The first two companies were selling about 60,000 pairs of hand gloves everyday. Swastick Rubber, which was the biggest company, was marketing about 30,000 pars per day.Those concerns were selling gloves at about 20 per pair.
When Helix first started manufacturing gloves, it tried to sell its product at the rate of 25 per pair. In terms of quality its product was superior to two of its competitors but occupied a second place when compared to Dial Rubber Works of Mumbai. Ling a surgical item the product had to satisfy the minimum specifications in respect of T.S. (Tensile Strength) and E.B. (Elongation at Break) laid down by the Government which required testing of the product in the Government laboratories before permission to market them.
The market for gloves consisted of hospitals, surgical trade, D.G.S & D. and State tenders, individual doctors, etc. Helix sold their brand of gloves, which was called Supertax, through wholesalers and dealers and were able to keep to delivery schedules. They had an open channel policy. Helix appointed one dealer each in Chennai, Kolkata and three in Delhi. No dealer was appointed in Mumbai where the competition was very tough.
In promoting the sale of gloves, Helix put up sign boards in important surgical and medical equipment’s market. It also advertised its products in medical journals and put-up stalls in medical and surgical conferences.
The above marketing mix did not, however, help Helix in selling its daily production of 2,000 gloves in the market. One of its partners, who had his training in marketing in one of the reputed business schools of U.S.A., finding that its product was not moving notwithstanding the fact that Helix s marketing mix compared favourably with its competitors, decided to experiment and identify the effect of price reduction on the sale of the new product. As a result of this decisions, the price of its product Supertax brand was reduced from 25 initially fixed price to P 20. The reduced price also did not make any difference in the sale of Supertax It again reduced the price to P 18 paise per pair. On finding that the reduced price of P 18 per pair, which was lower than its three main competitors prices in the neighbourhood of P 20 per pair, again failed to click, a decision was taken to further reduce the price to P 15 per pair. No tangible difference was, however, made to sales of Supertax even by this in price reduction.
In reviewing other elements of the marketing mix, it was found that the Mumbai concern was selling for cash and was not giving any credit facilities while its two other competitors were allowing 30 days credit. Helix in order to improve upon its competitive strategy decided to grant 2 months credit facilities to its customers. Unfortunately all these changes did not help Helix in marketing all the 2,000 pairs it could produce every day.The firm was really at a loss to understand what mix marketing strategy it could adopt to achieve success in its sales efforts.
Questions
1. What are the marketing problems being faced by the company ?
2. What marketing mix strategy would you recommend for the company ? Give reasons for you answer.
Answers
Answer:
In late January this year when medical glove importers in China heard whispers of a virus outbreak that could potentially have widespread consequences, they reached out to Top Glove, the world’s largest rubber glove maker.
At that time, phone calls to the Malaysia-based company were merely enquiries on delivery time and pricing. The calls didn’t turn into orders, said Lim Cheong Guan, Top Glove’s executive director, who heads the finance division, in an interview with FM.
“But things changed when the Chinese government started taking serious actions,” he said, pointing to city and province lockdowns that prevented workers from returning to offices and factories after the Lunar New Year holiday.
In February when the new coronavirus’s death toll surpassed that of 2003’s SARS outbreak, orders increased by 100% compared with the usual weekly orders from China. Singapore and, most recently, Italy had also started asking for more gloves.
In such a case of an unexpected surge in demand, how is Top Glove planning its production ramp-up?
It’s not that simple
The company produces 73.4 billion gloves a year and commands 26% of the global rubber glove market share. Its natural and synthetic rubber gloves are used by healthcare workers and food service workers, and in industrial settings. It sells to 195 countries, with the UK, Europe, and the US as its major export markets, closing 2019 with record revenue of MYR 4.8 billion ($1.16 billion) but a fall in profit due to increased competition and higher natural rubber prices.
The doubling of February orders means that it has to make roughly 5.8 billion more gloves in the coming weeks just to meet February’s additional demand. The usual lead time of 30–40 days was stretched to 50 days. This month when FM reached out again, orders are now 120 days till delivery, and its factories’ utilisation rate rose to 95%, up from 85% in February.
On the surface, a production ramp-up looks as simple as increasing inputs — raw materials, labour, and cash. But the experience of one manufacturer, Prestige Ameritech in the US, has shown that swift increases in production could create a risk that could almost destroy a business, according to a US National Public Radio report.
In 2009 at the height of the H1N1 flu pandemic, Texas-based Prestige Ameritech hired more workers and built new machines to increase surgical mask production. But the machines took months to complete, and by the time they were ready, the swine flu crisis had ended and demand had died out. To add to its woes, there was oversupply in the market, and hospitals didn’t buy for months. The manufacturer almost went bankrupt, NPR reported.
Protective equipment for healthcare workers is crucial to the fight against coronavirus. Earlier this month, the World Health Organization (WHO) urged businesses and governments to act swiftly to boost supplies of protective equipment, including gloves, medical masks, and respirators, for healthcare workers on the frontlines combating COVID-19, the disease caused by the new coronavirus. To meet rising global demand, the WHO estimates that manufacturers must increase production by 40%.
For many companies, production ramp-ups can be make-or-break moments. Winners are those that can act quickly to capitalise on the short but sharp demand spike. For Top Glove, the upshot has mostly been positive so far. In many ways, the company is well positioned to benefit from the demand surge.
New capacity every year
It already had a month’s worth of raw materials in warehouses to kick-start production ramp-up. And its rubber suppliers are in Thailand and Malaysia — the world’s largest and third-largest rubber producers, respectively — which means that Top Glove’s raw material supplies are secure amid current shocks to the global supply chains. A key factor now, Lim said, is to ensure that its suppliers in Thailand and Malaysia can also increase their raw material supplies to its factories.
Its factories run 24 hours a day in three shifts, and its 44 plants located mostly in Malaysia typically have 10% to 15% of unutilised capacity — a decisive factor that has enabled it to increase output at a moment’s notice.