Internal factors analysis of Paragon Union Berhad

Paragon Union Bhd. operates as an investment holding company, which engages in the
manufacturing and distribution of commercial carpets, rugs, car carpets, and noise, vibration, and
harshness (NVH) components. It operates through the following business segments: Automotive,
Commercial, and non-Reportable Segments. The Automotive segment comprises of car carpets
and components. The Commercial segment offers commercial carpets. The Non-Reportable
Segments involves operations to subsidiary companies which are inactive and dormant. The
company was founded on January 1, 1994 and is headquartered in Cheras, Malaysia.
In the commercial sector Paragon is the preferred brand to most of the five star hotels,
commercial buildings, mosques, offices and government projects. Besides, we have more than
100 authorized dealers nationwide and around the world.
Besides the local market, we are also exporting our carpets to overseas countries such as Saudi
Arabia, Bangladesh, Sri Lanka, Singapore, Vietnam, Cambodia and others. Our goal is to
penetrate new markets in Asia Pacific, Australia and Europe.
Specialized in designing, manufacturing and sales of Axminster carpets, Machine Tufted Carpets,
Hand Tufted Carpets, Carpet Tiles and Carpet Rugs.
For a strategy to succeed, it should be based on a realistic assessment of the firms internal
resources and capabilities. An internal analysis provides the means to identify the strengths to
build on and the weaknesses to overcome when formulating strategies. The internal analysis
process considers the firms resources; the business the firm is in, its objectives, policies and
plans; and how well they were achieved.

Financial analysis

Current Ratio

2013

2014

1.23

1.38

Working capital

9,107,303

9,323,851

Operating profit margin

17.42

17.59

Current Ratio:
We found that the Current Ratio of Paragon is more 1. Therefore, the firm is able to pay its
current liabilities.
Working Capital:
From the calculation Paragon has large amount as its working capital for day to day operations.
Therefore, the firm has more internal funds for its day to day activities
Operating Profit:
It show that Paragon has good operating profit margin.
Market share
In terms of market share, the group is able to maintain its own main existing automotive
clientele, which comprises of Proton, Perodua, Honda, Nissan, BMW, Volvo, GM Korea,
Peugeot and Isuzu. The group is able to secure additional projects from their existing clients with
launches of new models.
SWOT analysis
Strengths
reduced labor costs

Weaknesses
small business units

barriers of market entry

future profitability

monetary assistance provided

competitive market

existing distribution and sales networks

high growth rate
domestic market
Opportunities

Threats

growing demand

financial capacity

new products and services

technological problems

venture capital

Strengths
The major strength of Paragon has its strong reduction of labor cost which reduces the
administrative cost. Furthermore, the barrier to entry in the carpet is very high, therefore, making
the threat of new entrant almost inexistent. Also, the monetary assistance provided by the
government help the company to have a strong standing in the industry and, the existing
distribution and sales network they have within and outside the country give them a big market
share
Weakness
The outlook and market competitiveness remain challenging for the year ahead and could be
subjected to unforeseen factors which may affect their price competitiveness. For instance in the
recent year, the cost of production had escalated drastically, which affected their price
competitiveness, particularly the currency fluctuation and hike in the raw material prices.
Generally, such factors are usually counter-productive in their effort to stay competitive
Opportunity
Paragon prospects and outlook in the coming years would largely rely on the implementation of
the secured projects and the success rate of tenders in both automotive and commercial sector.
Dealers performance throughout the year would also contribute to their total revenue.
Threats
The group faced an erosion of margin due to higher costs and achieved a lower turnover of
RM49 million in 2014 and RM53 million in 2013. This downtrend of revenue was mainly
attributed from pressure from commercial sectors and economic uncertainness during the year,
which had adversely affected the overall performance of the company.

Strategies used by Paragon Union Berhad

Differentiation
Paragon is using product differentiation by producing other components for the automotive
industry such as Proton, Perodua, BMW, Nissan so on and so forth.
Value creation by focus and cost leadership
Paragon has outsourced his production as to reduce its operating cost to third party through vast
economies of scale. Paragon focuses on the automotive industrial design to make products that
are not only highly innovative but also the user-friendly and stylish in nature. Paragon has a
command on higher price than average price due to highly personalized and people friendly
devices.
Value chain activities

The value chain activities of Paragon Union Berhad rely more in the automotive market by
having a strategic partnership with local and international car manufacturers.