1. 0Introduction This paper is about the economic challenges face by the manager in the working environment. The challenges are base on the economic problems that occur in the country, Malaysia. This assignment was selected on the automobile industry that is the Second Automobile Manufacturer in Malaysia known as Perodua. The economic challenges are on the demand and supply of the resources and products, the import export of the product inside and outside the country and the price, rates, quantity and quality of the product.
There are also the issue on the oil price that has been increasing trough time and the green environment done by the company as many people nowadays are very sensitive in saving the planet by the program that has been introduce by the government that is go green. 2. 0Background of company The Second Automobile Manufacturer Private Limited abbreviated to Perodua, is Malaysia’s second largest automobile manufacturer after Proton. It was established in 1992 and launched their first car, the Perodua Kancil in August 1994. M2′ was refers to the codename, which was used when the project to establish Perodua was still Top Secret. The shareholders of Perodua are UMW Corporation Sdn Bhd with 38% stake, Daihatsu Motor Co. Ltd. (20%), MBM Resources Bhd (20%), PNB Equity Resources Corporation Sdn Bhd (10%), Mitsui & Co. Ltd (7%) and Daihatsu (Malaysia) Sdn Bhd (5%). Perodua mainly produces mini cars and does not actually directly compete with Proton. They do not actually produce any in house designs or engineering for their main components for example engine and transmission.
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Perodua cars are badge engineered from existing Daihatsu designs. Daihatsu originally held a 20% stake in Perodua, increasing this to 25% in 2001 and then to 35%. In 2004, the Toyota Avanza started being assembled by Perodua in their factory in Rawang for the Malaysian market. 2. 1Perodua Logo Perodua organized a logo competition in 1997 to find a new corporate logo, to be launched together with their upcoming model, tentatively known as the X555. The competition was won by Johnson Ng Weng Kuan, an architecture student from Universiti Teknologi Malaysia.
Perodua officially launched the new corporate logo on 24 August 1998 when they launched Malaysia’s first 4×4 vehicles, the Perodua Kembara. The new Perodua logo The new logo maintains the ‘P’ and ‘2’ and the colors of the old, squarish logo, but has been stylized further to become elliptical, which is more fluid and dynamic. The green color represents social responsibility to the environment and the community, while the red color symbolizes the development of competent workforce and resilience in meeting challenges in the globalised world.
However, the emblems mounted on the company’s latest cars have black in place the green and red areas, with the chrome relief maintained as it was. 2. 2Corporate Information Perusahaan Otomobil Kedua Sdn Bhd (PERODUA), established in 1993, is a joint venture company between Malaysian and Japanese partners. The shareholders of Perodua are UMW Corporation Sdn Bhd 38%, MBM Resources Berhad 20%, Daihatsu Motor Co. Ltd 20%, PNB Equity Resource Corporation Sdn Berhad 10%, Daihatsu (Malaysia) Sdn Bhd 5%, Mitsui & Co. Ltd 4. 2% and Mitsui & Co, (Asia Pacific) Pte Ltd 2. 8%.
The company started operations in 1994 and the ever so popular Perodua Kancil was introduced to the Malaysian market in August the same year. To date, the following vehicles have rolled out of the Perodua plant: * The Perodua Rusa – March 1996 * The Perodua Kembara – August 1998 * The Perodua Kenari – June 2000 * The Perodua Kelisa – August 2001 * The Perodua Myvi – May 2005 * The Perodua Viva – May 2007 * The Perodua Nautica 4WD – May 2008 * The Perodua Alza – November 2009 As at end of May 2011, Perodua has sold some 1. 9 million units of vehicles of various models.
Perodua headquarters is located on a 138-hectare site in Sungai Choh, Rawang, Selangor Darul Ehsan. It houses among others Perodua corporate building, R&D testing laboratories and styling studio, vehicle test track, manufacturing plant, engine plant, pre-delivery inspection area, vehicle distribution stockyard and parts warehouse. 2. 3Perodua Group * Perodua Auto Corporation Sdn Bhd (PCSB) was established in the final quarter of 2001. Besides Perodua, the two other joint venture partners of PCSB are Daihatsu Motor Co. Ltd. and Mitsui & Co.
Ltd both of Japan. The manufacturing operations of the Perodua Group are being managed by PCSB. * Perodua Sales Sdn Bhd (PSSB) is responsible for the sales, marketing, and distribution of all Perodua vehicles as well as after sales service and spare parts operations. * Perodua Manufacturing Sdn Bhd (PMSB) is the company responsible for the manufacturing of Perodua vehicles. * Perodua Engine Manufacturing Sdn Bhd (PEMSB) undertakes the assembly of the vehicle engines and also manufacturing of selected engine component parts. 3. 0Findings 3. 1Increasing Oil Price
Oil prices are always debatable and remain an important variable in determining the economic activity of any country. There are big impacts to any country in raising the oil prices especially in Malaysia. The impact of higher oil prices on the leads to inflation, increase budget deficit and puts downward pressure on exchange rate which makes imports more expensive. The rising oil prices are the major concern for all the developing economies and Malaysia is suffering from it too. The increase in oil price has further effect the daily consumption pattern of households badly.
The government was increase the oil price based on oil world market prices. According to Jalil, Ghani, & Duasa (2009), in the case of Malaysia, oil price is set by the government through government subsidy. Despite the fact that Malaysia is exporting oil, the country also imports oil from other countries. The surplus of exporting value over the importing value makes Malaysia a net oil exporting country. Despite these facts, the repercussions from price increase in the world market could not be avoided from spill-over to the local market, and forces the Malaysian government to slowly liberalize the domestic oil price.
Figure 1 : Malaysia Oil Price Source: Malaysia Green Tech. Corporation; Team Analysis The implementation of oil price increase in the local market has triggered mixed responses from the public, particularly households and business units. This is because, being a major energy resource to Malaysia’s industries, the increase in oil prices is likely to push the overall price level, and adversely affect the economy.
In particular, to the household, higher oil prices directly means taking a bigger percent of their income for gasoline expenses. Moreover, the inflation that results from higher oil prices will reduce the monetary value and adversely affect their expenditures and demand for goods and services. On the producers’ side, a higher oil price is associated with higher input price. Production at higher cost will not only cause reduction in quantity of output produced but also push the price of output sold in the market to be higher.
The event of oil price increase and the publics’ reaction to it has raised an important question of the impact of oil price on the economy. Many activity and businesses was affecting with this crisis. Perodua also was impacted due increasing oil price globally. But, Perodua get positive impact in demand from customer. It is because the customer preferences were changed to get compact car for saving fuel consumption. They prefer to buy Perodua car especially for Perodua MyVi model because this product have quality and meet the customer needs.
The sale of Perodua is going up rather than other automobile company. Otherwise, the price of Perodua car was not changed during this crisis. They maintain with the same price. The Perodua car’s price is set by the government and if the Perodua wants to rise up or change their price they must discuss and come out the good reasons in order to get approval from the government. It also contributes to the increasing demand from customer to buy Perodua cars. Even the oil price was increased, Perodua offered discounts like rebates for model Viva to attract customers to buy the Perodua cars.
But, Perodua never offered discounts to customers for MyVi model because that model is top selling car for their company. Perodua also maintained the price of services that provided to their customer during this time. So, increasing oil price not give negative impact but positive impact to the Perodua. This situation not challenged the company so much. 3. 1. 0CATASTROPHERE On 11 March 2011, the world was shocked by the earthquake at Japan. The 8. 9-magnitude earthquake set off a devastating tsunami that sent walls of water washing over coastal cities in the north.
Concerns mounted over possible radiation leaks from two nuclear plants near the earthquake zone. Japan’s economy was dragged into a recession after the earthquake, which caused severe damage to the northeast of the country. It also damaged factories and disrupted supply chains. Toyota and Nissan were halting production at all of their 20 factories. Toyota, the world’s largest car maker, evacuated workers from two plants in the worst affected regions and has not been able to reach the sites to inspect the damage. The plants make up to 420,000 small cars each year, mostly for export.
Two of Honda’s three plants remain closed. Other manufacturers have also reported major damage to their factories, with Kirin Holdings, Fuji Heavy Industries, GlaxoSmithKline and Nestle among those to halt operations. Sony, the electronics group, has suspended production at eight plants. At one plant, 1,000 workers had to take refuge on the second floor after the tsunami hit. All ports have been closed amid warnings of aftershocks to come. This situation was giving big impact to many countries that depending to Japan technology especially Malaysia.
One of the automobile manufacturers in Malaysia is Perodua. They are using Toyota technology in producing the cars. After an earthquake at Japan, Perodua was facing the problem in manufacture their cars. So, the productions for their cars less than company target. Hence, Perodua cannot distribute the cars to their customers on time. So, the department sales that are closed with the customer take responsibilities in explaining the issues to the customers to avoid dissatisfaction among them.
According to the Japan Cabinet Office data, the latest figures show that exports are improving, helping economic growth pick up and net exports accounted for just over a third of the growth in the third quarter. Yasuo Yamamoto from Mizuho Research Institute stated that the return to growth in the third quarter reflects the recovery in supply chains, which lifted factory output and consumption. Hence, this situation can cause Perodua to producing cars in the designated period. This catastrophe was give big challenge to the Perodua rather than increasing oil price situation. . 2 Import, Export and Competition Perodua has expanded its market and there are lot challenges they need to face in order to compete with other model car especially non-local model cars (NNC). It is crucial to Perodua to defenses itself toward the big impact of challenges whenever want to export it product to another country. They are big competition out there in term of to putting the price that even lower than the price at home. As example, the price of the Perodua MyVi in Britain is RM 36,792 which is compared with home price is RM 46,400 (OnnF.
C , 2011). This is due to price competition there that state other established and exclusive model is eventually is much lower than Perodua and to enter another country, they ought to reducing it price first because customer will consider other model if Perodua stick with that price. Because of Perodua is national car, government take initiative to intervene in term of impose tariff toward non-national car (NNC) models in order to protect local car model especially Perodua models as a way to control the competition between national and non-national car.
After this tariff was executed, usually the price of the NNC models will increase. From this will change the price of NNC to higher rate and more exclusive than before. People most prefer to choose the most economic and cheapest model and obviously, this really help Perodua as a national car models and give advantages to them. It different prices if another models brand such as Honda and Ford that are substantially higher than if there import these product to this country due to government that impose high duties to control the import NNC in entering this country.
The price of Honda and Ford is much lower than at their country, and this is big challenge to Perodua in order to compete with these models because as well as these models is established and looking exclusively also capturing the trust and equity from people, they can sell it at the lower price. Perodua make a confession that it is important to them to produce the high quality of the product in order to pursue its car model internationally. The key to become competitive in industry is technology. Through joint venture with Toyota and Daihatsu, Perodua success to offers the vehicle with a latest generation technology and quality.
Perodua is aone of few manufacturers within the small car sector to offer a twin cam engine with four valves per cylinder and dynamic variable valve timing (Anonymous, 2011). This level of technology is featured throughout Perodua cars and contributes to their lively performance, good handling and excellent economy. Obviously, from this joint venture with Toyota and Daihatsu as important step to Perodua to produce high technology model cars and become as a key to become competitive in automobile industry. During economic recession, Perodua not think that they having a bad impact because of these phenomena.
This is regarding positive response by people toward this model that increasing in demand. Besides, the price that cheapest and most economics than NNC turn the people switch their need toward these local modal. People not make this recession as reason they can’t anymore using the car, but just as reducing the cost toward the expenses for transportation with choose these model. Obviously, the using of these modal is most economy in term of less in usage of fuel and without doubtful they will choose these.
In order to compete with NNC, Perodua should develop R&D to designing and manufacturing cars that can meet the personality needs in terms of design, power and size for different age groups using marketing strategic formulation. Prior to the planning process, because of MyVi demand is have increasing in it demand, Perodua need to learns from the past records on MyVi performance, evaluating the present condition and envisioning the future target market. Perodua also need to develop their cars quality through manage it quality efficiency in term of product reliability and durability, how customer perceived regarding to product erformance, and also how Perodua producing and improving the product performance. 3. 3PERODUA SHOULD INVOLVE IN THE IMPLEMENTATION OF ISLAMIC FINANCE Nowadays people become more educated and started to realize the importance of implementing Islamic banking system in order to get the pleasure of Allah. The Malaysian government has fully support the implementation of Islamic finance as Islamic finance is the best system that can stabilize the county economy. In Malaysia we still use the dual banking system which combine the conventional and also the Islamic banking system.
Malaysia is trying very hard to convert the conventional banking system into the full fledge Islamic banking system. It takes a lot of time and effort to merge from conventional to the Islamic financial system as there are lots of new infrastructures that need to be done. The implementation of Islamic finance has become one of the challenges that the Perodua’s managers have to face nowadays. The managers must have a good knowledge in Islamic Finance as they have to deal with the customers who wanted to make loans to purchase the cars.
For the non Muslims maximizing profits is very important but for the Muslims the world is not only about achieving profits but it is a part of jihad. In whatever we do we have to intention to get the pleasure of Allah. So this means that in everything we do the earning that we got must be halal that complies with Syariah. In the Islamic financial system the Muslims must get rid of riba. Perodua has collaborated with conventional and also the Islamic bank in providing loan s to the customers to buy the cars. The bank involve are Maybank, RhB, Am Bank, Public Bank and Bank Islam..
Bank Islam provides the loans for the undergraduate. The loans are calls as the undergraduate scheme. Most of the loans offer is from Bank Islam as most of the customers are the undergraduate. Perodua cars such as MyVi and VIVA are compact cars and the price is affordable compared to the import cars so it is suitable for the undergraduates. During the interview session with the managers of Perodua at the Sungai Buloh branch we notice that the managers do not provide the knowledge to the salesman regarding the Islamic financial system.
As we all known the salesmen are the people who are very close to the customers and they are the people who are going to give the advice to the customers on how to make choice. It is not only the matter of advising the customers on which types of cars to be purchase but it also the salesmen responsibility to advice the customers regarding the loans to purchase the cars. In the interviews the managers mentions that they do not advice the customers regarding the loans. It is depends on the customers to choose Islamic loans or the conventional loans.
Actually for Muslims it is a responsibility for Perodua to provide information to the customers regarding the advantages of Islamic Loans compared to the Conventional loans. In our point of view Perodua should advice the customers to use Islamic loans as some of the customers do know the existence of Islamic loan but they did not know about the advantages of using Islamic loans. The government wanted to implement Islamic financial system but there are still people who use the conventional system. To make a change is not as simple as it seen so it should start from the initial stage.
In providing loans for the automobile consumers should start during the purchase system of the cars. It is not only the responsibility of the bankers to advice the customers to use the Islamic loan. Actually the salesmen are also responsible to guide the consumers to use Islamic loans as the customers would listen more to the advice given by the salesmen. It is very sad to know that many people are still do not know the differences of Islamic loan and the conventional loans some of them even claim that the service charge in Islamic bank and interest rate in conventional bank is the same.
Actually the interest rate is riba as the bank charges high rate for loan that can discriminate the debtor as the interest is always fluctuate. We recommend Perodua should not just only focus on how to achieve the sales but they should also have to educate their managers and salesmen regarding the Islamic loans by sending them to the seminars. At least they have the knowledge regarding Islamic loans so that when the customers ask them, they able to explain about the Islamic loan.
As long as there are still people uses the conventional loan systems we cannot implement the full-fledged Islamic financial system. Business is not only to achieve the profit but it is the matter of achieving Al-Falah which is success in this world and in the hereafter. 3. 4Role of Green Environment for business. Environmental pollution problems in Malaysia have a long history. River pollution by mine wastewater and sludge began with the rapid development of tin mining, a traditional industry that started at the turn of the century about 100 years ago.
From the late 1960s, Malaysia pursued rapid industrialization supported by foreign investment, but the result of industrialization was a raft of pollution problems, caused by industrial wastewater and other wastes, which became very apparent from the 1970s. In recent years, air pollution caused by the tremendous increase in road traffic that has accompanied economic development, and water pollution from manufacturing and household wastewater, have become obvious problems that particularly affect urban areas. Air pollution due to exhaust gas from mobile emission sources such as motor vehicles and pollution caused by industrial activities.
Of these three problems, air pollution from mobile emission sources is of greatest concern. In 1997, there were roughly 8. 5 million registered motor vehicles in Malaysia, climbing at the rate of 10 percent or more every year. According to 1997 figures, the estimated quantities of air pollutants released by these vehicles were 1. 9 million tons of carbon monoxide (CO), 224,000 tons of nitrogen oxides (NOx), 101,000 tons of hydrocarbons (HC), 36,000 tons of sulfur dioxide (SO2) and 16,000 tons of particulate matter.
Mean values for the years 1993 to 1997 show that the amount of air pollutants from mobile emission sources accounts for 81 percent of all air pollution occurring in Malaysia. Another problem is black smoke from diesel motor vehicles, the subject of numerous complaints from the public. In response, the government has launched a campaign to crack down on vehicles that violate the regulations. The problem will clearly become even more critical as the number of motor vehicles keeps on increasing.
In regard to lead pollution, the government in 1991 introduced incentives to use unleaded gasoline, and since 1996 it has been obligatory for gasoline-fueled vehicles to have catalytic converters. These policies have been successful in reducing the level of lead in the atmosphere year by year. Perodua also play their own responsibility to create and implement green environment for manufacturing plant and the branches itself. During the interview session, Mr. Mohd. Radzi B. Kassim, as a Branch Manager at Sungai Buloh had mentioned that all product from Perodua were produce with igh technology and the best part is all vehicle are eco-freindly. Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad said, Perodua welcomed the government’s announcement that 2012 would be the “National Innovation Movement”, which would help boost the company’s Eco-Challenge initiative for local institutions of higher learning. “Every year, Perodua allocates RM2 million to promote the Perodua Eco-Challenge, with the objective of challenging the participating institutions’ engineering prowess and innovation, design and fuel efficiency,” Aminar said.
Here, Eco-Challenge 2011 by Perodua become innitiative to challenge institution’s engineering prowess and innovation by benefit to saving the fuel. This is also become a part of Perodua’s corporate responsibility programs towards provide green product for green environment. Beside that, he also added that all Perodua’s vehicles must follow the Standard Emission that set by government by follow the requirements that set specific limits to the amount of pollutants that can be released into the environment.
Perodua also maintain and practice the quality of the environment at the manufacturing plant that located at Rawang, Selangor. Top Management shall define their commitment by define their commitment for pollution prevention, compliance to legal requirement and continual improvement in emission standard based on the environmental policy for Perodua. Perodua had installed emission equipment in full compliance with the legal standard at their plant. They also regularly monitor the gasses emitted by the plant stacks and maintaining concentration of toxic gasses at level below regulatory requirement.
Other efforts by Perodua to maintain the green environment by organize the program such as “Green Bag Program” which is “No Plastic Bag Days” that started since June, 2010 for every Saturday. They encourage all the employees to bring their own plastic or paper bag rather to get plastic bag especially from all canteens. We recommend Perodua to produce an electrical vehicles like Hybrid car by Honda, Prius by Toyota to follow the trend which is become the best alternative to replace the previous technology for car because by this, it can help to reduce usage for fuel since we’re running out of resources and can reduce air pollution.
Perodua also need to continous improvement in managing the plant by replace the old machines with the latest high technology equipment since they still use the old machines. Perodua also need to come out with the up-to-date system and layout of the schecule to make sure the wastege are managing well and smoothly without having to cause any pollution or hazards to people and environment as well. By this, it can help them interms of cost efficiency by reduce the cost and the time constraints by reduce the time for any activity after shifted to the new technology equipment, system and the scheduling for wastage.
The program such as “No Plastic Bag Day” also need to be sustain and encouragement among staff or employees to always bare in mind to practice this program to make sure the campaing success to maintain the green environment concept. 4. 0Conclusion In conclusion, we can see that economic challenges do effect the managers in managing the company either in the management, operations, finance and human resources. Many things that happened nowadays such as geographical disaster increase in money exchange value and others can affect the industry.
These challenges mostly give a good impact on the productions of the company that is when the tsunami happened in the Japan, some of the parts of the car could not be produce and export to Perodua and Perodua cannot produce the car. Thus, this goes to down rate of sales to the company. From this problem, it gives challenges to the managers to improve their sales in the next period after the recovery of tsunami in Japan to get back their sales to the actual stage. REFERENCES Anonymous (2011), “Perodua provide values with technology. Available on: http://www. carpages. co. uk/news/. Retrieved on Dec 15 2011. Abidin, M. Z. , & Rasiah, R. (2009). The Global Financial Crisis and the Malaysian Economy: Impact and Responses. Jalil, N. A. , Ghani, G. M. , & Duasa, J. (2009). Oil Prices And The Malaysia Economy. International Review of Business Research Papers 5, 232-256. Onn F. (2011), “What it takes to move our auto industry forward”. Available on :http://star-motoring. com/Features/Focus/2011/Malaysian-auto-industry–What-it-takes-to-move-for. aspx. Retrieved on Dec 16 2011.
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