IntroductionPerusahan Otomobil Kedua Sendirian Berhad
IntroductionPerusahan Otomobil Kedua Sendirian Berhad (Perodua) was built up in 1993 as the second biggest automobile manufacturer’s brand after Proton in Malaysia. Perodua began its business as a second national car organisation, which mainly manufactures small-compact cars and first launched its own car, Perodua Kancil, in 1994. At present, Perodua has developed into one of the best offering brands in Malaysia and its models are known for their quality.
The mission of Perodua Automobiles is to be a world class automobile company renowned for excellent quality and reliability. They are focused on winning customer loyalty with genuineness by tailoring their products and services to meet their customers’ personal lifestyle. It also highlights the company’s role in empowering employees and partners through industry-training and skills transfer. Perodua is headquartered in Sungai Choh, Rawang, Selangor including R;D test laboratories, vehicle test tracks, assembling, and engine factories.
Even since then the company has had numerous successful brands such as Perodua Aixa, Alza, Kembara, Myvi and many other products until their latest products are Perodua Bezza in 2016. The successes are due in the great part to the fantastic team at Perodua, who are passionate about the company and they work they do. Perodua company recorded a yearly turnover of RM682 million and had roughly 10,000 employees in 2016. By 2016, Perodua has maintained its top position in this industry for a long time and became the best-selling car company with highest ever market share in Malaysia CITATION Chi17 l 2052 (Chips, 2017).
2.0 Internal and External Environment Analysis2.1 Perodua PEST Analysis2.1.1 PoliticalPolitical factors play an important role and have a direct impact on the profitability of the automotive industry. In addition, import rules and taxes vary from country to country. Changing government systems and political regulation of the market may cause favourable or unfavourable fluctuation from time to time CITATION Abh17 l 2052 (Pratap, 2016). Therefore, government policies have largely affected the fortunes of auto companies.
The existence of AFTA otherwise ASEAN Free Trade Area is one of the important issues to be considered. Presently, the majority of ASEAN territory are free trade otherwise 96% of the entire ASEAN trade. In January 1992, AFTA was established with the aim of eliminating tariff barriers amongst the Southeast Asian countries. In order to develop the national capabilities of the automotive industry in a sustainable but competitive manner, the Malaysian government provides protect that allows local automakers to withstand some of the early environment downturns CITATION Ess13 l 2052 (Essays, 2013). In Malaysia, there is no import tariff on cars from ASEAN countries, and a 30% import tariff on cars from non-ASEAN countries. Car prices are further escalated due to tax rates and excise taxes imposed. According to the Malaysian Automobile Association (MAA), in addition to the 10% sales tax, the consumption tax on cars ranges from 65% to 105% CITATION Iri13 l 2052 (Lee, 2013).
The Malaysian government has also taken several measures in order to protect their local automotive industry, including high tariffs, licensing systems and import quotas, such as Approval Permits on imported vehicles. Approved Permits is a mechanism to control imported cars, it was under the Malaysian Customs Act 1967, meant to protect the National Car CITATION MIT18 l 2052 (MITI, 2018). This policy makes many foreign automakers disappointed, but the government claimed they have the right to implement policies in order to protect local automakers. According to this policy, people need to obtain an approved license to import cars. In addition, import duties between 140% and 300% will be charged for purchasing a foreign-made car CITATION Leo15 l 2052 (Leow ; Husin, 2015)In view of the global challenges and competitive in the automotive industry, the Malaysian government considers it necessary to review the strategic direction and policy framework of the domestic automotive industry. This shift to lower regulatory policies is critical to maintaining the competitiveness of the domestic and international automobile industry and making it viable in the long run. Therefore, the government launched the National Automotive Policy (NAP) in March 2006 with the main purpose of gradually achieving market liberalization. In 2014, the NAP was revised to expand its current implementation to cover other aspects of commercial vehicles and mobility. This policy ensures long-term sustainability of the domestic automotive industry and provides a safety, comfort and environment-friendly features in the vehicles CITATION Ber17 l 2052 (Bernama, 2017).
However, most consumers are dissatisfied with the excessive taxation of Malaysian cars, and the government is generally affected by the above anger. Most Malaysians are more prefer the quality and comfortable of a foreign brand car. Despite the frequent complaints about the excessively-priced vehicles, consumers are remarkably generous spenders in their car purchases CITATION Dan13 l 2052 (Augustin, 2013).
2.1.2 EconomicIn the context of the automotive industry, economic factors are also of particular importance. The world economy is growing rapidly especially in Asian region is leading in this regard. Therefore, the global economic situation has a major impact on the profitability of the automotive industry in various markets and also affects the employment condition of any country. A better economic situation means a higher level of employment, which in turn means higher customer purchasing power CITATION Abh171 l 2052 (Pratap, 2017). The higher the purchasing power of the people, the better the sales of the automotive industry.
The Malaysian economy is currently the 4th major economy in Southeast Asia and the 38th largest economy in the world. In 2017, Malaysia’s economy accelerated at a faster pace with the GDP grew 5.9% with a value of RM1173.6 billion at constant prices and RM1352.5 billion at the current price. The automotive industry contributed 4% or RM40 million to Malaysia’s GDP and employs more than 700,000 people across the nation’s ecosystem. Besides that, GDP per capita (PPP) of Malaysia stands at US$9813 and private consumption will drive economic growth, particularly in the short-term as the recent Goods and Services Tax (GST) rating is zero.
ITR is the annual interest rate charged by a creditor to a borrower in order for the borrower to get the loan. Band lending can affect car sales through various liquidity effects. If financial banks offer lowing lending rates, this will encourage current and future economic activity CITATION Ong13 l 2052 (Ong, 2013). CITATION Sha09 l 2052 (Shahabuddin, 2009) conducted a study to predict car sales and the result prove that ITR is negatively correlated with car sales. High band lending rates discourage investors and have a negative impact on their ability to make investment. The consumers loans are very sensitive to interest rates, which means that the lower the interest rate more will be the demand of vehicles through financing. This is because consumers will take instalment credit into their consideration when purchasing durable goods. However, Bank Negara Malaysia is constantly striving to improve the quality of loans, which would may make it difficult for low-income families, young buyers and SMEs to obtain loans, thus affecting the total industrial volume this year CITATION Ade18 l 2052 (Willy, 2018). As a result, the higher the ITR, the less intention for a consumer to buy a car because they pay more.
Gross Domestic Product (GDP) is defined as the total market value of all final products and services produced by a country in a given year, and GDP per capita is used to measure a country’s economic performance. According to, GDP per capita will be positively related to the competitiveness of the automotive industry through demand and supply channels CITATION Hun00 l 2052 (Hunya, 2000). The higher GDP per capita indicates increases economic growth and productivity, which increase demand for products.
Therefore, economic development and growth of country do affect the growth of motor vehicles through supply and demand. High economic performance has improved people’s living standards, thus creating more vehicle demand. In 2017, GDP per capita Malaysia was US$9,813, which was $439 higher than 2016 and was US$9,374. As a result, the higher the per capita GDP, the stronger the purchasing power of people stimulates consumer spending and promotes growth in various industries. Furthermore, the automotive industry will be the first to benefit from the new Malaysian government’s plan to annul the Goods and Services Tax (GST), which is expected to boost consumer’s willingness to buy CITATION HoS18 l 2052 (Ho, 2018). In other words, automotive industry is expected to achieve great sales during 0% GST period before Sales and Service Tax (SST) has official implement in this coming September of 2018.
2.1.3 SocialThe world’s automotive industry influences society all in all. It employs millions of people directly, tens of millions indirectly. Its products have changed the society, bringing unbelievable levels of mobility, changed the manner in which individuals live and work, and have even been able to easily connect with others who are far away. The automotive industry can play a role in helping to develop the mobility of such countries and can be achieved at the social costs acceptable to the state, getting ready to learn the necessary lessons and make necessary investments from the individuals who have gone through this route.
The socio-cultural factors that influence the advancement and development of the automotive industry include population growth rates, education levels, lifestyles, safety issues and cultural differences. Besides that, society’s habits and tastes are changing. People are more aware of the significant of the environment and getting to be ‘green shoppers’. The trend of social factors will affect the interest for the company’s products and the manner in which the company works. Therefore, companies may change various management strategies to accommodate these social trends.
Changing social trends, for example, preference can likewise directly impact on the brand’s business. Nowadays, environmental protection and electric vehicles are winding up increasingly mainstream. Their sales have grown rapidly over the past few years. Some automotive companies are planning to start mass production of electric vehicles by 2020. The development of the automotive industry relies on customer preferences, and most of them need to buy cars for families. They consider the accessible space, safety, and price of the car.
The population of ASEAN region are more than 500 million people. Malaysia, which situated in a strategic place in ASEAN region provide good chances for the worldwide automotive manufacturers. Malaysia’s dynamic working-age population is expected to grow by 1.6 percent in the following decade, one of the highest in the region. Due to the increasing number of widely used English and higher education graduates, Malaysia offers a large number of potential investors in the automotive industry CITATION Har17 l 2052 (Handley, 2017). As such, Malaysia is likewise increasingly being chosen by newcomers to Asia as their ASEAN centre point.
By 2018, Malaysia has a population of 32 million which could provide a large sum of markets. The population of Malaysia is growing at a steady rate, which is an important factor affecting the automotive industry. Since the public transportation system has not developed as well as other economically developed countries, the country’s car ownership is quite high at a ratio of 1:5. This shows that citizens are considering vehicles as important things in their lives. In addition, Malaysians are more willing to loyal to their national products such as choose to buy domestic vehicles as a sign of patriotism.
In Malaysia’s market economy, consumption is the main indicator of social stratification. A smartphone, fashion clothing and gold jewellery can all indicate a high rank in Malaysian social order. Given the mobility of Malaysian society, the brand of a person’s vehicle marks a class position that even exceeds home ownership. Anyone who drives a nice vehicle is considered wealthy. Consumers feel better when driving a nice or new car, if make them feel better about themselves. Therefore, each family will have at least one of transportation and consider motor vehicles is necessary to participate in contemporary Malaysian social life.
2.1.4 TechnologyTechnology is viewed as the most critical factors in the automobile industry. Because of increasingly fierce competition, the continuous development of engineering technology has improved every project and affected the performance as well as position of each organisation within the automobile industry. It is likewise important to consider the maturity of technology, together with the capabilities and development of the manufacturing, which can affect the advancement process of any company. This is because it could affect the novelty of any business. The potential for advancement and change is expanding because of the assist of different technologies, primarily PCs, and the internet.
In this consistently changing marketplace and globally competitive world, digital is upsetting the manufacturing process across industries, so businesses need to adaptable and rapidly adjust their corporate strategies or adopt new technologies to enable them to gain competitive advantage over different companies. Give the challenges facing Malaysian automakers, they should take digital solutions to elevate their production processes to the next level CITATION Ada16 l 2052 (Yee, 2016). For instance, with the manufacturing data is centrally consolidated and updated in real-time, plant operators can more likely comprehend the production line’s procedure. By planning and enhancing efficiency, automotive manufacturers can reduce overall costs and ensure product quality.
Uber was introduced to Malaysia in January 2014 and Grab Car was introduced in May a few months later. These two applications have only changed the public transport industry in Malaysia in just over three years after its launch. They also created economic opportunities for many Malaysians. Automakers engage in research and development to attract owners to trade updates, safer, more reliable models with more creature comfort CITATION DrT17 l 2052 (Hughes, 2017). Buyers who wish to have vehicles for many years are willing to pay extra for cars that meet their expected needs. This is because passengers are satisfied with each trip and can provide feedback and flag the driver if there are problems. Simply put, commodification will become a threat to the survival of the automotive industry as we know it today.
Technology and innovation have turned out to be important determinants of the automotive industry’s market share. The more innovative a business is, the higher its market share. In view of this fact, all major players have put intensely in research and development. Companies are investing in low-emission and environmentally-friendly vehicles such as Toyota, Hyundai and Ford CITATION Abh17 l 2052 (Pratap, 2016). Toyota even plans to launch driverless cars in the following couple of years. Not only that, but major technology players are attempting to enter the industry. In recent years, technological innovation has remained the main basis for the differentiation of automakers. This is because the customer’s attention turns to vehicles with high fuel efficiency and high mileage. Sales of low-emission and fuel-efficient vehicles are always high. It demonstrates that technology is one of the most important factors influencing the sales and profitability of the automotive industry.
2.2 Perodua Porter 5 Forbes AnalysisAccording to the theory of industrial economy, CITATION Por80 l 17417 (Porter, 1980) believes that by understanding the dynamics of the five key forces affecting an industry structure, one can best understand the profitability of an industry. The five major competitiveness are the threat of new entrants, the threat of alternative products or services, the bargaining power of suppliers, the bargaining power of buyers, and rivalry among existing competitors. For an external perspective, Perodua competitors are those organisations that offer similar goods or services to the same customer or compete for the resources needed by the organisation. Most organisations have at least one competitor (usually more than one) and must consider all potential competitors.
2.2.1 Threats of New Entrants
This is how easy (or not) it is for new companies to enter the industry, which affects the benefit and the competitive position of the firm. If an industry is profitable and there are few barriers to entry, then competition will soon intensify. When more companies compete for the same market share, thus benefits begin to fall. However, the existing firms should create high barriers to entry for new participants.
The automotive industry has high level of barriers to entry. It requires specific machinery, facilities, HR, technical equipment, distribution channels and so on. Due to market saturation, the threat of new entrants in Perodua’s home market is extremely unlikely and the capital required to build new manufacturing facilities for automotive are relatively high. Other than that, the current distribution channels in Malaysia mainly serve two national brands and it is not easier for foreign brands to enter these distribution channels. As the Malaysian government’s protection of its National Car Projects, the National Automotive Policy (NAP) keeps on making an unlevelled competitive environment for foreign-branded automakers to penetrate the same market segment of Perodua automakers CITATION Mei14 l 2052 (Chu, 2014). In view of these factors, it expected that the barrier to entry into the Malaysian auto maker are very high, or that the threat of new entrants is low.
2.2.2 Threat of substitution
Nowadays, all firms in an industry will compete with other companies which have products with similar functions. Those products with similar functions are called “alternative products”. The cloning of products and the potential for alternatives to enter the market is a real threat to the industry as it could limit the potential returns of firms in the industry, especially if the alternatives have better quality and lower prices. However, the threat of alternatives is moderate because automotive products are different, even though they have the same purpose. Due to product differentiation, customers have an opportunity to choose products such factors such as price, quality and design.
In Malaysia, the threat to automakers is not only that customers purchase different brands of vehicles, but also that potential customers use other modes of transportation, including buses, trains, taxis or planes to reach their destination. Currently, the main threat to the “alternative” of the domestic market is that The Land Public Transport Commission (SPAD) proposes to allow any foreign and local car models to be used as taxis CITATION Kum16 l 17417 (Kumar, 2016).This will further promote the sales of the national car Perodua. While switching costs are relatively low for customers to switch other forms of transportation, the comfort and convenience level offered by these substitute products are low. According to a survey conducted by CITATION Pra17 l 17417 (Prasarana, 2017), public transport use in the capital city of Kuala Lumpur, accounted for only 25% of total motorized travel. The low usage rate of public transportation and the high usage rate of cars make the threat of replacement very low. In other words, the quality and performance capabilities of alternative products are considered to be inferior to private cars. Overall, the threat of alternative products is medium.
2.2.3 Bargaining Power of SuppliersThe bargaining power of suppliers will affect the intensity of competition in the industry. Suppliers can reduce the potential profit of producers by increasing prices or reducing material quality thus both actions would increase the production costs. When the number of suppliers in the industry is dominated by a few firms, the bargaining power of suppliers is considered powerful. They can apply pressure on the company by charging higher prices, adjusting product quality or controlling availability and delivery timelines. When suppliers find that they offer unique products or services and when they have built up switching costs, it affects the competitive environment and directly affect the company’s profitability.
Due to the government’s promotion of industrialization, about 350 companies supplying components for vehicles in Malaysia, so the bargaining power of suppliers is very low. Malaysia’s automotive industry is an oligopolistic market, with only two major national automotive firms accounting for more than 50% of the market. Since Perodua is a state-owned company, it is unlikely to face any forward integration threats from suppliers. In addition, Perodua’s limitation also limit their choice of local suppliers. This means that suppliers have little bargaining power, and when other suppliers offer cheaper prices, higher quality or service, major automotive companies can switch to other suppliers. However, in order to reduce reliance on suppliers and reduce bargaining, Perodua is building strategic alliances, collaborations and partnerships with local and international suppliers, which is a strategic plan for their success and expansion in the global marketplace CITATION Har16 l 17417 (Harman, 2016).
2.2.4 Bargaining Power of BuyersAccording to Porter (1980), strong buyers can pressure sellers to lower production prices or improve quality products and services to provide a better service. As a result, their bargaining power would be high, making the industry more competitive and reducing the seller’s profit potential. On the other hand, weak buyers dominated by sellers in terms of quality and price have reduced industry competitiveness and increased profit potential for the seller.
Buyers and customers are one of the biggest push bargaining powers in any industry. The usual bargaining chips are of higher quality and lower prices. The protectionist policies supported national automakers and limit the number of competitors in the market. By lowering prices or imposing higher tariffs on non-domestic vehicles, the government has increased demand for domestically produced vehicles CITATION Mah04 l 17417 (Mahidin & Kanageswary, 2004). In a survey by Jomo, consumers claim that these policies force them to accept poor quality domestic cars and limit their choices CITATION Jom09 l 17417 (Jomo, et al., 2009). For car dealers, if they want to convert suppliers, there should be little or no cost. However, these car dealers are unlikely to switch suppliers because Perodua is a government-owned company that does not want to be blacklisted by the government. Overall, the buyer’s bargaining power was assessed to be lower.
2.2.5 Rivalry among Existing FirmsCompetition among competing for other companies in an industry is not an uncommon occurrence. Rivalry occurs because some existing firms are attempting to improve their products and services or lower prices to achieve a better market position. A competitor’s strategic initiative can only succeed if the initiative provides a competitive advantage. However, when competitor companies take counter-strategic measures to retaliate, such as lowering prices, conducting aggressive advertising, providing high-quality products, providing service guarantees, and so on.
Any competitor’s competitive actions may have a significant impact on the competition in the entire automotive industry. Because local and global competitors are few (in numbers), competitors will pay close attention to each other in order to match competitors’ new move with a countermove CITATION Joh14 l 2052 (Johnson, et al., 2014). Perodua has a relatively small number of competitors, and other national brands are major competitors. In Malaysia, compared with luxury cars, Malaysia’s affordable cars also have greater sales potential. The fixed costs and storage costs for automakers are assessed as high, which may increase the intensity of competition. In addition, Perodua is often lacking in differentiation and was deemed to be inferior to other brands in terms of quality and safety.
Coupled with the relatively low conversion costs of switching to other national brands, it is likely to increase the intensity of competition. Competition among automakers is focused on meeting customer needs in terms of lowering prices, more efficient distribution strategies, and stronger business relationships with supply systems. Finally, Perodua as a National Automotive Project (NAP) and a government-owned company, it has a high barrier to exit. As of the 2015 Malaysia’s market share, Perodua has a market share of 36.1%, whereas No. 2 is a proton with 17.3%, and the third is not far from Honda, with a market share of 16% CITATION Chi15 l 2052 (Chin, 2015). As a result, Perodua’s home market is already quite saturated and its growth rate is slowing.
2.3 Perodua Value Chain AnalysisPerodua’s value chain analysis (VCIO) is a series of activities designed to capture products and services from design, customer, and production. Perodua has the ability to import quality parts from its strong overseas suppliers. An automotive industry has enabled the organization to develop distribution networks within Malaysia. They should outsource this operation to supplier to become a more complex organization in the industry. It ensures that they can distribute their products to remote areas that are a source of competitive advantages CITATION Shu16 l 2052 (Shuman, 2016). In addition, Perodua brand allows the organization to enjoy low demand for marketing. With its partnership, sponsorships and quality products, Perodua could develop strong brands and public relations. Perodua’s quality and brand image enable it to build up a stronger brand image.
Inbound Logistics (Primary Activities)
This part of the value chain involves activities related to raw materials, processing, warehousing, inventory control and transportation, while also receiving, storing and distributing inputs internally CITATION Whe10 l 2052 (Wheelen ; Hunger, 2010). Perodua has a good relationship with suppliers, and the company provides an Electronic Supplier Information and Management System (e-SIMS) to reach its suppliers. Inbound logistics uses a JIT (instant) production system because it reduces inventory costs. Perodua uses the Just-in-Time system to manage raw material supply and optimize supply and production processes and minimize wasted or unused parts inventory. Through the excellent facilities provided by the Perodua plant, the activities required to receive, store and propagate inputs are completed smoothly. IQM has been a supplier to Perodua since 2002. Over the years, Perodua and IQM have built a strong relationship based on trust, quality and absolute endless loyalty to both parties CITATION Goh18 l 2052 (Howe, 2018). This strong and close partnership will enable long-term cooperation with key suppliers and distributors for mutual benefit.
Operations (Primary Activities)
As far as the value chain framework, operations will be one of the greatest keys to change, second just to marketing and sales. Operation is the way toward assembling raw materials together and producing the final product. Perodua Manufacturing Sdn Bhd is the company in charge of assembling Perodua vehicles. For this situation, Perodua’s operational processes are completed in the company’s owned plants. The plant presently has the capacity to produce 250,000 units per year in a two-move cycle with a plant zone of ??64,000 square meters and all operations are specialized CITATION Per18 l 2052 (Perodua, 2018).
On the other hand, Perodua Engine Manufacturing Sdn Bhd is responsible for the assembly of vehicle engines and the manufacture of selected engine components. The company believes that the system is localized, so the production plant can handle the value-added process itself. Value activities such as engineering, manufacturing, and quality control belong to Perodua’s operations because these transformation activities convert inputs into outputs. Product development and styling and technology development ensure high-quality cars, while process improvements involve reducing the overall vehicle bed by minimizing the impact of increased material costs on car prices and considering cost improvement activities even during the design phase.
Outbound Logistics (Primary Activities)
This part of the value chain includes activities such as collecting, storing, distributing and transporting assembled and/or finished vehicles to customers. Perodua controls the entire vehicle distribution process from the factory to the various branches throughout the country to ensure that the final product is delivered at the right place at the right time. Parts distribution management supplies service parts from the factory to the service centre. It supports the production and shipping preparation of service parts, including containerization and overseas transportation. Perodua Logistics uses road transport and large trucks to transport ready-to-use products. In addition, Perodua carefully selected its dealers and gave them strong support. Dealers keep stocks of Perodua cars, show potential buyers, negotiate prices, close sales, and service cars after sales. After the operation process is completed, the final product will be transferred to the retailer, the wholesaler, and finally to the final customer. At present, PSSB has 43 sales branches and 139 sales agents nationwide, providing customers with efficient transportation and training of highly trained personnel CITATION Per181 l 2052 (Perodua, 2018).
Marketing & Sales (Primary Activities)
Perodua Sales Sdn Bhd is responsible for the sales, marketing and distribution of all Perodua vehicles as well as after-sales and spare parts operations. The Perodua Sales and Service Center provides trained salespeople and promoters to sell their vehicles and provide information to individuals. In order to achieve their sales goals, Perodua also carries out various promotions to help sell Perodua, for example up to RM 2000 discounts, free gifts as sterling locks and touch and go cards.
Sales include direct sales to customers through showrooms available nationwide and authorized dealers. In addition, Perodua offers special offers to enable local customers to purchase brand new cars through loans or instalments. On the other hands, Perodua regularly promotes its products in different types of media, such as television, internet and billboards, especially during public holidays such as National Day, Lunar New Year, Deepavali and Hari Raya Puasa. Perodua also works with banks to promote its products and provide panel of finance and insurance for customers CITATION Buy18 l 2052 (Buy-Perodua, 2018).
Services (Primary Activities)
Perodua guarantees that products or services are effectively serviced to customers after sales and delivery to achieve exceptional after-sales service. Auto Assist is a 24-hour mobile assist system for all Perodua owners to provide roadside assistance to customers in any unexpected accident. To date, Perodua has 46 service branches and 117 service outlets throughout the country to serve customers efficiently. In addition, Perodua also offers body repair and coating centres placed nation-wide for customer convenience. Its official website provides customers with service information and service packages that enable customers to complain directly to Perodua in a timely manner to resolve issues.
Procurement (Support Activities)
This part of the value chain includes procurement activities and Perodua’s work to get the resources needed for operations, including finding suppliers and negotiating optimal prices. Perodua purchases raw materials, parts and components from local foreign manufacturers as an effective supply chain management. Perodua uses the Electronic Supplier Information and Management System (e-SIM) to implement e-commerce and contact its suppliers to negotiate the best prices. e-SIM aims to effectively and efficiently respond to supply chain technologies, build smart business partnerships, and develop more opportunities locally and globally CITATION Per182 l 2052 (Perodua, 2018). Besides that, the objectives and requirements of e-SIMs is to improve communication between Perodua and suppliers in a collaborative environment. Through improve planning and scheduling capabilities to ensure accurate and faster processing of transactions. In addition, Perodua improves communication with internal employees to improve operational efficiency.
Technology Development (Support Activities)
This part of the value chain includes design engineering, testing and R;D practices. The core value of Perodua’s R&D is to maintain technical support and always maintain technology, investing amount in manpower and IT software for its R&D activities. Its research and development department focus on developing capabilities in automotive technology, from basic testing, design and styling engineering to manufacturing engineering skills. The main activities include the styling of future models, concept car development and the ability to undertake major facelifts.
The other R&D facilities are further subdivided into safety technology, styling technology development, certification testing, vehicle platform and powertrain development. The main purpose of establishing a certification test is to conduct a security test. Safety testing is done in the areas of component, material, strength and safety (CMSS) laboratories, emission development laboratories, noise labs and test tracks, shower testing and hand brake testing. The Safety Technology Initiative is known as 360-degree safety and is done through stimulation and real-life crash testing to test the limits of the car in terms of safety. In addition, Perodua Management worked closely with GE Fanuc to use the Shop Floor Control System (SFCS) to ensure data integrity of vehicle production information CITATION GeF18 l 2052 (GeFanuc, 2018). Besides that, the CIMPLICITY software is pre-installed in the Perodua body, assembly and painting shop. The CIMPLICITY Viewer node is installed on the desktop of production engineers and managers, enabling them to monitor and control production status in real time. Perodua turned to GE Fanuc Automation for help in making their vision a reality.
Human Resource Management (Support Activities)
Having the right people at the right place and at the right time is critical to any business performance CITATION Tra14 l 2052 (Moxson, 2014). The foundational values of Perodua’s management are that efficient HRM are critical to accomplishing the company’s main goal. Committed to Perodua’s long-term success, urging teamwork and employees to propose and create ideas for increase efficiency and productivity. In this way, Perodua focus on the development of their human resources by ensuring that regular specialised training is provided for success through quality human resource. The training provided by Perodua is Perodua Technical Education System (PTES) and Perodua Technical Education System (Advance) rewards employee performance by continuously reviewing and upgrading company benefits, empowering Perodua employees to create new ideas for the next generation cars CITATION Per183 l 2052 (Perodua, 2018).
Firm’s Infrastructure (Support Activities)
Strong leadership accounting, legal, administrative and general management department frame the foundation of Perodua. The research and development test lab and styling studios, vehicle test tracks, manufacturing plants, engine plants, pre-delivery inspection area, vehicle distribution yards and parts warehouses. The factory covers an area of 64,000 square meters and has set up service centres in multi-location to provide services and solve problems for customers. Like any other organisation, Perodua manages a centralized hierarchy and top-down management system approach. Although research and development are kept centralised as much as possible. The IT systems such as HPE technology help Perodua management optimize performance, reliability, availability and disaster tolerance CITATION HPE15 l 2052 (HPE, 2015)2.4 Perodua TOWS MatrixTOWS matrix is generally utilized in the business world and could be recognised as a strategic planning method to evaluating strengths, weaknesses, opportunities, and threats involved in a project or business CITATION Dav18 l 2052 (Parrish, 2018). It will likewise be a helpful instrument for developing and identifying goal plus marketing strategies can be completed for a product, industry, or individual. It involves a clear goal of the business venture and identifies the internal and external factors that are favourable and unfavourable to meet the goal. The degree to which the internal environment of the firm matches the external environment is expressed by the idea of strategic fit.
The TOWS Matrix is an important matching tool that helps managers develop four strategies:
SO (strengths-opportunities) Strategies WO (weaknesses-opportunities) Strategies
– Use a firm’s internal strengths to take advantage of external opportunities.
– Aim at improving internal weaknesses by taking advantage of external opportunities.
ST (strengths-threats) Strategies WT (weaknesses-threats) Strategies
– Use a firm’s strengths to avoid or reduce the impact of external threats. – Defensive tactics directed at reducing internal weakness and avoiding external threats.
TOWS Matrix Internal Strengths
S1: Successfully manufacture affordable and economic car brand
S2: Excellent reliability and build quality
S3: Impressive standard equipment specification
S4: Strong marketing and promotion Internal Weaknesses
W1: Low productivity
W2: Low research and development
W3: Lack of low safety standards
O1: Buy Malaysia Product Campaign
O2: Inefficiency of public transport
O3: High technology from Japan
O4: High demand for compact car SO
SO1: Increasing promotion to respond government campaign to buy Malaysia product (S4, O1)
SO2: Offering affordable prices to those who are often using public transportation (S1, O2)
SO3: Introducing a compact car with impressing standard equipment specification (S3, O4) WO
WO1: Analyse car technology from Japan to encourage research and development in Malaysia (W2, O3)
WO2: Increasing product due to high demand of compact car (W1, O4)
T1: Go Green Campaign
T2: Aggressive marketing and promotion of another automobile company
T3: Unemployment rate increase ST
ST1: Introducing a compact car with impressing standard equipment specification and green technology (S3, T1) WT
WT1: Offer training and job employee to increase productivity (W1, T3)
WT2: Increasing promotion of compact car (W3, T2)
2.4.1 Strengths and Opportunities Strategies1) Increasing promotion to respond government campaign to buy Malaysia product (S4, O1)
Promotion is an activity that promotes the product’s strengths and persuades the target customer to decide to purchase the products or services. The company uses regular promotional tools, advertising personal selling, sales promotion, direct and online marketing tools, and public relations to reach customers CITATION Mar142 l 2052 (Martin, 2014). The two main considerations are the target market and cost. The best way to attract customers is to advertise, thus every feature and product created by Perodua must be communicated to the customers.
Perodua can communicate through a variety forms of paid media, such as TV and radio advertising, print advertising and product placement. Attracting new attempts is both simple and easy, and it increases sales. The advertisements are placed where advertisers believe they will reach and get the most relevant customers CITATION Geo17 l 2052 (Mentis, 2017). Therefore, Perodua uses advertising to drive the consumption of its products. Increasing promotions is a sign of issues such as responding with competitive activities. It encourages Perodua to develop a secession of information and is extremely cost effective. Perodua can use direct marketing and technology to maintain relationships with buyers before, during and after purchases. It treats advertising as a form of advertising that provides consumers with physical marketing materials to convey the information and details of products or services created by Perodua.
2) Providing affordable prices for people who are often using public transportation (S1, O2)
Perodua offers less expensive costs than other competitors. Perodua provides a variety of payment methods to benefit customers, such as credit card deposits, cheques and bank transfers, and cash as a safe method. Perodua additionally offers car loans ranging from 2.7% to 3.7% interest for 5 to 9 years, so customers just need to pay a few hundred-ringgit instalments CITATION iMo18 l 2052 (iMoney, 2018). Therefore, Perodua can work with banks to decrease loan interest so that low-income individuals can also purchase a car. Perodua also offers consumers some free gifts and more customer service, such as repairs and support for five years from the date of purchase.
3) Introducing a compact car with impressing standard equipment specification (S3, O4)
Perodua also offers courses for their engineers within the company. These courses can help them improve their technical skills and work experience. Perodua offers two courses, they are Perodua Technical Education System (PTES) and Perodua Technical Education System (Advance). The new generation of sub-subcompact cars on the market today, each indicating a small size, does not necessarily require less expectations. As a result, Perodua continues to develop some of the industry’s hottest technologies, such as 4G LTE connectivity and mobile Wi-Fi services including all-electric and hybrid settings.
Perodua continues to grow and continues to increase its market share. The main virtue of value-for-money, excellent reliability and build quality, the impressive standard equipment specifications and latest generation technologies in models such as Myvi and Axia are the main factors for the company’s continued success. For 20 years, Perodua has sold an overwhelming 2,500,000 cars to Malaysia to date. As an example, can take Axia cars. Axia was launched in September 2014 and one of Axia’s impressive aspects is the quality and tactile feel CITATION Aut14 l 2052 (Autofreaks, 2014). One of the biggest achievements automakers can achieve is to make a cheap car that doesn’t look cheap. This is what Perodua has done with the Axia.
2.4.2 Weaknesses and Opportunities strategies1) Analyse Japanese automotive technology and encourage R;D in Malaysia (W2, O3)
Nowadays, Japan is well known as a country with high technology in many fields. One of the technologies is automotive manufacturing and development. It includes technologies in automotive design, manufacturing and engine development safety. They always adopt new technologies in car development, which shows that Japan emphasizes research and development as high-tech countries. Therefore, Perodua is a joint venture partner with Daihatsu Motor Co., Ltd. and Japan Mitsui ; Co., Ltd. Perodua should seek advice from Japan to develop cars with their technology and use Japanese technology as a guide for Malaysian care development CITATION The10 l 2052 (TheEdge, 2010). From Japanese high technology, it can encourage and motivate R;D departments to analyse technology and implement it in their own products. In addition, the price of cars produced by Perodua may be lower than the price of cars imported from Japan. For those who are more interested in cars with Japanese technology, can reduced their costs by purchasing Perodua instead of importing cars.
2) Increasing product due to high demand of compact car (W1, O4)
At present, the compact care especially Perodua’s products are very famous among Malaysians. Therefore, Perodua should increase the number of employees is very important for maintaining and increasing production, demand and customer satisfaction. Once the number of employees increases, the number of factories will also increase to raise the firm’s output to meet the high demand of Perodua products. When the plant is expanded, employees will be able to work in a conducive working environment to achieve a high efficiency and efficient performance. On the other hand, Perodua can acquire, merge or work with other potential companies to increase the company’s production. Through this strategy, Perodua can absorb other technologies in order to meet the demand and customer satisfaction.
2.4.3 Strengths and Threats strategies1) Introducing a compact car with impressing standard equipment specification and green technology (S3, T1)
The globalization of the industries has brought more opportunities to all automotive manufacturers, and it is also undergoing fierce competition. Various car brand firms compete for each other’s prices, and the development of advertising campaigns and products keep them at the edge. Therefore, when the profit margin of a car company is low, the pressure among competitors is high. All protections of the Malaysian government are to control the import rate and prevent market cannibalization by foreigners. However, Perodua is a state-owned car manufacturer and therefore experience less competition but is still under pressure from imports. Perodua is committed to improving hybrid vehicles that are proficient in gasoline and electric power, as well as other special projects focused on technology development. By creating alternative vehicles for the future, the program provides customers with less fuel consumption, reduced uncompromising performance, and upgrades technology to levels comparable to their global competitors.
Currently, people are changing their attitudes and paying more attention to environmentally friendly products. Advances in lithium-ion battery technology have also created opportunities for the automotive industry to enter new areas. For years, researchers have worked hard to apply this technology to automotive traction batteries. Perodua is committed to producing environmentally friendly vehicles. They are constantly striving to reduce the negative impact of Perodua vehicles on the earth through enhanced technology and materials suitable for recycling. End of Life Vehicle (ELV) program is now being launched in partnership with Cartakeback.com Ltd. and will a reliable way to hand over and termination of vehicles at no cost to Perodua owners based on qualifying conditions CITATION Eug17 l 2052 (Mahalingam, 2017). In order to comply with current regulations, End of Life Vehicle must be recycled at authorized processing facilities.
2.4.4 Weaknesses and Threats Strategies1) Offer training and job employee to increase productivity (W1, T3)
The productivity of an employee can be drawn into a chart called a productivity curve. As the training progresses, employee productivity will continue to increase, and they will understand their work requirements. When they acquire all the requirements of a position, their production productivity will stabilize, which means that further training is needed to add additional tasks and help them to increase productivity in new areas. Perodua should hire highly efficient employees to realize the company’s interests. Efficient and effective employees will cut costs, save time and increase production or revenue. In addition, Perodua can provides 6 months of training for new employees or employees before confirming the position. Through this strategy, it will improve the quality of the work of Perodua employees.
2) Increasing promotion of compact car (W3, T2)
Since many people don’t buy more than one car at a time, companies often take bulk discounts. By offering a certain percentage of discounts when purchasing multiple vehicles, bulk sales will flow into the dealership. Discounts can provide additional forms of marketing that drive larger sales. On the other hand, every car owner wants to know how to maintain their car. Perodua can bring potential customers to your showroom by offering an open course. As much as possible, these courses will be held monthly and are free. In order to further encourage students to purchase vehicles, offer a gracious discount if they want to purchase a vehicle. Since the potential customers are already in your location, take advantage of this situation and promote them to each class.
Recommendations and ConclusionFirstly, Perodua needs to upgrade its ability to design its own models rather than relying on its foreign partners. When trade barriers fall, this is critical to reducing costs and increasing competitiveness. By continuously upgrading production technology to improve the efficiency and quality of the car, increasing efficiency means producing more cars with consistent quality to maintain customer confidence; let them believe that Perodua can provide them with the best products. Secondly, Perodua should work with business partners to restructure the business and coordinate the supply chain. The efficiency supply chain will help Perodua increase its market share. All these successes are an important step in improving Perodua’s viability. Thirdly, Perodua should reduce fuel consumption and emissions by bringing advanced technology vehicles to market. With global development and globalization, energy-efficient cars are becoming more and more popular, and Perodua needs to change its strategy to compete with competitors. As a result, Perodua has to make several effective changes to build strong, sustainable and competitive businesses locally and around the world.
In order to meet the challenges of competitors and the global market, Perodua must be vigilant about the rapid changes in the automotive industry. Despite the global economic instability, Perodua can also determine its future trends through PEST analysis and understand its internal and external environments through TOWS analysis, Porter 5 Forbes analysis and Value Chain analysis. Through these four analyses, Perodua can analyse their company and develop the necessary plans and implementation strategies to achieve market competitiveness and create more profit for the company. To be successful in the market, a winning strategy must be adopted. Furthermore, Perodua still needs to invest additional resources to research and develop the latest technology and maintain the existing workforce and structure within human resource management. In order to compete with other car companies, make their products better and better.