Top Glove Corporation Berhad Analysis

diadem baseb either mitt familiarity Berhad AnalysisGlobalization opens freshly opportunities to every one of us. At the corresponding time, it intensifies the ch eachenges before us. This report begins by introducing globularization and the rise of the trans raceal potbelly. Subsequently, it would establish the benefits and indentify the challenges that the selected ships accompany ( round top manus Corporation Ltd) encountered when doing credit line trans disciplinely. This multinational company is the worlds largest no-count baseball glove dor operates in three principal geographical beas of the world. It go away conclude by presenting a brief consideration for a multinational corporation in operating task abroad.A multinational corporation is refers to any business that has crossingive activities in two or more(prenominal) countries. Typically, a multinational corporation develops new products in its home unpolished and manufacturers them abroad. An world( prenominal) foxiness is refers to an exchange of adepts and services with foreign countries. The falling barriers to cross-border trade made it easier for todays pixilateds to sell planetaryly. Still, foreign direct cloakment (FDI) is when a firm making a physical investment funds into building a new factory to produce or grocery a product in an otherwise country.During the 1920s and 30s, various trade barriers raised by worlds nation government have contri besidesed to the Great Depression of the 1930s (Hill, 2009, p.11). However, the emergence of worldwide institutions such(prenominal)(prenominal) as GATT (General Agreement on Tariffs and Trade) and WTO (World Trade Organization) has successfully leaden the trade and investment barriers between countries and enabled more companies involved in world(prenominal) trade and investment.Besides, technological, grocery store, comprise and competitive factors had contributed to the growth of globalization. Many opportunities h ad produced in an world-wide business. A multinational company squirt expand its revenues by change products and services worldwide by producing in nations where key operation be such as beat back, ar cheap.As markets globalize, organizations increasingly engage in cross-broader trade and investments indicating that coach-and-fours need to recognize that the task of managing an international business is differs from that of managing a pu commit domestic business in many ways. In international settings, manager in a multinational company is confronted with a spue of issues that the manager in pure domestic business that would never confronts. Countries differences in political systems, economic systems, culture, legal systems pose a challenge to the manager because these differences require the manager to vary its practices country by country.Corporate indite vellicate boxing glove was established and founded by the husband and wife aggroup of Dr. Lim Wee Chai and Mrs. Ton g Siew Bee in year 1991. Dr. Lim Wee Chai was appointed as the professorship of Top glove Corporation Ltd on 4 September 2000 he has more than 20 years of devour in the rubber and latex paint manufacturing business. Co-founder Mrs. Tong Siew Bee was appointed as an Executive music director of Top baseball mitt on 4 September 2000, she has more than 10 years experience in the information technology field.The history of Top Glove stretches back 18 years when Dr. Lim brings a wealth of experience in the marketing of consumer products whilst he was the Sales Manager of a subsidiary company OYL Industries Ltd to set up Top Glove Pte Ltd in 1991. In spite of his first deliver glove manufacturing and trading business with totally three exertion lines, the manufacture has gone finished many changes in its corporate direction, the company survived through chaotic times during the Asian financial crisis in 1997 to 1998. The company was successfully listed in the Kuala Lumpur Stock E xchange in year 2001. In a short span of slimly more than a year, Top Glove Corporation Ltds listing has been successfully promoted from the Second get on with to the Main Board of the Kuala Lumpur Stock Exchange on May 16, 2002.Since its inception in Malaysia in 1991, Top Glove had evoked from 1 factory in 1991 with 3 production lines to 20 factories in 3 countries and expanded this business to be the worlds largest rubber glove manufacturer. There argon 14 factories in Malaysia, 2 factories in main(prenominal)land China, 2 glove manufacturing factories and 2 latex concentration plants in Thailand. With 379 glove production lines, Top Glove has a huge production capacity of over 33 billion pieces per annum.Today, Top Gloves customers consist of glove importers and distributors from all over the world, mainly from the U.S. and Europe. The company has comprehensive range of slip away quality products such as rubber-base paint enquiry Gloves(powdered and powder- degage), Latex E xamination Gloves(Powder free), Colored and Flavored (Mint)Gloves, Soft Nitrile Gloves, Surgical Gloves, Vinyl Gloves, Household Gloves, Polyethylene(PE) gloves, stretchable Vinyl Gloves, Clean room Gloves, and Polyethylene(PE) Aprons. These top quality products used in variety pains such as medical, food and services, dental, automotive, electronic and inquiry laboratory sectors.Top Glove has a market capitalization of RM3.7 billion as at 31 August 2010. The corporation sended a gross revenue revenue of RM2.08 billion in FYE2010, it was an increase of 36% from RM1.53 billion coating year while profit after tax of RM250 jillion rose 49% from RM168 million. (Top Glove, Annual Report 2010).The company continuous invests in RD and collaborates with safety Research Institute (RRI) and the Malaysian Rubber Board (MRB), Top Glove is at the forefront of new development in rubber research technology. The upgrading and collaborations of RD is to enable Top Glove to be a world househ old of cost effective producer with the around extensive range of pension quality glove products.BenefitsAs a result of the falling barriers to the free flows of goods and services, declining telecommunications and tape transport cost, the volume of cross broader trade and investment has been growing speedily indicating that there ar many companies go global. All these factors made it easier for companies to invest abroad and resulted the growth of multinational companies. This section is to elaborate possible benefits that Top Glove acquires while venturing abroad.Benefits of Globalize Production fit to Hill (2009, p.7), the globalization of production refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labor, energy, land and capital). By doing this, a multinational company would be able to pull down drink overall cost structure and improve the qualit y of its products offering.According to Mr. Lim Cheong Guan (Executive Director of Top Glove Corp), he said that foreign workers account for most 50 to 60 percent of the groups total workers. Although the cost of hiring foreign workers slightly racyer, it is non signifi enduret as it toilet be offset by improvement productivity through the huge base of workers (Top Glove, 2010). For example, when setting up plants abroad particularly in China, the large young and literate labor force available in China provides more choices for the company to erect the skilled labors that are inaccessible in Malaysia. Thus, with this characteristic, the production in China can be enlarged in a low cost manner.Furthermore, lower land science cost coupled with lower administrative cost grants Top Glove operate its business economically and preferred in the host country. On top of that, having factories in foreign market (e.g. Top Glove (Zhangjiagang) Co. Ltd in China and Great Glove (Thailand) Co., Ltd in Thailand) would enable the company to realize location economy because the high transportation costs can be forfended and it is more preferable for the company to riddle its products deep down the country besides than exportation.Expand Sales and IncomeGlobalization can provide Top Glove a new source of income. As a multinational corporation, apart from serving the local anaesthetic needs, the firm can in like manner enjoy the sales from the overseas business. For example, Top Glove has more than 900 customers and its products are exported to more than 180 countries. ground on the company website, most of its products cater for export market, sales revenue mainly from Europe 33%, North America 29%, Latin America 20% and tarry of the World 18%. Therefore, the overall business profit can be multiplied through the increasing revenues outside of the home country. multinational diversificationAs mentioned earlier, Top Gloves has a wide export markets. Thus, as the com pany diversifies its market, it becomes less vulnerable to the changes in local demand. In other words, it get around risk by avoiding having all eggs in a atomic make sense 53 basket. For instance, in the case of local market goes saturated or other factor such as interest rate raised by local government, when operating in such a huge market can insure Top Glove against such risks.According to Shapiro and gibibyte (2009, p.19-20), the foreign silver flows generally are not perfectly gibe with those of domestic investments, the greater riskiness of individual projects overseas can headspring be offset by beneficial portfolio effects. This has meant that a multinational company like Top Glove would be able to reduce taxes and avoid tight money control through foreign direct investment having relied on the existence of financial market imperfections. We have better profit, good cash flow and a very healthy balance poll said by Chairman Dr. Lim Wee Chai in an interview (Porter and Li, 2010). This also implies that the greater cash flow would enable the corporation to acquire possible business or to pay out dividends to its shareholders.Competitive AdvantagesWith regards to the glove industry manufacturers like Kossan Rubber Industries Berhad, Supermax Corporation Bhd, Hartalega Holdings Berhad are the major competitors in the local market. However, operate business globally can aid in minimizing such competitive risks. For example, when profits made by the export sales can be used to upgrade or strengthen the domestic business toward less vulnerable on local competition.ChallengesThis paper does not centralise solely on the benefits of doing international business but also addresses concerns nearly the challenges that Top Glove have experienced when venturing abroad. These challenges are olibanum discussed in depth in this section.Difficulty in internationalistic Management base on the company website, currently Top Glove has 20 factories in 3 geogr aphical areas include Malaysia, China and Thailand with a total human activity of 10, 900 employees. However, its size could also work against its favour as it is more onerous for the perplexity to keep a close eye on all its operations. Most importantly, the differences levels of economic development and legal system among countries complicated the staffing and wages activities.According to Lane (2009), most countries have an official language, a virtuoso basic legal system, a system of government, yet these practices and relationship are often different from those in the country next door. Country is thus a very important type of culture to account for an international business. For example, the journey in the ventured countries not smooth as Top Glove had to deal with different cultures and mindsets, particularly in China with its ever-changing policies.Latex Output and Price FluctuationsFor any manufacturers, piercing materials are the main concerned. Based on the annual r eport 2010, raw material like latex is the major costs components of glove products. They were concern over high raw material cost as the latex prices remained at a high of more than RM8 per kg. The crude oil price movement and speculation are the factors that make latex price fluctuate irregularly. Moreover, the output of latex whitethorn be shrunk due to weather impact. The varying on latex output may preserve the gloves production. Thus, latex price volatility will affect the corporations costs and margins, and there will be time lag on passing on the gloves to customers in different geographical areas when shortage of latex.CompetitorsAs mentioned earlier, Top Glove is facing several major local competitors within the glove industry. In global marketplace, the company is also facing with numerous global competitors such as Kimberly-Clark Corporation (U.S.), Ansell Ltd (Australia), Allfun Enterprise Co., Ltd. (China) and many others. These manufacturers are thus geared towards increasing capacity and offering gloves at the lower prices. Therefore, the domestic competition coupled with global competition result in difficulty in securing orders from overseas markets.Environmental IssuesAnother challenge is where all operation decisions have some kind of environmental impact. The addition of chemicals in latex compounding, discharge of residual latex containing toxic chemicals and disposal of spurned gloves i.e. not meeting product specifications are the headstream of generating waste materials. These waste materials resulted water pollution, health-related problems for workers and local community. The environmental issues not unaccompanied challenge the local operation, but also a tough issue when producing gloves in overseas such as in China and Thailand. As a result, the manufacturer is spirit ways in reducing and minimizing wastes.Currency ExposureTop gloves main income came from its export sales and all its exports are denominated in U.S. dollar. Th e reporting coin for the company is the Malaysian Ringgit (MYR). In fact, MYR was actually strengthening against the dollar throughout the year 2010. This may put the company in an unfavourable military post as the profits would be contracted when converted from U.S. dollar to RM. According to Top Gloves executive director Lim Cheong Guan, he said that the weakening US dollar hurt the company financial results the company has incurred forex losses totaling RM21 million in FY10 (Top Glove,2010). This is such a challenge to the corporation to grow at the rate they have been growing in past few years. Moreover, currency fluctuation can impact competitive positions, product prices, payable and receivable and ultimately the value of the firm itself.ConclusionDiscussion above has revealed that benefits and challenges are associated with doing business internationally. According to a research done by Foong (2010), Malaysia produces 65% of the worlds latex gloves. Top Glove is in the lead ing position in the industry with 23% global market share. This was the contributions from its wide range of product offering coupled with export markets. It also indicates that Top Gloves management police squad truly understands that most of the markets opportunities are outside of the home country, thus only doing business internationally can provide growth opportunities and allow firms to ask over essential sales and income.It can be seen that the firm mainly rely on exporting entry mode into foreign market although has few factories in overseas. Generally speaking, export may help the firm to experience economic of scale and avoid substantial costs of establishing manufacturing operations in the host country. By producing in a large volume and exporting to other national markets may enable the firm to realize substantial economies from its global sales volume. However, it is believed that its exporting has pitfall too. High transportation costs are associated when its produc ts are exported over a long distance such as Latin America, Europe, and Africa. Additionally, abrupt trade policy such as tariffs imposed by host government may prevent international trade which is very risky to the company as well. Managers within international business must develop strategies and policies for dealing with such interventions.As verbalize in the annual report, Top Glove has a great cash flow. Hence, it would be good for the company to make a merger and acquisition (MA) as it gives quick access to trained labor force, existing customers and an immediate source of revenue. This requires the international manager to conduct a detailed research otherwise a bad acquisition can be costly.In addition, it can be seen that Top Glove is confronting with quite a number of challenges. It is quite challenging when managing a large number of workforces. Managers in Top Glove have to decide how to staff key management post in the company, how to develop managers so that they are familiar with the subtle differences of when they are based in different countries, and how to compensate people as to fulfil highly skilled labors.After all, managing a global business is not that easy, it requires manager to see things globally, that is, see the bigger and broader picture by forever scanning the geographical horizon to learn more about say-so markets, competitors as well as technological changes. In a nutshell, a multinational company in complex international settings not only overcoming challenges but should always prepared for market opportunities.ReferencesFoong, M. (2010). Rubber gloves. Gloving the world. Deutsche bank global market research company. Retrieved Nov 25, 2010 from the World Wide Web http//www.google.com.my/url?sa=tsource=webcd=4ved=0CCwQFjADurl=http%3A%2F%2Fwww.supermax.com.my%2Fhtml%2Ffiledownload.aspx%3Ffile%3DDEUTSCHE%2520BANK%2520-20100510.PDFei=EvrxTOiPLIGwvgP5rtDJDQusg=AFQjCNGCxYKsiGoK8eHAsnwf5s0NYvRT2wHill, C. W. (2009). International business competing in the global marketplace (7th ed.). Boston McGraw-Hill/Irwin.Lane, Henry W.. International management behavior leading with a global mindset. 6th ed. Chichester, tungsten Sussex Wiley, 2009Porter, B. and Li, S. (2010). Top Glove Targets 40% Profit Distribution This Year (Update1). Bloomberg avocation Week. Retrieved Nov 24, 2010 from the World Wide Web http//www.businessweek.com/news/2010-01-21/top-glove-targets-40-profit-distribution-this-year-update1-.htmlShapiro, A. C., Sarin, A. (2009). Foundations of multinational financial management (6th ed.). Hoboken, N.J. John Wiley Sons.Top Glove Co, Ltd (2010). Retrieved Nov 28, 2010 from the World Wide Web http//www.topglove.com.my/index.htmTop Glove Co. Ltd. (2010). Retrieved Nov 22, 2010 from the World Wide Web http//www.topglove.com.my/news/2010/news_208.htmTop Glove Co. Ltd. (2010) Annual Report 2010. Retrieved Nov 27, 2010 from the World Wide Web http//www.topglove.com.my/IR-ar.htmTop Glove expects growth to slow in 2011. (2010) TheMalaysianinsider.com Retrieved Nov 24, 2010 from the World Wide Web http//www.themalaysianinsider.com/business/article/top-glove-expects-growth-to-slow-in-2011/