FIRST SEMESTER SESSION 2023/2024

BPMN 3023 STRATEGIC MANAGEMENT

GROUP E

ASSIGNMENT 1

STRATEGIC AUDIT REPORT

PREPARED FOR:

PROF. MADYA DR. KADZRINA BINTI ABDUL KADIR

PREPARED BY:

GROUP 2

GOH HUI CHIN 277374

KOH MIIN CHUEN 279404

NUR SHAFINA BINTI MD RUSLI 281094

TEOH JIA WEN 281254

SUBMISSION DATE:

14 JANUARY 2024
Table of Contents
1.0 Introduction ..................................................................................................................... 1

2.0 Strategic Issues ................................................................................................................ 2

3.0 Internal Analysis ............................................................................................................. 4

3.1 Company Profile .......................................................................................................... 4

3.2 Vision, Mission, Objectives, and Current Strategies ................................................... 6

3.3 Board of Directors ....................................................................................................... 8

3.4 Top Management Team ............................................................................................. 10

3.6 Financial Analysis ..................................................................................................... 13

3.6.1 Financial Performance........................................................................................ 13

3.6.2 Financial Health ................................................................................................. 20

4.0 External Analysis .......................................................................................................... 25

4.1 STEEP Analysis ........................................................................................................ 25

4.1.1 Socio-Cultural Factors........................................................................................ 25

4.1.2 Technological Factors ........................................................................................ 28

4.1.3 Economic Factors ............................................................................................... 29

4.1.4 Ecological Factors .............................................................................................. 31

4.1.5 Political Factors .................................................................................................. 32

4.2 Five Forces Competitive Model ................................................................................ 34

4.2.1 Threat of New Entrants ...................................................................................... 34

4.2.2 Threat of Product Substitutes ............................................................................. 36

4.2.3 Bargaining Power of Suppliers .......................................................................... 37

4.2.4 Bargaining Power of Buyers .............................................................................. 38

4.2.5 Rivalry among Existing Firms ........................................................................... 40

5.0 Situational Analysis....................................................................................................... 42

5.1 SWOT Analysis ......................................................................................................... 42

5.1.1 Strengths ............................................................................................................. 42

 5.1.2 Weaknesses ........................................................................................................ 46

5.1.3 Opportunities ...................................................................................................... 50

5.1.4 Threats ................................................................................................................ 53

5.2 TOWS Analysis ......................................................................................................... 57

5.3 IFAS Analysis............................................................................................................ 68

5.4 EFAS Analysis .......................................................................................................... 69

6.0 Recommendation ........................................................................................................... 70

7.0 References ..................................................................................................................... 71

1.0 Introduction

We have focused on assessing Top Glove Corporation Berhad's organisational

performance in our extensive strategic audit report. By utilising strategic auditing approaches,
we seek to investigate how well Top Glove has been achieving its corporate objectives. This
approach works wonders for identifying the company's internal procedures and external
positioning's strengths and weaknesses. We aim to provide an extensive understanding of Top
Glove's position by closely examining the internal conflicts and strategic obstacles the company
faces in the current state of business. Provided with an intimate understanding of these elements,
our goal is to put up strategic suggestions that will strengthen Top Glove's competitive position
in the market while simultaneously addressing recognised weaknesses.

1
2.0 Strategic Issues
Great Volatility of Glove Market

Based on the statement by the Executive Chairman of Top Glove, Tan Sri Dr Lim Wee
Chai, the glove industry is undergoing great volatility in the global glove demand due to
oversupply and stockpiling. The main leading factors are the oversupply of glove manufacturers
due to severe competition and the stockpiling by the healthcare sector due to the outbreak of
COVID-19. Gloves were heavily utilized as personal protective equipment as well as a safety
measure for the frontline to mitigate the risk of infection and further spread of the virus. As the
outbreak of COVID-19 has been under control by several measures, glove consumption has
reduced accordingly which led to a shrinking of global demand for gloves and contributed to
several material issues for the glove industry and Top Glove, as the industry leader was also
impacted critically.

Unfavourable Financial Performance

According to the Annual Report 2023 of Top Glove, it indicates a steep decline in
revenue from 2022 and lead to a huge financial loss in 2023. For instance, in 2022, the revenue
declined about 66% from an outstanding financial result, of RM16 billion in the history of Top
Glove. In 2023, the situation became worse as the revenue dropped again by 59% and
contributed to a loss after tax of RM885 million which is the most unpleasant financial
performance for the past 5 years. Consequently, the susceptible investor sentiment has been
affected by miserable profitability which is the reason that the share price of Top Glove has
dropped below RM1 since 2022.

Increasing Operating Costs

Apart from the steep decline in revenue, the increase in operating costs also led to the
financial loss of Top Glove. Several circumstances like global supply chain disruptions, an
increase in natural gas tariff in 2022, and the establishment of minimum wage influence the
operational cost for the manufacturing industry. Top Glove does not influence to mitigate the
impact of the factors that are sourced from the external environment. Thus, the lower revenue
and the rise of operating costs have induced a net loss in 2023.

Decreasing Average Selling Prices (AVPs)

The gloves market price is determined by the demand and supply of the gloves. The
issues of oversupply and stockpiling of gloves have caused the volatility of the global gloves

2
demand. The flood of gloves in the market has outnumbered the demand which results in lower
average selling prices of gloves. Consequently, it affects directly and significantly the revenue
of Top Glove and other glove manufacturers. In 2023, the average selling price of gloves has
bottomed out and caused several glove manufacturers to record a financial loss, including Top
Glove.

Impairment Loss Due to Obsolescence

To overcome the issues of oversupply and stockpiling, Top Glove has decided to pause
part of its production line and wait for the replenishment by its customers. As the production
line has been discontinued, the machineries and equipment within the production line are left
obsolescence which demonstrates an indication of impairment in the accounting aspect based
on the relevant financial reporting standards. Therefore, in 2023, Top Glove recognized an
impairment loss of RM206 million and wrote off its assets, which amounted to RM197 million.
Both losses due to the obsolescence of assets constitute a major and significant portion of the
net loss of Top Glove in 2023.

3
3.0 Internal Analysis
3.1 Company Profile
Top Glove Corporation Bhd, headquartered in Malaysia, was founded in 1991 as a small
local business with only one facility and one glove production line. Since then, the company
has grown to become the world's largest manufacturer of gloves, with operations in Malaysia,
Thailand, China, and Vietnam. In addition, the company maintains marketing offices in the
United States, Germany, and Brazil. Top Glove has over 2,000 customers and exports to over
195 countries. Top Glove Corporation Bhd is widely recognised as the world's largest glove
producer, having a considerable global presence. The company, which was created in 1991, has
its headquarters in Shah Alam, Malaysia. It has expanded dramatically since its inception, today
offering a diverse range of products that go beyond gloves, such as dental dams and other dental
products. Top Glove's success can be credited to its dedication to quality, innovation, and
customer satisfaction, which has enabled it to serve a wide range of sectors globally.

Top Glove Corporation Bhd, a glove manufacturing company, offers a diverse range of
products, primarily in the glove business, such as latex, nitrile, vinyl, surgical, cleanroom,
domestic, and industrial gloves. Their product innovation is outstanding, as they provide
specialist gloves for the culinary, healthcare, and technology industries, among others. The
company's portfolio includes non-glove items like face masks, dental dams, and contraceptives,
demonstrating its adaptability and response to market demands.

Top Glove has demonstrated a strong commitment to ethical and sustainable business
practices. Considerable progress has been made in the field of sustainable manufacturing, and
significant steps to improve labour standards have been put in place. These actions include the
resolution of forced labour issues as well as the safeguarding of workers' well-being. Their
dedication to ethics is obvious in the comprehensive corrective steps they have implemented to
improve labour standards and working conditions. These measures include worker
compensation payments, the blacklisting of unscrupulous recruitment agencies, labour
accommodation improvements, and the restriction of unreasonable overtime needs for
employees.

Top Glove's aid was critical during the difficult days of the COVID-19 epidemic when
the company increased production to satisfy the expanding global demand for medical gloves.
This initiative was crucial in offering aid to healthcare services during an extreme health crisis.

4
 Ongoing capital expenditures on infrastructure and growth of manufacturing capabilities
demonstrate Top Glove's commitment to becoming a manufacturing frontrunner, with a special
emphasis on its important contributions to the healthcare industry. Their unwavering
commitment to ethical ideals, innovation, sustainability, and adaptation to foreign demands
strengthens their position as a global market leader.

5
3.2 Vision, Mission, Objectives, and Current Strategies
3.2.1 Vision
As stated in their Integrated Annual Report 2023, Top Glove Corporation Bhd's vision
is "To be your world-class partner in gloves and healthcare products." This statement
emphasises the organization's ambition to establish itself as a prominent international supplier
in the healthcare manufacturing industry, with a particular focus on its dedication to producing
gloves and other healthcare products with excellence and innovation.

3.2.2 Mision
"Ensuring safe human protection globally" is the mission of Top Glove Corporation Bhd.
This mission statement demonstrates their dedication to delivering superior protective products
worldwide, emphasising safety and dependability. Their objective is to positively impact human
health and safety through the manufacture of healthcare products and gloves that adhere to the
most rigid standards for protection and excellence.

3.2.3 Objectives
1. To be the world’s undisputed leading producer of latex gloves.
2. To be the preferred nitrile glove manufacturer.
3. To be the fastest-growing surgical solutions provider.
4. To divest non-profitable non-core business to improve shareholders’ value with a refocus
on ESG.

3.2.4 Current Strategies

Top Glove Corporation Bhd has a strategy to improve its position in the market and find
its way into the global marketplace after the pandemic. This strategy is based on making the
market resilient. The company do this by regularly looking at changes in the industry and
encouraging quick reactions. This strategy helps the company adapt quickly to changing market
conditions and keep good ties with important people so it can stay competitive in the glove
industry.

In addition, Top Glove has put a lot of effort into streamlining its production methods
and keeping costs low. This is a determined attempt to cut down on waste and boost production
efficiency, which will ensure that all of their factories run smoothly. The company has also taken
strong actions in response to the imbalance in the market caused by too many gloves on the
market during the epidemic and lower demand. Two ways to try to match supply with current
market demand are to get rid of old production lines and briefly stop plant operations. These

6
strategies show that Top Glove is determined to stay at the top of the glove-making industry,
even though the global market is very competitive. Besides that, to keep working on the Group's
plan so that it can stay flexible enough to keep growing and provide steady returns after 2025.
The company has changed its corporate strategy to TG25+, which will help it build new skills,
especially in technology and people, to make sure the company stays relevant and competitive
after 2025.

The top priorities include lowering costs, improving product quality, improving
customer service, and getting rid of non-core assets. The company tries to get rid of non-core
assets to simplify its business and put more attention on its core operations, which makes the
company competitive and creates a lot of value for all stakeholders.

7
3.3 Board of Directors

Position Name
Executive Chairman Tan Sri Dr. Lim Wee Chai
Managing Director Lim Cheong Guan
Executive Director Lim Hooi Sin
Executive Director Ng Yong Lin
Non-Independent Non-Executive Director Dato' Lee Kim Meow
Senior Independent Non-Executive Director Sharmila Sekarajasekaran
Independent Non-Executive Director Datuk Dr. Norma Mansor
Independent Non-Executive Director Azrina Arshad
Independent Non-Executive Director Martin Giles Manen
Independent Non-Executive Director Dr. Ngo Get Ping
Independent Non-Executive Director Dr. Chong Su-Lin
Independent Non-Executive Director Rowina Ghazali Seth

8
BOARD OF DIRECTORS

9
3.4 Top Management Team

Position Name
Executive Chairman Tan Sri Dr Lim Wee Chai
Managing Director / CEO Lim Cheong Guan
Executive Director Lim Hooi Sin
Executive Director Ng Yong Lin
Director, Marketing Aaron Lam Yat Hing
Executive Director (Subsidiary) Hue Kon Fah
Senior General Manager, Manufacturing Chookiad Usaha
Senior General Manager, Joint Manufacturing Council Lim Hwa Chuan
General Manager, Sourcing & Procurement Michelle Ang Peck Kean
General Manager, Marketing Lim Jin Feng

10
3.5 Organizational Structure

11
 The organisational structure of Top Glove Corporation Bhd is a prime example of a
functional organization model. This model groups the company's operations into distinct
departments based on specialized functions such as Finance, Logistics, Property & Business
Development, and Internal Audit. Each department is structured to focus intensively on its
specific operational area, allowing for deep expertise and efficient handling of tasks related to
that function.

The functional organisation model employed by Top Glove facilitates a hierarchical

but cohesive management system. Within each department, there are layers of authority,
typically headed by managers and directors. This hierarchy ensures that decision-making is
both focused and informed by specialized knowledge. It also allows for clearer lines of
communication and responsibility, which are essential in large-scale operations.

The advantages of this organisational structure for a corporation like Top Glove are
significant. It allows for a clear division of labour, with each department honing its expertise
and efficiency. This specialisation ensures that every aspect of the company's operations is
managed by individuals with the most relevant skills and knowledge. Moreover, it aligns the
company's resources and efforts towards its overarching objectives, ensuring a cohesive
approach to achieving business goals.

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3.6 Financial Analysis
3.6.1 Financial Performance
In assessing the financial performance of Top Glove Corporation Berhad, critical ratios
such as the Gross Profit Margin and Net Profit Margin are indispensable. The Gross Profit
Margin, which measures the proportion of revenue exceeding the cost of goods sold, sheds light
on Top Glove's production efficiency and cost management. The Net Profit Margin, indicating
the percentage of revenue remaining after all expenses, interest, and taxes, is pivotal in
understanding the company's overall profitability and financial health. These ratios collectively
offer a vital perspective on Top Glove Corporation Berhad's operational effectiveness and
profit-generating capability.
3.6.1.1 Operating Efficiency
i. Assets Turnover Ratio = Sales /Average Total Assets

2021 2022 2023

= 16,361,443 = 5,572,349 = 2,257,221
(9,782,424 + 8,705,964)/2 (8,116,710 + 9,782,424)/2 (7,061,570 + 8,116,710)/2
= 16,361,443 = 5,572,349 = 2,257,221
9,244,194 8,949,567 7,589,140
= 1.77 = 0.62 = 0.30

Assets Turnover Ratio

21.77
1.8
1.6
1.4
1.2
1
0.8 0.62
0.6
0.3
0.4
0.2
0
2021 2022 2023

The Asset Turnover Ratio measures a company's ability to generate sales from
its assets. For Top Glove Corporation Berhad, this ratio has decreased significantly from
1.77 in 2021 to 0.30 in 2023. This indicates that the company generates less revenue per
ringgit of assets each year, suggesting declining operating efficiency. The trend could
be due to reduced demand, increased competition, underutilization, or inefficiency in
13
using the company's assets. This is a key indicator to watch, as it can impact the
company's profitability and competitive position in the long term.

ii. Inventory Turnover Ratio = Cost of Goods Sold /Average Inventory

2021 2022 2023

= 5,259,336 = 4,618,972 = 2,192,901
(1,144,705 + 530,729)/2 (575,262 + 1,144,705)/2 (301,496 + 575,262)/2
= 5,259,336 = 4,618,972 = 2,192,901
837,717 859,984 438,379
= 6.28 = 5.37 =5

Inventory Turnover Ratio

9

6.28
6 5.37
5

0
2021 2022 2023

The Inventory Turnover Ratio for Top Glove Corporation Berhad shows how
often the company's inventory is sold and replaced. In 2021, the ratio was 6.28,
indicating relatively high inventory efficiency. It has decreased to 5.37 in 2022 and
slightly decreased to 5 in 2023. This decrease from 2021 to 2023 suggests that the
company held onto its inventory for longer before selling it, which could indicate less
demand or overstocking.

iii. Accounts Receivable Turnover = Net Sales /Average Accounts Receivable

14
 2021 2022 2023
= 16,361,443 = 5,572,349 = 2,257,221
(566,299 + 798,805)/2 (258,791 + 566,299)/2 (182,622 + 258,791)/2
= 16,361,443 = 5,572,349 = 2,257,221
682,552 412,545 220,707
= 23.97 = 13.51 = 10.23

Accounts Receivable Turnover

30
23.97

20
13.51
10.23
10

0
2021 2022 2023

The Accounts Receivable Turnover of Top Glove Corporation Bhd has

exhibited a declining trend from 2021 to 2023, with the ratio dropping from an
impressive 23.97 to 13.51, and further down to 10.23. This trend suggests a slowing
efficiency in the company's collection of receivables, potentially indicating issues such
as lenient credit policies or economic headwinds affecting customers' ability to pay. The
consistent decrease over the years calls for an urgent reassessment of the company's
credit and collection strategies to bolster cash flows and mitigate the risk of accruing
bad debts.

iv. Accounts Payable Turnover = Cost of Goods Sold /Average Accounts Payable

2021 2022 2023

= 5,259,336 = 4,618,972 = 2,192,901
(692,361 + 810,824)/2 (459,357 + 692,361)/2 (265,261 + 459,357)/2
= 5,259,336 = 4,618,972 = 2,192,901
751,593 575,859 362,309
= 7.00 =8.02 = 6.05

15
 Accounts Payable Turnover
10
8.02
7
6.05

0
2021 2022 2023

Top Glove Corporation Bhd's Accounts Payable Turnover fluctuated from 2021
to 2023. In 2021, the company settled accounts seven times, indicating good liquidity
and creditor relationships. In 2022, the ratio increased to 8.02, suggesting better
liquidity or early payment discounts. However, in 2023, it decreased to 6.05, indicating
a more conservative payment approach towards suppliers. This suggests a need for the
company to maintain an optimal turnover ratio to maintain supplier confidence and
ensure efficient working capital utilization.

3.6.1.2 Profitability
i. Gross profit margin = Gross profit / Sales

2021 2022 2023

= 11,102,107 = 953,377 = 64,320
16,361,443 5,572,349 2,257,221
= 68% = 17% = 3%

Gross profit margin

80%68%
70%
60%
50%
40%
30%
17%
20%
10% 3%
0%
2021 2022 2023

The Gross Profit Margin for Top Glove Corporation Berhad has seen a drastic
decline from 68% in 2021 to 3% in 2023. This indicates that the company's cost of goods
16
sold is a growing percentage of sales, severely impacting profitability. This trend
suggests increased costs or decreased pricing power and is a concerning indicator of the
company's financial health over this period.

ii. Operating profit margin = Operating profit / Sales

2021 2022 2023

= 9,972,238 = 334,111 = -883,058
16,361,443 5,572,349 2,257,221
= 61% = 6% = -39%

Operating profit margin

80%
61%
60%

40%

20% 6%
0%
2021 2022 2023
-20%
-39%
-40%

-60%

The Operating Profit Margin for Top Glove Corporation Berhad dramatically
decreased from 61% in 2021 to -39% in 2023. This negative margin in 2023 indicates
the company is incurring a loss from its core operations, as operating expenses have
surpassed gross profits. This trend reflects significant operational challenges or changes
in the company's cost structure, market conditions, or pricing strategies, which may
affect its long-term sustainability.

iii. Net profit margin = Net income / Sales

2021 2022 2023

= 7,823,992 = 281,590 = -885,549
16,361,443 5,572,349 2,257,221
= 48% = 5% = -39%

17
 Net profit margin
60%48%

40%

20% 5%
0%
2021 2022 2023
-20%
-39%
-40%

-60%

The Net Profit Margin of Top Glove Corporation Berhad has shown a steep
decline from 48% in 2021 to -39% in 2023. This negative margin indicates that the
company is losing money on each ringgit of sales, which is a serious concern as it
suggests that the company's total expenses exceed its revenues. The substantial drop
over three years could reflect increased costs, declining sales, or both, and points to a
need for strategic reassessment of operations and cost management.

iv. Return on assets (ROA) = Net income / Total assets

2021 2022 2023
= 7,823,992 = 281,590 = -885,549
9,782,424 8,116,710 7,061,570
= 80% = 3% = -13%

Return on assets (ROA)

100%
80%
80%

60%

40%

20%
3%
0%
2021 2022 2023
-20% -13%

The Return on Assets (ROA) for Top Glove Corporation Berhad indicates a
decline from an 80% return in 2021 to a negative return of -13% in 2023. This shift
reflects a decrease in the company's efficiency at using its assets to generate profit,

18
transitioning from a strong positive return to a loss relative to the assets' value, signalling
potential concerns about asset utilization and overall financial health.

v. Return on equity (ROE) = Net income / Total equity

2021 2022 2023
= 7,823,992 = 281,590 = -885,549
2,955,175 2,603,743 2,806,211
= 265% = 11% = -32%

Return on equity (ROE)

300%
265%
250%

200%

150%

100%

50% 11%
0%
2021 2022 2023
-50% -32%

The Return on Equity (ROE) for Top Glove Corporation Berhad shows a
dramatic swing from a high of 265% in 2021 to a negative 32% in 2023, indicating that
in 2021, the company was highly efficient in generating profit from shareholders' equity,
but by 2023, it faced losses, reducing the equity's value. This negative ROE suggests
significant underlying issues affecting profitability and shareholder value.

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3.6.2 Financial Health

Top Glove Corporation Berhad's financial position deterioration could have several
significant effects. Investor distrust can hurt the company's stock price and hinder capital-raising
efforts. A drop in credit ratings may result in higher borrowing costs and more difficulty getting
loans. Due to operational constraints, cost savings may be required, which may influence
employee morale, product quality, and research and development. Reduced investment in
innovation may cause the company's market position to degrade, resulting in a loss of market
share. Furthermore, there may be an urgent need for restructuring and strategic realignment,
which could entail asset sales or the development of strategic partnerships. These consequences
may have long-term implications for the company's growth and viability.

3.6.2.1 Liquidity Risk

i. Current Ratio = Current Assets / Current Liabilities

2021 2022 2023

= 4,345,757 = 2,111,117 = 1,688,025
2,198,487 996,488 923,867
= 1.98 = 2.12 = 1.83

Top Glove Corporation Berhad has RM1.98 in current assets for every RM 1 in
current liabilities, according to its 2021 current ratio. The company's liquidity was
sufficient since it had enough short-term assets to meet its obligations. The current ratio
increases from 1.98 in 2021 to 2.12 in 2022 is usually considered positive. It
demonstrates that the company's liquidity has improved. With a current ratio of 2.12, the
company had more current assets than current liabilities in 2022, potentially due to
larger cash holdings, fewer short-term debt, or improved working capital management.
The current ratio decreased to 1.83 in 2023 from 2.12 in 2022, indicating a decrease in
20
liquidity. The company may have had short-term debt, fewer cash reserves, or slower
accounts receivable collections. A current ratio of 1.83 indicates that the company has
more current assets than current liabilities, despite the trend from the previous year.

ii. Quick Ratio = (Current Assets - Inventory) / Current Liabilities

2021 2022 2023

= (4,345,757 - 1,144,705) = (2,111,117 - 575,262) = (1,688,025 - 301,496)
2,198,487 996,488 923,867
= 1.46 = 1.54 = 1.50

From 2021 to 2023, the company's Quick Ratio fluctuate. The quick ratio was
1.46 in 2021, meaning the corporation has RM1.46 in rapid assets for every RM1 in
current liabilities. This indicated a reasonable ability to meet short-term obligations
without inventories. Next year, 2022, the Quick Ratio reached 1.54. This increased
liquidity compared to the previous year, indicating that the corporation either improved
fast assets or lowered current obligations. In 2023, the Quick Ratio fell to 1.50. While
still showing a good ability to fulfil short-term obligations, the minor decline may raise
concerns. This decline may arise from higher current liabilities or lower quick assets.
Based on the Quick Ratio alone, the company has had acceptable liquidity and can cover
its short-term financial obligations for three years.

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3.6.2.2 Solvency Risk
i. Debt-to-Equity Ratio = Total Liability / Stockholder’s Equity

2021 2022 2023

= 2,562,264 = 1,323,475 = 1,135,455
7,220,160 6,793,235 5,926,115
= 0.35 = 0.19 = 0.19

The company's D/E ratio changed significantly over the three years from 2021
to 2023. In 2021, the D/E ratio was 0.35, showing that debt-financed a major component
of the company's capital structure. However, there was a considerable improvement in
2022, as the ratio fell to 0.19, indicating a reduction in debt relative to equity. This
decline could be due to a variety of circumstances, including debt repayment or
improved equity. In particular, the D/E ratio stayed at 0.19 in 2023, indicating that the
company was able to sustain its increased financial leverage.

ii. Debt Ratio = Total Liability / Total Assets

2021 2022 2023

= 2,562,264 = 1,323,475 = 1,135,455
9,782,424 8,116,710 7,061,570
= 0.26 = 0.16 = 0.16

22
 The Debt Ratio dropped from 0.26 in 2021 to 0.16 in 2022 and 2023, indicating
a major financial restructuring. The Debt Ratio decreases when the company's debt-
funded assets decrease. Multiple factors may explain this change. It indicates that the
corporation has reduced its liabilities by settling some debts. However, it could suggest
a rise in the company's assets due to new acquisitions, revenue growth, or asset
reevaluation. The company's consistent Debt Ratio of 0.16 in 2022 and 2023 suggests a
stable debt financing strategy. A lower Debt Ratio indicates better financial health and a
lower risk of insolvency.

iii. Equity Ratio = Shareholder’s Equity/ Total Assets

2021 2022 2023

= 9,782,424 = 8,116,710 = 7,061,570
7,220,160 6,793,235 5,926,115
= 1.35 = 1.19 = 1.19

A shareholder equity ratio greater than one, as seen in 2021, is unusual and shows
that the company's shareholder equity exceeds its entire assets. This out-of-the-ordinary
scenario could be caused by negative liabilities or accounting abnormalities such as asset
write-downs or revaluations. The constancy of the ratio at 1.19 in succeeding years,
23
although remaining over the normal upper limit, indicates a consistent tendency in the
company's financial structure. This high equity ratio indicates financial stability and a
decreased reliance on debt, showing a cautious approach to financing.

24
4.0 External Analysis
4.1 STEEP Analysis
According to Fisher et al. (2020), the goal of a macro-environmental (STEEP) analysis
is to record and analyse what is happening alongside what is expected to happen in the
surroundings in which a corporation operates. It takes into account the wide-ranging factors,
modifications, as well as developments that transpire beyond the organization's walls and could
impact its commercial operations and markets. These components are referred to as sociological,
technological, economic, ecological, and political variables.

4.1.1 Socio-Cultural Factors

Higher Consciousness of Cleanliness and Health

According to Pulidindi and Ahuja (2023), the disposable glove business was calculated
to be valuable USD 12.3 billion in the year 2022 and is expected to expand at a compound
annual growth rate (CAGR) of 3.9% throughout 2023 to 2032. Increased awareness of safety
and hygienic measures—particularly for healthcare and the food and beverage industry—has
encouraged the growth of the disposable glove market. Among the main drivers driving the
industry are the rising utilisation of e-commerce channels, growing consciousness of hygiene
and sanitation, strict safety requirements brought on by the coronavirus disease (COVID-19)
pandemic, and growing demand in the healthcare industry billion (Disposable Gloves Market
Share, Size, Report 2023-2028, n.d.).

25
 The need for gloves as a readily affordable boundary of protection for individuals can
be observed amid health concerns like SARS, H1N1, and the most recent instance of COVID
in 2020. Disposable gloves are among the personal protective equipment, or PPE, that are in
high demand due to growing worries about safety and health. Disposable gloves are one-time-
use hand protection items that are utilised to uphold hygiene requirements and avoid cross-
contamination. Usually made of latex-based substances, polyethene, vinyl, or nitrile, gloves
protect the user and the surroundings by acting as an obstacle from chemicals, germs, and
dangerous materials. Because they are disposable, there is less chance of infection between one
work to another or even from one individual to another. They also aid in keeping an atmosphere
sanitary to stop the spreading of viruses. They also play a crucial role in safety procedures,
offering protection and comfort in a variety of professional contexts. Disposable gloves have
become commonplace in a variety of industries such as manufacturing, preparing meals,
healthcare, as well as cleanliness.

Gloves utilised in technology, industry, as well as research and development, are in an

enormous market due to the advent of IoT technologies, AI, and 5G. Regulators everywhere
have also imposed more stringent workplace security laws, compelling businesses to give their
employees safer working conditions. Businesses have used ISO45001 management systems for
occupational safety and health to control and enhance workplace safety in an effort to further
protect employees. Highly developed nations have created norms as well as guidelines to serve
the food and beverage sector on cleanliness, notably the proper application of gloves to avoid
food-borne illnesses. As a result, these elements will probably influence glove demand going
forward.

Increasing Ageing Demographic and Expanded Lifespans

Humans worldwide have been living a bit longer. Currently, the majority of individuals
can expect to live substantially until their sixties and possibly further (WHO, 2022). Not a single
country on earth is seeing an increase in the proportion of its population that is elderly. By the
year 2030, one out of every six individuals on the planet will have reached 60 years of ageing
or elderly. Rather than 1 billion in the year 2020, there is projected to be 1.4 billion individuals
over 60 by the present. By the year 2050, there will be twice as many people on the earth that
have reached 60 years of age or older—that is, 2.1 billion people. It is projected that the number
of individuals who are eighty years of age or above will quadruple to 426 million by the year
2050. Ageing lengthier provides chances for elderly people and their family members and
additionally for communities as a whole. Prolonged years of old ageing provide a chance to
26
explore brand-new endeavours, such as additional education, a fresh profession, or a long-
neglected hobby. Elderly individuals assist their households and their surroundings in a lot more
ways than one. But one factor—health—determines the extent of these alterations and their
impact in the greatest measure. Studies reveal that the proportion of people who live in good
health conditions has remained relatively constant, suggesting that more years are forfeited to
poor health conditions. Age-related health issues are linked to the older population's increased
susceptibility to various diseases and require more frequent evaluations with the doctor. Glove
utilisation has increased as a result of the growing need for healthcare products and services
due to the ageing population.

27
4.1.2 Technological Factors

New Developments in Technology

The industry is growing as a result of the growing need for disposable gloves as well as
advancements in the convenience, safeguarding, and functioning of these vital items of
protection (Disposable Gloves Market Share, Size, Report 2023-2028, n.d.). Furthermore,
producers are spending money on R&D to discover novel materials and production processes
that will modernise the disposable glove business and accelerate its expansion. Another
significant growth-inducing aspect is the invention of nitrile gloves, which provide better
resistance to chemicals, piercing obstacles, and sensitivity to touch than conventional latex-
based gloves. In addition, because nitrile gloves are not composed of latex, they are becoming
increasingly popular in medical environments. This is because they lower the possibility of
reactions to allergies in patients as well as healthcare professionals, which is driving up demand
for the product.

According to Top Glove Corporation Bhd. (2022), for a while now, the healthcare and
manufacturing industries have relied on natural latex rubber gloves due to their superior
flexibility as well as convenience compared to nitrile latex gloves. Nevertheless, anxieties about
latex allergies have driven glove makers to enhance the quality associated with their nitrile latex
gloves, and currently, nitrile latex gloves are nearly as breathable and cosy as gloves made of
natural rubber. Furthermore, sterilising nitrile latex gloves won't change their physical
properties. Nitrile latex gloves are therefore preferred by numerous industries due to their
outstanding durability. Since nitrile latex gloves have a greater average selling price (ASP) than
other key substances, it has proven challenging to enter underdeveloped markets. Glove
manufacturers have therefore made significant investments in digitalization and automation for
the purpose of rendering their products more affordable. This has increased production and
decreased overhead, strengthening the competitive edge of their businesses. Glove ASPs will
progressively decline in the future as production efficiency and usage rate increase.

28
4.1.3 Economic Factors

Fluctuations in Raw Material Pricing

The cost of the substances used in the production of disposable gloves, including vinyl,
nitrile, and latex, can vary significantly due to external factors like supply chain disruptions or
instability in politics (Maximize Market Research Pvt Ltd, 2023). These variations may
contribute to higher production costs for businesses, which in turn may result in higher prices
for customers in the disposable glove industry. For businesses in this industry, guaranteeing
gloves are sanitary, secure, and environmentally friendly is a financial problem. This difficulty
might serve as an obstacle for new competitors, driving up prices for consumers. The most
common substance for gloves, latex, is reasonably priced. Variations in the climate, rivalry from
competing sectors, and political circumstances all have an impact on latex glove costs.
Businesses must decide whether to absorb increased expenses themselves or transfer these
expenses to customers in the form of more expensive glove pricing as the price of raw materials
rises. Aside from that, the business’s expenses will be impacted by changes in the price of oil
because it is essential to the production of gloves made from nitrile and vinyl (AMMEX, 2022).
The figure below shows the price fluctuations of the raw material (Top Glove Corporation Bhd.,
2023):

29
Foreign Exchange Rate

Prominent exporters from Malaysia, such as Top Glove Corporation Bhd. have been
forced to evaluate the effects of the changes in the value of the Malaysian Ringgit compared to
the US dollar on their operations. More than 95% of Top Glove’s income, an international player
in glove production with operations across numerous nations, comes from glove exporting to
over 195 countries, with the majority of these sales being made in US dollars (Single News -
the World’s Largest Manufacturer of Glove, n.d.). For Top Glove, the changes in foreign
exchange rates bring opportunities as well as obstacles. For example, if the Ringgit Malaysia
appreciation against the US dollar, the immediate effect on revenue from exports may cause
profitability stress, even if it may benefit through reduced expenses of imported materials due
to the natural hedging formed by a large amount of expenses being paid in US dollars. Top
Glove highlights the significance of spreading rising expenses and advantages with consumers
via tactical price modifications, underscoring the company's dedication to current hedging
procedures and perceiving fluctuations in currencies to be having an immediate effect. For Top
Glove to remain successful in the global marketplace, it will be essential to strike an equilibrium
between cost management and aggressive pricing approaches as it negotiates the challenges of
fluctuating foreign exchange rates.

Growing in E-commerce Industry

The global simplicity and accessibility of internet buying are the main factors driving
the marketplace (Disposable Gloves Market Share, Size, Report 2023-2028, n.d.). The growing
use of e-commerce sites for disposable glove purchases also had an impact on market expansion.
The market is expanding because consumers can peruse a variety of glove alternatives, evaluate
costs, and study comments from the convenience of their residences or mobile gadgets. Another
significant growth-inducing aspect is the COVID-19 epidemic, which hastened the move
towards online commerce as individuals limit in-person interactions and outdoor usage.
Furthermore driving the e-commerce sector is the pandemic's increasing demand for disposable
gloves, which makes it possible for consumers to obtain gloves swiftly and effectively.
Additionally, the global availability of online shopping platforms has made disposable gloves
more accessible to consumers, opening up new opportunities and enabling vendors and
producers to reach a wider audience outside of their immediate geographic areas. This has led
to favourable market expansion. Additionally, e-commerce channels' smooth management of
supply chains and convenience of procuring in volume are improving the market picture.

30
4.1.4 Ecological Factors

Ecological Concepts – Environmentally Friendly Products

Hospitals and clinics should see a significant increase in demand for disposable gloves
as a result of rising healthcare costs worldwide (Maximize Market Research Pvt Ltd, 2023).
Disposable glove use has been driven by an ageing population and increased lifespans, which
increase the need for and volume of healthcare treatments. The marketplace for disposable
gloves is being driven by a variety of factors, including rising consciousness about the need for
cleanliness and the reduction of viruses in multiple sectors. It is anticipated that this trend will
continue, offering new opportunities for businesses that concentrate on producing effective and
inventive gloves. There are a lot of chances for the disposable glove market to grow because of
ongoing advancements in ingredients and technology.

In meeting the numerous requirements as well as preferences of consumers, these

innovations seek to improve the gloves' luxury, utilisation, safeguarding, ecological impact, and
functioning. The public's growing demand for disposable gloves that are environmentally
friendly, and disposable is indicative of a greater awareness of environmental issues. Producers
are proactively pursuing environmentally sustainable solutions to tackle environmental issues,
conforming to the principles of customers who place a premium on sustainability.

31
4.1.5 Political Factors

Government Regulations and Policies

All relevant legislation, regulations, instructions, guidelines, procedures notes,

directions notes, and other requirements imposed by the other stock market in relation to the
place where the business’s securities have been listed or traded for or the foreign depository, as
the case may be, as well as the Central Depositories Act, the Rules of the Depository, the Listing
Requirements, and the Act, as relevant, are all applicable and will be binding to or have an
impact Top Glove. For example, Top Glove has to follow the Environmental Quality Act 1974,
improve human rights, ethical behaviour, and social compliance by using UNGP Business &
Human Rights, and dispose of regularly scheduled waste and wastewater release in compliance
with Department of Environment (DOE) regulations.

Natural Gas Tariff

The term "tariff" in Section 13(1)(a) of the Gas Supply (Amendment) Act 2016
describes the service charge (tolling fee) that the licensee for reprocessing, shipping, or
distributing imposes on the end user of the gas infrastructure. The gas selling price that a retail
licensee imposes on its retail consumers is referred to as a tariff in Section 13(1)(b). Gas and
coal are typically utilised in glove manufacturing operations to provide heating for drying out,
chlorinating, and heating fluid latexes (Patrawoot et al., 2021). Hence, the decline in the tariff
will decrease the company's cost burden.

During the regulation time frame of January 1, 2023, to December 31, 2025, the newly
appointed Economic Minister and the Council of Ministers have decided to lower (in average)
the basic average rate of facility consumption gas that gas customers must pay (Government
Reduces Pricing for 2023-2025 Gas Tariff, 2022). The reprocessing ends are operated by Regas
Terminal (Sg. Shrimp) Sdn. Bhd. (RGTSU), a distribution pipeline functionality controlled by
Gas Malaysia Distribution Sdn. Bhd., the transportation workflow managed by PETRONAS
Gas Bhd. (PGB), and the regeneration endowed and retained by Pengerang LNG (Two) Sdn.
Bhd. (RGTP) will all be modifying their fees under the new tariff pricing. Ultimately, this will
result in a decrease in the cost of gas utilised by companies and industries. As a result, RGTSU's
average basic tariff, which is set at RM3.455 per gigajoule (GJ) per day, is unchanged from the
RP1 period. No modification for income. RGTP dropped from RM3.485/GJ/day during the RP1
period to RM3.165/GJ/day, a 9.2% decline. No change in income for the period. PGB also had
a 5.8% decline, or RM1.063/GJ/day, as opposed to RM1.129/GJ/day during the RP1 era. After

32
excess adjusting earnings of RM0.002/GJ/day, the average tariff permitted during the time
frame of January 1, 2023, to December 31, 2023, is RM1.061/GJ/day; the average basic tariff
for GMD stays at RM1.573/GJ/day, as it did during the RP1 period. After deducting
RM0.038/GJ/day for surplus revenue, the average tariff permitted for the period of January 1,
2023, to December 31, 2023, is RM1.535/GJ/day.

Throughout his live speech regarding the price modification, Economic Minister YB
Rafizi Ramli stated that the industry should expect lower energy expenses as a result of the
average gas facility rate for the RP2 period. Depending on the overall amount of petrol used,
with a drop in the average utility bill. For the user group of either homes, businesses, or
factories, this gas is expected to convert into reductions between RM5.5 million and RM33.2
million annually and between RM4,000 and RM55.9 million annually in 2023. Rafizi Ramli
expressed his optimism that this decrease in petrol facility rates would assist businesses in
adjusting to an unexpected spike in expenses and, in turn, translate into yet another attempt to
rein in the rising cost of daily life for the betterment of the populace.

33
4.2 Five Forces Competitive Model
4.2.1 Threat of New Entrants

As newly established companies are entering into the industry, the competition within
the industry rises accordingly as well as the risk and the influence on the profitability of every
company operating in the same industry (“Threat of New Entrants - Important Component of
Industry Analysis,” n.d.). A threat to the existing companies exists due to the new entrants while
its level of negative influence on the existing companies is determined based on the barriers to
the new entrants. The higher and more barriers to entry, the lower the threat of new entrants as
the barriers make it more difficult for a new company to enter the industry or to sustain its
business. In the case of Top Glove, within the glove manufacturing industry, the barriers to
entry include economies of scale, product differentiation, capital requirements, and access to
distribution channels.

Economic of Scale

Economies of scale will be achieved only when the firm can produce on a large scale.
The greater the production scale, the better the cost advantage the firm can capture. Based on
the Annual Report 2022, Top Glove reported 812 production lines and a production capacity of
100 billion pieces of gloves per annum. Undeniably, as the world's largest glove manufacturer,
Top Glove can achieve a high production scale as well as the economy of scale which is difficult
or impracticable for the new entrants to achieve the level of 100 billion pieces of gloves per
annum. Concisely, it will be a huge barrier for the new entrants to compete in terms of
production scale and cost minimization.

Product Differentiation

The global community is concerned with sustainability issues, especially climate change
which drives the trend of green manufacturing and eco-friendly products including the glove
industry. Therefore, product differentiation in terms of sustainability is the new target for the
manufacturers to focus on. As the customers are demanding more sustainable and eco-friendly
products, the new entrants might need to invest a huge amount of funds in research and
development. To launch a new product requires an abundance of resources in research and
development which will hinder the entries of the new entrants. For Top Glove, the debut of
Biogreen and Biodegradable Nitrile Gloves incorporating cutting-edge sustainable features is a
significant step forward in crafting a sustainable glove roadmap which is difficult to imitate by

34
the new entrants. Therefore, the threat of new entrants to Top Glove is insignificant in terms of
product differentiation.

Capital Requirements

In the manufacturing industry, capital investment and expenditure contribute a

significant portion to the business operation, especially investment in automated machinery,
production lines, factories, etc. to maximize the productivity of the manufacturing process. As
the leader of the glove industry, Top Glove is always concerned with the optimization of its
manufacturing process through capital investment in production facilities, factories, and state-
of-the-art technology as well as human capital to enhance productivity. To give an illustration,
in 2023, Top Glove invested about RM364 million in capital expenditure, including 48 factories
with a production capacity of 95 billion pieces of gloves per annum. The capital requirements
for the manufacturing industry will be a barrier to entry to new entrants and even worse the
rapid technological advancement will burden them with adapting to the latest manufacturing
practices.

Access to Distribution Channels

In the glove industry, the production capacity is not only the criterion of success for a
glove manufacturer. Instead, access to distribution channels is also a significant factor in the
sustainability of the business operation. It will be a barrier to the new entrants as the existing
market players have dominated the access to distribution channels. For instance, Top Glove has
access to the market in Malaysia, Thailand, China, Vietnam, and more than 195 countries which
constitute over 2,000 customers worldwide. Thus, it has limited access to the distribution
channels for the new entrants, especially since the rest of the distribution channels are competed
by the existing companies. As a result, it is difficult for the new entrants to sustain their business
and has limited threat to Top Glove.

35
4.2.2 Threat of Product Substitutes

Gloves are not Substitutable Products

First of all, gloves are not substitutable products in the aspect of healthcare as they act
as personal protective equipment (PPE) to protect the hands from hazardous, germs,
contaminants, or other infectious particles which is essential to healthcare industries like
hospitals (“Gloves Are PPE and More -- Occupational Health & Safety,” n.d.). When dealing
with contamination in a hospital, there is a set of stringent rules to be followed by medical staff
which requires them to wear gloves as PPE in certain circumstances. Gloves are always the best
choice for the healthcare sector to minimize the risk of contamination and cross-infection.
Following by the outbreak of COVID-19, a worldwide spreading virus, it was giving rise to a
huge demand for gloves. Gloves can never be a substitute product, especially since it is
affordable in a massive daily consumption.

On the same hand, not only in the healthcare sector, gloves are also becoming essential
in various applications across industries which consist of food and beverage, airlines,
construction, and other relevant industries. The growing consciousness of occupational health
and safety and the establishment of mandatory standards drive the demand for gloves
worldwide. For instance, ISO45001 which is for management systems of occupational health
and safety promotes the usage of gloves for the workers’ safety, especially when dealing with
hazards. Government policies also play a significant role in mandating the use of gloves within
occupational safety regulations to promote safer working environments. The food and beverage
industry also establishes a major consumption of gloves to ensure hygiene and contamination
of food as the food and beverage industry itself constitutes a substantial segment of economic
activities daily.

Technology advancement could be one of the contributing factors that why gloves are
not substitutable products. With the emergence of Industrial Revolution 4.0, new technologies
like the Internet of Things and Artificial Intelligence are demanding the usage of gloves in
research and development activities as gloves are vital for ensuring the safety of the workers
during the R&D process.

To be precise, Top Glove does not need to worry about the threat of product substitutes
for the foreseeable future as gloves are considered an essential item for various applications for
different needs.

36
4.2.3 Bargaining Power of Suppliers

Generally, the bargaining power of suppliers refers to the ability of suppliers to raise
prices or reduce the quality of the goods or services provided by them (“Bargaining Power of
Suppliers - Factors That Give Suppliers Power,” n.d.).

Ability to Raise Prices

In the case of Top Glove, natural rubber is the main raw material for its production of
gloves. To fulfil its huge production scale, Top Glove’s procurement team has collaborated
with 4,000 vendors and has incurred an annual RM3.7 billion and above in the procurement of
raw materials, especially natural rubber (“PROCUREMENT - The World’s Largest
Manufacturer of Glove,” n.d.). Based on the research by Yi Chiun Fong and the team, the price
of natural rubber is determined based on the global market demand and supply while at the
same time, it is affected by external factors like world crude oil price, real exchange rate,
synthetic rubber price, and other factors. It indicates that the suppliers of natural rubber have
limited power in raising the prices as their power is too little to influence the whole global
market of natural rubber.

Ability to Reduce Quality

As the leading player in the glove industry, the quality of products is the first and
foremost concern of Top Glove as well as the quality of raw materials supplied by the vendors.
Top Glove’s Quality Assurance Department will implement quality testing of random samples
to ensure the acceptable level of quality of the raw materials provided. The procurement team
will regularly update the code of conduct with the suppliers to ensure the delivery of raw
materials in a sufficient amount and an acceptable quality. By carrying out supplier audits, the
quality of raw materials can be assured to eliminate waste due to lower quality of raw materials.
Consequently, the suppliers have a low ability to reduce the quality of the raw materials through
their limited bargaining power.

Literally, in the case of Top Glove, the suppliers have limited bargaining power as they
cannot raise the price or reduce the quality of the goods and services provided.

37
4.2.4 Bargaining Power of Buyers

The bargaining power of buyers comes from the ability of the buyers to demand higher
quality products or services or to stipulate a lower price from the suppliers of the goods and
services (“The Bargaining Power of Buyers: Definition and Analysis,” 2023).

Large Purchases

In the case of Top Glove, most of its customers make orders in large quantities to fulfil
their industry needs, especially the healthcare industry. The gloves are daily consumption items
as personal protective equipment for the medical staff. Therefore, it will result in ordering a
large number of purchases to fulfil its daily needs. Based on the annual report, it demonstrates
that Top Glove has generated revenue from contracts with customers which amounted to about
RM2 billion in Malaysia, RM128 million in Thailand, RM8 million in China, and RM116
million in other market segments. Consequently, the larger the purchase from customers, the
higher the bargaining power of the customers.

Alternative Suppliers and Low Switching Cost

In the aspect of alternative suppliers, instead of Top Glove, there are other established
glove manufacturers to provide alternative products with a competitive price and quality. For
example, Hartalega, Kossan, and Supermax are the direct competitors to Top Gloves in
providing similar products which are Nitrile Gloves and Latex Gloves (“The Ultimate Malaysia
Big 4 Glove Maker Comparison - Kaya Plus,” n.d.). Therefore, the buyers have various
selections of suppliers and the switching cost is low for them to switch among the alternative
suppliers. As a result, the buyers have a high bargaining power to influence the suppliers to
provide products and services with higher quality and lower prices.

Product Differentiation

On the other hand, Top Glove has implemented product differentiation to provide a
more sustainable and eco-friendly glove to its buyers. Sustainable development has become a
global concern since the United Nations established the 17 sustainable development goals
which are to be committed to by the companies and the industries worldwide. To incorporate
the value of sustainability into the business operation, the buyers might be concerned about
glove products that could minimize waste and have a limited impact on the environment and
society. As a product differentiation strategy, Top Glove has established new product segments
that focus on sustainability, namely Biogreen and Biodegradable Nitrile Gloves.

38
Correspondingly, the bargaining power of buyers will be limited as there is little sustainable
glove selection available in the market.

39
4.2.5 Rivalry among Existing Firms

Rivalry among existing firms or competitors refers to the intensity of competition in a

similar market or sector. The existing firms are mutually dependent on the actions and reactions
of other competitors. The competition can result in 2 ways, either in an opportunity for
improvement or in a threat to the profitability of the business. Based on Porter’s theories, the
intensity of competition is determined by several factors, namely the number and competence
of competitors, rate of industry growth, high fixed cost, etc (“Industry Rivalry & Competition |
Porter’s Five Forces,” n.d.).

Comparison between Competitors

In the global glove market, Malaysia has dominated the market for several years as the
world’s largest producers are headquartered in Malaysia. Although Top Glove is ranked as the
first among the top glove manufacturers in terms of production capacity, it faces severe
competition from other established glove manufacturers, especially in Malaysia like Hartalega
Holdings Bhd, Kossan Rubber Industries Bhd, and Supermax Corp Bhd which are also known
as one of the world's largest glove producers.

Kossan
Top Glove Hartalega Holdings Rubber Supermax
Corp Bhd Bhd Industries Corp Bhd
Bhd
Headquarters Malaysia Malaysia Malaysia Malaysia
Products in Nitrile Gloves Nitrile Gloves Nitrile Gloves Nitrile Gloves
Common Latex Gloves Latex Gloves Latex Gloves Latex Gloves
ISO, TUV, EC,
EC, ISO, FDA, CE, FDA,
OHSAS, UL, NMPA, ISO, OHSAS,
Certifications EAR, TUV, CoI, CoP,
NFPA, FDA 510(K), IEC, TS, etc.
NQA, etc. CoA, etc.
etc.
Latest Financial Performance
31 Aug 2022 31 Mar 2023 31 Dec 2022 30 Jun 2022
Net Sales
5,572,349 2,409,618 2,343,764 2,687,227
(RM’000)
Net Profit
225,564 -235,136 157,095 718,905
(RM’000)
Operating
6.51 -8.58 9.29 39.64
Margin (%)
Return on
3.22 -4.8 3.95 14.48
Equity (%)

40
 Based on the comparison above, Top Glove has achieved a great number of net sales,
which are more than double its competitors’ net sales. However, Top Glove’s net profit is not
as high as its net sales and has recorded a relatively lower operating margin and return on equity
despite the size of the company. It indicates that although Top Glove has a great sales volume,
it still faces intense competition from its competitors.

Rate of Industry Growth

As discussed earlier, as gloves are not substitutable products, the demand for gloves
remains stable and is expected to increase due to the needs of various industries like industrial
and food industries. Based on the global statistics, the global gloves market is estimated to
achieve $118.5 billion by 2025 with a compound annual growth rate of 8.6% from 2021 to 2025
(“Industry Rivalry & Competition | Porter’s Five Forces,” n.d.). According to the Malaysian
Rubber Glove Manufacturers Association (Margma), the global demand is expected to hit 371
billion pieces in 2023 and a 4% growth in 2024 (“Industry Rivalry & Competition | Porter’s
Five Forces,” n.d.). Generally, both statistics show an upward trend of global glove demand
which drives industry growth. A positive growth in the global glove market will mitigate the
intensity of competition among glove manufacturers.

High Fixed Cost

The glove industry requires manufacturers to invest continuously in the latest

technology to maximize operating efficiency. Consequently, a high fixed cost needs to be
incurred by the companies to ensure their production line operates with maximum efficiency to
achieve competitive advantage. For instance, Top Glove has incurred RM364 million capital
expenditure in 2023 while Hartalega has incurred RM308 million to improve its operational
efficiency. Kossan has also incurred RM116 million in capital expenditure in 2022. These
indicate a high fixed cost that needs to be borne by the glove manufacturers annually.
Subsequently, it creates severe financial pressure for the companies to maximize their capacity
as well as sales to cover the fixed cost. Consequently, the intensity of competition will rise as
the companies are competing to gain sales and profit as much as they can.

Overall, the rivalry of existing companies is high to Top Glove due to severe competition
from established glove manufacturers like Hartalega, Kossan, and Supermax and the high fixed
cost while the growth of the global glove market might help to mitigate the intensity of
competition within the glove industry.

41
5.0 Situational Analysis
5.1 SWOT Analysis
5.1.1 Strengths
Commitment to Sustainability and Social Responsibility
Top Glove is particularly concerned about being environmentally friendly and caring
for others, and they adhere to strong company guidelines. According to the report, the
corporation aspires to have as little impact on the environment as possible while also balancing
economic growth and sustainability. This commitment pervades every aspect of their corporate
governance, from committees on the Board to group tasks at the management level.

This is due to the Group's company principles, which are Respect, Integrity, Value,
Empowerment, and Relationship, according to the report. The company's decision to continue
using the term "ESG" (Environmental, Social, and Governance) rather than "EESG" (Economic,
Environmental, Social, and Governance) demonstrates how it intends to incorporate economic
concerns into its sustainability strategy. This strategy approaches sustainability holistically,
balancing the need for economic growth with the preservation of people and the environment.
Sustainability governance is included in the company's structures, demonstrating that it takes a
comprehensive and strategic approach to sustainability.

Being socially and environmentally responsible is beneficial to business since it

enhances the company's image, attracts investors and consumers who care about doing the right
thing, and can save money by utilising resources more efficiently and decreasing waste.
Businesses that operate responsibly are better equipped to meet legal obligations, attract top
personnel, and gain a competitive edge as people throughout the world grow more aware of
environmental and social challenges. It demonstrates a dedication to bigger social aims in
addition to earning money.

Continuous Improvement: Directors’ Professional Development

Top Glove has implemented a training policy to allow its Directors to learn, grow, and
train. The program's purpose is to provide the Directors with the information and skills they
need to accomplish their duties appropriately. As part of these endeavours, the Board Induction
Programme assists new Directors in learning about the company, its operations, finances,
strategies, and issues. This form of professional development investment demonstrates that the
organisation values competent leadership and good decision-making.

The purpose of this policy is to equip Directors with the knowledge and skills they need
to carry out their responsibilities effectively and ethically. This type of plan ensures that the
42
company's management is up-to-date and capable of navigating the challenging business
climate. This enables people to make better judgements, develop better plans, and run the
administration more efficiently. Strong leadership is required to navigate challenging work
conditions. Directors who are always learning and evolving increase the leadership of the
company, making it easier to handle and respond to new problems and opportunities.

Source: https://www.topglove.com/downloadgovernance/policies/49/training-policy-for-
directors

Operational Efficiency

Top Glove's operational efficiency is a core of company success, and it is driven by

several critical strategies. To begin, the company emphasises lowering downtime and extending
the lifespan of consumable parts, which results in greater production line utilisation. Automation
is an important aspect of their operating strategy, particularly in labour-intensive sectors like
compounding and packing, where it improves productivity and reduces labour costs.

Implementing a centralised SCADA system for monitoring and controlling production

line parameters improves operational efficiency dramatically. This technology improves data
accuracy and traceability, resulting in ideal manufacturing conditions. Improvements in
manufacturing technology, such as enhanced robotic arms and auto-stacking procedures, have
also helped to increase the quality and efficiency of glove manufacturing.

Furthermore, Top Glove emphasises energy and resource management, implementing

numerous initiatives to save energy and improve water security, which aids in lowering utility
costs and assuring uninterrupted manufacturing. The company's dedication to continual process
improvement and strategic supply chain management improves operational efficiency by

43
ensuring that production methods are both modern and cost-effective. Top Glove's production
efficiency is improved because of these strategic measures, allowing the company to maintain
its competitive advantage in the worldwide glove manufacturing market.

Product Innovation and Diversification

Top Glove's global success has been boosted by product innovation and diversification.
R&D is prioritised by the organisation as the foundation of growth and success. Their R&D
personnel has grown dramatically from 15 in 2013 to 134 in January 2024. This expansion
demonstrates their commitment to product innovation and improvement.

The company has received numerous honours for its creativity. Top Glove was ranked
second in the 'Top 20 Malaysia Patent Applicants' list in 2020, and the company has filed 235
patents in Malaysia since 2002. This demonstrates their dedication to glove manufacturing
innovation. Top Glove has also received three International Innovation Awards 2020 in the
Product Category, as well as the Clarivate South and Southeast Asia Innovation Awards 2021 in
the Corporations Category in Malaysia, indicating their dedication to innovative product
development.

Top Glove has ten R&D Centres across Peninsular Malaysia and Southeast Asia, each
focusing on a specific research topic. These research and development facilities provide
analytical services, accredited labs, 3D scanning, surgical glove development, automation, big
data analysis, and artificial intelligence, displaying a diverse R&D strategy.

44
 Top Glove exhibits its commitment to environmentally friendly technology. By
developing and reusing eco-friendly products, Biogreen and Reclaim Rubber demonstrate their
commitment to environmental sustainability. This is demonstrated by engineering and
automation technologies such as the R&D Robotic Stimulator and the All-Vision Camera
Quality Inspection System, which incorporate advanced technology into their manufacturing
processes to increase quality and sustainability. Top Glove's dedication to product innovation,
diversification, and R&D has brought them to recognition as a glove manufacturer.

All-Vision Camera Quality Inspection R&D Robotic Simulator

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5.1.2 Weaknesses

Financial Losses and Performance Decline

Top Glove Corporation Bhd reported a significant loss in its 2023 financial year,
including an RM454 million loss after tax in the fourth quarter (4QFY2023), which
encompassed a one-off RM389 million impairment. This impairment did not impact the
company's cash flow, and excluding this factor, the loss for 4QFY2023 would have been RM65
million. Positive EBITDA and operational cash flow indicated recovery from demand-supply
imbalances in the glove industry. The total revenue for FY2023 was RM2.26 billion, with a net
loss of RM887 million, which would stand at RM498 million excluding the impairment. This
marked a stark contrast to its previous financial achievements and indicated a notable downturn
in the company's performance.

Sustainability Issues During Glove Manufacturing

For Top Glove Corporation Bhd, sustainability issues related to natural rubber
plantations significantly impact the environment and emerge as a weakness for the company.
The extensive cultivation and harvesting of natural rubber, a key raw material for glove
manufacturing, presents significant environmental implications. These practices contribute to
deforestation and loss of biodiversity, adversely affecting various ecosystems. Additionally,
such agricultural practices can lead to soil degradation and water resource issues. For Top Glove

46
Corporation Bhd, which relies heavily on natural rubber, this poses a significant challenge in
terms of aligning with global environmental standards and meeting the increasing demand for
sustainable practices from consumers and stakeholders. The failure to address these concerns
adequately may not only impede their operational compliance but could also gravely impact
their corporate reputation.

A significant weakness regarding Top Glove Corporation Bhd's operations is the

substantial carbon emissions arising from its glove manufacturing processes, which are heavily
reliant on fossil fuels for energy. As highlighted in the accompanying data, the company started
to utilize petrol and diesel in FY2022 and produced about 3172 metric tons of carbon emissions.
These fuels are among the most carbon-intensive energy sources, exacerbating the challenge
Top Glove faces in the global push for carbon footprint reduction and climate change mitigation.
For Top Glove, a leader in the glove manufacturing sector, these emissions are not just about
environmental compliance but also reflect the company's ability to meet the rising demand for
environmentally friendly products among eco-conscious consumers and stakeholders. The
company's carbon emission issues can potentially impact its brand image and market position,
as customers and investors are increasingly favouring companies with sustainable and green
practices.

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Undiversified Business Model

Top Glove Corporation Bhd's undiversified business model, primarily focused on the
production and sale of rubber gloves, especially for the healthcare sector, comes with several
limitations. This specialization means the company's fortunes are closely tied to the dynamics
of the rubber glove market, making it sensitive to demand fluctuations, technological shifts, and
competitive pressures. The reliance on a single product line restricts the company's ability to
spread risks and limits its flexibility to adapt to new market opportunities. Furthermore, this
model could constrain innovation efforts and revenue diversification, potentially impacting the
company's ability to respond to market changes and regional fluctuations effectively. In an
industry characterized by rapid evolution and diverse needs, such a focused approach may limit
strategic flexibility and growth prospects.

Top Glove Corporation Bhd operates 49 factories across Malaysia, Thailand, China, and
Vietnam, including 37 glove factories, 2 latex concentrate plants, 3 chemical factories, gamma
sterilisation factories, glove former factories, packaging material factories, dental dam, condom,
and face mask factories. However, with the majority of factories still dedicated to glove
production, the company's portfolio can be considered concentrated within that industry
segment.

High turnover of employees

Another problem Top Glove Corporation is facing right now is the high turnover rate.
It is a big concern for the company. They are spending too much on salaries and other expenses
to retain the employees. It is a big weakness for Top Glove Corporation.

48
 The figure below demonstrates a pronounced escalation in employee turnover at Top
Glove Corporation, signalling a critical vulnerability in the company's retention strategy. From
FY2020 to FY2023, the total turnover surged from 18.60% to a concerning 64.33%, with
voluntary separations reflecting a similar pattern. This alarming trend not only indicates a
potential lapse in fostering a supportive work environment but also suggests systemic
organizational challenges that may be driving the workforce to seek opportunities elsewhere.
Such a high rate of attrition necessitates a thorough evaluation of internal practices, including
but not limited to, employee engagement, competitive compensation, career progression, and
overall job satisfaction.

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5.1.3 Opportunities

Global Market Expansion

As the world’s largest glove manufacturer, Top Glove has accessed the international
market by having marketing offices in the USA, Germany, and Brazil with the support of
production lines in Malaysia, Thailand, China, and Vietnam to handle over 2,000 customers
worldwide and exports to more than 195 countries.

From the figure above, Top Glove has diversified its business segments into several
regions to access the domestic markets of each region. Due to the event of oversupply, the
global demand for gloves is significantly lower compared to prior years. However, as an
essential item to various industries, the demand for gloves is expected to be stable after the
depletion of gloves which were being stockpiled during the outbreak of COVID-19. Therefore,
it indicates a great opportunity for Top Glove to penetrate the international market to gain
market share to expand its global market segments with its global recognition and high-quality
products. Concisely, Top Glove has well-positioned itself as the global market leader for gloves
to retain the opportunity for continuous global market expansion in the future.

Expected Future Growth in the Glove Industry

According to RHB Research analyst Oong Chun Sung, the decreasing demand due to
oversupply and stockpiling is estimated to be normalized in 2024. As gloves are disposable
equipment, the consistency of replenishment of exiting stocks will speed up the normalization
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of the demand in the global glove market. On the same hand, the boomed utilization rate of
several industries like hospitality, food and beverage, and industrial products industries also
contribute to the stabilization and improvement of glove demand.

As discussed before, based on global statistics, the global gloves market is estimated to
achieve $118.5 billion by 2025 with a compound annual growth rate of 8.6% from 2021 to 2025.
According to the Malaysian Rubber Glove Manufacturers Association (Margma), the global
demand is expected to hit 371 billion pieces in 2023 and a 4% growth in 2024.

Recently, the outbreak of COVID-19 started to reignite based on the news article by
The Star. For instance, the reported COVID-19 infection cases have increased to 56,043, a 75%
increase compared to the prior week. The scenario of increasing reported COVID-19 cases will
be a red flag to society to be concerned about the contamination and spread of COVID-19.
These phenomena will be catalysts for the continuous improvement of global glove demand.

Precisely, several indications demonstrate a huge opportunity is awaiting Top Glove to

maximize its sales in the foreseeable future.

Automation and Digitalization

As a progression of Industrial Revolution 4.0, Industrial Revolution 5.0 is emerging by

incorporating technological advancements like Artificial Intelligence to streamline the
production process through automation and digitalization. It is complemented by human,
environmental, and social aspects to ensure sustainability and resilience in an organization. A
concept of Smart Production has been developed by integrating state-of-the-art technology and
has provided a competitive advantage opportunity to the manufacturers to utilize the advanced
technology in producing a competitive production capacity with a reasonably lower operational
cost.

To sustain itself as the industry leader, Top Glove has consistently invested in the latest
technology and adopted automation and digitalization practices within its production lines.
Based on the Annual Report, Top Glove is concerned about human labour-related hazards that
may result in affecting production and even the reputation of the company. Therefore,
automation and digitalization will be a great opportunity for them to minimize the reliance on
human capital by cultivating the concept of Smart Production by Industrial Revolution 5.0
within their manufacturing process. At the same time, it provides a significant competitive
advantage to Top Glove in establishing a cost leadership strategy to outperform its competitors.
With a comprehensive and streamlined manufacturing landscape, Top Glove could also
51
maximize its production capacity as well as its sales to cater to the increasing demand for gloves
in the future.

Sustainability Leader

The emergence of sustainability issues, especially climate change has driven the trend
of sustainable development for the organization to integrate sustainability pillars, namely
Environmental, Social, and Governance as more information on ESG is insisted on by the
stakeholders. The stakeholders nowadays are concerned about the organization’s ability to
manage the risks and opportunities related to sustainability issues as the issues might give rise
to a negative influence on the financial and non-financial performance of the organization. The
stakeholders including customers, employees, and investors are looking forward to the
company that could provide the best solution in dealing with the sustainability issues.
Sustainability achievement would be a value-added opportunity for an organization to attract
investors, recruit potential employees, and retain loyal customers.

In the case of Top Glove, it has achieved several global recognitions in terms of
sustainability. For instance, in 2023, it was recognized as the top 3% in the Healthcare
Equipment and Supplies Industry and S&P Global’s Annual Sustainability Yearbook 2023 as
an “Industry Mover”. Global recognition demonstrates an external assurance of the
sustainability performance of Top Glove in playing its role as a sustainability leader within the
glove industry. Concisely, with a good reputation and recognition, Top Glove could achieve a
competitive advantage in terms of sustainable development by differentiating itself from other
competitors that have weak sustainability management.

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5.1.4 Threats

Normalisation in Demand Causes Oversupply

The global market for rubber gloves, a necessary commodity utilised in numerous
businesses throughout the majority of the epidemic, is predicted to decline due to the fact that
the COVID-19 pandemic is mostly under control (Chong, 2022). The worldwide need for
rubber gloves for the year 2022 is expected to be 399 billion pieces, decreasing almost 12%
from the previous estimate of 452 billion pieces, according to a report released by the Malaysian
Rubber Glove Manufacturers Association on Wednesday, August 3, 2022. The nation, which
leads the globe in latex glove production and commands a significant portion of the US$28
billion worldwide market, projects that it will make over 240 billion gloves by the year 2023.

There is information that certain consumers would resupply soon because the prior stock
is anticipated to run out by the end of 2023 (Ng, 2023). However, considering that the majority
of nations have moved out of the stage of epidemics following border opening back up, it is
anticipated that replenishment efforts will continue to be ineffective. Comparing 280 billion
gloves in 2018 and 340 billion in 2019, the Malaysian Rubber Glove Manufacturers Association
(MARGMA) now predicts that the global glove demand will return to levels prior to the
pandemic in 2023 which is 300 billion pieces. It is anticipated that the worldwide market for
gloves will return to its level before the pandemic began with a normalised yearly expansion.
The global glove demand is shown in the figure below.

The most recent prediction indicates that despite more than two years of record-breaking
interest in disposable gloves throughout the worldwide epidemic, yearly demand expansion in
2022 will be somewhat slower, ranging from 10% to 12% (Chong, 2022). Supramaniam
predicted that in 2023, demand will probably resume its long-term growth pattern of 12% to
15%, provided the market absorbs the excess supply. Despite the lower-than-expected output,
53
the group is optimistic that Malaysia will receive roughly RM23.1 billion (S$7.16 billion) in
rubber glove earnings from exports in 2022. This remains more than the RM17 billion that was
recorded in 2019 prior to the epidemic. The sector's utilisation rate decreased about 35%–40%
by the fourth quarter of the year 2022 towards 32–35% during the first quarter of the year 2023
(Ng, 2023). The 80–85% industrial utilisation rate in the year 2019 was hardly 50% of it. In
addition to the slowing in consumer demand, glove manufacturers worldwide are also facing
challenges from oversupplied customers and overcapacity manufacturing that currently
applying influence on the average selling price (ASP) of rubber gloves.

But there exists quite an amount of inventory within the warehouses owned by
governments and buyers who are overloaded in response to worries of a shortage, making the
next six to nine months following August of 2022 challenging. According to Top Glove
Corporation Bhd. (2022), orders have consequently decreased significantly, and ASP is
additionally declining. Furthermore, because of decreased utilisations, consumers have not felt
compelled to place sizable orders, while others are also taking a “waiting and observing” stance
in case ASP continues to drop. The glove manufacturers in Malaysia are going to be displaying
lesser numbers once the surplus inventory is eliminated.

Government Regulations that Increase Operating Cost

The Malaysian government's Minimum Wage Order stipulates the fact that beginning
on May 1, 2022, workers' minimum monthly income will rise from RM1,200 towards RM1,500
(Ann Jacob, 2022). The order's application to companies having less than five staff members is
scheduled to take impact as of January 1, 2023. This obligation, leading to a 25% rise in labour
expenses at a time while companies were still struggling with the fallout from the COVID-19
outbreak, strains in worldwide supply chains, and skyrocketing inflation, caused vibrations
across the business community when it was first made public. Understandably, the marketplace
responded with an instinctive response that included a freeze on hiring, salary reductions, as
well as price increases for services and products when higher expenses could not be justified
by increasing income. Besides that, glove manufacturers will probably be significantly
impacted by an increase in natural gas expenditures unless they can absorb the consequences
via higher ASP (Glove Sector Likely to Be Affected if Natural Gas Prices Go Up, 2022).
Between 10% and 15% of glove manufacturers’ cost of goods sold, involving Kossan Rubber
Industries Bhd., Top Glove Corporation Bhd., Supermax Corp Bhd., and Hartalega Holdings
Bhd., have been attributed to natural gas.

54
 In accordance with Top Glove Corporation Bhd. (2022), the company's operational
expenses kept rising due to disturbances in the worldwide supply chain, hikes in natural gas
tariffs of roughly 60% during the financial year of 2022, and the implementation of the
Malaysian minimum wage in May 2022. Additionally, because of a decreased utilisation rate,
its unit costs have increased. Due to the continuous oversupply scenario, the company's ability
to pass these expense increases on to clients was impacted, negatively affecting its bottom line.

Volatility of Price of Raw Materials

The emergence of a fresh COVID variation might put the organisation at the potential
of disruptions in the supply chain deriving by worldwide transportation backlog as well as
international production and manufacturing trouble, even though numerous nations recently
reopened their borders and progressively lifted restrictions on travelling. Top Glove’s reliance
on a small number of vendors and foreign nations to supply certain basic ingredients that were
under limited availability among local vendors increased the possibility of getting items of
inferior quality alongside an absence of sourcing products. The growing emphasis on
environmental, social, and governance (ESG) concerns will subject the company to a more
rigorous assessment when choosing its main vendors, along with the typical critical factors that
must be examined in the supply chain. The goal is to satisfy ESG requirements at an affordable
price. Thus, the potential global disruptions in the supply chain might cause volatility in raw
materials prices.

Volatility in the market for materials of manufacture is common and is typically caused
by disturbances in the supply of goods, surplus demand, or notable pricing fluctuations (Juliano
et al., 2023). Instances involving transient and persistent supply-chain disruptions which
resulted in notable price rises may be found during the previous 20 years. For example, in 2010,
the nation of Thailand, the globe's greatest manufacturer of rubber, had severe flooding that
resulted in a 57% annual increase in rubber pricing. Corresponding to this, the worldwide sole
factory that makes the specialist dyes utilised by automotive paint was momentarily shut down
in 2011 by the tsunami and earthquake that struck Tohoku island in Japan. Large
manufacturers had to postpone producing cars in specific colours as they frantically tried to find
substitute compounds for the dyes. When the epidemic began, a chain of custody
disturbances led to scarcity and increased costs, which shook the manufacturing industry.
Bullwhip consequences have been observed, whereby variations regarding demand are
magnified as they proceed upstairs in the chain of supply, leading to notable variations in terms
of accessibility and cost.
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Market Share Price below RM1

The largest glove producer globally, Top Glove Corporation Bhd., has experienced an
abrupt decrease in the market share price; it is now less than RM1 in the year 2022 (Kana, 2022).
In light of a reduction in demand for gloves, the business and its main rival Hartalega Holdings
Bhd suffered a significant loss of operations in the most recent financial quarter. As a result,
profitability fell to levels that were not witnessed prior to the Covid-19 outbreak. Top Glove's
up to this point market value decreased by 70.5%, closing at 70 sen on 20 September 2022, and
Hartalega's shares closed at RM1.54, much below its peak of RM6.10, both show this decrease.
The marketplace's oversupply of gloves in combination with the advent of non-glove
competitors, especially from China, has made conditions difficult to sustain the glove
manufacturers.

According to Tan Sri Dr. Lim Wee Chai, Executive Chairman of Top Glove Corporation
Bhd., the glove sector stood in an exceptional position throughout the epidemic (Top Glove
Corporation Bhd., 2022). In contrast with numerous other businesses, they performed
incredibly effectively and were capable of shielding front liners key players using protective
gloves while also offering enticing dividends as well as capital gains through a higher price for
shares. Considering the explanations listed above, the present share price indicates a poorer
mood in reaction to the glove manufacturers' weaker outcome. Top Glove Corporation Bhd. is
confident, nevertheless, such its achievement will recover to levels prior to the pandemic or
possibly more effectively, with the valuation of its stock reflecting this belief additionally, if
glove need commences picking upwards along with consolidation in the industry and
expansions getting postponed. As usual, they urge investors to approach Top Glove with a long-
term view and to take into account the solid and stable foundations of the business instead of
only the price of the stock.

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5.2 TOWS Analysis

STRENGTHS (S) WEAKNESSES (W)

Internal Factors S1: Commitment to W1: Financial
Sustainability and Social Performance
Responsibility W2: Sustainability Issues
S2: Continuous Due to Natural Rubber and
Improvement: Directors’ Carbon Emissions
Professional Development W3: Undiversified
External Factors S3: Operational Efficiency Business Model
S4: Product Innovation and W4: High Turnover Rate
Diversification
OPPORTUNITIES (O) SO Strategies WO Strategies
O1: Global Market Expansion (S1+S2+O3+O4) (W1+W2+O1+O2+O4)
O2: Future Growth in Glove SO1: Process WO1: Product
Industry Reengineering Differentiation
O3: Automation and
Digitalisation (S4 + O3) (W3+W4+O1+O3)
O4: Sustainability Leader SO2: Diversifying into WO2: Global Digital
Digital Solutions Transformation and
Workforce Development
Strategy
THREATS (T) ST Strategies WT Strategies
T1: Demand Normalisation (S1+T1+T2) (W1+W3+T1+T2)
causes Oversupply ST1: Sustainable WT1: Strategic
T2: Increasing Cost due to Innovation Diversification and
Government Regulations Efficiency Enhancement
T3: Volatility of Price of Raw (S2, S3, & T2)
Materials ST2: Regulatory (W4+T4)
T4: Market Share Price below Compliance and WT2: Employee
RM1 Sustainability Assurance Preservation

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5.2.1 SO Strategy
SO1: Process Reengineering
As discussed in the strategic issues, Top Glove has faced the problem of increasing
operating costs which results in weak financial performance. SO strategy aims to utilize the
strengths to retain and maximize the opportunities. Therefore, in the case of Top Glove, process
reengineering is recommended as an SO strategy to overcome the operational issues. Process
reengineering could be an effective solution with the professional development and competence
of the board to achieve operational efficiency through optimizing automation and digitalization.
The directors are continuously updated with the latest trends and knowledge, especially the
technological advancement in terms of manufacturing. Therefore, the board could provide
insights into adopting the concept of automation and digitalisation within the production line to
optimize operational efficiency as well as to reduce operational costs. The directors should
initiate the process of reengineering to integrate digital technologies into the manufacturing
process and eliminate any non-value-added activities to streamline and enhance productivity
without escalating operational costs.

Additionally, the process reengineering could utilize the current strength of Top Glove
in terms of sustainability to realize the aim of becoming the sustainability leader of the glove
industry or even the whole manufacturing industry. As a gloves manufacturer, undeniably, Top
Glove must face sustainability issues, namely carbon emission of production, deforestation due
to natural rubber plantation, and even the exploitation of employees. To enhance its
sustainability performance, it is essential for Top Glove to reengineer its business and
operational processes to reduce the impact of business activities on society and the environment.
For instance, production should be reviewed in terms of carbon emissions to eliminate or
replace the process with the latest green solutions and technology. Top Glove should also
review the employees working hours and shifts to avoid the issues of exploitation of employees,
especially the production staff.

Concisely, with the professional competence of the board and commitment to

sustainability, Top Glove could effectively utilise its strengths to achieve its long-term goals
which are to achieve full automation and digitalization in manufacturing while at the same time
being recognized as the sustainability leader in the world.

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SO2: Diversifying into Digital Solutions

Companies must be adaptable and innovative to remain competitive in today's volatile

global business world. Top Glove, a leading maker of rubber gloves, understands the
importance of staying ahead of market trends and exploiting emerging possibilities. Top Glove
may strategically position itself to capitalise on its natural strength in "Product Innovation and
Diversification" (S4) by capitalising on its inherent strength in "Automation and Digitalization"
(O3).

Top Glove has constantly demonstrated its prowess in innovation and diversification, a
key differentiator in the sector. Over the years, the company's commitment to pushing the
frontiers of glove manufacture has resulted in the creation of new glove kinds and safety goods.
Top Glove's fundamental strength has enabled it to service a diverse range of industries, from
healthcare to industrial safety, displaying its adaptability and agility. The current global trend
towards automation and digitization gives companies an unprecedented opportunity. This trend
entails the incorporation of digital technology into daily objects, which results in increased
functionality, safety, and convenience. The incorporation of digital solutions has grown
increasingly significant in sectors such as healthcare and safety, creating an opportunity for
forward-thinking companies such as Top Glove to lead the trend.

Diversifying into Digital Solutions is a proactive response to the convergence of Top

Glove's strengths and emerging prospects in automation and digitalization. This strategy
comprises broadening the company's product offering to include gloves or safety devices that
incorporate digital technology or smart capabilities. One intriguing application of this method
is the creation of "smart gloves." These gloves can contain a variety of sensors, connectivity
features, and digital interfaces to fulfil a variety of functions. Smart gloves, for example, can
monitor the vital signs of healthcare personnel or provide real-time feedback on safety concerns
in industrial settings. They can also interface smoothly with the Internet of Things (IoT) for
data collecting, processing, and reporting. Top Glove might implement this plan by partnering
with technology businesses or establishing a digital solutions R&D team. Determine which
applications and industries will gain the most from digital gloves, such as healthcare, industrial
safety, and consumer. Conduct thorough feasibility studies and prototype development to assure
the utility, durability, and safety of digital gloves. Use regulatory expertise to get licences and
certifications, particularly in safety-sensitive businesses. Introduce and promote digital gloves
by emphasising their distinct features and customer benefits. User feedback should be collected
frequently to improve product design and functionality.
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 Digital diversification promotes Top Glove. It diversifies revenue and increases the
company's innovation and foresight. These digital solutions have the potential to enhance the
safety, efficiency, and user experience of glove-wearing professionals and workers. Top Glove
strategically leads industry trends by digitising completely. This proactive strategy maintains
the company competitive in a rapidly changing field where technology shapes safety and
healthcare.

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5.2.2 ST Strategy
ST1: Sustainable Innovation

This tactic requires the advantage of Top Glove's dedication to sustainability and social
responsibility in order to address the risks of rising costs as a result of government regulations
and normalisation in demand that causes oversupply. Top Glove can concentrate on creating
environmentally friendly and sustainable glove options that are consistent with its dedication
to environmental stewardship. Research and development (R&D) is crucial to determining the
success and future course. Continuous investment in R&D could make great progress in
growing Top Glove’s BiogreenTM line of environmentally friendly products as part of its
dedication to solving two pressing global issues: the accumulation of waste and climate change.
Continuous innovation could result in environmentally friendly gloves which minimise
environmental effects and use renewable materials to create gloves with a minimal carbon
footprint.

Besides that, the company may differentiate itself apart in the marketplace by offering
gloves produced from materials that have been recycled or by using creative as well as
environmentally friendly production techniques. This is due to the public’s awareness of
environmental issues is growing and has resulted in increasing demand for environmentally
friendly disposable gloves. By matching Top Glove's capabilities with the increasing demand
for eco-friendly products, this approach leverages specialised markets that place a high value
on sustainability and reduces its exposure to oversupply as well as rising costs as a result of
government regulations.

Top Glove could enhance its R&D for innovative sustainable products by investing in
R&D facilities. A substantial amount of funding should be set aside to create cutting-edge R&D
centres using the newest tools and technology. This will give researchers and scientists the tools
they need to carry out examinations, assessments, and experimentation pertaining to the
creation of sustainable products. Furthermore, Top Glove should further expand its long-term
alliances with outside organisations like colleges, research centres and sustainability-focused
business professionals while also maximising the potential of open innovation. Top Glove's
R&D efforts could greatly benefit from these partnerships, which have helped it achieve
breakthrough discoveries and significant social impact. Through collaboration with academic
institutions and research centres, Top Glove could leverage its specialised knowledge to refine
its production methods, simplify procedures, and improve overall operational effectiveness.
This enables the company to lessen the amount of waste it produces, use fewer resources, and
61
lessen the damage it does to the environment. Moreover, in order to keep R&D teams abreast
of the most recent developments in sustainable technology, establishing continuing education
programmes is essential. This dedication to lifelong learning promotes a culture of creativity
and guarantees that R&D staff members have the competencies required for innovative
sustainable product development.

ST2: Regulatory Compliance and Sustainability Assurance

Companies across industries must stay compliant with shifting standards and
demonstrate a commitment to sustainability in the dynamic and highly regulated global
business world. This is critical for Top Glove, which is a manufacturer of rubber gloves. Top
Glove can use its strengths in "Continuous Improvement: Directors' Professional Development"
(S2) and "Operational Efficiency" (S3) to handle "Increasing Cost Due to Government
Regulations" (T2). These assets are pooled in the "Regulatory Compliance and Sustainability
Assurance" strategy, which assists the business in navigating regulatory landscapes and
promoting sustainable practices.

This goal relies on Top Glove's continuous improvement, particularly the professional
development of directors (S2). It demonstrates the company's commitment to keeping up with
changing legal frameworks, industry standards, and ethical practices, allowing it to react to
changing restrictions. The operational efficiency of Top Glove (S3) contributes to lower
regulatory compliance expenses. Compliance investment costs are avoided when operations are
efficient, with streamlined procedures, optimal resource utilisation, and careful cost control.

A diverse method improves regulatory compliance. Directors and employees are given
continual training on regulatory changes, quality standards, and ethics to ensure they understand
the importance of compliance. Strong monitoring and auditing systems track compliance with
government standards and sustainability requirements, and regular internal audits identify areas
for improvement and help to avoid noncompliance. Legal, compliance, and sustainability
professionals collaborate to address compliance issues and incorporate sustainability goals into
the compliance framework.

This approach focuses heavily on incorporating sustainability into compliance.

Sustainability metrics and KPIs are purposefully incorporated into the compliance framework
to guarantee that sustainability goals are met and ingrained in company operations. Companies
must seek sustainable raw material sources and engage with suppliers who share their
sustainability aims to comply with sustainable sourcing laws. The environmental impact of
operations is evaluated regularly, leading to more sustainable practices.
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 In addition, the approach promotes proactive involvement with regulatory agencies,
actively participating in conversations and providing industry feedback to build standards to
match Top Glove's sustainability and compliance goals. Transparent disclosure of compliance
and sustainability data to regulatory bodies fosters confidence and credibility. Contingency
plans and risk mitigation measures are included in the risk management strategy to address
expected compliance difficulties and their financial impact, as well as carefully setting aside
financial reserves for compliance-related expenditures.

Lastly, Top Glove's "Regulatory Compliance and Sustainability Assurance" plan

indicates the company's commitment to responsible and sustainable business practices. The
company meets regulatory requirements and embeds sustainability into its DNA by combining
its competencies in continuous improvement and operational efficiency. Top Glove is portrayed
in this campaign as a responsible, forward-thinking corporation that addresses regulatory
challenges and supports environmental stewardship. Top Glove's commitment to this strategic
goal demonstrates business accountability and resiliency in an age of regulatory scrutiny and
sustainability concerns.

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5.2.3 WO Strategy
WO1: Product Differentiation

As a WO strategy, a product differentiation strategy is recommended to utilize Top

Glove opportunities, namely global market expansion and sustainability leader to overcome the
weaknesses of unfavourable financial performance and sustainability issues due to natural
rubber and manufacturing. The strategy will be formulated in the aspect of sustainability
development to cater to the needs of current customers who are concerned with eco-friendly
products and mitigate the impact of the sustainability issues which are unavoidable by glove
manufacturers like Top Glove.

According to Porter’s Competitive Advantage Theory, as Top Glove operates in a wide

market internationally, it should focus on a differentiation leadership strategy to achieve a
competitive advantage. It requires extensive research and development activities to develop a
sustainable, eco-friendly glove product. Top Glove should emphasize the aspects of
biodegradability, alternative sources of gloves, energy efficiency initiatives and other areas
which are concerned in terms of sustainability in developing a new product.

Consequently, the new product should be able to minimize the impact of the
sustainability issues, namely improving the biodegradability of gloves to mitigate pollution,
promoting new solutions to minimize carbon emissions, getting an alternative eco-friendly
source to replace natural rubber, developing a high-quality reusable glove to reduce wastes, etc.
Precisely, the establishment of sustainable gloves could assist Top Glove in marketing the
products globally as sustainability issues are the hot topics currently while improving its weak
financial performance and relieving the stress on the sustainability issues.

WO2: Global Digital Transformation and Workforce Development Strategy

The "Global Digital Transformation and Workforce Development" strategy at Top
Glove Corporation Bhd represents a comprehensive approach to addressing the company's
current business challenges and harnessing available opportunities. At its core, this strategy
seeks to utilize digital innovation to diversify the company's product range and expand into new
global markets, thus tackling the issue of an undiversified business model. By leveraging
cutting-edge digital tools and techniques, Top Glove can effectively anticipate and respond to
the evolving demands of different regions, introducing innovative products and services that
cater to a broad spectrum of customers. This not only serves to broaden the company's market
reach but also mitigates the risks associated with dependence on a limited product range.

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 Simultaneously, this strategy places a strong emphasis on addressing the high turnover
rate through an enhanced focus on workforce development, particularly in the context of rapid
digitalization. Recognizing the vital role of a skilled and engaged workforce in achieving
business objectives, especially during global expansion, Top Glove plans to invest in
comprehensive digital training programs. These programs are designed to upskill employees,
keeping them abreast of technological advancements and equipping them to adapt to changing
market needs. By fostering a culture of continuous learning and professional growth, the
company aims to improve employee retention, ensuring that it has a competent and motivated
workforce to drive its expansion efforts.

Furthermore, this strategy underscores the importance of integrating automation and

digitalization into operational processes, essential for streamlined and efficient global
operations. By automating key production processes, Top Glove can achieve higher efficiency,
reduce operational costs, and maintain consistent product quality – crucial factors for competing
effectively in new and diverse markets. The strategic use of digital tools also extends to market
analysis and targeting, enabling the company to identify lucrative markets and customer
segments. This comprehensive digital approach not only directly addresses Top Glove's
immediate weaknesses but also sets a solid foundation for sustained growth and a robust
presence in the international market.

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5.2.4 WT Strategy

WT1: Strategic Diversification and Efficiency Enhancement

The "Strategic Diversification and Efficiency Enhancement" initiative for Top Glove
Corporation Bhd focuses on overcoming the challenges posed by an undiversified business
model and financial performance issues amid market oversupply and increasing regulatory
costs. This strategy prioritizes expanding into new markets and product lines, leveraging Top
Glove's manufacturing expertise to develop related healthcare products. Such diversification
aims to stabilize revenue streams and reduce dependency on a single product line, providing a
buffer against fluctuating market demands.

In addressing financial performance and regulatory cost increases, the initiative

underscores the importance of operational efficiency and strategic cost management. This
involves implementing lean manufacturing techniques, optimizing supply chains, and investing
in energy-efficient technologies. These measures are designed to reduce operational costs,
enhance profitability, and maintain competitive pricing, crucial in mitigating the impact of
external economic pressures.

The strategy also includes proactive regulatory engagement and financial analysis.
Establishing a dedicated team for regulatory affairs enables Top Glove to navigate and
influence policy changes, reducing compliance costs. Concurrently, rigorous financial analysis
helps in identifying areas for cost reduction and revenue enhancement. This dual approach
ensures financial stability and adaptability in a dynamic regulatory and economic environment.

Through the "Strategic Diversification and Efficiency Enhancement" initiative, Top

Glove Corporation Bhd aims to strengthen its market position by addressing its internal
weaknesses while mitigating external threats, thus paving the way for sustainable growth and
profitability.

WT2: Employee Preservation

Top Glove may implement a thorough retention resilience strategy to address the
concerns of a fall in the market share price below RM1 as well as fixing the problem of high
staff turnover. The objective is to improve worker happiness, lower attrition, and
simultaneously deal with the difficulties brought on by the market share price fall. In order to
preserve the employees, Top Glove could implement programmes for employee development
and engagement. The company could establish in place comprehensive staff involvement

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activities, such as incentives for the enhancement of skills, training, and mentoring. Create
professional development structures to give staff members a defined route for advancement
inside the organisation. Offer benefits centred on preservation, like incentives for performance,
to recognise and encourage sustained dedication. Besides that, Top Glove could offer
competitive pay and benefits by making sure the current pay plans are still competitive in the
market by giving them a careful evaluation as well as looking into extras like flexible work
schedules, wellness initiatives, and healthcare packages to improve the overall benefits package.
Furthermore, transparent communication between employers and employees is essential to
understanding the needs of the parties involved. Top Glove should encourage open lines for
dialogue to address grievances raised by staff members to update them on the status and
prospects of the business and organise conversations about feedback as well as community
forums on a regular basis to foster an inclusive and transparent culture. By having a stable
workforce, Top Glove is able to respond effectively to the challenges posed by the decline in
market share price.

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5.3 IFAS Analysis

Weighted
Internal Factors Weight Rating
Score
Strengths
S1: Commitment to Sustainability and Social
0.15 3 0.45
Responsibility
S2: Continuous Improvement: Directors’ Professional
0.10 3 0.30
Development
S3: Operational Efficiency 0.15 4 0.80
S4: Product Innovation and Diversification 0.20 4 1.00

Weaknesses
W1: Financial Performance 0.15 4 0.30
W2: Sustainability Issues Due to Natural Rubber and
0.10 2 0.20
Carbon Emissions
W3: Undiversified Business Model 0.05 2 0.10
W4: High Turnover Rate 0.10 1 0.20
Total Score 1 3.35

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5.4 EFAS Analysis

Weighted
External Factors Weight Rating
Score
Opportunities
O1: Global Market Expansion 0.2 5 1
O2: Future Growth in Glove Industry 0.15 5 0.75
O3: Automation and Digitalisation 0.15 3 0.45
O4: Sustainability Leader 0.1 5 0.5

Threats
T1: Demand Normalisation Cuases Oversupply 0.05 1 0.05
T2: Increasing Cost due to Government Regulations 0.1 3 0.3
T3: Volatility of Price of Raw Materials 0.15 2 0.3
T4: Market Share Price below RM1 0.1 2 0.2
Total Score 1 3.55

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6.0 Recommendation
Plenty of strategic alternatives and suggestions were identified for enhancing Top Glove
Corporation Berhad's competitiveness and future strategic and financial performance, relying
on the comprehensive assessments carried out in the sections on internal, external, and
situational analysis.

First, it is advised to implement a product differentiation strategy that capitalises on the

business's dedication to sustainability and societal accountability. In order to take advantage of
the opportunities presented by the development of the worldwide marketplace and sustainability
leadership, this approach entails creating eco-friendly products that meet the increasing demand
for sustainable goods. This strategic choice aligns with the business's strengths in product
innovation and operational efficiency as well as its prospects for leading the way in
sustainability and expanding the worldwide market.

Additionally, by concentrating on sustainable innovation, problems such as demand

normalisation and rising expenses as a result of government regulations can be reduced while
still addressing the dedication to sustainability and social responsibility. This decision addresses
external challenges and opportunities while enhancing the business's strengths within
sustainability and operational efficiency. The business can create sustainable innovations that
boost its profitability and competitiveness by utilising its strengths in sustainability and
operational efficiency.

Finally, the threat of a market share price below RM1 can be addressed while
simultaneously overcoming the weaknesses associated with undiversified company models and
high turnover rates by adopting strategic diversification and efficiency enhancement. This
approach takes advantage of chances for automation and worldwide market expansion while
simultaneously matching the company's strengths and weaknesses. The corporation can
broaden its product lines and explore new markets by utilising its strengths in product
innovation and operational efficiency.

In summary, Top Glove stands to gain a competitive edge and enhance its financial
performance with the implementation of these strategic options and recommendations, which
are in line with the company's strengths, weaknesses, opportunities, and threats. Through the
strategic application of its strengths in product innovation, operational efficiency, and
sustainability, the firm may effectively seize growth opportunities and counteract possible
threats to its operations.

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