A Presentation on

Strategy Management of Asian Paints

Group-4 Shailesh Bhosale
Vijay Dhadwal Roopeshwar Darwin Suhas Kamble Sujata Koyande

: 9 : 17
: 21

: 41 : 49

Hitesh Patel
Avinash Patil Vivek Patil Akshay Polekar Yusuf Shaikh Shyam Yadav Amol Bhopte

: 72 : 73
: 74 : 79 : 92 : 110 : 126
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Paint industry
Paint industry estimated at INR 135bn. Unorganized sector accounts to 35% of paint market Volume growth estimated at 15%. Indias share in the world paint market is 1.6%.

Players in Indian Market

Company Industrial Market Decorative Market

APIL KNPL Berger Paints ICI (Akzo Noble) Jenson & Nicholson Others

14.50% 42.50% 14.20% 7.80% 8.10% 12.90%

37.50% 10% 11.20% 7.80% 5.50% 38%

Paint Market by Year 2016

In its latest report based on the data available on the coating industry, for the year 2011-12 has valued the Indian paint industry at Rs 26,000 crore with 71 per cent of it being decorative paints and the remaining being industrial. In volume terms, the size of the industry is 3.1 million tonnes with decorative paints being 2.4 million tonnes and industrial paints being 0.7 million tonnes. The per capita paint consumption has been estimated to be 2.57 kgs. The paint market is estimated to double to Rs 50,000 crore by 2016 with per capita consumption increasing to over 4 kgs.

Identification Of Focus Area of Competitor

APIL
Focus on decorative Paints and complete vacant slots in product range Gain Market share in auto OEM through JV

KNPL
Provide paint shop management services to sell solutions rather than product

BPIL
southern markets in India

ICI (Akzo Noble) JNIL

strengthen presence in fast growing architectural segments

Increase focus on Increase capacities to

Leverage on JV for growth in Industrial segments

Entry of Global Players in Paint Industry: Recent JV agreements

Company Collaborator Purpose

Asian Paints

Nippon Paints PPG Industries Sigma Coatings BASF

Pre treatment chemicals, Coil & Powder coating Automotive paints High performance coating

Can coating
GNP Kansai Paints Nihon Tokushu Auto & Industrial coating Auto coating

Berger

Herberts
Valspar Corp. Teodur Tikkurila

Auto coating
Heavy duty coating Powder coating Decorative

J&N

Rajdoot Shalimar ICI India

Herberts
Chugoku Becker Salphi W.R.Grace ICI

Auto refinish
Marine Coil coating Marine coating Can Coating & metal packaging Auto refinish
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Share of Market - India

4 5.7 11% 12

Asian Paints Goodlass Nerolac Berger Paints ICI

15.

37

13.8%

Competition Competitive Base position

Name Last Price 531.30 228.35 1,120.30 Market Cap. (Rs. cr.) 50,962.18 7,911.71 6,037.52 Sales Turnover 8,971.70 3,024.21 2,856.60 Net Profit

Jenson & Nicholson

Total Assets

Asian Paints Berger Paints Kansai Nerolac

1,050.00 209.80 292.20

3,069.02 1,287.45 1,346.47

Akzo Nobel
Shalimar Paints Jenson Nicholson

844.80
92.65 2.00

3,941.86
175.37 7.49

2,231.98
530.18 59.25

218.83
11.02 -5.84

1,105.30
163.12 -230.94
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Company Profile
Started in 1942 by four entrepreneurs: ASIAN OIL & PAINTS COMPANY.

In 1973, AP became a public ltd company.

In 2002. AP was a market leader of Indian Decorative Paints . Asian Paints along with its subsidiaries have operations in 17 countries across the world with 23 plants Asian Paints has two alliances, one with PPG Industries USA & other with Protech Chemicals, Canada. Offer the widest range of paints among all the paint companies in India, in terms of products shades as well as pack sizes. Asian paints have promoted 5 successful overseas subsidiaries.
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Achievements/ recognition:

Asian Paints is the 10th largest decorative paint company in the world

Awarded the 'Sword of Honour' by the British Safety Council for all the paint plants in India. This award is considered as the pinnacle of achievement in safety across the world.

Forbes Global magazine, USA ranked Asian Paints amongst the 200 'Best Small Companies of the world' in 2002 and 2003 and amongst the top 200 'Under a Billion Firms' of Asia in 2005.

Ranked 24th amongst the top paint companies in the world by Coatings World - Top Companies Report 2006.

The Asset - one of Asia's leading financial magazine ranked Asian Paints amongst the leading Indian companies in Corporate Governance in 2002 and 2005.

Received the Ernst & Young 'Entrepreneur of the Year - Manufacturing' award in 2003.

Rated Best Employer by BT-Hewitt survey, 2000 Bluest of the blue chips by Hindu Business Line; Most admired company to work for by ET-BT survey, 2000

Overall Corporate Strategy: Asian Paints

DISCOVER Exploit new markets by creating products /services by leveraging existing competencies differently

DEVELOP

NEW

Build new competency to Create the Future

MARKET OPPORTUNITIES

DEFEND EXISTING Defend existing market by strengthening existing competencies

DEEPEN Build Complementary/new competency to fortify position in Existing Market NEW

EXISTING

Distinctive Competencies

PROMOTION STRATEGY Campaign, sales promotion, personal selling, direct marketing and public relation. Mera Walla Blue har ghar kuch kehta hia Colour world store - Jjahan Milen world ke saare colour Home Solutions Sates promotion Giving discount to the dealer Specialty advertising Trade show Consumer preference

Positioning of Asian Paints

DISTRIBUTION STRATEGY Offer the widest range of products, shades and packs 13000 dealers network of over 47 depots.

SERVICE(i) Decorative Paints (ii) Industrial Paints (iii) Automotive paints.

RESEARCH Asian paints, the largest paint company of India have a very strong research methodology. (i) Market Research (ii) Research & Development of the products according to customers need & choices.
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Strengths Financial Leverage (Asian Paints) Financial leverage allows Asian Paints to use their balance sheet to expand their business and... Technology (Asian Paints) Superior technology allows Asian Paints to better meet the needs of their customers in ways that... Customer Loyalty (Asian Paints) When given a choice, customers are loyal to Asian Paints. Instead of targeting all customers, Asian... Brand Name (Asian Paints) A strong brand name is a major strength of Asian Paints. This gives Asian Paints the ability to...

Weaknesses

High Staff Turnover (Asian Paints) High staff turnover can hurt Asian Paint's ability to compete, because replacing valuable staff...
Weak R&D (Asian Paints) Weak R D can slow Asian Paint's growth as competitors out-innovate Asian Paints Lack of Scale (Asian Paints) A lack of scale means Asian Paint's cost per unit of output is very high. Increasing volume,... Cost Structure (Asian Paints) A weak cost structure means Asian Paint's costs are high in comparison to their competitor

Opportunities new staff (Asian paints) New Technology (Asian Paints) New technology helps Asian Paints to better meet their customers needs with new and improved... New Products (Asian Paints) New products can help Asian Paints to expand their business and diversity their customer base New Markets (Asian Paints) New markets allow Asian Paints to expand their business and diversify their portfolio of products...

Threats Bad Economy (Asian Paints) A bad economy can hurt Asian Paint's business by decreasing the number of potential customer Volatile Currencies (Asian Paints) Volatile currencies make Asian Paint's investments difficult, because costs and revenues change.. Intense Competition (Asian Paints) Intense completion can lower Asian Paint's profits, because competitors can entice consumers away. Substitute Products (Asian Paints) The availability of substitute products hurts Asian Paint's ability to raise prices 10

Threat from competitor

Large price differential between the company distemper brand Tractor (Price Rs. 45 ) and the unorganized sectors products (Rs.3-25 ). Danger of eroding Tractors equity if a low price variant is introduced. Threat of substitution of the higher period Tractor brand by the cheaper one by the painter, which had a poorer finish resulting in customer dissatisfaction. Introduction of global players like AkzoNoble, Jotun Paints, Nippon, BASF, with quality products, policies and money power

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The Companys Competitive Advantage - Customer Base

High degree of awareness about the company among the target market constituents. Company regarded as a quality-produce maker. Market leader, financial and marketing strength to sustain investment pressures Core competence in paints, wide variety and well-developed R & D. Wide dealer network and good information base about different markets.
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Segmentation
Base Decorative coating Premium Medium

STDP
Industrial coating Popular High Automotive coat Finished coating performance Powder coating Quality coating coating

Differentiation
TARGETING :

FORM Rural Sector FEATURE- comparison with tractor emulsion CUSTOMIZATION-Durability

Product - Positioning

Tire 1 strategic solution seekers Tier 2 value or brand sensitive Tier 3 consumer are price sensitive Tier-4 small mfg & local companies Tier-5 special attention as hey are highly innovative in nature
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ANSHOFF MATRIX

Market Penetration Wood Finishes, Metal Paints

Product Development Wall paints

Market Development Venturing APIL Products

Diversification Marine Paints

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Industry Analysis: Porters 5 force Model

Substitutes
1.White cement 2.White wash 3. Brick & stone Structure

BUYERS 1. Decorative: Fragmented Market. LOW POWER 2. Industrial: Low switching costs. Corporate have HIGH POWER

Existing Rivals
1. Berger 2. GN 3. ICI 4. JNPL

Suppliers
1.Tio2 Imported, 2.Few suppliers, 3.Availability of Substitutes of RM Low HIGH BARGAINING POWER

Threat Of New Entrant

1.Growth rate much higher than global so global player may be interested 2. Huge potential to increase per capita consumption. Thus Latent need exists. 3. Companies can erode into APILs industrial market by forming JVs.

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Strategy Followed: Strategic Thinking

This was influenced by the following factors: Painting of the house, especially interiors, was a deeply entrenched habit. Branded paints were perceived to be out of reach by the ordinary consumers. Penetration of all major paint brands put together was 24% of the users. Reduce margins and relentlessly chase volumes with high penetration in the rural and semi-urban markets would be required.

Product & Price

Band that would offer Value for Money Position as do-it-yourself, oil-based-distemper Utsav in 1992 @ Rs. 26 per kg The packet size was fixed at 1 kg, a small size, since the users had smaller-sized houses and did not require large pack sizes

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Place / Distribution
Company salesman linked up with dealers usually grocers, in villages and small towns, who in turn would be serviced by the companys established 17000 strong dealer networks. Undertook innovative promotional campaigns

The Company funded its dealers transportation overheads incurred in reaching out to the new 80,000 odd outlets.

The Ultimate
Utsav has been a success in the markets where it has been launched. It has overcome the main hurdle of dealer and consumer resistance.

The brand has gained market share at the expense of local packed distemper brands. Margins for the product are low about 2-3%, while the higher end brands fetch 20%.
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