Malaysia Is The Largest Contributor Of Rubber Gloves Marketing Essay

We are exploring and evaluating on the Malaysian based company that is potential in sustainable growth and profitability in the future. After we have done our research, we found that Top Glove Corporation Berhad is a potential company that reliable to invest for long term.

Firstly, we have found that Malaysia is the largest contributor of rubber gloves who supplies 63% of the global demand and it is also the top exporter of rubber gloves. Besides, we have found that rubber gloves are in demand for these few centuries. It is estimated that the global demand for rubber gloves growing at 8%to 10% annually. Recently, the demand for the gloves has burst as the awareness of health care has been increased since the outbreak of H1n1 influenza. China, India, and Vietnam have increasing their demand towards rubber gloves as the raise in health and hygiene awareness. In addition, the demand for rubber gloves in developed countries is growing in non medical sector. Since the rubber glove industry is a potential market to be invested, we suggest investors to invest in Top Glove Corporation Berhad which is the largest rubber gloves manufacturer in the world.

Top Glove Corporation Berhad is a Malaysian based company. The company has gain the global market share at about 23% currently and it is the market leader. It is well known for its high quality gloves. Top Glove has commenced operation in 1991 by Tan Sri Dato Sri Lim Wee Chai. It begins daily operations from one factory in 1991 with three production lines. It receive international recognition for various range of high-quality and value-added gloves. Moreover, Top Glove has a strong balance sheet, strong financial track record, and high level of net cash position. In these 19 years, the company has performs well and gain economic growth.

Throughout the report, we will explore and evaluate five areas that related to Top Glove Corporation Berhad which include the core business and the SWOT analysis, the past performance, the resources, the financial risks and the market’s view of the company. We will present a clear and deep research on the Top Glove Corporation Berhad.

http://www.topglove.com.my/news/2010/news_209.htm

Review of Core Businesses of the Company

Top Glove has commenced operation in 1991 by Tan Sri Dato Sri Lim Wee Chai. It is listed in Bursa Saham Kuala Lumpur in 2001. In August 2010, the company own 20 factories which 14 located in Malaysia, 4 located in Thailand, and 2 located in China. There are 371 production lines and about 10,900 employees. The products manufactured by the Top Glove Corporation Berhad is being demanded by 900 customers and exported to 180 countries worldwide. It produces about 33 billions pieces of gloves per year. Top Glove Corporation Berhad consists of 13 key products which include latex examination powered, latex examination powder-free, nitrite examination gloves, vinyl examination gloves, surgical gloves, household/ industrial gloves, long length 12” high risk gloves, cleanroom gloves, high density polyethylene (HDPE), low density polyethylene (LDPE), PE apron, and stretchy vinyl examination gloves.

SWOT Analysis

STRENGTH

Global market leader

Top Glove Corporation Berhad is the largest rubber gloves manufacturer in the world. The company benefit from gaining economics of scales by produce in huge capacity through 371 production lines. The products of Top Glove are also being present in worldwide. The company has gain the global market share at about 23% currently and it tries to improve their strategies in order to increase their global market share to 30% by year 2012. Besides, Top Glove is being recognised and awarded The World’s Best Brands in 2008 by The Asia Pacific Brands Foundation which was under category of The Best Brand in Manufacturing Rubber Glove. Moreover, Top Glove had received Growth Excellent Award from Frost & Sullivan for its excellent in growth in 2009.

http://www.topglove.com.my/IR-statement.htm

http://www.mida.gov.my/en_v2/index.php?mact=News,cntnt01,detail,0&cntnt01articleid=478&cntnt01returnid=110

Wide product range

The company has 13 ranges of productions from examination to industrial usage and from latex to synthetic gloves. These include latex examination powered, latex examination powder-free, nitrite examination gloves, vinyl examination gloves, stretchy vinyl examination gloves, long length 12” high risk gloves, surgical gloves, household/ industrial gloves, cleanroom gloves, PE apron, high density polyethylene (HDPE) and low density polyethylene (LDPE).

Economic of scale

Top Glove is producing variety range of gloves in a huge capacity. Thus, it is benefit from economic of scale. Tan Sri Lim Wee Chai said, “Our ability to grow our sales has helped give us the required volume to achieve economies of scale, thus reducing our costs and allowing us to price our products competitively.”

Well diversified

The products are exported to 180 countries worldwide includes North America, Latin America, Asia, Middle East, Africa and Europe. There are huge customers based, estimated 900 customers. http://topglove.asiaep.com/about.htm

High quality products and international accreditations

Top Glove has gains its worldwide accreditations such as US FDA, ISO 9001, US ADA and various European standards and Germany’s TUV through its high quality products which are disposable after use. The reputation of Top Glove has been strengthening by those accreditations. This has helped the company in winning new customers. http://file.lcmart.com/industry/topglove20040910.pdf

Strong technical expertise and ability to adapt to meet market requirements

The expertise of the Top Glove in upgrading the production lines has improvement in plant efficiency while enable to help company to save the maintenance costs and time. Besides, Top Glove managed to manufacture new gloves to meet customer’s needs through their researches and developments.

http://file.lcmart.com/industry/topglove20040910.pdf

WEAKNESS

Currency exposure

Costs of productions are in MYR while the sales transactions are carried out in USD. The USD is depreciating recently. On 5 October 2009, 1 USD is equal to 3.4746 MYR. On 5 October 2010, 1 USD is equal to 3.1101 MYR. The appreciating of MYR against USD had lead to the fall in Top Glove’s profit as the cost of production is higher while the return (sales price) is lower.

http://usd.cer24.com/myr/history/?q=365

OPPORTUNITIES

The spread of diseases lead to increase in hygiene awareness

Gloves have become necessity in health care and medical industries recently. The awareness of health care and hygiene among people has been increased today as the spreads of H1N1 flu outbreak, bird flu, SARS and anthrax have make people more concern on hygiene. The growth of global demand for gloves is estimated at about 8% to 10% after the health threat had been spread.

http://www.topglove.com.my/IR-statement.htm

Subsidies on natural gas by government has reduce the cost of production

Natural gas is partly subsidised in Malaysia which help Top Glove benefit from obtaining lower heat and energy costs than other regional players. (Tan Sri Lim Wee Chai, 2010)

http://www.topglove.com.my/news/2010/news_209.htm

Gain support by government agencies

Rubber Research Institute and The Malaysian Rubber Export Promotion Council help Top Glove in begin R&D efforts and promote the gloves produce by Top Glove to overseas.

http://www.topglove.com.my/news/2010/news_209.htm

THREATS

Increase in latex price

Latex is the main material in producing gloves. The price of one kilogram of latex is RM 7.75 in April 2010. The increase in the latex will raise the manufacture costs. However, most of the manufacture costs can be passed on to the customers.

Growth in the demand for gloves may threatened as the diminishing threat of the H1N1

The decrease in the spread of the H1N1 will slow down the growth in the demand for gloves. The demand for the gloves may “normalized” to the previous stage before the epidemic of H1N1, for a long period of time.

Future Prospect

Top Glove Corporation Berhad is estimated to achieve sustainable growth about 8% to 10% as there are high demand in rubber gloves since the spread of H1N1 influenza, SARS and bird flu. Besides, the demand is high due to the nature of the Top Glove’s gloves which are high-quality. In addition, hygiene awareness of industries such as food industries and services industries has lead to the increase in gloves’ demand too.

The decrease in spread of H1N1 had slow down the growth of gloves’ demand. However, rubber gloves market is a recession proof market as rubber gloves are basic necessities in the healthcare, food industries and services industry.

Top Glove is putting in more effort in increasing production capacity, making use of better marketing strategies, doing more improvement in quality of products, controlling the cost of production, and managing the company more efficiently in order to achieve better performance and growth.

To achieve their goals in obtaining more demand from customers globally, Top Glove has implemented two-prong growth strategies, which are vertical growth strategy and horizontal growth strategy. For vertical growth strategy, Top Glove will build more overseas marketing offices to get closer to their customers. While for the horizontal growth strategy, they will expand their product range for capturing bigger market share.

http://www.topglove.com.my/IR-statement.htm