STRATEGIC MANAGEMENT

CASE: THE ELECTRIC CAR OF PERUSAHAAN OTOMOBIL 3

In 2020, nation’s Cabinet has proposed a new national car manufacturer, Perusahaan Otomobil 3 (PERO3). They had decided to continue further work on its K-Elektrik1 (KE1), an electric car. Working versions of the car had been leased to a limited number of people; interestingly, the data indicated that there are demands on the electric car in the nation.

In February 2021 meeting of PERO3’s top management team, the Chairman Dato’ Ahmad, suggested that it might be time to build the nation’s first electric car, KE1. He noted that Toyota’s Prius hybrid had made Toyota look environmentally sensitive, where PERO3 was views as making gas “hogs”. The response was negative. Dato’ recalled one executive saying, “We lost $1 billion on the last one. Do you want to lose $1 billion on the next one?”.

Even though worldwide car ownership was growing 5% annually, rising fuel prices in 2020 reduced sales of PERO3’s profitable SUVs – resulting in a loss of $11 billion. Board members began signaling that it was time for management to take some riskier bets to get the company out of financial trouble. In February 2021, management reluctantly approved developmental work on another electric car. At the time, no one in PERO3 knew if batteries could be made small enough to power a car, but they knew that choices were limited. According to Puan Amalina, Vice President of R&D and Strategic Planning, “This industry is 98% dependent on petroleum. PERO3 has concluded that that’s not sustainable.”

Chairman and CEO Kassim surprised that world at the December 2021 Detroit Car Show with a vow to start developing and electric car called the PERO3 KE1. I would plug into a regular electric outlet, leapfrog the competition, and be on sale in the first quarter of 2022.

Management created a new team dedicated to getting hybrid and electric cars to the market. The R&D budget was increased from $6 billion in 2021 to $8 billion in 2022. Several new models were canceled to free up resources. The battery lab was under pressure to design batteries that could propel the KE1 800 kilometers before a small gasoline engine would recharge the battery and extend the range to 1,000 kilometers. Interestingly, En. Ali the battery lab manager said, “Fifty years from now, people will remember our electric car, KE1 – like they remember a successful national car.”

The KE1 was released with much fanfare in October 2021, and by 2022 PERO3 was selling 2,500 a month at just over RM120,000 per car. The company was still struggling to match manufacturing with sales and still make a profit. In the meantime, Nissan, Ford, and Toyota were making significant moves in the battery powered car business. Nissan released the Leaf, Ford released the electric Focus, and Toyota offered the Plug-in Prius and the all-electric RAV4, which claimed to get 500 kilometers per liter under full electric power.

ASSIGNMENT QUESTION:

Based on the above case, you are required to apply Portfolio Analysis in analyzing the relevant processes of the Boston Consulting Group (BCG) Growth-Share Matrix in the context of the above electric car, the K-Elektrik1 (KE1), to be viable in the car buyers’ market in the nation. Your suggestions will help the nation’s Perusahaan Otomobil 3 to be successful in selling the nation’s first electric car, KE1.

1.0       PENGENALAN

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