Proton Stays Single!

After months of retracted discussions, offers and counter ofers, denials and reluctant admissions, the Malaysian government has finally decided that Proton will end all discussions with all foreign parties that were touted as possible 'strategic' partners to the national car company.

The immediate reaction from the market is all too familar of course. Proton shares dipped and analysts and observers are all not too happy with this sudden turn-about.

Lets take a closer look at this latest addition to the colourful history of Proton sans the emotional baggage.

As it stands, Proton will continue to function as it has always done previously .ie. it will be a sovereign car maker. This, according to the government is because of the following reasons:

1. Proton has increased its market share from from about 20% plus to over 30% now and is well placed to increase it further
2. The Persona is doing well and more new models are on the way
3. Proton has entered the Chinese and Iranian markets.
4. Hence, Proton is strong enough now and can avoid a fire sale situation.

To be honest, Proton is definitely in a much better position than it was a few months ago. If you remember, I wrote about the Persona and said that it was indeed a good car. So, its not suprising that the Persona is doing well. However, I also said that one new model maketh no new future. May I also add that breaking into the Chinese and for that matter Iranian markets maketh no new future either. At the risk of oversimplyfying the issue, let me just say that these two markets are huge but extremely unpredictable. Will Proton be able to withstand any upheavels in these two markets?

Every major car manufacturer knows that the success of each new model is a hit-and- run story. To have a series of top selling back to back models is not impossible but not something that can be taken for granted either. Perodua did well with its models because it entered a market segment which at that time was less crowded and was able to carve out a nice little market share for it self unlike Proton that competes in a highly competitive market segment.

Also, what about the huge financial outlay needed to develop fresher models? The technology aspect of this is another matter all together.

Finally, have we forgoten the competition from India, Thailand and China? Can Proton single handedly withstand these competitions which will inevitably be about quality, price and volume?

On the other hand, I must admit that I am less pessimistic about Proton than most others simply because Proton has two critical advantages : huge production capacity and it owns Lotus. If these two advantages are leveraged we just might be able to have another world beater from Malaysia. The only question is that the whole Lotus issue is unclear. Also, I would suspect that Proton needs 2 new models next year. The Saga replacement is targeted somewhere in the first few months of 2008. I think Proton should not wait until 2009 for the proposed MPV. It should do that in 2008. This will give confidence to the market of Proton's seriousness in avoiding past mistakes.

Finally, I would also suggest that Proton look to India. Every major car maker is looking to India. In fact Suzuki is back on the automotive radar courtesy of its Indian market.

There is no turning back now for Proton. The next time it invites another car maker for strategic tea-talk, it has better be in good shape! We Malaysians will always wish the best for Proton. But, we will not be so forgiving anymore with our power-windows either!

Reality Check!

To all of you good people out there, may this year's Deepavali bring forth blessed joy, wealth and peace. Its going to be an excellent celebration this time around as far as Malaysia as a nation is concerned. Going by the tone of the Youth and Woman's wings of UMNO, much emphasis will be placed on building a united nation to withstand the relentless onslought of global competition and other forces of change in all spheres of life. So, I suspect this Deepavali will be a base to build a feel good atmosphere for all Malaysians after a year of racial verbal bloodletting. This will lay the groundwork for the next general election.

By now, you may already feel the difference in my writing. Yes! I did begin this article with a general broad-stroke of our nation's socio-political landscape. As you all know, I am very apolitical. However, I have a reason to dwell into that area momentarily this time around. The reason is this, everything said and done, we as a nation will always go back to unnesecary bickering and much time and energy will be wasted on trivial issues while our competitors are beating us left and right at every corner.

To make my point, I pulled out two newspaper articles. I am going to review these 2 articles this time around. On November 1st the NST in Biz News reported that Malaysia is 21st most competitive nation from a pool of 131 nations. The following are the rankings of a few other significant nations : Singapore (7), South Korea (11), Hong Kong (12), Taiwan (14). China was at 34 and India at 48.According o that report, even though Malaysia fell 2 rungs from 2006, we are still doing well on most other counts.

On 9th April I happened to read an intresting article also in the NST with the title Ace up India's Sleeve. Allow me to quote some satistics from this article : 18.5% of the the total workforce of Accenture are in India. Similarly IBM has 14.6%, Aviva 12.8% and Citigroup 6.7%. In the case of IBM " Indian teams now autonomously develop software solutions from start to finish for global clients". AND, it was reported that by 2010 India will lack 500,000 egineers.

How long do you think a nation such as India in today's economic and business environment will take to close the gap with our position as the 21st most competitive nation? Where was India 15 years ago? Get my point?

Well, think about this while munching into your muruku and 'whacking' some tosai and mutton. Cheers everybody. I will be busy next week with my program for RHB Insurance on Transformational Leadership. Till we meet again, Happy Deepevali and Happy holidays.

Brand Building

What do Google and Starbucks have in common? Lets see now.. they are both hugely successful, they are both valuable brands and they are both helmed by visionaries. There is of course this one other similarity that many are not aware of...they are both misers when it comes to advertising. Comparatively, both Google and Starbucks spend very little in advertsising in their respective industrie. Yet, they are growing and returning uninterrupted returns to their shareholders. What's the secret?

The secret is simply that they have a winning product and a winning value proposition which build more goodwill than any slick adverstising campaign can ever produce.

This is not to say A&P is not important. In fact sooner or later even Google and Starbucks will have to up their A&P budget when competition and/or consumer trends shifts. The point however is that a winning product-value offering will have a greater impact on long term sustainable return than merely a bombardment of A&P campaigns. The most valuable brand today is probably Coca Cola. I am going to be a heretic for saying this but I am goig to say this anyway : How much is the value of brand Coca Cola is the result of its inherent value proposition as opposed to its consistent and powerful imagery and association in the minds of the consumers. Let me put this way : There are some movies that are popular because of the hype surrounding it while there are others that become great hits simply because it captured the hearts and steadily won viewers. See my point?

Take Phuket for example. In terms of tourism, Phuket stands heads over shoulders above many other destinations in Asia. The thing about Phuket is that it offers something for everybody. It offers a unique blend of experience for both the leisure and buiness travellers that it has created a brand image without even trying. Even a devastating tsunami could not keep it down for too long.

So, Google and Starbucks have build a reputation that is a direct result of their product-value proposition. This is not, as we can see now, soley dependent on A&P.

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Arrifullah of Petronas Fertilizer Kedah : I am glad you enjoyed my write-ups on Proton and MAS. By the way, Datuk Seri Idris Jala recently clarified that the survey on mealboxes involved 35,000 passengers on 383 flights and 91% of the customers were satisfied with the mealboxes. I am happy to see that MAS has provided more details on the survey. Still, I am not sure what 'satisfied' means. What does 91% 'satisfied' response means if the other two choices are 'excellent' and 'great'

Surveys, especially when carried out by interested parties sometimes tends to prove what have been decided rather than to help in making the right decision.

Anyway, it has been reported that the mealboxes are on a trial run until the end of the year and more customer feedback is expected.

My hope, as always, is for Malaysian businesses to make the right service oriented decisions. That, for me, is the only winning formula.