Top Glove Game On

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MGT657
STRATEGIC MANAGEMENT



CASE STUDY #03:

TOP GLOVE: GAME ON


TABLE OF CONTENT




Pages
TABLE OF CONTENT
2


CHAPTER 1 INTRODUCTION

1.1
Background of the company
3
1.2
Vision and Mission Statement
4

1.2.1
Vision And Mission
4

1.2.2
Analysis of Vision and Mission
5


CHAPTER 2 VARIOUS ASPECT OF BUSSINESS AND MANAGEMENT

2.1
Internal and External Evaluation
7

2.1.1
Internal Evaluation of Top Glove
7

2.1.2
External Evaluation of Top Glove
8
2.2
Strategic Activities
9
2.3
Strategic Initiative
10
2.4
Problem Faced by the Company
11
2.5
Ways for the Company to achieve Competitive Advantage
13


REFERENCE
15




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
There are several internal evaluations on the Top Glove such as lack of motivation and self-leadership, lack of delegation and non-renewable resource. For lack of motivation and training, feeling low and unmotivated can cause an employee to become distant and quiet if they know that they can talk to their manager and then the situation can be discussed and improved or overcome. A lack of motivation and self-leadership can be caused by a number of factors including lack of career progression, boredom, lack of confidence in management decisions feeling under-appreciated unmanageable workload. The employee will show signs of demotivation. For example are lacks of focus, increased absence, increased breaks or time away from their desk, increased time to start working after arriving in the office and so on. Top Glove use Hersey-Blanchard Situational Leadership Theory based on Figure 2 below.

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

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Top Glove. (n.d.). In Wikipedia. Retrieved October 14, 2009, from https://en.wikipedia.org/wiki/Top_Glove

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