Introduction

Over the past decade, the advent of increased global trade has brought along with it fierce

competition to the international automotive industry. In the past, vehicle manufacturers offered the

market unique models that had a small variety of attributes and long life cycles. However, today,

automotive companies must now provide a high product variety to remain competitive as they are

facing increasing customer sophistication and fast- paced technological developments in the

industry. Furthermore, the recent global financial crisis has left many automobile makers to

reconsider their upcoming product lines and future strategies. This paper will focus on two

automotive manufacturers, namely: Proton Holdings Berhad and Toyota Motor Corporation. The

paper will go on to analyse their success factors, competitiveness on a global arena and also their

future prospects. foreclose market entry and maintain or increase their market share, increase their

prices and serve customer needs better by closely matching customer preferences and offered

products.

1) The automotive industry is a competitive yet lucrative business industry. Car companies are

constantly trying to outdo each other in terms of designing and developing the latest

revolutionary model car. Automotive manufacturers and dealers (in some cases) were able to

price their products at cut-throat prices in the past if they decided to because in most cases

the consumer did not have a choice but to purchase the car. We all need transportation and

with that in mind automotive traders basically determine product pricing. Today however,

the global industry has seen the arrival of many newer companies into the industry. As with

any industry, the introduction of a new company leads to the assumption of new and better

products. In the case of the automotive industry that case might be very true in a dwindling

economy where there seems to be no relief on rising gas prices. One of the most critical

factors dictating the way in which producers in the automotive industry price their products

are supply and demand. Along with the supply and demand factor companies in the

automotive industry also take into account the production costs when placing a price on their

product. When setting prices producers have to determine whether the product price reaches

the company’s financial goals, are consumers willing to buy at the set price and the product

identity. “A good pricing strategy would be the one which could balance between the price

floor (the price below which the organization ends up in losses) and the price ceiling (the

price beyond which the organization experiences a no demand situation)” McKinney 2006.

In order to remain competitive in their respective markets, these companies have capitalised

on their strongest assets and then brought this on to a global level.

Proton, in comparison with Toyota is a much smaller and newer entrant into the automotive

industry. Nonetheless, it has managed to utilise its limited local distribution knowledge and

experience to put a foot-hold in the international arena. One of Proton's key factors for international

success was the fact that it was Japanese backed. In the early days of Proton, Mitsubishi Motors

Corporation used to hold a substantial stake in Proton, along with the Malaysian government. Due

to this unique relationship, Proton was able to acquire many key technologies from Mitsubishi

which in turn helped them develop the Proton Saga. This also helped boost the reputation of the

company, as the components were mainly Japanese sourced. As a result, Proton ventured into the

UK market in 1989 with moderate success. Furthermore, to strengthen their position in the global

arena, Proton purchased British sports vehicle manufacturer, Lotus in 1996. This move enabled

Proton to again channel technology from its subsidiary to other divisions of the company. By doing

so, Proton was able to create the Proton Satria Gti that featured suspension “engineered and

designed by Lotus”. This strategic move allowed Proton to associate itself with the more prestigious

Lotus brand and allow it to improve its reputation in Europe.

For Toyota, one of its key success factors is its implementation of a Global Standardisation Strategy.

In principle, it is a strategy that focuses on reaping the cost reductions that come from going global

and creating a standardised product platform. Apart from this, Toyota has invested a lot of its time

and money into its Research and Development arm, (TRD). R&D values of Toyota are based on

Quality, durability, reliability, value for money, environmentally-safe, convenient. Toyota has

initiated new technologies including building the first bulk-produced hybrid gasoline-electric

automobile. The Prius, had a sale of two million worldwide in 2010. In addition, Toyota has various

facilities that come standard with its vehicles such as: Advanced Parking Guidance System (APGS)

(automatic parking), a four-speed automatically controlled with buttons for economy shifting and

power, and an eight-speed automatic conduction. In addition, Toyota also produces higher-end

luxury vehicles under the “Lexus” brand name. Technology in the car industry on today’s market

conditions plays a very important role, with gas prices rocketing energy companies are investing

money and time in developing alternative ways to be more gas efficient. Hybrid cars and alternative

fuels are a good example of technology impact in the car industry. Productivity is also impacted by

technology, the better technology we have the better cars the manufactures produce and also car

companies can produce more cars in less time. Productivity is also affected by the human factor,

employees are provided with new tools and resources to perform their task more efficiently and

technology here plays an important role as well. Toyota has manufacturing plants in most parts of

the globe. It assembles or manufactures automobiles for local markets. Toyota follows the JIT

Production and "Lean Manufacturing", which is one of the important key success factors. Its

business methods managerial views are known together as the Toyota system. Toyota has long been

recognized as an industry leader in manufacturing and production. Consequently, Toyota’s

management values have developed from the firm’s beginning. The company follows a Just-In-

Time (JIT) distribution method and adopts the values specified from its 14-principles known as the

Toyota Way.

2) Out of the two companies, Toyota, in my view is definitely the more competitive one.

Toyota is one of the largest car manufacturers in the modern world. In fact, this

multinational corporation has become the leading car manufacturer replacing the world

leader General Motors which has remained on the first position within several decades.

Obviously, this is a tremendous success for a Japanese company that was founded in 1937

and became the leading company of the world automobile market. Today, the company is

one of the most influential players in the world market. Many firms try to replicate the

human resource management efficiency of Toyota since it was traditionally considered to be

one of the most successful companies in this respect. Building on its disciplined and strong

work ethic, Japan as a country has always stressed on lifetime employment for their

employees. Unlike India, where job security is the main reason behind the lethargy found in

public sector employees, the Japanese ethos is very different. Job security makes Japanese

employees more flexible and loyal towards their organizations. They go over-the-board to

improve productivity. It would be difficult to find such an attitude in countries like

Malaysia, where the order of the day is hire and fire. This corporate culture that is instilled

into Toyota workers has been found to not only increase allegiance among workers; it

creates a more harmonious workforce as job security is given priority.

It is no surprise than that the success of Toyota was to a significant extent determined by the

effective management on all levels which made the company highly productive and which created

ample opportunities to promote its products worldwide. What is more important, Toyota production

was and still remains highly competitive but, if in the past the company basically borrowed the

achievements and technological experience of leading western companies than today the company

is one of the major innovators in the automobile industry. In this respect, it should be said that

Toyota’s first cars resembled successful American and European cars, such as the Dodge Viper, for

instance, while nowadays, Toyota creates its own unique prototypes on the basis of new

technologies. At any rate, one of the strategic directions of the functioning of the company is the

development and implementation of innovation in its production. An excellent example of this was

the introduction of the Prius by Toyota in 2001. When it was first launched, the prius was a first of

its kind, a hybrid vehicle that ran on petrol as well as electricity (charged by kinetic motion).

Furthermore, the global expansion of Toyota became a reality because the company has managed to

develop an effective production chain in which the cooperation between its plants situated in

developed and developing countries is highly productive. In addition to that, the company utilised

advanced stock management systems such as “Just-In-Time” inventory management systems to cut

down production time. To make the JIT system a success, Japanese companies developed a system

of focused factories and supplier networks, where there are no large integrated plants. Instead, there

are specialized plants supplying to the next level in the supply change. Toyota was able to

drastically reduce the lead time, mainly because factories were located in more or less the same

geographical area. It would be difficult to achieve such reduced lead times elsewhere and especially

in regions where companies depend on global sources for raw materials. No wonder that nowadays

the production chain of Toyota is spread worldwide and it is possible to estimate that Toyota is

really a global company which has its plants in many countries of the world, while there are even

more countries where its production is sold by official dealers.

Presently, Toyota has its plants manufacturing and assembling cars not only in countries, which are

traditional target markets for its products, such as the US, Australia, South-Eastern Asia, the EU, but

it also actively enters markets of other countries of the world, including China, Argentina, Mexico,

and others (Volti, 2005). This means that Toyota attempts to develop its production chain worldwide

or, to put it more precisely, the company has already realized that the ignorance of the potential of

new markets can lead to negative consequences to the market position of Toyota in the world

market. Once it has set up base in a certain country or region, Toyota builds upon its base by

establishing a series of reliable supplier networks. Japanese industries work on long-term supplier-

customer relationships. It is common to find specialized suppliers supplying parts to a few selected

customers. On the other hand, certain companies maintain single suppliers providing a variety of

components for a single customer. As a result of Toyota's powerful name and brand, many key

suppliers are willing to work with Toyota and build long, lasting relationships. This is known as a

first-mover advantage and has resulted in significant success for Toyota on the global arena.

Toyota operates worldwide, and has plants in practically all parts of the world while its cars are

recognizable in all countries of the world. However, such a trend to globalization, leading to the

localization of the production and growing cooperation between units of the company situated in

different parts of the world is the result of the minimization of financial barriers. In such a way,

Toyota demonstrates a strong trend to internationalization of its production that inevitably has lead

to minor changes in its management style which needs to be really universal and effective in all

countries of the world where Toyota operates. This has been the cornerstone of Toyota's success, by

allowing for a more diverse workforce, and the opportunity for locals to enter into senior level

management, Toyota has shown that it is a company that is employee oriented.

3) In the last few years, the Global Financial Crisis (GFC) had caused a drop in global

automobile sales. A lot of this was attributed to the lack of confidence amongst consumers as

many economies around the world were left in tatters. Nevertheless, the auto industry

seemed to be relatively stable with the same players, despite the fact that many of these

companies resorted to government bailouts and accusations of mismanagement by its

shareholders. Even though sales have been up recently, the automotive industry still faces

many challenges. These challenges need to be overcome in order to ensure the survival of

the industry's major players.

Firstly, one of the main elements of the industry that will shape future products is technological

change. Every year automakers use different technologies in the form of new materials, new

production techniques, and new drive train technology. This is part of their ongoing effort to make a

better vehicle, a more efficient vehicle, a faster vehicle, a vehicle that handles and brakes better, and

a vehicle that is cheaper to make. As a result, there has been a worldwide shift in demand for

smaller, more fuel efficient vehicles. In order for Proton and Toyota to capitalise on this surge in

demand, both manufacturers will need to put more research into creating more value-added vehicles

for this segment. As bold new plans are formulated for cars of the future the industry has to

determine who these vehicles will be designed and marketed to. Any automaker will admit that they

would like to have the next “world car.” A world car is loosely defined as a model that has universal

appeal if most if not all markets and a high profit margin. A world car takes advantage of

globalization of resources within a firm, modularization of parts and manufacturing techniques, and

it also utilizes outsourcing in component and vehicle manufacturing. On the other hand automakers

still have to consider how much of their resources should they should devote to the needs of specific

geographic markets.

Furthermore, automobile manufacturers should only focus on more profitable arms of the company

and sever the departments that are lagging behind. In order for any organization to grow, it has to be

aware of its strengths and weaknesses in its competing environment. Likewise, if an internal audit is

done and some departments within a company are no longer considered profitable, then, a decision

by upper management should be made to sever or change that particular division. It is said that a

hallmark of good global management is one that can respond quickly to slight changes in the

consumer market. Such is the case with Toyota, in November 2009, the company made a decision to

withdraw from Formula 1 racing (F1). Although not officially acknowledged, it has long been

speculated that the reason behind their decision was to focus on other, more profitable divisions of

the company such as its consumer sedan range. Although proton is still very active in the F1 scene,

it may be wise for upper management to reconsider their involvement in years to come.

It is readily becoming a reality that manufacturers have to place a constant demand on their

suppliers to continually cut costs. This is a very difficult situation, as manufacturers simultaneously

must outsource more and more of the production process. If they continue to pressure suppliers to

cut costs, they stand a chance of losing them. After the tragedy of the recent earthquake and tsunami

in Japan, many manufacturer's production, including that of Toyota was affected. Proton, although

not as affected as Toyota was still felt the repercussions as some of their specialised components

still came from Japan. Events such as these have reminded companies like Toyota and Proton that

they cannot be complacent and must always have secondary suppliers in the event of a disaster. In

addition, Collaboration is the key to survival in the next economy. Automakers must be prepared to

leverage relationships with suppliers, distributors, technology alliance partners, and customers more

intensively. Only those firms that skilfully develop and manage the capabilities of this extended

enterprise will thrive. For example, Proton should leverage opportunities into untapped foreign

markets such as the Eastern European bloc by setting up a trade partner there, similar to what they

did in China with Youngman Automobile Group Ltd. Each company is on its own quest for a unique

advantage in the industry's new economic geography. Nonetheless, the same cannot be said about

Toyota. Its collaborative efforts will mostly centre on building relationships with raw material

suppliers from around the world.

4) In my opinion, there are a few measures that Proton as a company should consider

implementing in order to increase its competitiveness on a global arena. Firstly, the

government of Malaysia, which currently holds 42% of Proton's shares, should sell most or

nearly its entire stake in the national carmaker. The rationale behind this is, Proton is that

Proton has been “protected” by government arbitrage for too long. Over the years Proton has

lost its competitive edge to a growing number of Korean manufacturers due to its lax

attitude. These manufacturers produce cars which have much more added value as opposed

to a Proton, and are priced very competitively. In order for Proton to come up to this level, it

must first be seen as an innovative and impartial. By Privatising Proton, the government will

have little incentive to “protect” it anymore. Furthermore, it should also expand its market

by leveraging its products and key competencies to other south-east Asian markets. Proton

should look first at its neighbouring ASEAN countries and start marketing its local offerings

more aggressively in these markets. By doing so, Proton would be able to decrease its

reliance on sales from its local market and focus on getting market share in these important

markets. Also, Proton would be wise to switch from a transnational type strategy to a more

international strategy. In an international strategy, the company allows for very little

customisation from its original product line-up to be sold to different markets. Therefore, the

company maintains a relatively standard offering across the board. Finally, there must be a

change in upper level management to allow for more experienced staff to take over the reins

and direction of the company. For too long, Proton has had a very rigid upper level

management. In order to improve Proton's competitiveness on a global arena, experienced

managers, designers and engineers need to be enticed to join the company and rebuild its

public image. Take for example, Kia Motors, the Korean automobile manufacturer, who

hired Peter Schreyer as their chief design officer in 2006. All in all, the global automotive

industry is evolving at a tremendous pace. Automobile manufacturer's that do not keep up

with the changes in this global industry will be swallowed by the competition.

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