University of Tenaga Nasional

Group Project

Responsive Model Analysis on Top Glove Berhad

For

Strategic Management MGTM633

Group Member:

1. Ho Jien Hau SB21041

2. Ahmad Alsaqr SB21579

3. Azadeh Taghizadeh Bidhendi SB21333

4. Putra Bala A/L Balasundram SP21013

Lecturer: Prof. Dr. Zainal Ariffin Ahmad

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No Table of content Page

1 Current Situation (Case Summary) 3

2 Corporate Governance 3-4

3 External Environment PESTLE

Industry Analysis

5-8

9-10

4 Internal Environment

SWOT Analysis & Financial Ratio

Name the Reasons for Weaknesses and Threats

TOWS

11-25

5 Analysis of Strategic Factors

O Organisational Diagnosis

19-24

6 Strategic Alternatives And Recommended Strategy 27-31

7 Implementation 32-33

8 Visualization of Implementation Plan 34

9 Evaluation and Control 35-38

10 Reference 39

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I. CURRRENT SITUATION (CASE SUMMARY)

R Read the case/Recognize the problems or prospects

Top Glove Berhad listed in the Malaysia share market emerges as the largest glove

manufacturer in the world. Tan Sri Lim Wee Chai as the founder of Top Glove is

managing the 26 factories of Top Glove, 498 production lines and a capacity of 43.9

billion gloves per annum. Looking at the financial ratio, Top Glove Liquidation ratio,

Net Profit Margin ratio, Return on Equity (ROE) and inventory turnover ratio have

been decreased. Although the percentage drop is small however the operating

environment for Top Glove is good, Top Glove shall perform better than the previous

financial year. A strategic analysis had been performed to scrutinize the entire Top

Glove to generate suitable strategies for better performance. Cost leadership strategy,

differentiation strategy, integration strategy and diversification strategy are

recommended to improve the operation of Top Glove Berhad. Balanced Score Card is

being implemented to monitor, evaluate and control the performance of Top Glove.

II. CORPORATE GOVERNANCE

BOARD OF DIRECTORS

Top Glove is led by experienced Board comprising members who are specialized in

the glove manufacturing and various business sectors supported by a wide range of

other professionals in the economics, engineering and accounting sectors.

The Board currently comprises eleven (11) members, made up of five (5) Executive

Directors including the Chairman and Managing Director and six (6) Independent

Non-Executive Directors. The roles of the Chairman and the Managing Director are

distinct and separate so as to ensure balance of power and authority. The composition

reflects a balance of Executive Directors and Non-Executive Directors such that no

individual or small group of individuals can dominate the Boards decision making.

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Table 1: Top Glove Board of Director Name list

No Name Title

1 Tan Sri Lim Wee Chai Chairman

2 Tan Sri Dato Seri Utama Arshad Bin Ayub Independent Non-Executive Director

3 Tan Sri Mohd Sidek Bin Haji Hassan Independent Non-Executive Director

4 Tan Sri Dato Dr. Lin See Yan Independent Non-Executive Director

5 Tan Sri Rainer Althoff Independent Non-Executive Director

6 Lee Kim Meow Managing Director

7 Puan Sri Tong Siew Bee Executive Director

8 Lim Hooi Sin Executive Director

9 Lim Cheong Guan Executive Director

10 Sekarajasekaran a/l Arasaratnam Independent Non-Executive Director

11 Lim Han Boon Independent Non-Executive Director

Tan Sri Lim Wee Chai

Chairman

Aged 55, a Malaysian citizen, was appointed as the Chairman of Top Glove

Corporation Bhd on 4 September 2000. He is also the founder of Top Glove Group of

Companies which was established in 1991 and was listed on Bursa Malaysia

Securities Berhad on 27 March 2001.

Tan Sri Lim Wee Chai is the spouse of Puan Sri Tong Siew Bee and the brother of Mr.

Lim Hooi Sin; both are the Directors and Substantial Shareholders of the Company.

He is also a Chairman to the Board of Trustee for Top Glove Foundation. He has no

conflict of interest with the Company and has not been convicted of any offences

within the past ten (10) years other than traffic offences, if any.

Tan Sri Lims business rules for the Company are:-

i) Do not lose our shareholders money;

ii) Do not lose our health;

iii) Do not lose our temper; and

iv) Do not lose our customers.

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Top Management

The top management of the company consists of the chairman, managing director and

executive directors in the board. Each of them is responsible for different department,

for example, Puan Sri Tong Siew Bee, she is responsible for the Information

Technology Department, Human Resource Department and the General

Administration for the Top Glove Group of Companies.

III. EXTERNAL ENVIRONMENT

E Environmental Analysis PESTLE Analysis

Politic

The general election for Malaysia was held on 5th May 2013. Barisan Nasional

(BN) is the government for Malaysia and continues ruling the country for the

next 5 year.

The opposition party had gained extra 4 seats from the previous election, and

it is continue to grow. However, there is little chance for the opposition to

conquer the federal government.

Penang, Selangor, Kelantan are under the Pakatan Rakyat (the opposition)

ruling.

The country risk is reduced as all the policies and government projects will be

preceded. The government is expected to continue its ongoing policies.

The government is trying to cut the subsidies for the petrol, diesel and energy

sector, price will be slowly increased for all the items.

Quota and protection of 30% shares for the listed company will be given to the

Bumiputra in Malaysia.

Small Medium Enterprise (SME) aid will be launched to provide soft loan,

incubate program, Business Accelerator Programme (BAP), SME Emergency

Fund, Branding to the SME.

1 Malaysia Transformation program was introduced by the Malaysia Prime

Minister to transform and help Malaysia to reach develop nation.

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Economy

Global economy

United State (USA) government has pursued to accommodate expansionary

monetary policy. In 2013, the Quantitative Easing policy has continued to

reach to 4th

time (QE4). The policy is creating more hot money flow into the

market, causing the global market economy to be blooming. Since interest rate

is low, more investments are foreseen to be embarked in the emerging market.

Malaysia economy

Malaysia economy has registered a 5.1% of real Gross Domestic Product

(GDP) growth according to the World Bank of report. It is expected to

continue its growth with 5.0% in 2013.

Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR)

at 3.00 percent. According to Bank Negara, the global growth momentum has

continued to be modest. In the Malaysian economy, domestic demand has

continued to provide support to growth while external sector are showing

sluggish performance. Investment activities and private consumption are

expected to attain sustainable growth.

Malaysia recorded a Government Debt to GDP of 53.10 percent of the

country's Gross Domestic Product in 2012.

Standard and Poor's (S&P) has downgraded Malaysia credit rating, rating

Malaysia A-, its fourth-lowest investment grade.

In the recently released Doing Business (DB) Report 2013 by the World Bank,

Malaysia improved its ranking to 12th position among 185 countries, moving

up six notches from 18th in 2012. Malaysia is ahead of Sweden (13th), Taiwan

(16th), Thailand (18th), Germany (20th), Saudi Arabia (22nd), Japan (24th)

and Switzerland (28th).

The toll charges are expected to hike for the major highways in January 2014

in the government exercises of reducing the subsidies. The transportation cost

will be increased to accommodate the price hike.

The latex price is continued to be in the down trend due to the soft economy

performance in the Europe and USA.

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The electricity tariff will be increased 15% by the government.

The minimum wage policy is implemented in January 2013 announced that

the minimum wage floor is RM900.

The employment rate in Malaysia is 3% in the year of 2012.

Energy alternative is available to use the biomass to obtain the energy instead

of the natural gas and distillate.

The Malaysian is now trapped in the medium income category.

Legal

As of 2012, the Malaysia Employee Provident Fund (EPF) required a

contribution of at least 11% of each member's monthly salary and storing it in

a savings account, while the member's employer is obligated to additionally

fund at least 12% of employee's salary to the savings at the same time (13% if

salary is below RM5,000). An increased of 1% for the contributor whose

salary is below RM5,000.00

Goods and Service Tax (GST) will be implemented in this country in April

2015 by the government.

Young person under the age of 16 is prohibited to work in factory according to

Children And Young Persons (Employment) Act 1966.

Patent law is enacted in Malaysia in protecting the new technology being

invented.

Social

Health-care workers and others were increasingly using the gloves to protect

themselves against the virus and other infectious diseases.

The demand for gloves increase due to frequent flu outbreak.

The population growth rate of Malaysia is expected to reach 1.51% in 2013.

Malaysia population has reached to 28 millions in year of 2010.

The composition of the races in Malaysia are Malay 50.4%, Chinese 23.7%,

indigenous 11%, Indian 7.1%, others 7.8%.

Malaysia government doesnt enforce the immigration law strictly resulted in

the millions of unskilled foreigners to work in Malaysia covering various

sectors.

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The education from primary and secondary is free provided to all the Malaysia

citizens. Highly skilled workers and tertiary educated graduates from various

industries are widely available.

New regulation for the private sector from the Minister of Human Resource

stated the increment of the retirement age from 55 years old to 60 years old.

The unionization of the Malaysia workers is generally soft and weak in

organization.

Technology

Kossan glove maker is able to produce the CheMaz-7th Sense glove, which is

a chemical allergy-free glove targeting the healthcare sector, who only

produce normal nitrile gloves.

Hartalega glove manufacturer is engaging the technology of automated

computerization which in turn brings down the production flaw rate further.

SAP (System, Application and Product) enterprise management software is

implemented in Top Glove to smoothen and efficiently manage the production

line.

Research and Development (R&D) centre is setup in every glove manufacturer

to produce specific types of gloves to meet the requirement of the customer

globally.

Telecommunication infrastructures are fully developed and internet with high

speed connection is widely available.

Environment

The Environmental Quality Act 1974 requires that the industries to monitor

the gas emission from the chimney.

All the discharge of the industries shall comply with the effluent regulation.

The chlorinated factory shall ensure that the chlorine vapor to discharge to the

scrubber for neutralization.

The dust release from the chimney shall be monitored as required by the

Department of Environment (DOE).

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B. Task (Industry) - Overall

Stage of Development

Top Glove was found in 1991, and it is now become the world largest glove

manufacturer. It has a shareholder fund of RM1.3 billion or USD401.2 million with

an annual turnover of about RM2.31 billion or USD713 million as at financial year

ended 31 August 2013. It has a market capitalization of RM3.61 billion as at 3

December 2013. Top Glove currently is now at the maturity stage of the company.

The company is performing diversification and growth strategy seeking to add more

value to the company.

Threat of New Entrants

The threat of new entrants to the glove manufacture industry is low. This is because

the new entrants have to reach a large economical scale in order to achieve the

required cost effective product. Currently all the glove manufacturer is producing the

glove at very big scale. For instance, Top Glove has 26 factories, 498 production lines

and a capacity of 43.9 billion gloves per annum.

Moreover, the new entrant has to invest heavily into the technologies and physical

hardware which impose a barrier to the new entrants. Since the technology of the

glove manufacturing is changing rapidly, this posses a steep learning curve for the

new entry. This would be a cost disadvantage for the new entrants. The new entrant

also has to build up reputation to increase the brand awareness of the customer.

Bargaining Power Buyers

The bargaining power of the buyers is low as Top Glove is producing in a large scale.

Only customer with large buying quantity could negotiate the price with Top Glove.

Small amount with less than 1 million quantities will have to follow the stipulated

price. In addition, the special Nitrile glove that Top Glove producing is not

substitutable. Therefore, the buyers have less power the bargain.

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Threat of Substitutes

The latex gloves and Nitrile gloves are easily being substituted. It is a close substitute

as the customer can easily switch to another brand of glove with similar function. The

industry-level price elasticity for the glove market is large; the rising of the industry

prices will tend to drive Top Glove consumers to purchase substitutes products.

Bargaining Power Supplier

The bargaining power for the supplier to Top Glove is low as they are price taker.

They couldnt perform price discrimination. Top Glove usually order in a large

quantity which is more favorite to the supplier. A larger quantity usually will come

with lower price. Although the profit for the large quantity is lower than the small

quantity, the large quantity could actually cover back the eroded profit margin.

Besides, Top Glove has the ability to plant its own latex. If the suppliers are offering

higher price, Top Glove could have its own latex supply.

Rivalry

There are a few major players in the glove manufacturing industry which are the

Hartalega, Kossan, Supermax and Adventa. Most of them are public listed in the share

market. The technologies that they are using for the glove production is similar. The

industry is highly competitive as the public listed companies are looking for sales

increment every year. All the public listed companies are expanding their market over

the globe. They are competing not only in Malaysia.

Table 1

Porters Five Forces Analysis of the Top Glove Berhad

No Force Threat to Profits

1 Rivalry High

2 Entry Low

3 Substitutes High

4 Buyer Power Low

5 Supplier Power Low

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IV. INTERNAL ENVIRONMENT

S SWOT Analysis

N Name the reasons for Weaknesses and Threats

Strength

1. World's largest rubber glove manufacturer

Top Glove has now emerged as the world's largest rubber glove manufacturer. It has

26 factories, 498 production lines and a capacity of 43.9 billion gloves per annum.

2. Low Production Cost

Top Glove has a lower cost structure comparing to its peers due to its advanced

engineered production lines and less expenditure on advertising and promotional

activities. 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 mentioned in a statement, 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.

3. Wide product range

Top Glove has a comprehensive product range with 13 major types of rubber gloves.

80% of production for health care sector and 20% for non-health care sector. Produce

69% natural rubber glove and 31% synthetic rubber glove.

Top Glove Products covers Latex Gloves, Nitrile Gloves, Vinyl Gloves, Surgical

Gloves, Household Gloves, Clean room Gloves, Cast Polyethylene (CPE) Gloves,

Polyethylene (PE) Gloves, Polyethylene (PE) Apron, Industrial/ Long Length High

Risk Gloves.

4. Geographically diversified

Top Glove has a global market share exporting its products to 195 countries with

more than 2,000 customers. It is geographically diversified and no single biggest

customer constitutes more than 4% of revenue. Customers are mainly distributors in

the respective countries.

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5. Strong technical expertise and ability to adapt

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 customers needs

through their researches and developments (R&D).

Weakness

1. Raw material price fluctuation

The latex price is fluctuating due to weather impact, crude oil price movement,

speculation, competition with other usage. The increase in the price could not post to

the customer immediately. There is a time lag in passing on to customers when prices

move up sharply.

2. No long-term contracts.

There are no long-term contracts and orders are dependent on regular customers

which has relationship ranging from 1 year to over 10 years.

3. High investment in technology

Top Glove needs to invest heavily in buying the modern machineries and need to hire

more experienced personnel in their production process. The machineries that bought

were extremely expensive. Thus, the maintenance of the machineries is expensive and

if there had any minor or major accessories spoiled; it will be costly to the company to

repair it back.

4. Lack of brand portfolio.

Top Glove has only three brand names, i.e. Top Glove, TG Medical and Great

Glove which accounts for 30% of its production. It may need to invest in a brand-

building exercise when the industry reaches a point of saturation in order to defend its

market share.

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5. Currency exposure

The majority sales of Top Glove are in USD, subject to USD currency movement.

Costs of productions are in Malaysia Ringgit (MYR) while the sales transactions are

carried out in USD. The appreciating of MYR against USD had lead to the fall in Top

Gloves profit as the cost of production is higher while the return (sales price) is lower.

Opportunities

1. Demand for gloves increases

The average global demand growth for the glove is 8% to 10% per annum. Medical

gloves are a necessity in healthcare industry as a barrier of protection. There is an

increasing healthcare and hygiene awareness especially in developing countries.

In some country, the ageing population such as elderly is more susceptible to a higher

risk of diseases. Besides, outbreak of emergency of health threats is frequent such as

A (H1N1), SARS, bird flu, and Bioterrorism threats.

2. Low land acquisition cost

The plantation land located in the Indonesia which is suitable for the latex plantation

is cheap compare to the acquitting cost in Malaysia. Indonesia is a developing country

with vast of land that has not being exploited. There is an opportunity for Top Glove

to backward integrate to own the natural raw material. This could help Top Glove to

have more bargaining power to its suppliers in dealing with the raw material

requisition.

3. Support by government

Rubber Research Institute and The Malaysian Rubber Export Promotion Council help

Top Glove in begin with R&D efforts and promote the gloves produce by Top Glove

to overseas. In addition, the government set up the Human Resource Development

Fund (HRDF) to encourage and push the human resource development. Subsidies are

given out to reduce the cost of the training.

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4. Reduction in latex price

Latex is the main material in producing gloves. The price of one kilogram of latex is

RM 2.30 in December 2013 compare to RM5.10/kg 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 but with a time lag.

Threats

1. High competition many players

For rubber gloves, Top Glove and Hartalega are the major two players in the industry.

It used to be Top Glove only being the largest producer by quite a fair bit while the

other players like Supermax, Kossan and Latexx Partners are smaller competitors.

However, recently another player has become larger in the context of market

capitalization and started to gain much followings which is Hartalega. Top Glove is

the largest natural rubber gloves maker globally while Hartalega is the largest

producer of nitrile gloves.

2. Increase of energy price

Government is looking for a rollback in gas subsidies, which account for 7-10% of

total production costs. This would increase the glove manufacturers cost base. Top

Glove estimates that every 5% increase in natural gas tariff would lower the net profit

forecasts by up to 3% (assuming no change in selling prices). Besides, the electricity

tariff is being revised and new tariff with higher price will be imposed to the nation

effective on 1st of January 2014.

3. Implementation of a minimum wage policy

On average, Top Glove staff costs account for 7-9% of total production costs, with

unskilled labor accounting for 45-50% of the workforce. Assuming zero cost pass-

through and a minimum wage of RM800-900/month, Top Glove estimates that

bottom line could be impacted by 10%. Furthermore, the higher staff costs will be

partially passed through via higher selling price, given that the minimum wage policy

would apply to the whole industry.

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4. Higher Tax Cost (GST)

Government is going to implement a new tax structure which is Good Service Tax to

all the industry. It is estimated that the cost of the production will be higher due to an

increase in the tax. Administrative cost will be increased to execute the new tax

structure. All the accounting software will be needed to upgrade to adapt with the new

GST policy.

Financial Ratio

Figure 1: Earning per share for Top Glove

The earning per share for Top Glove is maintaining at RM0.32/share for the financial

year of 2013. The earning per share is lower compare to the year 2012 which is 1 sen

lower. The earning per share is positive. The company might consider increasing the

sales volume in order to increase the earning per share.

0.18

0.33 0.32

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

2011 2012 2013

Earning Per Share

EPS

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Figure 2: Earning per share for Top Glove

Figure 2 shows that the liquidation ratio for Top Glove. The ability for Top Glove to

pay the short term debt is reduced from 3.0 year 2012 to 2.0 in the year of 2013.

Although the ratio has decreased, it is still above 1.0 which means that the company is

able to settle its short term debt without any concern.

Figure 3: Inventory turnover for Top Glove

Figure 3 shows that the inventory turnover for Top Glove is reduced from 10.8 in year

2012 to 8.9 in year 2013. This has shows that the stock in Top Glove is slower to sell

out compare to the previous year. This might be due to the lack of advertising or high

3.1 3.0

2.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2011 2012 2013

Liquidation ratio

Liquidation ratio

10.4 10.8

8.9

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2011 2012 2013

Inventory turnover

Inventory turnover

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competition in the market. Top Glove could engage marketing services to increase the

sales of the company.

Figure 4: Net Profit Margin for Top Glove

Figure 4 shows the net profit margin for Top Glove. It is recorded that the net profit

margin for Top Glove is reduced from 9.0 in year 2012 to 8.8 in year 2013. This

implies that the operation efficiency for Top Glove has reduced. Top Glove would

need to look at the production cost and efficiency to point out the weaknesses that

contributed to the reduced in the operational efficiency.

5.6

9.0 8.8

0.0

2.0

4.0

6.0

8.0

10.0

2011 2012 2013

Net Profit Margin

Net Profit Margin

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Figure 5: Return on Equity for Top Glove

Figure 5 shows the Return on Equity for Top Glove has reduced from year 2012

which is 16.2 to 14.9 in the year of 2013. This shows that the amount of Top Glove

invested generate less return than the previous year. This might shows a decrease in

the profit or the cost of the material has increased. However, a 14.9 percent in the

return on equity is good in the industry. It is a healthy sign for the company.

10

16.2 14.9

0

5

10

15

20

2011 2012 2013

Return on Equity

Return on Equity

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V. ANALYSIS OF STRATEGIC FACTORS

O Organisational Diagnosis

Insights of Top Gloves Growth Strategy

From operating in just one rented factory in 1991, Top Glove has grown

tremendously, having twenty factories, of which fourteen are in Malaysia, two are in

China, two glove manufacturing factories, and two latex concentrate factories in

Thailand. Majority of the factories in Malaysia are in Klang except one in Ipoh and

another in Banting. Through the years, Top Glove has become and remained a top

player in the rubber glove industries via expansions and strategic international

alliances. Over the years, through continuous improvements and innovations, Top

Glove is able to meet consistently the higher healthcare and safety demands with its

top quality gloves at efficient low costs. Their focus on R&D is also to meet the

customers growing demands as customer satisfaction is their main aim. Due to that,

they can become the largest rubber gloves supplier and sustain their survival in the

market of 90 suppliers from 200 plus suppliers in the whole of Malaysia.

Top Gloves products are accredited with the ISO 13 485, MS ISO 9001:2000

and SIRIM ISO 9002 standards coupled with other international quality accreditations,

such as the CE Mark of Europe, the SMG (Standard Malaysian Glove) of Malaysia,

the TUV of Germany, the NF Mark of France, the TSE of Turkey, the ADA of USA

and the necessary 510k from the Food and Drug Administration (FDA) to market its

gloves to the USA. Top Glove also has the CGSB of Canada and TGA of Australia

accreditations for export to these countries.

The structure

There are more than ten departments in Top Glove namely, the Human

Resource, Production, QA, Warehouse, Accounts, Lab, Packing, Documentation,

Marketing, Purchasing Department and R&D.

Since last year, Top Glove is aggressive in recruiting fresh graduates with

good results to work in the company. This year, they are targeting another 200 fresh

graduates from all fields, ranging from engineers to scientists and accountants. The

company employs fresh graduates from the engineering and mechanical fields with

good technical skills to come up with new ideas in respect of upgrading, improvement

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and automation of the production line. The new chemists to do new compounding

formulation that produce quality gloves with efficient low cost.

The Accounting and Finance Function

The accounting and finance function in Top Glove Group is well established

with one finance executive director, one financial controller and few accountants.

They have a finance manager in one of the subsidiaries, Medi-Flex Limited, which is

listed in Singapore and operating their factory in Banting. In Thailand, each factory

will also have one finance manager who does accounting functions.

The executive director is responsible for the overall function of finance and

accounts department including investor relations and treasury as well as handling the

corporate exercise of the Group. Thus, he is in charge of risk management, hedging

and managing the foreign exchange losses.

Mr. Jeremy Liew, an accounts graduate from USA, is the financial controller

of Top Glove. He is responsible for the operation, i.e., the financial of the company,

the products costing and liaises with auditors and lawyer.

Each of the accountants is responsible for overseeing a few factories. Each

factory will have its own accounts departments that report to the accountant in charge.

The accountant will in turn report to Mr. Jeremy Liew who will go down to see the

accounts staff to understand the problems better. The accountant will consolidate the

individual factory accounts and reviewed by the Executive Director and Mr. Jeremy

Liew.

Mr. Liew also does the product costing for the Group. Every week, a standard

costing report is done based on that weeks latex price. In addition special costing will

be done based on the customer specification upon request by the Marketers.

With a number of accountants in the accounting and finance department, most

of the financial management and accounting functions are done in-house including

those related to financial statement compliance, budgeting, forecasting, customer

profitability analysis, financial planning, product costing and performance

management. IT consulting advisory is also done internally because they have an IT

department to handle the accounting ERP System. HR consulting and secretary are

also done in-house. All those departments mentioned above are not under Mr. Liews

department but he needs to liaise with them.

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Top Glove used the services of independent internal auditors responsible for

internal control and risk management. Besides internal auditors, the company has a

tax department responsible for tax compliance, tax planning and tax incentive

application. The tax department has to liaise with government bodies, interpret new

tax laws, check into the accounts with regards to what is allowed and disallowed, and

have the schedule tied back with what they want at the year end.

Factors for Success

Top Gloves successful growth is mainly contributed by various factors. One

of the external factors is the ongoing demand for glove by the healthcare and other

industries Healthcare standards and best practices have improved creating even higher

demand for better hygiene, cleanliness and more advanced safety requirements. The

high demand from the traditional medical markets driven by strict regulatory

standards, aging population and emergence of health threats like A (H1N1) influenza,

SARS, bird flu and others resulted in Top Glove achieving increasing growth rate

annually to meet global demand. For example, their ended 2009 financial year with a

tremendous demand for gloves due to the emergence of A (H1N1) influenza. In

addition, the emphasis on hygiene by non-medical sectors especially within the food

and services industries has increased the use of gloves and increased the demand for

Top Gloves products.

Since the company is operating in a fairly recession proof market because their

products are necessities, particularly in the healthcare and food services industry, their

products demand is anticipated to stay resilient despite slowdown in major consuming

economies. Even when the prices of raw materials increased, the demand for gloves is

still there. The outbreak of new diseases, sales tends to exceed greatly than what have

been forecasted. Last year due to H1N1, the companys sales actually grew

tremendously and they managed to record a higher profit than anticipated.

Top Gloves success was also due to innovation in its products. For example,

they have been successful in producing quality gloves at efficient low cost. Top Glove

is the pioneer glove producer to reduce the weight of its gloves. As a result, Top

Glove can now offer their customers a wider choice of either thick gloves or thinner

gloves depending on the customer requirement. Top Glove also produced flavoured

glove such as mint flavoured gloves that has mint smell from the gloves will make the

end customers, such as the dentists patients; feel good instead of smelling the latex.

Page | 22

The success of Top Glove was also due to their effort of conducting regular

internal and external training for their staff to keep them abreast of the latest

innovations, technologies and processes in the industry. Top Glove recognises

employees as its greatest assets and rewarded them accordingly. As such, the

company organised regular recreational activities to foster strong teamwork among

the staff. Employees health considers an important aspect and the company do not

recruit smokers. Therefore, KPI is linked to their body mass index (BMI) to ensure

the employees will take care about their health. They always encouraged their staff to

join the fitness club and where the company will subsidize 50% of the fees. On top of

subsidizing fitness training for the staff, the company will encourage staff to read

books on healthy living and on management skills. Professional development of the

key management staff is inculcated by ensuring them to read the two books, relating

to health and management every month.

Their constant progressive drive for R&D into product and marketing,

capturing good students, improving products quality, productivity and cost

management to compete with the world market also contributes to their success.

Pricing to customer is based on the latest latex price so when the latex is high, the

glove selling price will be higher and vice versa. Thus price fluctuations, the company

will not be affected as they can pass the increase in the latex price to the customers.

Furthermore, their highly efficient energy cost saving measures such as implementing

biomass facilities in their factories in Malaysia, Thailand and their new factories also

help strengthen the companys competitiveness.

In order to achieve a competitive position as a world class cost efficient rubber

glove manufacturer, Top Glove invests in modern and advanced glove manufacturing

machineries that can produce good quality gloves. These advance machineries are

manned by competent personnel and regularly checked and maintained by qualified

experts to ensure the smooth running in production and ensuring the consistency in

the glove quality. On-line quality control measures have been instituted throughout

the manufacturing processes to ensure the highest quality products. Stringent quality

control procedures in line with ISO 9001 and in strict compliance with ASTM and

EN455 Standards are also practiced in Top Glove to ensure product quality. Adhering

strictly to good manufacturing practices (GMP) and Total Quality Management (TQM)

concept, each stage of the entire manufacturing process, from the receiving of the raw

materials, production process, and product quality control, pre-shipment quality

Page | 23

inspection until the loading of the finished goods into the container is carefully

monitored.

Moreover, Top Glove also collaborates with the Rubber Institute to be ahead

in the development of rubber research technology. The collaboration was for R&D

purposes. Both parties conduct a lot of studies, and cooperate in R&D to come up

with new and keep each other updated on the latest development. Top Glove does

most of the R&D themselves because it is more glove-related. For the R&D activities,

they have actually allocated a budget of about 1% of their annual turnover.

Through R&D, regular testing of the products in the manufacturing process

and maintaining the strictest quality control, Top Glove guarantees product

satisfaction and consistent quality at all times. In addition, the company is also re-

engineering their manufacturing processes to capitalize on economies of scale.

Top Glove also carries out continuous effort of aggressive marketing strategies

including participating in various exhibitions and trade shows worldwide. They have a

team of marketers to liaise with the customer and to get their feedback.

Living up to one of the companys key taglines like, The World is Our

Market, they work for their customers and their customers always come first. Top

Gloves friendly and customer oriented marketing team is well equipped to respond to

its customer at the fastest turnaround time. The company will participate in many

trade shows so that they attend to their customers enquiries. They listen to the

customers complaints and suggestions and continue improve from there. Every year,

Top Glove attends Medica Fair for the existing customers to visit them and for new

customers to make enquiries.

In addition to all of the above, Top Gloves success factor is also due to them

adopting a two-prong growth strategy. The two-prong growth strategy consists of the

vertical growth strategy which moves downstream to get closer to their customers via

setting up of more overseas marketing offices and the horizontal growth strategy in

product range expansion by increasing their sales in value added products such as the

enhanced and much improved version of powder free latex examination, soft nitrile,

vinyl, clean room and surgical gloves to capture a bigger market share.

The companys manufacturing presence in China also enables them to tap into

opportunities that synergize with their distribution channel. Furthermore, in order for

the latex supply to be consistent, Top Glove is controlling it by setting up two latex

concentrated plants in Thailand to supply the latex to their factories in Klang. Overall,

Page | 24

the ability of Top Glove to grow from strength to strength over the years has mainly

been attributed by various internal and external factors.

Challenges and Future Plan

The company faces several challenges ahead in the quest to maintain their

position. The first and foremost relates to the supply of latex in Malaysia due to the

conversion of rubber plantations to palm plantations. As such, Top Glove has set up

two latex concentrate plants in Thailand ensuring the availability and consistent

supply of latex to Klang factories. To further secure the supply of raw materials, the

company is aggressively looking for rubber plantations in Malaysia and abroad.

Beside the security of supply of latex, another challenge for Top Glove is the

fluctuation of latex prices, i.e., the main raw material. As the latex prices are volatile

due to weather impact and speculation, the company has to closely monitor the prices

as well as the foreign exchange rate as 96% of their gloves produced are sold overseas

in USD. Whenever the Ringgit Malaysia gets stronger, there will be some forex losses.

Top Glove is also looking into biomass energy because of the limited natural gas

supplied and again the government will be withdrawing the subsidies for natural gas.

In order to overcome that challenge, Top Glove has turned to biomass energy for new

factories. Besides, their Ipoh factory and Thailand factories are also using biomass.

By using biomass energy, they can apply for carbon credit. Top Glove is expecting

the gloves demand to continue to pick up momentum. Therefore, they are all set and

well positioned to continue with their successful strategy of being the worlds largest

preferred OEM gloves manufacturer through further expansions in their production

capacity to derive better economics of scale for the benefits of their customers

worldwide. As mentioned, the company target of gaining 30% worldwide market

share by 2012. To cater for the increase in sales, the company managed their

production schedule by having ample capacity to cater. Every year, they set up two

new factories. So there is some slack as the plants are also running at 80%. They will

power ahead to maintain their vision of being the worlds No.1 rubber gloves

manufacturer with Excellent quality glove products and services that enriched and

protect human lives.

Page | 25

TOWS Strength

S1 World's largest rubber glove manufacturer

S2 Low production cost

S3 Wide product range

S4 Geographically diversified

S5 Strong technical expertise and ability to adapt

S6 High cash on hand

Weakness

W1 Raw material price fluctuation

W2 No long-term contracts

W3 High investment in technology

W4 Lack of brand portfolio

W5 Currency exposure

Opportunities

O1 Demand for gloves increases

O2 Low land acquisition cost

O3 Support from government

O4 Reduction in latex price

Top Glove can set the price in the market that has more competitive advantage to itself and lead the market. (S1,O1)

Top Glove could negotiate with the bank to get the cheapest interest rate. (S1, O2)

Top Glove could influence and advise the government in the subsidies and support from the government so that maximum

advantages could be obtained. (S1,O3)

Top Glove could expand its production line for the lower latex price. Besides, it can produce more during the low price of raw

material and keep stock. (S1,O4)

Top Glove could lower the price of the gloves it is selling to draw customer from the competitors. (S2,O1)

Top Glove could obtain the grants from the government to lower the production cost, for example, applying HRDF grant for

training the company employees. (S2,O3)

Top Glove could invent special glove to cater the need of specific group. This could avoid Top Glove to compete with the other

competitors. (S3, O1)

Top Glove could engage with the government university for the research and development of the new product. Top Glove might

obtain tax reduction in sponsoring the researchers in their

research. (S3, O3)

Top Glove could expand its sales office to capture the increase of the gloves market. For example, set up a sales office where the

health care industry is starting to bloom. (S4,O1)

Top Glove could invent special types of gloves to cater the market need. (S5,O1)

Top Glove could increase the capacity of the production line to adapt on the growth of the gloves demand. The overhead for the

largest glove manufacturer will decrease. (S6, O1)

Top Glove could engage itself in the corporate social

Top Glove could lock in the price for raw material when the price is low. (W1,O1)

Top Glove could buy land to plant its raw material which is latex to eliminate the risk of price fluctuation. (W1,

O2)

Top Glove could pursue government in tax exemption for imported raw material. (W1, O3)

Top Glove could sign low term contract with supplier with the fix material price. (W1, O4)

Top Glove could offer the customer to sign with a long term contracts with an attractive price to lock in the

demand. (W2, O1)

Top Glove could work with the government to supply glove to government hospitals. (W2, O3)

Top Glove could pursue the customers with lower price and discounts to capture the market share. Once the

contract is signed the competitors are losing the customer.

(W2, O4)

Top Glove could re-design the production techniques to maximize the production of gloves. (W3, O1)

Top Glove could diversify its business into other industry that rely less on technology, for example, real property

industry. (W3, O2)

Top Glove could obtain duty import tax exemption from the government to reduce the high cost of the technology.

(W3, O3)

Top Glove could invent a cheaper way to produce gloves. (W3, O4)

Top Glove could hire brand image services to rebrand the product of Top Glove. (W1, O1)

Top Glove could obtain grant from the government to

Page | 26

responsibility to increase the image of the company. (S6, O3)

Top Glove could announce dividend of shares to attract more investors to buy its shares. (S6, O4)

send employee for the training of the employee on the

brand management. (W4, O3)

Threats

T1 High competition

T2 Increase of energy price

T3 Minimum wage policy

T4 Higher tax cost (GST)

Top Glove can use its market position to initiate price war to eliminate the other players. (S1,T1)

Top Glove can set up an energy efficiency management committee to monitor the energy usage. (S1,T2)

Top Glove could reduce the manual labour to automatic control of the production line. (S1, T3)

Top Glove can increase the production output to reduce the overhead cost. (S1, T4)

Top Glove could set up a purchasing committee to scrutinize the purchasing requisition to make sure that the company is choosing

the supplier with the best quality but the cheapest price. (S2, T4)

Top Glove could increase the product range to diversify the risk of depending on the energy price. (S3, T2)

Top Glove could set up new sales channel to increase the sales to reduce the impact of the increase of energy price. (S4, T2)

Top Glove could set up new factory at different locations to mitigate the risk of change in government policies and country

risk. (S4,T3)

Top Glove could set up new production line at different place where the taxation is favourable in low production cost. (S4,T4)

Top Glove could invent new gloves to differentiate itself with the other competitor. (S5, T1)

Top Glove could examine the techniques of the production of glove to less consuming the energy. (S5, T2)

Top Glove could buy the other competitor company to reduce the competition. (S6,T1)

Top Glove could lock in the price of the energy by paying the energy cost with cash instead of credit to reduce the transaction

cost. (S6, T2)

Top Glove could build factory at different country where the labour cost is cheap. (S6, T3)

Top Glove could have its own raw material supply to maintain its cost. (W1, T1)

Top Glove could invent in new technology that using less material and energy. (W1, T2)

Top Glove could employ cheap foreign workers to reduce the cost. (W1,T3)

Top Glove could invest in the marketing team to look for long term customer. (W2, T1)

Top Glove could come out with new product that could diversify the risk of energy price hike. (W2, T2)

Top Glove could shift its production line in country where the labour cost is cheap. (W2, T3)

Top Glove could diversify its core business to other so that it is not dependent on the glove business. (W2, T4)

Top Glove could invest in other business to reduce the risk of glove manufacturing. (W3, T1)

Top Glove could venture into new business such as plantation to diversify the risk of the glove manufacturing

business. (W3, T2)

Top Glove could venture into other business to mitigate the risk of depending on high investment of technology.

(W3, T3)

Top Glove could spend its resources heavily in the branding exercise to differentiate itself with other

competitors and to keep its loyal customer. (W4, T1)

Top Glove could diversify its core business to less rely on the currency and focus on the local market. (W5, T1)

Top Glove could lock in the price of the currency to reduce the fluctuation of the currency. (W5, T2)

Integration Strategy Intensive Strategies Diversification Strategies Defensive Strategies Generic Strategies of

Porter Forward Integration

Backward

Horizontal

Market Penetration

Market Development

Product Development

Concentric

Diversification

Conglomerate

Diversification

Horizontal

Diversification

Joint

venture

Retrench

ment

Divest

ment

Liquida

tion

Differenti

ation

Cost

Leadership

Foc

us

Page | 27

VI. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY

Top Glove Vision

We strive to be the world's leading manufacturer with excellent quality glove products

and services that enrich and protect human lives.

Top Glove Corporate Mission

To be a world class glove manufacturer by providing top quality products with

excellent services through continuous improvement and innovation.

To produce consistently high quality gloves with efficient low cost.

To earn 2 healthy dollars and spend 1 efficient dollar.

Alternative strategies

Cost Leadership Strategy

Top Glove could engage into cost leadership strategy with the aim to have lower cost

than its competitor to draw the customers from the other competitors. With its largest

rubber glove manufacturer, top glove could use its market leader to set the price that

is more favourable to the operation of Top Glove. For example, Top Glove has the

advanced technology that can produce high quality of Nitrile glove; it can set the price

slightly lower than the other competitors to attract all the customers to purchase its

glove. The market share will be owned by Top Glove. With this strategy, Top Glove

could eliminate the other competitors by drawing the market from the competitors.

Top Glove could use its market power to negotiate with its suppliers to obtain the

lowest possible price. Moreover, Top Glove could negotiate with the bank to obtain

the cheapest interest rate with its current position in the market and assets in the share

market. These strategies will help Top Glove to lower down its production cost which

in turn increase the profit earned.

With the high cash in hand, Top Glove could lock in the price for the raw material

when the price strikes to the lowest region. This could help Top Glove to eliminate

the risk of fluctuation raw material price. Top Glove could have more control and

monitoring on its operation of gloves.

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Moreover, Top Glove could pursue the government in tax exemption for the imported

raw material so that it has more competitive advantages toward the global glove

manufacturers. Advanced technology might come along with the high duty import tax;

Top Glove could have a conversation with the government to reduce the duty import

which in turn reduces the overhead of the production cost.

For the high energy price and the reduction of the subsidies by the government on the

energy, Top Glove could set up an energy efficiency management committee to

monitor the energy usage. This could help Top Glove in fully utilise the energy which

it purchases. Waste energy could be utilised for the other purposes until the energy

could not contribute any more. In addition, Top Glove could engage its R&D team to

invent or re-examine the techniques of the production to use less energy. This strategy

will help Top Glove to save its cost in purchasing more unit of energy.

Due to the implementation of the minimum wages, Top Glove could shift its

production line from manual labour to automation control of the production. Legal

foreign workers might be employed to reduce the overhead cost of the factories.

Meanwhile, Top Glove could set up a purchasing audit committee to scrutinize the

purchasing requisition to make sure that the company is choosing the supplier with

the best quality but the cheapest price. Top Glove could inform the suppliers that they

would not want any gift in return but quality of products. This strategy could

guarantee that no flaw in the raw material requisition.

The risk of low cost leadership is that the competitors might imitate the strategy.

However, due to Top Glove the largest glove manufacturer, lower production cost and

high cash on hand; the competitor could not easily compete in term of cost. In order to

ensure that the strategy is on track, the company shall frequently monitor its

production cost and implement tight cost control. The product which is invented shall

be easily manufactured with the least input. Rewards could be distributed to the

production that could meet targeted quality production output.

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Differentiation Strategy

Top Glove could invent special glove to cater the need of specific customer. This

strategy could avoid Top Glove to compete with the other competitors. The profit for

this type of special glove usually is high. Top Glove could be monopoly in this special

glove.

Besides, Top Glove could hire brand image services to rebrand the product of Top

Glove. The branding could help the customers to differentiate the product so that

brand loyalty could be formed. The customer will buy only the Top Glove brand.

With this strategy, Top Glove could charge a higher price with the Top Glove brand

instead of compete intensively with the competitors.

Advertising could help Top Glove to build its brand. Top Glove could spend its

resources into advertising to teach and aware the customer on the products of Top

Glove. The customers will slowly recognize the brand and be stay with the brand.

Besides advertising, involving into the corporate social responsibility will help Top

Glove to build its brand in the local community. For example, Top Glove could offer

scholarship to the local community to help the community. This could help Top Glove

in maintaining a pool of skilled labour. The management could easily obtain human

resource with the support of the local community.

The risk of differentiation strategy is that the company shall monitor what make the

product special. The bases for differentiation could change over the time. Top Glove

shall certain that the bases of the specialty remain. Competitor imitation on the

strategy could occur, however, once the advertising and branding exercises have

created the brand loyalty, it would be difficult for the competitor to influence the

customer. Therefore, branding exercise shall commence in the shortest time.

In order the differentiation strategy comes to success, Top Glove shall invest heavily

in the Research and Development (R&D) team. Highly skilled labour and creative

minded are the utmost needed. Besides, the marketing team would be needed in doing

the rebranding.

Page | 30

Integration Strategy

Top Glove could perform integration strategy, for instance, backward integration.

This is because Top Glove relies heavily on the raw material of rubber and the rubber

price is fluctuated in a wide range. Hence, Top Glove could acquire land to plants its

rubber tree to produce latex on its own. This could help Top Glove minimize the risk

of price hike for latex. Moreover, Top Glove would have more power in negotiate

with its suppliers on the supply of latex when it has its own latex supply.

With horizontal integration, Top Glove could open subsidiary at other countries so

that the products could be offered and sold there. This strategy could help Top Glove

to mitigate the risk of changing in government policies and country risk.

Besides, Top Glove could acquire its competitor to eliminate the competition and

control the market. With less competition in the market, Top Glove could set the price

higher. Besides, technology of the competitors also could be utilised to invent new

glove.

The integration strategy could help Top Glove to grow into a larger group with more

products being sold to other countries. Top Glove would be more geographically

diversified.

Intensive Strategies

Top Glove could penetrate the market by spending its resources in the marketing

department. Top Glove could work with the government to supply glove to

government hospitals. Due to the rising of the health care industry, Top Glove could

capture the market by attracting the customers with lower price to sign a long term

contract with the customer. With the long term contract, Top Glove could manage its

production line more efficiently. Besides, Top Glove could set up new offices and

sales channel in different country to penetrate to the new market in the new country.

The marketing team could look forward for the long term customer. With this strategy,

Top Glove could get higher sales volume and the share price of Top Glove would

increase. Moreover, the production line would be 100% utilised with the stable

demand from the long term customers.

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Diversification Strategies

Conglomerate diversification could be the strategy for Top Glove. Top Glove could

venture into the business that rely less on investment of technology, for example, the

real property industry. The risk of the strategies is the uncertainty of the economy of

Malaysia. The high debt ratio in the country and family raise an increasing concern of

the Bank Negara Malaysia. The people are worrying on the burst of the property

bubbles. Although it would carry risk, however, with the high cash flow on hand, Top

Glove shall not only rely on the income from the glove manufacturing. Diversification

exercise will attract different type of investors to invest into Top Glove. With the

venture into new business, Top Glove could venture into the business that is less

dependent on the labour supply and the currency fluctuation. Even with the hike in

energy price, Top Glove profit could be maintained with this strategy.

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VII. IMPLEMENTATION- I Implementation of Strategies

The recommended strategies for Top Glove are cost leader strategy, differentiation

strategy, integration strategy, intensive strategy (marketing strategy) and

diversification strategy. Top Glove top management shall involve and lead the

program of the implementation of strategies by providing signed memo by the CEO

of the company to the employees informing the upcoming related strategy. Top

management of Top Glove shall disseminate the jobs to all the related departments

down to every Top Glove employee to execute the strategy. Each department will be

set targets to be achieved and to be reviewed by end of the year.

Cost Leader Strategy

For the cost leader strategy, the top management of Top Glove shall set the objectives

of the strategy to the department and matching the managers to the goals of the

strategy. For example, to lock in the price for the raw material when it is low, the

manager shall assign an employee to monitor the market of the raw material supply.

When the price hits the low price, the employee shall inform the management to make

decision.

For the purchasing audit committee, in order to run the committee effectively, the

management of Top Glove shall identify the ability and potential of each employee to

match with the job scope. The employee with high credibility, responsibility and

honest shall be selected for the purchasing audit committee. Training and personal

development shall be provided to the employee if the employee is lack of the

respective knowledge on the committee. If the human resource is insufficient, the

Human Resource manager shall hire the related skill employee to the company.

For the price setting of the products that Top Glove are selling, the marketing team

shall work closely with the product development team and the management in order

to set the price correctly to compete with the other players in the market. All the

market data, economy and current situation of the market shall be scrutinized by the

team before setting the price lower.

The production manager in each line of the production shall be assigned a targeted

sales and operation cost so that each manager is equipped with goals to fulfil.

Page | 33

Differentiation strategy

For differentiation strategy, Top management shall allocate sufficient budget for the

Research and Development (R&D) department in order for the team to develop and

invent new types of glove. Training, seminars and forums for the team to explore shall

be given as well. Top Glove could engage with the local and overseas universities to

do the research with the new glove development. Sponsorship or scholarship could be

given to the researchers in order to keep the pool of highly skilled workforce.

Besides, Top Glove could assign the marketing and public relation manager to look

for good brand image building services company to work on the rebranding exercises.

They could form a working committee mainly for the branding work. If the staffing in

Top Glove has the appropriate knowledge on the branding exercise, the management

could spend the resources and budget into the branding committee.

Integration strategy

Top Glove shall involve the senior management team to have responsible in the

integration exercises due to the experience of the senior management and the

knowledge. The senior management shall be assigned to set up new subsidiaries,

venturing to the supplier business and acquisition. The senior management shall lead

the workgroup to accomplish the task. Reward system shall be reviewed to make sure

that the hard work from the senior management team is compensated.

Intensive Strategies

The marketing department is responsible to the intensive strategy which they have to

study and penetrate the market globally. The quantity of the long term customers that

the marketing team could obtain would be set as one of the goal. Besides, commission

shall be given to the marketing team when they have found new customers. This is to

ensure that the marketing team is working hard on the goals.

Diversification Strategies

For the diversification strategies, Top Glove shall use its upper management level

team to taking care of the new venture in different industry. It could be achieved by

acquiring developed companies in the related field to expand the non-core business of

Top Glove.

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V Visualization of Implementation Plan

No Strategy Responsible Department

1 Cost Leader Strategy

-Purchasing audit committee

-Price setting

-Lower cost production

Top Management,

Purchasing,

Marketing,

Production

2. Differentiation Strategy

-New special glove

- Rebranding

Top Management,

R&D,

Public Relation, marketing

3. Integration Strategy

-Backward integration (acquire

supplier)

Top Management, senior management

4. Intensive Strategy

-penetrate the market share in the

global market

Top Management, marketing,

5. Diversification Top Management, upper management

Table 2: Visualization of Implementation Plan

Page | 35

VIII. EVALUATION AND CONTROL

E Evaluation and Control

In order to perform management on the operation of Top Glove, measurement has to

be undertaken. Figure 6 below shows that the general flow for the measurement

process which follow the plan-do-check-act. Since the Return on Equity (ROE), Net

Profit Margin, Inventory turnover, Earning per Share (EPS) and Liquidation ratio has

been decreasing from the year 2012 to 2013. The measurement value that to be set to

the top management might be the five ratios mentioned which are the ROE, Net Profit

Margin, Inventory turnover, EPS and Liquidation ratio. A balanced score card

approach could be used to monitor the performance of Top Glove top management.

The management will then disseminate the job tasks to the lower management and

finally to the every employees so that everyone in the company will be assigned tasks

to hit in meeting up the objectives of the company goals.

Figure 6: Measurement of the result of the performance of Top Glove.

Page | 36

OBJECTIVES & KEY PERFORMANCE INDICATOR (KPIs) FOR PERIOD FROM 1 JANUARY 2013 TO 31 DECEMBER 2014

Rating scale: Needs Improvement; Performance Improve; Meet Expectations; Exceed Expectations; Super Exceed Expectation. (Your rating will be: NI=1; PMI=2; ME=3; EE=4,SEE=5 )

KEY RESULTS AREA (KRA)

WEIGHT (%)

MEASUREMENT TARGET (KPIs) Comments / Examples / Rationale Manager's

Evaluation Rating

Total Rating Achievement Rating

FINANCIAL

ROE 25 16.3

Net Profit Margin 25 9.5

Earnings per share 20 0.35

Inventory turnover 20 11.0

Liquidation ratio 10 3.0

CUSTOMER

INTERNAL PROCESS

GROWTH

TOTAL 0

Table 3: Sample Balanced Score Card for Top Glove Top Management

Page | 37

Control

The behaviour control such as deploy working procedures and checklists to monitor

the operation of Top Glove could be set up. A good monitoring management control

would be implementing ISO standard to the company such as the ISO 9001 Quality

Management System, the ISO 14001 Environmental Management System (EMS) and

the ISO 50001:2011, Energy management systems Requirements with guidance for

use. The ISO 50001 is the new ISO standard which monitors the usage of the energy

and minimizes the wastage of energy. All the standards stated are to enable an

organization to follow a systematic approach in achieving continual improvement of

its operation and management.

ISO 9000 certification will increase Top Glove international competitiveness. It

stresses on the commitment of quality on the products and provide assurance to the

customer that the quality Top Glove could produce.

Meanwhile, ISO 14000 certification will improve environmental awareness among

employees, reduces risks of violating regulations, and improves the firms safety

standard so that zero accidents could be achieved and safe working environment could

be established.

Internal audit committee could be set up to scrutinize the Non Conformance (NC) of

the standards and to fix the problems in the process before it is getting worse. The

internal audit committee could be set up from different departments, which every

department is assigned to audit the other department to check the conformance of the

department to the predetermined standard. All the audit results will be discussed

during the management review for further improvement and arrangement.

Whistle-Blowing Policy

A whistle-blowing system could be developed to strengthens, supports good

management and at the same time demonstrates accountability and sound corporate

governance practices.

It would be a platform to act as a channel for the complaints and fraud to be reported.

Wrong doings and non compliance to any rules or procedures by the employee and

management of Top Glove would be voiced out. An Anti-Corruption and Whistle

Page | 38

Blowing Committee will be directly reported to the board of Top Glove. Any issues

raised by the whistle-blower will be investigated thoroughly.

Page | 39

References

Bibliography Kossan Industry. (2013). Recent Advances in the Malaysia's Glove Industry in Meeting

Today's healthcare Challenges. Malaysia: Kossan.

OSK. (2013). OSK Top Glove Investment Review 2013. Malaysia: OSk.

OSK. (2013). OSK Top Glove Market Highlight 2013. Malaysia: OSK.

TopGlove. (2009). Top Glove Annual Report 2009. Malaysia: Top Glove Berhad.

TopGlove. (2010). Top Glove Annual Report 2010. Malaysia: Top Glove Berhad.

TopGlove. (2011). Top Glove Annual Report 2011. Malaysia: Top Glove Berhad.

TopGlove. (2012). Top Glove Annual Report 2012. Malaysia: Top Glove Berhad.

TopGlove. (2013). Top Glove Annual Report 2013. Malaysia: Top Glove Berhad.