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Going International With Malaysian Made PROTON Cars

Introduction

With the advent of technological advances in the field of communications and transportation the processes of carrying out business over a vast geographic spread has been made possible. This has led to businesses going international with their products and offerings. This trend intensified to such an extent during the past few decades that it entailed an immense competitive scenario. At present, Globalization is no longer a luxury for companies. Instead, it has become a bare necessity for them to penetrate foreign markets to survive this fiercely competitive arena. They need to gain the edge over other local brands and serve to diverse populations and capitalize on the market openings to ensure steady growth and healthy yields. This report analyzes various intricacies associated with international marketing in light of the situation Malaysian car manufacturing company PROTON Berhad faces and provides recommendations to the company based on the findings.

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Importance of Marketing Products Internationally

As technology provides businesses with tools to go, global companies are left with no choice other than acting as per trends. In this, immensely competitive marketing scenario firms understand what they stand to loose if they do not globalize. According to experts, the world consumer trends are moving towards unification in terms of standards, liking and tastes. This provides an enormous opportunity for firms to capitalize on. Going global implies an increase of customer base and this implicitly would lead to growth and expansion of the business. While catering to the needs of a large number of people with diverse origins firms start becoming aware of the individual needs of the customers. Thus, they can comprehend their drawbacks and tailor their procedures to the varying need of the customer. This has to be done in consort with building on strengths. Such attitude in business, as proved by market analysis and trends, leads to healthy growth and increased revenues. Marketing products internationally helps a firm build a strong brand value and increases brand awareness. Historical data analysis has shown that a customer-centric business model is much more successful that a product-centric business model. Customer trends show that they come to associate a sense of reliability and consistency with international brands and thus put in much more faith in those brands. Obtaining the customers faith and support gives a company a great deal of competitive edge and advantage. However, there are intricacies associated with going global. Therefore, once a company decides to globalize a carefully analyzed and crafted marketing plan must be formulated in order to achieve successes or else it could lead to a business disaster. (Jomo 2005)

Research Methods used to Obtain Information on Target Markets

As mentioned before customer requirements, demands and attitudes must be analyzed carefully and the business processes must be streamlined accordingly in order to achieve a competitive edge in this cutthroat market scenario. The first step in the endeavour should be to identify the target market whose needs are required to be taken care of. The primary target market for this business has been identified as the population aged between 25 years to 50 years. They belong to the lower as well as upper middle-income group. In addition, a few products would also be launched with the intention of catering to the premium markets. Thus, survey approach was chosen as the primary research instrument to understand the wants, requirements and demands of the target customers. Questionnaires were distributed at gas stations, automobile outlets, at auto expos and trade fairs. In addition, they were distributed to professionals working in major multinational companies along with employees in the small and medium sized industries. Online survey forms were also made available in coordination with major portals to obtain the views of a number of people who could easily participate in the survey through the Internet. This survey was carried out across eight countries, namely Sri Lanka, Pakistan, United Kingdom, Turkey, Saudi Arabia, UAE, South Africa and Australia. In addition to gain a thorough understanding of the market situation, extensive competitor analysis was carried out by identifying three major competitors in each country. (Jomo 2004)

Resources Required to Globalize

The primary requirement for any business in order to execute expansion plans is the possession of appropriate resources and assets. Resources and assets must first be optimized and the feasibility of the expansion/globalization/export plans must be elaborately analyzed. One of the most essential and mandatory resource required to carry out international marketing plans is that of the financial capital. The company must ensure it has enough financial strength to venture out into the international markets and the plans must be endorsed by a substantial number of investors. Once the plan gets the financial go-ahead signal, the operational feasibility has to be evaluated. With the expansion of the business, demands are likely to increase. International operations must be carefully planned out such that the firm is competent enough to handle the pressures of the growing demand. Export channels, manufacturing units, research and development facilities, customer support networks and legal frameworks have to be strategically set up in order to minimize the complexities associated with internationalization.

PROTON Berhad is a long established car-manufacturing firm with a strong footing in the Malaysian market. Its strategic collaborators would also have to play an important role in the process of internationalization of the firm. Proton’s second manufacturing unit in Malaysia has a capacity of manufacturing up to one million units annually in addition to the original manufacturing facility with an annual manufacturing capacity of 230,000 vehicles. In the present expansion scenario, this capability is judged more than adequate to handle export demands besides catering to the needs of the domestic market. (Kazmierczak, Neumann & Winkel 2007)

Legal Issues

In order to stay clean and avoid controversies the firm has to legalize all export plans and ensure it is not entangled in any legal battles with competitors or other third parties. Licensing is a very important part of the exporting business. Export license should be obtained from the Malaysian authorities as well as the business should be authorized and authenticated by the legal institutions of the country to which products are exported. International Trade Law issues should be considered carefully while dealing with shipping and delivery issues. Limitations and restrictions on the number of units, economic requirements and trade complexities must be clarified with the administrations of the states with which export relations are to be set up. Business collaboration some nationalized brand is mandatory in some countries in order to operate in its markets. Such requirements should be paid special attention and its feasibility must be assessed. (Heiskanen 2005)

Target Market Segment

Proton’s primary product line targets the small and mid-size segment of the automobile market. In the mid-size segment, the models named Persona, Arena, Perdana V6 and Saga are the most popular units. In the small car segment, the firm made its presence felt through the immense success of the launch of Satria Neo and Gen 2 and Savvy models. Customers prefer the small car and to some extent the mid-sized cars for personal use in cities and populated towns. Thus, the target customer base is identified as the cities and town population aged between 25 to 50 years. This age group consists of mainly professional workers working for multinational companies or is self-employed. The age group between 20 to 30 years belongs to the lower or upper middle-income group and thus prefers the small car segment. The age group between 35 to 50 years is generally well-employed and senior executives from a major fraction of this population. This fraction of the customer base structures the premium market and the mid-size segment is well suited to them. They needs and tastes of the diverse market segments in various countries differ in tastes, needs demands and requirements in respects whilst they are similar in some. These needs and demands have to carefully identified, analyzed and meet by the firm if they want to achieve success. Special care must be given to geographic conditions and economic situations of the specific countries to which the products are to be exported. Identifying the target segment and tailoring the business process according to their needs is of great significance for gaining a substantial competitive advantage. Thus before venturing into the export undertaking markets the target markets should be well analyzed and scrutinized. (Lecler 2006)

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Marketing Strategy

Once a firm decides to venture out into global markets, there are two fundamental policies, which it may adopt. Either it may decide to standardize its marketing strategy or alternatively it may decide to adapt the elements of its marketing mix to fit the market conditions in each country individually. An elemental tactical decision has to be taken instantaneously concerning whether to implement a homogeneous marketing mix as a component of the global marketing strategy or whether to fine-tune the marketing mix as per the exclusive traits of each national market. Numerous experts in the field feel that in this progressively converging global market the key to success is the firm’s ability to innovate and globalize. Standardization denotes the concept of presenting identical product catalogues to the market at comparable prices through similar distribution channels, propelled by matching promotional initiatives across different countries. Thus, standardizing the marketing mix elements and the marketing strategy is of immense importance. However, the pro-adaptation sect bases its ideology on the elementary assumption that each market is exposed to macro-environment constraints such as language, weather, racial background, topography, occupational activity, culture, taste, and recurrent divergences ensuing from different economic and legal regulations, traditions, and communal factors. Therefore, each multinational firm should be able to adapt i.e., appropriately tailor their marketing strategies which would best suit the market needs and local tastes to cater to the non-identical individual consumer demands. (Elmquist 2007)

Each strategy offers its own advantages and disadvantages. Standardizing elements of the marketing mix derives its benefits primarily from the economies of scale. It results in various cost savings, which can be channelized into other modules of the business like Research and Development etc. However, disparity observed in the tastes and cultural attitudes remains one of the major hindrances to globalization. Recently, the notion of mixing these two strategies has been conceived and implemented with a good deal of success. Thus subsequent to observing historical data and analyzing them it is recommended that a mixed strategy should be adopted to offset the disadvantages of one by utilizing the advantage of the other.

Pricing Strategy

The success of export operations depends upon the pricing strategy decided by the firm for the export product lines largely. The analysis of the target markets show that the pricing variables have a substantial influence on customer attitudes as well as on market trends. The study of basic needs of the customer entails a low pricing – high quality product line. In this business, pricing variables should be standardized across different markets. This means, the pricing strategy should be such that the products are made available at comparable prices across different market. This strategy should be followed as much as possible to eliminate pricing discrepancies. Of course, there are different constraints, which lead to pricing discrepancies. For example, the export costs to all the markets are not the same. In addition, currency exchange rates, export duties and other taxes also play an important role in deciding the pricing strategy. Export costs when included in the product price can alone lead to different prices. (Steffens 2007) Price fluctuations have a negative impact on the markets and leads to destruction of the brand image. To negate pricing fluctuations, a standardized approach should be adopted. Further, a dual pricing strategy may also be introduced in due course. The most popular models can have a low cost variant, which can be used for market penetration. Introductory price discounts may also be brought in maintaining lower profit margins in order to establish the brand in foreign markets.

Exporting Method

Exporting procedures should be streamlined and should be supervised by a proper administrative team. All government policies and regulations should be taken care of to avoid legal discrepancies. As per the Incoterms, a CIF approach would be adopted. In this approach the cost, insurance and freight will be paid by the company. However, the risk would be transferred to the buyer subsequent to the unloading of products from the ship. A dedicated exporting team would be employed and will be trained adequately. They would be suitably trained on the subject of international trade procedures. Their shipping and packaging skill would also be enhanced in this training and their expertise in the field would be utilized for shipping operations. A list of freight forwarders should be identified and then the most compatible freight forwarding company/companies should be collaborated. Trade agreements between countries should be carefully analyzed and complied. The company will absorb all prices for transportations at the supplying end. All exporting agreements will have the credit clauses sorted out unambiguously. Credit letters will be handled by company appointed lawyers and shall be reviewed periodically by the executive management. (Gutiérrez, Gutiérrez-Sánchez & Nafidi 2008)

Establishment and Sustaining Market Presence

Establishing the PROTON brand across foreign markets would require careful planning of promotional and pricing activities. Introductory price cuts, packages and offers should be introduced in order to gain an early competitive edge. The firm would need to go on an extensive promotion spree initially in order to build a strong brand image and enhance the brand awareness. While considering the promotional aspect of the business an adaptive approach should be adopted. Various foreign markets have different cultural and ethical background, diverse tastes and varying needs. Adding the local cultural flavour to the promotional initiatives works betters than standardized approach to the promotional activity. However, brand names and product lines should be standardized in order to send out the message of the company’s consistency and reliability. Such a mixed approach would exhibit the firm’s respect for the local culture, taste and attitudes as well as uphold the brand’s consistent nature. This would lead to increased brand credibility and help the firm establish its hold over the new markets it wants to venture. Once the brand is properly established, it would need to penetrate the new markets and eat into the competitors’ market share. In order to do this the company has to analyze the feasibility of different trade-offs and set a carefully crafted timeline of operational, promotional and feedback gathering activities. (Ahmed & Humphreys, 2008)

Product Quality in International Markets

In order to establish a strong brand-integrity the firm must promote a standardized product line with slight variations needed to suit various foreign markets. Product Quality in International markets should be top rated and in no case can be compromised. PROTON thrives to achieve such a goal by establishing its own Research and Development module for the business. By means of the assets, either technology, modernization, innovations, human resources and design competencies made available to or cultivated by PROTON itself, the firm should ensure premium quality product manufacturing. The venture into emergent research and design competences which incorporates the proficiency of Proton’s entirely-possessed subsidiary Lotus Engineering UK, one of the globe’s foremost automotive engineering consultancy firms, has endowed PROTON with an priceless resource helps the firm meet and exceed set quality standards. Developing an entirely new automobile is a multifaceted and extremely comprehensive process, commencing from preliminary concept phase, to the manufacture of a unit fit to roll on the roads of the real world. The firm employed a modular and phased development procedure ensuring that there is no compromise on quality. In 2003, the firms R&D section was benchmarked with the ISO 9001:2001 standard certificate for quality standards. (Ahmed & Humphreys, 2008)

Recommendations

In order to achieve success in its globalization efforts the company needs to analyze various aspects associated with the same. The firm needs to evaluate the financial and operational feasibility of the ventures and then make the final call. All legal issues such as licensing and trade agreements need to be taken care of subsequently. A mix of standardization and adaptation approach should be used in the marketing mix while designing the marketing plans. While product lines and pricing should be standardized with slight changes, promotional networks and distributive channels should be adaptive. Product quality should not be compromised at any cost. (Haggard 2001)

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Conclusion

In international trade, controversies and disparities are common and each company stands to loose a lot of capital due to such events. Thus, legal issues must be taken care of right at the beginning of the ventures. When the question of standardization or adaptation crops up, the firm must adopt a liberal approach and must embrace each strategy where required. Few aspects requires the local touch for the business to flourish while standardization has is own substantial set of advantages. Pricing strategies should be carefully designed and product quality should never be compromised as fluctuations in both prices or quality can lead to the downfall of the business at any moment. (Haggard 2001)

References

Ahmed, ZU & Humphreys, JH 2008, ‘A conceptual framework for developing-country transnationals: PROTON Malaysia’, Thunderbird International Business Review, vol. 50, no. 1, pp 45-58.

Elmquist, M 2007, ‘Vehicles for innovation and learning: the case of a neglected concept car project’, Knowledge and Process Management, vol. 14, no. 1, pp 1-14.

Gutiérrez, R, Gutiérrez-Sánchez, R & Nafidi, A 2008, Modelling and forecasting vehicle stocks using the trends of stochastic Gompertz diffusion models: The case of East Asia’, Applied Stochastic Models in Business and Industry, vol. 7, no. 12, pp 144-151.

Haggard, S 2001, The political economy of the Asian financial crisis, Peterson Institute, London.

Heiskanen, TA 2005, ‘How car and steel workers in different countries see their work’, Journal of Organizational Behavior, vol. 6, no. 4, pp 273-292.

Jomo, KS 2004, Japan and Malaysian development: in the shadow of the rising sun, Routledge, Sydney.

Jomo, KS 2005, Industrialising Malaysia: policy, performance, prospects, Routledge, Sydney.

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Kazmierczak, K, Neumann, WP & Winkel, J 2007, ‘A case study of serial-flow car disassembly: Ergonomics, productivity and potential system performance’, Human Factors and Ergonomics in Manufacturing, vol. 17, no. 4, pp 331-351.

Lecler, Y 2006, ‘The cluster role in the development of the Thai car industry’, International Journal of Urban and Regional Research, vol. 26, no. 4, pp 799-814.

Steffens, PR 2007, ‘An aggregate sales model for consumer durables incorporating a time-varying mean replacement age’, Journal of Forecasting, vol. 20, no. 1, pp 63-77.

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StudyCorgi. (2021, October 30). Going International With Malaysian Made PROTON Cars. Retrieved from https://studycorgi.com/going-international-with-malaysian-made-proton-cars/

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