MGT657
STRATEGIC MANAGEMENT
CASE STUDY
#03:
TOP GLOVE: GAME
ON
TABLE OF
CONTENT
Pages
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TABLE
OF CONTENT
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2
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CHAPTER
1 INTRODUCTION
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1.1
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Background
of the company
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3
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1.2
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Vision
and Mission Statement
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4
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1.2.1
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Vision
And Mission
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4
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1.2.2
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Analysis
of Vision and Mission
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5
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CHAPTER
2 VARIOUS ASPECT OF BUSSINESS AND MANAGEMENT
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2.1
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Internal
and External Evaluation
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7
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2.1.1
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Internal
Evaluation of Top Glove
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7
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2.1.2
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External
Evaluation of Top Glove
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8
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2.2
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Strategic
Activities
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9
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2.3
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Strategic
Initiative
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10
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2.4
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Problem
Faced by the Company
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11
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2.5
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Ways
for the Company to achieve Competitive Advantage
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13
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REFERENCE
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15
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CHAPTER 1
INTRODUCTION
1.1
BACKGROUND OF THE COMPANY
Figure 1: The
Entrance to the Top Glove Tower
Top
Glove was established in 1991 as a small factory with three production lines,
but it has since grown exponentially to become the largest rubber glove
manufacturer in the world. It was listed on Bursa Saham Kuala Lumpur on 27th of
March 2001 and promoted to Main Market of KLSE in 16th of May 2002. The company
has shareholder funds worth RM1.28 billion with annual turnover of RM2.31
billion at financial year ended on 31st August 2012. The company’s current
headquarters is located in Malaysia at Jalan Meru Klang, Selangor near with
Setia Alam. Figure 1 show that the entrance was in front of Setia City Mall. The
company currently has sales office in China, Thailand, USA, and Germany.
In order to capture more global market
share, the company has taken a rapid expansion of its capacity. The company’s
manufacturing facilities which are located at Malaysia, Thailand, and China
grew to 24 from only 5 when it was listed in BSKL on 2001. Top Glove
Corporation Berhad wholly-owned the subsidiary of Top Glove in Thailand and
China. The company represents 26 percent of the market share worldwide.
Currently, the company exports to its 1,800 customers in more than 185
countries around the world. The company’s products are exported and available
in most countries in North America, Latin America, Europe, Middle East and Asia
region.
1.2
VISION AND MISSION STATEMENT
1.2.1 VISION AND MISSION
The
vision of Top Glove is “to strive to be the world’s leading manufacturer with
excellent quality glove products that enrich and protect human lives” while the
mission statements is “to be world class glove manufacturer providing top
quality product with excellent services through continuous improvement and
innovation”. The company offers 13 types of rubber gloves to the public such as
latex examination gloves, nitrile examination gloves, vinyl examination gloves,
surgical glove, clean disposable gloves, general purpose glove and others. Top
glove have the capabilities to produce total production capabilities of 40.3
billion pair of glove annually. This because the company has 24 factories and
462 manufacturing line that can produce vast amount of glove.
Indonesia
is a tropical country located near Top Glove home country, Malaysia. Tropical
weather in Indonesia allows for fertile growth of rubber trees that are used in
production of latex. One of the agricultural industries in Indonesia is rubber
industry. The large and fertile soil is one of the geographic advantages of the
country from Top Glove’s view. It enables large supplies of latex to facilitate
the production of gloves to processing and manufacturing plants of Top Glove.
Indonesia is countries that possess one of the lowest labor cost in the world.
Indonesia currently has 248.6 million residents which is the 4th most populated
country in the world. Cheap labor cost coupled with large supply of raw
material makes it a suitable location for Top Glove to expand into. This factor
will save the cost of production thus enable the company to sell their product
at cheaper price, so that they can compete better in global market.
Indonesia
also experienced active reform in business regulation in recent years and is
among the top 50 economies improving the most and the top 5 within the East
Asia and Pacific Region. 14% of its Gross Domestic Product (GDP) is consists of
agricultural sector. The inflation rate also improved from 5.4% in 2011 to 4.5%
in 2012. Doing business and investment in most parts of Indonesia is relatively
safe and profitable. Thus, the stable economic and political environmental
encouraged Top Glove to expand to the country.
1.2.2 ANALYSIS OF VISION AND MISSION
There
are several reasons that attract Top Gloves Corporation to explore into
Indonesia market. However, entering a foreign may not only brings gains but
also shortcomings. Hence by analyzing the respective country, they able to
understand is it significant for Top Gloves Corporation to invest or to enter global
market.
According
to KM Lee as Managing Director of Top Glove Corporation, he stated that the
rise in healthcare standards tied with the increase in the global population
had increases the demand of medical gloves. Meanwhile, Chairman Tan Sri Lim Wee
Chai indicated that the rise in the labor cost with the introduction of the
minimum wage policy had forces the group to increase its glove prices by 3-5
per cent, depending on the type of product. With the rise on demand of medical
gloves, thus, Top Gloves Corporation tends to expand their production line.
Besides, the increase of labor cost due to minimum cost forcing the corporation
to look after a lower-cost country, as the labor cost will be lower. From the
literature findings, John Tanner (1996), he found that Indonesia is low cost
skilled labor that benefits to Top Gloves Corporation. Furthermore, Indonesia
is a country that rich with natural resources that match the Top Glove’s nature
of business that is the rubber. Thus, expanding a plant into Indonesia market
may lead the corporation to gain more profit, as the production line can be
more effective and efficient.
Apart
from that, Indonesia was a main attraction for Top Glove Corporation because
the country of Indonesia able to offer a lower production cost as the labor
cost resources is lower in price. According to Sari Shaviriyani (2006), a
statistic shows that Indonesia’s population is the world fourth largest. The
workforces over the country are huge and young enable the labor cost to be
lower as the workforce supply is higher than the demand forcing the wages to be
lower down. More to the point, the workforces are young and energetic allowing
Top Gloves production line to produce more effectively.
CHAPTER 2
INTERNAL AND EXTERNAL EVALUATION
2.1
Internal Evaluation of Top Glove
2.1.1
Internal Evaluation of Top Glove
Figure 2: Hersey-Blanchard
Situational Leadership Theory
For
lack of delegation, the manager take longer time to plan, lack of confidence in
their subordinate’s abilities, manager experience dual accountability and
insecure about their value of organization. From the benefit of delegation, the
employees feel more committed and empowered to do a given task. Furthermore, it
will give better decision making who closest to the actual problem to be solved
may be in the best position to make the most effective decision. Employees have
opportunity to develop analytical and problem-solving skills.
For
the non-renewable resources, the glove is produce by rubber which is not
environmental friendly product. Rubber is a non-renewable resources and it
cannot be reuse and recycle. Rubber is widely use in the health and medical
field which is this glove cannot be reuse again due to the sanitation
condition. If they do not address this glove properly, it will cause pollution
indirectly. This company also does not have any long-term contracts with other
companies hence the stability of the cash flow of the company is not steady
even this company is a worldwide company.
2.1.2
External Evaluation of Top Glove
PESTEL
Analysis is a strategic management tool that Top Glove Corporation strategy
makers can use to make better decisions related to external evaluation. PESTEL
stands for Political, Social, Economic, Technological, Environmental and Legal
factors that impact the macro environment of the firm that it operates in.
Political
factors are often related to the level of intervention and nature of
intervention of the local and national government in the business and economic
environment. Government policies and governance system plays a huge role in
nature and objectives of the policies. For economic factors, they includes interest
rate, inflation rate, consumer disposable income, labor market conditions ,
exchange rate, the stage of economy of country name, economic performance of
country name, taxation rate etc. The next is Social Factor where each society
and culture has its own way of doing business. These social factors can not
only help companies like company name to better understand the way of doing
business but also in understanding the customer preferences in sector name
sector of country name. Social factors include health and safety attitudes,
attitude towards certain products and services, acceptance of entrepreneurial
spirit, societal roles and norms, demographics, gender roles, traditions,
culture, and leisure interests.
Technology
is fast disrupting various industries and sector name is no different. There
are numerous ways technological factors are impacting the company name &
industry name in country name. Some of the technological factors are population
access to technology, supply chain disruption because of technology, innovation
in product offerings, access to greater information, innovation in customer
services, access to mobile phones driving empowerment and rate of technology
driven change. For over the last decade
sustainability and environmental factors are becoming critical for businesses.
Government and pressure groups are fast asking organizations to adhere to
environmental standards. Some of the environmental factors are – safe disposal
of hazardous material, increasing focus on sustainability, safe water
treatment, limiting carbon footprints, insurance policies, climate change, safe
waste disposal and laws regulating pollution. Lastly, Legal factor plays an
important role in the development of Medical Equipment and Supplies sector in
any economy. Top Glove Corp management has to consider following legal factors
before entering international market such as time taken to deliver justice, intellectual
property rights protection, biasedness toward home players, discrimination
laws, system of justice, copyrights law, data protection laws etc.
2.2
Strategies Activities
The world's largest natural rubber glove maker will
step up its innovation to better cope with rising competition. The rubber glove
industry is highly competitive, and profit margins are thin. These tiny margins
compel players to increase capacity to improve cost efficiency. Polyisoprene
Surgical Glove is a disposable device intended for surgical purpose and worn on
the hand of healthcare personnel during surgery to prevent contamination
between healthcare personnel and the patient. A dermatologically proven product
suitable for all skin types especially dry or itchy skin. The glove protects
and nourishes the hand while providing long lasting hydration. Our gloves meet
and surpass stringent clinical testing and international requirements.
Top Glove Corporation emphasis the value of
increasing Global Customer Satisfaction, as they are doing the thing right at
the first time and on every time; with integrity and total commitment to their
corporate, customers, and the community around the worlds. Besides that, Top
Glove desired to produces the products that are excellence in quality and
competitiveness nevertheless, without ignoring the environment and keeps doing
their corporate social responsibility. Addition, Honesty, Integrity and
Transparency are Top Glove business Ethics.
Top Glove expanded its R&D team in 2016. In
2015, it had 50 researchers. In a single year, Top Glove recruited another 50
researchers, doubling its number of researchers in 2016. Top Glove’s R&D
activities are focused on enhancing its newly launched range of products. They
include Polyisoprene Surgical Gloves and Grip Gloves. As a result, Top Glove
filed 11 patents for its range of new products in 2016 alone.
2.3 Strategies
initiative
Customer’s
satisfaction is the focus of Top Glove and it had placed a lot of emphasis in
Research and Development to produce a wide and diversified range of high
quality and value-added glove products in order to fulfill the expectation of
their customers. The company also collaborates closely with the government
agencies and Ministries to keep itself abreast of the latest development in
rubber research technology. The company also uses state-of-art high technology
and efficient automatic glove manufacturing machine to obtain the most products
manufacturing yield and to remain as one of the most cost-effective and highest
quality producer in the industry. With all these advantages and strategies, the
company is able to compete with the competitors and stand out in the industry.
A
company of their size will need to embark on Mergers and Acquisitions (M&A)
in addition to organic growth to grow faster and more efficiently if they are
to achieve the ambitious goals they have set. This cannot be achieved by organic
growth alone. That is why they want to continue to strategically pursue M&As and
joint ventures, and establish new set-ups in related businesses which will play
an essential role in enabling us to maintain our leadership position in the
glove market. The increased production capacity will also allow the group to
enjoy better economies of scale and compete more effectively in the global
market by capturing a greater market share, particularly from multinational
glove companies who are moving towards outsourcing their production capacities.
Powder-free
gloves stage is a technology to prevent stickiness of gloves by avoiding powder
usage completely by going through chlorination or polymer coating process. This
is one of the important technology processes in manufacturing latex glove
nowadays because most of the glove makers are producing the latex gloves with
powder-free. Top Glove produces latex powder and powder-free gloves. Basically,
the powder-free latex gloves are transformed from powdered gloves when the powder
is removed. Before the latex gloves dried, the powder helps the latex gloves
give uniformity as well as to prevent the latex gloves from molding together.
The tackiness on the glove surface can be removed by rinsing the latex gloves
in water. Then it is placed into a chlorine bath to transform the powdered
latex gloves to powder-free latex gloves. The glove is turned inside out and
the process is repeated. The powder-free gloves are placed back into the dryers
when the bathing process is completed.
2.4 Problem
Faced by the Company
High
cost of replacing existing experts within the Top Glove Corporation. Few
employees are responsible for the Top Glove Corp's knowledge base and replacing
them will be extremely difficult in the present conditions. Declining market
share of Top Glove Corp with increasing revenues will make the Medical
Equipment & Supplies industry is growing faster than the company. In such a
scenario Top Glove Corp has to be carefully analyzing the various trends within
the healthcare sector and figure out what it needs to do to drive future
growth. Low investments into Top Glove Corp's customer oriented services.
This can lead to competitors gaining advantage in near future. Top Glove
Corp needs to increase investment into research and development especially in
customer services oriented applications.
There
are a lot of recommendation to overcome the problem that faced by the Top
Glove. First and foremost, acquisition of the company in the same industry will
improve the company strength in production, reaching customer and even the
operation through synergy strategy such as the expertise and machinery. The
advantages of acquisition brings to the Top Gloves is reduced the cost. Top
Gloves are able to generate the raw material needed to process the gloves like
palm kernel shell and latex from Indonesia Besides, the labor cost in Indonesia
is much cheaper compared with Malaysian’s labor cost. Top Gloves should
maintain their current expansion strategy which is exporting and building the manufacture
in foreign country, at the same time, adopt the acquisition to take over the
related company in foreign markets. Once it is confirmed that the market
possesses a huge potential for gloves market, Top Gloves may set up a
manufacture plant in Indonesia and implement backward integration by taking
over the related company such as supplier for palm kernel shell firms.
Next
is Top Glove should be aware of the policy changes. Policy changes exist due to
unstable condition in term of political pressure, economic trend, social unrest
and restriction of the ownership of nondomestic company. To achieve long term
business profit in a dynamic changing country like Indonesia, it is important
to maintain awareness between economies and political issues. A strong
professional team must be developed to maintain high policy effectiveness.
Hence, to managing threats of policy changes, Top Glove can gather more foreign
information in Indonesia through recruit foreign proficient consultant who
understands the foreign culture well.
Last
point is hiring local managerial talent is the best ways in foreseen and helps
in explore business opportunity, it may facilitating the procedures in getting
approval and application of local operation and result in attracting more local
people join to the new established company. Besides, government will make
change on economic policy and legal rules in order to forcing the business to
update the way they do the business. Thus, Top Glove must managing
political-risk services and issues carefully which is incurring news
publication, employment issues, banks association and social media network. The
company can rely on lobbying to help in administration of political matter and
business operation, associate with public and bringing positive impact to
social. Buy this way, Top Glove can reduce the risk in global business
extension and minimize the possibility of legal fault.
2.5 Ways for
the Company to Achieve Competitive Advantage
First
is strategy to compete which is the customers satisfaction is the focus of Top
Glove and it had placed a lot of emphasis in Research and Development to
produce a wide and diversified range of high quality and value-added glove
products in order to fulfill the expectation of their customers. The company
also collaborates closely with the government agencies and Ministries to keep
itself abreast of the latest development in rubber research technology. The
company also uses state-of-art high technology and efficient automatic glove
manufacturing machine to obtain the most products manufacturing yield and to
remain as one of the most cost-effective and highest quality producer in the
industry. With all these advantages and strategies, the company is able to
compete with the competitors and stand out in the industry.
The
second is powder-free gloves stage. It is a technology to prevent stickiness of
gloves by avoiding powder usage completely by going through chlorination or
polymer coating process. This is one of the important technology processes in
manufacturing latex glove nowadays because most of the glove makers are
producing the latex gloves with powder-free. Top Glove produces latex powder
and powder-free gloves. Basically, the powder-free latex gloves are transformed
from powdered gloves when the powder is removed. Before the latex gloves dried,
the powder helps the latex gloves give uniformity as well as to prevent the
latex gloves from molding together. The tackiness on the glove surface can be
removed by rinsing the latex gloves in water. Then it is placed into a chlorine
bath to transform the powdered latex gloves to powder-free latex gloves. The
glove is turned inside out and the process is repeated. The powder-free gloves
are placed back into the dryers when the bathing process is completed.
Next
is quality control. Top Glove carries out its quality control in total quality
management system. In total quality management system, the process includes
regular testing of raw materials, close monitoring the manufacturing process,
continuous improvement on quality control, maintain regular quality control,
complying with stringent quality standard, target for zero defects, good
instructional labeling, efficient work standardization, continuous improvements
in packing and loading, close monitoring of production process, tensile
strength machine, innovative auto-stripping system, visual air pump test, water
tight test, physical dimension test, protein test and powder test in their
manufacturing process of latex gloves. The visual air pump test, water tight
test and physical dimension test will be carried out in this quality control
stage while the other test will be carry out during each manufacturing process
of the latex gloves. The air pump test serves to check for holes and visual
defects in gloves while the watertight test serves to check for pinholes rate
on the latex gloves. Each country will have their own acceptable quality level
(AQL) in allowing the company to export product to their country. For example,
the companies that want export their gloves to United States, a 2.5 acceptable
quality level (AQL) in the watertight test or better. The physical dimension
test is used to measure the dimension of the gloves whether to know the
measurement does meet the inspection level of 4.0 that set in acceptable
quality level (AQL).
REFERENCE
A.
D. Chandler, Strategy and Structure (Cambridge, Mass: MIT Press, 1962)
CK
Tan, Nikkei. (2016, November 17). Top Glove chases growth through innovation
[Business web post]. Retrieved from https://asia.nikkei.com/Business/Top-Glove-chases-growth-through-innovation
Dhesi,
D. (2018, April 14). Top Glove plans more acquisitions to strengthen market
share [Corporate News web post]. Retrieved from https://www.thestar.com.my/business/business-news/2018/04/14/top-glove-plans-more-acqusitions-to-strengthen-market-share/
Essays,
UK. (November 2018). Top Glove Corporation Berhad Marketing Essay. Retrieved
from https://www.ukessays.com/essays/marketing/top-glove-corporation-berhad-marketing-essay.php?vref=1
Euromonitor (2018), "Healthcare
Sector Analysis ", Published in 2018
Introduction
To Top Glove Corporation Berhad. (March 2016). Retrieved from https://studymoose.com/introduction-to-top-glove-corporation-berhad-essay
L. Wrigley, Divisional Autonomy and
Diversification (PhD, Harvard Business School, 1970)
M. E. Porter, Competitive Strategy
(New York: Free Press, 1980)
R.
E. White, Generic Business Strategies, Organizational Context and Performance:
An Empirical Investigation, Strategic Management Journal7 (1986)
Top
Glove Corp (2018), "Top Glove Corp Annual Report", Published in 2018
Top
Glove. (n.d.). In Wikipedia. Retrieved October 14, 2009, from https://en.wikipedia.org/wiki/Top_Glove
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