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MARKETING PLAN: PROTON

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  • 1. MARKET SUMMARY
    Proton is the Malaysian national automobile manufacturer (Malay acronym for Perusahaan OTOmobil Nasional, 'National Automobile Enterprise'), which was established in 1983 under the direction of the former Prime Minister, Dr. Mahathir Mohamad. Proton Holdings Berhad, the holding company, is listed on the Bursa Malaysia.
    Based on technology and parts from Mitsubishi Motors, production of the first model, the Proton Saga began in September 1985 at its first manufacturing plant in Shah Alam, Selangor. Initially the components of the car were entirely manufactured by Mitsubishi but slowly local parts were being used as technologies were transferred and skills were gained. The 100,000th Proton Saga was produced in January 1989.
    Until the end of the 1990s, the car's logo featured the crest from Malaysia's coat of arms, featuring a crescent and a fourteen-pointed star. The new Proton logo features a stylized tiger head. In 1993, a model called Proton Wira was introduced based on the Mitsubishi Lancer/Colt. More than 220,000 units were sold between 1996 and 1998. Proton Perdana, based on the Mitsubishi Galant/Eterna, was first produced in 1995, intended for higher end market. The Proton Waja (Proton Impian in UK), which launched early 2001, is the first car model designed internally by Proton.
    By 2002 Proton held a market share of over 60% in Malaysia, which was reduced to barely 30% by 2005 and is expected to reduce further in 2008 when AFTA mandates reduce import tariffs to a maximum of 5%. (See " Trivia" section for update on tariff implementation)
    With the acquisition of Lotus technologies in 1996 from ACBN Holdings (a company owned by the owner of Bugatti), Proton has gained an additional source of engineering and automotive expertise. This led to the production of Proton Gen-2 which was code name Wira Replacement Model (WRM) before the launch. The Gen-2 is the first of cars to be manufactured and assembled at the new manufacturing plant in Tanjung Malim, Perak which is part of Proton City development project. The plant was opened in 2004.
    On 8 June 2005 Proton introduced the second model to be manufactured in Tanjung Malim, the 1,200 cc 5-door supermini, the Proton Savvy. Both the Gen-2 and Savvy, were models that MG Rover was looking to rebadged when the British firm entered into collaboration talks with Proton. However these joint-venture talks were unsuccessful and MG Rover subsequently collapsed.
    In 2007, Proton launch its new sedan as replacement version for Wira Sedan but with new name, Persona. The new Proton Saga replacement model (codename Proton BLM) was launched on 18 January 2008. The new Saga is based on the Savvy platform, but using Campro 1.3L instead of Renault engine. It was announced on August 8, 2008 that Proton is developing a new, fuel-efficient hybrid car to beat rising costs and address environmental concerns. Prime Minister Abdullah Ahmad Badawi told reporters that he had already test-driven the car and urged the company to continue researching energy-saving technologies.
    As of 3 August 2008, Proton has produced 3 million cars since 1985, where the 3 millionth cars is a second-generation Saga.
    TARGET MARKET
    Proton has 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. Besides that, Proton cars has also been exporting a small volume of cars to Singapore, Brunei, Indonesia, Nepal, Sri Lanka, Pakistan, Bangladesh, Taiwan , Cyprus and Mauritius. 14,706 Proton cars were exported in 2006. Recently Proton returned to Guangdong, China, where it did business in the past but withdrew after having poor sales record. In July 2007, Proton signed an agreement with Youngman Automobile Group Ltd. Co., paving the way for the national carmaker to offer its products and services in China. Under the agreements,Youngman will import 30,000 Gen.2 CBU (completely built-up) units and resell them under its own EuropeStar brand and eventually develop a new range of Made-in-China cars with the engineering services provided through Proton's Lotus. Proton is expected to ship 1500 cars a month for 20 months starting December 2007 to fulfill the order.
    Proton began its exports from Malaysia to other right hand drive markets like New Zealand in the late 1980s to fulfill consumers needs based on culture situation, but its success was mostly limited to the United Kingdom where it entered the market, along with Ireland, in 1989. They advertised there with the slogan Japanese Technology, Malaysian Style. Proton cars proved popular among budget-oriented motorists, and like Japanese and South Korean models before them, led to the demise of manufacturers such as the Soviet Lada and ex-Yugoslavian (now Serbia) Zastava. By the 1990s, Proton had withdrawn from the New Zealand market after offering only the Saga four-door and Persona five-door models. The company also exited the Irish market in the early 1990s, following limited success in that country. The Persona and Natura models were sold in Chile briefly during the late nineties by a local Nissan importer, but few were sold and the venture ended after two years. Proton sales seem to be slowly declining in the United Kingdom with 2008 sales at 1518 (0.07% share of the market), compared to 2752 in 2002. These figures are insignificant compared to 2008 UK sales of 28,036 for Korea's Hyundai and 29,397 for Spain's SEAT.
    Proton also exports cars to Singapore and Australia, and now produces models in left-hand drive, for export to continental Europe. An entry into the US market was considered by Malcolm Bricklin following Hyundai's successful launch in the mid 1980s. However, exports to the US never materialized, as the cars required hundreds of changes to meet American safety standards in order to secure coverage from auto insurers and satisfy legislative requirements. Proton export models still do not comply to all environmental standards such as emission limits.
    The model that Malaysia has followed with the formation of Proton may be used as a case study for rent seeking as tariffs on imported cars rose almost immediately following the formation of Proton. Also AFTA agreements on relaxing entries into the ASEAN market space had exemptions specifically for Proton. The Malaysian government gained a three-year exemption for Proton from 2002 to 2005 where entry tariffs had to be lowered to 5%. This was replaced by other duties resulting in no net decrease in automotive prices for importers.
    In the United Kingdom, Proton cars suffer somewhat from a poor public image. They are considered deeply unfashionable with younger drivers, they are identified as being a vehicle popular with elderly people. In 1998 Proton attempted to change this by introducing the Proton Satria GTi however, the car was somewhat out of reach to younger drivers due to high insurance premiums. The Satria GTi also sported a " Lotus Ride & Handling" badge which, coupled with an average security system, made it easy picking for a potential thief. However, the vehicle was a success as far as handling was concerned which meant that, coupled with its 1.8 16-valve Double Overhead Cam Engine (which produced 133bhp) a number were purchased by Octogon Race Circuits and used as track cars at Silverstone and Brands Hatch racing circuits.
    Proton cars were imported into Trinidad and Tobago between 1993 and 2002. They were sold through a local dealer, H.E Robinson Ltd. Only the Saga and Wira ever reached this market with the Wira enjoying modest sales success. The bankruptcy of the dealership forced the exit of Proton from Trinidad and Tobago in 2002.
    MARKET GROWTH
    Proton market growth have been drop in 2006, Proton's sales dropped 30.4% from 166,118 in 2005 to 115,538 for the Malaysian market, with a later report indicating a 55% fall of sales to 962.3 million ringgit, its lowest in at least seven years. This allowed Perodua to overtake Proton as the country's largest passenger carmaker for the first time, with a 41.6% market share, while Proton's market share fell from 40% in 2005 to 32% in 2006. In the period ending December 31, 2006, Proton has also suffered three consecutive quarterly losses. Compared to a profit of 86.5 million ringgit in 2005, the car company lost 281.5 million ringgit in 2006. Proton blamed discounts from rivals. Total losses in 2007s financial year climbed to $169 million. The Employees Provident Fund (EPF) acquired an additional 830,000 shares in a transaction that spanned between January 5 and January 12, 2007.
    In 2008 improved performance was achieved on the back of increased revenues to RM5.6 billion compared with RM4.9 billion in the previous year. The increased revenue generated from increased sales volume, was mainly due to the introduction of PROTON’s two new models, the PERSONA and the SAGA. The group has also benefited from its revenue diversification program with income from sale of rights for use of its intellectual property, in its export markets. PROTON understands the importance of introducing new products and models that meet the expectations of the market. This is clearly demonstrated by the good reception to the PERSONA and SAGA. As such, PROTON is committed to further enhance its R&D and product development activities with a view to further invest in projects that meet the requirements of the market and allow for quick commercialization. In the last financial year alone, PROTON spent over RM500 million on R&D projects and activities, in-line with this philosophy. For the current financial year ending 31 March 2009, given the new product range, PROTON expects to significantly improve its exports performance further. The PERSONA and SAGA are planned to be launched in PROTON’s major export markets from June 2008 onwards.
    SWOT ANALYSIS
    Strengths
    Ties with other ASEAN markets are strengthening all the time through AFTA induced tariff reductions, which will provide advantages for carmakers basing themselves in Malaysia. The market continues to attract investment from major carmakers, with General Motors (GM) forming a tie-up with DRB-HICOM in August 2007.
    In addition to successes in product portfolio, Proton has also made commendable progress to bring about other operational improvements. The focus on cost management resulted in cost savings for new models, which were then passed on to the customers through competitive pricing.
    Emphasis on the elevation of the automotive eco-system saw the strengthening of the vendor base and dealer network. These rationalization initiatives enabled Proton together with vendors and dealers to deliver improved quality of service and be more competitive.
    Proton will continue to strengthen itself in all aspects to operational, financial and corporate to better equip itself in the years ahead. It will adopt a three-pronged thrust namely development of market-driven products, focus on high growth regional markets and a production strategy that achieves economies of scale.
    Weaknesses
    The national industry is in decline, with Proton losing market leadership for the first time in 2006 (albeit to fellow national producer Perodua). Protectionist measures are still barring new entrants; particularly Chinese manufacturers such as Geely Car ownership levels are relatively high at one car for every four people, compared with one for every 30 in neighboring Thailand and Indonesia
    After that, the existing quality issue can affecting brand image caused by active service units such as political interference by Tun Porsche on vendor selection, appointment of top management and design. Plant utilization low can also inability to retain and cultivate talent, inability to introduce real new models, no economies of scale, inability to penetrate export markets, inability to satisfy customers' needs, no sense urgency, corporate governance and complete numbness of developments in the auto industry. Funds shrinkage can influence result in Proton inability to introduce new models.
    Opportunities
    The entry of Danish vehicle tuner Kleeman could provide a boost for the premium vehicle segment. Proton’s export plans could help to offset its declining domestic influence and improve its global performance.
    Faced with declining domestic sales and uncertainty regarding a strategic partnership, Malaysia’s Proton has set its sights overseas. The company is evaluating a plan to build a production plant in Egypt, which would act as a gateway to Africa and West Asia and boost the carmaker’s exports. Proton already sells its Gen. 2 and Savvy models in African markets, such as Egypt and South Africa, confirming that a market for the company’s models already exists. According to Proton Managing Director Syed Zainal Abidin Syed Mohamed Tahir, Egypt provides a large market but could also act as a base to countries such as Saudi Arabia and Sudan.

    Starting in November 2007, Proton also plans to sell 30,000 units in China by end-2008. The models will be sold under the Europestar brand by distributor Youngman Automobile Group, which was appointed in July. Proton will initially export completely built units (CBUs) to China, although this will change to completely knocked down (CKD) kits for assembly from mid-2008. Talks with Indian distributors are underway but no concrete arrangements have been made. Elsewhere in Asia, Proton has also appointed a Thai distributor. Phranakorn Auto Sales will initially sell Proton models in 20 dealerships, with the network due to double within four years.
    Threats
    Malaysia’s trade dispute with Thailand over non-trade barriers in the automotive industry could hamper the export projects of major carmakers Burgeoning capacity levels of around 700,000 units could result in a supply glut Thailand’s ‘Detroit of Asia’ strategy threatens other manufacturing bases in the region.
    Other than, Proton and Perodua has been at each other’s heels since December 2006 when Perodua outsold Proton in monthly sales by 99 cars. Perodua’s lead was short lived when Proton outsold Perodua the following month by 550 cars. In February, Perodua outsold Proton again, beating Proton monthly sales figures by 763 units. This time however, the Malaysian Automotive Association reports that Perodua’s monthly sales have topped Proton by a massive 4,284 units, making it have a market share of 44% (13,574 units) as opposed to proton’s 30.35% is 9,290 units. For every Proton Savvy sold by Proton, Perodua sold Perodua Myvi. The Myvi has proven to be a stunning success.
    COMPETITOR ANALYSIS
    Malaysia has become a hotbed of production activity in recent years thanks to a raft of new assembly licences granted to international manufacturers. According to Mahaleel Ariff, chief executive of stateowned Proton, Malaysia’s output capacity has now reached 700,000 units, of which his company and fellow national Perodua account for 500,000 units. However, production fell from 563,408 units in 2005 to 503,048 units in 2006. The competitive position of state-owned carmakers Proton and Perodua has remained a key focus for the Malaysian automobile industry in recent years, with the two firms’ combined market share declining. Proton has been particularly hard hit. A bloated workforce and a lack of new models have not helped the firm, with the double-edged sword of long-standing government protection militating against efficiency. In 2006, the company lost leadership of the market for the first time, falling behind Perodua.
    After that, leadership of the passenger market shifted for the first time ever from national manufacturer Proton to local rival Perodua in 2006, as the domestic giant’s sales fell by 30%, to 115,538 units or 32% of the market. Perodua, on the other hand, increased its sales by 14%, to 152,733 units, boosting its market share from 32% in 2005, to 42%. The overseas brands saw their combined share of the passenger market fall slightly from 23% in 2005 to 22% in 2006. In terms of total sales for all segments, Perodua again made its mark, claiming 32% of the market from sales of 155,419 units, while Proton trailed with 24% from sales of 115,706 units. Toyota’s share of the total market is double that of its passenger car share with 16.7% with Honda pipped for fourth place by local firm Naza on 6.5%, against the Japanese brand’s 5.4%.
    The competitive environment category measures the opportunity for new market entrants, based on existing manufacturers and brands in the country. Despite increasing numbers of carmakers launching production activities in Malaysia, some major manufacturers are still absent leaving opportunity for extra competition. The market scores 5 out of 10. Another that, competitor is Toyota Motor Corporation; Honda Motor Company Ltd.; Shenyang Brilliance Automotive Company Ltd.; Mitsubishi Motors Corporation; Yuejin Motor Group Corporation; Hyundai Motor Company Ltd.; Mazda Motor Corporation; Daewoo-FSO Motor S.A.; Isuzu Motors Ltd.; Kia Motors Corporation and Toyota Astra Motor PT.
    Finally that, Perodua’s successful tie-up with Japanese manufacturers, as well as an emphasis on small, fuel-efficient vehicles, allowed it to overtake Proton in passenger-car sales in 2006. It outsold Proton in the domestic market both in 2006 and 2007. However, its subcompacts do not directly compete with larger, more expensive Proton offerings. The company has 140 sales outlets and 37 service branches and 113 service outlets across Malaysia.

    Product Offerings
    - Proton Saga (1985)- Proton Juara (2001)
    - Proton Iswara (1992)- Proton Waja (2001)
    - Proton Wira (1993)- Arena (2002)
    - Proton Staria GTi (1994)- Gen-2 (2004)
    - Proton Putra (1995)- Proton Savvy (2005)
    - Proton Tiara (1996)- Proton Persona (2007)
    - Perdana V6 (1998)
    Proton Saga (1985)
    The Proton Saga is the first car produced by Malaysian auto manufacturer Proton. Originally based on the 1983 Mitsubishi Lancer Fiore, the Saga first debuted in September 1985 and retained its core Fiore design for two decades, before a successor designed in-house by Proton was launched to replace the ageing platform in 2008. Since 1985, the Proton Saga and its variants contribute to most of Proton's sales and revenues. The Saga is also the longest surviving model produced by Proton, soldiering on for nearly 22 years.
    Proton Saga Iswara (1992)
    In 1992, the Saga was given a facelift and its name expanded as Proton Saga Iswara (also known in short as Proton Iswara), after a species of butterfly. Modifications included slimmer headlights, plastic bumpers, side mouldings, coloured door handles, grooved taillight clusters and rear number plate repositioned to the bumper. This particular model is used as taxis in Malaysia and some are converted to NGV. Due to the modification, boot space was reduced by half to accommodate the NGV tank and there are only a few petrol stations by Malaysian oil-giant Petronas.
    Proton Wira (1993)
    The Proton Wira is a car manufactured by Malaysian carmaker Proton, released as a four-door saloon and four-door hatchback beginning 1993. The Wira was intended as a newer alternative to the Proton Saga Iswara, a facelifted version of Proton's first model, the Proton Saga, as a flagship compact model for Proton. The Saga continued to receive minor updated until 2008, when a second generation Saga was introduced as a sub-compact model instead.
    Proton Staria GTi (1994)
    The Proton Satria was a hatchback produced by Proton. Production started in 1995 for the first generation and ended in 2005. The new Satria Replacement Model (SRM), known as Proton Satria Neo was launched on 16 June 2006. The name Satria which means knight in Sanskrit was chosen for Proton's 3-door hatchback to reflect the sportiness of the car.
    Proton Putra (1995)
    The Proton Putra is also sold in the United Kingdom and Australia as the Proton Coupe or Proton M21. After that, the car is a 2-door sporty coupe based on the Mitsubishi Mirage. Considered by many as one of the better looking of the Mitsubishi-based models, the Putra was well-received and commands good second-hand value.
    Proton Tiara (1996)
    The Proton Tiara was a supermini class 5 door compact car based on the Citroën AX. It was built under licence from PSA Peugeot Citroën by Proton from 1996 to 2000. The Tiara was powered by a 1.1L engine and featured a different grille, tail lights and bumpers than the Citroën AX. Its successor is the Proton Savvy.
    Perdana V6 (1998)
    In 1999, Proton shoehorned a 2.0 L 6A12 V6 engine (also sourced by Mitsubishi) into the Perdana. The so-called Proton Perdana V6 also had a new bodykit and 16" rims. The original Perdana soldiered on for a short while before it was dropped. With Lotus-tuned and upgraded suspension settings, the car handles well through tight corners and it is a good high speed cruiser.
    Proton Juara (2001)
    The Proton Juara was a microvan produced by Malaysian carmaker Proton between 2001 and 2003. The design and production of the Juara marked a notable departure from Proton's traditional preference towards saloons and hatchbacks, making the Juara the first van to be manufactured by Proton. In its marketing campaign, Proton decided that the Juara is essentially a Mini-MPV (Multi-Purpose Vehicle) and became the platform in its advertising and promotional campaign.The van's name was derived from the Malay language, meaning " champion" .
    Proton Waja (2001)
    The Proton Waja (Proton Impian in Europe) is the first Proton to be designed and styled in-house. However, the car's chassis and engine were sourced and adapted from Mitsubish (except for the 1,800 cc variant, which was powered by a Renault engine). The word Waja translates into English as " steel" while Impian translates into " dreams" or " ambition" . The name Impian was chosen as it was considered to be a more pleasant sounding word for the international market.
    In January 2006, the car was fitted with a Cam Pro engine which has been re-tuned to boost the horsepower to 86 kW (115 bhp) and 155 N-m of torque. This made it go full-circle, as the CamPro was originally developed for the Waja, but was deemed not ready for production when the Waja was launched, hence debuting in the Proton Gen-2. The facelifted 2007 Proton Waja was launched on 19 January 2007 with the new grille nearly identical to the Proton Savvy.
    The Waja was also released as the Proton Chancellor in late 2005, a variant for the executive market with a 250mm wheelbase stretch and luxury fittings and accessories, including a space-robbing rear centre console that restricts seating to four persons. It is fitted with powertrain from the Proton Perdana V6. With a selling price of about twice that of a Waja, the Chancellor is a very rare sight on Malaysian roads.
    Arena (2002)
    The Proton Arena (or the Proton Jumbuck in the United Kingdom and Australia) is a small front wheel drive coupé utility manufactured by Malaysian automaker Proton. Introduced in 2002, the Arena is the only form of pickup truck by Proton, and is the only Proton model to enjoy significantly more popularity in its export market than domestically.
    Gen-2 (2004)
    The Proton Gen-2 is the first fully Malaysian-developed (including chassis and engine) Proton car and the replacement model for the Proton Wira; launched on February 8, 2004. Proton still continued to sell the Wira after the Gen.2 was launched, due primarily to the popularity of sedan/saloon vehicles in the target market. The Gen.2, a hatchback design, is considered by many to be the best-looking Proton. It has a minimalist and modern interior with design cues from the Lotus subsidiary. However, very low quality of materials and fit and finish of interior components seriously hurt the public's perception of the quality of the vehicle at launch. Later models used improved quality materials and assistance from the TUV of Germany to help maintain the quality improvements.
    The Gen.2 was the first Proton to receive the (inappropriately) named CamPro engine, which at launch was widely criticised for the lack of low- to mid-range torque (pulling puwer), due to a late decision to drop Camshaft Profiling from the engine feature-list in production models. Attempts to improve this torque deficit by adjusting ECU parameters have largely been unsuccessful. Published engine torque curves still show a pronounced dip in torque output in the crucial 2000-3000 RPM engine speed region, presumably due to the missing engine feature.
    -1270300990Proton Savvy (2005)
    The Proton Savvy was launched on June 8, 2005. The 1,200 cc 5-door supermini car. The car is fitted with an engine and a gearbox sourced from Renault. In an official on-road test made by Proton in mid-2006, Proton Savvy recorded the fuel consumption rate of about 24 km/L at constant speed of 90km/h (or about RM0.08/km of fuel), making the car as the most fuel-efficient Malaysian car as verified by Malaysian Book of Records. Even with very good fuel efficiency the car maintenance were reportly to be very high even surpassing the Proton Waja. This is because of the use of the European Renault engine.
    Proton Persona (2007)
    The Proton Persona was launched on 15 August 2007. The 1.6 liter sedan is based on the Proton Gen-2 and features a sedan body instead of the Gen-2's hatchback body. It retains the same 82kW Campro engine. The Persona is rebadged as the Proton Gen-2 Persona in the UK market.
    CRITICAL ISSUES/ CHALLENGES
    The Proton badge today does not carry much brand equity. Many view Proton as a maker of cars that lack excitement but which are relatively cheap compared with Japanese or South Korean makes.
    The company needs more desirable models like the Persona, which has helped in reviving sales, and would have to maintain its recent improvements in quality as that would have a strong bearing on its acceptance level.
    Proton's Campro engine, which is the main staple of its product line, is hardly cutting-edge given today's technology. Proton also lacks an engine or platform to expand into the SUV and MPV markets, or the 2.0-litre and above segments. Proton may need to collaborate with a foreign partner much in the way BMW and PSA Peugeot-Citroen are working together to develop new engines and technologies.
    In the longer term, many of the green engine technologies that are emerging as a result of rising fuel prices and global warming would dictate the direction of automotive development, and these are beyond Proton's capabilities. It is of some comfort, therefore, to learn that the Government is still willing to consider a strong strategic foreign partner in the future.
    On its own, Proton has limited funds for research and development. And the bulk of its exports are mostly confined to less mature markets, including China and some Gulf Cooperation Council. A tie-up with a strong foreign brand will enable Proton to penetrate more discerning markets.
    But how many foreign stakeholders would be willing to invest the money in Proton to develop new infrastructure and facilities and share their latest technology without being given a substantial or controlling stake in the car maker? That is a matter for the Government to ponder on when the time comes.
    MARKETING STRATEGY
    MARKETING OBJECTIVE
    PROTON commands a substantial share of the domestic market for passenger cars and over the years has been building up distribution networks in key market centres across the four regions:
    • South-East Asia,
    • the Middle East,
    • United Kingdom / Western Europe, and
    • Australasia.
    The main business activities of the Group encompass vehicle engineering, research & development, manufacturing, distribution and after-sales services. The Group is also involved in financial services and property management in supporting the main business activities. The Group designs and produces cars for diverse consumer preferences. T
    he portfolio of PROTON models includes the reliable family-sedan Waja, the stylish Gen.2, the elegant Perdana V6, the versatile Arena, the proven Saga range, the fun-to-drive Savvy, the desirable sporty Satria Neo and the ‘2008 Best Model of the Year’ winner, the Persona. The Group also has in its portfolio, the world-renowned Lotus sports cars,with models such as Elise, Esprit, Exige, Europa and the recently unveiled Evora (which will be available in the first half of 2009) to suit a range of customer demands and preferences. The Group conducts research in its centres in Malaysia and the United Kingdom on new technologies to create cars that are unique in both design and driving performance. Through Lotus, the Group provides comprehensive and versatile consultancy services to many of the world’s OEMs and Tier 1 suppliers.
    Currently, the Group has almost 12,000 employees who are involved in the whole value chain of the business, from research, design, development, testing, stamping, casting, machining and assembly to marketing, distribution and after-sales services. Strong customer orientation and competitively priced products are the foundation of our business and essential to our success. We aim to maintain market leadership by continuing to develop innovative products and satisfy our customers needs better and enhance profitability.
    MARKET SEGMENTATION
    Quality is about customer satisfaction and meeting customers’ expectations. It is indeed challenging, to say the least, to improve quality in the market given the ever-changing expectations and quality perception among car buyers today. As such, the key to improving quality in the market is to understand the needs and perceptions of our customers.
    Towards this end, the Group established a ‘Voice of Customer’ framework to facilitate feedback on quality issues from the market. This is vital in order to establish quick and effective counter-measures to resolve critical quality issues in the market in a timely manner while preventing recurrence of the quality issues in future models.
    During the year under review, a new feedback mechanism called Customer Priority Index (CPI) was introduced with the aim to help drive and resolve quality issues in the market. CPI is a matrix that calculates and prioritises customer feedback based on aspects such as technical data, warranty claims and severity of the quality issue. The Group also gauged feedback on product quality in the market via indicators such as concerns per car (CPC), delivery quality defect-per-unit (DPU) and warranty provisions.
    On this scoresince the Persona and new Saga were introduced into the market, customer complaints have reduced significantly and quality perception for PROTON products has greatly improved as reflected in the notable improvements in the CPC and DPU levels. Additionally, from the market feedback gauged via warranty provisions and Product Quality Report (distributors’ feedback), we have recorded remarkable improvements that reflect PROTON’s strong commitment to satisfying our customers’ needs.
    MARKET POSITIONING
    • Launch of New Products
    The engine of growth for any car manufacturer lies in its products. PROTON’s single-minded approach to renew its product line-up to meet the evolving needs and requirements of the buying public resulted in the roll-out of the Persona and subsequently the iconic Saga during the year under review. Having invested much time and effort in the three years that are typically required to conceive and develop new models, PROTON is indeed pleased to note that the response to date from car owners has been extremely positive, to say the least.
    The Persona is the first to embody PROTON’s philosophy of manufacturing ‘the right car for the right market at the right time for the right price’. The Persona has received over 50,000 in bookings as at end July 2008. The Persona was followed by the unveiling of the new Saga, the car that remains the embodiment of Malaysia’s aspirations to be an internationally competitive auto manufacturer.
    The experience and lessons PROTON has garnered over the years have been embedded into this new model. This has translated into bookings of almost 70,000 units within six months since its launch. It is currently the fastest-selling model in PROTON’s history. Both the Persona and Saga are also expected to contribute significantly to PROTON’s export sales in the very near future. Within the PROTON Group, Lotus Group International Limited (“Lotus”) has also unveiled a brand new thoroughbred that is set to take the world of performance cars by storm. The Lotus Evora is the first new Lotus model to be launched in over 13 years. Entering the market above the Elise, Exige and Europa, this new Lotus will be available in the first half of 2009 and is expected to contribute positively to the Lotus Group.
    TARGET MARKETS
    Proton is the biggest Malaysian automobile manufacturer. Proton automobiles are available in many countries such as China, Singapore, Australia, Algeria and United Kingdom. Proton has commanded the local automotive market.
    Malaysia’s Proton sets ambitious car export target.
    MARKETING STRATEGIES
    It is imperative that PROTON keeps its focus firmly on the road ahead. The Group must not only be flexible and adapt to the constantly changing environment, but must also be committed to carry out long-range initiatives aimed at further strengthening its engineering and manufacturing foundations. With its expanded product range, improved quality and value for money product positioning, the PROTON brand will become increasingly attractive. This is what will drive sustainable growth for PROTON and positive returns for its shareholders. Most certainly the road ahead will be paved with challenges, but PROTON now has the benefit of experience and is rapidly strengthening the foundation for its future growth.
    However, PROTON cannot depend solely on the domestic market to grow. As indicated in the previous year's report, to prosper and thrive, PROTON has to expand its export potential further. Tangible and sustainable growth in the international market will be the mainstay for PROTON as it aims to expand its market share and sales volume in the export markets. Whilst PROTON has already gained a foothold in some markets, there is a need to explore new emerging markets to tap into. In line with PROTON's 10-year roadmap, the Group is committed towards expanding its regional presence in terms of sales and distribution, particularly in ASEAN, China, India, and the Middle East. Already, its strategies to grow the brand beyond Malaysian shores are beginning to show progress in terms of sales growth. It must now also source components and identify manufacturing facilities that will optimise costs and efficiency.
    The Chinese automotive market in particular, remains a very important market for many automotive manufacturers. PROTON, like other automotive manufacturers, regards China as an important market and one that it should participate in to be a competitive automotive player in the long run. In July 2007, PROTON entered into a business arrangement with Jinhua Youngman Automobile Manufacturing Ltd (Jinhua Youngman) to supply 30,000 units of Gen2 CBU cars over a period of 20 months. These cars will be rebadged and sold in the Chinese automotive market under the Europestar brand. Although the numbers are modest compared to other automotive manufacturers, this is a significant achievement for PROTON, representing the largest single export order of PROTON cars since its establishment in 1983. There is also large growth potential in this arrangement with Jinhua Youngman, both in terms of CBU units to be exported, licensing of engine and platform, as well as expanded scope of opportunities in engineering services and technical assistance.
    For the Malaysian vendor community, this will also represent significant additional volume for their manufactured components.PROTON is also expanding its non-manufacturing business by optimising revenue that can be obtained from its Group intellectual property. An example of this strategy can already be seen in the business arrangement entered into between PROTON and Jinhua Youngman. This business arrangement not only enables PROTON to indirectly enter the expanding Chinese automotive market, but also enables its subsidiary, Lotus Group International Ltd, to gain a strong foothold in the Chinese automotive engineering services market.
    PROTON is also mindful of the need to improve operational efficiency, particularly with regard to improved capacity utilisation. Towards this end, PROTON has identified contract manufacturing for other OEMs interested to enter this region as a possible means to supplement its own manufacturing volumes.
    MARKETING MIX
    Product
    Proton saga, iswara, wira, waja, perdana, gen 2, pesona, savvy.
    The importance of ensuring we have a strong product portfolio is all the more crucial as it has a pivotal impact on our turnaround plans. This is reinforced by our winning strategy of introducing ‘the right car, for the right market, at the right price and at the right time’. This strategy was reflected in our newly introduced Persona and Saga models, with the latter powered by the new CamPro IAFM engine during the year under review and suffice to note, these two models are performing tremendously well in the market to date.
    Furthermore, we have continued to update and refresh our existing product lines to entice and attract customers. The re-energised Waja and Gen.2, with their new look and powerful CamPro CPS engine, and the economical Savvy re-designed to give better value proposition to the buyers of the Savvy Lite, have successfully managed to excite car consumers in Malaysia during the year under review. Staying on course, PROTON will be launching our first MPV in early 2009, further solidifying our product line-up to include a high quality multi-purpose vehicle that can cater to the family-oriented contemporary lifestyle.
    Other exciting offerings are also in the pipeline with replacements for the Waja and iconic Perdana on the drawing board. To sustain this positive momentum, we will continue our research and development (R&D) efforts and comprehensive market surveys to gain a deeper understanding of the needs of our customer base. By harnessing the right technology and keeping our finger on the pulse of customers’ requirements, we truly believe that this will bring us closer to achieving our goals of a dynamic product portfolio.
    Product Development
    With robust product planning, we were able to introduce both new and improved PROTON cars in the year under review, marked by the successful launch of the Persona in August 2007, followed closely by the unveiling of the new Saga in January 2008.
    Product Refreshments
    Gen.2
    The face-lift of Gen.2 was done in tandem with the initiation of the Persona project to take advantage of cost sharing given that both projects share similarities in terms of their interior design. As a result of the exterior face-lift, the Gen.2 now features a new bumper, body kit, colour and alloy rims. We also upgraded parts of the exterior and interior of the car based on customers’ feedback while introducing the much-anticipated CamPro CPS powertrain. The engine’s Variable Intake Manifold (VIM) switch alternates between a long intake manifold at low engine speeds and a short intake manifold at higher engine speeds. PROTON is applying a longer intake manifold to achieve slower air flow, as this system has been found to promote better mixing of fuel. The short intake manifold will allow more air to enter faster and be especially beneficial to engines at high Revolutions Per Minute (RPMs). With extra power, better handling and improved quality, the refreshed Gen.2 is set to become a highly competitive model in the sporty C-segment automotive category.
    Price
    SATRIA 1.3GLi SE (Metallic)42,888.12WIRA Peca 1.5GL (Metallic)47,320.00WIRA 1.5GLi SE Aeroback Metallic)50,027.97WAJA 1.6L SOCH (Manual)59,455.60GEN-2 1.6 DOCH Auto (Metallic)58,114.50PERDANA V6 2.0(A)106,096.94ISWARA Aeroback 1.3S-LMST (Metallic)38,500.81
    Interest Rate is 3.88% for 7 years and 3.99% for 9 years.
    2 years standard manufacturing warranty plus 3 years Extended Warranty.
    Interest Rate is 3.88% for 7 years and 3.99% for 9 years.
    Promotion
    The year under review saw PROTON aggressively augmenting the International Sales & Services Division with additional human resources, focusing primarily on technical support as well as after-sales and customer services. Clearly, this investment reflects the importance of the export market in PROTON’s long-term growth. In terms of market expansion, the Group successfully penetrated into China and Thailand, while expanding our reach in Iran, the Middle East and Indonesia.
    At the same time, we re-energised the Saudi Arabian market, which is crucial to our success in the Middle East. The year also saw the implementation of a special programme for semi knocked-down (SKD) and completely knocked-down (CKD) exports to Iran and China, which are expected to contribute positively towards thenew financial year’s export volume growth PROTON’s technical support and after-sales service capabilities must be of high standards in order to further enhance PROTON’s brand equity in the international market. Towards this end, several ‘Service Campaigns’ were held during the year under review in our key export markets. Also known as PROTON STAR, these campaigns included customer-focused initiatives ranging from a 43-point check to discounts for spare parts.
    Naturally, these campaigns are ideal platforms to bring PROTON closer to the international customer base. During the year, there was also a marked increase in the frequency of visits by both the sales and technical teams to the various countries in which PROTON has presence, to enhance our understanding of the markets and provide better response to the customers.
    Place
    Indonesia
    Performance and Operations
    PT Proton Edar Indonesia registered higher sales of 1,422 units compared with 546 units in the previous fiscal year. In July 2007, the company launched the Waja and Neo models in conjunction with the Indonesia International Motor Show 2007.
    Prospects
    The Indonesian Automotive Industry Association (Gaikindo) had forecasted a steady total industry volume growth over the next three years from 500,000 units in 2008 to 600,000 in 2010. The Company is expected to perform better in the next financial year with the launching of the Gen.2 Persona in July 2008 and the new Saga before the end of 2008. To achieve the anticipated sales increase and improve the after-sales support, the Company has expanded its network by an additional four branches and five dealers.
    Thailand
    Performance and Operations
    PROTON made its entry into Thailand on 30 January 2008 through its wholly-owned subsidiary, Proton Motors (Thailand) Limited. Within a short span of time, PROTON managed to successfully penetrate the Thai market with sales of its cars exceeding 1200 units within the first six months of its launch. Since making in-roads into the Thai market, PROTON captured 1.3% of the market share in the passenger car segment and was ranked 8th overall.
    Prospects
    For financial year 2008/09, PROTON aims to achieve sales of 4000 units through the sale of various models including the Savvy, Gen.2, Neo and Persona.
    Singapore
    Performance and Operations
    The Certificate of Entitlement quota for cars in Singapore was lower by 3.1% in 2007. This reduction signaled the end of bumper quotas in the island state and resulted in distributors reducing their margins to clear outstanding stock. The year also saw the introduction of Chinamade cars into Singapore. Currently, 80% of cars in Singapore are less than four years old while 90% are less than five years. The reduction in quota, coupled with the introduction of China-made cars led to a 43% reduction of brands operating in our segment.
    Sales were also further affected by the increased petrol prices and tightening of credit due to the sub-prime fall-out in the US, as banks were more cautious in lending money. On another note, the PROTON Persona launched in October 2007 received encouraging response and drew accolades from both thepress and customers.
    Prospects
    Given the market conditions in Singapore, a number of initiatives are in
    the pipeline to increase our operational efficiency here.
    United Kingdom
    Overview
    Contrary to concerns surrounding the automotive industry, the overall UK total industry volume (TIV) in 2007 increased by approximately 2.5% to reflect over 2,400,000 sales. The increase was due to the business and fleet sectors where sales rose by 5.5% and 3.3% respectively, while private buyer sales were static, contributing only 43% of the total market share. Sales of diesel cars continued to rise, capturing over 44% of market share by end-2007, and is forecasted to sustain its momentum. With regards to body types, the only significant growth came from MPVs which rose by over 16%, usurping sales from the more traditional three, four and five-door segments.
    The year 2007 also saw the top ten market leaders focusing on private buyers with all of them seeing a substantial rise in sales, now accounting for over 70% of the entire UK volume between them. One of the key topics that took centre-stage in 2007 was the ‘green issue’ which influenced the perception of the UK buying public. Sales of ‘green’ cars were spearheaded by both the Government through vehicle taxation and manufacturers of highly fuel-efficient and low CO2 emission vehicles marketing its benefits. Sales of low CO2 tax band vehicles rose by 15%, while high tax band CO2 vehicle salesdropped by 17%.
    Performance and Operations Overall, Proton Cars (UK) Ltd saw a reduction in sales by 8% during the year under review. Nevertheless, despite reduced marketing expenditure, retail sales increased by 3.5% during the period, which bodes well for the brand in the long term. Sales of the Gen.2 model improved during the year and the Satria, which was launched in March 2007, was well-received by dealers, motoring press and the general public. However, sales for Waja were impacted due to a drop in demand throughout the segment while the Savvy faced severe competition from other brands in its category.
    Prospects
    In the second half of 2007 and early 2008, the operating environment in the UK became more challenging with higher interest rates, a slow-down in the housing market and rising cost of living. Given these market conditions, Proton Cars (UK) is adopting a number of initiatives which will lower operating costs, while maintaining a high level of support for our dealer network and customers.
    Australia
    Overview
    The total Australian vehicle sales grew by 9.1% and reached a record 1.049 million units. Sales of smaller fuel-efficient vehicles accounted for the majority of the increase due to the increasing price of oil and rising interest rates. The small and light segments, which PROTON competes in, grew by 10.2% and 5.9% respectively whilst PROTON’s retail sales increased by 16%. The current shift of sales towards smaller vehicles is expected to continue as fuel prices continue to rise and the economy slows down. Performance and Operations The positive financial results were due to improved Lotus vehicle sales and reduced operational costs by Proton Cars Australia. In addition, the company also managed to increase retail sales during the financial year in the face of heavy discounting by its main competitors.
    Prospects
    Automotive sales in the coming financial year are expected to ease slightly on the back of rising interest rates. On top of this, high fuel prices are projected to shift customers’ preference to more fuel-efficient models which could translate to increased sales in the small and light vehicle segments. However, the launch of Persona in May 2008 and the subsequent release of the face-lift Gen.2 are expected to boost volume by 22% in the new financial year.
    The number of dealers is also estimated to increase slightly. However, Proton Cars Australia will be implementing an aggressive rationalisation programme to improve dealer throughput and increase the yield in under-performing regions. The strong focus on these two key areas is expected to result in increased revenue and better operational returns. Proton Cars Australia successfully increased its dealer network to 41 dealers nationally during this period. Currently, all main regions throughout Australia are covered. Sales of the Savvy and Jumbuck also improved significantly towards the end of the year under review as a result of several innovative marketing campaigns. The Savvy in Australia.
    CONTROLS/ACTION PLAN
    Implementation Strategic
    Implementation Plan
    Auto-scrapping Scheme
    Proton already has a scrapping scheme running since the year 2007 called Proton XChange where old cars over 10 years old and owned by the owner for at least 6 months, registered and roadworthy can be traded in for RM 5,000 and so far up to 2,700 of such discounts have been issued. Once a car has been surrendered to Proton under the scheme it will be de-registered from the Road Transport Department and scrapped. Beside that, anyone who scraps their cars which are older than 10 years will receive a RM5000 discount to buy a new car, but only a new Proton. There is also zero incentive for those looking at a newer second hand car, even if it is a Perodua or Proton. The scheme will help proton to improve sales amid unfavorable consumer sentiment due to employment market uncertainties and could help boost car sales and rejuvenate the local automotive industry.
    Quality Control Campaign
    Quality Control campaign would address employees, production practices and components manufactured by it’s suppliers to make improvements to Proton quality. The launch of the quality campaign was based on the commitment of ensuring all Proton cars were free of defects. It wants to reverse this negative perception that Malaysians have on its cars, and is to get rid of the negative perception of brand image. It is going down to the core of the problem and evaluating its product range and it’s suppliers to weed out the quality control issues. Proton had always emphasized quality control in all aspects of its operations but it was now drawing on lessons from the past to ensure current levels of quality control were stepped up. Proton had recently established a monitoring system to identify defects on the production line to respond faster to problems of defective components. Proton was looking to further tap the markets in Asian, China, India and the Middle East. The high number of bookings for the Persona and Saga to date is reflective of growing customer confidence with regards to Proton's new commitment to quality.
    'Zero-Defect' Campaign
    Proton launched a 'zero-defect' campaign aimed at erasing a reputation for poor quality that has left it struggling to compete against foreign competitors. Proton also plans to fit all models with natural gas tanks from October to help motorists beat the rising cost of fuel. With the recent fuel hike, consumers want quality cars and they have high expectations. Proton wants to focus on rebuilding the company. The focus is putting Proton on a better footing, to improve quality, product and profit and need to be prepared to compete globally. The company will further tighten production controls and conduct audits before cars are rolled out to ensure that there are no rattles and squeaks any more.
    Proton's maiden multi-purpose vehicle (MPV)
    Despite the economic slowdown, Proton's maiden multi-purpose vehicle (MPV) slated to be launched in April 2009 is expected to give a serious challenge to other comparable MPVs due to its competitive pricing and value for money. Proton Exora, to be powered by a 1,600cc engine, would be priced below RM80000. At this current price, proton believe Exora will give a serious challenge to Toyata Avanza (maximum price: RM72000 for 1,500cc) and the Nissan Grand Livina (maximum price: RM97000 for 1,800cc). Proton registered a 4% decline in sales to 9874 units last month; Perodua posted a 5 % decline to 9874 units, while Toyota recorded a more worrying contraction of 41% in January sales. On the other hand, Nissan sales in January 2009 came in strong with a 17% increase in volume to 2,285 units while its total industry value has dipped by 5.0% compared to the same month last year. Car manufacturers were keeping mum on their new launches perhaps due to the fear of weak response as the economic outlook continued to look challenging.
    Contingency Plan
    The global and local automotive industries are facing one of the most challenging periods in recent history with buyers being cautious amid the global economic crisis. The government today announced that it will assist in the auto-scrapping scheme for Proton and Perodua. The government’s plan, announced under the second economic stimulus package tabled today, was timely and would positively impact the industry. Proton need every bit of help from the Government during this difficult period to ensure its survival as close to 200,000 people are directly and indirectly linked to the automotive industry nationwide. The scheme was also an important tool in the automotive industry’s environment management. It could help the industry to dispose old cars more efficiently and responsibly whilst protecting the environment. Malaysia will follow the footsteps of other countries like Spain, France and Italy. The UK (is also) contemplating the implementation of such a scheme in the near future to spur car sales. Once surrendered, the car cannot be returned.
    Bibiolografi
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    ANNUAL REPORT PROTON 2003
    http://www.proton.com/public/media/mediacentre/documents/annualreports/AReport_2003_Full.pdf
    ANNUAL REPORT PROTON 2005
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    ANNUAL REPORT PROTON 2006
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    ANNUAL REPORT PROTON 2007
    http://www.proton.com/public/media/mediacentre/documents/annualreports/AReport_2007.pdf
    ANNUAL REPORT PROTON 2008
    http://www.proton.com/public/media/mediacentre/documents/annualreports/AReport_2008.pdf
    Chapter 2- strategy marketing Carl McDaniel, ChAerles W.Lamb and F.Hair, Jr.(2008). introduction to Marketing (9th edition).Thomos South-Western
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    List of Proton car models.
    http://en.wikipedia.org/wiki/List_of_Proton_car_models
    Malaysia’s Proton back in profit on higher sales
    http://www.livemint.com/2008/05/26235421/Malaysia8217s-Proton-back-i.html
    Malaysia’s Proton sets ambitious car export target
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    http://www.proton-edar.com.my/indeotx.php
    Proton and Lotus Top the Aussie Vehicle Sales Growth Charts http://www.proton.com.sg/160407.html
    Proton Edar
    http://www.proton2020.com/about-us.asp
    Proton Holding http://www.einvest.com.my/ArchiveCompanyFocus/1.%20Company%20Focus/By%20Company%20Name/Counter%20Name%20M%20-%20Z/Proton%2020041006.pdf