The Bargaining Power of Suppliers The bargaining power of suppliers can affects the intensity of rivalry among competitors in an industry by increase the prices or decrease the quality of the goods and services. The bargaining power of suppliers is consider high when the market only have a few product substitute raw materials, then the buyers will have lower bargaining power because the control over the prices and the quality of goods and services is with the suppliers. When the goods and services offered by the suppliers are unique and hard to be imitate, cost of switching the raw material from one supplier to another supplier is very expensive to the buyers. Thus, the bargaining power of the suppliers is very powerful. Besides that, the bargaining power of the suppliers is also high when there are a few number of suppliers who able to provide the raw materials in that industry.
Historically, the bargaining power of suppliers is low in the automobile industry in Malaysia. Malaysia’s automobile industry is an oligopoly market which dominated by two main national car manufacturers that heavily supporting by government. These local car manufacturers are Perodua and Proton which capturing the majority of the market share in the industry. The suppliers in this industry have lower bargaining power because the number of suppliers who produce the component of the car is large. Majority of the suppliers were the vendors of the Proton and Perodua. Proton and Perodua can easily switch their suppliers to another suppliers who can provide high quality of goods and services at cheaper prices. Nowadays, the bargaining power of suppliers for Perodua is considered moderate.
In the car manufacturing industry, the resources includes the components, metals, tires, plastic, electrical system, parts, cooling system, steel, rubber and other raw materials are used in the process of car manufacturing. Perodua has more than 100 local vendors in its automobile industry which involved in manufacturing of car parts and components in order to satisfy its needs. Due to technology is rapidly changing across the industries, Perodua had used some of the advanced technology such as advanced electrical and heat exchange equipment, interior equipment in order to maintain competitive edge in the industry. However, there are only limited suppliers in Malaysia who able to provide or supply these types of advanced technology to the Perodua such as APM Holdings and Pecca Group.
Thus, the price of goods and services is high and costly to Perodua. Nevertheless, Perodua have a strong relationship with the suppliers especially Perodua have a partnership relationship with Japanese company, Daihatsu which supply those importance advanced technology to the Perodua such as engine. Therefore, the suppliers are willing to lower the price of goods and services if Perodua could guarantee a higher orders such as produced approximately 5,000 cars a month. In fact, Perodua is doing very well with introducing Bezza model by selling 207.110 units in domestic market last year and success in negotiating for lower prices from its suppliers.
In addition, this implies that the bargaining power of suppliers is moderate. Technology The automobile industry is one of the fast development sector as compared to the other industry. Perodua strengthen their competitive advantage by allowed the Japanese partner, Daihatsu to take a majority position in the manufacturing plant. Through a partnership with the Daihatsu, Perodua able to provide a range of vehicles with advanced or innovative technology and high quality at reasonable or affordable prices. As a result, Perodua successfully becomes the bestselling model in Malaysia.
However, the Perodua range of vehicle still contain some of the weakness which can be overcome by learning new technology from its competitors especially from Japan. Many of its competitors such as Honda, Nissan and Toyota manufacture their vehicle with a Continuously Variable Transmission (CVT) instead of the traditional technology which is an automatic or manual transmission, mainly due to their efficiency. CVT have the main advantage over traditional transmission which is when vehicle travelling uphill, CVT can seamlessly provide power without shifting, whereas the traditional technology will struggle. Next, CVT will improve the engine control which will reduce the possibility that driver lose the motor control on the vehicle and it achieve better fuel economy by maximize the fuel efficiency or reduce the fuel consumption up to 30% or above. It will also provide smooth and security driving environment for the driver.
The cost of the CVT is low so it is suitable for Perodua to using it to produce high quality vehicle at affordable prices. Besides that, the body structure of the Perodua vehicle is also need to be improve in order to reduce the number of road accident fatality with deaths. Perodua should adopt the advanced technology of Toyota.
One of the safety features of Toyota Vios is the energy absorption body structure that pursue the better collision safety performance. This is an excellent safety performance attributed to its high tensile body frame that effectively absorbs and dispenses impact energy in a frontal collision while dispersing high impact energy during side collision. By using this technology, it will strengthen the body structure of Perodua vehicle and reduce the injury of the driver and passenger during a collision.Moreover, Perodua may also adopt the advanced technology of the Toyota in order to further improve its safety performance and reduce the accidents especially driving at night. The Electro Chromic Mirror will provide better visibility for driver when driving at night by automatically adjusts the amount of reflected glare. Besides, there are high number of blind spot accidents occur each year in Malaysia because driver are unable to see the oncoming vehicles due to their line of sight being blocked by a component in the vehicle.
Perodua should adopt the blind spot monitor technology from Toyota as a tool of lane change assist for driver in order to better detect a vehicles by using a sub-millimetre wave radar. The blind spot monitor will flashed a sign on the side mirror to warns driver for any oncoming vehicles before changing lanes. However, the cost of the Electro Chromic Mirror is a little bit high so Perodua may adopt other similar technology to replace it in order to lower down the cost.Furthermore, there are increasing number of individuals willing to purchase a environmentally fuel efficient car. A hybrid car is becoming more and more popular and many of the competitors has released their own hybrid car in the markets. Therefore, Perodua should used advanced technology to produce a hybrid car in order to have the ability to compete with other large competitors and also attract those individuals who are concern about the environment to purchase.
Hybrid car is use conventional engine and electric motor. The hybrid car is environmentally friendly vehicle which will reduce the fuel consumption and conserves energy. This is a win win situation where the individuals can save money and help the environment.Safety feature should be the top priority for every consumer when buying a new car. In order to reduce the road accident victims and decrease the injuries caused in the road accident fatalities, Perodua is recommend to have an emergency call system in its vehicles. It is useful when the driver was involved in an accident at unfamiliar location and do not know about the local emergency telephone numbers.
In European Union, they has requires all the car manufacturers to install an emergency call system in their vehicles from the year of 2018 which show that this technology is very important and useful system that will increase the safety on the road . Perodua can adopt similar technology such as HondaLink Assist from Honda Accord, this technology will be activate by connect with the Bluetooth linked phone. When the driver was involved in the accident and the airbags are goes off, this technology will automatically call an operator to find out the location of the vehicle and will try to contact the driver. If the driver was unable to communicate with the operator, then they will call the public rescue services and send them to the driver location.In addition, Perodua may adopt the Tire Pressure Monitoring System to maintain or improve the safety driving environment and to avoid accident especially when driving in the highway. For some of the driver especially those young people, they are unfamiliar or do not know how to check the tire air pressure so this technology may provide an assistance to them. This system in the vehicle is to monitor the tire air pressure and will alerts the driver when it is too high or too low by appearing a warning light on the dashboard.
So, the driver can take an immediately action to overcomes the problems such as when the TPMS Light comes on if the tire air pressure is too low or too high, the driver can immediately find the nearest petrol station to take away or add any gas. Thus, the driver will have an opportunity to avoid tire blowout which might cause the driver lose control of the car. However, the cost of this system will be more expensive to maintain as compared to non-equipped tires. Therefore, Perodua may adopt other similar technology such as FOBO TIRE from Amazon, which is a small technology, the cost is more affordable and it has the similar function as the TPMS but need to works with the latest bluetooth linked phone device. Driver can monitor tire air pressure at anytime by checking on the FOBO TIRE app in their smart phone.Perodua also recommend to use the Automatic High Beam (AHB) technology from its competitor, Toyota or its Japanese partner, Daihatsu.
Currently, Perodua does not have this types of technology in its vehicles. Perodua New Myvi use the LED headlight that are just too bright and will impair the oncoming driver. As a result, it will not only harm the visibility of the driver and also may lead to an accident due to unable to identify and see the oncoming cars on the road. AHB is useful to overcome this problem because it will automatically adjust the brightness of the headlights to provide better visibility when it detect nearby car on oncoming lane.
This technology also help to better detect any pedestrians at night especially when the pedestrians wear a dark clothes. If there are oncoming vehicle, the AHB will automatically lower down the brightness of the headlight or switch to low bean in order to less likely affect the visibility of the oncoming drivers. After that, it will switch to high bean or become brighter when there are no oncoming vehicle and the area in front of the car is dark. Core CompetencyCore competency are the main strength of a business or company. Company may create a competitive advantage to be differentiate from its competitors in order stay in the marketplace. Core competency of an organization may includes skill, knowledge, experience in certain activity. In order to build or identify the core competency of an organization is to fulfill the specific criteria of sustainable competitive advantage which is Valuable, Rare, Costly to imitate and Non substitutable capabilities.
If an organization has fulfill all this 4 criteria then its competitive advantage is very strong and powerful.The core competency of Perodua is produce compact car at the affordable price and easy accessible to Malaysian. The valuable capabilities is about whether the resources will add value to the firm and help the firm neutralize the threats or exploit to any opportunities. Rare is about the resources or capabilities that are only possessed by a few or none competitor. Costly to imitate is certain resources are protected due to patent, trademark or copyright obtained by the company. It also includes such as unique company culture and brand name which are hardly and costly to imitate by other competitors. Nonsubstitutable resource or capabilities that an organization owned unable be obtain by other competitors. Perodua possesses these capabilities in its Affordable price of the products, Safety feature, Strong marketing and promotion, Company culture and Reliable brand reputation.
. Affordable price of the products Price of the products and services are the primary requirement for low or medium income family or person to buy a vehicle. Perodua is using the low cost strategy to compete with other competitors. The strategy partnership with Daihatsu enable Perodua to manufacture a compact car with advanced technology at affordable prices such as Bezza and Myvi. Perodua have a good relationship with its suppliers which enable the Perodua to enjoy a low cost of raw materials or a great discount from its supplies. The price range for the Perodua various vehicle is from RM 24,000 to RM 60,000.
As the majority of Malaysian are affordable with the car prices, Perodua had successfully gain a market share of 33.82%, its total sales is 184,707 units over the total industry volume of 521,907 units on last year. Hence, it is a sustainable competitive advantage for Perodua as it is rare because the prices offer by the Perodua is the lowest as compared with other competitors in Malaysia and it is also hardly to imitate since other brand vehicle with the similar vehicle feature, will costs double the money and no able to offer its product at cheaper price.
This pricing advantage as compared to other competitors such as Toyota and Honda has attracted a lot of consumers. Safety feature Besides that, Perodua Myvi currently been awarded a 5-star ASEAN NCAP Safety Rating with an overall score of 88.27 points and is higher than the Toyota Vios which was also be awarded a five-star rating by obtaining an overall score of 81.63 points. Perodua has constantly improve its R skill and knowledge in order to manufactures a high quality of car with advanced technology . Recently, Perodua has improves its existing and add new safety features in its new vehicle, Myvi with the technical and technology support of Daihatsu.
Perodua Myvi is now the most affordable car with AEB feature in Malaysia. The probability of the Perodua vehicle being recall is the lower, it is indicate that all the component, part, safety features, system and engine are in the good condition and properly equipped in the vehicle. The other competitors such as Toyota, Honda and Nissan are the top 10 most recalled car brand in local and Proton also have recall almost 100,000 units of its vehicle in 2016. Most of the car brand recall their vehicle is due to the air bags problems or others safety features in its vehicles. Thus, it is valuable and rare resources since the products of Perodua is excellent reliability and build its vehicle with high quality of safety feature. It is also difficult to imitate and without substitutes because no more competitors are able to manufactures its vehicle which comprises of all these safety features with a low probability that its vehicle will be recall in the future.
Strong marketing and promotion.Perodua also have strong promotion such as giving discount, cash rebates, free gifts . Besides that, Perodua often advertise its products in different types of media such as website, newspaper, television and use direct and personal selling strategy to promote their products and services. Perodua had launched its UFirst Website and UFirst Perodua Passport Mobile Application to offers information and other benefits. Perodua also cooperates with other parties in other industries such as financial institution, insurance company to further promote its products. For example, Perodua Sales Sdn Bhd signed a five years agreement worth RM355 million with the PETRONAS Dagangan Bhd in order to get the supply of 17 million litres of higher grade engine oil from Petronas. Therefore, it is a valuable capabilities and is costly to imitate because for other competitors who has a low or moderate marketing skills will need to spend more times and money to imitate the strategy apply by the Perodua such as the partnership with Petronas, Perodua has consumer a huge amount of money.
However, it is not rare and substitutable because some of the marketing strategy is very common and other competitors also can find alternative ways to compete with Perodua. Company culture Perodua believe its employees is play an important role in achieving its goals. Perodua always encourage its employees to develop a new ideas and build a effective teamwork culture in the organization for greater efficiency and productivity. The culture will always motivate its employees to be more effective and efficiency in every activities they performed. In order to maintain this culture, Perodua have provide regular specialized training to its staffs, give reward by constantly reviewing its staff performance and upgrading its benefits such as medical incentives, bonus.
Besides that, Perodua continuously provide a better conducive working environment for its employees. Minorities are taking an important role or higher position in the organization, it portrays a positive image which talent or good staff will be given an opportunity for career advancement. This culture is also a rare resources, since the Perodua has taken many years to develop this culture in the organization and it is difficult and costly to imitate by other companies in near future.