Operations Management & Analytics for Management

Executive summary

Proton Holdings Berhad is one of the leading automobile companies in Malaysia, with the company providing high-quality cars for Malaysian residents as well as operating in at least 26 countries across the globe, with the company being dominant in Asia. The company manufactured the first-ever car to be manufactured in Malaysia, the Proton Saga, which was rolled out to the masses. In Malaysia alone, the company had sold over 3,500,000 vehicles between the years 1985 and 2013. In the United Kingdom, the company has been by far the most successful export market when it comes to cumulative sales volume.

More than that, Protons Holdings Berhad has its primary competitors in SEAT and Hyundai. The company as well as a joint venture with other four different international automobile companies such as the French automobile manufacturer, Mitsubishi, China Youngman Automobile Group as well as Honda Motor Company with the aim of producing their cars to make sure that their cars are of high quality which will offer satisfaction to their customers. Since its establishment, Proton Holdings Berhad has become a key driver of Malaysian National development as it gives way for the company to advance with technological advancements.

Introduction

Proton Holdings Berhad was given the name Proton, which is originated from a Malay abbreviation of Perusahaan Otomobil Nasional translated to English as National Automobile Enterprise. Proton Holdings Berhad is a Malaysian-based company founded in 1983. The company mainly deals with manufacturing, assembling, and selling motor vehicles as well as the related products, which include spare parts, accessories, and other automobile components. Models by proton include SATRIA, GTI, WIRA, WAJA, ISWARA, PERDANA, V8, EXORA, PERSONA AND ARENA (Mohd Sofian and Roslan, 2018).

This paper therefore reviews state of the art in operations as well as Operations Management academic research, which Proton Holdings Berhad. The paper employs “Theory of the Firm”, which is a venerable and massive body of thought concerning where any firm draws a border between what it performs in-house and what the firm outsources. The paper discusses different tools used in assessing Proton Holdings Berhad operations review; Proton Holdings Berhad strategies and financial review; and the operations review tools’ advantages and disadvantages.

Organization analysis

Operational effectiveness can be well-defined as any kind of activity that allows a firm or an organization to maximize the consumption of their inputs by rising the firms’ products faster than the competitors and reducing defects. Therefore, a company should regularly evaluate its resources so as to find a way to lower the costs of the inputs while increasing the outputs. Thus, the operational analysis consists of such elements as capital expenditure, people resources, customer satisfaction, quality, and revenue (Joseph, Durimi and Ismail, 2017). In evaluating the operational effectiveness of Proton Holdings Berhad, we employ several tools such as SWOT analysis and Potter’s five forces analysis.

Past Success and Current Challenges

The Blue Ocean

During the 1980s, the Malaysian automotive market was conquered by the Japanese cars including Toyota and Datsun (Yap, 2012). By the time Proton Holdings Berhad was being introduced to the market in 1983, as the first as well as the only national car in Malaysia. Proton Holdings Berhad, therefore, created what is commonly known as the “Blue Ocean,” a term that refers to the unobstructed market environment, whereby rivalry is not relevant (W.C, Kim and Mauborgne, R., 2015). Proton Holdings Berhad was a massive opportunity to maximize profit in a blue ocean business setting. It created the demand for the Malaysians to buy locally manufactured national cars, competing with the imported Japanese cars. Therefore, this meant that Proton Holdings Berhad manufactured cars were sensibly priced, making them quite affordable for Malaysian families to purchase. Proton Holdings Berhad also received considerable government support, which was a benefit to PROTON by being the hobbyhorse of the then prime minister, Tun Dr. Mahathir. Proton Holdings Berhad sustained its number one ranking for two decades, the company’s market share reached its peak in 1993 which was 74% (NST, 1995) as well, the number of cars retailed reached the peak in 2002 where the company sold a total of 214,373 units (MAA, 2002).

The Red Ocean

Despite the ups and downs by the company, PROTON faced a real challenge after Perusahaan Otomobil Kedua Sendirian Berhad, commonly known as Perodua, joined the automotive industry. The company went ahead and situated itself as the subsequent national badge cars in Malaysia. Perodua offers small as well as fuel-efficient compact cars that are cheaper in terms of prices than those provided by PROTON. This, therefore, triggered the “Red Ocean” condition were there established a tight competition result at the bloody red ocean of the competitors fighting over a shrinking pool of profit (W.C, Kim, and Mauborgne, R., 2015). The effect of the red ocean battle was that Perodua took over Proton Holdings Berhad in 2006, after winning 42% of the total share, with about 152,633 cars being sold by the company. PROTON as well lost its number one spot in the market for the first time since its establishment in Perodua. The sales of the company as well dropped to 115,538 units and the market share shrunk to 32% Still bleeding from the battle, Proton Holdings Berhad financial and operational performance continues to show red. The company reported an enormous financial losses of about RM1.46 billion for financial year 2016 12 (Lin, 2017).

Financial analysis

Proton Holdings Berhad car output is hit 200,000 units in the year 2020. The company projects above 300,000 by the year 2023 and about 400,000 by the year 2027. Proton Holdings Berhad’s new plant located in Tanjung Malim is also anticipated to create about 50,000 jobs by the end of 2022. A sale volume of 400,000 cars by the company, is projected to bring the company a revenue of more than RM24 billion. In 2020, Proton Holding Berhad record breaking car was the most reasonably priced sedan, the Saga, a car that recorded steady sales that preceded 30,000units, while the Persona model sales by the company rose by 27% year-on-year to 19,510 units (Kassim, Husain, Ahmad and Jawi, 2020). Proton Holding Berhad projects at grabbing 30% market segment in Malaysia as well as 10% of the Asian market share.

Proton Holdings Berhad SWOT analysis

SWOT Analysis for PROTON aids in identifying the company’s strengths and weaknesses, as well as opportunities and threats. Refer to figure 1 below. SWOT analysis helps decide the qualities that are helpful and valuable for Proton Holdings Berhad to achieve its goals and objectives.

Strengths:

By being Malaysia’s first national car since it was established in the year 1983, Proton Holdings Berhad has been able to establish long-standing legacies and a solid customer base. Therefore, the company can meet varying customers’ needs from their wide range of data on customer wants with varieties of car models. As well their relatively priced cars ensure that PROTON’s cars are affordable as well as the company is known for its value for money (Tong, Terpstra and Lim, 2012, pp.347-377).

Weaknesses:

Proton Holdings Berhad is perceived to be offering low quality products to its customers by the public. This, therefore, impacts the company’s customer retention and satisfaction rates, resulting in a low rate of operational effectiveness. As well, Proton Holdings Berhad does not have enough experts who are experienced in advanced automotive engineering technology. This, therefore, limits the company’s innovative capabilities, impacting its operational effectiveness. Proton Holdings Berhad production costs is as well high as a result of its of its high-priced spare parts as well as costly technologies (Rahman et al., 2018, pp.1387-1398).

Opportunities:

Proton Holdings Berhad Tanjung Malim plant has the capacity to produce 500,000 cars annually. Therefore, the company has an opportunity to increase its operational effectiveness by maximizing on economies of scale. The Geely’s R&D edge is as well furnished with Swedish technology and over 10,000 engineers from over 46 countries (Kanyakumari, 2017). With Geely, Proton Holdings Berhad can be able to tap into 1.4 billion new market segments in China. Proton Holdings Berhad has an opportunity to add on its operational effectiveness from government support as it always receives government support (Zainal Abidin, 2017, pp.43-56).

Threats:

Proton Holdings Berhad is now operating in the red ocean market, and the company is fighting for the shrinking market share. As well, the Fuel price increase can also impact on Proton Holdings Berhad sales. The Malaysian market is also saturated and slow, making the company’s operations saturated and dependent on a slow but very competitive market. The automotive technology is advancing, and Proton Holdings Berhad is not responding fast enough, which may impact the company’s future operations (Said Hasan, Saimin and Omar, 2017, pp.43-56).

Figure 1: SWOT analysis

Porter’s five forces analysis of Proton Holdings Berhad

By assessing the forces that impact the rivalry within the automotive industry, Proton Holdings Berhad can identify the company’s strategic strengths as well as weaknesses. Then the company can formulate a plan that comprises: positioning, which are the Proton Holdings Berhad abilities to defend its position against its competitors; improving Proton Holdings Berhad position through strategic moves as well as exploiting possible changes by implementing a suitable strategy to the company operations before competitors identify it. In Porter’s Five Forces analysis for Proton Holdings Berhad, the threat of substitutes is high as the car drivers can decide to use public transport means such as training, buses, and motorbikes or as well grab a car service. The threat of new entrants is low as it is for a new player to enter the industry; the player requires economies of scale, making it costly for the new players. The industry is also characterized by tight government policies that make it hard for a new player to venture into the industry. The bargaining power of buyers is high as there are many similar products available in the market and with a similar price range. The ready disposal of other alternatives makes the bargaining power of the buyers extremely high. The bargaining power of the suppliers is low as there exist cheaper options as Proton Holdings Berhad can buy more affordable spare parts from China, as well, the company leverages on its partnership with Geely.

The Ansoff Matrix

The Ansoff Matrix is as well-known as the product or market extension grid. It is a tool that companies commonly use to analyze as well as plan for their companies’ strategies for growth and sustainable growth. The Ansoff Matrix can help Proton Holdings Berhad plan its future organization’s operations and development. According to Igor Ansoff (2020), product-market strategy is a joint account of a product line and the conforming set of goals of which the products are intended to fulfill.

Proton Holdings Berhad can expand its market share within the existing market segment by sing the current offerings by selling more products and services to the existing customer base. As well, the company can find new customers within the existing markets. Proton Holdings Berhad can use this market penetration strategy to increase promotion as well as distribution support, reduce price, and upgrade its current car models. By using the market development strategy, Proton Holdings Berhad can expand to new markets using its existing six products, which can be done by targeting different industrial buyers, customer segments, and new areas in Malaysia and Southeast Asia.

Proton Holdings Berhad can also leverage Geely’s product technology to increase its car output and enter into lucrative and not too different market segments. For product expansion strategy, Proton Holdings can develop extensive new products, for example, a new SUV and commercial vehicles, into the current markets through a joint improvement with Geely that has an advanced R&D center furnished with progressive technology. This will ensure that the company maintains customer satisfaction by offering high-quality products as well as ensuring operational effectiveness (Shatouri, 2012, December, pp.43-56. Lastly, in diversification strategy, Proton Holdings Berhad can diversity into Southeast Asia as well introduce new offerings; however, the company will have to diversify using a risky product as well as market development process. As a result of the Proton Holdings Berhad synergy with Geely, this is possible, and hence the company can adopt “related diversification.”

Evaluation Tools analysis

Porter’s five forces

Poter’s five forces is a conceptual framework used to analyze a company’s competitive environment. The power and the number of the company’s competitive rivals, the potential market entrants, the customers, suppliers, and substitute products affect the profitability of a company. These five forces have the potential to influence the operational effectiveness of a company and impact the profitability of the company. A high number of competitors mean that the customers have a wide range of products to choose from, which negatively impacts operational effectiveness. For example, with the stiff competition faced by Proton Holdings Berhad, the company competes on low prices, reducing the balance between the inputs and outputs. Availability of substitute products leads to reduced sales as well as a high purchasing power which reduces the profitability of a company. On the other hand, a low supplier’s power indicates an opportunity to minimize the cost of inputs and maximize profitability. For example, with a low supplier’s power, Proton Holdings Berhad is able to procure spare parts at a reasonable price hence optimizing on inputs (Rahman et al., 2018, pp.1387-1398).

Using the porters five forces analysis tool for evaluating a firm’s operational effectiveness has lots of benefits to the firm such as; Helps in Estimating the Competition within the industry, the analysis aids in determining the threat of new entrants, supplier bargaining power, the threat of substitution, as well as the buyer bargaining power. The analysis of these forces aids in analyzing the competitive rivalry of the industry, which supports the company in understanding the current competition of the industry as well as in adjusting the corporate strategies accordingly.

Showcase where the Strengths and Threats Exist

Porter’s five forces analysis provides an output of appreciative buyer and supplier forces with the risk of new entrants as well as substitute products. This aids the senior most management in finding out where does the company’s strengths place in as well as where does the threat exists, this, therefore, gives the company operations review a detailed analysis of the company’s operational effectiveness.

Identify which Entities Holding the Power

There exist three types of entities to which Porter’s Five Forces are related. These are buyers or the consumers, suppliers, as well competitors. Therefore, the potters five forces analysis offers the organization’s performance review insights into which are entities hold the most power and those with less power (Zainal Abidin, 2017, pp.43-5). This helps the company to make well-informed decisions on the paramount strategies to handle these entities.

Display Opportunities to Expand the Business

Despite analyzing the areas that the company needs to improve on, Porter’s five forces analysis also identifies different opportunities for the business to exploit by analyzing the power of suppliers and buyers in the industry. This helps the company make evidence-based decisions on whether to proceed with vertical integration to acquire suppliers and buyers with an aim of reducing their power and expanding the business.

As well, this aids the company in having comprehensions into the competitive rivalry, where the company can look for the possibility of conducting horizontal incorporation to obtain a competitor and ease the risk of competition.

As well, the potters five forces analysis is advantageous to the company operational review as it offers the review that’s a good understanding of the corporate risk. Porter’s five forces provide valuable perceptions into the power of consumers, power of suppliers, and power the of competitors information that is very useful in understanding the business’s corporate risk and making informed recommendations (Zainal Abidin, 2017, pp.43-5).

Disadvantages

Limitation on the Composition

Porter’s five forces can only concentrate on the power of consumers, power of suppliers, substitution, as well as new competition. But does not look on to the technological factors as well as other business strategies that impact the company’s operational effectiveness (Rahman et al., 2018, pp.1387-1398); for example, technological advancement is another biggest threats for all companies through all industries.

Unavailability of Quantitative Dimensions

Porter’s five forces analysis does not give quantitative data, and there is no model for quantitative examination of the external factors. This tool does not offer the review with any quantitative idea of the depth as well as the impact of the five forces described.

Can Be Used as Starting Point for the Analysis

Porter’s five forces is a simple tool containing five external factors that can be advantageous or else disadvantage for a company. Therefore, Porter’s five forces analysis can be used only as a tool for the initial point of a deep examination. This framework offers the initial indulgence of the company’s competitive position within the industry. This framework cannot alone offer an in-detail inquiry into the company (Zainal Abidin, 2017, pp.43-5).

Not Applicable for All Industries Universally

Porter’s five forces practically cannot be used for reviewing the operational effectiveness of some industries. For example, non-profit making companies cannot use this tool for analysis. Also, companies shepherding activities such as R&D will not benefit much from the tool.

SWOT analysis

Advantages

Problem Domain

SWOT analysis is applicable to a firm, individual, organizational unit, or even a team. In addition, the SWOT analysis can as well support a significant number of project processes as well as objectives. For example, the SWOT analysis tool can evaluate a brand or a product, company competitiveness, acquisition or partnership, and the contract out of a business role. SWOT analysis helps identify various strengths, weaknesses, opportunities, and threats of a company in determining its operational effectiveness (Zainal Abidin, 2017, pp.43-5).

Application Neutrality

The SWOT analysis also offers a sense of neutrality to the operation review. SWOT analysis is piloted by specifying an objective as well as shepherding a thinking session to classify the internal and also the external features that are promising or unfavorable to the accomplishment of the company’s objectives. This method remains the same whether the examination supports opportunity analysis, business development, competitive analysis, strategic planning, or product development processes.

Multi-Level Analysis

SWOT analysis offers the operations review with significant data about its objective’s chances by looking at each of the four components of the SWOT analysis: the strengths, weaknesses, available opportunities as well as threats, self-sufficiently or as well in combination. For example, the identified hazards in the Proton Holdings Berhad, such as new legal guidelines regarding a product proposal or the introduction of new technology in the industry, might impact the company’s overall operations (Tong, Terpstra and Lim, 2012, pp.347-377).

As well, identifying a company’s weakness, for example lack of qualified employees, may suggest a hindrance in the company’s operations as well as a need to contemplate on outsourcing in some particular functions. In turn, identifying the company’s opportunities, such as the availability of partnering companies to leverage on might encourage the company management to pursue the improvement of new products so as to meet an increasing customer demand. In contrast, the identified strengths, such as experiencing rapid international growth or extensive experience in an industry, might suggest an improvement of a company’s operations effectiveness (Rahman et al., 2018, pp.1387-1398).

Data Integration

The SWOT analysis offers the operations review with insight into both the qualitative and quantitative data as it requires a mixture of quantitative as well as qualitative data from several sources. Access to the wide range of facts from multiple available sources enhances decision-making, improves communication, improves enterprise-level planning as well as policy-making, and helps in coordinating operations.

Simplicity

The SWOT analysis also involves neither procedural training nor skills, which eases and simplifies the operations review process. Instead, it can be executed by anyone with an understanding of the business in question as well as the industry in which it functions. The process therefore involves a simplified brainstorming session through which the four scopes of the SWOT analysis are debated. As a result, the individual contributors’ beliefs as well as judgments are gathered into collective decisions that the group as a whole endorses. Therefore, in this way, each individual’s knowledge becomes the group’s knowledge, which makes the SWOT analysis an effective tool in reviewing the operations of a company (Tong, Terpstra and Lim, 2012, pp.347-377).

Cost-effective

A SWOT analysis involves neither technical training nor skills, a company can select one of the staff member to conduct the analysis which therefore cuts on the costs of hiring an expert to conduct an analysis. SWOT is somehow a simple tool that can be applied in a fairly short time.

Disadvantages

No Weighting Factors

The SWOT analysis front runs four individual lists of weaknesses, opportunities, strengths, and threats. However, the tool offers no apparatus to rank the impact of one factor from the other within any list. This, therefore, makes it difficult to decide the amount of any one aspect’s true impact on the company’s operations.

Ambiguity

The SWOT analysis as well creates a simple-minded model by which each and every problem quality is categorized as strength, a weakness, an opportunity or a threat. As a result, each of the quality appears to have only single influence on the organization’s operations. However, one factor may occur in an organization as both strength or as a weakness. For example, if a business locates a chain of stores on well-traveled streets that grant consumers easy access might be reflected in increased operations (Rahman et al., 2018, pp.1387-1398). However, the costs involved in operating high-visibility amenities may as well make it challenging to compete on price if the volumes of total sales are less.

Subjective Analysis

To considerably impact company operations, all business decisions should be based on relevant, reliable, as well as analogous data. However, the data obtained for SWOT analysis, in collection as well as analysis, entail a idiosyncratic process that mainly reflects the biases of the individuals who collected the data and participated in the brainstorming session. As well, the data input to the SWOT analysis may become outdated relatively quickly, which therefore means that the tool offers data for operation review valid for a short period (Tong, Terpstra and Lim, 2012, pp.347-377).

Conclusion

In conclusion, operational effectiveness be well defined as any kind of activity that allows a firm or a firm to maximize on the use of its inputs by developing the firms’ products at a faster pace than the competitors as well as in reducing defects. The operational effectiveness can be determined by using several tools such as SWOT analysis and Potter’s five forces analysis. SWOT Analysis for PROTON aids in classifying the company’s strengths, weaknesses, opportunities and threats. SWOT-analysis helps in determining the attributes which are helpful and useful in order for Proton Holdings Berhad to achieve its goals and objectives.

By evaluating the forces that impact the competition impacting the automotive industry, Proton Holdings Berhad can identify the company’s strategic strengths as well as weaknesses. Then the company can formulate a plan that comprises: positioning, which are the Proton Holdings Berhad abilities to defend its position against competitors; such as improving Proton Holdings Berhad position through strategic moves; as well as exploiting the possible changes by implementing an appropriate strategy to the company operations before competitors recognize it (Rahman et al., 2018, pp.1387-1398).

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