Evaluate Globalization And Strategy

Topics: Automotive industry, International trade, Volkswagen Group Pages: 6 (1626 words) Published: June 10, 2015
Globalization & Strategy
Globalization is a process of interaction and integration of different nations that is sped up by technological progress such as the internet, communication, advanced mode of transport especially air travel as well as the growing number of non-English speakers mastering English language. Strategy is a direction or scope of an organization through its configuration of resources within a challenging environment to meet the needs of markets and to fulfil the stakeholders’ expectations. This essay will discuss one of the challenges of globalisation, specifically global competition on Proton, a Malaysia automobile company and to evaluate the strategy adopted by Proton in response to globalization. Proton was established in 1983 as the sole national car company. It had been monopolizing and dominating domestic market for almost 10 years until the advent of Perodua, another Malaysian automobile manufacturer in 1993. In the mid-2000, Proton started losing its market power due to; stronger local competitor, Perodua with its best-selling MyVi launched in 2005. The removal of trade barriers has encouraged more international trade. The need of a country to increase its gross domestic products (GDP) has led to provision of favourable and friendly environment for MNCs to be established in foreign countries. This has caused an increased competition in the market Proton is playing because some imported cars are assembled in Malaysia known as CKD (completely knocked down). Compared to a CBU (completely built-up) car, which is imported as a fully finished unit, a CKD car is priced cheaper because the car parts are assembled in local plants by local workforce. Toyota (Vios, Camry and Innova), Mercedez-Benz, Volkwagen, Suzuki, Hyundai, Mazda, BMW, Land Rover and Nissan models can be purchased at cheaper prices because these cars are CKDs. Manufacturers also use local content (Malaysian-made parts like tyres, windows, and headlights) to put together the car to enjoy more tax preferences.

The car industry in Malaysia has become more competitive and tough for Proton but actually benefits locals as they have greater choices. Nowadays imported cars such as Toyota Camry, Honda Civic, Volkswagen (Polo) are affordable to average income earners even young adults who have just being employed. In addition, Proton’s image has been long tarnished due to poor and average quality that is not worth the price and killed by a corporate culture of complacency. Even though, the Malaysian government has levied high import duty and local taxes on all foreign cars as a protectionism step, Proton still loses its competitiveness. Its average quality that targets middle and low income earners is not relevant because people’s disposable incomes are increasing. In response to global competition, Proton executed its turnaround strategies that focus on; Quality, Customer, and Innovation. Proton tried to strengthen its market position by striving to be world car manufacturer and change negative perception towards it. Proton launched a new model, Iriz. This model scored 14.07 out of 16 marks in ASEAN NCAP‘s Adult Occupant Protection test outperforming its rivals’ cars MyVi and Axia (Perodua) and Peugeot 208 (quality). This model is sold between RM41 152 – RM 60 602 (affordable to customers). The R&D for this model costs RM560 million (innovation). This shows that Proton is really focused on innovation, quality and customer. The strategy adopted by Proton can be categorized as product development and market development in Ansoff Matrix. Market Penetration

Product Development
Market Development

Diversification

Product Development:
This strategy involves developing or modifying existing products to be offered to current or new markets. Looking 12 years back, the basic Proton Satria 1.3L was priced around RM43 000 as almost the same as the basic variant of Proton Iriz. But now even the basic Proton Iriz is equipped with...
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