Porter’s costs which one-time costs customers incur when Produa


Porter’s Five Forces
Framework Model analyses the competitive forces within the environment in which
a company operates, to assess the potential for profitability in an industry. Porter
consists of the threat of new entrants, the threat of substitute, buyer power,
supplier power, and rivalry among existing competitors. The change in any
forces normally requires firms to observe the market
and make the decision in the overall change of industry information.


Threat of New Entrants

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Profitable industries
that have high in returns will attract new firms to take involved. New
competitors may force existing firms to be more efficient and to learn how to
compete on new dimensions. The threat of new entrants is high when it is easy
for new competitors to enter a market ad low when there are significant entry
barriers to entering a market. These entry barriers make it difficult for new
firms to enter an industry and often place them at a competitive disadvantage
even when they are able to enter. The domestic cars that have produced in
Malaysia are Proton and Produa. This can seem that in the automobile industry,
there have high barriers for new entrants to involve in. The potential factors
that faced are economies of scale which is flexibility in pricing, differentiation
of product which promote special products, requirements of capital refer
according to industry, and switching costs which one-time costs customers incur
when Produa industry is buying from a different supplier. For example, the Produa
Myvi is a car produced by Malaysia manufacturer Produa while Myvi is the results
of Produa’s collaboration with both Toyota and Daihatsu. There are two types of
engine in Myvi car which are 1.3? and 1.5? and both of the car pricing are different
based on the types of engine that bought from the supplier are also different.








Threat of Substitute Products


A substitute product is a
change that makes which used a different technology to solve the same economic
needs. Threats of substitute products or services are high when they are many
alternatives to a product or service and low when there are few alternatives for
them to choose. The substitute product’s quality and performance are equal to
or greater than the existing product while the selling price is lower. The
factor that confronts is the number of substitute products available in the
market, the intention of buyer substitute, relative price, and quality of
substitute and buyer’s switching costs. Therefore, if there have a high threat
of substitute products, there is higher the possibility for Produa industry to
have the loss in advantage and profit of the particular products. For example,
after the launch of Produa Myvi; Proton, the first Malaysia national car maker
released a similar classed as Proton Savvy. Buyer will make the decision to buy
or not based on the price, quality, and capability of the car.


Bargaining Power of Buyers


The bargaining power of
buyers is the ability of buyers to affect the price they must pay for an item.
Firms can take measures to reduce buyer power such as given discount by helps
the company to find out which is firm’s loyal customers. Buyers’ power is high
if buyers have many alternatives and it is low if they have few choices given.
The buyer power increases when the Produa products are differentiated or
standardized. Buyers pose a credible threat to integrate backward into the
sellers’ industry. For example, buyers might influence by the  price which buyers want the cheap and affordable
car, so if Produa Myvi has the price lower than Proton Savvy, buyers will rather
choose Produa Myvi as the first preferences car in the option of the price.
Besides that, they also have the option of choosing sizes, colour and others
additional features of the cars that buyer needs.








Bargaining Power of Suppliers


The bargaining power of
suppliers is the supplier’s ability to affect the price they charged for
supplies which including of raw materials, labour, and services. The supplier
power will increases when supplier’s products create high switching costs.
Besides that, suppliers also have substantial resources and provide a highly
differentiated product and pose a credible threat to integrate forward into the
buyers’ industry. In order to reduce the supplier power, Produa industry needs
to build the strong relationship with the supplier, so they can get the low
cost of material in order to lower down the production costs. For example,
Produa can make an agreement or partnership with other automobile industry for the
good quality of raw materials that needs and they also can have for their
production at low costs.


Intensity of Rivalry among


Rivalry among existing
competitors is high when competition is fierce in a market and low when
competition is more complacent. For most industries, the intensity of
competitive rivalry is the major decision of the competitiveness of the
industry. Therefore, having an understanding of industry rivals is important to
promote a product smoothly. Besides that, a business must be aware of its
competitor’s marketing strategy and pricing which the reactive will occur if
there have any changes made. Firms seek to differentiate their products in ways
that customers value and in which the firms have a competitive advantage.
Common rivalry dimensions include price, service after the sale, innovation and
etc. For example, most automobile industry will promote the similar price of
the car, the similar service after the sale in the reason to defeat the




3.3  Internal Environment



The resources have two
components which are tangible resources and intangible resources. The tangible assets
that have in Produa industry are financial resources that enable the firm’s
capacity to borrow and generate internal funds. Besides that, they also have
technological resources which are stock of technology such as patents,
trademarks, copyright, and trade secrets. While intangible resources include of
knowledge; trust; skills; and collaborative abilities in human resources,
innovation resources in scientific capabilities and capacity to innovate, and
the last is reputational resources in brand name; perception of product quality,
and reliability.




Functional Areas



ü  Adequate training ensuring stable source of skilled manpower
ü  Automated manufacturing process
ü  Maintenance of technical competence

Marketing & Sales

ü  Conduct various and promotions activities
ü  Advertisement in media
ü  Provide panel of finance and insurance for customers
ü  Showrooms are available


ü  Have follow-up service for customers
ü  Service information and service package provided for customers
ü  Easy availability of spare parts

Human Resource Management

ü  Encourage in teamwork and employees to develop ideas for greater
efficiency and productivity
ü  Ensuring regular specialized training is provided for success
ü  Reward staff performance
ü  Provide a conducive working environment






Core Competencies


Core Competency enables a
company to deliver unique value to customers. It embodies an organization’s
collective learning, particularly of how to coordinate diverse production
skills and integrate multiple technologies. Core Competency also creates the sustainable
competitive advantage for a company and helps enable an organization to access
a wide variety of markets. There are two tools firms use to identify and build
core competencies.


Ø  Four Specific Criteria of Sustainable Competitive
Advantage which capabilities must need to fulfill the four criteria in order to
be core competencies are valuable, rare,
costly-to-imitate and non-substitutable capabilities.


Ø  Value Chain Analysis is a strategic tool
used to analyze the strength and weakness of internal firm activities. There is
value chain and support activities that should be analysed, while each activity
should be examined through competitor’s abilities. Therefore, the firm that
competes through differentiation advantage will try to perform its activities
better than competitors would do. If it competes through cost advantage, it
will try to perform internal activities at lower costs than competitors would
do. When a company is capable of producing goods at lower costs than the market
price or to provide superior products, it earns profits.


 Value chain activities are the activities the
firms’ complete produce products and sell, distribute, and service in the ways
that create value or customers.  There
have five primary activities which are Supply-Chain Management that handles
sourcing, procurement, conversion, and logistics management that necessary for
the firm to receive raw materials and convert them into the final product.  For example, Produa industry needs to make a
deal or order the raw materials from the supplier for them to produce the final
product. Distribution is the activity that relates the final products to
customers which efficiently handling customers’ orders, choosing the delivery
channel and working with the financial support for customers’ payments. For
example, if there has a customer order a car in Produa, Produa employees need
to efficiently handle their orders and arrange the customers’ payment through
finance support function. Marketing including Sales is the activities that
target customer on the basis of satisfying customers’ needs and locate the additional
customer. For example, the Produa has developed the advertising campaign and
determining pricing strategies for the purpose of attracting the customer for
buying Produa products. Operations are the activities that developing
employees’ working schedule, designing production process and determining
production capacity needs in order to change the raw materials into finished
products. For example, Produa employees will assign the task to workers for
them to complete the finished products. 
Lastly is the Follow-up Service is the activities that taken to increase
a product’s value for customers. For example, Produa has made the survey as the
feedback about the customer’s satisfaction, offering technical support after
the sale and fully complying with product’s warranty.


that, finance, human resource, and management information system is the support
functions which their activities in the firm can create customers value through
work being done to produce, sell, distribute, and service the products when
firm is producing. For example in Produa Company, the finance support
department will be associated in managing financial resources activities such
as investing in organizational functions in ways that will support the products
in produce and distribute for the short and long term by managing the relationship
with those providing financial capital to the Produa company. Besides that,
human resource department will associate with managing the firm’s human capital
such as employs the workers and retraining in ways that create a capability.
Lastly is the management information system which obtains and manage the
information and knowledge throughout the firm such as determine the ways to
collect and distribute knowledge by linking relevant information and knowledge
to organizational functions.