Hartalega: Taking off the Gloves?
Malaysian publicly-listed Hartalega has grown to become one of the world's largest nitrile glove manufacturers. Still predominantly managed by the founder's family, it is renowned for its innovation and quality. Its growth and operational achievements have translated into a stellar financial performance, boosting its stock price 20-fold since 2008 (while the Malaysian stock market has been flat). Among other factors, its success is the result of a commitment to innovation and technology, as well as a competitive strategy that builds upon Hartalega's strengths. Having grown into a billion-dollar company (by market capitalization) and one of the largest glove manufacturers in the world, Hartalega still has ambitious plans to almost triple its production capacity in the next four years. However, the planned expansion comes at a challenging time. First, Hartalega's competitors are enjoying substantial economies of scale and are investing in technology and product quality to rival that of Hartalega. Second, if the expected increase in supply outstrips that of demand, there is a possibility of overcapacity in the glove market, which could shrink margins and harm profitability. In this regard, Hartalega's margins have already fallen by approximately seven percent since 2011. Finally, as Hartalega embarks on its ambitious plan, given its size and complexity, it must transform itself from a traditional family business into a business with a professionalized management and a more formalized structure and governance. Thus, despite its great success, Hartalega is faced with substantial challenges.