An Exploratory Sudy on the Market Potential for Industrial Rubber Boots in Malasia

An Exploratory Study on the Market Potential for Industrial Rubber Boots in Malaysia

The Case of Harvik Industries Sendirian Berhad

Background of the study

Harvik Rubber Industries Sdn.Bhd is an original equipment manufacturer (OEM) of high-end, specialty rubber boots in Malaysia and has grown to become one of Southeast Asia’s leading manufacturers of such superior quality footwear products. The company exports about 95 percent of its products globally with Europe as its largest target market. In all aspects of its operations, Harvik Rubber Industries Sdn.Bhd is guided by the philosophy of being totally committed to quality. The company believes that customer loyalty is achieved by remaining consistent in terms of product reliability, performance and quality. It became a frontrunner in the winter footwear industry within a short period of time since it started operations primarily because of this business strategy together with utilizing the right expertise, resources and technology.

The company manufactures all kind of premium quality boots. The products are hand made by skilled craftsmen who have been in the business for more than 28 years. The production undergoes meticulous processes, research and testing to ensure highest level of quality and performance that would exceed customer expectations. Research and development efforts have been devoted to providing new boot-design technology that combines greater safety features and updated aesthetics. Its well-managed and well-planned inventory control system allows for product shipments to customers without delay, and seasonal products are delivered in response to seasonal changes in the target markets. The company adopts a total satisfaction guaranteed policy thereby ensuring that defective products are replaced without any additional cost to customers. The company is so committed to quality that it is able to meet international quality standards such as those of Malaysia, USA, Germany, Canada, Sweden, Norway, New Zealand, Australia, and the European Union. Product prices come with a premium as a result of the company’s adherence to quality management strategies and of catering to a highly specialized target market. However, pricing, advertising, sales promotion and distribution for the European market is controlled and determined by Viking Fottoy A/S. The company also invests in regularly providing technical and management skills training to its employees as part of its commitment to offering superior quality products.

These are some problem occurred that Harvik Rubber Industries Sdn.Bhd encountered despite of being successful in the rubber boots business industry.

1.Viking Fottoy A/S which handles marketing and distribution in Europe will no longer be renewing its contract with Harvik. Europe is Harvik’s largest target market, amounting to 50% of the market for rubber boots in the world, followed by North America (20%), Australasia (20%) and others (10%). The company now must decide if it should venture into Europe independently.

2.Harvik faces a problem of an aging workforce. Its products are hand-made and rely heavily on manual labor and the company’s skilled workforce significantly includes older workers who have been loyal to the company for many years and are already reaching the retirement age in 10-15 years. Younger people in Malaysia seem to be uninterested and not so keen into working in the rubber industry.

3.Advancement in technology has brought more players in the industry and has therefore caused increased competition for Harvik, particularly in Eastern Europe. China also poses as a threat to the company, as it now offers cheaper substitutes with the lower-end and lower-priced rubber boots that it manufactures.

Problem/ Decision statement

There are two formulated problem/ decision statement that the researchers used in order to determine the result of investigating Harvik Rubber Industries Sdn.Bhd.

1.Should Harvik explore the possibility od venturing into Europe independently? This would mean going against the dominance of Viking Fottony A/S in European markets?

Will Harvik be successful in doing so, as the company has no, or little experience, in European markets, in terms of distribution and logistics?

2.Should Harvik explore the possibility of aggressively tapping into the market potential of the Malaysian market? There is a market for second-hand quality rubber boots (boots with cosmetic defects) in Malaysia, but is the market substantial enough?

Methodology and findings

The SWOT analysis was done based on the internal information collection within the company, and discussions held with the management of the company.

Strengths:

The company products are of superior quality and therefore premium priced.

The products are highly differentiated and targeted to a certain market niche.

Low employee turnover, due to loyal employees who are mainly older employees, highly skilled employees are the result of many years of experience in the company.

Harvik reputation as a company that manufactures industrial rubber boots is well known throughout the world.

Weaknesses:

Company has no, or little knowledge, about pricing of the product as well as the production volume of boots, meant for European markets.

European market the distribution are controlled by Viking Fotty A/S.

Viking is well-known brand in the European market than Harvik.

Many Malaysian workers especially millennial are not interested in working in the rubber industry.

Opportunities:

Potential for expansion by venturing into the market of second-hand quality boots (boots that may have cosmetic defects) in Malaysia

Natural disasters such as forest fires when high quality rubber boots are necessary may increase company sales.

Threats:

The impact of globalization, particularly the rising competition from manufacturers in China and Eastern Europe

Rising labor