Table of Contents

Sections Page Numbers

1.0 Executive Summary 2

1.1 Introduction 3

1.2 Problem Statement 3

1.3 Objectives 3

1.4 Significance of Study 4

1.4.1 Top Management 4

1.4.2 Students 4

1.4.3 Professors 4

1.4.4 Future Researchers 4

1.5 Literature Review 5-7

1.6 Methodology and Procedures 7

1.6.1 SWOT Analysis 7

1.6.2 Financial Analysis 7

1.6.3 Procedures 7

2.0 Company Overview and Background 8-9

Kossan

Kossan was a multinational organization, started by Dato KS Lim in 1979 and involved in the
manufacturing of gloves. It began with five man operations team then grew into world class
manufacturer. In addition, Kossan focus their vision on research and development (R&D) is an
essential component of innovation and act as the key factor in developing new competitive
advantages.

The industry is operating in oligopolistic markets and the gloves they are supplying are basically
homogenous products. In order to sustain in the industry, the competitive strategy for Kossan has
to be low cost, low profit margin and high volume production. The industry has a constant grow
at 6-8% per year and the industry seems attractive for a company to invest in.

Besides, Kossan sold to over 300 distributors in order to minimize risk. Kossan also diversified its
product mix to increase its supply of gloves for food, household and safety applications. Kossan’s
business strategy of diversifying across users and industries contrasted that of its competitors,
which remained focused on particular market segments.

The production lines are running in full capacity. If the company ignores this problem, continue
pending up orders from the customers, and the company may miss delivery time which could
result lost in revenue, reputation, business and further impair the quality of the products.

This analysis will provide guidelines for top management, students, professors and researchers to
have more understanding towards the analysis on how to solve the company problem with the
combination of academia ways that applies the theoretical into the actual industry world.

Finally, this case analysis will use method of SWOT analysis and financial analysis to determine
the strategic position of Kossan currently stands among its industry rivalry.

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1.1 Introduction

In this case study, the topic chosen is glove manufacturing company ̶ Kossan. The industry is
operating in oligopolistic markets and the gloves they are supplying are basically homogenous
products. In order to sustain in the industry, the competitive strategy for Kossan has to be low
cost, low profit margin and high volume production. The industry has a constant grow at 6-8%
per year and the industry seems attractive for a company to invest in.

The main purpose of this case study is to determine whether the company has sufficient
proficient to exercise the expansion plan and future competitive strategy and analyze the problem
that currently faced by the company. Case analysis is carried out to organize the information
correctly and give a better picture to guide back the case study. The methodology that used in
this case study contributes to identify the challenges face by Kossan.

1.2 Problem Statement

Kossan would want all the production lines goes perfectly, without any defection whereby
everyone is aware and notified of the results and status. To integrate Kossan’s vision on research
and development (R&D) is an essential component of innovation and in developing new
competitive advantages.

All the production lines are almost running at its full capacity. If the company ignores this
problem; continue pending up orders from the customers, and the company may miss expected
delivery time which could result lost in revenue, reputation, business and further impair the
quality of the products.

I will use SWOT analysis and financial analysis methodology in assessing the last release to help
to improve the company processes.

1.3 Objectives

For me as a student, the objective of conducting case analysis is to find out the most suitable
solution to handle the given case analysis. This case allows me to give judgment and opinion. It

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applies what I have learned during my studies. It grants me the ability to propose and select from
multiple possible options to the case study provided it is valid. It enables me to have a better
experience with real expertise that happening in the industry world.

For Kossan as an organization, the objective of this analysis is ensuring that Kossan has
sufficient framework for operational activities to generate the demands with unique of quality
and fulfill the demands on the market thus whether they should implement the expansion plan.

1.4 Significance of the Study

The purpose on this analysis is implementing and brainstorming the analytical skills on ideas and
theoretical I have learned from the study. This analysis will provide guidelines for top
management, students, professors and researchers to have more understanding towards the
analysis on how to solve the company problem with the combination of academia ways that
applies the theoretical into the actual industry world.

1.4.1 Top Management

Top management could refer to this analysis as the organize enrollment procedure from different
ideas of strategies thinking which provide them the insight on the implementation of the strategic
planning.

1.4.2 Students

This analysis assists student to have the general ideas and act as a guideline and reference for
those student who pursuit similar task in the future.

1.4.3 Professors

This analysis will assist professors during their discussions. It will be easier for them to refer as
criteria to undertake related subject about this study.

1.4.4 Future Researchers

This analysis benefits to those researcher who planning to use as reference during their analysis
in any related field while taking case studies assignment. This analysis making the researches
works become more accessible in the future.
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1.5 Literature review

The literature review on this case analysis does not really refer to any previous researchers as
benchmarks to conduct support. Besides, there are no benchmarks whether the previous
researchers is correct ways of analyze the case analysis. There is no right or wrong in the case
analysis. Therefore, I would like summarize the major synthesis ideas in the given case of
Kossan.

Five main key driven the increase of usage on gloves

There is an increasing demand for medical gloves, medical gloves only able to use one time and
dispose after used. Medical glove will continue to grow due to high consumption amount from
the healthcare industry as a result of rising standards and availability of healthcare worldwide.

In the developed countries, peoples are more aware on their hygiene due to knowledge on
sanitation have increased dramatically. People are more concern on their health condition.

Elderly population had rose simultaneously, elder person are more susceptible to diseases. Usage
on glove has become a standard product to minimize the probability of spreading diseases.

Health regulations worldwide have become more strictly on the standards of hospitality. This
will encourage the demand for rubber gloves to rise as enhancement of the standard of
hospitality by the government.

The rising in merge of new diseases such as H1N1, SARS, bird flu and other diseases has urged
the global demand for gloves.

Also, the industry faces the following challenges in operating environment.

Fluctuating raw materials prices

Main material for producing a latex glove is rubber. The market price of rubber reflects the cost
of product for a glove. A latex rubber glove consists of 51% materials made out from rubber on
the total cost of producing a glove. It is highly dependent on raw materials price.

Competition from lower cost countries such as Indonesia and Thailand

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Indonesia and Thailand has relatively lower income than our country. It reflects the competitors
having cost advantages on their labor intensive.

Volatility in foreign exchange rates

The volatility in foreign exchange rates increases the cost of import. Besides, the company is
highly dependent on export will be facing loss due to weaken dominated currency.

Changing global political environmental potentially affecting trade

Policy makers often create and implement new rules and regulation on trades, increase in trade
constraint.

Four main competitors in the industry

Top Glove

It offers various types of gloves, is the world largest product manufacturer. Currently, Top Glove
commanding the 25% of global market share and has its own rubber plantation. The company’s
produce mix consists of 58% latex gloves, 32% nitrile gloves and 10% others gloves.

Hartalega

Largest producer of nitrile gloves in the world, inventor of the world’s first lightweight nitrile
glove in 2002. The company derives its product mix to 95% nitrile gloves and 5% latex gloves.

Supermax

The company has its own brand manufacturer (OBM). It meets approximately 12% of global
demand. The company also diversifies its manufacturing to contact lens business. The product
mix for the products is 52% latex gloves, 45% nitrile gloves and 3% other types of gloves.

Riverstone

The company is targeting niche market, the company major it’s specification into two types of
cleanroom gloves. The product mix for the products is almost 95% in nitrile gloves.

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The common goals within the glove industry are to increase the efficiency through automation.
Lower production cost results in greater competitive advantages. It can reduce the reliance on
labour intensive. The main idea is to reduce the cost of production and achieve profit
maximization on their businesses.

1.6 Methodology and Procedures

1.6.1 SWOT Analysis

In this case analysis, I use SWOT analysis to analyze the possible outcome from the company.
SWOT analysis method allows us to seek out any relevant information that could possible
influence the success of a new project. This method enables me to check the strategic position of
Kossan in the rubber glove industry. Moreover, this methodological is very easy and
straightforward. It can be practiced in any scenario or environment of the company. Strength and
weakness are internal analysis while threat and opportunities are external analysis.

1.6.2 Financial Analysis

Likewise, I also use financial analysis to calculate the business information. Financial analysis
enables me to have a better comprehension on the current financial position of the company.
Since information were given in exhibits 5A, 5B, 5C, 6A, 6B, 6C, 7 and 8. This method allows
me to evaluate several aspects of Kossan’s financial performance in particular on liquidity,
profitability, efficiency and solvency.

1.6.3 Procedures

After using SWOT analysis and financial analysis method to reviews the company, I will
conduct a table to differentiate what is the current position of the company. The construct of
table enables me to have a clear picture on the information that I should focus in.

Try to prioritize from the strength and weakness for the company. Compare and contracts
whether the financial ratios of the company able to overcome the weaknesses. Following by
understand the weakness faced by the company, and then improve the company from its internal
performances.

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Next, I will try and point out ideas by considering the impact of threat and opportunity as well.
Then determine whether the company has the sufficient funds to exercise the plan. Or else the
company should not expand the plan, and then I need to provide another alternative plan that
suitable to the company.

2.0 Company Overview and Background

Kossan Rubber Industries Berhad (Kossan) mainly manufactures latex disposable gloves. Kossan
was established its business during 1979 in Malaysia. Dato KS Lim is the founder of the
company. Dato KS Lim graduated as a chemical engineer. He graduated with a Bachelor of
Science (Chemistry) degree from Nanyang Technological University in Singapore then proceeds
with Master’s degree in Chemical Engineering at Imperial College, United Kingdom.

The company was previously specialized in cutlass bearing for the fishing industry. The
inspiration ideals derived from witnessing damage done to his father’s fishing boats caused by
vibrations. Dato KS Lim sees the opportunity to venture into glove manufacturing in 1988. The
business begins with five man operations team then grew into world class manufacturer. Kossan
was listed on the second board of Kuala Lumpur Stock Exchange and promoted to the mainboard
in 2003.

Dato Lim believes that using technology to compete in business is one of the criteria that benefit
his stakeholders in order to retain in the business. Therefore, Research and development (R&D)
is an essential component of innovation and act as the key factor in developing new competitive
advantages. On that basis, the company is enthusiastic to lead the market in the right direction.
Kossan was scheduled to open its first R&D centre in the third quarter of 2017. The centre was
intended to begin a new chapter for Kossan by enhancing its R&D activities and potential.

Kossan had achieved in 2009 an important milestone of growing its monthly supply of gloves to
about one billion pieces a month, after building a manufacturing plant in Kapar, Selangor. The
56-acre plot of land was acquired by Kossan in 2013. The acquisition was in line with Kossan’s
strategy to replenish its land bank to generate long term sustainable income and viability. With
rising demand, the plan was mean to build four more glove manufacturing plants with a total
output of at least 18 billion pieces a year on its 56-acre site in Selangor’s Batang Berjuntai in

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Malaysia. The development of this project was targeted to commence in 2019 and be completed
by 2023.

Dato KS Lee did not want limiting his business into few buyers. Kossan was sold to over 300
distributors in order to minimize risk. However, he ensured that none of the distributors may
account for more than 5% of sales. Besides, Kossan diversified its product mix to increase its
supply of gloves for food, household and safety applications. Kossan’s business strategy of
diversifying across users and industries contrasted that of its competitors, which remained
focused on particular market segments.

Rubber gloves under the classification nitrile rubber gloves and latex (natural) rubber gloves.
Synthetic rubber is used to manufacture Nitrile glove. Nitrile glove considered as substitution for
those users who have latex allergies and more puncture resistance.

Due to increased concern about latex allergies around the world and global developments in
regulations, nitrile rubber gloves are slowly supplanting latex rubber gloves worldwide.
Developed nations such as the US have mandated the use of nitrile gloves, leading to its
increased demand. On the other hand, in developing countries, the demand for latex gloves has
been increasing due to its lower cost.

Rubber gloves are mainly produced for industrial, medical and household uses. Rubber gloves
are worn for safety and hand protection. It use to cleaning or working with oils, solvents and
other chemicals. Rubber gloves were used to cleanroom manufacturing and food production in
most of the time. While disposable gloves are used for medical examinations and procedures, to
prevent cross contamination between caregivers and patients.