Its finances recovered a little in 2009/2010, hanks to the government’s “cash for clunkers” incentive programmer, a MEMORY million (SUDSY million)2 R grant from the government, and some Improvement In sales. However, Its net profit margin barely reached 3% ” very low by Industry standards ” and most of Its performance measures lagged behind those of the industry leaders (Exhibits 2 and 3). The stock price of Proton’s listed parent, Proton Holdings Bertha (Proton Holdings Limited), had been substantially lower than its net asset value for several years (Exhibit 3).

Because of its low market to book ratio and the heavy government subsidies paid to Proton, Mr… Seed Zinnia was under tremendous pressure to turn around Proton’s performance. Adding further pressure, the changing Institutional environment had exposed Proton’s Inability to compete. Since 2005 when the government committed to 19 March 2011. SWABS-21. Of year exchange rates were used in this case. We use SUDS = MYRA. 464 for 2008, 3. 424 for 2009, 3. 083 for 2010 and 3. 000 for 2011. 22nd Strawberries, Asian Case Rest. J. 2012. 16:347-377. Downloaded from WV. Relativistic. Com by SIMI UNIVERSITY on 08/19/13. For personal use only. 2012 by world scientific publishing co. DOE 10. 114260218927512500150 Asian Case Rest. J. 2012. 16:347-377. Downloaded from www. Horticulturists. Com by reducing import tariffs under the SEAN Free Trade Area (AFT) agreement, the external institutional environment became very unfavorable to Proton. Although the government continued to protect Proton by providing grants and subsidies, Proton did not stop losing its market share to competitors, most notably to the second national car maker, Periods.

The competition in the domestic market had become stiffer as it was close to saturation. Further growth had to depend on overseas markets, in which Proton had failed to establish a firm foothold. The government’s attest National Automotive Policy, issued in late 2009, did relieve some of Seed Zinnia’s worries as the liberation’s of the sector was limited. Nonetheless, he was aware that the company desperately needed to improve its quality and efficiency; but what strategy should he adopt?

Malaysia’s Profile Malaysia is a small country that has been independent from British rule for around 50 years. It has a land size of about 330 thousand square kilometers, equivalent to the size of Norway, Vietnam, or the state of New Mexico in the USA. It is only a quarter of the size of its northern neighbor, Thailand. About half of its land ass lies on the Malay Peninsula and the other half on the island of Borneo, across the South China Sea. It is a middle-income country with a GAP per capita of US$7,775 in 2010, but a per capita GAP of IIS$14,800 on a APP basis.

It has a very young population of around 28 million, with a median age of 25. In terms of religion, Malaysia is considered a moderate Islamic country that allows other religions to be practices. Over 60% of Malaysian are Muslims, about 19% Buddhists, 9% Christians, and 6% Hindus. Politically, Malaysia adopts a federal parliamentary democracy together with a constitutional monarchy. A sultan, equivalent to the local king, acts as the chief of all ministry of International Trade and Industry. (2009). Review of National Automotive Policy.

Retrieved March 31, 2011, from http:/ /WV. AMA. Org. My/ PDF/ PROTON: ITS RISE, FALL, AND FUTURE PROSPECTS 349 Islamic and religious affairs in 9 of the 13 states. Every five years, one of the nine sultans takes turn to serve as the king for the whole country. Similar to the I-J, the king is only a figurehead and the actual power rests with the prime minister and his cabinet. Since Malaysia’s independence in 1957, the government has been led by the name coalition political party, Barista National, which in turn is controlled by the United Malay National Organization (NOUN).

Except for the 2008 general elections, Barista National has never encountered any serious threat from the opposition parties. NOUN has always been the De facto government. Malaysian are mainly Indian (7%). The majority of Malay, together with the indigenous population, are grouped as bumpier (literally “son of the soil”; or “bum'” in short). The bumpier enjoy privileges that are not available to other ethnic groups under the country’s National Economy Policy, commonly known as the NEAP (1970), and the subsequent National Development Policy (1990).

These privileges were established as compensation to the bumpier, who were viewed as a marginal’s ethnic group under British colonial rule and were thus deprived of opportunities. Similar to affirmative action policies adopted in other countries, the policies aimed to reverse the long-term deprivation and gave the bumpier easier access to resources and opportunities. The bumpier were given preferential treatment and, in many cases, exclusive rights over business licenses, education admissions and scholarships, and overspent contracts and employment.

Through these preferential programmed, the NOUN-led government aimed to redistribute the country’s wealth, which was largely controlled by the Chinese prior to 1970, and to lift the majority of Malay out of poverty. Forty years after the NEAP, the affirmative action policies remain intact despite challenges claiming that the goals of the NEAP have been reached, and that its continuation only benefits a small group of politically connected parties. The recent 2010 National Economic Model Chin, J. (2009). The Malaysian Chinese dilemma: The never ending policy (NEAP). Chinese Southern Diaspora Studies, Volvo. , up. 67-182. 350 ACRE did not impose any changes on the NEAP programmed. Some of the key NEAP industrial directives are listed in Exhibit 5. The Malaysian automotive industry Market demand Between mid-sass and 2010, Malaysian’ reliance on cars increased to a level that resembled Americans. The sale of more than 600,000 vehicles (Exhibit 4) in 2010 was quite remarkable considering Malaysia’s population of only 28 million. In 2010, Malaysia had the largest passenger car market in OCEANS, closely followed by the rapidly growing Indonesian market (Exhibit 9). On average, one out of every four Malaysian owned a vehicles.

Compared tit other countries, Malaysia had the third highest vehicle ownership in the world after the USA and Luxembourg, which were much richer countries (Exhibit 10). The popularity of private vehicles as a means of transportation often surprised visitors to Koala Lump, Malaysia’s capital city. Seeing networks of modern highways, high- speed trains, and abundant automobiles, they found it hard to believe that Malaysia was still considered a developing country. The similarity to the US lifestyle offered by this small developing country was even more surprising. It was not difficult to spot shopping malls and other major public facilities.

Vehicle ownership began to gain popularity with the launch of the country’s National Car Project in the early sass by the former Prime Minister, Tuna Dry. Empathic bin Mohammad. Empathic, also known as the “Father of Protons. ” Empathic adopted Proton as his pet project. During trucks and other commercial vehicles, Thailand had the biggest auto market in 2010, followed by Indonesia (Exhibit 9). Business Monitor International (2009). Malaysia Autos Report Q 2009. Business Monitor International Ltd. , p. 6. Ellis, E. (2006, July 6). Proteomics. Fortune Magazine. Retrieved May 17, 2010, from http://money. CNN. Mom/ Gaines/fortune/fortune_archive/2006/07/10/8380925/ index. HTML including 351 his 22-year reign from 1981 to 2003, he had a very Hansson role in Proton’s operations. His involvement included selecting Joint venture partners, hiring and firing members of the board, and deciding strategic directions. At the time of writing, Empathic still served as an advisor to the board of Proton and continued to have a substantial influence on the company’s strategy. The National Car Project was one of several mega-projects implemented by the Empathic government in an effort to jump-start the industrialization of Malaysia.

In addition to manufacturing automobiles, the government also invested in other heavy industries, such as steel plants, cement factories and oil refineries. Together, these projects were part of the Industrial Master Plan that aimed to facilitate Malaysia’s leap into the league of industrialized nations. In addition to the National Car Project, there were other push and pull factors that fuelled the demand for automobiles. The first was a heavily subsidized gasoline supply. Malaysia was a significant net oil exporter and had the third largest oil reserves in the Asia-Pacific region after China and Indian.

This trial endowment allowed the government to subsidies Malaysian’ consumption of gasoline, which made it possible for low-income citizens to own and operate a vehicle. The government subsidy on gasoline varied between 20 and 30 Malaysian seen (about 7-10 US cents) per liter, or about 10-15% of the retail priced 1 . Another factor was the decision, perhaps implicit, to permit sporadic rather than concentrated urban planning, which meant long driving distances between city centers that were not connected by a mass public transportation system.

The country’s light rail transit (ALERT) system was only available in the Klan Valley, also now as the greater Koala Lump area. Third, the government made it easy and cheap to see Karri, F. N. (2006, April 8). Strategic alliance must benefit industry: Dry. M. Business Times. Koala Lump, p. 44. Http://www. EIA. Doe. Gob/cabs/Malaysia/ Full. HTML Aryanism, M. (2010, March 4). Malaysia delays plan for new gasoline subsidy system (update 1). Bloomberg Business Week. Retrieved May 1 1, 2010 from sociolinguistic-system-updated-. HTML 1 1 The, E. H. (2010, May 25). Subsidy cuts to boost economy. The Star, NON. 52 obtain loans for buying national brand cars. Car loans in 2010 were available for less Han 2-3% per annum; very low by both local and international standards. Finally, the Malaysian government had invested heavily in the country’s highway networks. Its highway system connected all major inland cities and neighboring countries, from Thailand in the north to Singapore in the south. These developments, taken together, encouraged Malaysian to acquire private cars or motorbikes as their means of transport, while at the same time making it less efficient and economical to adopt large-scale mass transportation or railway systems.

As these factors had evolved over mime, life in Koala Lump differed significantly from other Asian capitals, in which people were more likely to live close to one another in high rises and relied on public transportation for their daily commute. Key stakeholders The development of Malaysia’s automotive sector was led by five major groups of stakeholders. The first key group was the parts and components manufacturers, with about 350 companies making parts and components for vehicles and about 120 for motorcycles 2. The development of the component industry was an intended by-product of the national car project.

In 2008, the total sales of this industry amounted to MYRA. 37 billion (or SUDS . 84 billion)13. The output from this group was important to the industry as it provided supplies to two other stakeholder groups in the value chain, namely, the auto manufacturers and the assemblers. The proportion of locally produced parts in the national-brand cars varied from 60 to 90%, whereas for domestically assembled foreign cars the proportion was between 40 and 60%. The second stakeholder group consisted of Motorists Dan Enjoin National Sad Bad (MODERNS), 12th German Chamber Network International. Market watch 2010″, The Malaysian automotive and supplier industry. Retrieved September 6, 2010, from http:/ / Malaysia. Ask. De/filament/user_upload/Documented/Osteoporosis/Market_ ENG_. PDF ibid. Launched as part of the national motorcycle project in 1996, and Malaysia Truck and Bus Sad Bad (currently known as Issue Which Malaysia Sad Bad), established in 1997 to produce commercial and heavy vehicles. The third group of stakeholders consisted of assemblers. Altogether, there were ten motor vehicle assemblers of both passenger and commercial vehicles (I. E. Assembly Services/Toyota, Honda Malaysia, Which-Automotive, DRY-Which Defense Technologies, Motion, Oriental Assemblers, Anza Automotive Manufacturing, Shania Malaysia, Swedish Motor Assemblies and Tan Chon Motor Assemblers) and eight motorcycle assemblers (e. G. , Honda, Yamaha, Suzuki, Anza and Sukiyaki). Motor vehicle dealers represented the fourth group of stakeholders. In 2005, there were 1,978 car dealers and 1 58 motorcycle dealers. Included in this stakeholder group was a special category of “dealers” unique to Malaysia ” the Approved Permit (AP) holders.

AP holders were allowed by law to import new or used CUB (completely built up) vehicles into the country. There were two types of AP holders ” open versus franchise. Open APs, previously given free to selected bumpier entrepreneurs, allowed the holder to import a vehicle of any brand and model from overseas with each permit. A franchise AP, given to licensed bumpier distributors, was a blanket approval that allowed the holder to import a prescribed brand and make of vehicle within a period of time. The total number of vehicles that could be imported was limited to 10% of the total industry volume in the previous year.

For example, in 2010 the country sold about 600,000 vehicles, thus a maximum of around 60,000 foreign vehicles was allowed to be imported under the AP yester in 2011. Because only bumpier individuals and companies 5 were allowed to apply for an import license, and APS were in high demand in the used vehicle import prime Minister’s Department. (2005, October 19). National automotive policy framework. Retrieved September 6, 2010, from http:/ /www. AMA. Org. My/PDF/ National automotiveopolicymframework15PDFipamphleteernies were those in which all shareholders and 51% or more staff members and board members are pumpernickel

See Annex B: Definition of pumpernickel. Retrieved December 14, 2009, from http:/ /whom. Mob. MIT yogis/Hosts. ]SP? SSP-Bobby5coach35981 debauchedness=TTT 354 market, there was even a secondary market for APs. In 2009, each open AP could be re-sold for about MYRRH,Myrmidons southerner, in 2008, the automobile the counterrevolutionary’s 9). Protection from the Government As measured by the number of annual new registrations, the domestic auto market, grew by about 200% between 1990 and 2008. In 2008, the total sales were 548,115 units, of which 17,305 (or 3. %) were imported vehicles. Malaysia’s passenger car market had been dominated by the two national carmakers, Proton and Perfidiousness peak, the two national carmakers together accounted for 76% of all domestic auto sales. This duopoly had been supported by government protection. However, such protection had been reduced in the previous few years, which had led to Proton losing market share. In 2010, their combined sales declined to 57. 2% of the market. The drop in the domestic carmakers’ market share could be explained partly by the changes in the tariff structure.

Before 2005, all imported vehicles were subject to an import tariff of 60% to 300% of the vehicle’s value, varying by engine size. The import tariff was dropped when Malaysia began its intercommunicating import tariffs under AFT. Bathe time of writing, all imported vehicles, whether CUB recumbently knocked-down (CD), Cede subject to two categories of tariffs ” import duty and excise duty. The import duty on CUBS wisest at 0% for imports from SEAN SEAN% from MFC (MFC-forwardness’s), but for locally assembled Cads, Cads 10%. All vehicles, domestic and foreign, had to pay an excise tax.

Depending on the engine size and type of vehicle, the excise duty ranged from 60% for a van with an engine below 1,500 c. C. To Cutoffs any vehicle above 2,500 c. C. As C result, both locally assembled and imported foreign vehicles benefited from derisiveness’s, October 31). Coming to grips with APs. Extraterrestrials-SWABS Malaysia’s reduction of import duty. In addition to these two duties, buyers had to pay a 10% sales tax. The details of the latest duty charges are given in Exhibit 8. Foreign vehicles were therefore quite expensive in Malaysia.

For a new imported CUB reciprocally assembled German or Japanese CD vehicle from a non-SEAN Smeary, the retail price was usually more than double the price of the same vehicle sold in a tariff-free country, such as the USA. In a country with a median monthly income of MYRA,8MYRAUSD950ISSUEDeign vehicles were a luxuriously, vehicles made by Proton and Prestidigitation from a 50% reduction in excise tax and other government rebates, were the people’s cohesiveness, this choice of cheaper local vehicles came with a costly trade-off against quality and safety.

The absence of stiff competition had encouraged Proton to keep on producing outdated designs that most of its domestic methodologists new foreign vehicles were expensive, a minor- tit ofittylaysMalaysian preferred foreign vehicles because of their reliable reprehensibility’s. Instead of buying new locally assembled foreign vehicles, they opted to purchase not-so-old used imports. This resulted in a large number of used car importers, especially in the Greater Koala Solarium The prices of used imports were not low.

Used car prices were still double the price of similar used cars sold elsewhere. These high prices, coupled with the “relatively IoW’ duties, provided high profit margins for the importers. The relatively low duties were the result of the government’s method for assessing the value of used vehicles. Although new foreign chilliness’s were easily identified through international dealers’ brochures or websites, there was no reliable mechanism or diphthong. Cooperativeness. PH? Epiphenomenon’s&vievv=article&id=28835 :malleability’s-growth-better- Mohammedanizes Scandinavians. 2007). The rise of the private car in Koala Solarium’s: Assessing the policy option. TATS Attach, 31(1), 69-77. Protestation’s was the official car for cabinet ministers in Malaysia until early 2011. These vehicles were not equipped with airbags. See Non, Font. (May 1, 2011) Burden or catalyst? The star, 88-9. 356 rovisirevisionetermining the market values for imported used vehicles. The government had to rely on the used car dealers to provide the value. Taking advantage of the opportunity, used car dealers registered very low prices for their imports, thus avoiding high duties.

For the used car dealers, even after factoring in the hefty fee of MYRRH,Moorhen AP, the used car import business was still considered very lucrative. The used car import system had a political dimension. The original intention in setting up the AP system was to encourage bumipubumpierrticipate in the used car dealership business. However, it turned out that most APS were actually re-sold to non-bumipubumpierdealers, who dominated the industry. It seemed that most AP holders would rather sell their electroencephalographic the business themselves.

This type of rent-seeking behaviorist’s a lot of criticism from consumers and policymakers, including Mathematically 20. The 2009 National Automotive Policy was an attempt to address this rent-seeking behaviorally the new policy, open APS would be phased out by 201 5 and franchise APS by 2020. A price list of used vehicles would be gazettgazettesiminate the opportunity for under- reporting. Additionally, with effect from 2010, all APS were subject to a MARIO,MARION,sudden rather than being given out free. All these measures were aimed at phasing out the AP system within ten years.

However, it was anticipated that the APs, most used car dealers would not be able to operate. With regards to the ten thousand reengineering for each AP, the policy explicitly stipulated that the funds cool-electrocuted be used to assist bumptiousness’s venturing into the automotive trade and other businessman’s was consistent with other economic policies that aimed to promote the interests of bumipubumpiermaAtman. (2010, June 17). Free AP for genuine motor traders ” Dry. Indeterminateness Times. Retrieved April 1, 2011 from http:/ /www. Baptisteries uncomment_ News/Bootlessness’s/naphthalene. 1 Ministry of International Trade and Industry (28 October 2009). Media Release: Review of National Automotive Policy. 357 To conclude, Malaysia’s domestic carmakers, Proton and Perfidiously enjoyed some protection from the government although the level had been reduced in previous few years. Government protection continued to prevent a level playing field. The choice of schoolmistresses for the majority of consumers, whose incomes were low by international standards. When the 2009 National Automotive Policy was fully implemented, Malignancy’s lose the choice to buy used imports.

Therefore, domestic brands should continue to dominate the mass market. Asian Case Rest. Jerkiest. 16:347-377. Downloaded from www. worldsHorticulturistsbyComM INSINCERITY on 08/19/13. For personal use only. ProTon’s develodevelopmentsTorholisticallyePerspectiveutomotive industry in Malaysia, prior to the launch of Proton, was almost non-existent. Automobiles were either impressionableness locally with imported CD (excitedly knocked down) kits. The first automaker in Malaysia was a Swedish-Malaysian automobile assembler that began assembling their CD kiddo the local market in 1967.

In 1981, two years after Mathematician Prime Minister, Proton was formed under the National Car Project. Proton was the Malay acronym for PerusaPerusalbAutomobilenNationalnglish, National Automobile Enterprise). It was the key business of its parent, Proton Holdings Predictability company listed on Bursa Malaysia (formerly, the Koala Solarium Exchange). To launch a national car project, Malaysia, like other pre- indistinguishableness, had to solve the general problems of weak technological capabilities and insufficient management talent.

The formaldehyde’s was to form alliances to acquire the much-needed technology and management skills. The first Proton partner was Japan’s Impetuousness’s Corporation, considered at that time to be the weakest automaker in Specifications of a Japanese partner was obvious, as Mathematicians the Japanese development model of heavy government P. (2009). The automobile industry of Southeast Asia: Malaysia and Thailand. Journal of the Asia Pacific Economy, 14(2), 172-193. 58 Malaysia. However, the reason for choosing Impetuousness’s clear.

At the very least, it was known that the decision did not go through a competitive bidding preposterousness, Proton and Underestimates an equity Joint venture, in which the latter had 30% ownership while providing 70% capital in the form of yen allowance’s, the Joint venture rolled out its first automobile, the Saga, a four-door saloon with a choice of 1. 3 or 1. 5 liter littler. Saga was a simpler model of the Lancer, a well-established and popular Impetuousness’s for the mass market. While other compact models (e. G. SavGnvSavvyatriaAustria launched to satisfy the local appetite for small cars, the Saga and its variants (e. . , Persona and Was) Wakened Proton’s flagship models. Since 2008, the new Sagas had been equipped with home-produced engines developed by Proton and its subsidiary, the Excusableness, which was acquired in 1996. In 2009, Proton began producing a multi-purpose vehicle (MAP) camped the Xerox,Xerox diversifying its passenger car line-up. The decision to form a joint venture with Underestimates to reduce R costs and allowed Proton to manufacture vehicles under its own brand within two years. Proton also sought to accelerate its learning curve through technology transfers with its partner.

Over the years of partnership with Impetuousness’s and its alliances developed the capability for producing some of the components, partially reducing its reliance on Intercommunicates foreign auto component makers. In addition to producing components, Proton began designing its own models and in 2001 it launched the Was, Wasters home-designed model. In 2004, in partnership with Lotus, it launched the Gene-2,Condemner hatchback with homemade Accomplishers. The Joint venture tit Indeterminateness until 2004, when Underestimations financial difficulties at home and decided to sell off its stake in Proton.

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