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Lecturer: Abu Bakar Sedek Bin Abdul Jamak




The use of high quality rubber in todays rubber products is highly valued. Many production
facilities that manufacture finalized rubber products seek out high quality raw rubber material in
order to meet or exceed specifications.

With greatly varying quality of raw rubber supplies, manufacturing facilities require a steady
inflow of intermediate raw rubber material. A standardized raw material is therefore needed,
with certain specifications that would suit the needs of manufacturers.

Another issue with raw rubber supply is the varying qualities. Natural rubber is a greatly
inconsistent raw material, with any variances in contaminants and natural compounds and
chemicals. Adding to the complications of seasonal changes, maturity of rubber trees, and
various other environmental irregularities, the plantation itself may not be practicing standard
quality control procedures.

MARDEC ensures the highest industry standards for the range of Standard Malaysian Rubber
products. The emphasis in quality meant no compromise in terms of processing and supplier
chain. Strict quality control from supply, right up to sales, and MARDECs range of raw rubber
blocks ensures that manufacturers of rubber products are able to produce high quality products at
acceptable prices with minimal losses due to wastage.

To attain the required quality as well as cope with the potential number of demands, a reliable
chain of supply would be sourced. The suppliers history would be researched in order to
evaluate their reliability and consistency.

A sample or prototype of the product would also need to be developed, with the same strict
quality as would be produced for the potential buyer.

To commercialize the product, the company is required to research potential market, and also
competitors. The requirement of these buyers and their buying power would also be researched
in order to be able to assess the market size potential of the product.

The commercial value of MARDECs SMR20 can be fully realized with proper
commercialization structure and resource planning. The industry would greatly benefit from this
consistently high quality raw rubber supply.



2.1 Description...5

2.2 Prototype Status..5

2.3 Intellectual Property Status...6




5.1 Management Structure..18

5.2 Experiences, Roles, and Responsibilities..19

5.3 Missing Talent and Gaps in Personnel.21


6.1.1 Business model risk.24

6.1.2 Customer service.24

6.1.3 Competitive response..24

6.1.4 Cost estimate assumptions..25

6.1.5 Changing business environment25

6.2. Sales and marketing risk..25

6.3. Financial risk...26

6.4. Execution risk..26


7.1 Market entry strategy..27

7.2 Timeline and milestones..28



2.1 Description

The SMR20 product is designed mainly to supply for big tire companies such as Continental, and

Goodyear, to produce high quality tires. The flow of the processes in producing SMR20 is shown

in Figure 1 below:

Raw Shredding Creeping Drying Shipping

Material process process process products

Figure 1: The flow of the processes in producing SMR20

The final product of SMR20 is known as intermediate product in order to produce high quality of
tires. MARDEC ensures the highest industry standards for the range of SMR20. The emphasis in
quality meant no compromise in terms of processing and supplier chain. MARDEC embraces
and applies the concept of Quality Assurance in all its processes to prevent defects, mistakes and
non-compliance for its product, services, environment and health & safety.

2.2 Prototype status

2.2.1 Raw material

The raw material as shown in figure 2 below are stored in a storage bin area for 6 days to ensure

that all the moisture content inside the raw material will be vaporized properly before the transfer

it to the production line where they starts to process the raw materials .
Figure 2: Raw Material

2.2.2 Shredding process

In production line, the raw material will undergo shredding process to cut the material into

smaller pieces to be transferred to another process. The shredding machine is shown in Figure 3


Figure 3: Shredding Machine

2.2.3 Creeping process

After shredding process, the shredded materials will undergo creeping process to pound the raw

materials to be transferred into the next process. The creeping machine is shown in Figure 4

Figure 4: Creeping Machine

2.2.4 Drying process

After creeping machine, the raw material will then be dried in the drying machine as shown in

Figure 5 below:

Figure 5: Creeping Machine

2.2.5 Inspection

The raw rubber block or known as Bale is produced after undergo all previous processes and

then will proceed to do the inspection to check and test for the quality of the produced Bale as

shown in Figure 6 below. All contaminants will be removed from the rubber blocks.
Figure 6: Inspection of Bale

2.2.6 Shipping

After inspection and undergo all the processes, the Bale will be stored in a container which can

store 36 Bale then the container will be shipped to the buyers.

2.3 Intellectual Property status

To commercialize the product, the company is required to research on the market entry strategy.

The commercial value of MARDECs SMR20 can be fully realized with proper

commercialization structure and resource planning. The industry would greatly benefit from this

consistently high quality raw rubber supply. The commercial plan draws attention to the fact that

the usage of tire in Malaysia will always be in demand because as long as cars exist, they will

always need tires.


SMR 20 (Standard Malaysia Rubber) is one of the current products produced by

MARDEC Processing Sdn. Bhd. (Malaysian Rubber Development Corporation). For your
information, the main business of MARDEC Processing Sdn. Bhd. is in the processing rubber
into semi-finished goods in the form of block. Not only SMR10 that have been produce, there are
other product as well, for example SMR 20 and Latex. MARDEC is the largest producer and
exporter of all premium and volume grade Standard Malaysian Rubbers (SMR) in the country.
Later, MARDEC underwent a period of consolidation and rationalization. In Malaysia, the
rubber industry is one of the main suppliers for the country financial.

Figure 1: Malaysia Export Earning of Natural Rubber, rubber products, rubber woods and other

The figure above show how much Malaysia can earn by exporting the rubber product
throughout the world. The rubber industry has been in global through their subsidiary companies
located in Indonesia, Thailand, and Vietnam. Custom made rubber products are produced by
MARDEC according to client specifications and demand, supplied to more than 90 countries

This rubber industry is very important, because the products like SMR20 are mostly use
for vehicles tires. Tires are the principal product of industrial rubber industry. It accounts for
approximately three-fourth of total rubber tonnage. The growing of vehicles industry will
enhance the growth of SMR20 production. Future growth in the market will be driven by
expanding world vehicle population. Rapidly growing automotive sector in developing
economies and increased demand for high-performance tires, sealing products, and tire adhesive
are expected to contribute to the growth of the global industrial rubber market. As on date, Asia
Pacific is the largest producer and consumer of industrial rubber, with its tire sector exhibiting
promising growth rate. Manufacturers have shifted their production facilities to emerging
economies, due to the low labor and operating costs.

Trends & Drivers

Growing automotive industry, rising construction output and manufacturing activities are
some of the key factors driving the growth of the industrial rubber market.
Enhance the high performance tires
Improve vehicles safety

Market Analytics
The global industrial rubber market is expected to register a double-digit CAGR for the
forecast period. Depending on geographic regions, global industrial rubber market is
segmented into seven key regions: North America, South America, Eastern Europe,
Western Europe, Asia Pacific, Japan, and Middle East & Africa.
With the modernization of its machineries especially in mixing, moulding and extrusion
process, MARDEC Processing has the capability to produce highly-precise rubber
components for the following industries:
Precision Products
Industrial & Consumers Products
Oil & Gas Products
Defense Industry
Railway Industry
Market profiling

Market trends & issues

Growth drivers & enablers
Growth inhibitor
Opportunities and challenges
Recent industry activities
Product innovations & trends

From its humble beginnings, MARDEC remained true to its commitment to serve the
processing needs of smallholders throughout Peninsular Malaysia, and by 1976 MARDEC
owned a total of 16 factories nation-wide. They produced an annual total of 120,000 MT whilst
serving over 100,000 Malaysian smallholders. This made MARDEC the largest producer and
exporter of all premium and volume grade Standard Malaysian Rubbers (SMR) in the country.
Later, MARDEC underwent a period of consolidation and rationalization.

In 1998, MARDEC's forward-thinking approach sent its operations offshore to handle the
processing and exporting of rubber & latex from neighboring countries such as Thailand,
Indonesia and Vietnam, as well as India and China.

Currently, MARDEC Berhad has the capacity to handle 300,000 MT of TSR (technically-
specified rubber), latex and specialty rubbers at its processing factories. MARDEC also takes
pride in being the first producer and trader of smallholders' rubber in the world to be awarded the
prestigious ISO 9001 certification.

Today, MARDEC's core business remains in rubber processing, marketing and trading
whilst operating with a more diversified production base, producing a varied range of products
with a greater competitive edge to better serve its customers all over the world.

Mahmood said MARDEC was busy putting its house to better position the group as an
integrated global rubber player while it continued to improve shareholders' value. Prior to the
listing, we must ensure that MARDEC is a profitable outfit with a good dividend track record,
he added. All companies in the MARDEC group continue to show improved profit
performance. MARDEC has consistently declared dividends of at least 8% annually since
2003. MARDEC will strengthen its overseas operations over the next five years. We are
looking at increasing our investments in the world's largest rubber producing nations like
Thailand, Indonesia, Vietnam and India, Mahmood said. The four countries and Malaysia
account for about 80% of the total world rubber production.

He said MARDEC would allocate RM125mil to RM150mil for its aggressive overseas
expansion over the next five years. Our future business growth will be charted by overseas
expansion, which will push us to new frontiers, added Mahmood. By 2012, he said, the group
would boost the number of its rubber processing plants overseas to 19 from 10 currently. Our
annual overseas rubber production will increase from 90,000 tonnes currently to 250000, he

MARDEC has one plant in Thailand, two in Indonesia, five in India and two in
Vietnam. He said it would maintain its existing seven plants in Malaysia, which had a production
capacity of 180,000 tonnes per year. Mahmood said MARDEC was poised to be one of the
world's largest rubber processing, manufacturing and marketing groups in terms of volume, with
a combined rubber production of 430,000 tonnes annually for the next five years. MARDEC's
plants process natural rubber latex into a range of commodities such as latex concentrate,
technically specified rubber and skim rubber. We have successfully leveraged on our 37-year
experience and expertise in buying, processing and marketing various grades of natural rubber
from rubber smallholders within the region, he added. As a producer of Standard Malaysian
Rubber (SMR), concentrated latex and block rubber under its own brands. In fact, he said,
MARDEC had established a reputation as a reliable supplier of rubber and was well known
abroad due to its extensive rubber trading operations. Mahmood also said MARDEC's 45%-
owned trading arm, Singapore-based R1 International Pte. Ltd, had the potential to be the world's
largest rubber trader. R1 is a joint venture with Cargill Asia Pacific Ltd, Thailand-based
Thaveesak Holdings Co Ltd and Kian In Ltd. It currently trades about 580,000 tonnes of rubber
annually. .Mahmood said: R1 is targeting to trade up to one million tonnes within the next three
to four years. This means it will by then control about 10% of the world's total natural rubber
production. R1 is also moving into synthetic rubber trading. We are planning to open a trading
office in Russia to source for the commodity there, he added. To date, R1 has trading offices in
Thailand, Vietnam, India, China, Japan and Malaysia.

Another subsidiary is Mardec Polymers Sdn. Bhd., one of the leading polymer
manufacturers in Malaysia. It uses the M-Pol brand name for all MARDEC rubber and plastic
manufactured products, he said, adding that Mardec Polymers' strength lay in its ability to
design and manufacture rubber-based products for a broad section of industries such as
automotive, electronics, military, pharmaceuticals, oil and gas, as well as household and water
sports products. Mardec Polymers is focusing on import substitutions. Malaysia's current
imports of rubber products amounted to about RM1bil annually. We are tackling this issue
through Mardec Polymers, he said.

Value chain analysis

Porters definition includes all activities to design, produce, and market, deliver, and
support the product/service. The value chain is concentrating on the activities starting with raw
materials till the conversion into final goods or services.

Divided into two categories which are:

Primary Activities (operations, distribution, sales)

Support Activities (R&D, Human Resources)

Value Chain is categorized into types based on the type of organizations.

Manufacturing based.
Service based.
Both manufacturing and service based

According to this model the activities are divided into two broad categories:

Primary Activities- Activities which relate directly to the actual creation, manufacture,
distribution, and sale of a product or service to the firms customers.
Support Activities- Economic activities which assist the firms primary activities.

MARDEC Value Chain Analysis

Support Activities
Funds collection
Administrative tasks
Managing employees
Training employees
Appraisals and rewards
Human Resource Management
Knowledge transfers
Freedom of thoughts
Conducting meetings
Feedback from customers
Research work
Improvising of their products
Technology Development Innovation
Launch of new products
Use of IT, databases
Temperature controlled trucks
Acquiring the resources
Rubber from local suppliers
Special rubber From Thailand,
Primary Activities
Flow of raw materials like:
Rubber source
Pick up rubber from estate
Inbound Logistics Storage of rubber stock
Packaging tools
Cutting tools
Supply rubber to customer.
Preparation of pizza base
Customization of rubber
Make SRM model
On time processing
Transporting pizza bases
Outbound Logistics
Serving pizzas hot
Target Market
Redefining its menu
Marketing and Sales Introduction of new products
Promotional offers
Customer feels comfortable
Service and Support Online orders

Every organization, business, charitable or governmental, needs a management team with

people who are good drivers not just as managers but as leaders too. Hampson and Morgan as
cited in Zammit (2006) define management as the process of controlling, coordinating and
developing economic activities, encompassing operational (internal) and strategic (external)
domains. The people who carry out this process make up a management team. On the other hand,
Redman (nd) stresses that management team is fundamental to the success of any management
system and to the implementation of continual improvement throughout the organization. Senior
managers, he adds, provide strong leadership, visible and active support and demonstrated
commitment requisite for the companys success and perpetuity. Just as with many other
companies and organizations, this is exactly the case with MARDEC SDN BHD. During the
project site visit, the study team had the opportunity to learn of MARDEC management team as
well as interact with some of its members in the process of fulfilling the objectives of the project.
Thus, in this section, the experiences of MARDEC management team, its structure and key
responsibilities as well as the challenges and gaps in its human resource are discussed and

Drawing from project interviews with MARDEC staff at Bota and literature review, the
key roles and responsibilities of the companys management team can exactly be summarized
into the five main functions of management as defined by Henri Fuyol and stated by Vliet
(2014). These include:

Planning: The function of management that involves determining the best ways and
options of attaining the objectives of the organization as lay down by senior management
team. It enables the managers to be conscious of environmental conditions within the
company operates, its capacity and capability to predict future conditions and trends. This
involves different types of planning such as:

Strategic planning which is all about analyzing competitive advantages (strengths),

weaknesses, opportunities and threats of the organization, and in response determine
necessary strategies and programmes to best achieve the organizational objectives.
Vliet (2014) states that strategic planning is the link between governance and
management aspects of organizations/companies with a shared responsibility to
develop the right strategy to ethically achieve the organizational objectives.
Tactical planning, a mid-range planning, designed to develop relatively concrete and
specific means to implement the strategic plan.

Leading: refers to providing direction and guidance to the lower level managers and
workers to aware them of their obligations and empower their will to perform them
efficiently and effectively. This function involves influencing and motivating others,
through effective communication and judicious use of authority, to achieve organizational
objectives. Indicators of how successful this is done are enthusiasm and self-activism of
subordinates in concerted attempts to attain organizational objectives.

Organizing: involves developing an organizational structure and allocating human and

other resources to ensure the accomplishment of the set objectives and implementation of
the strategic plan. It involves the design of individual jobs within the organization and
striking a balance between the need for worker and management specialization and the need
for people to have jobs that entail variety and autonomy.

Controlling: is basically a supervisory function by which assigned tasks and timelines are
checked from time to time to ensure conformity and implementation. It consists of;

Establishing the plan or required performance standards

Comparing actual performance against the required standards at appropriate intervals
Taking corrective or preventative action when necessary.
Providing assurance to the companys governing body that all levels of management
and staff are held accountable for their actions and are performing and conforming to
the organizational objectives and governing principles

Coordinating: is primarily focused on organization of the different elements of the

organizations functions or activities and therefore enable the workforce to perform their
tasks hand in hand and effectively.
In line with these functions, each of the departments in the management structure
develops programmes, implements them and fulfills the attached responsibilities in a manner that
utilizes and/or combines all these management functions. There may be department specific
functions but these functions shape all responsibilities and authority levels from raw materials
supply, production, sales/exports and research to marketing of finished products

5.1 Management Structure

The management structure is a hierarchal relation between different levels of authority in

an organization and the personnel upon a given measure of authority is entrusted. Organizations
and companies develop management structures to support organizational direction. The lines of
managers take the form of front line, middle and senior managers. Because of this relational
nature of management, management team members are able to execute their functions and
responsibilities without any conflict of authority. As, witnessed in MARDEC, the team role and
delegation of authority across different units from administration, production to the finishing and
packaging point reflect the importance of management structure in organizations. How roles
sharing and performance are interdependent was at play at MARDEC and reflective of the
importance of management structure.

Figure 5.1: MARDEC Management Structure

At broadest, MARDEC management structure is topped by the Chief Executive Officer

(CEO) who heads and directs the overall running and management of the company through three
main departments of Operations, Finance and Services, and Technical and Product Development
as shown in Figure 5.1 above. Each of these departments is headed by designated personnel with
required technical knowhow. These departments, Mr. Andi said, also subdivide downwards
further into smaller other units headed and manned by several staff and technicians in accordance
with the departmental core responsibilities and individual personnel terms of references. The
different country operations in Malaysia, Thailand, Indonesia and Vietnam encompass all aspects
of management and serve both production and marketing functions.

Besides the management structure, there is also the corporate structure which brings together the
different branches into close association as can be seen in Figure 5.2 below.

Figure 5.2: MARDEC Corporate Structure

5.2 Experiences, Roles and Responsibilities

According to Mr. Andi, MARDEC which was found in 1969 as Malaysian Rubber Development
Corporation (MRDC) is one of Malaysias oldest companies and as such has had a rich
experience in management, business strategic development and technological progress in the
industry. He added that many of its management roles and responsibilities have changed
considerably. However, there are general aspects that have always remained relatively the same
over the time and across different companies. The three departments shown in Figure 5.1 are
replicated in each of the companys branch offices and production sites in Malaysia and other
countries and have the following summarized functions.

(a) Operations

The primary functions of an operations department include the design and management of
products, services and processes. In addition, the operations department evaluates and allocates
resources to effectively deliver products and services. According to Mr. Andi, MARDEC
operations department is responsible for daily running of the companys business activities. It is
the departments duty to determine accountability for profit and loss, and seeks to maximize
return on investment for the shareholders. Operations staffs are ultimately responsible for the
success or failure of the companys business. The operations department is also responsible for
the bottom line, oversight of other departments in the company and employee -development as
well as employee-customer relations. In short, the responsibilities of the operations department
can be summarized into purchase of raw materials, determining profitability, increasing sales,
people management and product and service management.

(b) Finance and Support Service

Finance department is usually a stand-alone. But in some cases as it is at MARDEC, Bota and a
few other branches, it also incorporate staff support services and human resources management
which is then subdivided into separate units. The primary role of finance department is to
determine how best the shareholder value can be maximized. Maximizing shareholder value can
be done over the long-term or short-term and thus the real task of the finance department is to
determine how best of them can be done without goal competition. To achieve this task, the
department is purposed to perform the following.

The finance department is devoted to the task of figuring out how to allocate assets for the
overarching goal of maximizing shareholder value. They must ensure that the right assets
are in the right place at the right time.

The finance department must also manage the company's liabilities so that all projects are
financed in an optimal way without taking on too much risk.

(c) Research and Product Development

The company's research and development department plays an important role the companys
product lifecycle. For MARDEC, there are hardly any new products, at least not frequently.
Their semi-finish product, the Standard Malaysian Rubber, SMR 20, is the main product.
However, there are two different forms of raw material from which it is produced the scrub and
latex. Each of these has some difference in SMR production process. Because of the need to
make some improvement in the product and to optimize the production process, the company has
research labs where necessary tests and researches are conducted. While the department is
separate from sales, production and other divisions, their functions are related and often require
collaboration. MARDEC ventures into research and product development in to attain the

New Product development

Improvement on the existing product
Quality standards
Innovation of superior products

5.3 Missing Talent and Gaps in Personnel

One of the challenges that MARDEC faces is unreliable workforce. Most of the activities are
labor intensive. From planting of rubber trees and latex/scrub harvesting through to production,
there is high involvement of manual labor. The company recruits from the local host
communities. But, according to Mr. Andi, many of them quit just after one month. This has some
direct consequences in the production process as well as the research and product development.

Conversely, the same challenge also affects the recruitment of technical personnel. Mr Andy said
that there are a few graduates or industrial specialists who want to take up jobs in rubber
production plants. This is largely due to the modest process units operation that potential
employees see as not offering enough technical experiences. As an international company with
concrete presence in the ASEAN region, the workforce is expected to be highly diverse.
However, there is a few international staff working at each local branch. This affects the human
resource capability and reliability.

Technology risks threaten assets and processes vital to business and may prevent
compliance with regulations, impact profitability, and Damage Companys reputation in the
marketplace. Information technology (IT) risk can result from human error, malicious intent, or
even compliance regulations. Protecting information assets like operational and financial data,
customer data, intellectual property (IP), personally identifiable information (PII), or protected
health information (PHI) is only the beginning. Its also important to identify and verify events
such as data breaches, network failure, electronic fraud, and other suspicious activities before
they result in fines and expenses, damage your brand or personal reputation, prevent you from
reaching your business goals, or even lead to a lawsuit.

Established in 1974, M-Pol is a contract manufacturer with over 30 years' experience. It

is a leading player in the diverse fields of rubber and polymers related products, ranging from
consumers to industrial precision and engineering applications. Having achieved a solid
reputation for the development and manufacturing of customized rubber polymers products, M-
Pol's vision is to be a leading customer focused, fully integrated world class rubber and polymer
corporation. In MARDEC industry, technology only apply for certain processing which require
high portion of human energy during production. This might as well reduce the number of
worker as worker cannot occupy the manual energy required. This is because the rubber
processing uses a lot of human manual energy rather than automation machine which can lead to
ergonomics incidents.

Production of SMR GP involves the method of blending which is involving co-

coagulation of latex-oil mixture and wet crumbs. Wet crumbs use prepared from a blend of
unsmoked sheet and field coagulum. Subsequent processing gives very uniform blend and
minimum mechanical working. The process above involving the following steps. Field coagulum
is pre- cleaned and then formed into a blanket. depends on the quality of raw material and should
give a blanket with less than 0.12% wt. dirt. The unsmoked sheets are milled into a blanket. The
unsmoked sheet and field coagulum blankets are blended. The crumbs are transferred and spread
evenly into a latex coagulation tank, then manually sprayed with 10% formic acid solution.
Required amount of emulsified aromatic oil and then mixed into a pre- determined quantity of
latex. Hydroxylamine Neutral Sulphate is added to the latex as viscosity stabilizer. The latex- oil
mixture is adjusted to pH 7.0 to 7.5 and poured into the coagulation tank. Latex-crumb coagulum
then processed and dried. This concludes that high technology risk will be a burden in order to
produce high quality rubber products.

6.1.1 Business model risk

Business model is an indication of how a company is working on earning profit by

generating revenue. It is also called a profitability model. It takes into consideration of method of
earning revenue by performing several tasks such as performing maintenance, revenue by selling
products or evens earning fees to provide better understandings of the business model. Type of
business model is further explained below;

6.1.2 Customer service

The rubber product proves to be useful function for the usage of nowadays
society. To propose a business model of generating profit from selling to customers would be
highest earning revenue. But there could be a tendency for the product to be less appealing to the
customers need.

6.1.3 Competitive response

As competitors increase to sell the same type of product in the market, prices
would go down to attract the customers attention. To do so, loss of customer will surely occur or
the process of reducing the rubber product price which in turn reduces the companys profit. This
proves that the business model has high risk.

6.1.4 Cost estimate assumptions

Failure to understand the cost estimation one such case of risk or failure. The rubber
product might actually need more people once product processing occurred. In example,
advertisement is one of commercialize method which need to reconsider in cost estimation.
6.1.5 Changing business environment.

Failure could also occur when the economic environment is in a poor state and
customer choose to keep their money instead of spending it.At times, generating revenue to be
able to make profit is not as easy as the business model seems like in the beginning.

6.2. Sales and marketing risk

There are a few types of sales and marketing risk such as sales forecast, riot theft or
industrial dispute and finally risk of duplication. The actual sales of the SMR 20 may prove be
totally different than the actual sale in real time. This forecast may prove to a failure due to
wrong analysis in forecasting system. For riot, industrial dispute and theft, these cases could
occur in the industry place while manufacturing SMR 20.These would only reduce the profit of
company by selling the products. Finally, the risk of duplication occurs if there is similar type of
rubber products which could disrupt the sales profit.

6.3.Financial risk

Financial risk is an umbrella term for multiple types of risk associated with financing,
including financial transactions that include company loans in risk of default. Risk is a term often
used to imply downside risk, meaning the uncertainty of a return and the potential for financial
loss. The possibility that shareholders/investors will lose money when they invest in accompany
that has debt, if the companys cash flow proves inadequate to meet its financial obligations.
When a company uses debt financing, its creditors will be repaid before its shareholders if the
company becomes insolvent. Financial risk also refers to the possibility of a corporation or
government defaulting on its bonds, which would cause those bondholders to lose money. Credit
risk refers to the risk that a borrower will default on any type of debt by failing to make
payments which it is obligated to do. The risk is primarily that of the lender and includes lost
principal and interest, disruption to cash flows, and increased collection costs. The loss may be
complete or partial and can arise in a number of circumstances. For example, a consumer may
fail to make a payment due on a mortgage loan, credit card, line of credit, or other loan. A
company is unable to repay amounts secured by a fixed or floating charge over the assets of the
company. A business or consumer does not pay a trade invoice when due. A business does not
pay an employees earned wages when due. Credit risk can be classified in the following way
,Credit default risk - The risk of loss arising from a debtor being unlikely to pay its loan
obligations in full or the debtor is more than 90 days past due on any material credit obligation;
default risk may impact all credit-sensitive transactions, including loans, securities and
derivatives .Concentration risk - The risk associated with any single exposure or group of
exposures with the potential to produce large enough losses to threaten a banks core operations.
It may arise in the form of single name concentration or industry concentration.

6.4.Execution risk

Execution risk occur when the time to execute a plan fails due to not proper planning of
the business model, sales and marketing risks and technology risks. All these criteria could affect
the execution of the rubber products. The execution could come to a halt and production would
cease if it is not properly done. Therefore, the planning is important. If we unable to plan, we
make us unable to success.

Commercialization strategy refers to the series of financing options that a company pursues to
move its technology/product from concept to the marketplace. Following the successful product
(SMR) formulation and launch, MARDEC then considers a number of possible paths to
commercialize its new products. As new products, the company needs to step up its marketing
activities in close execution of marketing strategy.

7.1 Market entry strategy

In developing a technology platform with the ability to affect multiple industries, there is need
to include an assessment of which applications should be develop first. For MARDEC, this is
discussed in their commercialization strategy, and potential markets that should be rank ordered
in terms of their readiness. Mr. Andi says, the company positions itself to hit windows of
opportunity on time. A commercialization strategy is affected by:

The companys vision,

Business philosophy,
Stage of technology development
market risk,
competitive activities and
window of opportunity

The degree of technology risk, market risk, a competitors activities, and the window of
opportunity should all affect a companys commercialization strategy. As part of the market
entry strategy, MARDEC pursue the following.

Licensing with developmental funds

Strategic alliances
Equity investment in the parent company
Equity investment in a spin-off Initial
Public Offerings
Each of these strategies usually involves several stages of financing. Although the last step
used by MARDEC is the one that lends each strategy its name, the other modes of financing are
included too.

7.2 Timeline and milestones

After inception in 1969, MARDEC, then known as MRD, started producing rubber products on a
much low scale. The company then grew and became MARDEC in 1971, became a fully private
company in 1991 and a fully-owned subsidiary of Tradewinds Plantation Berhad via Prisma
Spektra Sdn Bhd.in 2003. It now has four processing units located in the North, Central and
South Kerala manufacturing Centrifuged Latex, Skim Crepe, Pale Latex Crepe, Pre-vulcanized
latex, Compounded Latex and ISNR.

From its humble beginnings, MARDEC remained true to its commitment to serve the processing
needs of smallholders throughout Peninsular Malaysia, and by 1976 MARDEC owned a total of
16 factories nation-wide. They produced an annual total of 120,000 MT whilst serving over
100,000 Malaysian smallholders.

This made MARDEC the largest producer and exporter of all premium and volume grade
Standard Malaysian Rubbers (SMR) in the country. Later, MARDEC underwent a period of
consolidation and rationalization.

In order to achieve go-to-market stage, a strategy needs to be implemented. This go-to-

market strategy would attempt to manage and utilize the companys various resources to achieve
greater marketability.

First and foremost, the company needs to realize the market potential of their product. The
first step in doing so is to research the target market and their requirements. In this case, their
target market is large manufacturing industries producing rubber products. It is at this stage that
the company will know where they can offer their product and/or services that can be an
improvement to the clients current solution.

With the knowledge gained from the previous stage, the company can then devise a value
proposition. Value proposition is the key statement that explains how a product or service can
solve a clients problem, or indeed if it may offer a better solution to their current alternative.

A pricing strategy would then be determined based on the clients needs and that of the
current market trend. A pricing strategy would determine its placement in the market, the
companys profit margin, and also determine the decision that the client would make.

MARDEC has to acquire resources, both to create the actual product that would be consistent
with the product that is offered to the client, as well as resources to initialize the go-to-market

Resource requirement for product:

1. Reliable source of natural rubber.

This would ensure that there is consistency in terms of quality and quantity in the final
product. Failure to acquire a reliable source would mean failure to meet the standards that
is be presented and promised to the customer or client.
2. Up to standard manufacturing.
To ensure that the consistency of quality and standards in product.
3. Experienced and qualified quality control personnel.
They would ensure that the facility and product is up to par with production standards.
The Go-to-market Strategy

The objective of a GTM strategy is to create a presence in the market, and increase the
commercial power of the company, and its product and services. Being able to attain greater
market share will create a bigger awareness of the company by new potential clients in a new
market. A larger market share, with greater market penetration equals greater profit and growth.

These are the steps into creating an effective GTM strategy:

1. Define the target market.

Being able to identify the target market clearly will increase the likelihood of product
acceptance. Factors such as size of industry, location of client to manufacturing plant/s,
and size of demand would have to be considered with great scrutiny for an effective
GTM strategy.

2. Define company and brand image.

Clients would likely to accept service and products from a company with great
confidence of their product.

3. Define the product, clearly.

With confidence in brand image comes the understanding of the product itself. The
product and services needs to be laid out clearly for the client in order for them to
understand its relevance to the client. For instance, clients using MARDECs SMR20
would be able to reduce wastage of raw material, reduce extra processing and therefore
cost, as well as having less rejection rates due to defective rubber compounds caused by

4. Create a sales channel.

A sales channel is a way of bringing a product to customers. The most effective sales
channel would require the least resources and the best coverage. A few examples of a
sales channel are sales offices, sales representatives for face-to-face meetings, internet,
and industry exhibitions. The best sales method for MARDEC would have to be face-to-
face meetings (direct selling) with the client, as this would not only instill confidence in a
potential long-term client, but also allow them to see a sample of the product on offer.

5. Building a budget model.

A budget model would determine the pricing of the product and any services offered. It
would largely be dependent upon the market trend, competitor pricing, and the rate of
return that would be required to start making a profit in a few years. There are a few
things to consider such as:
i. Is it attractive for the customer or client?
ii. How does it compare with the competition?
iii. How long would it take to achieve profit?
iv. How would the pricing be justified?

6. Create a marketing strategy.

A sustainable competitive advantage depends upon the company arranging an effective
marketing strategy. A proper marketing strategy helps the company in focusing limited
resources in marketing to reach the best opportunities, creating large sales numbers and
improving brand image. A marketing strategy should be looked upon as a rule to be
followed by the company, to achieve business success.

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