prerna shree
TRANSCRIPT
PROTON HOLDING BHD
CASE SYUDY ON PROTONIndividual Assignment
(BLB20058-M)Hand in Date:-14/Dec/2011Hand out Date:-13/Oct/2011
Submitted To: - Submitted By:-Mr. Nidhi Khurana Prerna Shree(Lecturer) (PTM1101002) (MBA 1st year)
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PROTON HOLDING BHD
CERTIFICATE
This is to certify that is “PRERNA SHREE” Roll No. PTM 1101002 of MBA stream
had completed her assignment on “CASE STUDY ON PROTON” on 14 DECEMBER 2011.
Submitted To: - Submitted By:-Mr. Geetainder Handa Prerna Shree(Lecturer) (PTM1101002) (MBA 1st year)
ACKNOWLEDMENT
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PROTON HOLDING BHD
I am very Thankful to Miss. Nidhi Khurana to providing such opportunity to prepare such
type of assignment which helped me to enhance my skills. I had a lot of difficulty during my
assignment but she guided me continuously and also helped me out to solve them. I would
like to thank to A.P.I.I.T SD INDIA for giving me an opportunity to work on this project. At
last but not the least I would like to thank to everyone who helped me out to accomplish this
project.
Warms & regard
Prerna shree.
TABLE OF CONTENTS
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PROTON HOLDING BHD
Sr. No. Title Page No.
1. Acknowledgement 3-3
2. Background 5
3. Introduction 6-9
4. Analysis ( Internal and External environment) 11-22
5. Conclusion 27-30
6. References 31-33
7. Appendix 33-47
BACKGROUND STUDY
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PROTON HOLDING BHD
Strategic products are generally obtained from one supplier where the short and long-term
supply is not guaranteed and represents high value in the cost price of the end product. The
strategy is to strive for a partnership-like relationship with the suppliers in order to obtain
significant improvement in quality, cost, delivery, product development and innovation.
Before the establishment of PROTON the component parts manufactured locally were few
and catered basically for the replacement market. However, with the introduction of specific
localization programs for the industry, in the mid of 1980s, by PROTON through its
Suppliers Development Program (PVDP), more components were produced to cater to the
domestic as well as export markets. Many suppliers were born, and later developed and grew
solely as a result of this PVDP. There were only 17 suppliers supplying 52 parts when
PROTON commenced operations in 1985, most of which were low-tech traditional local
parts like batteries, tires, and the like. To date there are 182 suppliers supplying more than 4,
000 parts to PROTON (Interview with the President PROTON Suppliers Association, 2006).
In 1986, PROTON established the Procurement and Suppliers Development Division (PVD)
whereby the objective is to develop its own group of suppliers in order to formulate and
implement the local content program for the national car. It was envisaged that with the
implementation of this local content program the automotive parts industry would expand.
This expansion was much needed not only by PROTON in its end favors to build a strong
industrial base to depend on, but also by the Government as a source of employment
absorption and reduction of imports.
OBJECTIVE OF STUDY
To evaluate whether the proton’s new strategic plan can boost its competitiveness.
INTRODUCTION
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PROTON HOLDING BHD
PROTON PERUSAHAN AUTOMOBIL NATIONAL BERHAD
INCORPORATED 7 MAY 1983
TYPE PUBLIC SECTOR
HEADQUARTER SUBANGJAYA AND SHAH ALAM
MANAGING DIRECTOR MR.SYED ZAINAL ABIDIN
REVENUE RM8.23 BILLION MYR
SUBSIDIARIES LOTUS
PROTON MALASIYA’S FIRST CAR
MAIN PLANT SAHA ALAM
CAPACITY 80000 UNITS PER YEAR
VISION STATEMENT
Proton has their vision to have a very strong presence in the domestic market. As ja car
Manufacturer in a national economy you must dominate that economy.
MISSION STATEMENT
Driving Malaysia’s transformation into a leader in technology and quality. Proton are a
passionate group of people working together, creating exhilarating products and services
for global markets, synonymous with great styling, innovation and leading technology.
MARKET OF PROTON
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PROTON HOLDING BHD
Proton Holdings Berhad is the holding company which is listed on the Bursa Malaysia. It
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. It has
never succeeded to export their car to the US, because the cars required many changes to
meet American safety standards in order to secure coverage from auto insurers and satisfy
legislative requirements. In some countries, Proton’s cars suffer somewhat from a poor
public image because of their designs.14,706 Proton cars were exported in 2006 to other
countries. Proton cars have also been exporting a small volume of cars to other countries like:
Singapore, Brunei, Indonesia, Nepal, Sri Lanka, Pakistan, Bangladesh, Taiwan, Cyprus and
Mauritius.
LIST OF PRODUCTS
PROTON SAGA (1985 - 2011):- Among all products proton, The Saga is the
longest surviving model, soldiering on for nearly 22 years. The Saga continued to
receive minor updated until 2008, when a second generation Saga was introduced as a
sub-compact model instead.
PROTON INSPIRA- (2010-2011)
PROTON WIRA - (1983 - 2006)
PROTON SATRIA GTI - (1994 – 2007)
PROTON PERDANA - (1995 - 1998)
PROTON TIARA - (1996 - 2007)
PROTON JUARA - (2001 - 2003)
PROTON NEEDS TO REVAMP ITS STRATEGY BECAUSE
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PROTON HOLDING BHD
Proton is facing pressures by Asean Free Trade Agreement (AFTA) and World
Trade Organization (WTO) in which Malaysia is a member of these two organizations
on the issues of lowering or removing tariffs and other non-trade barriers.
Proton is unable to match the quality of foreign competitors - something the
exposed with the lowering of import barriers.
Proton cars are facing competition arising from import tariffs.
Proton is unable to compete without the shield of tariffs due to its low technology.
Proton is unable to improve its entire network’s ability to operate in a more
productive to reduce wastage or unnecessary cost.
It has lost its Chinese joint venture as of in 2006 it has four joint venture with
Chinese partners.
By 2002 Proton had a market share of over 60% in Malaysia, which was reduced to
barely 30% by 2005 and is expected to reduce further in 2011 when AFTA mandates
reduce import tariffs to a maximum of 5%.
Proton is unable to communicate with its consumer about their expectations from
car.
Company is lacking in their R&D, quality, innovation and also product
differentiation in comparison to other competitors.
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PROTON HOLDING BHD
Apart from the mentioned current strategy we can say that Proton is not working properly
in all of the above areas i.e. up to the benchmark that is why it is losing its market
share. After analysis of overall performance of proton, we found that it is very poor. We
have shown it in the figure given bellow:
COMPETITION
The existence within a market for some good or service of a sufficient number of buyers and
sellers such that no single market participant has enough influence to determine the going
price of the good or service. (E, Robert. 2009)
(On the basis of porter’s five forces framework i.e. entry of competitors, threat of substitutes,
bargaining power of suppliers, bargaining power of buyers and rivalry)(Appendix-4)
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SUCCESS CRITERIA PERFORMANCE (COMPARISION WITH COMPETITIORS)
HIGH LOW JUSTIFICATION
MARKET SHARE
COST STRUCTURE
PRODUCTQUALITY
FINANCE
DISTRIBUTION
TECHNOLOGY
OWN BRAND
√ FALL DOWN TO 80%
√
√
GOES UP TO 30%
77% LESS THAN OTHERS
√
√ √
√
60% MORE THAN OTHERS
20% MORE SUPPLIERS
FALL DOWN TO 70%
100% IN HOME COUNTRY
OVERALL EVALUATION
PERFORMANCE IS VERY
PROTON HOLDING BHD
THE MAJOR COMPETITORS OF PROTON ARE
DOMESTIC COMPETITIORS
1. Perodua.
2. Nissan
3. Mitsubishi
GLOBAL COMPETITIORS
1. Daimler AG
2. Fiat S.P.A
3. Ford motor company
4. Toyota
5. Suzuki
6. Honda
Perod
ua
Proto
n
Toyot
a
Honda
Nissa
nNaz
a
Inok
om
Mits
ubishi
Suzuk
i0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Jan – June 2009Jan – June 2010Jan – June 2009Jan – June 2010VehiclesSales UnitMarket Share
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ANALYSIS OF EXTERNAL
ENVIRONMENT
All external environmental forces which can affect how a company operates but which are
beyond its control. These includes: political, Economical, social and technological.
(H, jones, 2009)
PEST ANALYSIS: - A PEST analysis is one of them that is merely a framework that
categorizes environmental influences as political, economic, social and technological forces.
Sometimes two additional factors, environmental and legal, will be added to make a PESTEL
analysis, but these themes can easily be subsumed in the others. The analysis examines the
impact of each of these factors (and their interplay with each other) on the business. The
results can then be used to take advantage of opportunities and to make contingency plans for
threats when preparing business and strategic plans (R, Duand. 2009)
PEST ANALYSIS (APPENDIX (1)
POLITICAL
One of the important factors to consider is the presence of AFTA or ASEAN Free Trade
Area. Currently, most of ASEAN region are free trade or 96% of the entire ASEAN trade.
AFTA was established in January of 1992 in order to eliminate tariff barriers among the
Southeast Asian countries. It planned to reduce tariffs to zero to 5% in 15 years among the six
nations through a common effective preferential tariff (Ghani & Zainuddin 2008). Because
Malaysia has two national carmakers which are Proton and Perodua and the government
wants to protect their interests. Unfortunately, they said development could prove to be a
temporary solution. If we are going to check on the high selling prices of the national cars of
Malaysia because of high production costs and lack of vendor efficiency, there is a big
possibility that the local market will be ruled by imported cars. As a result, there will be
increase in the number of the vehicles on the road and there will be a glut of used cars in the
market, because people will tend to trade their cars for cheaper and imported brands. On the
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PROTON HOLDING BHD
other hand, the issue regarding the environment is vital because it is considered as one of the
most talk about topics in the world. The environmental regulation in Malaysia can be traced
back during the colonialism of British which introduced the environmental standards about
the mineral and agricultural resources to Europe. AND In terms of international trade, Over 5
years, Malaysia more than doubled its exports from US$29.416 billion. Historically, the
United States has long been one of Malaysia's largest trading partners, its exports to the
United States reaching 21.9 percent in2010.
ECONOMICAL
The vehicle sales in the country are expected to fall by 12.4% due to different economic
aspect, primarily the issue of global financial crisis, which affected the local financial
status of the country (Asean One Monitoring 2009). As a result, the government of the
country is expecting a slow economic growth for the country, which can affect the buying
behavior of the customers. Furthermore, due to the AFTA, it had increased the competition,
which will impact the performance of Proton. However, the performance of the automobile
industry will be maintained and managed due to the huge total labor force. Despite of the
slower economic growth in the unemployment rate can be reduced to only 3.5%, which can
shows an almost full em
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SOCIAL
The growing population in the country is one of the factors which can affect the
automobile industry. In 2010, the country had a total of 27.5 million citizens (US Department
of State n.d.). This will give a greater number of markets. Furthermore, the ratio of car
ownership in the country is somewhat high or total of 1:5, which signifies that people are
considering cars as important things in their lives. Furthermore, people will also set on big-
ticket items or consumers are expected to put off buying different motor
vehicles because of the employment market uncertainty because of the global and local
financial crisis. Another factor to consider is the growing knowledge and concern of the
people regarding different environmental issues. Furthermore, the impact of the image to
the loyalty of the customer is also another factor.
TECHNOLOGICAL
Technology is considered as one of the most important factor in the automotive industry. Due
to the increasing competition, the development in technology is growing and affecting the
performance and position of each and every company in the automobile industry. It is also
important to consider the maturity of technology, together with the maturity and
capacity of manufacturing, which affect the innovation process of any company. The
intellectual property is also important factor, because it is considered as a sign of authenticity
and uniqueness. Due to the different technologies, primarily the help of computer and the
Internet, the potential for innovation and development is increasing
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After PEST analysis, these are the opportunities and threats of Proton:
On the basis of Porter’s diamond model (Appendix 6)
OPPURTUNITIES
Available government support
Economic of scale
Available technological innovations
New product development to
improve the capability of the
existing models
Strategic alliances
Improve customer service
Brand image, and Building world-
class vendor
THREATS
Slow growth
Economic crises
Change in the consumer lifestyle
Changing technology
New competitors entering the
market
Threat of substitute product
Threat of trade disputes
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ANALYSIS INTERNAL
ENVIRONMENT
The conditions, entities, events, and factors within an organization that influence its activities
and choices, particularly the behavior of the employees. Factors that are frequently
considered part of the internal environment include the organization's mission
statement, leadership styles, and its organizational culture. (S.Janat,.2009)
According to ‘value chain’ (Appendix- 2), we can identify strengths and weakness of
proton.
STRENGTH
strong support from the
government
Proton has over 20 years of
experience
Experience of exporting cars
Availability of funds
Popular in domestic country
WEAKNESS
Over reliant on the government
Lack of successful operation
internationally
Limited product line
Quality constraint
Less human resource
Lack in R&D
CORE COMPENTENCIES
CORE COMPENTENCIES refers to strengths or strategic advantages of a business. Core
competencies are the combination of pooled knowledge and technical capacities that allow a
business to be competitive in the marketplace. (Johnson, at el, 2008)
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BUILDING SENARIO
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1983FIRST MOVERNO CORE COMPETENCIESWINLOW COST CARENTERED INTO MARKET WITH LOW COST STRATEGY
YEARSBUSINESS SCENARIOCORE COMPETENCIESWIN/ LOSS JUSTIFICATION
1990-2000FIRST STRATEGIC ALLAINCESNO CORE COMPETENCIESWIN
YEARS
BUSINESS SCENARIOCORE COMPETENCIES
WIN/ LOSS JUSTIFICATION
EXPAINSION OF BUSINESS
INCREASE IN MARKET SHARE
PROTON HOLDING BHD
Expertise
PROTON expertise is focused around three axes: An industry/sector view, a geographic
view, and a functional view.
1. Industry/Sector Areas of Expertise
Proton Advisors has working knowledge in these two business sectors:
Financial Services
It is expertise in the global securities markets; including deep expertise in all aspects of
electronic trading, market data, order routing, execution management, order management,
order matching and execution. We also have substantial expertise in independent/automated
research technologies, including internet technologies such as semantic search and analysis.
We have worked for market data and information vendors, brokerages, stock exchanges, and
asset managers, advising on and delivering solutions for electronic trading.
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2000-2010 CORE COMPETENCIESWIN
YEARS
BUSINESS SCENARIOCORE COMPETENCIES
WIN/ LOSS JUSTIFICATION
ENTERED INTO GLOBAL MARKET.
FLUCTATION IN MARKET
STRONG DISTRIBUTION NETWORK,PRODUCE F1 CAR,COLLABORATION WITH MITSULISH,BOOST IN INDONESIA,AWARDED FOR SAGA AND EXORA.
PROTON HOLDING BHD
Networking and Telecommunication
It has extensive experience in global telecommunications, with a strong focus on business-to-
business IP services and low latency networking for high-speed trading strategies. We have
worked for network and telecommunications companies, been customers of those companies,
and have advised network and telecommunications companies as well as network and
telecommunications hardware and software suppliers.
2. Geographic Expertise
Proton Advisors has worked with clients to deliver solutions around the world, with
particularly strong experience in the major financial markets.
3. Functional Expertise
Proton Advisors has working experience in the following functional areas:
Business Strategy
The foundation of your success is a business strategy that recognizes the strengths that you
bring to the marketplace, and deploys your assets optimally to exploit those strengths. We
can help you develop and refine your strategy.
Operational Execution
It doesn’t matter how brilliant your strategy is unless it is effectively executed. Your goals
and objectives must flow from that strategy, and be supported by the right measurements,
reward systems, and business processes. We can help you implement your strategy and
troubleshoot your current operations.
Marketing Strategy and Product Development
A core element of any strategy is an understanding of what the market will pay for, and an
ability to deliver products that customers will value. We can help you implement an
effective, market driven product development methodology, and develop an effective go-to-
market approach.
Information Technology and Business Process
Underlying the success of any business strategy today is a set of information systems that are
driven by and aligned with your business goals. You must have effective systems to manage
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PROTON HOLDING BHD
your order-to-cash cycle, your customer service interactions, and to provide you with the
information you need to support timely and quality decision making. We can assess your
information technology systems, business processes, and organization, and recommend how
to improve them so that they effectively support your business goals.
PROTON was focusing on the above area before 2006(PERODUA entered in market) but
now the scenario has been changed because it is not working up to the benchmark. So, at this
point of time we can find that proton does not have any core competencies.
BUT, in order to get a sustainable competitive advantage, proton should go
for: (On the basis of Competitive advantage Appendix-5)
Vehicle Development
Vehicle Development includes strategic alliance, value added partnership with Lotus, MV
Agusta and Mitsubishi.
Innovation Capacity Building at PROTON - It includes Engineering and R&D
Process, Skill Building, Knowledge Management, Manufacturing, Quality Certification as
per standards.
Knowledge Sharing Culture:
Proton Engineers
Technical Partners
Venders Suppliers
Flexible Production
Attained through optimizing the resources
Standardized Work- Implemented by JIT and ‘Pull’ system
Overall Equipment Effectiveness (OEE) Monitoring-That includes availability, performance
and quality of PROTON cars throughout at optimum level. Proton is also working on LEAN
MANUFACTURING Lean Manufacturing is the process of improvement and waste
elimination undertaken by PROTON by avoiding unnecessary processes in car manufacturing
and unnecessary stock.
Fuel efficiency
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Proton knows the price of fuel isn’t getting any cheaper. The Proton Savvy uses just 5.7
liters per 100km combined city and highway driving (as per ADR81/01)
Customer service
All new Protons come with a competitive warranty to give you added confidence. All Proton
vehicles are backed by a comprehensive 3 year warranty. Plus you will also receive free
roadside assistance in the case of a breakdown. Proton also guarantees your car against
corrosion. Each Proton vehicle comes with a minimum 5 year comprehensive corrosion
warranty for peace of mind against corrosion. Proton vehicles undergo a Pre Delivery
Inspection by its Proton Dealer in accordance to the recommended inspection schedule set by
Proton Cars.
Strategy Alternatives and Recommendation
TOWS ANALYSIS
TOWS Matrix is a relatively simple tool for generating strategic options. By using it, we can
look intelligently at how we can best take advantage of the opportunities, at the same time
that we minimize the impact of weaknesses and protect us against threats. Used after detailed
analysis of threats, opportunities, strength and weakness, it help us to consider how to use the
external environment to our strategic advantage, and so identified some of the strategic
options available. (Johnson, et al, 2008)
The TWOS Matrix is an important matching tool that helps managers develops four types of
strategies:
SO strategies — use a firm’s internal strengths to take advantage of external opportunities.
WO strategies — are aimed at improving internal weaknesses by taking advantage of
external opportunities.
ST strategies — use a firm’s strengths to avoid or reduce the impact of external threats.
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WT strategies — are defensive tactics directed at reducing internal weaknesses and avoiding
external threats.
TWOS MATRIX OF PROTON
INTERNAL STRENGTH
1. Commendable experience of 20
years.
2. Government support.
3. Experience of exporting cars.
4. Availability of funds
INTERNAL WEEKNESS
1.Over reliant on the government
2.Lack of successful operation
internationally
3.Limited product line
4.Quality constraint
5.Less human resource
EXTERNAL OPPURTUNITY
1. Worldwide demand of product
2. Collaboration with Asian
companies may boost up the sales.
3. Proton is evaluating a plan to
built a manufacturing plant is
Egypt.
S O
1. They can enter in new global
market because it has good
experience. (INTERNATIONAL
level strategy)
2. It has government support, so
they can provide quality service at
best price. (BUSINESS level
W O
1. Try to increase the production
while working on worldwide
operation. (international level
strategy)
2. The manufacturing plant in
Egypt may increase its product
line.
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PROTON HOLDING BHD
4. Economic of scale strategy)
3. Company can go for joint
venture or collaboration.
(INTERNATIONAL level
strategy)
( International level strategy)
EXTERNAL THREAT
1. Slow growth
2.Economic slow down
3.Change in the consumer
lifestyle
4.Changing technology
5.New competitors entering the
market
S T
1. Try to manufacture fuel efficient
car to increase sales. ((operational
level strategy)
2. By their well qualified and
technical R&D department they can
attract more customers and can lead
in terms of quality, cost and
innovation amongst their
competitors.(operational level
strategy)
W T
1. Reduce the price of cars as much
so it can be affordable for every
customer.
(Business level strategy)
2. Always try to increase the sales
as it has good experience in export.
(Business level strategy)
ALTERNATIVE STRATEGY: Here we are referencing the method and direction of
strategic development beyond the scope of TWOS matrix but within the scope of company’s
direction.
1. CAPTURE THE MARKET
Proton can capture the market, but competing at a local level should not be the concern for
Proton thus for competing at a global level it should have some strategy that involves its
strengths and opportunities so that it can overcome its weaknesses and threat.
2. MAINTAINING COST LEADERSHIP
It needs to have a cost cutting strategy so that it can invest in global market as it can also
manage low cost of its car
3. ATTRACT CUSTOMERS
It can also have some expert people to build some international strategy to know the customs
and attract the customer segment of the countries in which it is going to expand its market.
4. UNIQUE DESIGN
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In order to sustain in the current scenario of market, Proton must move towards unique
design. It will give an advantage to compete with its domestic as well as global competitors.
5. HYBRID CAR
Proton should go for hybrid as it will lead to low cost with a product differentiation in terms
of product development as presently their products are not going well and with the help of
well experienced and trained employees they can generate economies of scale by examining
customer needs.
CURRENT STRATEGY
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1. Vehicle Platform
This department is responsible for vehicle development programmers covering:
Product Strategic Planning.
Styling.
Supplier Development Programmer.
Natural Gas Vehicles (NGV)
Hybrid car
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2. Prototype Centre
Its leading-edge facilities and high precision tools allow error-free
prototypes to be built with extremely short lead times. The prototype centre is made up of the
following:-
Clay Modeling
3D scale models allow designers and engineers to conduct feasibility studies on
preliminary designs.
Rapid Prototyping
Extremely fast production of prototype samples is possible during the development
timing.
Prototype Shop .Full functioning prototypes are developed, as per vehicle design
specifications. This enables testing to be carried out.
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3. Engineering Development & Services
This Department will help proton to perform a regulatory and management function:
Vehicle Architecture
Maintaining a product engineering parts database for Vehicle Development plan
Managing data communication related to engineering designs with vehicle programs
and PROTON vendors
4. Proton lifecycle management (PLM)
As PROTON grows beyond the local market, we continue to employ innovative technology
which will help us to accelerate the development of our products in a more timely, and cost
effective manner. Product Lifecycle Management (PLM) solution is an initiative that
PROTON has adopted, to manage the entire product lifecycle processes right from
conceptual design through to after sales support. The program is being carried out together
with the support of Hewlett-Packard (HP) and Siemens PLM.
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RECOMMENDED STRATEGY
After doing this study I found that among Proton’s strategies, It should go for following
strategy:
(1) Attaining cost leadership and differentiation strategies by improving the R&D sector
and accelerating investment in product development.
(2) Exploring new niche market and strategic alliance in order to expand the distribution
channels.
(3) Providing new brand images to accelerate public confidence and brand loyalty in the
domestic and international market
(4) Diversifying parts component sources and selecting reputable suppliers would help in
achieving cost reduction effort of the company.
(5) Creating strategic alliance to improve technical Capability as well as to penetrating new
market and acquiring faster transfer of technology and technical-know-how.
(6) It should go for more customers’ responsiveness.
(7) To rationalizing its operations particularly in technological internalization efforts and
on continuous improvement programs in Malaysia and Thailand it should increase its
competitiveness.
(8) They should look at the possibility penetrating of direct exports to other assemblers
outside and within ASEAN, such as Japan (possibly through strategic alliance with
Katayama), and the growing markets such as in India and Turkey.
(9)According to BCG Analysis Proton falls under Question mark in a result of which it can
go for investing in new opportunities like Joint Venture. To be in capable of adapting the
Lean Manufacturing it should go with Toyota.
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CONCLUSION
This research conducted focused on the current and future strategy of proton with the
objective of obtaining better understanding of the current practices in the Current market
scenario of the Malaysian automotive industry.
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COMPAY’S TIME FRAME
PROTON HOLDING BHD
TIME FRAME
This will help proton to identify the area of improvement
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SUPPLY CHAINDEVELOP PRODUCT LINEINNOVATIONSTRATEGIC ALLAIANCE DIVERSIFICATION
2012 AND ONWARDS
2013 AND ONWARDS 2012 AND ONWARDS 2012 AND ONWARDS 2013 AND ONWARDS
ACCORDING TO THE ANALYSIS OF TIME FRAME OF PROTON, JUST AFTER 3 -4 YEARS, COMPANY WILL BE ABLE TO BOOST ITS COMPETITIVENESS ACROSS THE WORLD.
PROTON HOLDING BHD
STRATEGIC ACTIVITY MAP OF PROTON
This is an activity mapping tools that allows you to plot lower & higher order thinking skills
against application in a unit of work, a subject or cross circulation across several subjects.
Then in predictable & unpredictable real world situation and scenarios which almost
universally call on knowledge, process and skills from many area. This map can be helpful in
informing managers what they can do to preserve and strategic capability.
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CRM
EFFICIENCY
R&DL
OW
COST
BENCH
MARKING
AFTER
SALES SERVICE
STRATEGIC COLLABORATION
ECONOMIES OF SCALE
EXPERIENCE
CURV
E
PROFIT
GLOBALISATION
HYBRID
EFFECTIVENESS
MARKET SHARE
DEREGULATION
INNOVATION
GOOD NETWORK
SUPPLIERS
BRAND
BUILDING
PROTON HOLDING BHD
LEVELS OF STRATEGY
Now, we can conclude that PROTON has indeed working very hard for total quality
management, customer responsiveness, product development and strategic collaboration. Due
to the hyper competition in market it will be important to focus on the Best Product
positioning. To have this they must have a good R&D at their inbound logistic. In order to get
sustainability in market they must focus on low cost or differentiation of the products. In
order to maintain the process of engineering and designing passenger cars which will suit the
taste and preferences of the customers this is affected by different demographics, economics
ASIA PACIFIC INSTITUTE OF INFORMATION TCHNOLOGY Page 32
CORE
COMPETENCIES
UNIQUE RESOURCES
DISTINCTIVE CAPABLITY
FUNCTIONAL LEVELINNOVATION
QUALITY
CUSTOME
R RESPONSIVENESS
PRODUC
T DEVELOPMENT
BUSINESS LEVEL
INTERNATIONAL LEVEL
CORPORATE LEVEL
HYBRID CAR
COST LEADERSHIP
DIFFRENCIATITONSTRATEGY
FOCUS STRATEGY
MARKET PENETRATION
WORLDWIDE OPERATION
INDIA&CHINIA
EGYPT&INDONESIA
SBUSTRATEGIC ALLAINCES
PLANNING NEW BUSINESS
DIVERSIFICATIONVALUE
CREATION
INCREASE MARKET SHARE
CASH FLOW
COMPANY IS WORKING ON THIS
COMPANY IS NOT WORKING ON THIS
PROTON HOLDING BHD
and social factors. Apart from this, managing key risks and identifying emerging risks
especially in export markets will also play an important role for being a major international
player. Thus, Company should go for right product, at right place, at right price and right
time.
REFRENCES
BOOKS
C,Sunil,M,Peter,and D,Kalara,2010,Supply chain management, 4th Edition,South
Asia,Dorling Kindersley.
Kotler, P. and Keller, K.L, 2009, Marketing Management, South Asia, New Jersey,
(pp 53, 77-84)
A. Pierre, et al 2007, International supply chain management, Canada, Nelson.
D, Garry and W, Margareta, .2007, The management of technology and innovation, 1st
Edition, Canada, Nelson.
G,Vipin,G,Kamal,R.srinivasan.,2009,Business policy ad strategic
management,India,PHI Pvt Ltd.
H, Jones, 2009, Essentials of management, Canada, Nelson.
Johnson, Schools, K and Whittington.richard, 2011, Exploring corporate strategy,
seventh Edition, India, Dorling Kindersley
K, Azhar., 2010,Strategic management and business policy,India,Tata Mc Graw.
K, Philip, 2009, Marketing management, 13th Edition,South Asia,Dorling Kindersley.
NL, Charles. 2010,.Integrated approach to strategic management, South Asia,
Pearson.
Prahalad, C. K, and Hamel, .1990, The core competence of the organization.
HARVARD BUSINESS REVIEW, (90, 79–93)
R,Duane et al, 2009,Strategic management,Canada,Nelson.
S, Janat, 2009, Supply chain management, South Asia, Pearson.
S, Robbins,. 2007, Management, 9th Edition,Us,Prentice Hall.
Tyagi.R., Available from: www.ProcessExcellenceNetwork.com/, [Accessed: 12th
Nov, 2011]( BALANCE SCORE CARD)
ASIA PACIFIC INSTITUTE OF INFORMATION TCHNOLOGY Page 33
PROTON HOLDING BHD
JOURNALS
Garth, S, at el, 2008, Strategic Management, Delhi: John Wiley and Sons Inc.
Hax, A. and Wilde II, D, 2003, ‘The Delta Model- A New Framework of Strategy’.
Journal of Strategic Management Education ,vol. 1, no. 1. Available
fromhttp://pesona.mmu.edu.my/~wruslan/MISP2/Readings/detail/Reading-37.pdf.
Kuemmerle, W., 2001, Home base and knowledge management in international
ventures. JOURNAL OF BUSINESS VENTURING, 17, 99–122; Lorenzoni, G.,
&Lipparini, A. 1999.
Prahalad, C. K., and Hamel, G, 1990, Thecore competence of the organization,
Harvard Business Review, 90, 79–93.
ARTICLE
2003, LG CNS Automotive Consulting Service
2010, “Market Watch 2010”,The Malaysian Automotive and Supplier Industry, p34- 46.
Abidin A.S.Z., 2011, Exploratory Study: Design Capabilities Development for
Malaysian Vendors in Automotive Industry,Proceedings of the 2011 International
Conference on Industrial Engineering and Operations Management Kuala Lumpur,
Malaysia, p45-46.
Abidin, A., 2011, Proceedings of the World Congress on Engineering, Assessing Proton
and Vendors Design Capabilities towards Internationalization, 1 (2), p5-6.
Arshad, S., 1996, The history of the Malaysian automotive industry, p67-69.
Mokhtar, M., 2010, Proton Annual Report.
ASIA PACIFIC INSTITUTE OF INFORMATION TCHNOLOGY Page 34
PROTON HOLDING BHD
WEBSITE
Strategic Management , Available
from:http://www.emeraldinsight.com/products/journals/journals.htm?id=jsma,
[Accessed- 11thOct, 2011]
Business Strategy , Available from:
http://tutor2u.net/business/strategy/ansoff_matrix.htm[Accessed- 25th Oct, 2011]
Proton , Available from: www.proton.com, [Accessed-17th Oct, 2011]
Proton , Available from: www.proton-edar.com.my, [Accessed- 23th Oct,
2011]
Investopedia, Available
from:http://www.investopedia.com/terms/v/valuechain.asp#axzz1daBEIoBh,
[Accessed- 01stNov, 2011]
Businessdictonary, Available from:
http://www.businessdictionary.com/definition/capability.html, [Accessed- 07th Nov,
2011].
Proton, Available from:
http://www.hoovers.com/proton-holdings/--ID103957--/freeuk-co-factsheet.xhtml,
[Accessed-26nd Oct, 2011].
Investopidia , Available from: http://www.investopedia.com/terms/1/80-20-
rule.asp#ixzz1deOo97Pb, [Accessed- 11th Nov, 2011].
ASIA PACIFIC INSTITUTE OF INFORMATION TCHNOLOGY Page 35
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Trading Economics , Available from:
http://www.tradingeconomics.com/malaysia/inflation-cpi, [Accessed- 12th Nov,
2011]
APPENDIX
Appendix-1
PEST ANALYSIS
Factors Could include
Political e.g. International trade, the euro, taxation policy, government trade regulations
Economical e.g. Interest rates, exchange rates, national income, inflation, unemployment, stock market,
Social – cultural factors
e.g. Ageing population, attitude to work, income distribution
Technological e.g. Innovation, new product development, rate of technological obsolescence , R & D
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Environmental e.g. Global warming, environmental issues, waste disposal, energy consumption
Legal e.g. Competition law, health and safety, employment law, product safety
A P P E N D I X - 2
V a l u e c h a i n a n a l y s i : Value Chain Analysis describes the activities that take
place in a business and relates them to an analysis of the competitive strength of the business.
Influential work by Michael Porter suggested that the activities of a business could be
grouped under two headings:
(1) Primary Activities - those that are directly concerned with creating and delivering a
product (e.g. component assembly); and
(2) Support Activities, which whilst they are not directly involved in production, may
increase effectiveness or efficiency (e.g. human resource management). It is rare for a
business to undertake all primary and support activities.
Value Chain Analysis is one way of identifying which activities are best undertaken by a
business and which are best provided by others ("out sourced").
Linking Value Chain Analysis to Competitive Advantage
What activities a business undertakes is directly linked to achieving competitive advantage.
For example, a business which wishes to outperform its competitors
through differentiating itself through higher quality will have to perform its value chain
activities better than the opposition. By contrast, a strategy based on seeking cost
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leadership will require a reduction in the costs associated with the value chain activities, or a
reduction in the total amount of resources used.
Primary Activities
Primary value chain activities include:
Primary
Activity
Description
Inbound
logistics
All those activities concerned with receiving and storing externally sourced
materials
Operations The manufacture of products and services - the way in which
resource inputs (e.g. materials) are converted to outputs (e.g. products)
Outbound
logistics
All those activities associated with getting finished goods and services to
buyers
Marketing and
sales
Essentially an information activity - informing buyers and consumers about
products and services (benefits, use, price etc.)
Service All those activities associated with maintaining product performance after
the product has been sold
Support Activities
Support activities include:
Secondary
Activity
Description
Procurement This concerns how resources are acquired for a business (e.g. sourcing and
negotiating with materials suppliers)
Human
Resource
Management
Those activities concerned with recruiting, developing, motivating and
rewarding the workforce of a business
Technology
Development
Activities concerned with managing information processing and the
development and protection of "knowledge" in a business
Infrastructure Concerned with a wide range of support systems and functions such as
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finance, planning, quality control and general senior management
Steps in Value Chain Analysis
Value chain analysis can be broken down into a three sequential steps:
(1) Break down a market/organization into its key activities under each of the major headings
in the model;
(2) Assess the potential for adding value via cost advantage or differentiation, or identify
current activities where a business appears to be at a competitive disadvantage;
(3) Determine strategies built around focusing on activities where competitive advantage can
be sustained
A P P E N D I X - 3
SWOT analysis: SWOT analysis is a method for analyzing a business, its resources, and its environment.
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SWOT is commonly used as part of strategic planning and looks at:
Internal strengths
Internal weaknesses
Opportunities in the external environment
Threats in the external environment
SWOT can help management in a business discover:
What the business does better than the competition
What competitors do better than the business
Whether the business is making the most of the opportunities available
How a business should respond to changes in its external environment
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The result of the analysis is a matrix of positive and negative factors for management to
address:
Are internal to the business
Relate to the present situation
Opportunities and threats
Are external to the business
Relate to changes in the environment which will impact the business
Using SWOT analysis
The key words are match and convert:
A key challenge for any business is to convert weaknesses into strengths. For example:
Weakness Possible Response
Outdated technology Acquire competitor with leading technology
Skills gap Invest in training & more effective recruitment
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Positive factors Negative factors
Internal factors Strengths Weaknesses
External factors Opportunities Threats
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Overdependence on a single product Diversify the product portfolio by entering new markets
Poor quality Invest in quality assurance
High fixed costs Examine potential for outsourcing or off shoring
APPENDIX-4
P o r t e r ' s F i v e F o r c e s M o d e l : a n a l y z i n g i n d u s t r y s t r u c t u r e
Defining an industry
An industry is a group of firms that market products which are close substitutes for each other
(e.g. the car industry, the travel industry).
Some industries are more profitable than others. Why? The answer lies in understanding the
dynamics of competitive structure in an industry.
The most influential analytical model for assessing the nature of competition in an industry is
Michael Porter's Five Forces Model, which is described below:
Porter explains that there are five forces that determine industry attractiveness and long-run
industry profitability. These five "competitive forces" are
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Threat of New Entrants
New entrants to an industry can raise the level of competition, thereby reducing its
attractiveness. The threat of new entrants largely depends on the barriers to entry. High entry
barriers exist in some industries (e.g. shipbuilding) whereas other industries are very easy to
enter (e.g. estate agency, restaurants). Key barriers to entry include
1. Economies of scale
2. Capital investment requairements
3. Customer switching cost
Threat of Substitutes
The presence of substitute products can lower industry attractiveness and profitability
because they limit price levels. The threat of substitute products depends on:
1.The relative price and performance of substitutes
2.The costs of switching to substitutes
Bargaining Power of Suppliers
Suppliers are the businesses that supply materials & other products into the industry.
The cost of items bought from suppliers (e.g. raw materials, components) can have a
significant impact on a company's profitability. If suppliers have high bargaining power over
a company, then in theory the company's industry is less attractive.
Bargaining Power of Buyers
Buyers are the people / organizations who create demand in an industry
There are few dominant buyers and many sellers in the industry.
Buyers threaten to integrate backward into the industry
Suppliers do not threaten to integrate forward into the buyer's industry.
The industry is not a key supplying group for buyers.
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Intensity of Rivalry
The intensity of rivalry between competitors in an industry will depend on:
The structure of competition - for example, rivalry is more intense where there are many
small or equally sized competitors; rivalry is less when an industry has a clear market leader
The structure of industry costs - for example, industries with high fixed costs encourage
competitors to fill unused capacity by price cutting
Degree of differentiation - industries where products are commodities (e.g. steel, coal) have
greater rivalry; industries where competitors can differentiate their products have less rivalry
Switching costs - rivalry is reduced where buyers have high switching costs - i.e. there is a
significant cost associated with the decision to buy a product from an alternative supplier
Strategic objectives - when competitors are pursuing aggressive growth strategies, rivalry is
more intense. Where competitors are "milking" profits in a mature industry, the degree of
rivalry is less
Exit barriers - when barriers to leaving an industry are high (e.g. the cost of closing down
factories) - then competitors tend to exhibit greater rivalry.
APPENDIX-5
Competitive Advantage: A competitive advantage is an advantage over competitors gained
by offering consumers greater value, either by means of lower prices or by providing greater
benefits and service that justifies higher prices.
Competitive Strategies: Following on from his work analyzing the competitive forces in an
industry, Michael Porter suggested four "generic" business strategies that could be adopted in
order to gain competitive advantage. The four strategies relate to the extent to which the
scope of businesses' activities are narrow versus broad and the extent to which a business
seeks to differentiate its products.
The four strategies are summarized in the figure below:
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The differentiation and cost leadership strategies seek competitive advantage in a broad
range of market or industry segments. By contrast, the differentiation focus and cost
focus strategies are adopted in a narrow market or industry.
Differentiation
This strategy involves selecting one or more criteria used by buyers in a market - and then
positioning the business uniquely to meet those criteria. This strategy is usually associated
with charging a premium price for the product - often to reflect the higher production costs
and extra value-added features provided for the consumer. Differentiation is about charging a
premium price that more than covers the additional production costs, and about giving
customers clear reasons to prefer the product over other, less differentiated products.
Examples of Differentiation Strategy: Mercedes cars; Bang & Olufsen
Strategy - Cost Leadership
With this strategy, the objective is to become the lowest-cost producer in the industry. Many
(perhaps all) market segments in the industry are supplied with the emphasis placed
minimizing costs. If the achieved selling price can at least equal (or near)the average for the
market, then the lowest-cost producer will (in theory) enjoy the best profits. This strategy is
usually associated with large-scale businesses offering "standard" products with relatively
little differentiation that are perfectly acceptable to the majority of customers. Occasionally, a
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low-cost leader will also discount its product to maximize sales, particularly if it has a
significant cost advantage over the competition and, in doing so, it can further increase its
market share. Examples of Cost Leadership: Nissan; Tesco; Dell Computers
Strategy - Differentiation Focus
In the differentiation focus strategy, a business aims to differentiate within just one or a small
number of target market segments. The special customer needs of the segment mean that
there are opportunities to provide products that are clearly different from competitors who
may be targeting a broader group of customers. The important issue for any business
adopting this strategy is to ensure that customers really do have different needs and wants - in
other words that there is a valid basis for differentiation - and that existing competitor
products are not meeting those needs and wants.
Examples of Differentiation Focus: any successful niche retailers; (e.g. The Perfume Shop);
or specialist holiday operator (e.g. Carrier)
Strategy - Cost Focus: Here a business seeks a lower-cost advantage in just on or a small
number of market segments. The product will be basic - perhaps a similar product to the
higher-priced and featured market leader, but acceptable to sufficient consumers. Such
products are often called "me-too's".Examples of Cost Focus: Many smaller retailers
featuring own-label or discounted label products. Culture and attitudes.
APPENDIX- 6
Balance score card: This method is very much effective to analyze the position of Proton
when compared to its competitors on different scale like holdings from share holders,
customer satisfaction level. According to balance score card (appendix) it is important for
proton to revamp its strategy as in many a cases Proton is stronger but in some it is weak too.
It has a good position in share market but it is losing it because of Perodua’s low cost product
and with good quality.
Balance Shareholder Look Operational Organization Customer
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Score
Card
Effectiveness al Learning targeting
Proton Volume, revenue,
gross margin by
technology segment
and market segment
Revenue and turnover
by geographical
segment (Asia, Europe,
Middle East, Africa
and Pacific)
Wholly-owned
subsidiary Lotus
Engineering UK –
leading automotive
engineering
consultancy company
Application of
Information
Technology in the
R&D
% of sales from
new technology
and models;
Training as a %
of sales;
Customer market share
by tier
Profitability by
customer tier
Customer satisfaction
by tier
Strategic
and
Integrate
d Partner
companie
s
Volume, revenue,
turnover, gross margin
by individual client
Year over year sales
and turnovers growth
by individual clients;
Cost to serve clients; Number of
clients on each
country and
partner;
Return on
investment on
collaboration
tools per
selected clients;
Customer satisfaction;
Joint revenue and
turnover from
complementary
relationship
Relationship
Body
Shopper
Volume, revenue,
turnover, gross margin
by individual clients;
Return on investment
per head;
% revenue and sales
from new clients
Time needed in order
to complete
thetransaction from
start to finish per
model or
project;Return on
investment on
collaboration;Direct
selling.
Cost of the
collaboration
tool in order to
facilitate transfer
of knowledge
Cost to serve clients per
channel;
Customer satisfaction
on the models,
relationship and cost of
products.
APPENDIX-7
Porter Diamond Model
According to Porter, as a rule competitive advantage of nations is the outcome of 4
interlinked advanced factors and activities in and between companies in these clusters. These
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can be influenced in a pro-active way by government. PORTER argued that a nation can
create new advanced factor endowments such as skilled labor, a strong technology and
knowledge base, government support, and culture. PORTER used a diamond shaped diagram
as a basis of a frame work to illustrate the determinants of national advantage. The diamond
represents the national playing field that the countries establish for their industries. The points
of the diamond are described as follows
1. FACTOR CONDITIONS-a country creates its own important factors such as skilled
resources and technological base. These factors are upgraded / deployed over time to meet
the demand. Local disadvantages force innovations. new methods and Hence comparative
advantage.
2. DEMAND CONDITIONS-A more demanding local market leads to national advantage.
A strong trend setting local market helps local firms anticipate global trends.
3. RELATED AND SUPPORTING INDUSTRIES-Local competition creates innovations
and cost effectiveness. This also puts pressure on local suppliers to lift their game.
4. FIRM STRATEGY, STRUCTURE AND RIVALRY-Local conditions affect firm
strategy. Local rivalry forces firm to move beyond basic advantages.
APPENDIX-8
The Boston Consulting Group Box ("BCG Box")
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BCG MATRIX OF PROTON
Using the BCG Box (an example is illustrated above) a company classifies all its SBU's
according to two dimensions:
On the horizontal axis: relative market share - this serves as a measure of SBU strength in
the market
On the vertical axis: market growth rate - this provides a measure of market attractiveness
By dividing the matrix into four areas, four types of SBU can be distinguished:
Stars - Stars are high growth businesses or products competing in markets where they are
relatively strong compared with the competition. Often they need heavy investment to sustain
their growth. Eventually their growth will slow and, assuming they maintain their relative
market share, will become cash cows.
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MARKET SHAREHIGH LOW
MA
RK
ET
GR
OW
TH
LO
W
H
IGH
STARS
Proton can use its cash cow position to
reach up to this category as it has now
started to bring on new technology to
increase its market share in new global
market.
QUESTION MARKS
Proton can invest in increasing its market share
in that country where the growth of market is
high as currently does not fall in this category to
move itself to STAR.
CASH COW
Proton should work to get position in this
cell. It has less percentage in this cell as the
growth of other automobile industry has
now started increasing and the holding
market share.
DOG
In this category Proton should invest more on
those product that are very old in technology
and have poor performance, as it is bringing up
new version of Exora (Exora 2)
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Cash Cows - Cash cows are low-growth businesses or products with a relatively high market
share. These are mature, successful businesses with relatively little need for investment. They
need to be managed for continued profit - so that they continue to generate the strong cash
flows that the company needs for its Stars.
Question marks - Question marks are businesses or products with low market share but
which operate in higher growth markets. This suggests that they have potential, but may
require substantial investment in order to grow market share at the expense of more powerful
competitors. Management have to think hard about "question marks" - which ones should
they invest in? Which ones should they allow to fail or shrink?
Dogs - Unsurprisingly, the term "dogs" refers to businesses or products that have low relative
share in unattractive, low-growth markets. Dogs may generate enough cash to break-even,
but they are rarely, if ever, worth investing in.
APPENDIX-9
ACTIVITY MAP: strategic involves continuity of direction.(porter 2001,p.71).in
essence porter argues that strategy involves defining a company will and will not do to the
market place making the hard trade off replicate fit among parts of the activity system the
firm constructs to deliver value to customers al with a view to making a superior return on
investment Graphic represent for representation to business modlesand strategy are important
to this paper porter has develop three representation of strategy. First is five fame work
Activity map show that how the company. Activity system map show a company’s strategic
positioning in contained in a set of trailed activities designed to deliver it.
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