SWOT analysis clearly shows that Top Glove’s strengths and the opportunities available to it outweigh its weaknesses and the threats to its business. Strengths. One of Top Glove’s competitive edge is its size and wide product range. This is in line with group’s strategy of becoming the one-stop glove sourcing centre for glove users. Its size confers on it economies of scale and also the ability to expand upstream.
Weakness. We can identify only one weakness in Top Glove. Being an OEM manufacturer, it does not have any products that carry its own brand name. Its size and strong growth could also work against its favour as it makes it more difficult for management to keep a close eye on all its operations. This is demonstrated by the recent illegal labour issue.
Opportunities. Opportunities abound for Top Glove. Its expansion plans will enable it to ride on the increasing global demand for rubber gloves and the outsourcing trend by MNCs. Top Glove’s size also places it in a good position to undertake M&As, which are likely given our belief that the local industry will experience more consolidation.
Threats. The glove industry has low barriers of entry as only RM1m-1.5m is needed to start a line. That said, although it is cheap to enter the industry, new players may not be competitive as they have to distinguish themselves from other players and need to compete in terms of volume in order to enjoy economies of scale. Aggressive expansion by the bigger players also poses the threat of an industry glut. Price and availability of latex are also sources of concern given that latex makes up more than 50% of the group’s costs. To mitigate the risk, Top Glove has expanded upstream by acquiring its own latex processing plant.
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