Reducing A Countries Dependance On Foreign Goods Commerce Essay

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1. The company that I have chosen, Kossan Rubber Industries Bhd, has a clear purpose in achieving business stability with long-term sustainable growth. This purpose is reflected in the company's vision and mission statement. The company's vision and mission statements are easy to understand as no jargon is used. Besides, they explicitly tell the public what the company is all about by showing that the company is in the rubber manufacturing industry.

By 'striving to reduce Malaysia's dependence on imported rubber goods' and 'navigating towards Malaysia's Vision 2020', the company shows its desire to become the main supplier in Malaysia and a main exporter of rubber products in the future (Kossan Rubber Industries Bhd, n.d.). This is a long-term destination for the business and may help in motivating and inspiring the employees to improve their work as it serves as a challenge for them. Hence, this shows that the company has a clear purpose in wanting to be a successful manufacturing company both locally and internationally.

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In addition, the company aims in 'keeping a healthy growth through teamwork' and 'stepping up the welfare and professionalism of their employees' (Kossan Rubber Industries Bhd, n.d.). This shows that the company is concern about their employees. They value their employees and understand about the importance of working together in harmony for the company's well-being. Teamwork is an important value as it may allow the company to be a success by reducing inner conflict among the employees. Thus, this shows that the company has a clear purpose in wanting to achieve a stable growth by improving its productivity of the company through the care for their employees.

Moreover, the company is 'opting to be competitive through the provision of good services and quality products', and 'aspiring to develop more high technology products for their customers' (Kossan Rubber Industries Bhd, n.d.). This shows that they place great importance on their customers and that in order to be a successful manufacturing company, they constantly improve their products so that they can compete with their competitors. With better and more advanced products, they will be able to provide excellence customers service, which would in turn bring about success to their company. In addition, the company shows that they are constantly looking for ways to better their technology in order to prepare for the future. Therefore, this reveals clearly that the company wants to achieve success not only in the present, but also in the future by fulfilling customers' satisfaction.

Overall, the company shows clear purpose in what it does, what it wants to achieve and the ways to bring about the success. Besides, the purpose is a long-term one and it serves as a guide for the company to stay focused and in the right direction. However, the purpose can be improved by focusing on the needs of the company's investors and business partners, and the importance of caring for the environment. These are external factors that may affect the function of the company and hence determine its long-term growth and success.

2. Corporate culture is the unique characteristics of companies shared among the people working over there that affects the way they do things and differentiate them from the other companies. In Kossan, good care for employees, good relationship with shareholders, excellent customer service and quality products, and being competent and innovative are emphasised.

Kossan believes that in order to grow and create a synergistic result, they have to care for their employees. They are part of the company that help to make the business successful. Hence, the company works to produce a competent workforce that is able to work together as a team and share similar goals. Human capital management programme has been developed to hire and retain the right people, nurture talents and groom future leaders (Kossan Rubber Industries Bhd, n.d.). Trainings are also provided to develop their employees (Kossan Rubber Industries Bhd, n.d.). Besides, the company cares for the employees' safety by providing them a safe workplace and insurance coverage (Kossan Rubber Industries Bhd, n.d.). Accommodation facilities are also provided for foreign and out-stationed workers (Kossan Rubber Industries Bhd, n.d.). Furthermore, they believe in introducing a right mix of work and play in the organisation (Kossan Rubber Industries Bhd, n.d.). They treat everyone as a family. This shows that the company places great importance on their employees and advocates a healthy and balanced corporate culture by building a well-rounded and caring corporate entity.

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The company also understands about the importance of having a good relationship with their shareholders. To achieve this, the company tries to maintain an active level of dialogue and communication with their shareholders as they find that this will reduce any misunderstandings or conflicts among the different parties (Kossan Rubber Industries Bhd, n.d.). Also, shareholders will be able to monitor their investment more closely with all the accurate information channelled and hence are more confident with the company (Kossan Rubber Industries Bhd, n.d.).

Moreover, the company values their customers and cares for their interests by maintaining excellent customer service and practising professionalism. They have put in effort and use various ways to ensure that their customers are satisfied with their products and services offered. For instance, they adopt the shortest possible time to respond to customers' feedbacks and assure timely delivery and good quality service (Kossan Rubber Industries Bhd, n.d.). With great customer care, they believe that they will get good recognition and strong trust from their customers and suppliers, which eventually will ensure great profitability to the company.

To offer quality products and ensure that Kossan achieves to be "A Name You Can Trust", the company constantly monitor their work (Kossan Rubber Industries Bhd, n.d.). They put in much effort in maintaining and improving their standards to get the trust from all the parties they are working with. They focus on Research and Development (R&D) and Quality Control (Q.C.) to ensure on-going testing and development of products and to lower overall production cost through 'more consistent and stable production flows, minimum idle production times, and reduced production rejects and wastages' (Kossan Rubber Industries Bhd, n.d.). Besides, the company employs new technology to cultivate a knowledge-based workforce and promote better communication with all relevant parties . With the use of advanced technologies and R&D, the company seeks to be competent and innovative.

Year

2007

2008

2009

Number of directors on the board

9

9

9

Number of Non-Executive Independent Directors

3

3

3

3.

The company generally practises good corporate governance. The board of the company is led by nine directors in which four are executive directors, a non-independent non-executive director, three independent non-executive directors and an alternate director (Kossan Rubber Industries Bhd, n.d.). This shows a balanced number of executive management and independent non-executive directors in the board. The independent non-executive directors provide unbiased and independent views, advice and judgement, reducing conflicts of interest between management and shareholders. Furthermore, there is a division of responsibilities at the head of the company. The roles of the Chairman and the Managing Director are separated and clearly defined. This ensures that there is a balance of power and authority. However, due to the family relationships between the executive directors and the non-independent non-executive director, there may be a risk that the board is dominated by a small group. This shows poor corporate governance.

To enhance the directors' knowledge in developments relevant to the company, they attended the Mandatory Accreditation Programmed (MAP) prescribed by Bursa Malaysia (Kossan Rubber Industries Bhd, n.d.). Also, orientation programme and trainings are offered to them (Kossan Rubber Industries Bhd, n.d.). Moreover, the directors meet on a quarterly basis and this allows timely reporting of the performance of the company (Kossan Rubber Industries Bhd, n.d.). Prior to the Board meetings, an agenda and a set of Board papers are distributed so that directors are prepared for discussion and informed decision making (Kossan Rubber Industries Bhd, n.d.). This allows the meetings to run smoothly and effectively. The Board is also regularly updated and advised on new statutory and regulatory requirements relating to duties and responsibilities of directors (Kossan Rubber Industries Bhd, n.d.). This provision of information reflects good corporate governance as sufficient and relevant information will help in carrying out proper oversight.

Besides, the company shows good corporate governance as the nomination, remuneration and audit committees are comprised mainly of the independent non-executive directors. The appointments to the Board are made in accordance with the regulatory requirements (Kossan Rubber Industries Bhd, n.d.). The directors are re-elected every year as well (Kossan Rubber Industries Bhd, n.d.). The rewards and benefits for the directors are related to their contributions to the company's overall performance (Kossan Rubber Industries Bhd, n.d.). The details of the directors' remuneration are disclosed in the company's annual report. Furthermore, the directors 'take responsibility to present a balanced and understandable assessment on the company's position and prospects' (Kossan Rubber Industries Bhd, n.d.). The board also maintains a system of good internal control, including risk assessments, and the need to review its effectiveness constantly to protect the company's assets and shareholders' investments (Kossan Rubber Industries Bhd, n.d.). A formal and transparent relationship with the auditors has also been established by the company (Kossan Rubber Industries Bhd, n.d.).

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In addition, the company informs the shareholders and investors about business matters affecting the company regularly. To keep them updated about the developments of the company, dialogues with investment analysts and fund managers are held (Kossan Rubber Industries Bhd, n.d.). The Annual General Meeting also allows communication with shareholders to present them the progress and performance of the business of the company (Kossan Rubber Industries Bhd, n.d.). Shareholders are encouraged to participate in the question and answer session where the board of directors and external auditors will be available to answer the questions raised (Kossan Rubber Industries Bhd, n.d.). The company's website also allows the shareholders to update their information about the company's activities (Kossan Rubber Industries Bhd, n.d.).

4. According to the Bursa Malaysia Corporate Social Responsibility (CSR) Framework, the four main focal areas are the workplace, community, marketplace and environment.

Kossan works to improve the condition of the workplace for the employees' welfare. The company believes that human capital development is very important to ensure that the employees have the relevant skills and knowledge in ensuring sustainable business growth. So, trainings are conducted to develop the employees to improve their quality of work and workplace (Kossan Rubber Industries Bhd, n.d.). As the company hires foreign and out-stationed workers, accommodation facilities with all basic amenities to ensure comfort and hygiene are provided (Kossan Rubber Industries Bhd, n.d.). Besides, the company complies strictly with the Occupational Safety and Health Act (Kossan Rubber Industries Bhd, n.d.). It forms a Work Safety Committee to develop policies to maintain a safe and healthy workplace so as to prevent the employees from any injuries (Kossan Rubber Industries Bhd, n.d.). The employees are also protected under the various types of insurance. Furthermore, regular trainings, meetings, inspections and prevention programmes are performed to ensure that the workplace is safe and healthy, and to inform the employees about its importance (Kossan Rubber Industries Bhd, n.d.).

As companies live within the community, both are dependent on each other. Hence, involving in community issues will benefit both parties. Kossan recognises this and hence gives out donations to various charitable bodies and schools for their regular expenses and building funds (Kossan Rubber Industries Bhd, n.d.). In fact, the company should be more socially responsible in this area by contributing more to the community. Besides donating money, the company can donate gloves to countries where medical attention is needed, for example, due to the outbreak of war. Also, they can offer scholarships to provide education to the under-privileged ones. Proper education ensures long term benefits to the people as knowledge will enable them to earn money to sustain their living themselves.

The marketplace is where important stakeholders - the shareholders, suppliers, and customers are found. Kossan takes good care of their stakeholders. Good communication with their shareholders is maintained and accurate information about the company is provided so that the shareholders are able to monitor their investments more closely (Kossan Rubber Industries Bhd, n.d.). In addition, the company maintains excellent customer service and practises professionalism to ensure great customer satisfaction (Kossan Rubber Industries Bhd, n.d.). They invest in R&D and Q.C. to improve the quality of their products (Kossan Rubber Industries Bhd, n.d.). Also, annual satisfaction surveys are conducted to make the necessary corrections and improvements to their products and services so that high level of trust is maintained in their stakeholders (Kossan Rubber Industries Bhd, n.d.).

Lastly, the environment should be protected as they are part of the external factors that may affect the company. To improve on its social responsibility, Kossan should contribute more in protecting the environment. As the environment is increasingly harmed by pollution, the company can find ways to reduce their energy usage so that less coal will be burnt to generate energy, which can contribute to global warming. Moreover, they can explore methods to reduce their greenhouse gas emissions that can damage the climate.

By putting more effort in caring for the community and the environment, the company will be able to improve its social responsibility.

5. Key financial data of Kossan Rubber Industries Bhd.

SOURCE: Kossan Rubber Industries Bhd Annual Reports 2007-2009, http://www.kossan.com.my/RubberDivision/main.htm

a) From 2007 to 2008, the financial performance of Kossan had improved as can be seen from the increase in its sales by 27.69%, operating profit by 21.71% and net profit by 7.44%. Besides, the slight increase in the cash flow from operations by 0.03% shows that the company has increase in its profitability. However, there was also an increase in its liabilities and cash flow from investing by 24.12% and 25.68% respectively. These were probably resulted from the expansion and upgrading of the company as shown in the rise of 29.8% in the net tangible assets (Adnan, 2007). The decrease in the cash flow from financing by 87.79% was maybe because of the repayment in debt.

From 2008 to 2009, there was an improvement in the net profit by 13.8% and the operating profit by 13.85% but a decrease in the sales by 6.1%. The increase in profits was likely due to the manufacture of better product mix and increase in the demand for nitrile gloves (Kossan Rubber Industries Bhd,n.d.). Meanwhile, the decrease in sales was probably resulted by the economic downturn, in which the average selling price of the glove declined due to lower raw materials costs, forex losses and poor demand for technical rubber products (TRP) (Hamzah and Chang, 2010). Furthermore, in May 2009, one of the Kossan manufacturing plants was burnt down, affecting the production of gloves (Yeow, 2009). There was a boost in the cash flow from operation by 27.44% indicates that the ability of the company in generating profit has increased greatly. Also, the cash flow from financing shows a negative value, which was probably due to the repayment of debt. This is good as it reduced the total debt of the company, as shown in the data, by 6.86%.

b) The company's sales and profits will probably continue to grow in 2010-2011 as it is evident from the rising trends in the previous years. Besides, there is an increase in health awareness around the world due to the outbreak of various diseases like H1N1, resulting in the rising demand for rubber gloves (Alibaba.com, 2010). The company has also started on its expansion plan since 2007 to increase its production (Tan, 2007). Moreover, the company has increase in its investment in the R&D sector to increase the quality of its products (The Star, 2007). This would increase the customers' satisfaction level and hence improve its sales and profits.

6. a) The daily share price of Kossan Rubber Industries Bhd. in April 2010.

b) The daily movement of the Kuala Lumpur Composite Index (FBM-KLCI).

c) On 1 April 2010, the stock price of Kossan started quite high, with the highest at RM 8.25 on 7 April 2010. It then gradually decreased to the lowest at RM 7.56 on 13 April. Another plunge was on 19 April, at RM 7.68. Following this, the price rose and remained stable at about RM 7.9 towards the end of the month. The decline in the prices on 13 April and 16 April was also shown in the closing price of the Kuala Lumpur Composite Index (KLCI), where the lowest was at RM 1326.67 on 16 April.

The drop in the stock price of Kossan on 13 April was due to the rising in the ringgit against the US dollar (Murugiah, 2010a). Hence, this reduces the profit from sales. Also, due to the increase in the demand for rubber products in Japan, the cost of raw materials rose because of the inadequacy of supply (Murugiah, 2010a). Furthermore, the lack of gas supply, a main component of production, contributed to the excess in demand for rubber products (Tan, 2010b). As a result of higher products prices, stock prices declined due to poor sales. On 16 April, due to the fraud committed by Goldman Sachs Group Inc on subprime mortgages, the regional markets crushed, affecting the shareprice of Kossan (Murugiah, 2010b).

7. The environmental forces that will affect Kossan are the political and legal factors, economic factors, social factors, technological factors and competitive force.

For political and legal factors, the company has to comply with the laws implemented by the Malaysian government in order to operate well. For instance, the Standard Malaysia Glove Product Certification required that the gloves manufactured are low in protein and powder (Standard Malaysian Glove, 2009). As Kossan also has business overseas, they have to conform to the regulations such as the US Food and Drug Administration (FDA) and the Brazilian quality control and quality standard (Yeow, 2009b). In addition, due to the employment of foreign workers, the company has to adhere to the employment laws such as the Employment of Foreign Workers Act. Other legislations include the Malaysian Code on Corporate Governance and Bursa Malaysia rules.

The economic factors may affect the sales of the company. For instance, the appreciation of the ringgit against US dollar has reduced the profitability of Kossan in 2009 (Tan, 2010b). The recession in market due to the fraud committed by Goldman Sachs Group Inc has also affected the performance of the company (Murugiah, 2010b). Besides, the increase in the cost price of the raw materials due to the insufficient supply of products and the lack of gas posed disadvantages to the company (Murugiah, 2010a; Tan, 2010b). It can be seen that in recent years, the company was affected by negative economic effects.

The social factors include the population size and education level. Due to the sales of rubber products to overseas, especially to China, where the population size is large, the company would gain high profit. Furthermore, owing to the increase awareness in the health sector, the demand for rubber gloves increases (Alibaba.com, 2010). This is especially during the outbreak of diseases such as the H1N1 flu (Tan, 2010b). As a result, these factors have a positive impact on the company.

The technological factors are important for the company as it would help to reduce the manufacturing costs and better satisfy the changing demand of customers. Hence, it is vital that the company embark on the R&D sector so that they remain competitive. Kossan has invested in the R&D and Q.C. to constantly improve the quality of their products and to develop diversified products (Kossan Rubber Industries Bhd, n.d.). The production of nitrile gloves, which can reduce the chemical allergy, is also increasing to suit the needs of all the customers (Kossan Rubber Industries Bhd, n.d.).

The competitive forces may also affect the company. The threat of new entry may probably be low as the latex price rises (Murugiah, 2010a). The inability to achieve economies of scale would discourage the new firms to enter the industry. The threat of substitutes would be absent as there is no real substitute for gloves. The buyer power is likely to be high because of the increasing health awareness (Alibaba.com, 2010). The supplier power may remain constant due to the lack of substitute products. The competition among firms is very high as the rubber products are standardised. Hence, these five competitive forces may motivate the company to strive harder to survive in the industry.

Despite negative environmental factors, the rubber industry would be likely to survive as the positive factors encourage good sales.