UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF ACCOUNTANCY AND MANAGEMENT

MKEG15503 MANAGERIAL ECONOMICS

MASTER OF BUSINESS ADMINISTRATION

MASTER OF BUSINESS ADMINISTRATION (CORPORATE GOVERNANCE)

January 2022 Trimester

GROUP ASSIGNMENT COVER PAGE

ASSIGNMENT DETAIL

COMPANY SELECTED: _HARTALEGA HOLDINGS BERHAD________________

STUDENT DETAILS

Group Members’ Name: ID Number

1. Albert Tan

2.

3. Yap Li Shan 21UKM02452

4.

Important note: Submission of assignment is the responsibility of the students. Failure to

reference may result in a zero mark.
 UNIVERSITI TUNKU ABDUL RAHMAN
FACULTY OF ACCOUNTANCY AND MANAGEMENT
JANUARY 2022 TRIMESTER
MKEG15503 Managerial Economics

GROUP ASSIGNMENT RUBRICS – 30%

Criteria Poor Moderate Good
Points Weight Marks
(1 – 3 point) (4 – 7 point) (8 – 10 point)
Background of the Description on the Description on the Comprehensive
company background of the background of the discussion on the
company selected is company selected is background of the
vague. brief. company, the nature of
Unable to describe the Description of the nature the industry and the
nature of the industry. of the industry is brief major products/ 5
Fail to discuss the and unclear. services.
major products/ Mention the major
services of the products/ services of the
company. company without
discussion.
Analysis on the Merely identify the Provide analysis on Provide comprehensive
dynamic of the market structure, dynamic of the market analysis on the dynamic
market structure competitors, suppliers, structure, but the analysis of the market structure
and/ or consumers of unable to include all for both input and
the company. aspects. output market,
Unable to explain the Partially support the including analysis on 10
trend/ changes of the analysis with evidence competitors,
market structure. consumers, suppliers of
the company.
Support the analysis
with sufficient evidence
Recommendation of Merely provide Recommend strategies Recommend strategies
strategies for recommendation with some justifications, with strong
sustainable growth without justifications but the rationales given is justifications and 10
or rationales not strong rationales to support the
recommendations
Overall Uneven and Clear overall Organize ideas
presentation of the ineffective overall organization relating logically with
report; structure, organization, unclear most ideas together, good paragraphs and
clarity, and introduction, or introduction and connects them with
organization of conclusion. conclusion. effective transitions,
information  Employs words that Word forms are correct, clear and specific
are unclear, sentence sentence structure is introduction, and
structures inadequate effective. conclusion.
for clarity. The writing follows Employs words with
3
Writing contains normal conventions of fluency, develops
numerous errors in spelling and grammar concise standard
spelling and grammar throughout and has been English sentences,
which interfere with carefully proofread. balances a variety of
comprehension. sentence structures
effectively.
The writing is essential
error-free in terms of
spelling and grammar.
Citation and Citations is poorly Some of the citations are All the citations are
referencing format  presented and do not presented using the APA accurately presented
2
follow the APA format. using the APA format. 
format.
TOTAL 30
Table of Contents

No. Contents Page

1. Introduction

2. Analysis on the Company’s market

3. Issues identified and Recommendations

4. Appendix

5. References
 Hartalega Holdings Berhad is an investment holding company, which also a
subsidiary of Hartalega Industries Sdn Bhd. Hartalega Holdings Berhad (the “Company”) is a
medical device firm that specialises in latex and nitrile glove manufacturing and distribution
industry. It is well known for invented the first soft stretchable nitrile glove in the country,
and it is now the country's most automated glove manufacturer. This remarkable company is
founded by Mr Kuan Kam Hon in year 1988, which is now run by the current managing
director, Mr Kuan Mun Leong who is a successor of the company's founder. The Company’s
headquarter is located in the main city of Malaysia, Kuala Lumpur, and it has successfully
listed on Main Board of Bursa Malaysia on 17 April 2008 because of its outstanding qualities
of products which exceed international quality standards. With Hartalega’s reputable image
worldwide, the Company has expanded their business by exporting gloves to other countries
such as Japan, Germany, America and others, in which they are able to serve clients from all
over the world (The Edge, 2010).

The Company provides its products to a variety of end customers, including

industrial, healthcare, dental, laboratories and etc. Hartalega’s gloves are utilised in the
healthcare industry for surgical operations or laboratory experiments. Aside from that, the
gloves are employed in other industries such as art industry for applying tattoo. The products
include Nitrile, latex glove and Original Equipment Manufacturer (OEM) gloves, where it
also produces wide range of gloves including nitrile examination gloves, nitrile clean room
gloves, natural rubber examination gloves and natural rubber surgical gloves and etc
(Hartalega, 2022). The key selling point of its products are low contamination from human
contact as it adopts automated monitoring systems and procedures; nitrile gloves are
incredibly light and has high sensitivity of touch which are able to mimic the feature of latex
gloves; and nitrile gloves can reduce the possibility of protein allergy which caused by rubber
latex (Matrade, n.d.).
 With an unparalleled growth track-record and revolutionary in-house factory
automated processes that have won multiple awards such as The Edge BRC Highest Growth
in Profit After Tax Over 3 Years (Super big cap companies) 2022, The Edge BRC Company
of the Year 2022 and etc, Hartalega is perceive as the most solid and robust in the business
(Hartalega, 2022). The Company not only invest in expanding capacity to meet the rapidly
increasing worldwide demand, but also invest in Research and Development (R&D) to
improve process and product innovation. The Company has successfully become the first to
innovate non-leaching Antimicrobial Gloves, COATS™, high stress relaxation nitrile gloves,
polymer coated powder free examination gloves and light weight nitrile gloves. The
Company annual production capacity is at 43billion with 12 plant and plan to increase it to
95billion gloves by year 2027 (Reuters Staff, 2021).

Over the years, the share price of the Company has decreased and increased where the
current share price is RM4.73 closed at 29 March 2022 and the highest share price is
RM20.28 on July 2020 as there are high demand for gloves during Covid-19 pandemic (Lim,
2020). The market capitalization as at 29 March 2022 is 16.21billion (Yahoo Finance, 2022).
With the latest technology advancement adopted such as automated glove stripping machine;
double former production lines; and GoodPacTM which is a smart packing system that
ensures only one glove is dispensed at a time, reducing glove waste and contamination, the
efficiency and productivity of the Company has been improved. Hartalega's assurance of
quality, efficiency, and cost effectiveness has made them a preferred supplier for a number of
well-known global brands, where it can be proved in the financial statements for the year
ended 2021 of the Company, the annual sales are RM6.7billion, an increase of 129.45%
compared to year 2020. Hartalega said in a statement that the solid growth was driven by
higher sales revenue, lower raw material costs, and lower energy costs, as well as continued
cost-cutting measures (Jaafar, 2020).

Hartalega’s mission and vision are the navigation tool for them to achieve Company’s
goals. The mission is to provide increasingly improved, safer, and more convenient gloves in
specific product categories to people who operate with their hands in exposed and difficult
conditions. The vision is manufacturing gloves that can protect people's lives (Hartalega,
2022). In order to achieve the goals, the Company has decided to invest a total of RM7billion
in building of 16 new glove factories in Malaysia's northern area over the next 20 years. In
the most recent deal, they are expected of purchasing of 250 acres land and 130 acres land in
Kota Perdana Special Border Economic Zone (“SBEZ”) at Bukit Kayu Hitam, Kedah by
March 2022. This expansion does not even effect shareholders’ holdings, share capital, net
assets or earnings per share for the financial year ended 31 March 2021. This is because of
Hartalega has a good facility rating due to good reputation on environment, community and
qualities, the acquisition will be funded by existing credit facilities and/or internal funds
(Shankar, 2021).

However, throughout their business cycle, they have had good market growth while also
encountering several obstacles and problems.
Issues identified and Recommendation

According to Hong Leong Investment Bank Research, Hartalega is facing a high turnover
rate on the local workers, and 8-10% of the time, they are absent from work (Ikram, 2021).
This can lead to higher salaries to maintain the talent and existing workers within the firm.
However, Hartalega is trying hard to increase and remain the number of local workers
because it has become difficult to hire foreign workers during the Covid-19 pandemic. As a
result, it has increased the staff operating expenses to remain the skilled worker and replace
the existing experts within the Hartalega. This is because there are only a few employees are
responsible for Hartalega’s knowledge base, and replacing them will be extremely difficult in
the existing conditions. The high turnover rate and the existence of demotivated workers will
generally affect the company’s productivity and be detrimental to the company’s financial
performance in the long term. The factor that leads to high employee turnover is because of
the long working hour. During the epidemic peak of COVID-19, the standard working hour
of the rubber glove industry was 72 hours a week (Ikram, 2021).

The recommendation for Hartalega will be to accelerate technological innovations

and advances to reduce the dependency on the human workforce. In manufacturing, a
paradigm shift is happening nowadays. The advancement in Big data and Machine Learning
(ML) transform the traditional manufacturing era into the smart manufacturing era of
Industry 4.0 (I4.0) (Rai et al., 2021). This paradigm shift has created new opportunities for
the manufacturing sector. Smart Manufacturing refers to a technology-driven way that
utilizes the Internet of Things and internet-connected devices to produce goods and monitor
processes. Applying these technologies, it will automate the manufacturing process by
boosting efficiency, increasing sustainability, and leading to better supply chain management.
Asian Development Bank (2018) further recommends that automation is more likely to
replace repetitive tasks and activities within an occupation instead of eliminating jobs
opportunities in their entirety. Therefore, adopting the technology will help the company
solve the human workforce dependency issue. At the same time, the local worker
unemployment rate of the country will not be negatively affected. Furthermore, the
acceleration of the technology will also enable Hartalega to manufacture a vast array of
products and services and venture into adjacent products. This can significantly help the
company to gain competitive advantages by offering a wide range of products than its rivals.
 Furthermore, the company should recognize that their workers regularly work long
hours, recognize the effects on occupational health and endeavour to improve the situation.
The practice of work-life balance has indeed become a primary concern to those wishing to
have a good quality of life, especially under the pandemic Covid-19 (Soomro et al., 2018).
Wong et al. (2019) outlined that the ideal daily working hour is around 6-8 hours. This
statement is agreed by the scientists that the workers are more concentrated in the morning.
Therefore, the workers take advantage of the hours when they are most productive and focus
in the afternoon on other daily activities such as social sporting and cultural. This freedom
will enable the workers to better manage their fatigue, practice work-life balance, and
rediscover everyday life outside the workplace. In this case, flexible scheduling and remote
work are two approaches that the company can practice to assist the workers in achieving
better work-life balance and increasing retention. Adnan (2019) claimed that organizing
working time will make the employee happy and motivated and stay with the company. In
sum, the company's effective work-life balance policy will enable the employees to engage
with the community while ensuring that cost and turnover are under control and productivity
is improved (Helmle et al., 2014).

Besides, the declining market share of Hartalega with increasing revenues. The
company’s revenue is primarily generated from the manufacturing and selling of nitrile
gloves. Due to the unprecedented and staggering of Covid-19 worldwide, the medical
equipment and suppliers’ industry is growing faster than the company. Thus, Hartelaga
should diversify its production line into a different category of products to achieve greater
profitability and market share. According to the research by Fortune Business Insights
(2020), the global market demonstrated a decrease of 3.7% in 2020 as compared to the
average year-to-year growth during the 2021-2028 period. The market is forecasted to
increase from USD 455.34 billion in 2021 to USD 657.98 billion in 2028 at a CAGR of 5.4%
in the 2021-2028 period. This can be justifying that the growing prevalence of chronic
disease and the increasing emphasis of healthcare agencies towards early diagnosis and
treatment is leading to an increasing number of patients undergoing diagnostic and surgical
procedures. Hence, this can be a future opportunity that Hartalega could seize by expanding
its production line to various medical equipment and suppliers instead of purely focusing on
developing gloves. By expanding reach and attractiveness, the company will be able to
explore new sales avenues, which can significantly boost the profits.
 This paper suggests that Hartalega could be involved in manufacturing medical
equipment or medical consumables other than gloves. Since there was a forecasted
significant margin and potential growth in the future. These diversifications could increase
the market share of Hartalega in the market. This is due to the greater the company’s
presence in the market, the higher the market share will obtain, leading to more significant
revenues as consumers know and see the brand more frequently. Besides, diversification will
enable Hartalega to fully utilize its existing competencies and abilities to launch new medical
products. Based on the analysis, the target customers are healthcare practitioners, food
processing workers, lab workers, and other professionals. Hence, diversification will enable
Hartalega to sell the new products to these groups of people rather than having to start from
scratch. Generally, diversification will enable Hartalega to minimize the risk of an industry
downturn, enhance brand image, and it can also be applied as a defence mechanism to
safeguard a company from strong competition.

The third main issue of Hartalega will be lacking of critical talent. In Star TV, the
managing director of Hartalega Holdings Bhd, Mr. Kuan Mun Leong, claimed that it is
essential to have suitable systems, processes, and talents to further expand operations abroad,
adding that there are talent constraints in the country. As a result, it believes that Hartalega is
suffering from a lack of critical talent, especially in the field of technology and digital
transformation. This also became a resistance for Hartalega to restructure processes in light of
developments in the field of Artificial Intelligence (AI) and machine learning. In this paper, it
recommends that Hartalega could access into a wider global market to obtain high-level
talent and skillful workers that can match the company’s needs. Thus, expansion into the
international market will enable Hartalega to tap into the international talent market. Besides,
it will also enable Hartalega access to a much larger base of customers. With a greater
customer base, it will allow Hartalega to gain a better chance of reaching out to more people
over different geographical areas. In the end, globalization could boost the company’s sales
and build the customer’s loyalty. 

When a loyal customer base is established, a solid customer base will become an
important marketing tool for Hartalega. A strong customer base can build word-of-mouth
within the customer’s network toward the company’s brand in their daily
communication. Word of mouth is a free form of promotion tool, as it is shared by customers
and triggered by an event the customer experiences. Kutschler (1985) developed the
interaction theory suggested that communication, mutual influence, and commitment are
dynamic practices in relationship marketing. In Uganda, it has been proven that successful
relationships significantly drove businesses’ customer loyalty and success in collectivist
societies (Ngoma & Ntale, 2019). People tend to believe the brand recommended by their
friends rather than the other advertisement tools. As a result, they are more likely to support
or believe in a brand when referred by friends. Furthermore, access into the international
market will also enable Hartalega to gain a competitive edge over its rivals. For instance,
Hartalega can expand in markets where its opponents do not operate to gain the first-mover
advantage, which allows them to build strong brand awareness with consumers before their
competitors. Enter into the global market can also promote a company’s profile as global
operation can help develop brand awareness to support future business scenarios such as
contract negotiations and new marketing campaigns. 

Based on the financial performance of Hartalega, it demonstrates a better financial

performance compared to its competitors such as Top Glove, Kossan, and Supermax.
Also, the overall performance of Hartalega was above the industry average. Firstly, the total
revenue of Hartalega is lower than Top Glove (refer to Table 1); however, the profitability
ratio of Hartalega is generally greater than Top Glove (refer to Table 2). This indicates that
the Hartalega has a greater ability to generate earnings relative to its revenue, operating costs,
balance sheet assets, or shareholders’ equity . The profitability performance of Hartalega also
demonstrates the margins above the industry average. In terms of liquidity, Hartalega was
recognized as the most liquid company among its competitors. The high liquidity shows that
the company can quickly convert its asset into cash to pay off its liabilities or debts.
However, excess liquidity might be leaving workable assets on the side-line and lead to
wastage of resources. It suggests that Hartalega can consider to fully utilize its available free
cash flow to invest in projects or expansion of products line, which can generate an attractive
return in the long run. On the other hand, it indicates that Hartalega has a low dividend yield
and dividend payout compared to its competitors. The dividend yield shows how much
income has been received to the share price, while dividend payout is the proportion of
earnings that are paid out to shareholders in terms of dividends. Since Hartalega has a strong
financial foundation, it recommends that Hartalega could offer a higher dividend rate to its
shareholders and investors. Paying dividends at a higher rate will provide a clear, powerful
message about a company’s future prospects and performance, and its willingness and ability
to pay steady dividends over time offers a strong demonstration of financial strength. Also, a
higher dividend yield will be more attractive to attract more investors to invest funds into the
company and increase the share price. 
Appendix
Table 1: Financial performance of glove industry in Malaysia
  Hartalega Top Glove Kossan Supermax
28/2/2021 31/3/2021 31/3/2021 31/12/2020
(RM Million) (RM Million) (RM Million) (RM Million)
Total Revenue 2,3 5, 2, 1,
07.48 365.48 192.15 998.64
Operating 1,5 3, 1, 1,
Income 13.22 724.89 376.35 396.63
Net Income 1,1 2, 1, 1,
19.20 881.85 041.82 059.46
 
Total Assets 6,8 12, 4, 6,
65.97 409.58 507.44 113.18
Total 1,8 4, 1, 2,
Liabilities 91.07 272.53 373.37 867.38
Total Equity 4,9 8, 3, 3,
74.90 137.04 134.07 245.80

Table 2: Financial ratio of glove industry in Malaysia

  Industry Hartalega Top Glove Kossan Supermax
Average

Profitability Ratio
Operating Margin
59.34 64.33 54.68 56.38 67.30
Pretax Margin
59.35 64.27 54.66 56.29 67.45
Net Profit Margin
45.79 49.39 42.76 42.91 52.07
Return on Equity
88.27 90.99 80.61 88.95 101.87
Return on Assets
64.70 69.92 58.52 65.80 64.86
Return on
Investment 83.58 83.93 78.34 83.62 100.29
Liquidity Ratio
Quick Ratio
2.83 4.11 1.44 3.87 2.87
Current Ratio
3.39 4.72 2.03 4.39 3.10
Leverage Ratio
LT Debt to Equity
2.34 2.81 2.17 1.32 1.92
Total Debt to Equity
5.94 4.52 6.68 6.26 6.64
 Turnover Ratio
Asset Turnover
1.41 1.42 1.37 1.53 1.25
Revenue/Employee
975.66K 1.08M 599.42K - -
Net
Income/Employee 454.87K 533.17K 256.32K - -
Dividend Policy Ratio
P/E Ratio
2.96 3.76 2.98 1.56 0.85
Dividend Yield
18.71 17.46 20.83 18.10 -
Payout Ratio
48.84 38.36 295.05 21.46 22.71
References
Adnan, B. K. (2019). Impact of work-life balance, happiness at work, on employee
performance. International Business Research, 12(2), 99-112.

Asian Development Bank. (2018). Asian Development Outlook (ADO) 2018: How

Technology Affects Jobs (No. id: 12717).

Fortune Business Insights. (2020). Market Research Report. Medical Devices Market Size,
Share & COVID-19 Impact Analysis, By Type (Orthopedic Devices, Cardiovascular
Devices, Diagnostic Imaging, In-vitro Diagnostics, Minimally Invasive Surgery,
Wound Management, Diabetes Care, Ophthalmic Devices, Dental Devices,
Nephrology, General Surgery, and Others); By End-user (Hospitals & ASC’s, Clinics,
and Others), and Regional Forecast, 2021-2028

Hartalega (2022). Healthcare. Hartalega.

https://hartalega.com.my/market_segment_category/healthcare/
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Helmle, J. R., Botero, I. C., & Seibold, D. R. (2014). Factors that influence perceptions of
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rm220m-rm94m-year-earlier
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land-kota-perdana-sbez-kedah-rm2887m

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