1 1 1 - My Power Point Presentation on Competitive Analysis Watch - 8 May 2010

Course ID : BUMKT5922Course Title : Competitive AnalysisLecturer : Dr. Matthew WongPresenter : Rustam Affendi Abu RahimPresenter ID : 30084393

Tan Chong Motor Malaysia

CA Watch Analysis Presentation“ Tan Chong Revs Up"

About The Articles

Source : The Edge Malaysia Dated : March 12 2010, pp. 78-7 Written by Mr Loke Wei Wern from CIMB Equities Research,

Malaysia Cited :

http://www.tanchong.com.my

Over ViewThe analysis is on as his views to demonstrate strategies taken by Tan Chong Motor Holdings Berhad (TCMH) on how the organizations a. applying resources within its

environmentb. embarking on intensive transformation

strategies to accomplish its short term and long-term corporate goals

c. their aspirations achieving their 3 years planning on improving value of ‘Earning Per Shares’ (EPS) into double digit. (Year 2010 – 2012)

Background Tan Chong Motor & Co. (TC & Co.) was founded in 1950s Started by Tan Chong and his two sons, Tan Kim Hor and Tan Yeut Foh Incorporated in Malaysia on 14 October 1972 Listed on the Main Board of Bursa Malaysia Securities Berhad on 4 February 1974 TCMH Group commenced business as a small motor vehicle distributor in the 1950s as a distributor of the first Japanese car ever in Malaysia.

Background

Tan Chong now is a conglomerate as activities :-

a) assembly and marketing of motor vehicles b) auto parts manufacturingc) property developmentd) trading in heavy machineriese) industrial equipment f) consumer products

DataHas 3 manufacturing bases in a. Segambut, Kuala Lumpur b. Serendah in Selangor c. New plant at Danang City, Vietnam

Has the workforce of 18,000 employees The franchise holder and exclusive distributor of all Nissan passenger (X-Trail, Sentra, Cefiro, Serena, Grand Livina, Latio, Frontier etc)

Renault

The franchise holder and exclusive distributor for Nissan UD diesel trucks and buses.

Data

It has more than 150 sales branches and authorized dealership outlets nationwide, and supported by 45 after-sales services centers.

The franchise holder and exclusive distributor for Nissan UD diesel trucks and buses. The Group’s vehicles sales command ( Year 2009)

14.5% of the market share for non-national cars 5.6% of the automotive industry wide market

Competitive Advantages and Corporate Strategies of

TCMM

EPS Growth Year 2010 as 71%

Year 2011 as 31.2% Year 2012 as 42.2%

On Transformation Strategies Plan

for Double Digit - Earning Per Share

EPS Year 2008 – 2012

Competitive Advantages and Corporate Strategies of

TCMM

EPS is are the earnings returned on the initial investment amount.

EPS important because is generally considered to be the

single most important variable in determining a share's price and the stability and survival of the

company

What is Earning Per Shareor EPS ?

Financial Summary (in RM 000,000)

2008 2009 2010F

2011F 2012F

Revenue

3,195.8

2,856.9

3,319.9

4,223.8

5,476.9

Net Profit

245.8

152.3

260.5

341.7

485.8

EPS (sen)

36.6

22.7

38.8

50.8

72.3

EPSGrowth (%)

153.8%

(38.0%)

71.0%

31.2%

42.2%

Dividend Yield

2.5%

2.7%

3.0%

3.2%

3.5%

ROE (%)

18.5%

10.4%

16.2%

18.5%

22.1%

Impressive Earnings Trajectory

i. Leap in volume over the next few years

ii. Recovery in marginsiii. Exponential earnings in

growthiv. Targeting 20% ROE for next

three yearsv. Lower CAPEX and leaner

balance sheet

Competitive Advantages and Corporate Strategies of

TCMMPART ONE

New Car Models and Regional Strategyi. Expansion in model mix to drive sales

ii. Penetrating the D-segment market in 2010

- (mid-size sedan)iii. Global entry car launched in Thailandiv. New market the B-segment in 2012 - (sub-compact sedan)v. Increase exports to create natural hedge

to US dollars

Competitive Advantages and Corporate Strategies of

TCMMPART TWO

Transformational Strategies Into Regional Asia and ASEAN

Player

i. A more prominent role in the region of Asia

ii. More taking part of Nissan’s ASEAN strategy

iii.Nissan’s expansion in Vietnamiv. Niche Market in Vietnam, Laos and

Cambodia

Competitive Advantages and Corporate Strategies of

TCMMPART THREE

Latest Scenario on Tan Chong Environment

i. More sales Nissan than projection in 1Q2010 with increases of 26% compares 1Q2009

ii. Capacity and inventory shortages on Q42009 as lackluster delivery timing to list confirmed bookings

iii. The management optimism on demand growth by double production line in Serendah plant

(from 1,440 cars to 2,400 cars per month by June 2010)

Competitive Advantages and Corporate Strategies of

TCMMPART FOUR

Niche market

Tan Chong is focused on niche strategy on less competitive

segment (i.e. 4 WD and commercial vehicles).

Personal Evaluation on TCMMONE

The latest scenario of up-graders market that will drive demand for

non-national cars as for those aged 25-39 age bracket,

which makes 23% of Malaysia population

will given vast opportunity for Tan Chong

for increasing monthly sales volume

Personal Evaluation on TCMMTWO

Scenario of Up-graders Market

Political policies and National Automotive Policy (NAP)

The Tan Chong also should actively appeal

to government to allow them to bring their best model of NISSAN

(Primera, Cube, LaFesta MPVs) as HONDA and TOYOTA have a few ‘privileged provision political’. ( as involve AP and NAP )

(NAP is National Automotive Policies)

Personal Evaluation on TCMMTHREE

In summary, I am agree with the writer about

Tan Chong's strategies can achieving the 3 years the double digit EPS growth

in Year 2010-2013 by implementingthe strength of

their competitive advantages.

SUMMARY ONE

Tan Chong also should make a few significants inputs

on their corporate strategy as :-

i. The stiffer price war competitionii. The more leaner of cost-saving

exercises strategiesiii.Aggressive automotive sales plan dan

sales figure will then boost their efforts towards the objectives.

SUMMARY TWO

THANK YOU

ADDITIONAL ONE – SWOT ANALYSIS

Strengths of Tan ChongHighly Team-work and has excellent revival plan

Serendah plant may double production capacity (1,400 to 2,400 per month)

Strong reputation since 1950s, experienced and skilled human capital

Competitive valuable alliances with NissanHigh quality products focusing on fuel-efficiency and the size of engine in consideration of its productions Market a diversified product as “lifestyles and trends” and has successfully targeted itself to different lifestyle groups with the product line

The X-Trail : The Adventurer The Grand Livina : The Environment Friendly Family The Latio Sport : The “Petrol Head” The Latio Sedan : The Trendy One The Frontier : The Practical One

ADDITIONAL TWO – SWOT ANALYSIS

Weakness of Tan Chong

a. Under-represented in more than 20% of the consumer segments Class A (Compact Car)

Class B (sub-compact sedans)

Class D (mid-size sedan)

b. Limited marketc. Low market capitalizationion Low

Market Capitalization

ADDITIONAL THREE – SWOT ANALYSIS

Opportunity of Tan Chong

a. The sliding market share of Proton, Perodua, Honda and Naza in the auto industry

b. The market is recovering from a slump which gives Nissan the opportunity to gain ground in the market share

c. Nissan has been a pioneer in developing small, powerful and efficient engines and thus is a bonus to it on two levels

ADDITIONAL FOUR – SWOT ANALYSIS

Threat of Tan Chong

a) Foreign Exchange Risks

b) Economic downturn riskc) The increased of globalization has threatened Tan Chong with

facing new completion. d) The National Automotive Plan puts Tan Chong and Nissan at a

disadvantage as it most local support Malaysian brands over international ones.

e) Degree of product differentiation; rivals sell similar products. i.e. Toyota, Honda, Proton