Proton Entering South African Market Internal and External Analysis and Strategic Analysis

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A strategic analysis of the industry is being done to determine the attractiveness of the South African Industry. To keep a sustainable competitive advantage over time an external analysis will help to determine the opportunities and threats in the operating environment that influence organizational objectives. Macroeconomic factors have to be looked at because they are part of this operational environment. The country and national environment in which the company competes. In the case of this report the country is South Africa.

Country and Environment

South African Inflation has caused policy makers to increase interest rates in order to reduce the inflation down to about 5% by 2009. The country’s growth on the other hand has been a good 4%, but this growth, stimulated negatively by the high interest rates, violence in the country and power cuts in 2008 could decrease.

The Industry
The South African Industry is currently a growth industry in 2008. It only really gained its foundations in 1990s. In 1995 the South African automotive industry became more globally structured. Since the 1990s there has been a shift from local to foreign ownership. All assemblers are now wholly owned by multinationals now. There are many indicators that accentuate the fact that it is a very lucrative time for proton to invest in this industry. “The South African automotive industry consists of light vehicle assemblers, the medium and heavy commercial vehicle sector, the component sector and the retail sector, the latter including motor trade and aftermarket parts and accessories. The catalytic converter manufacturing industry in South Africa is the biggest contributor to the automotive component export sector, which has been so successfully stimulated by the Motor Industry Development Program (MIDP). The catalytic converter industry currently exports millions of converters a year, with a total value of more than R15.8 billion in 2006 compared to R 9.9 billion in 2005, with the 2007 figure likely to be around R20 million.. Leather seats and parts are the second most exported automotive component in South Africa amounting to R2.5 billion in 2006 followed by tires and engines both with R1.2 billion.” (NAACAM 2008 directory) Supporting Trade for Industry

In terms of the trade which supports this industry, there are approximately: •4 400 garages and fuel stations (with the majority having service workshops as well) •a further 1 800 specialist repairers

1 350 new car dealerships holding specific franchises
an estimated 1 580 used vehicle outlets
about 300 vehicle component manufacturers, together with about 150 others supplying the industry on a non-exclusive basis •1 700 specialist tyre dealers and retreaders
480 engine reconditioners
170 vehicle body builders
2 770 parts dealers and
Statistics provided by NAACAM’s directory.

These statistics intimate favorable opportunities for Proton. Competetive Environment
Some of the global major motor vehicle manufacturers assemble vehicles in South Africa and are concentrated in three of the South Africa’s provinces. These include BMW, Nissan and Ford (incorporating Mazda) which are operating in Gauteng. Volkswagen, Mercedes Benz and General Motors are operating in the Eastern Cape. Toyota is operating in KwaZulu-Natal. Six of these seven OEMs are wholly foreign-owned multinationals while Toyota is majority foreign-owned. Mercedes, Volkswagen, BMW, Nissan, Ford and Mazda are not the brands that Proton is in close competition. Proton Targets new buyers and is in competition with Perodua, Kia, Toyota and Honda According to NAACAM’s 2008 directory “South Africa...
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