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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! $t K'%m'- GA****
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TABE OF CONTENTS
Pages
Executive Summary 3 - 6
1. From a financial analysis perspective, has the Proton
management done a good o!"
6 # 1$
%. &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+$3 to manufacture, assem!le and sell motor vehicles and related products including
accessories, spare parts and other components. Proton product7s line up comprised of Saga,
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s'ara, &ira, Satria, Satria 2eo, Persona, nspira and most recently, Exora. Proton7s plant
located in Shah lam and 4anung 5alim. Severals challenges faced !y Proton. ne of the
challenge is during the controversial sale of Proton sta)e in 58 gusta of taly for a to)en of 91
to :E8 Sp in 'hich :E8 sold it to 5& for 9+3 million. esides, proton also faced legal
suits 'hen !eing sued !y ;hinese for failing the venture. ?o'ever, Proton claimed that
:oldstar failed to o!tain a license for the , revealed !y the
5inister of nternational 4rade and ndustry =54> 'as !enefit Proton. Several )ey highlights
of the announced 2P are pproved Permit =P> system extended to %(1/, excise duty structure
remained status Buo and import duty structure maintained (A for ;CD7s and /A for ;7s
under the sean Free 4rade greement =F4>.
t 'as late %((+ and the 'orld 'as struggling in the process of li!eralisation and
glo!alisation. &ith the advantages of protectionism, Proton, the 5alaysian national car ma)er
had enoyed a fair degree of success in the home mar)et, and internationally, 'ith some of its
export models over the last t'o decades. 4echnical tie-ups and colla!orations 'ith foreign
partners had !een a mixed !ag of successess and failures. 4he li!eralisation measures
announced !y the 5alaysian 5inister of 4rade and ndustry in the 2ational utomotive Policy
on %$ 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,$%#-! 3,".#-2 3,#"1-3 3,""1-" 3,".-.
*+rrent (ssets
nventories 1,395.1 1,1.3 1,273.6 1,389. 967.1
Re&eivab#es 1,8.3 1,99. 1,192. 1,244. 1,43.2
urrent invest0ents 15.3 2.8 73.4 212. 21.5
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%eosits, ban an! &as$ ba#an&es 913.9 1,226. 626.5 1,586. 2,454.7
Total *+rrent (ssets 3,..-$ 3,..$-1 3,1$%-% .,.31- %,2$-%
*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
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;urrent 0atio 1.$( %.1(% %.(6* 1.$+3 %.%*
uic) 0atio 1.(6 1.*31 1.%33 1.%++ 1.$3
At(8(t3 R't(o
verage 4ime ;ollection 6(.+ 1.36 +%.$% /$.%* 6(.3nventory 4urnover *.6/ /.11 3.6$ /.61 $.
4otal sset 4urnover (.+1 (. (.6 (.+* (.+6
Fixed sset 4urnover %.%+ 1.$ 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$$3.6(
= 1.1
+**
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G 3**6.1(163+.%(
= +.1*
+**7
G 316/./(1/33.$(
= +.*6
+**6
G **31.((%3*1.1(
= 1.
+**5
G /(%6./(%%1(.((
= +.+7
From the ratio analysis in liBuidity for ;urrent ratio sho's that in year %((/ is %.%* times and in
year %((+ is 1.$( times 'hich mean the amount sho's are greater than 1.( 'here!y Proton are
afford to repay short-term de!t. 4he higher the current ratio, the stronger the companyHs a!ility to
repay short-term de!t !ut from year %((/ to %((+, the a!ility to pay de!t sho's rapidly do'n !y
(.* times. ased on year %((+, Proton have assets 1.$( times from current lia!ilities and
Proton provide 05 1.$( current assets for the purpose of repayment of short-term lia!ilities.
1.% uic) 0atio
uic) 0atio G =;urrent ssets # nventory> ;urrent @ia!ilities
+**
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G %((+./(1$$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.$3 times,
'here the different from year %((+ are (. times, meaning Proton 'hen year ahead the ratio is
going do'n and it7s sho's that Proton not strong in finances and a!ility to pay de!t affected.
4hese ratios are moderately poor liBuidity.
4he only difference !et'een the current and Buic) ratios is that inventories =stoc)> is omitted
from the Buic) ratio. nventories is sometimes very difficult to convert into cash, particularly at
the value placed upon it in the !alance sheet. ecause it can !e difficult to generate liBuid funds
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through the sale of inventories, it is inappropriate to consider it 'hen loo)ing at the issue of
'hether Proton is a!le to pays its de!ts Buic)ly.
%. ctivity 0atio
%.1 verage 4ime ;ollection
verage 4ime ;ollection G 0eceiva!les Sales x 36/ days
+**
G 1($(.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.%($*$3.3 x 36/ days
= 6*.7
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4he average collection period ratio indicates the average length of time =in days> a !usiness must
'ait !efore it receives payment from customers 'ho !uy merchandise on credit. n Proton, the
higher average collection period ratio in the year %(( 'as +3 days and the lo'est 'as /$ 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$+.(
= 5.61
+**5
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G $*$3.3(+6.1( = .77
4he inventory turnover ratio provides an indication on 'hether a company has excessive or
inadeBuate goods =products> in inventory. n Proton, year %((/ sho' that inventory turnoverratio 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
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+**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 the property, 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 usually su!tracted from the total fixed assets to present a more meaningful fixed
asset turnover ratio.
3. Profita!ility 0atio
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3.1 2et Profit 5argin
2et Profit 5argin G Profit =after tax> 0evenue
+**
G =3(1.$>6*$6.6(
= > 4.65?
+**
G 1$*.6/6%1.6(
= .+4?
+**7
G -/$+./*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
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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*?
+**6
G *6./$(.6(
= *.75?
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+**7
G -/$+./6+*6.$(
= >.46?
+**6
G *6.$31%.$(
= *.56+?
+**5
G **%.*$$3(.+(
= 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 personalservices 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
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*.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
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
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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
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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 as
outputs 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"
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.
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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 fromtime to time. ;ompany from country li)e
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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 peopleshould 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- #;;((#-3
Production 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.
&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"
SOT ANA9SIS :>
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STRENGT&S
;ompetitively priced products
@o' price in maintenance
Easy access to service,maintenance, repairs and o!tain
spare parts !ecause many servicecentre availa!le
Easy availa!ility stoc) !ecause
produced in 5alaysia
Extensive nation'ide distri!ution
net'or)
: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
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
dangerous in term of safety
Do not produce compact cars and *-
'heel drive such as Perodua 8ivaand Ford 0anger
Dependa!ility to foreign companies
in 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 orderto 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 'illreduce demand
0eputation of poor product
performance and functionality
!ecause most ;hinese don7t !uyProton
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STRENGT&S
P0427s strength lies in its competitively priced product. t extensive nation'idedistri!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
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
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development more innovative products could !e invented and ensure that P042 as a
!rand name remains in the industry.
T&REATS
ne of the threats is of course from the rivals, the competitors in the automotive industry.
Even Perusahaan tomotif Cedua =PE0D> # 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 sellingmodel 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
future. part from that also is allo'ing them to increase o! opportunities in the field
and the most important automotive P042 support from the government.
From a revie' of %((+ 2ational utomotive Policy, are there areas of possi!le colla!oration
'ith Proton, short of a full mergerta)eover"
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1> T)# A""ro8#0 Prm(t AP %3%t#m #t#-0#0 to +*15
4he P system 'ould !e phased out in stages end in %(1/. 4he P holders 'ould also
!e audited t'ice yearly and those found uncompetitive 'ould !e removed from the list.
nitially slated to !e a!olished !y end-%(1( !y the previous 2P in %((6, the system,
instead, 'as extended to %(1/ !y the :overnment.
%> T)# #(%# 0!t3 %tr!t!r# r#m'(-#0 %t't!% !o
4he excise duty structure should !e maintained so that the dumping of imported cars 'ill
!e status Buo. 4his 'ill result in improved gro'th of the national car in the mar)et.
3> T)# (m"ort 0!t3 %tr!t!r# m'(-t'(-#0 *? ;or CKD% '-0 5? ;or CB% !-0#r t)#
A%#'- Fr## Tr'0# A,r##m#-t AFTA
5alaysian continues to non-compliance 'ith the ;ommon Effective Preferential 4ax
=;EP4> greement 'here the import duties for the ;s of 5alaysia, runei, ndonesia,
the Philippines, Singapore and 4hailand 'ould !e eliminated no later than 1 F!// /($#r'/(%'t(o- o; /o'/ '%%#m$/#0 /!!r3 "'%%#-,#r 8#)(/#% '$o8# 1** (t)
o->t)#>ro'0 "r(#% o; '$o8# RM15*K #;;#t(8# 1 J'-!'r3 +*1*
Foreign firms could freely o!tain a manufacturing licence and hold a 1((A sta)e in a
company to assem!le passenger vehicles provided they fulfilled certain conditions. 4he
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current policy of contract assem!ly 'as maintained to encourage utilisation of existing
excess capacity. 4he policy !enefited Proton, 'hich focused primarily on the lo'er-end
mar)et =the smaller vehicle segment> as the non-li!eralisation of small vehicle segment
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%
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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-term
development 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.
+> Ro'0ort)(-#%% I-tro0!t(o- o; E-0>o;>(;# #)(/# E Po/(3
nder 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
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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-
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
Page | #
http://en.wikipedia.org/wiki/Boston_Consulting_Grouphttp://en.wikipedia.org/wiki/BRIChttp://en.wikipedia.org/wiki/Iranhttp://en.wikipedia.org/wiki/Indonesiahttp://en.wikipedia.org/wiki/Boston_Consulting_Grouphttp://en.wikipedia.org/wiki/BRIChttp://en.wikipedia.org/wiki/Iranhttp://en.wikipedia.org/wiki/Indonesia -
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already !uy more cars than esta!lished mar)ets. ccording to a
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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.
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+. 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 ;ost
1(. nterest charges
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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
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
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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
'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
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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
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%. 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+$3, there are many colla!oration made !yP042 'ith international company to produce ne' model.
7. C!%tom#r F##0$'@
;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
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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
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 andcompanies may have to close.
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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
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.
$ 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.
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Kajian Kes Integrasi (EPPA 4716)Case 5 : Proton : From Saga to Exora
4$ 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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Kajian Kes Integrasi (EPPA 4716)Case 5 : Proton : From Saga to Exora
. Easy to drift for !eginner
$. Suita!le for single and couple
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
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