Proton implementing a global strategy
Table of contents
2 Protons motivation for expanding abroad
1 Traditional motivations for internationalization
2 Protons emerging motivations for internationalization
4 3 Impact of distance on global expansion
4 Protons global strategy
3 Scale economies
4 National differences
5 Scope economies
5 Protons current partnerships
7 Lotus group international
9 Protons race for globalisation
The report at hand deals with the Malaysian car manufacturer Perusahaan Otomobil Nasional (Proton) which was founded by the former prime minister Mahathir bin Mohamed in 1983 in cooperation with Mitsubishi. Proton belongs to the Malaysian automotive manufacturer DRB-Hicom and with 75 % market share in the Malaysian automotive market it is the most successful car manufacturer in its homeland (www.proton.com). After having established a solid customer base in its homeland Proton expanded globally to increase its global presence. This report examines how Proton evolved from a successful company in its home market to a successfully global operating firm by using a global strategy. In this context, it will be analyzed which steps Proton followed to create its global strategy. The report discusses first Proton’s motivations for expanding abroad. Followed by analysing the different objectives of a global strategy. Afterwards, three of Proton’s main strategic alliances will be explained and it will be clarified how they supported Proton in developing a global strategy. Finally, this report concludes the main stages Proton followed to create its global strategy and how the company is currently performing.
2. Protons motivations for expanding abroad
Before analyzing Proton’s performance abroad it is important to question why the company decided to go abroad and what they needed to consider while expanding abroad. According to Bartlett and Beamish (2011) one can distinguish between two different motivations for internationalization. On the one hand there are traditional motivations and on the other hand there are emerging motivations. The three traditional motivations captured by Bartlett and Beamish (2011) are the earliest driver for internationalization, whereas the emerging motivations are developed after the first establishment of international sales and productions. 2.1. Traditional motivations for internationalization
One of the three traditional motivations for expanding the operations internationally is the need to secure key supplies. This need also motivated Proton in the beginning to expand beyond the local market, since, due to a lack of experience, local suppliers could not meet Protons’ requirements for high quality products. As a result the components for their first car Proton Saga were entirely manufactured by Mitsubishi (Abdullah et al, 2008). However, today Proton sources its components mainly from local suppliers. Another traditional motivation encouraging internationalization is market-seeking behavior, which was also a reason for Proton to expand abroad. In the beginning, the number of cars produced was rather low and did not increase much because of an economic recession. Seeking for a higher volume Proton expanded to other markets such as Singapore, Bangladesh, Brunei, New Zealand, Malta and Sri Lanka. Later they entered the European market by distributing their cars in the United Kingdom (Proton, 2012).
The third motivation for expanding abroad is the access to low-cost factors. However, in Proton’s case this was not one of the reasons for expanding abroad since the company ensured cost savings in labour costs due to its production plant which is located in Shah Alam, in their...
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