Business Finance

Business Finance:
With reference to the above press listings and your recent visit to the Proton plant, prepare a report to your CEO to illustrate the feasibility of a capital budgeting decision of a RM2.0 million on investing in Proton’s future plans on ‘green’ vehicles in the last quarter of 2008.

Description of background information and objectives

Currently Sony Corporation has recognized that global environmental improvement as the most important issue in the future. Sony Corporation has been in the hardware sectors since 1947. It has not been change until now; that Sony Corporation has not been involving in any specific vehicle as symbol of Sony Corporation.

The proposal of the new investment into vehicle industry is to open a brand new market which will be involvement into vehicle market. It’ll be modified to meet the objectives and goals of Sony Corporation whereby car will be included with Sony products to make it become luxurious car, not to abide green environment promise.

Investment Justification

1. Explanation of how the investment related to Sony Corporation’s portfolio and how it supports the corporation business plan.

Objectives
This proposal directly supports one vital objective of Sony Corporation’s plan. The objective has continued to evolve from the yearly plan:
• Green Management 2002 – To reduce the consumption and wastage of electrical products
• Green Management 2006 – To achieve 15% reduction in energy use at manufacturing and non-manufacturing sites.
• Dominate Car Accessory – A plan to push all products in car using Sony accessory

Investment goals
The 3 main goals are expected as results of investment into Proton:
• Increase in market share for Sony Car Accessory Products.
• Opening a penetration into vehicle market.
• Improving green environment achievement.

Since proton has emerged from an ordinary vehicle manufacturer towards a green ‘vehicle’, it stamped a name in the world. The investment of this 2 billion from Sony will fasten the company towards green world’s project as well as opening a new symbol to Sony. Our investment into this proton will not only make it an ordinary green car, but also included the beat of Sony’s original products included into this green car. It will boost up the Sony Corporation image towards a green environment supports and also advertising Sony’s hardware; when drivers and passengers sit in the car listening and using the accessory provided by Sony.

In Australia, the green Persona has taken a 4 star rating and very value worthy compare to any cars. We believe that in the future, more and more people will start realizing about green environment car as the fuel is going up fast as well as the damaged environment will noticed every living people. Thus, by investing into this Proton Company, we believe the return on investment will be bloom; as proton total sales volume will be doubling by year 2010 to 300,000 units.

A reduction of interest rate to 3.5% by all the banks for national cars will helps to improve the net sales, thus increasing our return on investment. Proton report an increase from 4.6 million net profits to 5.6 million shows a very good sign on future net profit. We believe the investment on Proton will return a very good significance sign as the green car concept is launched throughout the world and has been already accepted. Countries like Australia and United Kingdom give more positive reviews on Proton green cars as it is cheapest, reliable and most important, supporting green environment more than most of the vehicles in the market.

However, we do take consideration onto the inflation rates that happening in most of the countries; as well as the local host for Proton. The purchasing power for people in the world has been decreased after the price of fuel increased. It is understandable that vehicle needed to be changed more into Solar or Electrical (Hybrid) car. The changes of Proton have not achieved those new proposed vehicle, and it will be a risk that this investment has to take.

In addition, interest rates and different countries that offer different taxation will decrease the volume of sales and export. Taxation will decrease the volume of sales as the green cars will be overcharged and making people not to buy from it. On the other hand, countries that have embargo relation with the host, Malaysia such as Lebanon will not be able to reach the green cars as they will not export or having any trade relation. The investment on this Proton has another risk that will have to bear, which we must remark that not every corner in the world will have the green cars approached.

Investment Approach

We strongly insist that investment on Proton is an absolute. It fulfills the goals of the Sony Corporation which are increase in market share for Sony Car Products, opening a penetration into vehicle market and improving green environment achievement. This not only will allow Sony to be the main vehicle accessory producer, but also to advertise out the accessory for other cars. The advertising by using a green car to promote the products will not only fulfill marketing, but also fulfilling the green environment achieves which Sony Corporation has been set for years.

The investment into this Proton Company will return a huge amount of ROI, as the sales volume of Proton has insignificantly grow, and will doubling the sales to 300,000 units by year 2010. By 2 years ahead, the investment can be fully returned with profits, and it is a short time investment plan. We believe that this is a very good investing chance that shouldn’t be missed.

Appendix

http://www.sony.net/SonyInfo/News/Press_Archive/200010/00-1006E/

http://sify.com/finance/fullstory.php?id=13374493

http://www.proton.com/downloads/documents/annual_reports.php
http://business-marketings.com/blog/proton-revenues-to-rm56-billion-profit-of-rm162-million/