Proton: Knowledge Management

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1.0 BACKGROUND OF THE COMPANY

Proton is the first Malaysian automobile manufacturer which is found in 1983. Proton headquartered is located in Shah Alam, Selangor, with a manufacturing plant in Tanjung Malim, Perak. It was Malaysia's only carmaker until the establishment of its competitor and arch-rival Perodua in 1993. Proton is a core member of Proton Holdings Berhad which is listed on Bursa Malaysia. Over 42% of its equity is owned by a government-owned company Khazanah Nasional Berhad, making it government-linked. For more than a decade since its establishment, this stake was jointly owned by Mitsubishi Motors Corporation and Mitsubishi Corporation until they sold its stake in that company. Proton began the first car model, Proton Saga based on technology and parts from Mitsubishi Motors in September 1985. 100,000 Proton Saga were produced until January 1989. In 1993, second Proton car model named Proton Wira was introduced based on the Mitsubishi Lancer. More than 220,000 units were sold between 1996 and 1998. Proton Perdana based on Mitsubishi Galant design was firstly introduced in 1995 to target for higher end market. The components of the car initially were entirely manufactured by Mitsubishi but slowly local parts were being used as technologies were transferred and skills were gained. As the first car maker in the nation, Proton relied very much on its business partner, Mitsubishi Motors which has greater knowledge compare to Proton which has no experience in car manufacturing industry. Knowledge management system becomes essential step for Proton to capture the knowledge and skill from Mitsubishi Motors. Tacit knowledge which is embodied in experts and embedded in Mitsubishi car manufacturing processes are needed to be converted to explicit knowledge in order to be shared. Until early 2001, Proton Waja, the first car designed internally by Proton was launched. With the acquisition of Lotus technologies in 1996 from ACBN Holdings (a company owned by the owner of Bugatti), Proton has gained an additional knowledge source of engineering and automotive expertise. This led to the production of Proton Gen-2 with the installation of first local designed engine called CAMPRO. CAMPRO engines are also installed in other later Proton car models such as Proton Savvy, Proton BLM (replacement model for Proton Saga), Persona and Proton Exora. Proton has extended aggressively the export market to the countries like United Kingdom, Australia, South Africa, several countries in Middle East and Southeast Asia. Government policy has kept the Proton cheaper than other makes by the simple strategy of taxing the competition, while giving Proton exemptions or rebates from these same taxes. Proton held a market share of over 60% in Malaysia in 2002, which was reduced to barely 30% by 2005 and is expected to reduce further when AFTA mandates reduce import tariffs. This becomes a challenge to Proton when facing imported car competitors like TOYOTA, HONDA, HYUNDAI and other international car makers. In the interview on the vision of Proton by THE STAR reporter with Proton Holdings Berhad new chairman, Datuk Mohd. Nadzmi (Jan 6, 2009) states: ‘I want Proton to have a very strong presence in the domestic market. As a car manufacturer in a national economy you must dominate that economy. I am not satisfied with even a 29% market share. We can’t expect a 75% share like when I was managing director but the ideal is 50%. To improve market share we must look at the requirements of the market. We can’t compromise on quality and must have a shorter replacement cycle as replacement buyers comprise some 80% of total buyers.’

2.0 STRATEGY ASSESSMENT ON BUSINESS GOALS AND OBJECTIVES

The two main business objectives for Proton Holdings Berhad are, to be the market leader in Malaysia by dominating 50% of domestic market share, and to produce best quality cars with no compromise to quality issues. Product quality is a key strategic in...
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