Proton Vs. Toyota u2t66

Introduction Over the past decade, the advent of increased global trade has brought along with it fierce competition to the international automotive industry. In the past, vehicle manufacturers offered the market unique models that had a small variety of attributes and long life cycles. However, today, automotive companies must now provide a high product variety to remain competitive as they are facing increasing customer sophistication and fast- paced technological developments in the industry. Furthermore, the recent global financial crisis has left many automobile makers to reconsider their product lines and future strategies. This paper will focus on two automotive manufacturers, namely: Proton Holdings Berhad and Toyota Motor Corporation. The paper will go on to analyse their success factors, competitiveness on a global arena and also their future prospects. foreclose market entry and maintain or increase their market share, increase their prices and serve customer needs better by closely matching customer preferences and offered products.

1) The automotive industry is a competitive yet lucrative business industry. Car companies are constantly trying to outdo each other in of deg and developing the latest revolutionary model car. Automotive manufacturers and dealers (in some cases) were able to price their products at cut-throat prices in the past if they decided to because in most cases the consumer did not have a choice but to purchase the car. We all need transportation and with that in mind automotive traders basically determine product pricing. Today however, the global industry has seen the arrival of many newer companies into the industry. As with any industry, the introduction of a new company leads to the assumption of new and better products. In the case of the automotive industry that case might be very true in a dwindling economy where there seems to be no relief on rising gas prices. One of the most critical factors dictating the way in which producers in the automotive industry price their products are supply and demand. Along with the supply and demand factor companies in the

automotive industry also take into the production costs when placing a price on their product. When setting prices producers have to determine whether the product price reaches the company’s financial goals, are consumers willing to buy at the set price and the product identity. “A good pricing strategy would be the one which could balance between the price floor (the price below which the organization ends up in losses) and the price ceiling (the price beyond which the organization experiences a no demand situation)” McKinney 2006. In order to remain competitive in their respective markets, these companies have capitalised on their strongest assets and then brought this on to a global level. Proton, in comparison with Toyota is a much smaller and newer entrant into the automotive industry. Nonetheless, it has managed to utilise its limited local distribution knowledge and experience to put a foot-hold in the international arena. One of Proton's key factors for international success was the fact that it was Japanese backed. In the early days of Proton, Mitsubishi Motors Corporation used to hold a substantial stake in Proton, along with the Malaysian government. Due to this unique relationship, Proton was able to acquire many key technologies from Mitsubishi which in turn helped them develop the Proton Saga. This also helped boost the reputation of the company, as the components were mainly Japanese sourced. As a result, Proton ventured into the UK market in 1989 with moderate success. Furthermore, to strengthen their position in the global arena, Proton purchased British sports vehicle manufacturer, Lotus in 1996. This move enabled Proton to again channel technology from its subsidiary to other divisions of the company. By doing so, Proton was able to create the Proton Satria Gti that featured suspension “engineered and designed by Lotus”. This strategic move allowed Proton to associate itself with the more prestigious Lotus brand and allow it to improve its reputation in Europe. For Toyota, one of its key success factors is its implementation of a Global Standardisation Strategy. In principle, it is a strategy that focuses on reaping the cost reductions that come from going global and creating a standardised product platform. Apart from this, Toyota has invested a lot of its time and money into its Research and Development arm, (TRD). R&D values of Toyota are based on

Quality, durability, reliability, value for money, environmentally-safe, convenient. Toyota has initiated new technologies including building the first bulk-produced hybrid gasoline-electric automobile. The Prius, had a sale of two million worldwide in 2010. In addition, Toyota has various facilities that come standard with its vehicles such as: Advanced Parking Guidance System (APGS) (automatic parking), a four-speed automatically controlled with buttons for economy shifting and power, and an eight-speed automatic conduction. In addition, Toyota also produces higher-end luxury vehicles under the “Lexus” brand name. Technology in the car industry on today’s market conditions plays a very important role, with gas prices rocketing energy companies are investing money and time in developing alternative ways to be more gas efficient. Hybrid cars and alternative fuels are a good example of technology impact in the car industry. Productivity is also impacted by technology, the better technology we have the better cars the manufactures produce and also car companies can produce more cars in less time. Productivity is also affected by the human factor, employees are provided with new tools and resources to perform their task more efficiently and technology here plays an important role as well. Toyota has manufacturing plants in most parts of the globe. It assembles or manufactures automobiles for local markets. Toyota follows the JIT Production and "Lean Manufacturing", which is one of the important key success factors. Its business methods managerial views are known together as the Toyota system. Toyota has long been recognized as an industry leader in manufacturing and production. Consequently, Toyota’s management values have developed from the firm’s beginning. The company follows a Just-InTime (JIT) distribution method and adopts the values specified from its 14-principles known as the Toyota Way.

2) Out of the two companies, Toyota, in my view is definitely the more competitive one. Toyota is one of the largest car manufacturers in the modern world. In fact, this multinational corporation has become the leading car manufacturer replacing the world leader General Motors which has remained on the first position within several decades.

Obviously, this is a tremendous success for a Japanese company that was founded in 1937 and became the leading company of the world automobile market. Today, the company is one of the most influential players in the world market. Many firms try to replicate the human resource management efficiency of Toyota since it was traditionally considered to be one of the most successful companies in this respect. Building on its disciplined and strong work ethic, Japan as a country has always stressed on lifetime employment for their employees. Unlike India, where job security is the main reason behind the lethargy found in public sector employees, the Japanese ethos is very different. Job security makes Japanese employees more flexible and loyal towards their organizations. They go over-the-board to improve productivity. It would be difficult to find such an attitude in countries like Malaysia, where the order of the day is hire and fire. This corporate culture that is instilled into Toyota workers has been found to not only increase allegiance among workers; it creates a more harmonious workforce as job security is given priority. It is no surprise than that the success of Toyota was to a significant extent determined by the effective management on all levels which made the company highly productive and which created ample opportunities to promote its products worldwide. What is more important, Toyota production was and still remains highly competitive but, if in the past the company basically borrowed the achievements and technological experience of leading western companies than today the company is one of the major innovators in the automobile industry. In this respect, it should be said that Toyota’s first cars resembled successful American and European cars, such as the Dodge Viper, for instance, while nowadays, Toyota creates its own unique prototypes on the basis of new technologies. At any rate, one of the strategic directions of the functioning of the company is the development and implementation of innovation in its production. An excellent example of this was the introduction of the Prius by Toyota in 2001. When it was first launched, the prius was a first of its kind, a hybrid vehicle that ran on petrol as well as electricity (charged by kinetic motion). Furthermore, the global expansion of Toyota became a reality because the company has managed to

develop an effective production chain in which the cooperation between its plants situated in developed and developing countries is highly productive. In addition to that, the company utilised advanced stock management systems such as “Just-In-Time” inventory management systems to cut down production time. To make the JIT system a success, Japanese companies developed a system of focused factories and supplier networks, where there are no large integrated plants. Instead, there are specialized plants supplying to the next level in the supply change. Toyota was able to drastically reduce the lead time, mainly because factories were located in more or less the same geographical area. It would be difficult to achieve such reduced lead times elsewhere and especially in regions where companies depend on global sources for raw materials. No wonder that nowadays the production chain of Toyota is spread worldwide and it is possible to estimate that Toyota is really a global company which has its plants in many countries of the world, while there are even more countries where its production is sold by official dealers.

Presently, Toyota has its plants manufacturing and assembling cars not only in countries, which are traditional target markets for its products, such as the US, Australia, South-Eastern Asia, the EU, but it also actively enters markets of other countries of the world, including China, Argentina, Mexico, and others (Volti, 2005). This means that Toyota attempts to develop its production chain worldwide or, to put it more precisely, the company has already realized that the ignorance of the potential of new markets can lead to negative consequences to the market position of Toyota in the world market. Once it has set up base in a certain country or region, Toyota builds upon its base by establishing a series of reliable supplier networks. Japanese industries work on long-term suppliercustomer relationships. It is common to find specialized suppliers supplying parts to a few selected customers. On the other hand, certain companies maintain single suppliers providing a variety of components for a single customer. As a result of Toyota's powerful name and brand, many key suppliers are willing to work with Toyota and build long, lasting relationships. This is known as a first-mover advantage and has resulted in significant success for Toyota on the global arena.

Toyota operates worldwide, and has plants in practically all parts of the world while its cars are recognizable in all countries of the world. However, such a trend to globalization, leading to the localization of the production and growing cooperation between units of the company situated in different parts of the world is the result of the minimization of financial barriers. In such a way, Toyota demonstrates a strong trend to internationalization of its production that inevitably has lead to minor changes in its management style which needs to be really universal and effective in all countries of the world where Toyota operates. This has been the cornerstone of Toyota's success, by allowing for a more diverse workforce, and the opportunity for locals to enter into senior level management, Toyota has shown that it is a company that is employee oriented.

3) In the last few years, the Global Financial Crisis (GFC) had caused a drop in global automobile sales. A lot of this was attributed to the lack of confidence amongst consumers as many economies around the world were left in tatters. Nevertheless, the auto industry seemed to be relatively stable with the same players, despite the fact that many of these companies resorted to government bailouts and accusations of mismanagement by its shareholders. Even though sales have been up recently, the automotive industry still faces many challenges. These challenges need to be overcome in order to ensure the survival of the industry's major players.

Firstly, one of the main elements of the industry that will shape future products is technological change. Every year automakers use different technologies in the form of new materials, new production techniques, and new drive train technology. This is part of their ongoing effort to make a better vehicle, a more efficient vehicle, a faster vehicle, a vehicle that handles and brakes better, and a vehicle that is cheaper to make. As a result, there has been a worldwide shift in demand for

smaller, more fuel efficient vehicles. In order for Proton and Toyota to capitalise on this surge in demand, both manufacturers will need to put more research into creating more value-added vehicles for this segment. As bold new plans are formulated for cars of the future the industry has to determine who these vehicles will be designed and marketed to. Any automaker will it that they would like to have the next “world car.” A world car is loosely defined as a model that has universal appeal if most if not all markets and a high profit margin. A world car takes advantage of globalization of resources within a firm, modularization of parts and manufacturing techniques, and it also utilizes outsourcing in component and vehicle manufacturing. On the other hand automakers still have to consider how much of their resources should they should devote to the needs of specific geographic markets.

Furthermore, automobile manufacturers should only focus on more profitable arms of the company and sever the departments that are lagging behind. In order for any organization to grow, it has to be aware of its strengths and weaknesses in its competing environment. Likewise, if an internal audit is done and some departments within a company are no longer considered profitable, then, a decision by upper management should be made to sever or change that particular division. It is said that a hallmark of good global management is one that can respond quickly to slight changes in the consumer market. Such is the case with Toyota, in November 2009, the company made a decision to withdraw from Formula 1 racing (F1). Although not officially acknowledged, it has long been speculated that the reason behind their decision was to focus on other, more profitable divisions of the company such as its consumer sedan range. Although proton is still very active in the F1 scene, it may be wise for upper management to reconsider their involvement in years to come.

It is readily becoming a reality that manufacturers have to place a constant demand on their suppliers to continually cut costs. This is a very difficult situation, as manufacturers simultaneously must outsource more and more of the production process. If they continue to pressure suppliers to

cut costs, they stand a chance of losing them. After the tragedy of the recent earthquake and tsunami in Japan, many manufacturer's production, including that of Toyota was affected. Proton, although not as affected as Toyota was still felt the repercussions as some of their specialised components still came from Japan. Events such as these have reminded companies like Toyota and Proton that they cannot be complacent and must always have secondary suppliers in the event of a disaster. In addition, Collaboration is the key to survival in the next economy. Automakers must be prepared to leverage relationships with suppliers, distributors, technology alliance partners, and customers more intensively. Only those firms that skilfully develop and manage the capabilities of this extended enterprise will thrive. For example, Proton should leverage opportunities into untapped foreign markets such as the Eastern European bloc by setting up a trade partner there, similar to what they did in China with Youngman Automobile Group Ltd. Each company is on its own quest for a unique advantage in the industry's new economic geography. Nonetheless, the same cannot be said about Toyota. Its collaborative efforts will mostly centre on building relationships with raw material suppliers from around the world.

4) In my opinion, there are a few measures that Proton as a company should consider implementing in order to increase its competitiveness on a global arena. Firstly, the government of Malaysia, which currently holds 42% of Proton's shares, should sell most or nearly its entire stake in the national carmaker. The rationale behind this is, Proton is that Proton has been “protected” by government arbitrage for too long. Over the years Proton has lost its competitive edge to a growing number of Korean manufacturers due to its lax attitude. These manufacturers produce cars which have much more added value as opposed to a Proton, and are priced very competitively. In order for Proton to come up to this level, it must first be seen as an innovative and impartial. By Privatising Proton, the government will have little incentive to “protect” it anymore. Furthermore, it should also expand its market by leveraging its products and key competencies to other south-east Asian markets. Proton

should look first at its neighbouring ASEAN countries and start marketing its local offerings more aggressively in these markets. By doing so, Proton would be able to decrease its reliance on sales from its local market and focus on getting market share in these important markets. Also, Proton would be wise to switch from a transnational type strategy to a more international strategy. In an international strategy, the company allows for very little customisation from its original product line-up to be sold to different markets. Therefore, the company maintains a relatively standard offering across the board. Finally, there must be a change in upper level management to allow for more experienced staff to take over the reins and direction of the company. For too long, Proton has had a very rigid upper level management. In order to improve Proton's competitiveness on a global arena, experienced managers, designers and engineers need to be enticed to the company and rebuild its public image. Take for example, Kia Motors, the Korean automobile manufacturer, who hired Peter Schreyer as their chief design officer in 2006. All in all, the global automotive industry is evolving at a tremendous pace. Automobile manufacturer's that do not keep up with the changes in this global industry will be swallowed by the competition.

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