FACULTY OF

BBPM2103 MARKETING MANAGEMENT I JANUARI 2013

ASSIGNMENT TITLE ECONOMY DRIVERS

Name : Matric number : NRIC : Telephone number : E-mail address : Tutors name : Learning Centre : Semester :

CONTENT

TITLE 1.0 2.0 3.0 4.0 5.0 6.0 Description on the selected organisation Descriptions on the new economy drivers Identification and discussion on the new economy driver(s) that affect the selected organisation Recommendations of steps to manage the new economy driver(s) in the selected organisation Summary that highlights the new economy drivers, discussion of effects and recommendations to manage them References

M/S

1.0

Description on the selected organization The auto industry in Malaysia is closely linked to the history of Perusahaan Otomobil

Nasional Bhd (PROTON). PROTON was incorporated on May 7, 1983 to manufacture, assemble and sell motor vehicles and related products, including accessories, spare parts andother components. Some researchers like, Sim (1979) and Keat and Li (1998) pointed out obstacles to production efficiency in local motor vehicle assembly operations and also in the marketing of automobiles in Malaysia. This includes diseconomy of scale associated with production oriented to a domestic market of limited size and lack of Customer focus. Later, the Malaysian Government with the direct support of Yang Amat Berhormat Dato' Seri Dr Mahathir Mohamad, former Prime Minister of Malaysia initiated the national car project.

Picture: Proton Logo

Perusahaan Otomobil Nasional Bhd (PROTON) has come a long way from a mere car assembler to an integrated car company. The Malaysian Prime Minister, Dato' Seri Dr Mahathir Mohamad, commercially launched Malaysia's first car model, the Proton Saga, on July 9, 1985.

Converted to a public company on 22nd Nov. 1990, it was publicly listed on the Kuala Lumpur Stock Exchange (KLSE) in March 26, 1992. The company is publicly listed on the Bursa Malaysia and a majority 42.74% stake of its equity is owned by the Malaysian conglomerate DRB-HICOM, as of January 2012. Previously, Mitsubishi Motors and parent Mitsubishi Corp. held a 15.86% joint stake in Proton from the company's inception until March 2004, which they later sold to Khazanah Nasional. Proton, predominantly reliant on the local industry is currently undergoing major structural and internal changes, as evident in the appointment of a new owner and the launch of various new and upcoming models such as the Proton Prev, designed to conform and compete on the international level. Among the greatest achievement of Proton are: a) 11 January 2011 in Automotive. b) 24 February 2011 Proton Inspira - 2nd Place (Family Cars Category) at the Asian Auto Fuel Efficiency Award 2010. Lotus Elise S - 2nd Place (Performance Cars Category) at the Asian Auto Fuel Efficiency Award 2010. c) 13 April 2011 Proton Persona - 2011 Frost & The BrandLaureate Master Awards

2010 - Voted by The SMEs As The Most Preferred Brand

Sullivan Malaysia Excellence Award for the category Value-for-Money Car of the Year (1.3l and Above). d) 14 April 2011 PROTON awarded the Quality

Management Excellence Award (QMEA) (Category IV for annual sales turnover exceeding RM100 Million) during the Malaysia Industry Excellence Award (IEA) 2010.

e)

08 May 2010 -PROTON Achievement Award for

awarded the

Labour

Day

category

Competitive

Employer Award (Big Corporations) in conjunction with 2010 Workers' Day Celebration presented by the Prime Minister. f) 12 May 2010 Frost & Sullivan Malaysia

Excellence Award 2010, Best Passenger Car Model of the Year for Proton Saga (fifth award) and Best Automotive Debut Model of the Year for Exora. The development of the local motor vehicle industry has had useful economic functionsgeneration of employment and has helped establishment of supportive industries. It has spawned a number of companies solely dedicated to making specialised accessories such as sports rims, tints, and an scores of workshops. Presently, Malaysia has become one of the region's largest auto markets and holds a dominant position in vehicle sales among ASEAN countries.

2.0

Descriptions on the new economy drivers New economy is a term often used in the media to describe the changes that have taken

place in the world of business since the widespread adoption of Internet technology. It has been applied to a wide range of situations and issues, most notably the rise and fall of high-tech and Internet startup companies. During the 1990s, as the United States experienced a long economic expansion and the stock market soared, many people started to think that basic economic principles no longer applied in the age of the Internet. The basic idea behind the new economy was that computer and Internet technology had fundamentally changed the typical way of doing business. Analysts and investors alike focused on technology adoption and stock price valuation rather than revenues and long-term business plans when evaluating companies. Companies in the new economy are heavily involved in the internet and biotech industries, but the ripple effects of new technologies have spread out to all other industries as well. Because marketing is one of the basic fundamentals of the business of business, hence it is necessary to effectively identify and obtain new customers, and build strong relationships with existing customers to ensure retention. Effective marketing should not only convey the product, price and delivery methodology, but more importantly it is your tool to communicate the value you create for your customers, partners and society.

Digitalisation and Connectivity

The new economy is a digital economy. Throughout history, revolutions in a natural resource have led to new tools, which led to new wealth and social development. The new age could be aptly dubbed the age of sand. The affairs of commerce, business transactions, human communications, and the insights of science are all reduced to charges on particles of silicon or through glass fibers-both based in sand. In the new economy, information is increasingly digital in form-bits. When information becomes digitized and communicated through digital networks, a new world of possibilities unfolds. Vast amounts of information can be squeezed or compressed and transmitted at the speed of light. The quality of the information can be far better than with analog transmissions. Information can be stored and retrieved from around the world, providing instant access to much of the information recorded by human civilization. New digital appliances can be created which fit in your pocket and can impact most aspects of business and personal life By the year 2020, an entire generation, Generation C (for connected), will have grown up in a primarily digital world. Computers, the Internet, mobile phones, texting, social networkingall are second nature to members of this group. And their familiarity with technology, reliance on mobile communications, and desire to remain in contact with large networks of family members, friends, and business contacts will transform how we work and how we consume. In general, digitisation means conversion of non-digital material to digital form. It is needed for easy retrieval and storage. The digitization of the business world has rendered the phone book and print ads nearly obsolete. Consumers use Google and other search engines to locate and research products and services. Word-of- mouth referrals are made via social media sites such as Facebook and Twitter. Product and service reviews are available through corporate and personal blogs. To survive and grow in todays market, businesses have to use all these and more to reach their customers.

The phenomenon of digitization is reaching an inflection point. The effects of an increasingly digitized world are now reaching into every corner of our lives because three forces are powerfully reinforcing one another.

Customisitation and Customerisation Customisation refers to the tailoring of the campaign according to the needs of an individual or groups of individuals. In other words it mean an activities of tailoring a particular product to the specific needs of an individual customer. These are high margin products where the volumes are low and the buyers are few. It is the process of allowing the customers to design and have the product to their choice. Production of personalized or custom-tailored goods or services to meet consumers'

diverse and changing needs at near massproduction prices. Enabled by technologies such as computerization, internet, product modularization, and lean production, it portends the ultimate stage in market segmentation where every customer can have exactly what he or she wants. Customized marketing is generally practiced by companies whose products are very expensive or unique, such as custom home builders or airplane manufacturers, because these products can be designed to suit the special needs of each customer. Since the company adapts its product and marketing program with such a high degree of specificity, customized marketing is considered to be the ultimate form of target marketing. For example, a furniture manufacturer that manufactures based on the customer needs.

Customerisation on the other hand means a combination of operational and marketing customization. A company has to be able to interact with each customer personally in terms of message, services and customer relation.

Disintermediation and Reintermediation Disintermediation is the removal of intermediaries in a supply chain, or "cutting out the middleman". Instead of going through traditional distribution channels, which had some type of intermediate (such as a distributor, wholesaler, broker, or agent), companies may now deal with every customer directly, for example via the Internet. Disintermediation initiated by consumers is often the result of high market transparency, in that buyers are aware of supply prices direct from the manufacturer. Buyers bypass the middlemen (wholesalers and retailers) to buy directly from the manufacturer, and pay less. Buyers can alternatively elect to purchase from wholesalers. Often, a business-to-consumer electronic commerce (B2C) company functions as the bridge between buyer and manufacturer. The use of direct sales channels between manufacturers and buyers was expected to significantly increase in the early 2000s, boding well for many companies. Peppers and Rogers Group of Stamford, Connecticut and the Menlo, Californiabased Institute for the Future conducted a study that revealed a healthy forecast for companies selling direct. The research predicted the number of consumers using the direct sales channel would triple between 1998 and 2010 from 11 percent to 33 percent, respectively. It also forecast consumer direct sales to grow from $190 billion to $1.1 trillion during the same timeframe. Reintermediation can be defined as the reintroduction of an intermediary between end users (consumers) and a producer. This term applies especially to instances in which disintermediation has occurred first. Reintermediation occurred due to many new problems associated with the e-commerce disintermediation concept, largely centered on the issues associated with the direct-to-consumers model. The high cost of shipping many small orders, massive customer service issues, and confronting the wrath of disintermediated retailers and

supply channel partners all presented real obstacles. Huge resources are required to accommodate presales and postsales issues of individual consumers.

Convergence Industry In the new economy, the dominant economic sector is being created by three converging industries which, in turn, provide the infrastructure for wealth creation by all sectors. In the old economy, the automotive industry was the key sector. The dominant sector in the new economy is the new media, a product of the convergence of the computing, telecommunications, and content industries. In the U.S, new media and its ancillary industries and services account for more than 15 percent of GDP Computer hardware and communications bandwidth are both becoming commodities. The profit in the new sector is moving to content because that's where value is created. However, many of the content companies-the entertainment companies, broadcast networks, and publishers-are slow off the block as old paradigms die hard. The more successful companies are those with a background in software, services, computer-based content, and digital telecommunications. Convergence is becoming the basis of all sectors. The new media is already beginning to transform the arts, the way scientific research is conducted, and the way education is delivered. It is on the threshold of transforming the firm as we know it, and changing the way we do business, work, play, live, and probably even think.

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3.0

Identification and discussion on the new economy driver(s) that affect the selected organisatio Convergence is becoming the basis of all sectors. The new media is already beginning to

transform the arts, the way scientific research is conducted, and the way education is delivered. It is on the threshold of transforming the firm as we know it, and changing the way they do business, work, play, live, and probably even think. Driven by convenge industry, Proton exports cars to the United Kingdom, South Africa, and Australia and the company is aggressively marketing its cars in several other countries including the Middle East. Additionally, Proton has also been exporting a small volume of cars to Singapore, Brunei, Indonesia, Thailand, Nepal, SriLanka, Pakistan, Bangladesh, Taiwan, Cypr us and Mauritius. 14,706 Proton cars were exported in 2006. The export units jump to 21,261 in 2009 but fell to 18,769 in 2010 due to global recession Also, the digitalization has affected proton on how they going to expand their business. Hence, Proton actively connected to digitalization by rapidly makes rebranding using their medium of technology. From 1983 the manufacturer's badge on the front of the car was a midblue shield with a yellow crescent below a yellow fourteen-pointed star - references to Malaysia's coat of arms. In 2000 this was revised into its current form, a stylized yellow tiger head on a green roundel upon a darker blue shield, with the Proton name in yellow

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capital letters. At the same time text representations of the Proton name were changed from lowercase italic text "proton" to uppercase "PROTON". Sales collateral and PR literature use both "Proton" and "PROTON".

4.0

Recommendations of steps to manage the new economy driver(s) in the selected organization In order to effectively embrace the New Economy, Proton need to realize that the new

economy is a networked economy, integrating molecules into clusters which network with others for the creation of wealth. The new paradigm in wealth creation is possible because of digital computer networks and because of a shift from the host-computer, hierarchical networks of the past to peerto-peer webs based on the Internet model. As the bandwidth of such networks grows to achieve full multimedia, the opportunities for new institutional structures grows dramatically. The new networked organizational structures are not simply the creation of "processoriented" organizations in which "stovepipe" business processes are reengineered horizontally to save costs and improve responsiveness. Nor is the change simply a shift to team-based structures. Rather, it is a radical rethinking of the nature and functioning of the organization and the relationships between organizations. The new organization, dubbed by the Alliance for Converging Technologies as the "Internetworked Enterprise," is a vast web of relationships, including all levels and functions, in which the boundaries inside and outside are permeable and fluid.

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For Proton, the new technology networks enable small companies to overcome the main advantages of large companieseconomies of scale and access to resources. At the same time, these smaller companies are not burdened with the main disadvantages of large firms-deadening bureaucracy, stifling hierarchy, and the inability to change. As larger companies become clusters of smaller molecules which can work well together, they gain the advantages of agility, autonomy, and flexibility. The Internetworked Business is a far-reaching extension of the virtual corporation, because there will be access to external business partners, constant reconfiguration of business relationships, and a dramatic increase in outsourcing. The Internetworked Enterprise will behave just like the Internet, where everyone can participate and the total effort is greater than the sum of the parts. It is also impotant for them that the overall economy will act in the same way. Networks of networks along the Internet model are beginning to break down walls among companies and their suppliers, customers, affinity groups, and competitors.

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5.0

Summary that highlights the new economy drivers, discussion of effects and recommendations to manage them The new economy involves acquisition, processing, transformation, and distribution of

information. It is a marvelous device for allowing us to collect and transmit existing information, of which there is an enormous amount dispersed around the world. The rules of the new economy promote the generation of new knowledge because the lower distribution costs make the potential market for new information much larger and more lucrative. On this other hand, the lower cost of transmission and distribution may erode the property rights in intellectual property and make the production of new knowledge less profitable. But yet, how these two forces willbe resolved is unclear. For Proton, broadening the boundaries of international trade is part of the more general phenomenon wherein the new economy is likely to intensify competition in many sectors. In essence, the reduction in communications costs, particularly the immense increase in connectivity due to the Internet, will allow much improved price discovery, comparison shopping, online auctions, and other features that in effect increase the size of markets. This trend will be particularly intensified with the increasing push toward commoditization, discussed above, which broadens markets and intensifies competition.

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Added together, these trends suggest that the main impact of the new economy on open economies indeed on individual firms and individuals who are after all tiny open economies will be to intensify competition, erode pockets of market power, and reduce the frictions that keep markets from operating effectively and even ruthlessly. This is surely good news for consumers and for nimble businesses but may be bad news for sluggish firms, rigid economies, and inflexible or poorly educated workers. In the new economy, as Pascal said, risk favors the prepared mind.

6.0

References

"First National Car Reborn". The Star / YouTube. 18 January 2008. Retrieved 6 March 2013 http://corporate.proton.com/About/Brand/Awards.aspx. Retrieved 6 March 2012 http://www.proton.com.my/. Retrieved 6 March 2013 Ong Soo Heong (2006-01-13). "VW's demands wreck deal with Proton". Malaysia Today. Archived from the original on 2007-01-03 "PROTON 25 Years". Proton Interactive / YouTube. 15 July 2010. Retrieved 7 March 2013 Whitley, Angus (2007-01-25). "25/01: Malaysia's Proton loses top-selling spot for the first time". Bloomberg.com. Archived from the original on 2007-10-10

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