criticizing the new product. To manage customers
perception is an important aspect when introducing product which uses our own brand.
The competitors will take advantage on our weakness and use this opportunity to spread the
false news regarding the bad quality of PROTON.
Second issue is regarding the quality of Proton Saga which has been the main topic in the
rumors. PROTON should investigate whether or not the rumors which stated Proton Saga has
low ability in climbing hill is true or not. Customers will feel reluctant to purchase product with
low quality thus PROTON must do something to prove all the rumors are false. To prove the
customers that PROTON has good quality is important in order to regain the trust from the
customers.
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Problem Statement
PROTON for the first time has launched its first and new automobile product to the Malaysia
market segment. They received many feedback from the people about Proton Saga. The feedback
comes from positive and negative side. The positive side because of the spirit to become national
car producer as well as to be independent in making national car. However, there are negative
feedback on this move such as PROTON produced low quality product since the technology
used was old and obsolete.
In one of the event held to promote Proton Saga massively which called as Sagarama, there were
rumors spread out regarding the ability of Proton Saga to climb up the hill. Proton Saga has been
accused to have small cc and small radiator that can cause overheating if any exertion happens
when it try to climb the hill. The CEO of EON was panicked about the rumors and called out the
emergency meeting to solve the issues.

Several Options
There are two options for PROTONs CEO to consider in order saving the company from bad
perception or rumors from the public.
1) Wait for complaints or any incidents by customers
2) Do the vehicle test on the hill

Analyzing the situation

PROTON team can choose between first or second option to proceed for the action. Every action
will incur cost and time to in order to execute the plan.
For the first option, the advantage of this option is PROTON will not have to spend any cost in
order to investigate whether the rumors is true or not. The cost to investigate the rumors will be
huge since a lot of operations need to be carried out such as to recall the sold cars back for
investigation, compensation to the customers and administration cost. However, to wait for the
rumors to really happen is a risky option since the consequences will involve humans life. Let
say the rumors is real which shows that Proton Saga is not able to climb the hill. The impact of
this scenario will cause severe effects on PROTONs reputation as the first national car producer
in Malaysia. PROTON will never be trusted and this case will become the history that will be
never forgotten by the Malaysians .
For the second option, which is to investigate the rumors by executing the test on the vehicle
would be considered as a responsible action. As the car producer, PROTON should not ignore
the rumors that might influence and affect companys reputation. Something should be done by
PROTON together with the partnership member which is Mitsubishi. The action that should be
taken is the car need to be tested climbing the hill at the night which no one could know about
this test. Only the engineers from PROTON and Mitsubishi should take part on this test and
obtain the proof whether the rumors is true or not.
There will be two answers can be achieved by conducting the test. The first one is yes, the
rumors is true which the Proton Saga is proven cannot climb the hill successfully. If this is the
result, the engineers from PROTON and Mitsubishi must conduct a special discussion on how to
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fix this situation. Whether they need to inform the customers and recall the sold car or not.
Whether they need to ask for customers apology or not and others. If the result of the test
showing the Proton Saga can successfully climbing the hill, PROTON should announce the news
to all the customers in the Malaysia. PROTON should held one more bigger Sagarama and busy
telling people about the success of Proton Saga climbing the hill. The impact of this success will
cause PROTON to have higher reputation and increase the sales of its first ever product. Thus,
to choose option number two should be the choice of PROTON in solving this problem.