PROTON Brand Strategy

MARKETING MANAGEMENT

PRODUCT : PROTON EXORA 2Prepared by:

An IntroductionProton Exora is a compact multi-purpose vehicle (MPV) model produced by Malaysia car manufacturer known as Proton Holdings Berhad (Proton). The new model car was launched on 15 April 2009, which is the first Malaysian designed MPV. Proton Exora is a new lifestyle family vehicle, which combines advanced styling, spacious interior, which accommodates 7 adults and has multiple usage, high quality design and good performance with emphasis on the value for money factor.

Despite the benefits offered by Proton Exora, our group had identified few major problems faced by Proton. One of the major problems faced by Proton is Proton has lost its market share to local and foreign competitors from 60% of the domestic passenger car market in 2001 to 29% for the first half of 2008 (Malaysian Automotive Association 2008). Protons brand value has also dropped from RM239 million in 2007 (rank 19) to RM150 million in 2008 (rank 23). The latest news on 23rd November 2009 reveals that Protons ranking has dropped from Malaysias 30 Most Valuable Brand (MMVB) ranking.

Therefore, our group has recommends new concept car known as Proton Exora 2 with additional improvised features included to enhance the performance and increase the demand for Proton Exora car. Possible solutions to mitigate the problems identified are by introducing additional value improvised features to enhance the performance and sales of Proton Exora 2 by focusing on fuel efficiency, convenience and safety and emphasizing on the environment friendly vehicle. Overall, the action plans recommended are based on 4Ps strategies and marketing mix models. Company BackgroundPERUSAHAAN OTOMOBIL NASIONAL BERHAD or PROTON was incorporated on May 7, 1983 to manufacture, assemble and sell motor vehicles and related products, including accessories, spare parts and other components. PROTON produced Malaysias first car, the Proton SAGA which was commercially launched on July 9, 1985 by Malaysian Prime Minister, Dato Seri Dr. Mahathir Mohamad who conceived the idea of a Malaysian car.

PROTON had some major challenges in the recent years, with new competition and the deregulation in the industry. Proton Holdings Bhd has swung into the black in 2008 with a cumulative net profit of RM202.9 million, compared with the loss of RM589.5 million it registered in 2007. The national carmaker's revenue rose 14.6 per cent to RM5.63 billion from RM4.91 billion a year earlier. One of the reason of this achievement is due to the introduction of new models with higher profit margins, stronger sales volume, savings from group-wide cost-reduction initiatives, income from the sale of rights for use of Intellectual Property Rights relating to a vehicle platform (for the China market) as well as the R&D grant.

For the year 2008, PROTONs focus would be in the core areas of product, quality, cost efficiency and distribution network. PROTON aims to have a strong product portfolio by introducing the right car, for the right market, at the right price and at the right time. This was reflected in the organisations newly introduced Exora, Persona and Saga Models, with the latter powered by the new CamPro IAFM engine. PROTON has also continued to update and refresh existing product lines to entice and attract customers.

Market OverviewOnce known as the king of the road, PROTON has seen its fortunes dwindle due to growing competition from local and foreign competitors as Malaysia opens up its auto market. Malaysia is Southeast Asia's largest passenger car market with 497,459 vehicles sold in the year 2008.

Malaysias auto market is dominated by its national cars, PROTON and Perodua which in year 2000 accounted for market share of roughly 90 percent of the vehicles sold annually. Some 25 other manufacturers compete for the remaining 10 percent. But compare with last 2 years, market share of the national car makers has declined to roughly 63 percent.

During year 2000, PROTON conquered 63.4 per cent market share. It has eroded to below 30 percent in year 2007 and 2008. Perodua, the second national cars manufacturer has taken over the market of the king since two years ago with a market share of 33.6 percent in 2008.

PROTON has been maintaining their market share with best- cost and broad differentiation strategy, although the market share fell from 40% in 2005 to 32% in 2006 (www.wikicars.com) allowing Perodua to overtake PROTON as the country's largest passenger carmaker for the first time. Total losses in 2007's financial year has climbed to RM169 million and this was caused by the extensive promotional discounts by its tight rivals, according to PROTON.

Figure 1: Show the Overall market share of passenger car market. (from MAA vehicle sales resources) Noted : 2006 data is not publishedTo date, PROTON is facing severe competition in its home market as government may remove rules that protect local car makers when it reviews the 3-year-old auto policy to boost foreign investment. This reduction of the protection accorded to PROTON may increase its difficulties to become market leader again. Although government has cut import taxes, it still imposes high taxes on locally assembled foreign cars and this has given protection to national carmakers.

Looking at the industry overview, the year 2009 witnesses a tremendous improvement in motor vehicle sales. This uptrend, which began from the second half of 2007, was a welcome relief to the industry but unfortunately the momentum could not be maintained. After recording peaks of more that 50,000 sales in April, July and September 2008, it saw a significant drop of 21% after that, which was due to the global economic meltdown marked by the collapse of major financial institutions in the United States. This was further compounded by the increase in petrol price in October 2008. After that the industry resurged, driven mainly by the introduction of new models at highly competitive and consumer-friendly prices, attractive and creative financing schemes for car buyers as a result of aggressive sales campaigns, and strong economic growth of 5.75% in 2008. But again, in 2009, MAA has forecasted that there would be a decrease of 12.2% of passenger cars compared to 2008. The forecast was well-founded on the current global financial and economic climate, reiterated by the contraction of GDP growth. Other factors may include fluctuating oil and commodity prices as well as unfavorable FOREX rates (ref: www.proton.com.my).

In terms of financial performance, for the financial year ended 31 March 2009, PROTON recorded a loss after tax of RM301.8 million, although there was improved revenue of RM6.5 billion. This decline was largely due to the one-off exceptional provision for the impairment of property, plant and equipment and inventory write-down for certain models impacted by declining demand. In addition to that, PROTONs financial performance for the second half of the financial year was also adversely affected by the accelerated amortization of dies and jigs for certain models as well as higher commodity prices, increased costs of components and raw materials which arose from higher foreign currency exchange rates, particularly the Japanese Yen and US Dollar.

Marketing AnalysisProduct: PROTON design and technology lack of attractivePrice: The price that PROTON offer to the customer is more expensive compare to the same CCs of foreign car.

Place: -

Promotion: The promotion that offered by PROTON is quiet many but it less attractive. We can say that it is all about the mentality of few Malaysian that feel that local brand is not as good as imported brand. SWOT Analysis

Strengths

Competitively priced products

Extensive nationwide distribution network

Good corporate governance

Influence of patriotism as Proton is national car-maker

Government support

Weaknesses

Reputation of poor product performance and functionality

High cost to expand their operation by advanced technology

Short history in automotive industry

Vulnerable to increasing material cost (steel, etc)

Opportunities

High demand on the products

Opportunity to grow their business globally

R&D Development

Government support

After-sales services

Collaborations within automotive industryThreats

Competitors - local & international brands

A lot of substitute products in market

Fast changing and advanced engineering technology

Economic downturn decrease of car sales

Page | 7