1. The document discusses managerial economics group project on innovation in PROTON, Malaysia's national car company. It covers topics like the challenges and process of innovation, technology and economic growth, and the importance of research and development. 2. Some of the key challenges PROTON faces for innovation are a lack of human capital and technological capabilities, reliance on foreign imports, and pressure from competitors in Thailand with more advanced technologies. 3. PROTON's innovation process involves collaboration with research institutions, creating a culture of innovation within the company, and leveraging programs to solicit ideas from employees.

1. Managerial Economics
ECO740
Group Members:
NURULRAHAYU MOHD AZIL 2012577357
ATIKAH BINTI MOHAMAD TAJUDIN 2012343197
NORHAFIZAH BT MAT ZAM 2012140717
WAN MOHD SHAIFUL BIN WAN NAWI
2012120887

2. Content
• Introduction
– Innovation in economics concepts.
• Challenges towards innovation: Internal and external
• Process of Innovation
– Process of Innovation in PROTON
• Technology and Economic Growth
• R&D
• Case Study: Challenges and Impact of Proton Innovation
towards Business Development
– Challenges towards innovation in PROTON
– Impact of Innovation in PROTON towards their business
development.
• Conclusion

3. End of this presentation, you will learn about
a) What is Innovation?
b) How Innovation effect decision making?
c) When Innovation take place in the company?
d) How innovation effects the economic?
e) Process of Innovation?
f) Why R&D is important towards innovation?
g) Innovation challenges, internal & External.
h) PROTON innovation activities and practices.
i) PROTON innovation process and cycle.

4. Innovation in economics concepts
• Innovation can be defined as a complex construct
• It is a production or adoption of a value-added
• It helps in enlargement of existence products, services, and markets in
order to ensure a development of new methods of production; and
establishment of new management systems
• Innovation help to stimulate improvements in dynamic efficiency and help
to ensure the demand need was fulfill through the innovation process
• It provide satisfaction on the system and products that being innovate
1. The diagram below uses cost and
revenue curves to show the effect of
driving down production costs from
SRAC1 to SRAC2 – leading to lower
prices and a higher output.
2. This diagram can be use to show the
gains in producer and consumer
surplus that come from cost-reducing
innovation and technological change.
3. Consumers will gain more from such
innovation in that they should be able
to expect lower prices.

5. Challenges towards innovation in PROTON
Oligopoly market structure
According to Malaysian Automotive Association (MAA) , September
2013:
Thailand’s automobile industry in the areas of production, sales,
technology and product standards.

6. Internal Challenges towards
innovation in PROTON
• Poor human capital
• Lack of linkages between meso-level organisations (universities,
government research labs etc.) and the domestic vehicle makers.
– This problem is also exacerbated by the poor innovative capability among
students from polytechnics and vocational schools (i.e. not engineers).
• For high tech components and supplies there is a dependence on foreign
imports.
– poor technological leadership and innovation from the behalf of the domestic
incumbent firms.
• Government policy that permitting the national carmakers to monopolize
the local vehicle market.
– It has promoted inefficiencies among the local producers in terms of
production, quality, insufficient research and development programme,
diseconomy of scale, as they were more complacent of their performance in
the local market than the global market.

7. External Challenges towards
innovation in PROTON
• Natural Disaster :
– Supply chain disruption due to Japan Tsunami
• Economic downturn :
– Economic crisis, inflation will cause the limit of cost
in Innovation Process
• Customer’s Demand
– Consumer’s demand on the car that equipped with
latest technology at lower prices.

8. • Income Elastic
– Augmented faster than the increase in income level.
– A pertinent issue influencing the cost of car ownership
is inflation.
 Good X represents Proton cars while good Y represents foreign cars.
 As people’s income increase, budget line shift to the right causing
purchase for Proton cars to drop from X1 to X2, while purchase for
foreign cars increase from Y1 to Y2.
 Therefore a rise in income will lead to a lower demand of Proton cars.
Consumer will tend to choose alternative foreign brand such as Toyota,
Honda, Nissan etc. as they provide more quality and advance features.

9. Process of Innovation
Strategic
Thinking
Portfolio
Management
& Metrics
Research
Insight
Selling
Innovation
Development
Market
Development

10. Process of Proton Innovation (Products)

11. Process of Proton Innovation (Products)
Innovation for the Future : The Green Wave

12. Process of Proton Innovation (Products)
Future Innovation : Green Technology

13. Process of Proton Innovation (Process)
Building Innovation Capability through Collaboration in Institutions
Research
Proton had successfully collaborated with quite a numbers of research institutes and
bodies in order for them to improve their research and development towards
producing a high quality prototype before they can launch a new car.

14. Cont.
• To ensure PROTON stays abreast with the other OEM’s,
technology collaboration is nurtured within the vendor
community through a structured approach with the
following main objectives:
– Explore and solicit the technology available within the vendor
community
– Develop a concept car and draw out a technology acquisition
planned aligned with PROTON Technology Roadmap

15. Process of Proton Innovation (Process)
Creating A Culture Of Innovation
Innovative and Creative Circle (ICC)
• Small groups of employees who meet
regularly to identify and analyze work
related problems, investigate causes,
recommend solutions and take
corrective actions when the authority
is in their purview.
• Total of 415 ICC projects in 2009/10
with RM 49.8 million cost avoidance
Kaizen Suggestion Scheme
• Kaizen activities continually improve all
functions of a business, from
manufacturing to management and
from the MD / CEO to the assembly line
workers.
• A total of 26,214 process
improvements were made with total
cost reduction recorded at RM42.84
million

16. Process of Proton Innovation (Process)
Innovative - Driven Quality Programme
All Innovation Matters Scheme
(AIM)
• A group of 6 to 8 people within
the same department who are
trained to identify, analyse,
resolve or enrich work related
concerns guided by the Plan – Do
– Check - Action (PDCA) cycle
• Total of 57,789 suggestions for
FY2010/11
• Resulted in cost avoidance
amounting RM30.8 million; an
improvement of more than 30%
compared to FY2009/1
Malaysian Skills Competition
• Strategic partnership between
PROTON and Ministry of Human
Resource to nurture young
talents for a world class
workforce.
• Average of the competitors
participate in the Malaysian Skills
Competition per year are 45
competitors.

17. Technology and Economic Growth
• Technology transfer is a key factor strongly impacting on
economic growth in the short and long term period.
• The access to technology and its usage in economic
processes to large expand effect the decision of the
competitive situation in the industry.
• That the easiest access of the technology into the industry
may effect the situation happen.
• Technology transfer can have both a vertical and horizontal
character.

18. • The vertical technology flow is taking place across particular stages with
additional creation in the value chain:
R&D → implementation → production process → distribution → final
buyer
• Horizontal technology transfer is conducted in similar production stages or in other words it relates
to economic environments where it very typical in the diffusion process:
Laboratory↔ laboratory / factory ↔ factory / country ↔
country
• Technology transfer lead from the innovation made by the respective
responsible person after passing through all the level starting from R&D
investment towards the results of research done.
• This technology transfer effects the economic growth of a country and
may affect the level of productivity of the industry related towards the
technology.

19. Research & Development
• A good measurement of innovation for a nation
or organization might help in essential for
policymaking
• The world's most innovative economies countries
are also the world’s fastest growing economies
country such as Korea, India and China. The level
of spending on R&D seems to be determined by
the volume of research.
• The limited supply of researchers may itself
reflect weak demand for R&D spending.

20. • R&D expenditure as a percentage of GDP in Malaysia is relatively
low compared to Japan, South Korea, Singapore and Hong Kong.
• The trend shows R&D expenditure over the years in Malaysia did
not increase much.

21. • Malaysia has high technology exports as % of manufactured
products and the trend was increasing for some time
• Malaysia needs to expand and diversify its patent activity to many
other fields like engineering, biotechnology, automotive,
agricultural technology and many more.
• One of the high technology exporters is automotive industry. It
gives significant contribution to national production and
development, employment and level of technology.
• Expenditure towards R&D helps in increasing more innovation to be
done in the county.
• Innovation is among the most important drivers of an economy.
Innovation helps to leads new product development and results in
increase in productivity

22. Challenges towards innovation in PROTON
As predicted by the Malaysian Automotive Association (MAA) after announcing
the sales and production figures for September 2013, the Total Industry Volume
(TIV) for the month of October was almost similar, with a 133-unit (0.2%) increase.
However, compared to the same month in 2012, the October TIV was 6% higher
with 55,078 units registered. Perodua remained as the market leader with 15,539
units sold, representing 28.2% of total TIV .
• TIV in automotive
– Total Industry Volume (TIV) for the month of October was almost similar, with a 133-unit
(0.2%) increase
– Proton sat firmly in second spot with12,941 units sold this month, totaling 23.5% of TIV
market share.
• Proton's Sporty New Hatchback Arrives In Indonesia
• The All New Proton Suprima S Arrives In The Land Down Under
• Proton Suprima S Launches In Brunei

23. Impact of Innovation in PROTON
towards their business development
Proton-Honda JV deal finalized
• Proton Holdings Bhd has finalized the details of its
collaboration with Japanese automotive giant Honda Motor
Co.
• This is Honda’s first collaborative agreement with another
original equipment manufacturer and it would like to keep
thing under wraps as details are trade secrets

25. References
• http://shrffhhazatul.wordpress.com/2013/10/24/proton-microeconomics-3/
• http://www.mpc.gov.my/mpc/images/file/Highlights/APIC_Paper%20Presentation/PROTON%20Birth%
20of%20Innovation.pdf
• http://www.epu.gov.my/documents/10124/4aaf122a-53eb-494c-8628-d7ae7defb191
• http://innovation.my/pdf/innovating_formulation_of_nis/Knowledge%20Innovation%20Growth.pdf
• Gurbiel R., transfer technology and Foreign Direct Investment and Technology Transfer, Warszawa 2001.
• http://ideas.repec.org/a/wsi/acrjxx/v16y2012i02p347-377.html
• http://online.wsj.com/news/articles/SB10001424052970204830304574130820184260340
• http://sloanreview.mit.edu/article/the-impact-of-technological-innovation-on-outsourcing-decisions/

26. Proton Innovation