194195148 case 5 proton full assignment

7/26/2019 194195148 Case 5 Proton Full Assignment

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EPPA 4716

KAJIAN KES INTEGRASI

CASE 5: PROTON From SAGA to EXORA

FOR : DR. ROSIATI BT RAMI

Gro!" M#m$#r% :

&'%(m') &'%)(m GA***1+

N,'t(-') S#"') GA***+

N!r!/ Am(r') Mo)0 Noor GA***6

S(t( S'r(-' S'm't GA***46

S'-0r'm't)( A2P R'm'- GA***4+

A%)'03'-' $t A%m( GA****4

F'(r! $t K'%m'- GA****


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Kajian Kes Integrasi (EPPA 4716)Case 5 : Proton : From Saga to Exora

TABE OF CONTENTS

Pages

Executive Summary 3 - 6

1. From a financial analysis perspective, has the Proton

management done a good o!"

6 # 1$

2. %hat characteristics should foreign partner have that &ill ena!le

maximum synergies"

1$ # '(

3. %hat !road considerations should determine the parts of Proton

that are &orth )eeping and developing and the matter of

operations to !e relocated or closed do&n"

'( # ''

*. From a revie& of '((+ nternational utomotive Policy, are

there areas of possi!le colla!oration &ith Proton, short of a full

merger ta)eover"

'3 # '/

/. %hat other information not included in the case could help

consultant Saiful la&i ma)es a more meaningful

recommendation" %hy"

'6 # 3*

0ecommendations 3* - 36

E#!t(8# S!mm'r3

Perusahaan tomo!il 2asional erhad or P042 &as incorporated in 5alaysia on

5ay 1+$3 to manufacture, assem!le and sell motor vehicles and related products including

accessories, spare parts and other components. Proton product7s line up comprised of Saga,

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s&ara, %ira, Satria, Satria 2eo, Persona, nspira and most recently, Exora. Proton7s plant

located in Shah lam and 4anung 5alim. Severals challenges faced !y Proton. ne of the

challenge is during the controversial sale of Proton sta)e in 58 gusta of taly for a to)en of 91

to :E8 Sp in &hich :E8 sold it to 5% for 9+3 million. esides, proton also faced legal

suits &hen !eing sued !y ;hinese .

t &as late '((+ and the &orld &as struggling in the process of li!eralisation and

glo!alisation. %ith the advantages of protectionism, Proton, the 5alaysian national car ma)er

had enoyed a fair degree of success in the home mar)et, and internationally, &ith some of its

export models over the last t&o decades. 4echnical tie-ups and colla!orations &ith foreign

partners had !een a mixed !ag of successess and failures. 4he li!eralisation measures announced

!y the 5alaysian 5inister of 4rade and ndustry in the 2ational utomotive Policy on '$

cto!er '((+ presented Proton &ith a crossroad situation # either !uild on pass successes

to&ards a !right future or suffer decline through !ad decisions against intense competition.

multinational auto giant had sensed opportunity in Proton and 5alaysia and approached

consultant, ;hartered ccountant Saiful la&i, to revie& Proton and to recommend &hether an

investment andor colla!oration should !e considered.

PROTON

Income Statement

For the Year Ended 31st March (RM' Million) 2! 2" 2# 2$ 2%

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Revenue 6,486.6 5,621.6 4,687.3 7,796.9 8,483.3

(Loss)/Profit before taxation (319.2) 144.3 (618.1) 18. 399.3

(Loss)/Profit after taxation (31.8) 184.6 (589.5) 46.7 442.4

Retaine! earnin"s attributab#e to s$are$o#!ers 4,174.5 4,476.2 4,319.2 4,963.6 5,54.2

%ivi!en! (2.6) . (27.5) (54.9) (137.3)

Retaine! earnin"s &arrie! for'ar! 4,153.9 4,476.2 4,291.7 4,98.7 4,916.9

Share In&ormation

Per Share

asi& (#oss)/earnin"s (sen) (54.9) 33.6 (17.3) 8.5 8.6

%ivi!en! ai! (sen) 5. . 5. 1. 25.

*et assets (R+) 9.3 9.9 9.5 1.7 1.7

ssue! s$are &aita# (-) 549,213 549,213 549,213 549,213 549,213

PROTON

alance Sheets

s t 31st March (RM' Million) 2! 2" 2# 2$ 2%

Non)*+rrent (ssets

Proert, #ant an! eui0ent 2,827.1 3,15.4 3,169.5 3,32.9 3,288.9

Preai! #an! #ease a0ents . 24.1 9.9 1. 1.1

oo!'i## 29. 29. 29. 29. 29.

ntan"ib#e assets 431.7 275.2 169.1 18. 14.3

sso&iate! &o0anies 158.4 165.4 169.8 16.4 165.6

oint# &ontro##e! entities 195.6 192.7 223.6 245.3 251.8

nvest0ents 1.4 1.4 1.4 1.4 6.3

%eferre! tax assets 5.7 . . 15.8 38.4

Total Non)*+rrent (ssets 3,$%#-! 3,".#-2 3,#"1-3 3,""1-" 3,".-.

*+rrent (ssets

nventories 1,395.1 1,1.3 1,273.6 1,389. 967.1

Re&eivab#es 1,8.3 1,99. 1,192. 1,244. 1,43.2

urrent invest0ents 15.3 2.8 73.4 212. 21.5

%eosits, ban an! &as$ ba#an&es 913.9 1,226. 626.5 1,586. 2,454.7

Total *+rrent (ssets 3,..-$ 3,..$-1 3,1$%-% .,.31- %,2$-%

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*on&urrent assets $e#! for sa#e 36.4 . . . .

Total (ssets #,!"-! #,2!3-3 $,!.$-" ",312-" ","3-!

E/+it0

$are aita# 549.2 549.2 549.2 549.2 549.2

t$er Reserves 398.5 395.8 389.7 412.7 393.8

Retaine! earnin"s 4,153.9 4,476.2 4,291.7 4,98.7 4,916.9

uit attributab#e to euit $o#!ers of t$e &o0an 5,11.6 5,421.2 5,23.6 5,87.6 5,859.9

+inorit interest . . . . .3

Total E/+it0 %,11-$ %,.21-2 %,23-$ %,"#-$ %,"$-2

Non)*+rrent 1ia2ilities

Lon"ter0 #iabi#ities 11.5 23.5 181.6 1.3 759.6

%effere! tax #iabi#ities 12.2 2.4 .8 .8 1.1

Total Non)*+rrent 1ia2ilities 113-# 232-! 1"2-. 11-1 #$-#

*+rrent 1ia2ilities

Paab#es 1,571.3 1,524. 1,367.2 1,519.4 1,979.5

:axation 6.3 1.6 2.2 16.9 2.6

$ort ter0 borro'in"s 36. 113.6 164.4 84.8 227.9

Total *+rrent 1ia2ilities 1,""3-$ 1,$3!-2 1,%33-" 2,3.1-1 2,21-

Total 1ia2ilities 1,!!#-3 1,"#2-1 1,#1$-2 2,..2-2 2,!#-#

Total E/+it0 and 1ia2ilities #,!"-! #,2!3-3 $,!.$-" ",312-" ","3-!

PROTON

RATIO ANA9SIS

(!(0(t3 R't(o +** +** +**7 +**6 +**5;urrent 0atio 1.$( '.1(' '.(6* 1.$+3 '.'*

uic) 0atio 1.(6 1.*31 1.'33 1.'++ 1.$3

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At(8(t3 R't(o

verage 4ime ;ollection 6(.+ 1.36 +'.$' /$.'* 6(.3

nventory 4urnover *.6/ /.11 3.6$ /.61 $.

4otal sset 4urnover (.+1 (. (.6 (.+* (.+6Fixed sset 4urnover '.'+ 1.$ 1.*$ '.36 './$

Pro;(t'$(/(t3 R't(o

2et Profit 5argin -*.6/3A 3.'$*A -1'./A (./++A /.'1/A

0eturn on EBuity -/.+16A 3.*(/A -11.'(A (.+/A ./*+A

0eturn on sset -*.'/1A './31A -$.*$6A (./6'A /.(1(A

F(-'-('/ #8#r',# R't(o

4otal De!t EBuity 0atio (.'$1 (.'/ (.'* (.'+* (.336

@everage 0atio (.3+' (.3*/ (.3'$ (.*16 (./(

From a financial analysis perspective, has the Proton management done a good o!"

n order to comment on the financial of P042, analysis on financial ratio need to !e done.

4here are / types of ratios &hich are liBuidity, activity, de!t, profita!ility and financial leverage

ratio. 4he calculations of each ratio sho&s accordingly &ith !rief analysis.

1. @iBuidity ratio

1.1 ;urrent ratio;urrent ratio G ;urrent assets ;urrent lia!ilities

+**G 3*(*.6(1$$3.6(

= 1.1

+**

G 3**6.1(163+.'(

= +.1*

+**7

G 316/./(1/33.$(

= +.*6

+**6G **31.(('3*1.1(

= 1.

+**5

G /('6./(''1(.((

= +.+7

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From the ratio analysis in liBuidity for ;urrent ratio sho&s that in year '((/ is '.'* times and in

year '((+ is 1.$( times &hich mean the amount sho&s are greater than 1.( &here!y Proton are

afford to repay short-term de!t. 4he higher the current ratio, the stronger the companyHs a!ility to

repay short-term de!t !ut from year '((/ to '((+, the a!ility to pay de!t sho&s rapidly do&n !y

(.* times. ased on year '((+, Proton have assets 1.$( times from current lia!ilities and

Proton provide 05 1.$( current assets for the purpose of repayment of short-term lia!ilities.

1.' uic) 0atio

uic) 0atio G =;urrent ssets # nventory> ;urrent @ia!ilities +**

G '((+./(1$$3.6(

= 1.*7

+**

G '3*/.$(163+.'(

= 1.4

+**7

G 1$+1.+(1/33.$(

= 1.+

+**6

G 3(*'.(('3*1.1(

= 1.*

+**5

G *(/+.*(''1(.((

= 1.4

5easuring the a!ility of cash and cash assets to cover lia!ilities. From the ratio analysis in

liBuidity for uic) ratio =cid test ratio> sho&s that in year '((/ is 1.$3 and in year '((+ is

1.(6 times, Proton has a ratio of 1.(6 times faster &hich means total asset are met are the same

for every 05 1 lia!ility asserted. 4his contrasts &ith the year of '((/, Proton has 1.$3 times,

&here the different from year '((+ are (. times, meaning Proton &hen year ahead the ratio is

going do&n and it7s sho&s that Proton not strong in finances and a!ility to pay de!t affected.

4hese ratios are moderately poor liBuidity.

4he only difference !et&een the current and Buic) ratios is that inventories =stoc)> is omitted

from the Buic) ratio. nventories is sometimes very difficult to convert into cash, particularly at

the value placed upon it in the !alance sheet. ecause it can !e difficult to generate liBuid funds

through the sale of inventories, it is inappropriate to consider it &hen loo)ing at the issue of

&hether Proton is a!le to pays its de!ts Buic)ly.

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'. ctivity 0atio'.1 verage 4ime ;ollection

verage 4ime ;ollection G 0eceiva!les Sales x 36/ days

+**G 1($(.36*$6.6 x 36/ days

= 6*.7

+**

G 1(++.((/6'1.6( x 36/ days

= 71.6

+**7

G 11+'*6$.3( x 36/ days

= +.+

+**6

G 1'**+6.+( x 36/ days

= 5.+4+**5

G 1*(3.'($*$3.3 x 36/ days

= 6*.7

4he average collection period ratio indicates the average length of time =in days> a !usiness must

&ait !efore it receives payment from customers &ho !uy merchandise on credit. n Proton, the

higher average collection period ratio in the year '(( &as +3 days and the lo&est &as /$ days.

4he lo&er the average collection period, the faster a company receives its money from

customers, and the stronger a company appears. n the other end of the continuum, the higher

the average collection period ratio, the longer customers ta)e to pay their !ills, and the less sta!le

a company appears.

'.' nventory 4urnover

nventory 4urnover G Sales nventories +**

G 6*$6.6(13+/.1(

= 4.65

+**G /6'1.6(11((.3(

= 5.11

+**7

G *6$.3(1'3.6(

= .6

+**6

G +6.+(13$+.(

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= 5.61

+**5

G $*$3.3(+6.1( = .774he inventory turnover ratio provides an indication on &hether a company has excessive or

inadeBuate goods =products> in inventory. n Proton, year '((/ sho& that inventory turnover

ratio is too high $., it means Proton is running out of inventory at various times throughout the

!usiness year. lso, in many cases, !usinesses &ith a high inventory turnover ratio &ill

experience a loss of sales to competitors. n the other hand, the lo&er an inventory turnover

ratio, the less cash reBuired !y a company to finance its inventory, and therefore the stronger a

company generally appears.

'.3 4otal sset 4urnover

4otal sset 4urnover G Sales 4otal ssets +**

G 6*$6.6((+$.+(

= *.1

+**

G /6'1.6('+3.3(

= *.77

+**7

G *6$.3(6+*6.$(

= *.67

+**6

G +6.+($31'.$(= *.4

+**5

G $*$3.3($$3(.+(

= *.6

sset turnover =total asset turnover> is a financial ratio that measures the efficiency of a

companyHs use of its assets to product sales. t is a measure of ho& efficiently management is

using the assets at its disposal to promote sales. 4he ratio helps to measure the productivity of a

companyHs assets.

4here is no set num!er that represents a good total asset turnover value !ecause every industry

has varying !usiness models. t also depends on the proportion of la!our costs in relation to the

capital reBuired, i.e. &hether the process is la!our intensive or capital intensive. 4he higher the

num!er, the !etter. f there is a lo& turnover, it may !e an indication that the !usiness should

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either utiliIe its assets in a more efficient manner or sell them. ut it also indicates pricing

strategyJ companies &ith lo& profit margins tend to have high asset turnover, &hile those &ith

high profit margins have lo& asset turnover.

'.* Fixed sset 4urnoverFixed sset 4urnover G Sales 4otal Fixed ssets

+**G 6*$6.6('$'.1(

= +.+

+**

G /6'1.6(31/(.*(

= 1.7

+**7

G *6$.3(316+./(

= 1.4

+**6

G +6.+(33('.+(

= +.6

+**5

G $*$3.3(3'$$.+(

= +.5

Fixed asset turnover ratio compares the sales revenue a company to its fixed assets .4his ratio

tells us ho& effectively and efficiently a company is using its fixed assets to generate revenues.

4his ratio indicates the productivity of fixed assets in generating revenues. f a company has a

high fixed asset turnover ratio, it sho&s that the company is efficient at managing its fixed

assets. Fixed assets are important !ecause they usually represent the largest component of total

assets. n increasing trend in fixed assets turnover ratio is desira!le !ecause it means that the

company has less money tied up in fixed assets for each unit of sales. declining trend in fixed

asset turnover may mean that the company is over investing in theproperty, plant and eBuipment.

4he fixed assets usually include property, plant and eBuipment. 4he value of good&ill, long-term

deferred tax and other fixed assets that do not !elong to property, plant and eBuipment is usuallysu!tracted from the total fixed assets to present a more meaningful fixed asset turnover ratio.

3. Profita!ility 0atio

3.1 2et Profit 5argin2et Profit 5argin G Profit =after tax> 0evenue

+**G =3(1.$>6*$6.6(

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= > 4.65?

+**

G 1$*.6/6'1.6(

= .+4?

+**7G -/$+./*6$.3(

= >1+.577?

+**6

G *6.+6.+(

= *.5?

+**5

G **'.*$*$3.3(

= 5.+15?

Profita!ility ratios measure a company7s a!ility to generate earnings relative to sales, assets and

eBuity. 4hese ratios assess the a!ility of a company to generate earnings, profits and cash flo&s

relative to relative to some metric, often the amount of money invested. 4hey highlight ho&

effectively the profita!ility of a company is !eing managed. Different profita!ility ratios provide

different useful insights into the financial health and performance of a company. For example,

gross profit and net profit ratios tell ho& &ell the company is managing its expenses.

2et profit margin =or profit margin, net margin, return on revenue> is a ratio of profita!ility

calculated as after-tax net income =net profits> divided !y sales =revenue>. 2et profit margin is

displayed as a percentage. t sho&s the amount of each sales 0inggit left over after all expenses

have !een paid. 2et profit margin is a )ey ratio of profita!ility. t is very useful &hen comparing

companies in similar industries. higher net profit margin means that a company is more

efficient at converting sales into actual profit.

3.' 0eturn on EBuity =0E>0eturnonEBuity G Profit =after tax> 4otal EBuity

+**

G =3(1.$>/1(1.6(= > 5.16?

+**

G 1$*.6/*'1.'(

= .4*5?

+**7

G -/$+.//'3(.6(

= >11.+7*?

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+**6

G *6./$(.6(

= *.75?

+**5

G **'.*/$6(.'= 7.54?

0eturn on eBuity =0E> is the amount of net income returned as a percentage of shareholders

eBuity. t reveals ho& much profit a company earned in comparison to the total amount of

shareholder eBuity found on the !alance sheet. 0E is one of the most important financial ratios

and profita!ility metrics. t is often said to !e the ultimate ratio or the Kmother of all ratios7 that

can !e o!tained from a company7s financial statement. t measures ho& profita!le a company is

for the o&ner of the investment, and ho& profita!ly a company employs its eBuity. ?istorically,

the average 0E has !een around 1(A to 1'A, at least in the S and C. For sta!le economics,

0Es more than 1'-1/A are considered desira!le. ut the ratio strongly depends on many

factors such as industry, economic environment =inflation, macroeconomic ris)s, etc.>.

4he higher the 0E, the !etter. ut a higher 0E does not necessarily mean !etter financial

performance of the company. s sho&n a!ove, in the DuPont formula, the higher 0E can !e

the result of high financial leverage, !ut too high financial leverage is dangerous for a companyHs

solvency.

3.3 0eturn on ssets =0>

0eturnonssets G Profit =after tax> 4otal ssets

+**

G =3(1.$>(+$.+(

= > 4.+51?

+**

G 1$*.6'+3.3(

= +.51?

+**7G -/$+./6+*6.$(

= >.46?

+**6

G *6.$31'.$(

= *.56+?

+**5

G **'.*$$3(.+(

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= 5.*1*?

0eturn on assets =0> is a financial ratio that sho&s the percentage of profit that a company

earns in relation to its overall resources =total assets>. 0eturn on assetsis a )ey profita!ility ratio

&hich measures the amount of profit made !y a company per 0inggit of its assets. t sho&s the

companyHs a!ility to generate profits !efore leverage, rather than !y using leverage. nli)e other

profita!ility ratios, such as return on eBuity =0E>, 0 measurements include all of a

companyHs assets # including those &hich arise from lia!ilities to creditors as &ell as those &hich

arise from contri!utions !y investors. So, 0 gives an idea as to ho& efficiently management

use company assets to generate profit, !ut is usually of less interest to shareholders than some

other financial ratios such as 0E. 0eturn on assets gives an indication of the capital intensity

of the company, &hich &ill depend on the industry. ;apital-intensive industries =such as railroads

and thermal po&er plant> &ill yield a lo& return on assets, since they must possess such valua!le

assets to do !usiness. Shoestring operations =such as soft&are companies and personal services

firms> &ill have a high 0J their reBuired assets are minimal. 4he num!er &ill vary &idely

across different industries. 4his is &hy, &hen using 0 as a comparative measure, it is !est to

compare it against a companyHs previous 0 figures or the 0 of a similar company.

4. Financial @everage 0atio*.1 4otal De!t EBuity 0atio

4otal De!t EBuity G 4otal @ia!ilities 4otal EBuity L @ia!ilities

+**

G 1++.3(+$.+

= *.+1

+**

G 1$'.1('+3.3(

= *.+57

+**7

G 116.'6+*6.$(

= *.+47+**6

G '**'.'$31'.$(

= *.+4

+**5

G '+(.$$3(.+

= *.6

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4he de!t-to-eBuity ratio =de!teBuity ratio, DE> is a financial ratio indicating the relative

proportion of entityHs eBuity and de!t used to finance an entityHs assets. 4his ratio is also )no&n

as financial leverage. De!t-to-eBuity ratio is the )ey financial ratio and is used as a standard for

udging a companyHs financial standing. t is also a measure of a companyHs a!ility to repay its

o!ligations. %hen examining the health of a company, it is critical to pay attention to the

de!teBuity ratio. f the ratio is increasing, the company is !eing financed !y creditors rather than

from its o&n financial sources &hich may !e a dangerous trend. @enders and investors usually

prefer lo& de!t-to-eBuity ratios !ecause their interests are !etter protected in the event of a

!usiness decline. 4hus, companies &ith high de!t-to-eBuity ratios may not !e a!le to attract

additional lending capital.

high de!teBuity ratio generally means that a company has !een aggressive in financing its

gro&th &ith de!t. 4his can result in volatile earnings as a result of the additional interest

expense. f a lot of de!t is used to finance increased operations =high de!t to eBuity>, the

company could potentially generate more earnings than it &ould have &ithout this outside

financing. f this &ere to increase earnings !y a greater amount than the de!t cost =interest>, then

the shareholders !enefit as more earnings are !eing spread among the same amount of

shareholders. ?o&ever, the cost of this de!t financing may out&eigh the return that the

company generates on the de!t through investment and !usiness activities and !ecome too much

for the company to handle. 4his can lead to !an)ruptcy, &hich &ould leave shareholders &ith

nothing. 4he de!teBuity ratio also depends on the industry in &hich the company operates. For

example, capital-intensive industries such as auto manufacturing tend to have a de!teBuity ratio

a!ove ', &hile personal computer companies have a de!teBuity of under (./.

*.' @everage 0atio =:earing 0atio>

@everage 0atio G 4otal @ia!ilities 4otal EBuity

+**G 1++.3/1(1.6

= *.+

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+**

G 1$'.1(/*'1.'

= *.45

+**7

G 116.'/'3(.6= *.+

+**6

G '**'.'/$(.6

= *.416

+**5

G '+(./$6(.'

= *.5*7

ny ratio used to calculate the financial leverage of a company to get an idea of that

companyHs methods of financing or measure its a!ility to meet its financial o!ligations.

4here are several ratios, !ut the main factors evaluated !y a ratio include de!t, eBuity,

assets, and interest expenses. ratio used to measure a companyHs mix of operating costs

that yields an approximation of ho& changes in output &ill affect operating income. Fixed

costs and varia!le costs are the t&o types of operating costsM depending on the company

and the industry, the mix &ill differ. :enerally, companies &ith higher leverage as

determined !y a leverage ratio are thought to !e more ris)y!ecause they have more

lia!ilities and less eBuity. leverage ratio is also called a gearing ratio or an eBuity

multiplier. 4hese leverage ratios are very important for the company7s internal users as

&ell as external users. 4hese ratios helps identify the &ea) areas of the company internally

and help the shareholders ma)e a udgment a!out their investments. ;ompanies &ith high

fixed costs, after reaching the !rea)even point, see a greater increase in operating revenue

&hen output is increased compared &ith companies &ith high varia!le costs. 4he reason

for this is that the costs already have !een incurred, and so every sale a!ove !rea)even

transfers to the operating income. n contrast, a company &ith high varia!le costs sees little

increase in operating income &ith additional output, !ecause costs continue to rise asoutputs rise. 4he degree of operating leverage is the ratio used to calculate this mix and its

effects on operating income.

%hat characteristics should a foreign partner have that &ill ena!le maximum synergies"

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s &e )no&, at the moment, P042 do not has enough resources to stand !y itself. 4his

means that it need other company to oin or cooperate in order to produce the products. ?o&ever,

it is important for the foreign partner to have several good characteristics or Bualities in order to

ensure that the partnership or colla!oration ta)en place &ill !e successful and !enefit to

P042.

Several characteristics that a foreign partner should have in order to ena!le P042 maximiIe

its synergies are J

1. A08'-# (- t#)-o/o,3 2 t#)-o/o,3 #"#rt(%#ne of the maor factor in order to ensure success in automotive industry are technology.

4echnology plays a very important part in producing a good Buality product !ecause

consumer al&ays aim the !est technology. 4echnology in this &orld are rapidly changing

and of P042 are una!le to follo& the technology flo&, it might collapse !ecause the

competition is very high.

ther automotive company are very efficient in advancing their technology. 4hey al&ays

moving for&ard and )no& the reBuirement of consumer and upgrade its products from

time to time. ;ompany from country li)e


17/33


4he foreign partner that P042 are loo) into to have partnership or colla!oration &ith

must have this characteristics to help P042 maximiIe its sales.

3. A$/# to '0'"t (t) /o'/ !/t!r# '-0 -orm%Different countries have different cultures and norms. ?o&ever, cultures and norms is

something that should !e respected !y people from other country in &hich foreign people

should have respect on local culture and norms. Even though P042 really need the

partnership and colla!oration, this aspect cannot !e regarded as it &ill affect the company

as a &hole.

*. Pro0!t(o- #;;((#-3Production efficiency is very important to ensure Buality and reduce costs of production

!ecause the cost in producing automo!ile product are very high. Foreign partner should

!e efficient in their production so that the overall costs can !e reduced and the customer

satisfaction can !e maximiIed.

/. F(-'-('/ (-8#%tm#-t@ast !ut not least, in order for P042 to find partner, the partner must have a sta!le

financial position. %ith a strong financial position, they can help P042 in term of

capital.

developing and the matter of operations to !e relocated or closed do&n"

SOT ANA9SIS :>

STRENGT&S

;ompetitively priced products

@o& price in maintenance

Easy access to service,

maintenance, repairs and o!tain

spare parts !ecause many service

centre availa!le

Easy availa!ility stoc) !ecause

produced in 5alaysia

Extensive nation&ide distri!ution

net&or)

EAKNESSES

0eputation of poor product

performance and functionality

?igh cost to expand their operation

!y advance technology

Short history in automotive industry

8ulnera!le to increasing material

cost example steel

;ars are not fuel efficiency

ehind in technology !ecause still

using timing !elt &hich is

Page 17


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:ood Buality of certain parts such

as air-conditioning

%ide range of models

0LD # s a company &hich

receive support from :overnment,Proton have enough fund to do

0LD and al&ays come &ith ne&

model

:ood corporate governance

nfluence of patriotism as Proton is

national car-ma)er

dangerous in term of safety

Do not produce compact cars and *-

&heel drive such as Perodua 8iva

and Ford 0anger

Dependa!ility to foreign companiesin order to get their technology

0educe profit in &hich has to pay

royalties &hen colla!oration !eingmade

OPPORTNITIES

?igh demand on the products #

5alaysian al&ays &aiting &henProton are going to launch ne&

model !ecause of price factor

:overnment support

5alaysian products # ttract many

5alaysian &ho patrionism in order

to support 5alaysian products

pportunity to gro& their !usiness

glo!ally

0LD Development

fter-sales services

;olla!orations &ithin automotive

industry

T&REATS

;ompetitors # local and

international !rands. lot of su!stitute products in

mar)et and ne& model &ith ne&

technology are changing rapidly

Fast changing and advanced

engineering technology

Economic do&nturn &hich decrease

of car sales

ncrease in oil prices &hich &ill

reduce demand

0eputation of poor product

performance and functionality

!ecause most ;hinese don7t !uy

Proton

STRENGT&S

P0427s strength lies in its competitively priced product. t extensive nation&ide

distri!ution net&or) helps the industry to move for&ard &ith the support from 5alaysian

government. 4he company also has good corporate governance, and highly regarded !y

many 5alaysians out of patriotism they feel for this country as P042 is the national

car ma)er.

EAKNESSES

Page 1"


19/33


nexperience, apparently due to short history in car ma)ing certainly could not !e an

excuse for P042 to come out &ith lo& Buality products. 4his could cost P042

very high as over time, it might eopardiIe P0427s reputation. Poor product

performance and functionality is something that cannot !e allo&ed to happen and Buality

al&ays needs to !e monitored and assured to the customers. ther than that, operational

cost and other expenses is al&ays a challenge to any industry and for the case of

P042, it is more vulnera!le to increasing ra& material cost such as steel particularly.

OPPORTNITIES

4he demand for cars in any segment is al&ays there, except for more trying times li)e

during economic crisis. 4here are al&ays opportunities for P042 to !e a glo!al

player. 2o!ody ever say that cars should only !e manufactured !y # 5alaysian second national car ma)er,

set up after P042 started to challenge P042Ks mar)et share in 5alaysia. Perodua

actually did !etter in recent year and outperformed P042 via their most &ell selling

model so far, 5y8i and gra! more than 3(A of overall mar)et share. nder policy li)e

F4 =SE2 Free 4rade rea> consumers can have more choices form ?2D,

4oyota, ;hevrolet and others !rand to !e selected at a more afforda!le price, as 5alaysia

no& has cut duties on imports from other Southeast sian countries to less than five

percent.

n the !asis of a S%4 analysis a!ove, P042 is no need to close or move part of

P042 as it is an icon for 5alaysia to !e proud of and &ill !e a milestone in the

Page 1#


20/33


21/33


assem!lers andor manufacturers continued to protect the local incum!ents. 5oreover,

the policy &as attractive for Proton as it provided means for it to employ its under-

utilised capacity =estimated volumes for the 4anung 5alim plant at 1/(,((( units per

year and the Shah lam plant at '((,((( units per year &ere under-utilised at /(A> and

!oost its revenue stream.

Proton must focus to produce vehicles a!ove 1,$((cc to fulfil demand of 5alaysian

consumer.

/> A// (m"ort#0 !%#0 8#)(/#% "r(#% to $# ,'#tt#0 to "r#8#-t !-0#r>0#/'r't(o-4his &as aimed to prevent manipulation of car prices. nly the pricelist of ne& imported

;s &ould !e gaIetted for the purpose of duty computation. separate gaIetted

pricelist for used ;s &ould !e issued to supplement the existing list of ne& ;s to

prevent the under-declaration of grey imports !y registering the vehicles as NusedO

instead of Nne&O.

6> T)# (m"ort o; !%#0 "'rt% '-02or om"o-#-t% to $# "ro)($(t#0 '-0 t)# ,r'0!'/

")'%(-,>o!t o; (m"ort#0 !%#0 omm#r('/ 8#)(/#% to $# #;;#t(8# ;rom 1 J!-# +*11

'-0 1 J'-!'r3 +*16 r#%"#t(8#/3 to "romot# %';#t3 '-0 #-8(ro-m#-t'/ o-#r-%

4he policy &ould !e very costly for customers paying more for ne& auto parts &hen the

NhalfcutsO &ould !e !anned.

> I-#-t(8#% ;or m'-!;'t!r#r% o; r(t('/ '-0 )(,) 8'/!#>'00#0 "'rt% om"o-#-t%4he high value-automotive-part manufacturers such as transmissions, !ra)e systems,

air!ags and steering systems &ould enoy incentives such as 1(-year 1((A fiscal

deduction Pioneer Status =PS> or a /-year 1((A tax exempted nvestment 4ax llo&ance

=4>. Similarly, the investments made for the assem!ly or manufacture of hy!rid and

electric vehicles &ould !e granted the a!ovementioned incentives in addition to other

incentives such as customised trainings and research and development =0LD> grants.

Spilled-over from ncentive no. 6, this &as a measure to promote the local long-termdevelopment goal of !ecoming a regional 0LD and manufacturing hu!.

$> A ;r### o- m'-!;'t!r(-, /(#-# ;or r#o-0(t(o-(-, '-0 r#$!(/t 't(8(t(#% (//

o-t(-!#

4his policy &as aimed to filter out possi!le malpractices &ith respect to the re!uilt

segment in the automotive industry.

Page 21


22/33


+> Ro'0ort)(-#%% I-tro0!t(o- o; E-0>o;>(;# #)(/# E Po/(3nder this policy, effective 1 Proto- to #%t'$/(%) ' %tr't#,( "'rt-#r%)(" (t) ,/o$'/ OEM% to #-)'-# (t% ,/o$'/

om"#t(t(8#-#%% ;or /o-,>t#rm 8('$(/(t3

Discussions surrounding Proton forming potential strategic partnerships &ith 8%,

0enault S and :5 had long !een ongoing in the mar)et. Proton had !een eyeing for a

strategic partnership to increase its technological pro&ess in exchange for a gate&ay to

the sean region, an advanced 0LD platform and ample production capacity. ?o&ever,

the slo& pace li!eralisation of the automotive industry =e.g. a reluctance to a!olish the P

system and the non-compliance to ;EP4 greement> &as ma)ing 5alaysia less attractive

to the foreign automotive players as compared to the other regions li)e 4hailand and

ndonesia for example, 8% had already invested in an assem!ly plant in ndonesia,

&hich &as expected to !e operational !y '(1'.

ased from a revie& of '((+ 2ational utomotive Policy, Proton should merge &ith other local

automotive to overcome and solve their pro!lem. 4hey can discuss and ma)e a clear term and

conditions in an agreement a!out the !est solution for !oth of them.

%hat other information not included in the case could help consultant Saiful la&i ma)es a

more meaningful recommendation" %hy"

s a consultant, ;hartered ccountant, Saiful la&i have to prepared a Proected udgeting to

revie& Proton and to recommend &hether an investment andor colla!oration should !e

considered.

4here are a fe& information in this case are not included. 4hese areJ

1. C!rr#-t M'r@#t S(t!'t(o-

Page 22


23/33


Eo-om3

4here &ere a!out $(6 million cars and light truc)s on the road in '((, consuming over

'6( !illion S gallons =+$(,(((,((( m3> of gasoline and diesel fuel yearly. 4he

automo!ile is a primary mode of transportation for many developed economies. 4he

Detroit !ranch of oston ;onsulting :roup predicts that, !y '(1*, one-third of &orld

demand &ill !e in the four 0; mar)ets =raIil, 0ussia, ndia and ;hina>. ther

potentially po&erful automotive mar)ets are ranand ndonesia.Emerging auto mar)ets

already !uy more cars than esta!lished mar)ets. ccording to a


24/33


'((+ 61,+1,$6$ -1'.*A

To" 8#)(/# m'-!;'t!r(-, ,ro!"% $3 8o/!m#

4he ta!le !elo& sho&s the &orldHs largest motor vehicle manufacturing groups, along

&ith the marBuis produced !y each one. 4he ta!le is ran)ed !y '(1( end of year

production figures from the nternational rganiIation of 5otor 8ehicle 5anufacturers

=;> for the parent group, and then alpha!etically !y marBuee.


25/33


Page 25


26/33


+. It#m (- I-om# St't#m#-t (-t#r-'/ (-;orm't(o-

ncome statement is a statement sho&ing all the income and expenses in order to produce

a company7s net profit and income attri!uta!le to shareholders. ?o&ever, the income

statement of P042 from year '((/ until '((+ does not sho& a lot of cost and

expenses incurred.

ll the items !elo& are items that should !e included in the income statement !ut they

are not revealed in the income statement of Proton.

1. ;ost of Sales

'. ther operating income

3. Distri!ution costs

*. dministrative expenses/. ther operating expenses

6. Finance cost. Share of results associated companies

$. Share of results of ointly controlled entities

+. 0esearch and Development ;ost1(. nterest charges

4he values of a!ove items are very important to determine, influence and help Saiful

la&i to ma)e a reasona!le, rationale and correct udgment.

For example cost of sales. ;ost of sales is !eing used to determine ratio of inventory

turnover. nventory turnover ratio is a ratio that measures a company7s a!ility to sell its

products or convert its inventory into cash in a year. y )no&ing this ratio, Saiful la&i

&ill )no& ho& efficient Proton in planning its production and sales to ensure that there is

a !alance !et&een them to avoid inventory that is )ept too long.

. R#%#'r) A-0 D#8#/o"m#-t RHD

2ext is 0esearch and Development ;ost. P042 has !een given a huge amount of

allocation from :overnment to do research and development and they are al&ays doing it

in order to improve the Buality of their product. y right, amount of research and

Page 26


27/33


development should !e reported in the income statement. 4he value &ill help Saiful ala&i

to decide &hether or not P042 has done a good research !y comparing to the cost of

research and the result or outcome from the research.

0esearch and development is the &ay to change and a path to development. t increases

the efficiency in the organiIation !y finding different efficient and effective means of

&or)ing. 0LD is the source of information and it updated the organiIation data and

insists the organiIation to fell change in environment. it tell the organiIation a!out

changing in the preferences and taste of customers. 0LD demonstrates the need of

consumers and customers for particular product.

dministrative expenses are also important to !e revealed. 4his is !ecause the amount

&ill determine ho& efficient P042 in spending its administrative expenses. n

administrative expense is not an operating expense and does not determine !y the

production.

nterest charges are amount of interest paid !y company for loan !eing made &hether

long term or short term. 4his amount is also need to !e revealed to let Saiful la&i )no&

&hether P042 has made a &ise in ma)ing an outsource financing.

4. SOT A-'/3%(% o; Proto- '-0 (t% om"#t(tor

S%4 nalysis is an analysis that consists of a company7s strength, &ea)ness,

opportunity and threat. 4he analysis &ill help company to discover their o&n strength and

&ea)ness and opportunity and threat that they are facing from outside. t &ill also help

company to increase value of a company in all aspects from the capital financing to

production of products. 4his includes the Buality of product, the effectiveness and

efficiency of each department, the s)ills and )no&ledge of their la!our and so forth. y

)no&ing their o&n &ea)nesses, they are a!le to find solution to overcome the

Page 27


28/33


&ea)nesses in order to minimiIe it so that a company can focus on expanding its

strength. pportunity and threat is something that a company have to )no& in order to

expand and gro& its !usiness. 4o ensure the successful of a company in a long term, they

need to gro& and expand. Same goes to P042. 3( years is a long ourney made !y

P042 &here!y they has to )no& exactly the opportunity that is availa!le for them to

ta)e and the threat that they need to !e a&are.

4his analysis should !e revealed !ecause from the analysis, Saiful la&i &ill have a

!road mind of P042 and also manage to decide the crossroads of P042 in a long

run as &ell.

esides S%4 nalysis of Proton, other information that should !e included is lists of

its competitors and their S%4 nalysis. 4his information is very useful to Saiful la&i

so that he manages to ma)e a comparison and a!le to )no& &here P042 stand

compare to its competitors and discover &ea)nesses of P042 !etter.

5. PROTON% or"or't# (-;orm't(o-

n order for Saiful la&i to evaluate P042, he needs the company7s corporate

information. 4he corporate information includesJ

1. ;ompany7s vision and mission'. nternal and external environment of the company

3. Short term and long term o!ectives

*. Strategies-strategies that have !een implemented !y the company to achieve goals

6. R#8(# o; t)# ',r##m#-t '-0 o//'$or't(o- )'% $##- 0o-# $3 PROTON 0o(-,

"'"#ror@

Since P042 !een esta!lished in 1+$3, there are many colla!oration made !y

P042 &ith international company to produce ne& model.

7. C!%tom#r F##0$'@

Page 2"


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;ustomer feed!ac) is vital to ma)ing a !usiness &or). 4he customers are the heart of

P0427s operationM &ithout them, it &ould !e impossi!le to have any of the success

that the company does. ;ustomer feed!ac) can !e an excellent &ay to )eep the !usiness

going in a positive direction.

Get Honest Opinions

;ustomer feed!ac) is a vital &ay to get honest opinions on P0427s services or

products from people &ho are familiar &ith them. 4hese opinions can ma)e it easier to

get into the minds of the most important critics.

Improve Relations

%hen customers feel that a !usiness truly cares a!out them and &hat they thin), they

may !e more li)ely to !e loyal customers. %hen a !usiness ma)es changes according to

feed!ac), it sho&s that they truly listen and respect those opinions.

Inexpensive Business Advice

Some !usinesses pay thousands of dollars for someone to come in and tell them &hat

improvements need to !e made to the !usiness to get more customers. ;ustomer feed!ac)

is essentially inexpensive !usiness advice directly from the source.

More Customers

%hen a !usiness is &illing to receive feed!ac) and listen to it, &ord spreads and more

customers may !e &illing to give the company a shot !ased on your commitment to

excellent customer service.

Positive Changes

!usiness does not li)e to !rag a!out the negative aspects of their operationM they &ant

to have mostly positive things to say. ;ustomer feed!ac) can mean positive changes

Page 2#


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according to their comments, &hich could mean a !etter reputation and more money for

the !usiness.

So, in this case, the information a!out the customer feed!ac) is important !ecause it

could help Saiful la&i to identify the customer satisfaction a!out P0427s product.

. M'r@#t(-,

4he heart of the !usiness success lies in its mar)eting. 5ost aspects of your !usiness

depend on successful mar)eting. 4he overall mar)eting um!rella covers advertising,

pu!lic relations, promotions and sales. 5ar)eting is a process !y &hich a product or

service is introduced and promoted to potential customers. %ithout mar)eting, the!usiness may offer the !est products or services in your industry, !ut none of the potential

customers &ould )no& a!out it. %ithout mar)eting, sales may crash and companies may

have to close.

For example, PE0D has oined a program N%hat7s p :raduateO &ith a lo&

minimum monthly installment, /(A discount, free maintenance cost, insurance incentive

and free driving license.

. Pro0!t(o-

4he processes and methods used to transform tangi!le inputs =ra& materials, semi-

finished goods,su!assem!lies> andintangi!leinputs =ideas, information,)no&ledge> into

goodsorservices.0esourcesare used in thisprocessto createan outputthat is suita!le

for use or has exchange value.

4his information could help Saiful la&i to )no& the extent to &hich the productions of

Proton meet the needs and preferences of customers.

Co-/!%(o-

ase on this case, our recommendations areJ

Page !$
http://www.businessdictionary.com/definition/method.htmlhttp://www.businessdictionary.com/definition/tangible.htmlhttp://www.investorguide.com/definition/raw-materials.htmlhttp://www.investorguide.com/definition/raw-materials.htmlhttp://www.businessdictionary.com/definition/semi-finished-good-SFG.htmlhttp://www.businessdictionary.com/definition/semi-finished-good-SFG.htmlhttp://www.businessdictionary.com/definition/subassembly.htmlhttp://www.businessdictionary.com/definition/subassembly.htmlhttp://www.businessdictionary.com/definition/intangible.htmlhttp://www.businessdictionary.com/definition/intangible.htmlhttp://www.businessdictionary.com/definition/idea.htmlhttp://www.businessdictionary.com/definition/information.htmlhttp://www.businessdictionary.com/definition/knowledge.htmlhttp://www.businessdictionary.com/definition/knowledge.htmlhttp://www.businessdictionary.com/definition/goods.htmlhttp://www.businessdictionary.com/definition/services.htmlhttp://www.businessdictionary.com/definition/services.htmlhttp://www.businessdictionary.com/definition/services.htmlhttp://www.businessdictionary.com/definition/resource.htmlhttp://www.businessdictionary.com/definition/process.htmlhttp://www.businessdictionary.com/definition/create.htmlhttp://www.businessdictionary.com/definition/output.htmlhttp://www.businessdictionary.com/definition/exchange-value.htmlhttp://www.businessdictionary.com/definition/exchange-value.htmlhttp://www.businessdictionary.com/definition/method.htmlhttp://www.businessdictionary.com/definition/tangible.htmlhttp://www.investorguide.com/definition/raw-materials.htmlhttp://www.businessdictionary.com/definition/semi-finished-good-SFG.htmlhttp://www.businessdictionary.com/definition/semi-finished-good-SFG.htmlhttp://www.businessdictionary.com/definition/subassembly.htmlhttp://www.businessdictionary.com/definition/intangible.htmlhttp://www.businessdictionary.com/definition/idea.htmlhttp://www.businessdictionary.com/definition/information.htmlhttp://www.businessdictionary.com/definition/knowledge.htmlhttp://www.businessdictionary.com/definition/goods.htmlhttp://www.businessdictionary.com/definition/services.htmlhttp://www.businessdictionary.com/definition/resource.htmlhttp://www.businessdictionary.com/definition/process.htmlhttp://www.businessdictionary.com/definition/create.htmlhttp://www.businessdictionary.com/definition/output.htmlhttp://www.businessdictionary.com/definition/exchange-value.html


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1. ased on the financial analysis has !een made, &e can see that Proton are no longer a!le

to pursue the !usiness !y their o&n !ecause of the lo& liBuidation ratio and high leverage

ratios. 4herefore, Proton may consider to ma)e a colla!oration &ith the local partners or

foreign partners.

'. ;hoosing the foreign partners is not easier as &e can tal). 5any thing and aspect that &e

must consider !efore &e ma)e colla!oration &ith the foreign partners li)e cultural issue

and adherence to the rules and regulation in this country.

3. S%4 analysis is very important to a company to understand their strengths and

&ea)nesses as &ell as to find out &hat are the opportunities that can !e seiIed and the

threats to !e avoided. 4herefore, refer to this case, Proton can use that S%4 analysis

&hether to ma)e an investment or colla!oration.

*. 5isuse of po&er and fraud !y high level of management should !e addressed and

investigate either !y maor shareholders, :overnment !odies and create Proton

;ommission to solve Proton pro!lems in the future development

/. 4he production of a!ove models usually comes from colla!oration of Proton &ith foreign

partners. From example, colla!oration &ith 5itsu!ishi produced nspira &hile

colla!oration &ith 0enault S produced Savvy. Proton also used foreign technology in

the production of cars such as @otus. 0ecently, Proton also going to have colla!oration

&ith ?onda. n terms of mar)eting, steps have !een ta)en to increase proton visi!ility in

foreign countries such as Egypt, Syria, 4hailand, ;hina and ndonesia.

6. ;olla!oration,


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model !ut it suits many people

'. 8alue for money-fuel efficiency and

price reasona!le

3. @o& maintenance-every 1(,((( )m

*. ?ave a good reputation

/. Excellent reali!ility and !uild Buality

plus the impressive standard eBuipment

specification and latest generation

technology apparent in models

6. ccording to the $('( rule, the prices

of Perodua cars are relatively

afforda!le to the $(A of the people.

. Easy to drift for !eginner

$. Suita!le for single and couple

models availa!le and the same car only

upgraded-do not produce ne& model of

car

'. Design not impressive

3. %ea) management team

*. Dependa!ility to 4oyota company

!ecause using their technology

O""ort!-(t(#% T)r#'t%

1. pportunity to gro& !ecause meet the

demand people no&adays-fuel saving

and compact car

'. pportunity to mar)et glo!ally

3. pportunity to produce more products

due to goos reputation-people have

trust in ne& product

1. Economic slo&do&n

'. ;ompetition from competitors

especially Proton

. ;hanging existing engine technology to green technology from fuel to hy!rid =electricity>

$. ;reativity in technology innovation can !e considered and asses !y doing mar)eting

survey to the nation&ide customers such as favourite colour, design, car capacity, car

Buality, etc+. 5ar)eting strategy to !e revised, improve and implement immediately to increase sales,

customer satisfaction, customer reBuirements etc

1(. ;omprehensive and accepta!le in generate udget ;ash Flo& and Financial udgeting to

solve Proton financial situation and to create opportunity for future development

Page !2


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11. Full utilisation of factory space &ith mass production not produce only one type of car

!ut mixture type of cars in !oth factory either in 4anung 5alim or Shah lam

194195148 case 5 proton full assignment

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