1. 2012 Competitive Strategy
Report
Prepared by:
Sara Yeap
0008VMVM0112
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2. UMW Background
UMW (United Motor Works) Holdings Berhad is founded by Chia Yee Soh in 1917 as an
automobile repair shop (Bicycle)
 Worth RM10 billion today and listed one of the top ten listed companies in Bursa Malaysia
 They are strongly operating in Singapore, Indonesia, Thailand, Vietnam, Papua New
Guinea, Australia, Taiwan, China, India, Myanmar and Turkmenistan
 Having more than 10,000 employees with 80% of them are Malaysians
 Having 5 strategic partners and UMW Corporation Sdn. Bhd. Holds the largest profit
earning 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 (L)
Berhad (L) Ltd. Ventures Shd.
Bhd. Ltd.
Bhd.
 Vision: To become a truly world-class brand
 Mission: “A Good Business Is Rooted Deep in the Solid Ground of Customer Satisfaction.”
This saying from Chia itself had embedded in their operating culture continuously for years.
They are to treat their customers with honesty, loyalty, earnestly and the best.
“Beyond Boundaries” is their new rallying call started in year 2008
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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
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4. UMW Toyota Motor Shd. Bnd.
UMW Toyota Motor Sdn. Bhd is the assembler, importer and distributor of Toyota and Lexus
cars in Malaysia
 A joint-venture company with 51% in hand while Toyota Motor Corporation (39%) and
Toyota Tsusho Corporation (10%).
 It assembles engines and parts from Thailand and Japan together with the body in which is
manufactured in Malaysia itself
Having four 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 quality shock absorbers and steering
pumps.
 ASSB assembled a few Toyota models: Vios, Hilux, Innova, Hiace and Fortuner . The rest are
imported.
 It also invested into PERODUA, local car manufacturer with a 38% share interests (biggest
shareholder besides Daihatsu)
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5. Analysis – Financial & Market Share Analysis
Financial 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%
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6. Analysis – SWOT Analysis
Strengths Weaknesses Opportunities Threats
 Toyota holds the largest market  Despite Toyota’s performance in  The global fuel prices are has  Price leadership by local car
share among the foreign cars in Malaysian and global markets, the been steadily increasing, giving a manufacturers
Malaysia and the third biggest production capacity is limited as the clear opportunity on the potential  Natural catastrophe in Japan and
market 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 Perodua. Japan and US unlike many other fuel efficient cars production line
 The strong brand image of Toyota leading auto manufacturers which got  The environmental awareness  The Malaysian automobile market
both locally and globally manufacturing plants in low cost among Malaysians is growing is saturated due to the slow growth
 Toyota is the industry leader in locations. On 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 rising prices of Toyota economy is likely to increase the  Market share dropped from 13% to
moving ahead with R&D and latest cars demand for Toyota cars 11% with Korean cars; Hyundai &
technology especially in the  Toyota has moved away from niche Kia grabbing some of the shares.
manufacture of hybrid cars with an segments and making cars on the  The prices of Toyota cars in
objective to 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).
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7. Analysis – PESTLE Analysis
Politic & Legal Social
The Malaysian domestic automobile With the government grants and People tend to purchase different car Toyota produced variety of cars
industry is strongly protected by the other incentives, local cars are models and brands as a symbol of the ranging from luxury to medium-end
government. The revised National becoming more affordable creating social status ranging from the luxury and to economical models such as
Automotive Policy (NAP) gives tough competition for Toyota in the cars to the medium, economy and low Toyota Vios which catered to different
serious consideration in further Malaysian market. end cars. walks of life among the Malaysians
developing the domestic auto
manufacturers such as Proton and Technology
Perodua. Meantime, there’s no tax
With the mainstream awareness of the Toyota has been the leader for
imposed on some hybrid models
negative environmental impacts from environmental friendly vehicle
extended till 31st December 2013 as a
automobiles and the increased technologies for a long time and
support 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 moving
In 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 sector
imported 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 sale
has given 100 exemptions on of Toyota hybrid models such as
customs duties and exercise duties Prius and Prius C. Environment
for both hybrid and electronic cars. Environmental protection has become a The increased environmental
hot topic recently and Malaysian awareness coupled with the tax
Despite the recent global economic The good economic growth will
customers are becoming more aware of incentives and the government’s target
crisis, the Malaysian economy has have favourable impact on people’s
the environmental concerns. on cutting down carbon emission, it is
been steadily growing with an purchasing power thereby increasing
obvious that Toyota has a bright future
expected growth rate of 4% in 2012. demand for durables such as hybrid
on its hybrid models.
cars.
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8. Analysis – Porter’s Value Chain
Support
Activities
Primary
Activities
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9. Analysis – Porter’s 5 Forces
Barganing Power of Buyer - High Threat of New Entrance - Low
•Can easily switch to other brands if they're cheaper •New entrants can't enter the market easily as it
and better specifications such as Honda's 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 won't 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 bus
How to reduce How to reduce its
bargaining power of Rivalry within the industry - High selling price and
buyer to moderately maintain its quality
•There are two major players in Malaysian
low 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 as
How to overcome foreign brands. Currently Volkswagen and Honda What to do to stay
government’s are moving aggressively with their strategy to own ahead of its strong
protection duty higher market share in Malaysia especially with rivalry?
Hybrid models
taxation 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 don't own the power to determine the hiking. However, it depends greatly on the
price. consumers' geographical location
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10. Analysis – Competitors Analysis
Toyota’s market share in Malaysia dropped 1.2% from 13% to 11.8% because of
Korean car emerging fast (stylist & cheaper)
 Hybrid models are most expenses now compared with Honda (as for now).
Technology higher but losing out interms of price.
 Took too long to produce hybrid cars, Toyota has 2 while Honda as 4 (one
launching soon).
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11. Analysis Findings & Summary
Competitors 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 – RM140,000
Financial 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 Thailand
SWOT 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 on foreign cars
Focus
Growth Target How to better and
be COST LEADER?
Toyota wants 15% market share
Lexus wants to boost 35% sales
with new model
Differentiation Cost Leadership
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12. Recommendations
Strategic Option 1
Collaborate and trained Perodua intensively to
produce a Perodua first Hybrid Model
Strategic
 A win-win situation for both:
Option 1 Perodua increased technology & skills
UMW Toyota profits increased if sales well
Local car, cheaper (No shipping cost & Tax)
Strategic Option 2
Backward Integration strategy on its supply and Strategic Option 2
value chain. – Backward
Propose to Perodua to manufacture its engines Integration
& accessories locally.
Implement strategic option 1 to build
trust, confidence, skillful enough and to test the
market
Why? To avoid natural catastrophes such as
floods & earthquake in Toyota’s production land.
 Also reduce price as cost (shipping & tax)
reduced tremendously.
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13. Recommendations Cont’ – Gantt Chart for Strategic Option 1
Preparation – Planning – Analysis – Production – Testing – Documenting = 488 days
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14. Implementation & Control
1. Integration of UMW Toyota and
1. Managing/sharing customer information Strategy Perodua team with other
2. Implement Toyota manufacturing management, marketing (corporate
systems (TQM & JIT) into Perodua communications, brand
existing system marketing, direct marketing) and IT staff
3. Managing content quality 2. Utilize cross-functional teams and
4. 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 of
1. Insourcing VS Outsourcing Values management style/culture among the
2. Staff Development and training top managements and employees to
3. Achieving senior management buy- share the same values especially
in/involvement in this corporation Perodua adapting and adhering to
4. 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
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15. References
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