As an automotive fan, a significant portion of my income is spent on automotive magazines. Among the myriad magazines you can find at the book stands, one of those magazines I never miss each month is Live Life Drive. Personally, I appreciate the creativity, wit and style of writing and it also serves as an inspiration for how I frame my articles and pictures. No, this is not advertorial or endorsement for the magazine but I just wanted to let you all know why I often state references in relation to them. For example, the Forte Koup article HERE starts of by mentioning about them. I thoroughly enjoy their issues and if you have a chance, give them a try.

 

Now, coming to the topic at hand, their most recent publishing (Issue # 36) had a writer, Ahmed Shahriman commenting about how much he disagreed with Datuk Aminar Rashid Salleh, the Managing Director of Perodua in considering to produce compact sedan vehicles. Mr Shahriman accused Datuk Aminar Rashid of not caring for the brand. To quote the writer ” by line-extending his solidly built small-car brand into the forays of the extremely competitive sedan segment, he will almost undoubtedly cause an erosion of Perodua’s brand’s strength, built over 20 years of hard focus.” It is the writer’s opinion that branding-wise, Perodua is a specialist company, a focused company, a small/compact car company. Venturing to other segments is seen a brand dilution, particularly when Perodua is synonymous with small/compact cars such as the Kancil, Kelisa, Kenari, Viva and of course, the national’s best seller, the MyVi and Mr Shahriman proceeded to present his case with marketing quotes and examples to make his point.

 

 

 

 

Well, with all due respect, I disagree and find his examples to be a little off the mark and inappropriate.

 

 

First of all, let’s talk a little about the history and development of the national car project. The National Car Policy was first introduced in 1983; it’s primary purpose was to put Malaysia on the world map as one of the most developed car manufacturing centres of the world. Eventually, came another master plan where 5 local companies would specialize in 5 different vehicle segments; Perodua on specialist small car, Naza on sedans, Proton on luxury sedan, Inokom on MPV/van and HICOM on trucks and by ensuring each company focusing and improving on each segment rather than spending resources manufacturing similar segment vehicles and end up fighting each other for the same pie. This way, the pie can be grown as a whole.

 

 

A brilliant plan …. you can have a young Malaysian who just started his career and needs an inexpensive & fuel efficient vehicle with minimal maintenance cost.  He then finds the girl of his dreams and despite his modest beginnings, they hit it off well & decides to get married and expects their first child soon. The compact hatchback then makes way for a compact sedan with similar criteria as the first car. The first kid comes, the guy gets promoted and the couple plan for a second child. Compact sedan becomes a C or D segment sedan and as his career (and family size) advances, may move to an MPV or other luxury segments.

 

 

 

 

In a perfect world, the government would want that person to start with Perodua, then go to Proton/Naza/Inokom (Hyundai). Think of it like this; you start off with a BMX bike, then upgrade to a larger BMX bike before going to a  Raleigh bike and ending up with exotics like Audi e-Bike which has an electric motor that allows you to outrun a cheetah at 80kph.

 

 

 

 

The problem is Proton has compromised on quality and reliability so much that a large number of Malaysians would rather place themselves in higher debt and get other makes instead of a Proton if they can afford it. There is a disconnect in the transition between brands and money just flows elsewhere (and we’re talking about the country as a whole. Don’t forget that ultimately, Perodua, Proton, Naza, Inokom and DRB Hicom are 5 different companies whose individual P&L means as much as crap to each other). So much for the master plan.

 

 

So here you are,  happily cycling your upgraded BMX bike to some remote jungle before sh*t happens and the chain snaps, the handle bar breaks, the brakes fail and you’re left stranded in the middle for nowhere. That one incident will probably ensure you’ll never grace your butt on a BMX anymore (sorry BMX for comparing you against Proton, this is purely for illustration only). To make it worse, you Facebook/Tweet/9gag the entire world and instantly, the bad publicity spreads faster than lice on an unclean dog. The only good thing is, Proton’s reputation, as much as they have indeed improved, is still so bad, their isn’t much worse you can do by stepping on it more (we’re talking about Proton as a business so please don’t bring the national-pride-ego into this discussion). It’s indeed sad for a 28 year old company when everyone, even their own staffs say “it’s a Proton, what did you expect?”

 

 

I find it most amusing that in Mr Shahriman’s statement about Perodua being good for small and compact cars only, there was an Alza picture right next to it. As a matter of fact, Mr Shahriman conveniently ignored Alza existence in his entire article despite it selling more than 20,000 units for the first half year of 2012 (Motortrader Jan-May statistics and CBT June statistics), making it one of the most popular vehicles in Malaysia. When it was introduced, many analyst looked at the Alza in disfavor …. like Mr Shahriman, they were like thinking WTF is Perodua doing stepping out of its expertise and making compact MPVs? Haven’t they learn from the Rusa failure? What more, it’s pricing is very close to the Proton Exora which beats the Alza hands down in terms of space and specification. Yet today, the Exora continues to trail behind the Alza in terms of sales (until May 2012, Exora sold 10,721 units vs Alza’s 16,397. Source: HERE).

 

 

 

The Alza represents an anomaly to Shahriman’s logic. By his argument, the Alza should NOT exist, not to mention should not even top the best selling 5 models in Malaysia. Yet it sells out as fast than your favorite nasi lemak at a famous food stall and continues to lead by a reasonably large margin month after month compared to the Exora.

 

 

Why? I believe the answer lies in the point that most Malaysians believe Perodua = Japanese technology. While no company can claim all their cars are 100% problem free, Perodua has been a lot more consistent in producing lemon-free units that are economical to run and maintain. Doesn’t help that most Proton vehicles aren’t particularly well-known for their fuel consumption so with the threat of higher fuel prices constantly looming on the horizon, the demand fuel efficient vehicles will be on a constant high. In this aspect, Proton stands at the losing end.

 

 

Both Proton and Perodua has not been particularly innovative in producing new technology and this is particularly damning for Proton which many have harbored hopes that one day it will be a serious player in the international automotive circuit. Unfortunately, despite all the years of protection from the government, Proton has been the butt end of jokes and, like everything else that goes online, its negativity gets amplified once published. Despite whatever has been said, Perodua still has a stronger reputation here in Malaysia and banking on that, Perodua has successfully introduced the Alza and judging from the response, I’d say they’re ripe to try something else.

 

 

So, would Starbuck open a tea parlour shop simply because there’s a lot of tea drinkers in the market? Of course not …. but that has not prevented them from coming up with a range of tea menu for non-coffee drinkers. And please, don’t bring up the example of Harley-Davidson venturing into the car business … that is a totally different segment. The appeal (and function) of a motorcycle is as different as durians and rambutans. You can spawn various species but you can’t exactly say shifting from a lifestyle bike to a car an upgrade, can you? Or moving from a HICOM truck to an MPV. They fulfill totally different functions and needs of their users so this example is rather ludicrous.

 

 

Ultimately, everyone will need a bigger car …. why let others gain the business when your core values represents so much more to the consumer than just a small/compact hatchback car manufacturer? Perodua can be developed into a full fledged profitable global business if not for the excessively protective stance of the government in fattening Proton to a state of obesity until they can’t stand on their own two feet without the intervention of the government …. but on the other hand, perhaps it’s because of this very reason that Perodua had to learn to be independent on their own a lot sooner.

 

 

So yeah, why not give it a shot, Perodua? You can’t do any worse than a Proton Juara

 

 

 

 

 

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kensomuse

Though working in a field completely unrelated to the automotive industry, kenso has always had an interest in dabbling into the automotive industry, particularly business related aspects such as sales, marketing, strategic planning, blah blah blah. You can probably find better sources of technical specifications elsewhere if you dig long enough in the internet as this blog talks about the real life ramifications of who, what, where, when and why of the automotive world and focuses on relevant information to potential buyers.

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6 Comments

  1. Gan Pee Loo
    September 15, 2012 at 9:35 am — Reply

    A good counter point against En. Ahmed Shahriman’s opinion. Malaysian driving enthusiast should be given more options.

  2. Ahmed Shahriman
    September 18, 2012 at 6:29 pm — Reply

    Dear Kensomuse,

    Great comment! I really appreciate it! Its actually surprising that anyone read my article, and in fact, bold enough to leave a comment! Well, let me respond to you a bit, so that perhaps you can see that I’m not so much off the mark as you may think, ya?

    First of all, I’m not against any company that wants to give us, the consumers, an option to our purchases. In fact, its great that they do want to! It gives us better insight towards our purchases, and if the product/service does help us use/buy better goods/service, then great! So, in fact, I am all for new products & services!

    What I actually mean in the article is NOT that Perodua shouldn’t give us an option, but should NOT do that USING THE BRAND Perodua. That’s why the Harley/Starbucks examples were given. You’ll see why a bit later on.

    You see, Kenzomuse, when it comes to branding, what the name means to us, the consumers, is very important. It helps us choose what is right for us. And, each brand name also tells not only what the product is about, but also the “status level” of the product. Lets do a quick test here:

    What does Louis Vuitton mean to you? Handbags? Shoes maybe? Leather goods? Really expensive? High class? Prestige? Well, in a nutshell, LV does evoke the meaning “prestige”, doesn’t it? What about Audi? Mercedes? Ferrari? They all share an equally strong connection to the word “prestige”, albeit in different but unique ways.

    Ok. Now lets go to the other end of the spectrum. The ‘cheap’ spectrum. Anything comes to mind when you think of cheap? Immediately, mine goes to ‘Mydin’. They sell so many ‘cheap’ things there its ridiculous! What about you? I’m sure you can conjure up a few brands that evoke ‘cheap’ for you. If you’ve lived in Europe like I have, you’d be really surprised that brandnames like IKEA, ZARA and even Volkswagen evoke the meaning of ‘cheap’ to most Europeans!

    Ok, just another wee test before I get to my answers to your well written critique. Mentally, just picture the answers to what the brand names I’m about to list down to you in a bit mean to you, ok? Here you go:

    MILO
    MAGGI
    PANADOL
    NESCAFE
    PAMPERS
    PROTON
    DUNHILL

    Ok, I’ll stop. Now, if you’re an average Malaysian joe like me, your mental answers would be something like this:

    Maggi = instant noodles
    Milo = instant chocolate drink
    Panadol = fever medicine
    Nescafe = instant coffee
    Pampers = baby diapers
    Dunhill = cigarettes

    Correct me if I’m wrong. Anyway, rather immediately, you’ve associated the abovenames to ‘something’ in the real world, right? But, do these names mean something else too? For instance, is the Maggi brand ‘exclusive’ to only instant noodles? No, right? Maggi (actually made by Nestle) also makes tons of other stuff like tomato ketchup, chilly sauce, seasonings etc, right? But how come when we say the word Maggi, instantly we think of instant noodles? Have you ever gone to a mamak stall and ask him “Maggi satu” and he comes back with a large bottle of tomato ketchup? Or a packet of food seasoning?

    No, right? So, no matter what Maggi makes (or what is branded Maggi, to be more precise), we Malaysians still think that Maggi = instant 3 minute (souped) noodles. What if a wise-fella at Nestle decides that they should now start making cars by the name of Maggi? What do you drive? I drive a Maggi! You’d probably be really dumbfounded, wouldn’t you? Or laugh your head off! Having a Maggi car brand, just like having a Harley-Davidson car, just screws with your head, doesn’t it.

    Ok, lets get to answering your critique now. I’ve done my fair bit of work on the brand name Perodua, and the thing is, it means, to most of us Malaysians, a small/compact car company. And in fact, like I mentioned in my article, the people working at the Perodua company has done its work in defending that “thought” for over 20 years now – we make great small/compact cars (just don’t go and ask Jeremy Clarkson about it, though). In doing so, they have made a statement to us Malaysians, that they are SPECIALISTS in making small/compact cars.

    Now, isn’t that good? Its like when you have chest pains or a heart attack, you’re rushed to IJN (if you don’t yet know what this means, you better – its Institut Jantung Negara) instead of a clinic specializing in ENT (ear, nose and throat).

    Being a specialist is good! In fact, its great! That’s why I urged Perodua to keep making small/compact cars (under the brand Perodua simply because its now a ‘specialist’ name in the market) in my concluding argument. Unlike Proton. In fact, Proton tried to make everything – small cars, small MPV (yes, the Juara), big MPV, and yet, its only real “success” (if you want to call it a success) lie in the sedan market. You want to know why? Because Proton first entered into our marketplace (and most most importantly into our MINDS) with a sedan – the Saga. And Perodua? With a compact (even micro, by my standards) car – the Kancil. And you know what? Saga is still the best selling model for Proton, despite all the hoohaa with the rest of its lineup. In fact, it is the bread-and-butter for Proton.

    And no, the Alza is not an anamoly to me, my dear friend. Alza IS a compact MPV. So, as long as Perodua makes anything within the “compact” category, fine then! It is a compact car company anyway. Proton has actually got no business playing in the MPV category. The brand name “Proton” is synonymous to ‘cheap sedan maker’. That’s why they’re struggling with the Exora. They think, hey, there’s a market for cheap MPVs. Let make MPVs then! See what happens when a company does that to us the consumers? We get lugged with half-past cooked goods and services, when we should be getting great products at great prices.

    When you say my examples of Starbucks and Harley are ludicrous, actually, perhaps you may be closer to understanding it than dismissing it, without even knowing it! So you say that Harley is a motorbike company, right? Now, would you buy a car with the same brand if they were to make it? You’d probably say – hey, Harley is a bike company. Why would they make cars?!? Just like you said, Starbucks would perhaps not open a tea-parlour. Serving tea for those who don’t drink coffee at their current premises is enough, right? But do you know how many tea drinkers actually go to Starbucks? And, what is the cost of serving a cuppa tea, really? I’d say not that much.

    Now yes. Perodua intends to make sedans, right? You may be thinking – they make cars, they’re quite good at it, they’ve got Japanese backing, etc etc. Yeah, maybe they’ll make good sedans. Its in the same segment – making cars (just to follow your kind of thinking). But, Kensomuse, making a whole new car isn’t like serving tea on the side, my friend. Its a whole lot of investment! Tens of millions of ringgit, my friend. Knowing Malaysian businesses, the losses Perodua may suffer would eventually hit us, the consumers.

    Just to wrap up, I just don’t want to see Perodua make the same mistakes they have done before, and also the mistake others like Proton have done (like from your example, the Exora). Sure, Perodua should grow. But growth in our extremely competitive modern world nowadays doesn’t necessarily have to mean “growing out of your own skin”. In business, the CORE VALUE of a company means everything. Who are you? What are you? And due to that, a CORE VALUE must mean one thing, and one thing only. It cannot be many things at once.

    Finally, I agree with you that Perodua can be developed into a full fledged profitable global business, but unfortunately, not in the way you suggested. FOCUSING on one segment of the global business should be the way forward for Perodua. They are already a specialist in making small cars. At least here domestically. That you agree, right? So, why not expand that vision globally? Being strong in one segment is better than being mediocre in many segments. Being a specialist in one area is better than being a generalist in many areas. Just ask how much a cardiologist earns as compared to a normal doctor.

    The world is headed towards specialization, my friend. In fact, that’s why Hyundai and Kia are doing well, because the Korean government has realized the need for their chaebols to specialize rather than doing everything under one brand name. Did you know Samsung also makes cars? And that LG also has car-making capabilities? Would you wanna buy a Samsung car? Well, unless you live in Korea, you won’t be able to. And so will Koreans as Samsung will no longer make cars. They are focusing on telecommunication devices.

    That’s the power of FOCUSING, my friend. And that’s the whole point you’ve missed out on my article!

    Cheers!

    • September 19, 2012 at 3:23 pm — Reply

      Hi Mr Shahriman,

      First of all, please allow me to express my sincere honor of having you coming in and dropping a few words about your views concerning my comments. You write very well and I did enjoy reading your article in the magazine (as I do most other articles in LiveLifeDrive except those fictional stories with profanities. Gosh, I have no idea how the editor gets away with printing all those language here in Malaysia!). With regards to the topic in hand, being a business decision of Perodua, there may not be a true “right” or “wrong” answer but it’s certainly worth debating over. As I have said before, I do not agree with your opinion and examples leading to that conclusion.

      .
      Coming back to your reply, I see your point and I understand your advocate for brand focus. Sadly, I’ve not had the fortune as you having the opportunity of living in Europe so I bow to your superior knowledge of the market there. I did have my fair share of business meetings there and it was somewhat interesting for me to see good ol’ Bata shoes being positioned as a mid level brand in Switzerland unlike here in Malaysia. Anyways, I digress …. I still note that you quote extreme examples. Visiting a ENT clinic for a heart attack would probably be similar to bringing a Perodua car to a petrol driven remote control car service centre; aside from the fact that both runs on petrol and has 4 wheels, they’re as different as cheese and chalk.

      .
      So what’s a Core Value?
      A principle that guides an organization’s internal conduct as well as its relationship with the external world. Core values are usually summarized in the mission statement or in a statement of core values. What’s the mission statement of Perodua?

      .
      To be a world class automobile company renowned for excellent quality and reliability through :

      .
      Professionalism in all our operations
      Efficiency in utilising technologies and available resources
      Resilience in meeting our challenges
      Optimising benefits to customers and stakeholders
      Dedication towards social responsibility to community, the environment and development of competent workforce
      Uniqueness in our products
      Aspiration to glorify the name of PERODUA

      .
      You can read about it here: http://www.perodua.com.my/corporate/corporate-mission

      .
      Quite frankly, to survive and thrive in today’s highly competitive world, professionalism, efficiency, resilience, optimization, corporate social responsibility, product uniqueness and brand building are all prerequisites; it’s a MUST HAVE, so to speak. So our definition of Perodua’s Core Value being a small/compact car manufacturer is defined by its history of vehicles produced. Prior to the Alza, we can indeed say they’re just a small car manufacturer.

      .
      Which comes to the part of the Alza. You quoted “And no, the Alza is not an anamoly to me, my dear friend. Alza IS a compact MPV. So, as long as Perodua makes anything within the “compact” category, fine then! It is a compact car company anyway. ” To the crux of the matter then, if you were to read the title of this article, it is about Perodua making a “compact” sedan vehicle. By your definition, you agree that it is feasible for Perodua to pursue this avenue (which kinda contradicts your earlier opinion in the LiveLifeDrive article). In addition, if we are to look at the history of Perodua, they have yet to develop a whole new vehicle from ground up (the Alza and Myvi shares common derivatives as the Daihatsu Boon) so it is likely that whatever Perodua cooks up, it’s going to be some form of badge engineering with bodywork modification and this allows the company to sidestep the tens of millions of ringgit R&D that’s required to design, produce and market a completely new model; capital which admittedly is something that Perodua, as successful as they may be today may not have. Unless they can ensure the model sells well not just domestically but overseas, it’s just economically not viable to spend that kind of money.

      .
      Likewise, while it is cheaper to develop a new model using this method, Perodua may also be hampered by trade agreements which limit their sales territory … that is, until they are strong enough to have that kind of budget to make something of truly Malaysian origin (and we’re not just talking about CKDs with local content) OR the principal relaxes its grip on some markets and allow Perodua to enter using its rebadged models.

      .
      To conclude, Perodua IS staying true to their focus which is on “compact-ness” as you put it … but instead of just focusing on one segment (hatchback small cars), they have diversified into the MPV market and did so splendidly with the Alza. And if history is going to be an indication of what’s to come in the future, then a Perodua compact sedan may very well be another national best seller, conquering the compact, B segment sedan market. Therefore, with all due respect, I remain convinced that Perodua should pursue the compact sedan vehicle. Cheers, bro!

      .

      • AHMED SHAHRIMAN
        September 30, 2012 at 12:14 pm — Reply

        Hey Kensomuse,

        Nice response! And yes, we can debate all this until the cows come home, take a shower, have breakfast and then go out grazing again! Haha! And thanks so much for the kind compliments, too. I’m afraid its even a bit much for just an average joe like me, who just loves branding and hate to see good brands do injustice to their own brand.

        Anyhow, yes, my examples are extreme – partly because in order for most people to understand “branding”, we brand marketers have to use simple yet profoundly contrasting examples. But for the more refined members of the community, like your goodself, it may be a tad “Little House on the Prairieish”…

        Anyway, the truth is, whatever we say (or even do, I’m afraid), our words are probably going to trickle down like water off a duck’s back. The act of line-extending (simply means just overstretching a brand) is unfortunately a very ASIAN trait. We in Asia love to think we can do anything (which is good) but forget that a name (and what it stands for) can only go so far.

        Take Samsung for example. Ask yourself, what is a Samsung? You’d probably have a hard time coming up with ONE idea of what it means! But take NOKIA. What is NOKIA? Easy. Cellphone maker. Now, this wasn’t true if you know NOKIA back more than 20 years ago. When I visited a friend’s hometown in Finland, I saw NOKIA TVs, computers, radios, practically every electrical equipment has a NOKIA name on it! On top of it all, NOKIA originally made – Rubber boots!!

        But what did they do when they wanted world domination? Got rid of everything (except the rubber boot business) and put all their money into ONE BASKET, and went all out just making cellphones! And made tons of money!

        Sure, they’re wobbling a bit now, but they’ll bounce back, cuz Steve Jobs is now no longer around. Apple will make some money for a few more years, but they can now no longer rely on Jobs to carry them for another decade or so.

        So, what’s the relation to the car industry, you may say? Well, simple. The foundation is FOCUS. List down 20 pages of core values, for all I care, but if they don’t stay true to the ONE strength that they have, a company will always one day go astray (thinking that the name Perodua can now be synonymous to buses and trucks, or even airplanes!!)

        For me, and many other brand strategists out there, this spells trouble!

        So, again, for over 20 STRONG years of making rather good small cars, better use that STRONG stand domestically and expand INTERNATIONALLY, within that SAME NICHE. Sure, build other types of vehicles. JUST BRAND that d**n thing something OTHER than PERODUA.

        Saves us all the trouble when that product fails!

        Cheers!

  3. fuel cell phone
    September 20, 2012 at 8:24 am — Reply

    personally, I am on 50-50

    first 50, most likely perodua already have the japan-made candidate which can be rebadged or transformed into a compact sedan with good FC, not to mention better build quality than proton (in this case saga) thus giving us ‘compact-pocket’ consumers more options.

    second 50, if the first 50 going to materialize, it would bring serious challenge or threat to proton, who are still struggling after 28 years with quality issues even with recent preve thus it would be a sad case for the 1st national car company to further losing their already-small share of the pie.

  4. bystander
    September 20, 2012 at 9:47 am — Reply

    i don’t know about other ppl, but the Perodua brand to me stands for better quality and reliability at an “acceptable” price. In absolute terms, you don’t get better value than buying a Proton, but you’d probably be paying for other “unseen” benefits like better fuel consumption, reliability etc.

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