Strategic Management Essay
* 1. 2012 Competitive Strategy ReportPrepared by:Sara Yeap0008VMVM0112 1 * UMW (United Motor Works) Holdings Berhad is founded by2. UMW Background Worth RM10 billionChia Yee Soh in 1917 as anautomobile repair shop (Bicycle) They aretoday and listed one of the top ten listed companies in Bursa Malaysia strongly operating in Singapore, Indonesia, Thailand, Vietnam, Papua NewGuinea, Having more thanAustralia, Taiwan, China, India, Myanmar and Turkmenistan Having 5 strategic partners10,000 employees with 80% of them are Malaysians and UMW Corporation Sdn. Bhd.
Holds the largest profitearning annually which operates all of their core businesses activities UMW Holdings Berhad UMW UMW UMW Australia UMW Oil & Gas UMW Petropipe Malaysian Corporation Sdn. Ventures Vision: To become a truly(L) Berhad (L) Ltd. Ventures Shd. Bhd. Ltd. Bhd. Mission: “A Good Business Is Rooted Deep in the Solid Groundworld-class brand of Customer Satisfaction. ”This saying from Chia itself had embedded in their operating culture continuously for years. They are to treat their customers with “Beyond Boundaries” is their newhonesty, loyalty, earnestly and the best. rallying call started in year 2008 2 * 3.
UMW Background – Cont’UMW Core Businesses UMW Core Values: Honour in their continual efforts in building trusted relationships and behaving with the utmost integrity, resulting in quality products and services that stand the test of time Vibrant in their energetic and open-minded approach to new ideas that inspire fresh solutions to their partners and businesses Unshakeable in their commitment to their customers, partners, employees as well as the community at large, to persevere and strive for excellence in all their undertakings Pioneering as they lead the way with bold ideas that shape the futures of their industries 3 * UMW Toyota Motor Sdn.
Bhd is the assembler,4. UMW Toyota Motor Shd. Bnd. A joint-ventureimporter and distributor of Toyota and Lexuscars in Malaysia company with 51% in hand while Toyota Motor Corporation (39%) andToyota Tsusho It assembles engines and parts from Thailand and JapanCorporation (10%).
Having fourtogether with the body in which ismanufactured in Malaysia itself subsidiaries : Subsidiaries Responsibility Assembly Services Shd. Bhd. (ASSB) Local assembler/manufacturer of Toyota passenger and commercial vehicles. Automotive Industries Shd. Bhd. (AISB) Original equipment manufacturer of exhaust systems for national and non-national car companies Toyota Boshoku UMW Sdn. Bhd. (TBU) Manufacturing and assembling high quality and cost-effective – Formerly known as Takanishi SIM Shd. Bhd. car seats, door trims and interior parts for all Toyota cars and Hino commercial vehicles assembled by ASSB using the JIT method. KAYABA (Malaysia) Shd. Bhd. (KYB-UMW) Manufacturer of high ASSB assembled a few Toyota models:quality shock absorbers and steering pumps.
It alsoVios, Hilux, Innova, Hiace and Fortuner . The rest areimported. invested into PERODUA, local car manufacturer with a 38% share interests (biggestshareholder besides Daihatsu) 4 * 5. Analysis – Financial & Market Share AnalysisFinancial highlights of UMW Toyota Group revenue registered an increase of 150% for both Toyota/Lexus and Perodua earnings in 2Q12 in compared with the preceding year’s corresponding quarter. Group profit before PBT (Taxation) increased by 27. 6% to RM433. 3 millions. (Appendix J ) Net profit attributable to equality holders of the Company increased by 44. 9% compared with the same quarter of 2011. Consolidated cash and deposits stands at RM2. 3 billion.
Total market share in the automotive sector of Malaysia is approximately 50% (UWM Toyota Motor & Perodua) as of 2012 FOREX conversion rate is better than year than preceding year (Appendix F) Despite global economy recession, Malaysia’s GDP is anticipated to grow 4-5% 5 * 6. Analysis – SWOT Analysis Strengths Weaknesses Opportunities Threats The global Despite Toyota’s performance in Toyota holds the largest market Price leadership by local car share among the foreign carsfuel prices are has in Malaysian and global markets, the been steadily increasing, giving a manufacturers Malaysia and the third biggest production capacity is limited as Natural catastrophe in Japan and marketthe clear opportunity on the potential share after the two local car main production centers are located in increase in demand for Toyota’s Thailand affected Southeast Asia manufacturers-Proton and ThePerodua.
Japan and US unlike many other fuel efficient cars production line Thestrong brand image of Toyota leading auto manufacturers which got The Malaysian automobile market both locally andenvironmental awareness globally manufacturing plants in low cost among Malaysians is growing is Toyota is the industry leader in locations. Onsaturated due to the slow growth top of that, the ASSB is which will tend more people to rate in population and the presence efficient manufacturing and only putting together the parts produce prefer hybrid cars like Toyota of strong competitors such as operations in terms of TQM (Total in those major production centers Prius. Honda, Volkswagen, Fords and Quality Management) and JIT (just- thereby incurring huge shipping costs The growth in the Malaysian Hyundai.
in-Time) manufacturing and is and directly Market share droppedrising prices of Toyota economy is likely to increase the from 13% to moving ahead with R&D and latest cars demand for Toyota cars 11% with Korean cars; Hyundai & Toyota has movedtechnology especially in the away from niche Kia grabbing some of the shares. manufacture of hybrid cars with The prices of Toyota cars in objective toan segments and making cars on the eliminate waste specific needs of small customer Malaysia are higher than other groups. This has given a competitive countries due to heavy taxation on weakness in terms of limited product foreign cars.. differentiation (e. g. Toyota Vios is Profit largely affected by FOREX promoted as a car suitable for all fluctuations ages). 6 * 7.
Analysis – PESTLE Analysis Politic & Legal SocialThe Malaysian domestic automobile With the government grants and People tend to purchase different car Toyota produced variety of carsindustry is strongly protected by the other incentives, local cars are models and brands as a symbol of the ranging from luxury to medium-endgovernment. The revised National becoming more affordable creating social status ranging from the luxury and to economical models such asAutomotive Policy (NAP) gives tough competition for Toyota in the cars to the medium, economy and low Toyota Vios which catered to differentserious consideration in further Malaysian market. end cars. walks of life among the Malaysiansdeveloping the domestic automanufacturers such as Proton and TechnologyPerodua.
Meantime, there’s no tax With the mainstream awareness of the Toyota has been the leader forimposed on some hybrid models negative environmental impacts from environmental friendly vehicleextended till 31st December 2013 as a automobiles and the increased technologies for a long time andsupport to moving towards green importance given to the precious energy Toyota was the first to commercially resources, leading car manufacturers are produce vehicles with such coming up with new technologies to technologies with its launch of the Economy manufacture fuel efficient cars.
Also, Prius in 1997 and has been movingIn order to develop the domestic Heavy taxes on imported cars lead to Malaysia has recently announced its ahead with this technology ever since. automobile manufacturing industry, a significant increase in prices of plans on boosting the automotive sectorimported cars have been heavily Toyota cars to the end-customer. through production of electronic cars. taxed. Since 2011 the Malaysia government With this, it is likely to boost the salehas given 100 exemptions on of Toyota hybrid models such ascustoms duties and exercise duties Prius and Prius C.
Environmentfor both hybrid and electronic cars. Environmental protection has become a The increased environmental hot topic recently and Malaysian awareness coupled with the taxDespite the recent global economic The good economic growth will customers are becoming more aware of incentives and the government’s targetcrisis, the Malaysian economy has have favourable impact on people’s the environmental concerns. on cutting down carbon emission, it isbeen steadily growing with an purchasing power thereby increasing obvious that Toyota has a bright futureexpected growth rate of 4% in 2012. demand for durables such as hybrid on its hybrid models. cars. 7 * 8.
Analysis – Porter’s Value Chain Support Activities Primary Activities 8 * 9. Analysis – Porter’s 5 Forces Barganing Power of Buyer – High Threat of New Entrance – Low •Can easily switch to other brands if theyre cheaper •New entrants cant enter the market easily as it and better specifications such as Hondas new requires huge capital investment and the industry Hydrid models which are more lucrative than have already reached economics of scale Toyota Prius •Brand loyalty amoung the buyers. They wont easily •Local domestic manufacturer:
Proton & Perodua switched to new brand as purchasing a vehicle which holds a hefty 58% of market share in 2011.incurred high cost •Other substitues such as walking and busHow to reduce How to reduce itsbargaining power of Rivalry within the industry – High selling price andbuyer to moderately maintain its quality •There are two major players in Malaysianlow to compare with automotive industry, two national cars which is simultaneously?
National cars’ price? more affordable •Other top 8 auto companies presence in Malaysia such as Honda, Nissan, Hyundai, Volkswagen, etc asHow to overcome foreign brands. Currently Volkswagen and Honda What to do to staygovernment’s are moving aggressively with their strategy to own ahead of its strongprotection duty higher market share in Malaysia especially with rivalry? Hybrid modelstaxation over its GLC?
Bargaining Power of Supplier – Moderately Threat of Substitute – Moderately High Low •There are a lot of substitutes in this industry. When •Various types of suppliers in vehicles industry such the price or specifications of the vechicle is lack of as cooling, electrical, braking, fuel supply systems favour, the substitutes will emerge distributed across the globe. •Besides a vehicles, buyer can opt for other •They own many interchangeable supplier and substitues such as bicycle, bus, train or even produced many components in the short time. walking to reach their destination with petrol price Supplier dont own the power to determine the hiking. However, it depends greatly on the price.
consumers geographical location 9 * Toyota’s market share in Malaysia10. Analysis – Competitors Analysis dropped 1. 2% from 13% to 11. 8% because ofKorean car emerging fast (stylist & Hybrid models are most expenses now compared with Honda (as forcheaper) Took too long tonow). Technology higher but losing out interms of price. produce hybrid cars, Toyota has 2 while Honda as 4 (onelaunching soon). 10 * 11. Analysis Findings & SummaryCompetitors Analysis Toyota is doing fine in existing product but not in Hybrid models which are perceived lack of designs and variety to compare with its competitors, Honda. PESTLE Analysis Free duty tax on Hybrid models are only extended till end of year 2013.
After that, it will be a lot more expense to own a Hybrid car whereby current price ranges are starting from RM90,000 – RM140,000Financial Analysis Toyota is doing great in year 2012 but the looking back to year 2011, its sales dropped tremendously from the impact of natural catastrophe.
Value Chain Analysis Toyota inbounds logistic and operation relied in Japan and Thailand whereby sales and production from assembly plant in 2011 is badly affected by earthquake and floods (Appendix C). Only few models are assembled locally and majority models are imported from ThailandSWOT Analysis FOREX currency fluctuates every year and no guaranteed sales target achieved every year (Appendix B) Latest market dominance revealed by theedgeMalaysia that Toyota had reduced from 13. 1% to 11. 8% with more new models emerging from Hyundai & Kia (theEdgemalaysia.
com, 2012)Porter’s 5 Forces Threats from substitutions would increased if Malaysian’s government withdraw from the “no duty tax” on hybrid models and increased current taxation Toyotaon foreign cars FocusGrowth Target How to better and be COST LEADER? Lexus wants to boost 35% saleswith new modelwants 15% market share Differentiation Cost Leadership 11.
* Collaborate and trained Perodua12. Recommendations Strategic Option 1 A win-winintensively to produce a Perodua first Hybrid Model Strategic Perodua increased technologysituation for both: Option 1 & UMWskills Local car, cheaper (No shipping costToyota profits increased if sales well & Backward Integration strategy on its supply andTax)Strategic Option 2 Propose to Perodua to manufacture itsStrategic Option 2value chain. – Backward engines Integration& Implement strategic option 1 toaccessories locally. Why?
To avoidbuildtrust, confidence, skillful enough and to test themarket natural catastrophes such asfloods & earthquake in Toyota’s production Also reduce price as cost (shippingland. & tax)reduced tremendously. 12 * 13. Recommendations Cont’ – Gantt Chart for Strategic Option 1Preparation – Planning – Analysis – Production – Testing – Documenting = 488 days 13 * 14. Implementation & Control 1. Integration of UMW Toyota and1. Managing/sharing customer information Strategy Perodua team with other2. Implement Toyota manufacturing management, marketing (corporate systems (TQM & JIT) into Perodua communications, brand existing system marketing, direct marketing) and IT staff3. Managing content quality 2. Utilize cross-functional teams and4.
Unified reporting between both teams steering groups to exchange brilliant to align marketing effectiveness System Structure ideas Priority: 3 Priority: 1 Shared Improving and gradually change of1. Insourcing VS Outsourcing Values management style/culture among the2. Staff Development and training top managements and employees to3. Achieving senior management buy- share the same values especially in/involvement in this corporation Perodua adapting and adhering to4. Staff recruitment and retention Staff Toyota’s Hybrid Technology Skills Priority: 5 Priority: 2 Style Seek for specific set of skills into position Relates to role of highly innovative and fit (design exports, financial commitment as to influence dynamic analyst, project manager, automotive thinking and infiltrate into the team with 1.
Gaining appropriate budgets and engineers, etc) to create an effective same voice demonstration to deliver value to share skill set amongst themselves Priority: 7 across the organization. Annual planning Priority: 6 approach 2. Deliberate techniques for aligning strategy with organizational and market strategy Priority: 4 14 * 15.
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University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 15 February 2017
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