MGT 657 STRATEGIC MANAGEMENT

CASE STUDY

TOP GLOVE & FGV

PREPARED BY

NAME NO.MATRIC
1. NUR HAZWANI BINTI ABDUL RANI 2017926577

2. NUR ELLISA BINTI ZULKEFLEE 2017972055

GROUP BY:

BA2465A

PREPARED FOR:

MADAM NOORAIN BINTI MOHD NORDIN

DECEMBER 2015 (FGV)

1) Five internal problems faced by the FGV in competing in the plantation industry.

1. Lack of LLA business model factor even though LLA business model is working well at the
FGV group's operational level. The LLA factor in practice is distorting and complicates the
fair value accounting treatment on FGV, which saw its profits pulled down in the recent
financial year results.

2. Group's net profit was down on the fair value losses in LLA of 2013 due to additional
depreciation to assets due to acquisitions of FHB postiche united plantation BHD that lower
crushing margin of its canola crushing plant in Canada

3. The operations were not effectively and efficiently managed whereby the operational
leakages and in efficiencies in. The system run into millions of ringgit a year.

4. The undoing uncertainty over the land lease agreement (LLA) is affecting market perception
and needs to be resolved immediately.

2) 3 strategies used by FGV to encounter challenge in its plantation strategy.

1. Market penetration strategy.

Basically, market penetration Strategy is seeks to increase market share for present products or
services in present markets through greater marketing efforts. FGV put in measures such as
cost efficiency and best practices which have started to show results. For example, FGV'S CPO
cost of production ex mil has come down to RM1397 per ton in 2014 from Rm 1,457 per ton
in 2003.

2. Product Development strategy. -In order to generate immediate profits FGV has join in to
merger and acquisitions. For example purchasing Brownfield oil palm plantation. This strategy
was implemented by to increase sales whereby improving or modifying their present product
and services.

3. Differentiation- Differentiation can be based on the product itself, the delivery system by
which it is sold, the marketing approach, and a broad range of other factors.
3) 3 types of defensive strategies that can be implemented by FGV to sustain its financial
position.

1. Divestiture - Given the extremely challenging external outlook in palm, sugar and rubber
business, FGV would focus internally by way of reducing it cost of production of CPO per
tonne, strengthening asset-backed trading and improving capital efficiency · FGV are divest
move non-core assets in an effort to monetize its long standing investments and stream line
core operation.

2. Liquidation

It is refer to selling all of a company's assets, in parts for their tangible worth. For asset backed
trading FGV Trading, a new company set up recently would manage. The marketing of CPO
and its other refined products in order to generate the best margins. They have been sell own
CPO about 3 million tonnes per year in the past.

3. Retrenchment

Refers to when an organization has a distinctive competence but failed consistently to meet it
global. FGV mergers and acquisition that year will focus on generating immediate profits for
FGV, for example purchasing Brownfield oil palm plantations. The group considers newly
acquired Asian Plantation Ltd last year as a midterm investment.

4) 2 main competitive advantages that FGV have over other competitors.

1. FGV’s has managed to remain competitive in the market through its capability of modifying
its processes to cut cost and achieve high levels of quality in their output by implement its
continuous strategy and FGV has keep in pace to stay ahead in the competitive market.

2. FGV’s competitiveness in the market through its capabilities and best practices in its
business operations and the company’s exceptional growth in a years.
JULY 2017

QUESTION 1

Philosophy of Top Glove

The Business Philosophies of Top Gloves are they work for their Customers. Their take care
of the interest of their Shareholders. They ensure that their Employees continue to contribute
positively to the company and their take good care of the welfare of their employees and lastly,
they work closely with their Bankers, Suppliers, Business Associates, and Government
Authorities and Friends.

The corporate Mission of Top Glove is to be a World Class Glove Manufacturer Providing Top
Quality Products with Excellent Services through Continuous Improvement and Innovation.
While the Slogan “We strive to be the world’s Leading Manufacturer with Excellent Quality
Glove Products and Services That Enrich and Protect Human Lives” is the guide for Top Glove
Moving toward their Vision. Top Glove’s Business Directions is to Approach to produce
consistently high quality gloves with efficient low cost and to earn two healthy dollars by spend
one efficient dollar. In Top Glove Quality Policy, The way they doing business is emphasis on
Quality and Productivity, with the duties to Continuously Improvement and Innovation, and
the target towards Zero Defective in their production.

Top Glove Corporate emphasis the value of increasing Global Customer Satisfaction, as they
are doing the thing right at the first time and on every time; with Integrity and Total
Commitment to their corporate, customers, and the community around the worlds. Besides that,
Top Glove desired to produces the products that are excellence in quality and competitiveness
nevertheless, without ignoring the environment and keeps doing their corporate social
responsibility.
QUESTION 2

4 Component of Top Glove’s mission

1. Customers
Top Glove exceed clients’ and patients’ expectations by the provision of ethical
customer service in a comforting and caring environment.
2. Employees
Top Glove recognise every staff member as a valued partner who plays an important
role in sustainable growth and profitability, towards the success of the centre.
3. Technology
Top Glove apply professional excellence in the operations of a premier ambulatory care
centre, guided by international standards.
4. Public image
Top Glove contribute positively to the wellness of the community that they service,
through activities that promotes healthy living and prevention of environment abuse.

QUESTION 3

3 Strategies that have been implemented by Top Glove

1. Product development
Product development is a strategy that seeks increase sales by improving or
modifying present product or services. Product development usually entails large
research and development expenditures. A product development strategy is a
strategy based on developing new products or modifying existing products so they
appear new, and offering those products to current or new markets. These strategies
typically come about when there is little to no opportunity for new growth in a
company’s current market. At that point, a company has one of three choices: create
an updated product for a current product in a current market, enhance an existing
product for a new market, or simply move away from the product altogether, and
cease growth. Most competitive companies won’t opt for the third choice so a
strategy is therefore designed to either evolve a product for its existing market, or
enhance it to introduce into a new market.
2. Cost leadership
Cost Leadership is a situation in which market leader sets the price of a product or
service, and competitors feel compelled to match that price. Cost Leadership is
perhaps the clearest of the three generic strategies. In it, a firm set out to become
the low-cost producer in its industry. The firm has a broad scope and serves many
industry segments, and may even operate in related industries, the firm’s breadth is
often important to its cost advantage. The sources of cost advantages are varied and
depend on the structure of the industry. Top Glove may include the pursuit of
economies of scale, proprietary technology, preferential access to raw materials,
and other factors.
3. Differentiation
In a Differentiation Strategy, Top Glove seeks to be unique in its industry along
some dimensions that are widely valued by buyers. It selects one or more attributes
that many buyers in an industry perceive as important, and uniquely positions it to
meet those needs. It is rewarded for its uniqueness with a premium price. The means
for Differentiation are peculiar to reach industry. Differentiation can be based on
the product itself, the delivery system by which it is sold, the marketing approach,
and a broad range of other factors.
QUESTION 4

2 Potential Advantages

1. Pursuing organic expansion

Optimization of a business focuses by Top Glove on continuing to improve a business's
processes to reduce costs and set appropriate pricing strategies for products or services.
Reallocation of resources involves allocating funds and other materials to the
production of best-performing products, while new product offerings seek to grow a
business by introducing new goods and services that will add to profits and overall
growth.
2. Merge and acquisition
The most common reason for firms to enter into merger and acquisition is to merge
their power and control over the markets.
Another advantage is Synergy that is the magic power that allow for increased value
efficiencies of the new entity and it takes the shape of returns enrichment and cost
savings. Economies of scale is formed by sharing the resources and services. To become
competitive, Top Glove have to be compelled to be peak of technological developments
and their dealing applications.
2 Potential Disadvantages
1. The rising cost of raw materials and utility bills
Business performance of Top Glove is being put under significant pressure by rising
raw material prices and reduced availability.
2. Fluctuations in foreign exchange
The fluctuation of a country’s currency can have a far-reaching impact on the country’s
economy, consumers, businesses and remittance inflows. This means that whether a
country’s currency appreciates or depreciates, it will have both positive and negative
impacts on a country’s economy, depending on the sector. A change in currency can
have a direct impact on a Top Glove business’s bottom line.