stm2 assignment

7/30/2019 STM2 Assignment

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STRATEGIC MANAGEMENT REPORT

ON ASIAN PAINTS LIMITED

In partial fulfillment of the requirements of the course

STM-II

MBA PT (2010-2013)


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TABLE OF CONTENTS

Sr. No. Contents Pg. No.

1. Learning Objective......................................................... 3

2. Introduction.... 3

3. Company History ................................ 3

4. Industry Analysis............................................................ 4

5. Major Players in India ................................................ 7

6. Competitive Advantage.................................................. 8

7. Market Segmentation & Positioning.............................. 10

8. Cost & Differentiation Drivers...................................... 12

9. Bibliography. 14

Learning Objective


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The learning objective for the industry analysis is to determine the opportunities andthreats that exist for firms within a competitive environment.

The learning objective for the firm analysis is to determine the strengths andweaknesses of a firm and to determine the core competence that can be built on to

establish a competitive advantage. Also analysis shows the strategic segmentation and positioning in the market and costand differentiation drivers of the industry.

Introduction

Paint is a generic term for a range of chemical substances that help protect surface a keepthem looking good. Paint is defined as a group of emulsion, consisting of pigment suspendedin a liquid medium, for use as decorative or protective coating. Though there are differenttypes of paint for different surface, all paints are mixture of four elements- solvent whichgives it its flow and enable it to brush on the surfaces, binders for cohesion as well asadhesion to the surfaces, pigments for colour and capacity, and additives which give paintcertain special characteristics such as resistance to fungus, algae and rust.

Asian Paints has always been ahead when it comes to providing consumer experience. It hasset up a Signature Store in Mumbai & Delhi in India, where consumers are educated oncolours and how it can change their homes.

Company History

Today

Asian Paints becomes the 10th largest decorative paint company in the world. Asian Paints is more than twice the size of its nearest competitor. It is one of the most admired companies in India. Present in 22 countries with 27 manufacturing locations, over 2500 SKU's, Integrated SAP -

ERP & i2 - SCM solution. 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. On the recommendations of Booz, Allen and Hamilton, Asian Paints restructured itself into

Growth, Decorative and International business units and adopted SCM and ERP technology. Asian Paints aims to become the 5th largest decorative paint company in the world.

1967Asian Paints emerges as India's leading paint company ahead of any internationalcompetition.

1957 - 66 The family-owned company makes the transition to a professionally managed organisation. British company Balmer Lawrie rejects the products of a giant British paint company in

favour of Asian Paints. Asian Paints embarks on an ambitious grassroots marketing campaign, partnering with

thousands of dealers in small towns all over India.


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1954Asian Paints mascot, Gattu, the mischievous kid, is born.

1945Asian Paints touches a turnover of Rs. 3,50,000, with an innovative marketing strategy "to reach

consumers in the remotest corners of the country with small packs."

1st February, 1942Armed with little knowledge and great determination, Champaklal H. Choksey, Chimanlal N. Choksi,Suryakant C. Dani and Arvind R. Vakil get together to manufacture paint in a garage on Foras Road,Bombay. They name their company 'The Asian Oil & Paint Company', a name that they pickedrandomly from a telephone directory.

Industry Analysis:

Paint industry estimated at Rs. 135bn. Unorganized sector accounts to 35% of paint market. Volume growth estimated at 15%. Indias share in the world paint market is 0.6%. Per capita consumption of paint in India is1.2kg/annum. India's largest paint company and Asia's third largest paint company, with a turnover of Rs

96.32 billion. The group has an enviable reputation in the corporate world for professionalism, fast track

growth, and building shareholder equity. Operates in 17 countries and has 24 paint manufacturing facilities in the world servicing

consumers in over 65 countries. Asian Paints was included in Forbes Asia's 'Fab 50' list of Companies in Asia Pacific in 2011

and 2012. Forbes Global magazine USA ranked Asian Paints among the '200 Best Small Companies in

the World' for 2002 and 2003 and presented the 'Best under a Billion' award, to the company.Asian Paints is the only paint company in the world to receive this recognition. Forbes hasalso ranked Asian Paints among the 'Best under a Billion companies in Asia' in 2005, 2006and 2007.

Asian Paints maintained their position as market leader through

i. Excellent marketing

ii. Intensive distribution, and

iii. Leadership in Information Technology

At present, Asian Paints is one of the ten largest decorative paint companies in the world, and islargest exporter exporting directly to 20 countries. Recently, it changed its name to Asian PaintsLimited as a part of its global strategy.

Group Subsidiaries

1. Apco Coatings2. Asian Paints Industrial Coatings Limited


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3. Asian PPG Industries Limited4. Berger International Limited5. Taubmans Paints6. Scib Paints Limited.

The distribution of its operations in the world is given as below:

Regions Countries Operating Companies

South PacificAustralia , Fiji, Solomon islands, Samoa,

Tonga, VanuatuAsian Paints and its subsidiaries

South EastAsia

China , Malaysia ,Myanmar, Singapore,Thailand

Berger International and itssubsidiaries

South Asia India, Bangladesh, Nepal, Sri Lanka Asian Paints and its subsidiaries

West Asia Bahrain ,UAEBerger International Limited and its

subsidiaries

Oman Asian Paints and its subsidiaries

Caribbean Barbados, Jamaica ,Trinidad and TobagoBerger International and its

subsidiaries

Africa andothers

Egypt SCIB paints

Asian Paints Products:

Asian Paints is engaged in manufacturing of paints. The company offers interior and exterior wallpaints, automotive paints, powder coatings, auto refinish paints, and wood finishes.

It operates in 22 countries and has 29 paint manufacturing facilities in the world servicing consumersin over 65 countries. It is headquartered in Mumbai, India and employs 3,924 people

1) Interior Wall Paints2) Exterior Wall Paints3) Wood & Metal Paints4) Wood Finishes5) Ancilliaries


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Vision

Asian Paints aims to become one of the top five Decorative coatings companies world-wide byleveraging its expertise in the higher growth emerging markets. Simultaneously, the company intendsto build long term value in the Industrial coatings business through alliances with established global

partners.

Mission

To provide paints as per market demand, ensuring desired level and quality of customer (dealer)service, continued availability of the right product mix of right quality at the right time.

Core Values

Commitment and Integrity in dealing with internal and externalcustomers A strong belief in individual ability and creating an environment in which entrepreneurial

spirit is encouraged Ownership and Responsibility

Core Purpose

To continuously rejuvenate every living and working space of peopleand bring joy to theirlives

This New identity captures the spirit and the journey of thispartnership.

The symbol the ribbon starts with a spark: the idea that inspires and lends itself to aform that is easy to make, playful, fluid continuous and unbroken.

It retains word mark the bulwark of strong enduring values of trust,reliability, honesty and excellence.

They together express what Asian paints do:Inspire decor ideas and empower and partner industrys consumers to create and celebratetheir beautiful homes.

Source: company


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Major Players in India:

ASIAN PAINTS LTD :

Asian paints are the largest player in India, and also the market leader in decorative paint,

with a 41%market share. It has a domestic installed capacity of 1, 62,700 tpa for paint. Withthe government planning thrust in the housing sector, players like Asian paints stand for thebenefit, as the demand for decorative paints will grow.

Taking advantage of the increase in the automatic approval of overseas investment, Asianpaints recently acquired the entire paint business pf pacific paints company pvt ltd. Australiafor Aus $ 375000. Last year Asian paints had acquired the largest paint company in Sri-lanka.Asian paints vision is to be among the top five decorative paint companies in the world by2007.

GOODLASS NEROLAC PAINTS LTD:

Goodlass nerolac paint is the leader in the industrial paint segment. Earlier this year, kansai paint of Japan brought out the tatas stake in goodlass nerolac paints, to raise its stake in thecompany to 65%. Goodlass nerolac paint manufacturing capacity is 88,140 TPA.

BERGER PAINTS LTD:

Berger paint ltd acquired Rajdoot paints ltd in FY 1999. Thus, it has consolidated its positionwithin the decorative segments. Installed capacity is 56,420 TPA. In addition to focus on itsexisting industrial paints/protective coating business, the company is entering into a 50:50

joint venture with ICI India ltd, exclusively for automobile and industrial paints. Bothcompanies will have equal representation of board of joint ventures.

ICI INDIA LTD:

ICI India, is a subsidiary of ICI plc of UK, has hived of its explosive division and isconcentrating on the paints and rubber chemical business.

MAJOR FOREIGN COLLABORATION OF PAINT COMPANIES:

company Collaboration Areas Of collaboration

Asian paints PPG Ind.IncSigma coatingsNippon paints

Automotive PaintsElectro depositionPrimers; high performancecoatingsPowder coating

Good lass Kansai Paints Auto and industrial coatings

BERGERPAINTS

Herberstone gmbhVal spar corp. Inc

Teodur bv

Auto coatings;Heavy duty coatings

Powder coating


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J&N HerHerberstone gmbh Auto coating

ICI (INDIA) ICI Plc Auto refinish

Competition

Name Last Price Market Cap.(Rs. cr.)

SalesTurnover

Net Profit Total Assets

Asian Paints 4,054.10 38,886.84 7,964.16 958.39 2,656.00

Kansai Nerolac 981.00 5,286.80 2,600.60 215.90 1,132.15

Berger Paints 142.70 4,941.56 2,662.10 177.40 1,015.30

Akzo Nobel 944.10 4,405.20 1,987.85 201.78 1,441.00

Shalimar Paints 134.40 254.39 486.45 14.46 132.46

Jenson Nicholso 3.45 12.91 53.24 0.69 -228.48

Source: http://www.moneycontrol.com/competition/asianpaints/comparison/AP31

Competitive Advantage:

Marketing Factors

Market leader -38% share in organized sector

Asian Paints is more than twice the size of its nearest competitor.

>50 yrs -leader

Widest product range -product shades, wide colours ,pack sizes

40 different decorative paints -1000 shades, 8 different sizes in packing,no. of brands -allsegments

Brand name

High quality

Countrywide distribution (29 plants in 22 countries) .

Physical distribution far superior to competitors
http://www.moneycontrol.com/india/stockpricequote/paintsvarnishes/asianpaints/AP31http://www.moneycontrol.com/india/stockpricequote/paintsvarnishes/kansainerolacpaints/KNPhttp://www.moneycontrol.com/india/stockpricequote/paintsvarnishes/kansainerolacpaints/KNPhttp://www.moneycontrol.com/india/stockpricequote/paintsvarnishes/bergerpaintsindia/BPI02http://www.moneycontrol.com/india/stockpricequote/paintsvarnishes/bergerpaintsindia/BPI02http://www.moneycontrol.com/india/stockpricequote/paintsvarnishes/akzonobelindia/ICIhttp://www.moneycontrol.com/india/stockpricequote/paintsvarnishes/akzonobelindia/ICIhttp://www.moneycontrol.com/india/stockpricequote/paintsvarnishes/shalimarpaints/SP13http://www.moneycontrol.com/india/stockpricequote/paintsvarnishes/shalimarpaints/SP13http://www.moneycontrol.com/india/stockpricequote/paintsvarnishes/jensonnicholson/JNhttp://www.moneycontrol.com/india/stockpricequote/paintsvarnishes/jensonnicholson/JNhttp://www.moneycontrol.com/india/stockpricequote/paintsvarnishes/shalimarpaints/SP13http://www.moneycontrol.com/india/stockpricequote/paintsvarnishes/akzonobelindia/ICIhttp://www.moneycontrol.com/india/stockpricequote/paintsvarnishes/bergerpaintsindia/BPI02http://www.moneycontrol.com/india/stockpricequote/paintsvarnishes/kansainerolacpaints/KNPhttp://www.moneycontrol.com/india/stockpricequote/paintsvarnishes/asianpaints/AP31


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strong in inventory control (18 processing centers, 350 raw material and intermediategoods suppliers, 140 packing material vendors, 6 regional distribution centers, 72 depots areintegrated)

Manufacturing/Operations factors:

Size advantage in relation to competitors

Finesse in production planning , scheduling ,matching with marketing requirements

In-house production outsourcing high reliability suppliers superior quality assurance

Four production location spread benefits.

Research & Development:

At Asian Paints, R&D plays an important role in developing new products andinnovations, and reducing costs by value re-engineering of formulations

It consists of 140 strong R&D team consisting of 7 doctorates and around115 qualifiedscientists, has always backed the company's business planand demands of the market place.

Asian Paints' R&D team has successfully managed to develop High-endexterior finishedand wood finishes in-house.

SWOT Analysis of Asian Paints LTD

Strength :

NO.1 Player in decorative paints and 2 nd in industrial paint segment Wide range of products and colors Geographically well spread giving the company logistical advantage Wide distribution network i.e. 19,000 dealers Highest manufacturing capacity Strong Advertising

Weakness:

The industrial business of the company has performed below expectations,though the decorative business has done very well.

Opportunity:

High growth in both decorative paint and industrial paint. Potential in overseas markets.

Threats :


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Growing industry and low capital intensive nature of business will attractcompetition.

Setting up Greenfield project and buyout are viable options for internationalplayers to enter the domestic market.

Aggression from existing players Industry can grow more on Multinational business

Market segmentation and Positioning:

Asian Paints segment the market based on the usage :

Brand Positioning

Recently major paint companies have been harping on health benefits of their products ratherthan just the decorative properties of look, feel and design.

Kansai Nerolac is currently aggressively marketing its products, having low to zero VOC(volatile organic chemicals). Kansai has launched a new campaign No VOC, No Gadbadwhich points out the gadbad in popular paints VOC. During the painting process VOCevaporates in the air causing health risks such as headaches, nausea, respiratory disorders,dizziness, chest congestion, lung irritation and burning sensation in the eyes, nose and throat.

Asian Paints has had low VOC products for a long time in its portfolio but now it has gone astep ahead and introduced Green Assure stamp for a select range of best-in-class products(like Royale, Royale Shyne and Apex Ultima) which conform to true Green standards. Under

this campaign, products not only conform to international VOC specifications but also do notcontain any hazardous raw materials like lead, heavy metals, APEO (AlkylphenolEthoxylates) and toxic materials as per the hazardous material usage guidelines laid out bythe International GS - 11 (Green Seal) standard.

It is how the Asian paints enabled people to form a mental image for their products in thecustomers mind. The strategies that they followed where as follows,

Brand Image

The ways in which Asian Paints attempted to meet the customers psychological and socialneeds. Indian paint industry is a low involvement industry. Till 1990s people will just telltheir budget for painting their house to their contractors. And few customers will alsomention the colour they need. During that period Asian Paints analyzed the customer marketand found that people where not brand conscious but their concern was only the price of thepaint. To meet this needs of the customer

Asian pa ints reduced the cost of the raw materials by backward integration in order toreduce the cost of the paints


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Established an advertising strategy with created an emotional touch among the customersAll these strategies helped them in creating a Brand Image for their products among peopleand people started realizing the need for brand conscious in this industry.

Umbrella Brand

In 2004 the company realized that though they have almost 20 brands only few products likeApex emulsion, Royale interior emulsion, Apcolite and Touchwood had high recall amongthe customers. Therefore they decided to promote the brand as a whole, to create a corporateimage and the various products under their Umbrella Brand Asian Paint, which becametheir mother brand. This created a Brand Awareness as a whole among the customers.

Brand Portfolio:

It was realized that instead of spending on individual brands and in promotingthem it was

logical to promote their corporate image and allthe brands under their umbrella brands...Asian Paints has embarked on an umbrella branding policy encompassing all its productsand services. The project includes a new visual identity that establishesthe company nameas the dominant reason for purchase. Tractor, Royale, Utsavand Apcolite names are no longerthe focus on the can, rather consumers will be buying "Asian Paints." Some key brand namesare being retained for the time being--to signal a position in the market rather than a productor surface. With the umbrella-branding move, Asian Paints can also afford to moveforwardfrom a mere functional platform for each individual product to the highground of a mood-based emotional dimension.

An Underlying Theme

At Asian Paints, the underlying theme is "har ghar kuchh kehta hai," or "everyhome hassomething to say." The depth and texture visualized by this line goesinto the customer's basicpsyche of owning a home, and will carry throughvarious messages emanating from thecompany, which is the leader in thedecorative coatings market in India.

Paint can be broadly be classified as decorative and industrial on the basis of end use.

INDUSTRIAL PAINTS:

This material can be further divided into following four sub-segments depending on end userprofile.

Automotive paints Marine paints Powder coating High performance coating Other general industrial finishes Coil coating

DECORATIVE/ARCHITECTURE FINISH PAINTS:


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This market can be further segmented on the basis of the following:

Customers type : institutional/retail or domestic use.

Product Features/Categories: Distempers, enamels, emulsion.

Price: Premium, medium, economy

Cost and Differentiation Drivers:

The paint industry costs and prices are driven by raw material costs which constitutes about

57% of the costs of sales, and government levies which constitutes 38% of the cost of paints.There are more than 300 inputs going into the manufacturing of paints and about 70% of them are based on petroleum. The petroleum prices are therefore one of the most importantcost drivers. The paint industry includes the extent of concentration in the paint industrywhich is very high. This lead to very low margin at each level with the final retailer as littleas 4-5%.

Five Forces in Present Paint Industry:

Supply:

Supply exceeds demand in both decorative as well as the industrial paint.

Demand:

Demand for decorative paints depends on housing sector and good monsoon. Industrial paintdemand is linked to users industries like auto, engineering and consumer durables.

Barriers to Entry:

Brand, distribution network, working capital efficiency and technology play a crucial role.

Bargaining Power of Suppliers:

Industrial Paints

Decorative Paints


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Price increase constrained with the presence of the unorganized sector for the decorativesegment. Sophisticated buyers of industrial paint also limit the bargaining powers of thesuppliers. It is therefore that margin is better in decorative segments.

Bargaining Power of Customers:

Bargaining power of customers of paint products is high due to availability of wide choice.

Competition:

In both the categories, companies in the organized sector focus on brand building. Higherprices through product differentiation are also followed as a competitive strategy.


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BIBLIOGRAPHY

http://www.asianpaints.com/corporate_information/manufacturing_facilities.aspx

http://www.asianpaints.com/pdf/press_releases/BIL_Dec02releaseforBSE.pdf

http://www.moneycontrol.com/competition/asianpaints/comparison/AP31

http://www.asianpaints.com/asianpaints_identity.aspx?src=bilg

Report published by Edelweiss Securities Limited (Edelweiss) about Asian paints

www.google.com

http://en.wikipedia.org/
http://www.asianpaints.com/corporate_information/manufacturing_facilities.aspxhttp://www.asianpaints.com/corporate_information/manufacturing_facilities.aspxhttp://www.asianpaints.com/pdf/press_releases/BIL_Dec02releaseforBSE.pdfhttp://www.asianpaints.com/pdf/press_releases/BIL_Dec02releaseforBSE.pdfhttp://www.moneycontrol.com/competition/asianpaints/comparison/AP31http://www.moneycontrol.com/competition/asianpaints/comparison/AP31http://www.asianpaints.com/asianpaints_identity.aspx?src=bilghttp://www.asianpaints.com/asianpaints_identity.aspx?src=bilghttp://www.google.com/http://www.google.com/http://en.wikipedia.org/http://en.wikipedia.org/http://en.wikipedia.org/http://www.google.com/http://www.asianpaints.com/asianpaints_identity.aspx?src=bilghttp://www.moneycontrol.com/competition/asianpaints/comparison/AP31http://www.asianpaints.com/pdf/press_releases/BIL_Dec02releaseforBSE.pdfhttp://www.asianpaints.com/corporate_information/manufacturing_facilities.aspx

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