Japan’s Suzuki Motor Corp to Shut Down Its Motorcycle Assembly Plant in Malaysia

ARTICLE 1

PART A:

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Suzuki’s Malaysia-based factory was established in 1971, with specialising in assembling automatic and manual motorbikes with engines of less than 150cc models. The plant was located at the Prai industrial area in Penang. However, due to weak market demand for the company’s product, Japan’s Suzuki Motor Corp has  decided to shut down its motorcycle assembly plant in Malaysia. According to “The Star”, a newswire in Malaysia, the factory output in 2015 was reduced by 50 percent to 8,000 units, partly sparked by Malaysia’s application of goods and serviced tax in 2015^[1]. Suzuki plans to assemble 1.44 million motorcycles in fiscal 2016^[2].

Due to the limited economies of scale, Suzuki has been struggling to keep up the pace with new model development and to boost motorcycles sales in Asia but unfortunately the profitability that it gained remained low. The cost of living has increase tremendously and it provide huge impact to the company’s sale in Southeast Asian country. A Report in the Nikkei Asian Review said the company has decided to focus on exporting their motorbikes straight from Japan into Malaysia instead of assembling them in the country. However, according to industry sources, Suzuki intends to maintain a presence in Malaysia for the foreseeable future.

An ongoing process of strategic management is needed to develop and revise future-oriented strategies that allow an organization such as Suzuki to achieve its objectives, considering its capabilities, constraints and the environment in which the organization’s operates. There are three phases of strategy formulations; which are known as diagnosis, formulation and implementation. These three phases are important to Suzuki as strategies must be implemented to achieve results and to make new strategy operational effective in achieving the organization’s objectives. Strategy exist in three level in an organization. They are Operational Strategy, Business Unit Strategy and Corporate Strategy.

At a corporate level strategy, Japan’s Suzuki Motor Corp need to be concerned with wide decisions about its total organization’s scope and its direction. This is a crucial level since the strategy is greatly influenced by investors in the business and acts to monitor strategic decision-making throughout the business. A growth strategy could be implemented by the organization for expanding its operations both globally and locally; this is a growth strategy based on internal factors which can be achieved through internal economies of scale; and it can also grow externally through mergers, acquisitions and strategic alliances^[3] (See diagram 1.1 for Growth Strategy Matrix). Thus, changes on the organization’s growth objectives and strategy for achieving it need to be consider at all time. There are four types of growth strategies options (See diagram 1.2 for Types of Growth Strategies Options) and those four strategies are known as:

1. Integration Strategies
2. Diversification Strategies
3. Intensive Strategies; and
4. Defensive Strategies

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Diagram 1.1: Growth Strategy Matrix

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Diagram 1.2: Types of Corporate Level Strategies

With the closing down its motorcycle assembly plant in Malaysia, defensive strategies has been used by the the top management of Japan’s Suzuki Motor Corp. Since the Suzuki Malaysia is faces declining in its sales and profits (as refer to the article given), then it considers the retrenchment strategy in which it reorganizes its activities by reducing its assets and also costs^[4]. When Suzuki Malaysia faces a decline in their sales and profits as seen in the article 1, then the organization assumes that by using the retrechment strategy is appropriate for the company; whereby it restructures its activities by reducing its assets and also costs. Thus, by doing so the organization is actually reverses the impression of profit and sales decline. This strategy is also called a restructuring or recovery strategy. Furthermore, the basic competence of Suzuki Malaysia is also strengthened through an effective retrenchment strategy.

Another strategy for Japan’s Suzuki Motor Corp to achieve their objectives is by performing a SWOT analysis (See diagram 1.3 for SWOT Analysis Matrix). This analysis help the organization to understanding the business environment and factors  involve that describe or design the working environment of the organization and it is use to evaluate various of challenges faced by the Suzuki for the past couple of years. Since the business environment of any organization involves of many factors, it is important for a company to study and monitor its environment in order to ensure smooth running of its current and future projects and plans^[5]. Therefore, all things whether external or internal to an organization, affecting or bringing changes in organizational plans constitute an organization's business environment. Like every other organization, Suzuki Motor Corporations has also dealt with different factors that have impacted the performance of the organization and has forced the organization to bring in changes in its strategies for the smooth and successful running of the organization^[6]. Thus, SWOT analysis has been done on Suzuki Motor Corporation to evaluate, understand and examine the strengths and weaknesses, exploring the opportunity available and the threats that the organization is exposed to.

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Diagram 1.3: SWOT Analysis Matrix

1. Strength

Being operating more than 193 areas around the world, Suzuki Motor Corporation is known as one of the established distribution leading company in the automobile industry around the globe. The global presence of the company helps them to understand the requirements of people of a country depending upon their demography^[7]. Once the organization are able evaluated the demands of the customers from a particular demography, it can modify its strategies to manufacture market and sell products to customers in other country which having similar demography characteristics. This way, the organization can be proactive and be able to meet the demands of its customers on a timely manner, therefore providing a competitive edge to the organization. With its brand image, the company has the ability to design products with differentiating features for the society.