February 24, 2010 [MARKETING TRATEGY] 1.0 INTRODUCTION The rubber industry in Malaysia has since evolved through the years and has transformed itself into a more integrated industry where the rapid developments of the mid- and downstream industries have made the industry a multi-billion ringgit one. This was vastly aided by the tremendous progress made in the R&D of rubber cultivation & harvesting as well as rubber processing. The invention of technically specified rubber (the SMR) in 1965 and the introduction of the three Industrial Master Plans, (IMP) (1986- 2020) gave greater impetus to the growth of the rubber processing and manufacturing sectors. Currently NR rubber industry is a 25- billion ringgit industry. Being a largest exported of raw natural rubber (Standard Malaysian Rubber) in the 80’s, Malaysia now becomes one of the biggest importer & consumer of raw rubber and a major exporter of rubber products. Malaysia has been recognized as one of the biggest producer of natural rubber of the world with the production of 3.13 million tons in 2006. The rubber cultivation scattered in every regions of the country. Natural rubber (NR) was introduced in Malaysia in 1877 when 22 seedlings from a batch of 70, 000 seedlings that Sir Henry Wickham collected from the Amazon jungles in 1876 were dispatched to Singapore Botanical Garden. The arrival of 22 Seedlings in Singapore did not create the Malaysian plantations overnight. Hevea 1 Analysis on Malaysian Rubber Company
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February 24, 2010 [ ]
1.0 INTRODUCTION
The rubber industry in Malaysia has since evolved through the years and has
transformed itself into a more integrated industry where the rapid developments
of the mid- and downstream industries have made the industry a multi-billion
ringgit one. This was vastly aided by the tremendous progress made in the R&D
of rubber cultivation & harvesting as well as rubber processing. The invention of
technically specified rubber (the SMR) in 1965 and the introduction of the three
Industrial Master Plans, (IMP) (1986- 2020) gave greater impetus to the growth
of the rubber processing and manufacturing sectors. Currently NR rubber
industry is a 25-billion ringgit industry. Being a largest exported of raw natural
rubber (Standard Malaysian Rubber) in the 80’s, Malaysia now becomes one of
the biggest importer & consumer of raw rubber and a major exporter of rubber
products.
Malaysia has been recognized as one of the biggest producer of natural rubber
of the world with the production of 3.13 million tons in 2006. The rubber
cultivation scattered in every regions of the country. Natural rubber (NR) was
introduced in Malaysia in 1877 when 22 seedlings from a batch of 70, 000
seedlings that Sir Henry Wickham collected from the Amazon jungles in 1876
were dispatched to Singapore Botanical Garden. The arrival of 22 Seedlings in
Singapore did not create the Malaysian plantations overnight. Hevea seedlings
were initially planted in the Residency gardens at Kuala Kangsar where they
were nurtured by the Resident, Hugh Low. The large scale planting of Hevea by
the government was only started in 1888 when Henry Ridley was appointed
Director of the Singapore Botanic Gardens.
(Nutchanart et.al. 2007)
1 Analysis on Malaysian Rubber Company
February 24, 2010 [ ]
1.1 Rubber Types and Grades
Pale Crepe. After coagulation, the wet slabs are passed through a creping
machine, and the crepe varies from off-white to pale yellow color. The
crepe sheets are largely used in making the crepe soles of shoes.
Ribbed Smoked Sheets. Slab rubber can also be passed through a series
of rollers; one of the last set prints a simple pattern, such as crisscross.
The sheet is, then, hung on rocks, in smoking shed, for 48 hours or more
to dry. The smoke is obtained by burning wood or oil. The ribbed smoked
sheets are of a dark amber colour. In trade, they are popularly known as
"Ribbed Smoked Rubber". A huge quantity of ribbed smoked sheets is
exported to all parts of the world.
Hevea Crumb. It is made of adding some chemicals in the latex. It is
produced in the form of a mass of crumb-like pieces instead of sheets.
This new brand is popularly known as the Standard Malaysian Rubber
(SMR) or Hevea-crumb rubber. In this form, the rubber can be
conveniently compressed and packed for export.
Skim Rubber. In the process of coagulation, some ten percent rubber is
left behind in the liquid of coagulation tank. That residual rubber is
recovered by skimming; it is known as Skim Rubber. Skim rubber contains
a much higher proportion of impurities, and so it is less desirable.
Vulcanized Rubber. It is to be noted that the rubber is graded according to
International Standard published by the Rubber Manufacturers
Association of New York.
The starting of rubber plantations in Malaysia has resulted in the rapid economic
development of the area. Roads, railway lines and ports have been developed,
and new areas, with all modern amenities, have been settled by the people. The
population has increased, and the people now maintain a high standard of living.
Source: (kisaso.com)
2 Analysis on Malaysian Rubber Company
February 24, 2010 [ ]
1.2 Disadvantages/Problems of the Rubber Industry
At present, based on the author’s research and analysis the policies of the
Malaysian Government are not as favorable to foreign investors as previously.
The Government regulations, regarding benefits and wages to native workers,
are more strict, and the taxes are higher. The rubber planters also face the
problem of surplus production (it is because the huge areas are available for the
rubber plantation), which results in lowered prices and profits. The abundant
production of synthetic rubber in the U.S.A. and other countries has also given a
great set back to marketing. The synthetic rubber, which is made from petroleum,
coal, alcohol or other materials, is obtained at a very low cost of production.
Another problem is the need to replace a large proportion of the trees, which are
very old, with new ones of very high yield. The Government has laid a special tax
on exported rubber, and the money, thus, raised is utilized for the cost of
replanting trees. Because of all these hazards, the rubber planters are now
converting the rubber estates to that of palm. But it does not mean that the
rubber plantation system will discontinue. The synthetic rubber is excellent for
certain purposes, but it is not yet as satisfactory as natural rubber for general
purposes, such as tyres. As such, with an expanded role of the Government in
the management of the rubber plantation, the production of rubber in Malaysia
will undoubtedly continue, and, perhaps even increase in importance.
Source: (kisaso.com)
3 Analysis on Malaysian Rubber Company
February 24, 2010 [ ]
1.4 Comparison of Natural Rubber production and yield between Malaysia
and other countries
In 2005, the six leading producers -Thailand, Indonesia, Malaysia, India, China
and Vietnam - accounted for roughly 89% of world NR production. Combined
output in Thailand, Indonesia and Malaysia alone represented around 70% of the
global output. Despite the substitution effect with SR, world natural rubber
production increased from roughly 2,1 million tonnes in 1961 to over 9,1 million
tonnes in 2005. According to IRSG's predictions for 2009, the world's production
rise for NR should not overcome 3.6% and 3.5% for SR. As more, Indonesia
should stay the most dynamic market with a rise of 6.8%.
NR production (thousand tonnes) - largest producers, 1961-2005
4 Analysis on Malaysian Rubber Company
February 24, 2010 [ ]
1.4.1 Malaysia, NR area, production and yields, 1961-2005
Malaysia had been the largest NR producing country for most of the 20th
century, until it was relegated to third position in the early 1990s. Back in the mid-
1970s, Malaysia accounted for almost half of the world's NR output. Following
the steady decline in production since the second half of the 1980s, its share
dropped to 11.5% in 1999. It has been argued that as the Malaysian economy
advanced, the cost of opportunity of producing NR increased. Higher wages in
the city attracted workers, which made labour scarce as well as land and capital