Australian Paper Manufacturers Essay Example for Free

Australian Paper Manufacturers Essay Introduction The case deals with the Australian Paper industry in 1990, the major players operating in it and how the environment is throwing up challenges to its major players and shaping the future growth of the industry. The paper industry in Australia can be separated into three categories Newsprint, Paperboards and Fine paper. The industry is dominated by two big players namely the PCA and Australian Paper Manufacturer (APM) and the rest catered to by imports. PCA operates in the fine paper market enjoying a 75% market share, while APM is a leading player in the paperboards segment. Both the companies are part of a huge diversified parent organization. Environment regulations from the government, green peace activists have been recently posing threats to PCA on organochloride emissions. APM is proactively seeking to strive ahead of the environmental issues facing the industry. Ken McRae, the GM of APM has to decide on three alternatives to choose upon for utilizing the A$ 50 million allocated by the parent company Amcor, keeping in view the Financial, Strategic, Ethical and Environmental issues. Case Facts Before 1987, the Australian paper industry was divided into three companies. Australian Newsprint Mills supplied newsprint, Australian Paper Manufacturers produced paperboard, and Paper Company of Australia produced coated and uncoated fine-papers. All three of those companies were subsidiaries of major Australian corporations. Maitland sales, which owned Paper Company of Australia (PCA), recorded $495 million in net sales. Amcor Limited, which owned Australian Paper Manufacturers (APM), grossed $2.4 billion in net sales. APM decided to enter another aspect of the paper industry and dive into uncoated fine papers. They figured that they could draw on their strength in paperboard manufacturing. The making of fine paper or paper in general requires close attention to detail. The first step in making paper requires the wood to be pulped. This process refined the wood so that only the fibers remained. During pulping, the cellulose fibers were separated from the other components so it could be processed further. This process can be done in two different ways, mechanically or chemically. The chemical process produces much sturdier pulp, but unlike mechanical pulping, which uses 90-95% of the wood, chemical pulping uses 45-50%. Chemical pulping is also the least environmentally friendly of the two. When the fibers are made into fine paper, it goes through an immediate step called bleaching, where as chlorine gas and chlorine dioxide are applied to the pulp. After bleaching, chemicals such as, rosin, aluminium sulphate, or synthetics to reduce absorbency for writing papers. The annual consumption of fine paper in Australia rose to nearly 358,000 tonnes in 1987. Uncoated fine paper, such as photocopy paper, stationary, and offset printing paper, comprised 52% of that market, while coated fine paper, the type used in an annual report, comprised of the rest. In 1984 APM completed a a $163 million modernization of its kraft pulp plant in Maryvale, Victoria. The improvement added 140000 tonnes per year of kraft pulp capacity, bringing the Maryvale plant’s total output to 350000 tonnes per year. The Maryvale plant had four paper machines and in 1986 APM turned its attention to Paper Machine 3.Originally built in 1972 to produce brown shopping bags Machine 3 had a capacity of 31,000 tonnes per year. By the mid 1980s, though people had stopped using these checkout bags and between Machines 1 and 2 the company could cover demand. This left Machine 3 ripe for transformation. APM seized the opportunity, upgraded machine 3 and used it to take them into the heart of PCAs fine-papers market. People in the plant were convinced that it could be done and that their years of experience in making bag paper could be adapted to such a closely allied process. A number of trial runs were made in order to determine the general viability of the idea. Once it was proven feasible, APM sanctioned the investment. Between May 1986 and July 1987 APM spent A$50 million to rebuild Maryvale’s Machine 3, converting it from making bag paper to producing white wood free paper. The upgrading of Machine 3 had not only put APM next to PCA as the second domestic supplier of uncoated fine paper. It also made APM the owner of Australia’s largest and most technologically advanced fine paper machine. The 70,000 tonnes per year of Machine 3 capacity gave APM the product it needed to steal from imports-the company’s primary goal in entering the fine paper market. Customers had been accustomed to buying some of their paper from PCA and some from overseas but PCA had not kept pace with the growth in demand. Although aiming to replace imports, McRae, director marketing for APM papers group at the time, knew his toughest job lay in establishing APM’s fine papers amid a market dominated by PCA. In August 1987, APM inaugurated its move into the fine papers market. McRae developed a careful paln for ramping up to full capacity on Maryvale 3.APM intended to be producing at 40,000 tonnes annual rate by august 1988, starting with three crews working Monday through Friday and eventually moving to four and then five crews. Like all of Maryvale’s other paper machines, Machine 3 would eventually operate 24 hours a day, 365 days a year. By August 1988, Maryvale Machine 3 was producing at a rate of 50,000 tonnes per year and by March 1989 it had reached its capacity of 70,000 tonnes per year. In May 1989 APM introduced its newest entry in the fine papers market, ReRight. It was Australia’s first stationery paper made from 100% recycled paper- post- recycled paper that was produced without chemicals and was neither de-inked nor bleached. The World Wildlife endorsed ReRight and the product generated significant interest and publicity. Despite ReRight’s higher cost it grabbed a 3% market share (7,000 tonnes per year) of the uncoated fine papers market. To recoup its research and development expense, APM charged 20% more for ReRight than for comparable, non recycled paper. ReRight’s immediate acceptance inspired APM to introduce ReRight-Form in the spring of 1990, a recycled computer paper. While APM expanded its recycling efforts PCA suffered yet another blow on the environmental front. Greenpeace released a surprise report on PCA’s Kayser soda pulp mill on the coast of Tasmania, declaring it the dirtiest mill of its type in Australia. It found Kayser discharging 11.5 tonnes of organochlorides per day into the sea, at times reaching a level 80% above government standards. It also decried the presence of chloroform a cancer causing agent, in the effluent and cited it as a health risk to PCA’s workers. The environmental group called upon the government to monitor the mill’s effluent levels more closely and demanded that the company reduce its discharge of organochlorines to a maximum of one kilogram per tonne of pulp. It also recommended complete elimination of organochlorine discharges by 1993 and asked the government to review employees’ medical records to search for abnormal incidence of cancers attributable to oraganochlorines such as chloroform. Future Scenario Encouraged by APM’s success Amcor had provided A$50 million to APM to consolidate yhe investment that had carried it into fine papers, though a pre-tax return of at least 20% was expected. While larger sums could always be requested, it was understood that larger sums required more attractive returns-as had been the case when APM originally entered the market by upgrading Machine 3. Further expansion into fine papers loomed as a possibility. Copier paper alone promised 10% annual growth and recycled paper continued to grow in popularity. The uncoated fine papers market as whole was projected to grow at a rate of 6.5% annually through the year 2000. Now, McRae had the following options for the capital budget: 1) The capacity of Machine 3 at Maryvale could be expanded upto 100,000 tonnes. Initial estimates put the cost of increasing from the existing capacity of 70,000 tonnes at A$35 million. McRae would have to decide how he would use this extra capacity. Analysis of option 1- 2) APM was producing 7,000 tonnes of recycled paper at its Fairfield plant and increasing capacity would cost A$18 million. Analysis of option 2- 3) In addition to APM’s recycling efforts, McRae focused on ways to reduce APM’s discharge of organochlorines. APM could reduce its dependence on chlorine by substituting oxygen in one of two ways: a) To replace chlorine through oxygen pre-bleaching, APM would have to spend A$15 million in development and implantation. Oxygen pre-bleaching would reduce chlorine use by 50%. Pulp output at Maryvale would drop by 5% from 350,000 tonnes to 332,500 tonnes, but many engineers at the plant had expressed keen interest in learning about the technology. Pulp contribution at Maryvale was A$200 per tonne of pulp. Analysis of option (a)- b) Alternatively, APM could intensify the use of oxygen during bleaching, which would reduce the level of chlorine by 15% and cost approximately A$8 million. Pulp output would be unaffected. Analysis of option (b)-

Barn Burning Essay -- essays research papers

Barn Burning "You’re getting to be a man. You got to learn. You got to learn to stick to your own blood or you ain’t going to have any blood to stick to you." This quote from William Faulkner’s "Barn Burning" does reveal a central issue in the story, as Jane Hiles suggests in her interpretation. The story is about blood ties, but more specifically, how these ties affect Sarty (the central character of the story). The story examines the internal conflict and dilemma that Sarty faces. When the story begins, Sarty and his family are in a courtroom. Sarty, known in a proper setting as Colonel Sartoris, which in itself gives an insight into the families mentality. Sarty’s father, Abner Snopes is being accused of a barn burning. Right away, as Sarty is called to testify, you get an idea of what is going through the boy’s head, and the mentality that has be ingrained in him. He thinks to himself, Enemy! Enemy!, referring to the people t hat his father and his family for that matter are up against. Sarty would later discover that things are not always the way that his father leads everyone to believe they are. Sarty, somewhere deep down wants to just do what is right, but being roughly 10 years old, I don’t think he quite has that figured out yet. His sense of right and wrong has been biased under the tyranny of his father. We also get a good idea of the personality of the father, Abner, by the way Sarty describes his physical appearance. Abner is...

Hartalega Holdings Berhad Strategic Management

1. Introduction Hartalega Holdings Berhad is a gloves manufacturer and began their business with the vision of produce gloves that protect life (Hartalega, 2013). Hartalega has experienced tremendous growth in the market and there are many issues and problems that faced by them. The first issue that faced by Hartalega is fluctuation of US dollar (CIMB Research Report, 2011). USA is a key market for glove industry and has contributing part of the market share of Malaysian industries. Fluctuation on US dollar has affected the margins of the company.Besides, the economic conditions have influence the glove industry will continue to be unstable due to rises in material and production costs. Moreover, high latex price also is one of the issue that faced by Hartalega (CIMB Research Report, 2011). Latex prices continue to be volatile would bring an effect to its margin. Supply of latex may be reduced due to the weather conditions. During the dry season in Thailand and Malaysia, it would dec rease the production of latex. Thus, price of latex during dry season will be slightly higher compare to other season.Furthermore, Hartalega faced the issue about labor. The recent governments policies about foreign labor have cause a great concern for the gloves industry. The gloves industry has voiced out their concerns towards this issue because hired labor would have an impact on the manufacturers’ costs. Besides, more and more glove manufacturers are using automation and it will decrease the reliance on manpower. Next, pollution is one of the most important issues that faced by Hartalega as their company’s reputation has affected by the negative news or rumours.Hartalega was received complaints from the Deputy Minister in the Prime Minister’s Dept and a few residents of Taman Suria and claim that they are causing air and water pollution. Hartalega deny all the accusation and declare that they are operating legally according to the Malaysian environment regu latory standard (â€Å"Hartalega: Aggrieved At Accusations†, 2010). This might affect the reputation and the creditworthiness of Hartalega and might cause the market share decrease in this particular time frame. 2. Remote EnvironmentRemote environment is the factors that affect a form of decision making abilities, but are beyond its control. Political, economic, social, technological and ecological factor are the factors that include in the remote environment. The first factor is political factor. Hartalega has exports almost all of their products mainly to the developed countries such as USA, Brazil, Japan, Germany, Europe, Malaysia and others. Hartalega also has expanded its business successfully to China and India. Gloves sales have increase but a little drop in the selling prices. Major output of the company is made up by nitrile gloves.The total costs of the gloves increases due to the high output and increase in labor costs. Besides, the recent governments policies abou t foreign labor have cause a great concern for the industry. Hartalega have to adjust the wage structure of their workers due to the minimum wage ruling that effective from January 2013 that regulate by the government. Stringent government regulatory also is the threat for Hartalega. There are many government regulations and policies need to be follow by the company such as minimum wage legislation, guidelines on buffer zones and more.If companies fail to follow or break the rule that enforce by government, it may bring them into trouble, such as they might receive penalty from the government. Next is economic factor. Fluctuation of US dollar, raw materials prices increase and fuel costs rising has bring an impact towards the gloves industry with challenging economic conditions (Hartalega, 2013). Fluctuation on US dollar has affected the margins of the company. The nitrile gloves have experienced declining its margins due to high raw materials price and face competition with their c ompetitors.Furthermore, demand for nitrile gloves have not affected by economic crisis and slowdown because it is a recession proof products and an essential thing in the healthcare sector. Hartalega expects the demand for nitrile gloves will maintain positive growth in the future and continue export to the other countries such as Europe, China and India. In economic factor, Hartalega might face the threat of high latex price. Latex prices change irregularly would create a threat to its margin. Supply of latex may be reduced due to the weather conditions as well as measures to support rubber prices by Thailand and Malaysia.The dry season in Thailand and Malaysia would decrease the production of latex. Thus, price of latex during dry season will be slightly higher compare to other season. In the social factor, the annual report of Hartalega has show that Hartalega has enjoy the 100% market share in Victoria, Australia because all public hospitals in this state only used Hartalegaâ₠¬â„¢s gloves. Global hospital supplies market also is one of the opportunities for Hartalega. People wearing gloves in the hospital help to prevent spread of germs and help to protect both medical staff and patients from infection.Hence, it also shows that Hartalega has a big opportunity to growth in this area. Hartalega can offer top quality and great selection of gloves to the hospitals or other industry, so that more and more people from all around the world can choose and use Hartalega’s gloves. Opportunity that can be found in this factor is industry recognition. Industry recognition defines as the degree of public awareness for the brand or products. Hartalega has put many efforts in innovation, quality, R&D and good manufacturing.Thus, Hartalega has the opportunity to gain more recognition from all around the world as the company continually expands its business to more nations. Furthermore, technological factor is also one of the factors that affect a decision making abilities of the company. Advancements in technology enables Hartalega placed them with a competitive advantage in the glove industry. High efficiency production lines, automated product handling system, glove removal system, process simulator and biomass heat energy plant are the technologies that used by Hartalega (Hartalega, 2013).High efficiency production lines is the latest high speed production lines in the industry which able to produce 40,000 pieces of gloves per hour. Automated product handling system used to remove defect during transit, packing and storage. RFID tags are tagged in every pallet, so that can monitoring the product movements and make sure the products are on time delivery to the customers. Besides, glove removal system used to decrease the reliance towards the manual workforce. This system also able to remove nitrile and latex gloves quickly from the hand moulds.Process Simulator enable the company test their imagination in a timely manner and ensure quick delivery of a new product to their customers. The opportunity that found in this factor is advancement of technology. Technology advancement enables the company produce more pieces of gloves in a shorter time and better quality. Besides, automated product handling system that used by Hartalega also enable the company can easily track the location of the products and ensures provides an on time delivery to their customers. Last is ecological factor.Hartalega has set up a â€Å"next generation integrated glove manufacturing complex† (NGC) that contains high technology production lines and mainly involved in the production of rubber gloves (Hartalega, 2013). The project location is landscaped to be green and eco-friendly environment. Moreover, Hartalega has used biomass energy plants to avoid emission of Greenhouse Gases (Hartalega, 2013). Biomass energy plant is the only environmental friendly energy plant in the industry where it burn on the plantation waste to generate heat f or the production process.Hartalega also used effluent water treatment plants to ensure the waste that the company discharge is no harm to the environment. Biomass heat energy plant allowed Hartalega to conduct their business in a more effective way. Negative complaint about pollution could a threat for Hartalega. In year 2010, Hartalega has received complaints from Deputy Minister in the Prime Minister’s Dept and some residents of Taman Suria and claim that they are violate the environmental regulations that set by government. Hartalega deny all the accusation and declare that they are operating legally according to the regulations stated.Although Hartalega has state that they have independent inspectors and consultants who regularly test water and air emissions to ensure it is always full compliance with the requirements of government, but this also might happen again if they did not provide sufficient information and training that relates to the green environment to their employees. This also might affect the reputation and the creditworthiness of Hartalega and might caused the market share decrease in this particular time frame. 3. Industry Environment Industry environment is the concept to the foreground for the strategic thought and business planning.This includes Porter 5 Forces that explain the competitiveness of the particular company in the relevant industry. The strategic business manager can use this model or strategy to get a better understanding of the industry context in which the firm involves so that an effective strategy to compete with rival can be developed. There are 5 forces or factors to create the competitiveness of the company which is the threat of new entrants, threat of substitutes, bargaining power of suppliers, bargaining power of buyers and intensity of rivalry.Threat of the new entrants is the seriousness of the barriers occurred or presented by the existing competitors to the new entrants to enter the relevant industry o r market. A high threat of entry means that the new comers are likely to be attracted to the profits of the industry and can enter the market with ease. New entrants enter the market can threaten or decrease the profit gained by the existing competitors which mean high threat of entry will result the industry become more competitive. The glove industry has high threat of entrants as only RM1 million to RM1. millions is needed to start a line (CIMB Research Report, 2007). Cheap labor, low level of technology skills needed and natural gas access as well as the procurement price for latex due to bulk purchase making the barrier of entry high for the new entrants. However, although it is cheap to enter the industry, new comers may not be competitive as they have to differentiate themselves from other existing competitors and need to compete in terms of volume to enjoy the economies of scale. Moreover, threat of substitutes is the availability of product a consumer can purchase instead o f the industry’s product.The availability of close substitute products can make an industry more competitive and decrease the profitability of the particular market. The threat of substitutes for rubber glove industry is relatively low as the industry is dominated by the main 6 players, namely Top Glove, Supermax, Kossan Rubber, Hartalega, Latexx Partners and Adventa. Top Glove is the traditional industry leader but recent research showed that Hartalega has had taking on Top Glove in term of the success on the development of R&D (Research and Design) of Hartalega.The other reason for the low threat of substitutes is low rubber glove cost and making no incentives for the research house to find other alternatives. The bargaining power of suppliers explains the pressure the suppliers can exert on business by raising prices or reducing the quality of purchased goods and services. Powerful suppliers can squeeze the profitability out of an industry to recover cost increases in its own prices. (Pearce, 2012). The main raw material for rubber glove industry is latex.The steady easing in the price of latex since April 2011 and currently stable price appeared to be favorable to the glove manufacturers. Top Glove has ventured upstream into rubber plantations to secure a stable latex supply. Meanwhile, Kossan Rubber is concerning on the niche market that might get better margin, Supermax is putting effort on downstream distribution network and Hartalega is creating more values on its innovation technological of the production lines. So, the bargaining power of suppliers might be low as the results of effort that the glove manufacturers have putted.Furthermore, the bargaining power of buyers refers to the pressure the buyers can exert on business by force down the price, demand higher quality or more services and play competitors off against each other in term of the expense of industry profits. Strong buyers can pressure sellers to lower the prices for the products , improve products’ quality or offer better services. As mentioned just now, the substitutes for the rubber glove is low as the industry is dominated by the main six players. So, the bargaining power of buyer is tentatively low as well.It is because there is not much alternatives the buyers can choose to purchase. The buyers for glove industry are mainly as doctors or laboratory users. Lastly, intensity of rivalry explains to the extent to which firms within an industry put pressure on other competitors and limit their profit potential. High intensity of rivalry means competitors aggressively other competitors’ target and aggressively pricing products. The industry leader for rubber glove industry is always Top Glove where Hartalega is the world’s largest synthetic glove manufacturer.There is a high intensity of rivalry in the rubber glove industry. For instance, on the topic of labor costs with respect to the monthly minimum wages to be RM 900 in Peninsular Mal aysia and RM800 in Sabah and Sarawak, OSK Research Sdn Bhd. analyst Jerry Lee noted that Top Glove Corporation Bhd. might be the most impacted and Hartalega Holdings Bhd. is the least affected due to its innovation in automating its production lines. On this issue, Top Glove might be affected due to the ineffectiveness of handling the labor issue.It may affect its image of industry leader. As a conclusion, the threats of new entrants is high, threat of substitutes is low, bargaining power for both suppliers and buyers are low and there is high intensity of rivalry. So, the rubber glove manufacturing industry is attractive and still can earn good profit the 5 forces can be managed well by the relevant firms in the industry. 4. Operating Environment The operating environment describes the conditions, entities, events, and factors that surrounding the organization that will affect the choices and activities.A firm needs to depend on the operating environment because it will affect the organization in acquiring the needed resources or in term of profitability. The factors are the firm’s competitive position, the composition of its customers, its reputation among suppliers and creditors and its ability to attract qualified employees (Pearce, 2012). A firm’s competitive position explains the position of the particular firm in the relevant industry. It can be the leader industry or just a follower in the industry.By accessing the competitive position of the firm, the organization able to more accurately forecast both its short and long term growth and its profit potential. Hartalega is the world’s largest synthetic glove manufacturer where Top Glove is the industry leader in rubber glove industry. Although Hartalega is not the industry leader but it acquires sufficient resources and technology in generating more high quality gloves with its new automated production lines and glove removal system. And they are expert and have improved in R&D devel opment.The high efficiency production lines enable Hartalega to produce 40,000 pieces of gloves per hour per line, the highest among the industry where the glove removal system is capable of removing not only latex but also nitrile gloves up to a speed of 30,000 pieces of gloves per hour. These technologies make Hartalega to become the world’s largest synthetic glove manufacturer. Customer profile is the firm analyzes and identifies what type of the customers that the company served, what kind of customers they have and etc.The traditional approach of this factor is to segment the customers in term of geographic, demographic, psychographic and buyer behavior information (Pearce, 2012). This can allows the company to know the needs of each segment with ease and then satisfy their needs. The products that Hartalega offer are examination, surgical, laboratory, Clean Room Packed Class 100, Food Grade and so on. They also provide synthetic gloves to latex sensitive users from prot eins that may cause allergic reaction.Basically, the customers that Hartalega served are generally on the international market where Hartalega export their products to overseas to gain high profit. Medline, the largest manufacturer and distributor of healthcare supplies and services in US, is one for the two major customers of Hartalega. The next factor is the firm’s reputation among their suppliers. Firm regularly relies on its suppliers for financial support, services, resources and equipment. It is clearly seen that suppliers play an important role in determining an organization’s success or not.Hartalega has a strong reputation as the highest quality and lowest cost producer of nitrile gloves has enabled the firm to boost their sales every year. The financial support and resources that can be acquired from their suppliers are significant to the organization itself. Although the raw materials for produce the glove have increased which is latex, but Hartalega still c an manage to handle the situation by adjusting the price for the gloves. And the buyers can accept the adjustment in price that Hartalega made.That means the increase of price in raw material by the suppliers still can be acceptable by Hartalega and their buyers. Moreover, the reputation of the company does affect the reliability for their creditors. If the reputation of the organization is low, then the creditworthiness of the firm might be affected. That mean if the company is currently influence by negative rumors or news, probably the firm’s market share will be affected. Hartalega was affected by negative news which state that Hartalega was causing water and air pollution near Taman Suria, Batang Berjuntai in 2010.However, Hartalega has successful dismissed allegations of pollution where The Department of Environment (DOE) has claimed that Hartalega is complied with the Malaysian environment regulatory standard. This might affect the reputation and the creditworthiness o f Hartalega and might caused the market share decrease in this particular time frame. Other than that, Hartalega Chairman, Kuan Kam Hon claimed that Hartalega recorded revenue of RM931. 1 million, representing a significant 27% jump from RM734. million in the previous financial year while profit after tax increased to RM201. 4 million compared with RM190. 3 million for the last fiscal year. That means the company are currently gaining profit and they are able to implement a dividend policy which pay out minimum of 45% of the Group’s annual net profit as dividends to their shareholers. These few conditions showed that Hartalega are doing well in their business and able to earn profit in the industry. Lastly, the ability of the firm to attract capable employees is one of the components for the operating environment.The management for the human capital within the organization is vital for the organization to develop competitive advantage so that the organization can compete with their competitors. The organization needs to determine whether their workers or staffs are capable, skillful and experience or not. The more effective the management of human capital, the more easier the firm to achieve success in the industry. Hartalega has implemented a competitive remuneration package to their employees in order to recruit and retain performance centric individuals.They adopted several training programmes to encourage professional development and develop leadership skills among their employees such as Supervisor Development Programme and Group Leader Apprentice Programme. This programme is to invite talented students to learn the necessary skills and knowledge in manufacturing rubber gloves. The qualified students are able to become permanent workers for Hartalega. 5. Internal Analysis Value chain analysis is to understand how a business creates customer value by examining the contributions of different activities within the business to that value (Pearce II, J. A. , & Robinson, R. B. , Jr. , 2013). The value chain includes the primary activities and support activities. Primary activities involve inbound logistics, operations, outbound logistics, marketing and sales, and service. Support activities involve general administration, human resource management, research, technology, and systems development, and procurement. First is inbound logistics. Hartalega adopted the global supply chain management for their company with the raw materials, components, and parts from all over the world. Latex plays an important in the Hartalega Company.Research analyst said the latex price rise soon. This situation will affect the Hartalega’s profit decrease. In the operations, Hartalega has high efficiency production lines. Hartalega from a beginning of a one line operation grow into a sizeable company of 43 production lines. They produce over 8 billion gloves annually. Hartalega is the highest speed production line in the industry. They can produce 40,000 pieces of gloves per hour per line. They never decrease the quality of gloves even though they produce the gloves at such high speed.Their programmable logic controls measured and acquired every critical parameter. It is communicated to the Supervisory Control and Data Acquisition system and later fed to the Data Management System for trending and other analytical auditing. Third is outbound logistics. Customer can buy the product through the internet. Customers can order their products, make request and register to receive materials on some pages. Customers need to fill in their name, address email address and phone number only and submit to the Hartalega, and then Hartalega will deliver the product which is already order by customer to the ustomer. If the customer orders a gift online and they want Hartalega sent it directly to the recipient, customer need to submit the recipient’s address. In the marketing and sales, Hartalega is the largest producer of premium qual ity nitrile gloves in the world. They have good reputation as produce the nitrile gloves at the highest quality and lowest cost. It helped the Hartalega Company increase their sales during the year under review. Nowadays, many companies do their business in China and India. Hartalega also do their business in China and India.It is because these countries have high population figures. Demand from existing customers grows and Hartalega also try to attract new customers. Next is service. Hartalega receive some complaint about ammonia gas and chemical waste pollution. The Department of Environment (DOE) already checks the Hartalega’s factory and cleared glove manufacturer Hartalega Holdings of allegation pollution. Selangor DOE director Che Asmah Ibrahim said that Hartalega Holdings has compliance with the rule and regulation and they no need close the factory. General administration or management is one of the supportive activities.Profit margin of Hartalega has decrease compare d with the previous financial year. Although their profit margin decreases, they also maintain the highest margins in the sector globally. Although margins narrowed slightly, it is because of this foresight that we still achieved an absolute increase in our bottom line on year on year basis. Second supportive activity is procurement. Procurement is a part of inbound logistics or purchasing activities. Hartalega adopted the global supply chain management for their company with the raw materials, components, and parts from all over the world.Global supply chain management help the company compete all over the world and give company a competitive advantage. Company also can lower the supply chain cost if adopt the global supply chain management. Next is human resource management. Hartalega has implemented a competitive remuneration package to their employees in order to recruit and retain performance centric individuals. They also become the number one company for talent, they not only in the glove manufacturing sector but in the manufacturing sector large.Hartalega has provided several training programmes to encourage professional development and develop leadership skills among their employees such as Supervisor Development Programme and Group Leader Apprentice Programme. This programme is to invite talented students to learn the necessary skills and knowledge in manufacturing rubber gloves. The qualified students are able to become permanent workers for Hartalega. Last is research and development. Hartalega Company is focused on research and development (R&D). They highly focused on research and development because they want to ensure continuous product innovation.Research and development helps the Hartalega increase the barrier to entry. It is because the characteristics of synthetic nitrile, which needs careful R&D to ensure similar consistency to natural rubber gloves in terms of softness and elasticity. Besides that, R&D also helps the Hartalega successfull y reduced raw material usage per unit and do not decrease the product quality. They also have raised the bar with their various inventions and have far surpassed the industry due to their engineering capabilities in their manufacturing processes.Therefore, Hartalega highly focused on research and development because R&D helps Hartalega to benefit from maintaining the product quality at lower unit production costs, increases the barrier to entry, and the ability to reduce prices without affecting margins. Value chain analysis can helps Hartalega found the strength and weaknesses. First strength from Hartalega is company adopt the global supply chain management and it help the company lower the supply chain cost and give company a competitive advantage. Second is high efficiency production line.Third is customer can buy the product through the internet. Fourth is good reputation at the highest quality and lowest cost and it helping the Hartalega increase their sales. Next is Hartalega has provided several training programmes to encourage professional development and develop leadership skills among their employees. It helps Hartalega attract new employee and help their existing employee become more talented. Superior success in R&D activities leading to product innovative is strength from Hartalega. On the other hand, Hartalega also have some weaknesses.First is Hartalega receiving some complaint about ammonia gas and chemical waste pollution. Although Department of Environment said that Hartalega Holdings has compliance with the rule and regulation and they no need close the factory but it also influence the reputation of Hartalega. Another weakness is profit margin of Hartalega has decrease compared with the previous financial year. 6. Strategy Formulation TOWS Martix | Strengths 1. Global supply chain management 2. High efficiency production line 3.Online purchasing 4. Good reputation 5. Training programmes 6. Strongly R&D| Weaknesses 1. Receive compliant infl uence reputation 2. Profit margin decrease | Opportunities 1. Industry recognition 2. Global hospital suppliers and industrial laboratory 3. Synthetic glove | a) Strengths- Opportunities (SO) 1. Market development (S3, S4, O2) 2. Product development (S6, O2)| b) Weaknesses-Opportunities (WO) 1. Concentrated growth (W2, O2, O3)| Threats 1.High latex price 2. Government regulatory 3. High intensity of rivalry | c) Strengths – Threats (ST) 1. Innovation (S6,T3)| d) Weaknesses- Threats (WT) 1. Vertical Integration (W2, T1, T3)| a) Strengths-Opportunities Strategy (SO) SO strategy is using the firm’s internal strengths to take advantage of external opportunities. It is the most favourable situation which allows the firm to faces several environment opportunities and has numerous strengths that encourage pursuit of those opportunities (Pearce & Robinson, 2013). 1.Market development (S3, S4, O2) Hartalega have a good reputation as produce the nitrile at the highest quality an d lowest cost in the world and online purchasing. The main buyers for Hartalega are doctors or laboratory users. Therefore, Hartalega can use their main buyers as one of their company strengths to take advantage to global hospital supplies and industrial laboratory market. Hartalega able to offer the highest quality, lowest cost and at the same time they can provide variety types of gloves to hospitals and industrial laboratory.Besides that, customers around the world also can easily and convenience to make an order directly for the company website, this is because Hartalega had prepared the online purchasing method for their customer and business partners. These will make more and more hospitals and industrial laboratory around the world recognize and use Hartalega’s gloves. On the other hand, this method can help Hartalega to increase their sales and profit as well. 2. Product development (S6, O2) Hartalega is expert on their research and development (R&D).Therefore, Hartal ega can use this strength to develop more different types of gloves to attract more customers from global hospital supplier and industrial laboratory market. In addition, due to them expert in R&D, they not only focus the needs of the hospital and industrial laboratory, but also can try to satisfy the need for other different customer in order to help Hartalega to increase their market share also. So, they can come out different types of qualities of the product to fulfil different groups of the customers’ need. ) Weaknesses-Opportunity Strategy (WO) WO strategy is to improve company internal weaknesses by taking advantage of external opportunities. A firm faces an impressive market opportunity but is constrained by weak internal resources (Pearce & Robinson. 2013) 1. Concentrated growth (W2, O2, O3) Hartalega can increase their production of synthetic gloves and expand more into global hospital supplier and industrial laboratory market. This is because the costs of raw mater ial to produce synthetic glove is cheaper than latex (Hartalega, 2012).Therefore, Hartalega can major expansion of synthetic gloves to global hospital supplier and industrial laboratory market will help them substantial cost savings to counter price competition and overcome the profit margin (Hartalega, 2012). So, Hartalega can avoid the high rises of latex price. By avoiding fluctuation of latex price, their profit earned will be more stable and able to increase the profit too. c) Strengths-Threats Strategy (ST) ST strategy is using the firm’s strengths to avoid or reduce the impact of external threats.A firm that has identified several key strengths faces an unfavorable environment (Pearce & Robinson, 2013). 1. Innovation (S6, T3) As mention on above, R&D is the strength for Hartalega. Therefore, Hartalega can use this strength to create the barrier to entry. R&D can help Hartalega successfully to reduce raw material usage per unit and maintain the product quality and incre ase the barrier to entry. So, Hartalega can offer the cheaper price to their customer compare with their competitors such as Top Glove.Hartalega also keep on focusing on their R&D in order to develop more different types of innovation product and try to beat down their competitors and become the leader in the rubber glove industry. d) Weaknesses-Threats Strategy (WT) WT strategy is a defensive tactics aimed at reducing internal weakness and avoid external threats. This is the least favorable situation, with the firm facing major environment threats from a weak resource position (Pearce & Robinson, 2013). 1. Vertical Integration (W2, T1, T3) Nowadays, the price for one of the raw material to produce glove which is latex is keep on rising.This situation was affected Hartalega’s profit to decrease. Therefore, Hartalega can benchmark other companies’ product and make a comparison on how other competitors performs their product activity effectively. This is useful to Hartal ega to improve the management control. The objective of benchmarking is to identify the best practices in performing an activity and learn how to down the costs of the raw material, less defects, or other outcomes related to excellence achieved (Pearce & Robinson, 2013). Hartalega can apply backward vertical integration to control their raw material price.For example, Hartalega can follow its competitor which is Top gloves has ventured upstream into the rubber plantation to secure a stable latex supply. 7. Recommendation A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices. (Riley, 2012) Differentiation is one of the most practical ways in which Hartalega can gain advantage over other competitors in the rubber gloves industry.Differentiation can be achieved by Hartalega through high quality, efficient low cost manufacturing of glov es. Hartalega is recommend to continuously enhance their flexibility and efficiency in their production process scheduling, saving more time, employees efforts and the company’s money. Besides that, Hartalega needs to ensure all operations from the top to bottom must run efficiently by adopting programmable logic controller able to the monitoring of the operation automatically and promote continuous production that help in increase production and minimize cost.Hartalega should focus on customers’ satisfaction because it had placed a lot of emphasis in R&D to produce a wide and diversified range of high quality and value-added glove products in order to fulfil the expectation of their customers. The company also collaborates closely with related government agencies and Ministries to keep itself abreast of the latest development in rubber research technology. Hartalega also can uses state-of-art technology and efficient automatic glove manufacturing machine to obtain the highest yield and to remain as one of the most cost-effective and highest quality producer in the industry.With all these advantages and strategies, Hartalega is able to compete and stand out in the industry. For the Goods and Service Design, Hartalega can print instructions and methods of wearing gloves on the packaging. Besides, Hartalega can focus on detailed product design such as creating innovative glove with functions and amenity features for all type range of gloves use in surgical and clinical practice and operation.In addition, Hartalega products packaging must provide with its product outlook and description that meet the preferences of their customer across different countries and cultures. Concerning fluctuation price on raw material, Hartalega needs to find multiple sources of raw materials to avoid high fluctuation of cost on raw materials. Therefore, Hartalega is recommended to invest more and expand their own rubber plantation acreage, this would reduce their depen dence on raw rubber from other suppliers.Hartalega has to maintain and enhance its products and operation quality endlessly, therefore, Hartalega always needs to audit their operation and the product quality control to ensure low / no defects in their production based on the Six Sigma and Total Quality Management procedure. On the other hand, Hartalega needs to review foreign countries’ Acceptable Quality Level to improve in their company’s quality management system (Bheda, 2010) Perhaps, Hartalega needs to adopt total quality management or R&D on high quality latex to ensure producing high quality products that meet their customer expectation.In conclusion, each key analysis and discussion on Hartalega manufacturing operation will help in understanding and makes improvement from each operation processes based on the studies of latest operation management system. With this, Hartalega will be able to maintain or strengthen each of its manufacture’s operation and its products positioning in the world market.

Global Financial Crisis 2008 Finance Essay - Free Essay Example

Sample details Pages: 7 Words: 2032 Downloads: 6 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? Financial Crisis is a situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated with a panic or a run on the banks, in which investors sell off assets or withdraw money from savings accounts with the expectation that the value of those assets will drop if they remain at a financial institution (Bhatia2011, p.12). .1.2 Importance of the issue Global Financial Crisis of 2007-2008 has been the worst since the Great Depression in the 1930s.The financial crisis has had a profound effect, much more than that anticipated by many. The national borders have been breached and the ramifications are still being felt far from the epicenter. Although the global economy is recovering, the confidence in the markets is still weak as market participants are looking for a direction which is by no means straight forward. Don’t waste time! Our writers will create an original "Global Financial Crisis 2008 Finance Essay" essay for you Create order The aim of this essay is to understand the financial crisis, its causes, impacts and lesson that could be learnt from this crisis. Financial crisis history In order to understand the causes of the crisis we need to understand the past events that molded the current crisis. They include the financial landscape existing before the crisis, working of the global financial system and the shadow banking system. Reinhart and Rogoff (2011) and Schularick and Taylor (2012) provide a consistent picture of the runÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ up to a financial crisis: an acceleration of debt from both governments and financial intermediaries are the most important antecedents. According to Reinhart and Rogoff (2008). First, there was the Asian financial crisis of 199798, which saw Asian economies generate large current account surpluses that had to be invested offshore to keep their nominal exchange rates low. Capital flowed out of Asia into US dotcom stocks driving up equity prices. Next was the bursting of the dotcom bubble, which saw the booming NASDAQ over 1998-2000 burst in 2001. Fearing a downturn and possible deflation, the US Federal Reserve eased monetary policy in 2001 in a series of steps to 2004. Rising demands from China (and, to some extent, India), plus a booming world economy saw commodity prices rise across oil, minerals and food from late 2004 to late 2007(Warwick2009,p.4). Financial crisis 2008 3.1 Causes of financial crisis 3.1.1The bursting of the housing bubble Falling house prices has a major effect on household wealth, spending and defaults on loans held by financial institutions. Events in the United States typify a global phenomenon. From 2000 to 2006, house prices in some areas doubled to subsequently collapse. These changes in some areas have generated dramatic news headlines but, overall the United States index of house prices has fallen by 6.2 percent in real terms from the 1st quarter 2008 to the same quarter in 2009. While house prices were rising so strongly, credit was supplied liberally to meet the demand as perceptions of risk fell. The rising wealth boosted confidence and spending. The housing bubble was a global phenomenon centered mainly on the Anglo Saxon world (Warwick2009, p.6). 3.1.2 Rising equity risk premie The surprise upswing in commodity prices from 2003 but most noticeable during 2006 and 2007 led to concerns about inflation leading to the sharp reversal in monetary policy in the US. This tightening in US policy also implied a tightening of monetary policy in economies that pegged to the US dollar. It was the sharpness of this reversal as much as the fall in US house prices and the failures of financial regulation (for example, the mortgage underwriters Fannie Mae and Freddie Mac) that led to the financial problems for 2008/09. Lehman Brothers failure was primarily due to the large losses they sustained on the US subprime mortgage market. Lehmans held large positions in the subprime and other lower rated mortgage markets. But mortgage delinquencies rose after the US housing price bubble burst in 2006. In the second fiscal quarter 2008, Lehman reported losses of $2.8 billion. It was forced to sell off $6 billion in assets. 3.1.3A rise in household risk The reappraisal of risk by firms as a result of the crisis also applies to households. As households view the future as being more risky, so they discount their future earnings and that affects their savings and spending decisions. As with the previous shock, we model two scenarios: one permanent and the other temporary. The increase in household risk in the United States is assumed to be 3 percentage points in the permanent scenario and returning to zero by year three in the temporary scenario. 3.2 Effects 3.2.1 Stock market The financial shock has the largest negative impact on stock market values from baseline in 2009 and an equally large impact as the bursting of the housing bubble on investment. The equity risk shock causes a shift out of equities into other domestic assets, such as housing and government bonds as well as to asset purchases overseas. The shift into government bonds drives up their prices and pushes down real interest rates substantially. This surprisingly raises human wealth because expected future after tax income is discounted at a much lower real interest rate. Thus in the US, the equity shock alone is positive rather than negative for consumption in the short run. Investment on the other hand falls sharply. The equity shock reduces US investment by about 20 percent below baseline. The rise in equity risk implies a sharp selloff of shares due to a large rise in the required rate of return to capital. The higher equity risk premium implies that the existing capital stock is too high to generate the marginal product required from the financial arbitrage condition and investment falls and, over time, due to the existence of adjustment costs, the capital stock falls and potential output is permanently reduced. 3.2.2 Lowered real Gross Domestic Product of US Each of the shocks has a negative effect on the United States and, combined, has the effect of lowering real GDP by 7 percent below baseline in 2009 and real GDP does not return to baseline until 2017, nearly a decade later. That is sufficient to put the US into recession in 2009 (baseline growth is 3.4 percent) but will allow positive growth in 2010. 3.2.3 Fall in demand for manufactured goods A key compositional effect also occurs when household discount rates rise and risk premia generally rise. The effect is a much sharper fall in the demand for durable goods relative to other goods in the economy.. Imports and domestic production of durable goods falls by more than non durable goods. The high risk adjusted cost leads to a reduction in the flow of services from durables and therefore the demand for these goods drops sharply. This compositional effect is for the trade outcomes. Countries that export durable goods are particularly affected by a crisis. 3.2.4 Effects to other world economy. According to Harvey (2010), the recession in the United States has three main effects on the world economy. The negative knock on effect from the loss in activity with those economies most dependent on the United States market most affected. As prospects dim in the United States, so the returns on investment look better elsewhere. Money flows out of the United States (or strictly in the case of the US, less inflow than otherwise) and into other economies where it stimulates investment and economic activity. This is illustrated by the effect on China. The United States is a large importer from China. As US imports fall, Chinas exports fall with a combined effect from the three shocks of a drop in exports of 5 percent below baseline in 2009. The most affected sectors by the economic crisis are agriculture, mining, tourism, textiles and manufacturing in Africa. There have been many job loses which have direct negative effects on workers living standards for examples, South Africa: 36,500 jobs have been lost in the automobile industry. 3.2.5 Decrease of demand for consumer loan There was an overall decrease in demand for consumer loans, as measured by applications to both affected and unaffected savings banks. The effect is stronger for mortgages, as compared to consumer loans. If a borrower had a prior relationship with the savings bank, the effect is mitigated, that is, those customers are less likely to have their applications rejected compared to new customers. What Did We Learn from the Financial Crisis of 2008? According to Shibashish (2008), these are the lessons learnt from the 2008 financial crisis: (i) The importance of voluntary and involuntary disclosures on financial products, or the lack of both, (ii) the importance of regulators and how important it is for them to regulate and have an oversight of the macroeconomic indicators, (iii) existing risk management practices especially for the big banks and rating agencies, (iv) the most important of all, it is the exercise of rationality while making large investment decisions by the investors. From a policy-making perspective the crisis has been a wakeup call for the regulators who have until now ignored the Keynesian economic model that speaks about free market economy along with strong oversight. In fact the accounting regulation body such as the Financial Accounting Standards Board (FASB) have completely failed to keep up with the pace at which firms have evolved in the recent years. There are some legitimate concerns such as the fair value accounting of non-tradable assets, etc. However, the big picture is still that the market value of the banking firms far exceeds in their intangible assets value than their tangible assets and still the accounting regulations do not require these firms to disclose sufficiently on their intangible assets. This is the leading factor that creates a huge information asymmetry in the market where the investors have a limited knowledge about the instruments in which they are making large investments, and definitely before the crisis the scale was unprecedented. The scope information asymmetry is plenty in the banking sector that starts from processes, culture, human capital and the capacity for the bank to be innovative. These asymmetries are constructive asymmetry and can benefit the investors from the diversifica tion perspective. What is not recommended is that investors are deliberately kept in the dark because of lack of reporting standard about derivatives such as CDOs and CDSs, which can be lucrative investment vehicles and banks are able to sell these instruments in enormous quantities creating a shift in the systematic risk quotient of the market. Therefore, it is absolutely essential for the U.S. banks in order to remain globally competitive regulators have to fix the shortcomings of the financial reporting standards and market oversight policies. This should motivate banks to formulate their risk management and disclosure strategies rather carefully. With more information and understanding about seemingly complicated derivative products perhaps investors will also make better choices and informed decisions. Conclusion This paper has explored the impact of major shocks representing the global financial crisis on the global economy. For the crisis itself shocks are needed to capture the observed drop in asset prices and reduction in demand and trade. It is necessary to simulate the bursting of the housing bubble centered in the United States and Europe, but extending elsewhere, rising perceptions of risk by business as reflected in the equity risk premium over bonds and rising perceptions of risk by households. The regulatory bodies identified lack of transparency in the financial system as the basic problem that hindered effective oversight of the institutions (McKibbin and Stoeckel 2009b). The complex structure of the securitized products did not allow purchasers of MBS to correctly evaluate the quality of underlying assets and to understand the risks involved There is no doubt that more coordination in regulatory policies would be required at the global level. Special care would have to be given to the capital and liquidity requirements for financial institutions. The global nature of the financial system makes this coordination imperative. The enhanced capital and liquidity requirements will be phased in along the next 5 years. Simply put, this should make the banks safer by providing a greater cushion to survive the mistakes and accidents from which they suffer. Generally, the regulatory proposals have been aimed at reducing the impact of the current crisis and preventing recurrences. The proposals have targeted a host of issues, including executive pay, financial cushions, consumer protection, the regulation of derivatives and the soÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ called shadow banking system, and the power of the Federal Reserve to windÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ down systemically significant financial institutions