PEST analysis refers to political, economic, socialand Technology.
It is important and necessary to implement in a company. PESTanalysis can understand the positive and negative impact towards the business.The environment and the technology keep changing and it cause Perodua to thinkcarefully and make decision faster. It is the long term planning that all theorganization has to consider with.
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Political/legalOur country is currently undergoing a majortransformation due to the current economic slowdown. The company must preparethemselves to face with whatever challenges that may arise due to politicaluncertainties. This segment also relates to how organizations try to influencegovernment and how government entities influence them. Perodua company has thepotential to become a major contributor to gross domestic product, employment,technology upgrading, and foreign exchange earner.
But with this economicslowdown, the ability of the government to continue its support of the Peroduacompany is greatly in doubts. The tight credit squeezing by the financialinstitutions due to declining liquidity and the subsequent reduction in thepurchasing power on the buyers have affected the company.Economic The deteriorating fundamentals ofMalaysia characterized by the instability of ringgit, lack of confidence inoverall economies, up-surging inflationary pressures, inadequate corporategovernance, lack of transparency and weakened financial system are becominggreat challenges to the Perodua company in at least few years to come. Due tothe heavy reliance on imported raw materials and finished good, the company ishit by escalating inflation. Furthermore,the increasing interest rate has also asserted pressure on the operating costof business and therefore further aggravate the inflationary pressure. Pricesof vehicles will not be spared from this effect as the prices are expected togo up further by another 50% to 60%. This will reduce the demand of the automobilesin the already shrinking market due to credit squeeze, declining wages, andincreasing unemployment. Moreover, supply of fuel andelectricity is abundant, and is supported by a well-established delivery systemin this country.
This could provide a further incentive to motivate the growthof the company. But the ability of the related utility agencies and companiesto maintain a dependable and reliable source of supply will be anotherchallenge confronting the company in the years to come.DemographicWork force in Perodua company has enjoyed a vibrantlabor market over the past eight years when the economy was booming. Wages wereunder pressure for upward adjustment which unfortunately was not correlated tothe improvement in productivity. Furthermore, the volatile labor market hasprevented management from implementing process re-engineering as the employeeswould threaten the management with resignation should the pressure for changesin attitude, role or productivity deemed too high. In addition, there isresistance to change from the management itself. The company need to stave offthis challenge of implementing changes so that the workers will realize thatthe company is facing economic slowdown. Thus, the need for them to increaseproductivity and reduce costs.
TechnologicalIn the local company, there is still an apparent lackof local technological innovation in the manufacturing of component, parts andtechnological capabilities in product design and engineering. The manufacturingcapabilities of the sector are yet to be fully developed to support thedomestic and overseas market. As far as the company is concerned, the increasingrate of technological change and diffusion is tremendous. The shorter productlife cycle especially the newer models introduced due to ever increasing rapiddiffusion of new technologies place a competitive premium on being able toquickly introduce new goods and services into marketplace. For example, a fewyears ago the models of 2.0L were considered the best at that time.
But today, thismodel has slowly been replaced by a newest and latest model of higher capacityof 3.0L. Therefore, it is becoming extremely important for Perodua company inMalaysia to be able to adopt newer technology in every facet of their operation,be it new product development or customer service are. In customer service care, investments in informationtechnology, computerization and technological advances for better services arecritically important. For instance, using a fully integrated computerizationmachinery to inspect and service an automobile can reduce greatly customerwaiting time and thus better service in the eyes of the buyers. Global Intensive competition is becomingmore and more synonymous with the company of Perodua in Malaysia. Although thenumber of players in the company is not that many, the intensity of competitionis immense and stiff.
Therefore, for a local company to survive in this everchanging condition of competition in the local scenario and the inevitableincoming of intensive competition, the strategy of globalization is imminent. Theplayers of local company are lacking in their ability to successfully formulateand implement value creating strategy. Instead, they are more concerned withshort term results in gaining immediate sales using various sales and marketingstrategies, often at the expense long terms results which are always criticallymore important strategically. For our national company to competeinternationally, it is necessary to have a close linkage among major globalautomobile manufacturers through capital investment and business collaboration.
Sociocultural With the advancement of informationtechnology, consumers are changing their expectation, taste and preferences innew product development faster than before. Furthermore, consumers as well asgovernment are more demanding in terms of product safety requirement,environmental friendliness and speed in styling changes. This pose a seriousthreat to the Perodua company especially when it is not well equipped with thenecessary facilities, management skills, creativity to response quickly to thisnew competition and market’s needs. For example, consumers nowadays demandadditional safety features in their automobiles such as airbags, anti-brakesystem and protected windscreen which do not shatter easily. Unfortunately, thelocal producers do not have the ability and know how to produce these parts.
Therefore one of the challenges faced by the company is to keep abreast withthe changing needs and preferences of these customers and at the same timeattempt to acquire the knowledge transfer to manufacture locally at lowercosts. 3.4 SWOT Analysis Strengths 1. Established in 1992 & total employee strength of 10000 employees 2.
Malaysia’s second largest automobile manufacturer after Proton Cars 3. Among largest small car manufacturers in Asia 4. Indirectly linked to Toyota which gives an image of Japanese association Weaknesses 1.They are notorious for low safety standards due to their design 2.They are excessively dependent on Toyota for upgrades 3.
A local Malaysian player thus currently limited reach Opportunities 1.They should look at newer markets as their home markets are getting saturated 2.Increasing fuel prices will drive people to prefer smaller cars, thus Perodua will benefit from the change 3.It can look at newer markets which are favourable for small cars Threats 1.Competitors like Proton Cars have higher investment capabilities thus can overtake in terms of R&D investments 2.
Low cost substitutes being marketed by Chinese manufacturers 3. The macro-economic situations are leading to lower sales for all automobile manufacturers