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Malaysia is a developing country. From the year 1960 to 1971, the country’s economy was dependent on farming and primary commodities such as rubber and tin. Nowadays, Malaysia is a middle-income country with a multi-sector economy. The GDP growth rate was 5.8% in 2006 and 5.9% in 2007. Domestic demand and dynamism in exports are the main reasons for the economic constancy in Malaysia. Malaysia’s economic is now depending on industry, agriculture, and services sector, which contributes nearly 115% to the GDP at 2007. Along with the research, Malaysia is one of the world’s main exporters of vehicle parts, accessories and components and to Thailand, Singapore, Taiwan, Indonesia, Japan and UK. The automobile parts industry in Malaysia is maintaining the high reputation among their valuable customers locally and also in other country. Engineering capabilities, industrial master plans, and technology advancements are the main factors for the high reputation. The demand for Malaysia’s automobile parts are continually increasing, especially among major automobile companies like Mercedes, Mazda, Ford, General Motors, Suzuki, Nissan and Mitsubishi. Besides that, there are 343 automobile parts manufactures in Malaysia. Is up until now, RM 8.2 billion was invested by automotive components and parts manufactures in auto parts industry (MSC, 2007).
Malaysia is dedicated to fulfill its multilateral commitments under WTO and AFTA and has taken steps to liberalize its duty structure. Other measures have been taken as well. Since 2001, the equity policy for the automobile sector has been relaxed to allow up to 51% foreign equity on a case by case basis. Besides that, in Malaysia manufacturers and assemblers are currently free to multi-source from the most competitive suppliers globally, uninhibited from local content policy requirements (ELM, 2007).
Malaysia’s population was estimated at 25.2 million in 2007, every year’s growth rate of 1.7 percent. More than 60 percent of the population in Malaysia is Malays and other is Indians (8 percent) and Chinese (32 percent). Approximately 44 percent from the total population is consider to be trained or skilled workers with basic qualifications or higher. Malaysian’s employees work a minimum of 48-hours per week and also have more holidays compared with China. Until now, the labors costs are still relatively standard compare with other countries in Asia, including Vietnam and China. In addition, Malaysian’s salary can be divided into two types: one is monthly minimum wages and the other is average wage for an employee in the manufacturing industry (Kiat, 2008).
Malaysia’s infrastructure is good and presents considerable benefits to automobile supply chain operation. Malaysia has 80,328-km road network, highways, and main roads. This mode of transport represents 90% of the goods and passengers traffic in Malaysia. In addition, Malaysia has rail network of more than 2,000 km, mainly located in Kuala Lumpur and along the coast of the Strait of Malacca. The railway service in Malaysia is continuously improving by the government. Such as KTM and LRT. Besides that, there are three main ports and two airports in Malaysia currently growing in terms of exports. Such as KLIA and LCCT. (Kiat, 2008).
Macro-environment for automobile industry in host country (PEST analysis):
Firstly, the automotive sector is an important yet complicated sector. However, they could use PESTLE analysis to help them in making strategies. PESTLE analysis is a tool that can help organizations making strategies by letting them know about the external environment so they could plan their operate time whether they want to operate now or operate in the future. PESTLE stands for political, economic, social, technological, legal and environment.
The people will see a continued progress in the ruinous steps which have forced the industry into a social politico economic corner. Whether this is related to flat demand or to the industry’s creation of an ever-wider range of vehicles that many buyers seem to care little about, there is a problem. The manufacturing is like linked approach to the policies of governments, the earnings of banks. Little wonder then that so many emerging countries are keen to develop an auto sector or that there is such a political pressure to protect it in the developed countries. The world’s vehicle industry is currently dominated by little more than a handful of firms, each wielding colossal financial, emotional and political power. The manufacturing closely to dealing with political institutions has not always been bright. It tends to be good on technical issues, although it has not always fully presented the longer-term options, but in order to make the choices and their clear.
For much of the developed world, and increasingly for the developing world, the automotive industry is a pillar industry, a flag of economic progress. Without an automotive industry, it is impossible to develop an efficient steel business, a plastic industry or a glass sector – other central foundations of economic progress. The automotive industry has been a core industry, a unique economic phenomenon, which has dominated the twentieth century. However, the industry now suffers from a series of structural schisms and has become riddled with contradictions and economic discontinuities. For the capital markets and the finance sector, it has lost a lot of its significance, as a result of ever declining profits and stagnant sales. The proliferation of products means that it has become hopelessly wasteful of economic resources. While all these and more sound like a very gloomy assessment of such a vast economic phenomenon, the industry is not in the end despondent. A different future is possible for the industry, a highly desirable one.
The world’s automotive industry affects the society as a whole. It employs millions of people directly, tens of millions indirectly. Its products have transformed society, bringing undreamed-of levels of mobility, changing the ways people live and work. The social value of the additional mobility that this industry brings involves the value of the people being able to commute over longer distances easily, among many others. For most of its existence the motor industry has been a model of social discipline and control and it is not just that the auto sector offers a ‘pillar’ of something else. There are, on the other hand, particular social issues to address in many developing countries, often those that are the result of an undertone of religious faith. The automotive industry has the role to play in helping develop the mobility of such countries and it can be achieved at an acceptable social cost of the country is prepared to learn the necessary lessons from those who have traveled this route before it, and to make the necessary investments.
The automotive industry works on a scale so awesome and has an influence so vast that it is often difficult to see. The level and diversity of technologies that it must deploy are increasing, which imposes both new investment burdens and new uncertainties and risks. Roughly a million new cars and trucks are built around the world each week – they are easily the most complex products of their kind to be mass-produced in such volumes. The industry uses manufacturing technology that is the cutting edge of science. But still, the potential for developing coordination skills, intellectual capabilities and emotional sensitivities through electronic technologies remain far from fully exploited. There are numerous additional near-term technological opportunities to adapt the automobile to changing energy availability. The possibilities suggest that automotive technology is unexpectedly robust and provides a powerful defence against energy starvation even if the real price of oil climbs steadily during the next couple of decades.
The automobile industry is subject to numerous technical directives and regulations, as well as legislation of a more legal nature. The legislation covers areas such as competition law, intellectual property law, consumer protection and taxation, and emissions (air quality and fuels). When the auto parts industry reached full development, accelerated technological efforts were made to create a web of local suppliers that would make it possible to meet the growing legal requirements for the national integration of production.
Other than the vehicles themselves, and the roads and fuel needed to run them; the business is intricately tied to the manufacture of a wide range of components and the extraction of precious raw materials. Indirectly, it brings people road congestion, too many fatalities and a wave of other environmental troubles. The effect to the automotive companies are that they needed to establish R&D centres to take advantage of research infrastructure and human capital, so that they can develop vehicle products locally to satisfy the requirements of the environmental and safety regulations more effectively.
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