Term Paper:

Berger
Strategies of Colors

Submission of Term Paper:

Berger-Strategies of Colors
Course Title: Business Strategy Course Code: MGT 401 Submitted to: Md. Shawkat Kamal Course Instructor BRAC Business School BRAC University

Submitted by: Ashfaq Mustafa Anwar (05104124) Labonee Ahmed (06304051) Mofliha Masnoon (07104030) Farzana Amin (07104077) Section: 02

Date of Submission: 29 July,2010

Letter of Transmittal
29th July, 2010 To Md. Shawkat Kamal Course Instructor BRAC Business School BRAC University Subject: Submission of report for Busness Strategy (MGT-401) Dear Sir, It is a great pleasure that we are finally submitting our final report on Berger-Strategies of Colors. The practical exposure while working on this paper helped our team to bridge the academic work and the practical knowledge. We were very fortunate to have worked with some experienced professionals while gathering the relevant data for this report. We tried our best to furnish this report with all the relevant information and facts and also tried to raise the right questions. But we do acknowledge that many anomalies might arise, which we are willing to change in light of further in-depth research or information. We will welcome any clarification and suggestion regarding this report. Thanking you. Sincerely yours, Ashfaq Mustafa Anwar (05104124) Labonee Ahmed (06304051) Mofliha Masnoon (07104030) Farzana Amin (07104077)

Acknowledgement

We would like to convey our sincerest thanks to our teacher, Md. Shawkat Kamal for this report; because this assignment helped us to apply the theoretical knowledge learned in the classrooms to the real life situations. Without his guidance and support, this project work would have been a lot more difficult. The thoughtful and focused guidance that our teacher has provided us from the academic and professional perspective helped us immensely while writing this report. We would also like to acknowledge Mr. Nahid Hasan, Planning Assistant, Supply Chain Management of Berger, who furnished this report with all the relevant information of the value chain process at Berger.

Executive Summary

This report is based on the business strategies of Berger Paints. Thus we have named this report as- Berger-Strategies of Colors. For the convenience of task we have chosen one particular brand of Berger and tried to trace different steps in its value chain process. Berger Paints started its sailing into the sea of Bangladesh from pre-liberation era, to be precise in 1950. The main business flourished in the post liberation phase. Over the decades, Berger has evolved to becoming the leading paint solution provider in this country and has diversified into every sphere of the industry - from Decorative Paints to Industrial Coatings, from Marine Coatings to Powder Coating and what not. Our selected brand is Robbialac Acrylic Plastic Emulsion. Under this brand there are lots of shades and we have selected the shade Brilliant White. Throughout this report we have tried to discover different strategies adopted by Berger Paints in different stages of value chain process. This was really a valuable experience for us to have an exclusive oppurtunity to work with such a reputed company and observe their value chain process.

Table of Contents
Topic No 1.1 1.2 1.3 1.4 1.5 2.1 2.2 2.3 2.4 3.1 3.2 3.3 3.4 4.1 4.2 4.3 Name of Topic Chapter One Introduction Objective Methodology Scope Limitation Chapter Two Company Overview Financial Facts Products Selected Brands Chapter Three Procurement Operation Distribution Marketing Chapter Four SWOT Matrix Recommendation Conclusion References Annex Page No 07 07 07 08 08 08 11 11 12 12 14 17 19 19 19 20 20

Chapter One 1.1 Introduction

This report is based on the business strategies of Berger Paints. Thus we have named this report as- Berger-Strategies of Colors. For the convenience of task we have chosen one particular brand of Berger and tried to trace different steps in its value chain process.

1.2

Objective

We have divided the objectives in to two different parts. These areGeneral Objective was to observe the overall strategies that Bergers applies in order to deliver their product to the end user. Specific objectives include To identify and observe different stages of value chain process including marketing strategies of Berger paints To observe how the product is developed from raw materials to finished good

1.3

Methodology

To furnish this report with the relevant facts we have basically obtained a few specific methodology. These are discussed below: Company Visit:

For gathering information from direct source we have visited Bergers Head Office at Dhaka which is situated at Uttara. There we have consulted with their professionals and got valuable primary information. Group Discussion:

For making a good synergy we arranged several group meetings with the group members so that we can analyze the gathered information in a better way.

Consultation with Course Instructor:

Time to time we have also took consultation of our course instructor, who actually guided us and monitor our activities. Methods Used:

Beside providing a literature overview we have also conducted a SWOT analysis to scrutinize the overall findings. Secondary Source of Information:

Besides primary source we also took help from Internet and text book as secondary ource of information.

1.4

Scope

We belive that the scope of this report is very wide. This will give a comprehensive and clear idea about the paint industry of Babgladesh. It will also provide knowledge about the different stages of value chain process of a paint manufacturing company.

1.5

Limitation

The major limitation that we faced was the barrier to the access in to the factory. The representatives of the company were unwilling to let us visit the factory. As a result we missed the actual scenario of their operation. This is might be because they want to protect their intellectual property and business secrets.

Chapter Two 2.1 Company Overview

Berger is one of the oldest names in paint industry tracing back to 1760. Lewis Berger, a German national, founded dye and pigment making business in England. Lewis Berger & Sons Limited grew rapidly with a strong reputation for innovation and entrepreneurship. Berger Paints started its sailing into the sea of Bangladesh from pre-liberation era, to be precise in 1950. The main business flourished in the post liberation phase. Over the decades, Berger has evolved to becoming the leading paint

solution provider in this country and has diversified into every sphere of the industry from Decorative Paints to Industrial Coatings, from Marine Coatings to Powder Coating and what not. To give a comprehensive and sustainable painting solution to the need of the industry, Berger has invested more on technology and Research & Development (R & D) than any other manufacturer in this market. The superior quality of Berger's products has been possible because of support from its advanced plants and an internationalstandard of strict quality. Berger's one of the prime objectives is to provide best customer support-connecting consumers to technology through specialized services like free technical advice on surface preparation, color consultancy, special color schemes etc.

Vision:
Berger wants to remain as the benchmark in the Paint industry by: We shall remain as the benchmark in the paint industry by: being an innovative and technology driven Company consistently delivering world-class products ensuring best consumer satisfaction through continuous value added services provided by highly professional and committed team

Mission:
Berger Paints Bangladesh Ltd expresses their mission in following manner: We shall increase our turnover by 100% in the next five years.

We shall remain socially committed ethical Company

Strategy:
The strategy of Berger can be summed as: Our strategy is to build long-term partnership with the customers/consumers. With their support, we aim to maximize the potential of our business- through a combination of enhanced quality of product, service, creative marketing, competitive pricing and cost efficiency.

Market Share Analysis:

At present Bangladesh paint industry has 6 companies who have significant market share. Berger Paints Bangladesh Ltd. is operating as the market leader and enjoying almost 53% of national paint market share. The nearest competitor is Asian Paints who reside far below the market leader in aspect of market share. The following Table shows the present market share of different companies in paint industry of Bangladesh: Companies BPBL Asian Roxy Elite Pailac Sagar Chemical & Paint Ind. Ltd. Others Total Market share 53.67% 8.20% 6.80% 5.20% 4.30% 4.60% 17.30% 100%
Table 1: Market share of different Paint Companies Source: Company

2.2 Financial Facts

Performance in last 5 years:

Table 2: Financial Facts Source: Annual Report 09

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2.3 Products
Berger mainly provides 3 types of paints which is categorized according to the purpose of use: Decorative Industrial Marine The well known brands of Berger are given below. It is to be noted that all these are market leader in their respective category. Brand Robbialac Parrot Luxury Silk Jensolin Industrial Acrylic Emulsion Decorative Category Decorative Decorative Decorative Brand Seabore Weather Coat Walmasta Category Marine Decorative Decorative

Table 3: Well Known Brands of Berger Source: Company

Beside this Berger Color Bank introduces to the global way to paint with an unlimited choice of shades to match different customers endless taste-instantly.

2.4 Selected Brand

Our selected brand is Robbialac Acrylic Plastic Emulsion. Under this brand there are lots of shades and we have selected the shade Brilliant White. We have chosen this brand because as per company it is very well known and highly sold brand.

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Competitive Analysis:

Brand Name Berger-Brilliant White Ujala Pailac Romana Roxy Elite

Container (litre) 18.2 18.2 18.2 18.2 18.2 18.2

Size Price (BDT) 3250 2800 2900 2800 2750 2950

Table 4: Competitive Analysis Source: Local Market

Chapter Three 3.1 Procurement

Raw Materials:
Paint is composed of pigments, solvents, resins, and various additives. The pigments give the paint color; solvents make it easier to apply; resins help it dry; and additives serve as everything from fillers to antifungicidal agents. Berger selects the raw materials from some of the best known suppliers in the world. MITSUI, MOBIL, DUPONT, HOECHST and BASF are a few to name. Components of paints are described brifly below:

Pigment:
Pigments are granular solids incorporated into the paint to contribute color, toughness, texture or simply to reduce the cost of the paint. Alternatively, some paints contain dyes instead of or in combination with pigments. Hundreds of different pigments, both natural and synthetic, exist. The basic white pigment is titanium dioxide, selected for its excellent concealing properties, and black pigment is commonly made from

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carbon black. Other pigments used to make paint include iron oxide and cadmium sulfide for reds, metallic salts for yellows and oranges, and iron blue and chrome yellows for blues and greens.

Binder or vehicle:
The binder, commonly referred to as the vehicle, is the actual film forming component of paint. It is the only component that must be present; other components are included optionally, depending on the desired properties of the cured film. The term "vehicle" is industrial jargon which is used inconsistently, sometimes to refer to the solvent and sometimes to refer to the binder. The binder imparts adhesion, binds the pigments together, and strongly influences such properties as gloss potential, exterior durability, flexibility, and toughness.

Solvent:
Solvents are various low viscosities, volatile liquids. They include petroleum mineral spirits and aromatic solvents such as benzol, alcohols, esters, ketones, and acetone. The main purposes of the solvent are to adjust the curing properties and viscosity of the paint. It is volatile and does not become part of the paint film. It also controls flow and application properties, and affects the stability of the paint while in liquid state. Its main function is as the carrier for the non volatile components. In order to spread heavier oils (i.e. linseed) as in oil-based interior housepaint, thinner oil is required. These volatile substances impart their properties temporarilyonce the solvent has evaporated or disintegrated, the remaining paint is fixed to the surface.

Additives:
Besides the three main categories of ingredients, paint can have a wide variety of miscellaneous additives, which are usually added in very small amounts and yet give a very significant effect on the product. Some examples include additives to modify surface tension, improve flow properties, improve the finished appearance, increase wet edge, improve pigment stability, impart antifreeze properties, control foaming, control skinning, etc.

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3.2 Operation
Step 01: Making the paste
Pigment manufacturers send bags of fine grain pigments to paint plants. There, the pigment is premixed with resin (a wetting agent that assists in moistening the pigment), one or more solvents, and additives to form a paste.

Step 02: Dispersing the pigment

The paste mixture for most industrial and some consumer paints is routed into a sand mill, a large cylinder that agitates tiny particles of sand or silica to grind the pigment particles, making them smaller and dispersing them throughout the mixture. The mixture is then filtered to remove the sand particles.

Instead of being processed in sand mills, up to 90 percent of the water-based latex paints designed for use by individual homeowners are instead processed in a highspeed dispersion tank. There, the premixed paste is subjected to high-speed agitation by a circular, toothed blade attached to a rotating shaft. This process blends the pigment into the solvent.

Step 03: Thinning the paste

Whether created by a sand mill or a dispersion tank, the paste must now be thinned to produce the final product. Transferred to large kettles, it is agitated with the proper amount of solvent for the type of paint desired.

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Figure 1: Paint Making Process Step 04: Canning the paint

The finished paint product is then pumped into the canning room. For the standard 8 pint (3.78 liter) paint can available to consumers, empty cans are first rolled horizontally onto labels, then set upright so that the paint can be pumped into them. A machine places lids onto the filled cans, and a second machine presses on the lids to seal them. From wire that is fed into it from coils, a bail meter cuts and shapes the handles before hooking them into holes precut in the cans. A certain number of cans (usually four) are then boxed and stacked before being sent to the warehouse.

Figure 2: Canning Process

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Step 05: Design

Paint is generally custom-made to fit the needs of industrial customers. For example, one might be especially interested in a fast-drying paint, while another might desire a paint that supplies good coverage over a long lifetime. Paint intended for the consumer can also be custom-made. Paint manufacturers provide such a wide range of colors that it is impossible to keep large quantities of each on hand. To create colors like "aquamarine," "canary yellow," or "maroon," Berger select a base that is appropriate for the deepness of color required. (Pastel paint bases will have high amounts of titanium dioxide, the white pigment, while darker tones will have less.) Then, according to a predetermined formula, the manufacturer can introduce various pigments from calibrated cylinders to obtain the proper color.

Step 06: Quality Control

Berger utilizes an extensive array of quality control measures. The ingredients and the manufacturing process undergo stringent tests, and the finished product is checked to ensure that it is of high quality. Ensuring Functional Qualities: A finished paint is inspected for its functional qualities like density, fineness of grind, dispersion, and viscosity. Paint is applied to a surface and studied for bleed resistance, rate of drying, and texture. For exampl, weathering is tested by exposing the paint to outdoor conditions. Artificial weathering exposes a painted surface to sun, water, extreme temperature, humidity, or sulfuric gases. Fire retardancy is checked by burning the paint and determining its weight loss. If the amount lost is more than 10 percent, the paint is not considered fire-resistant. Ensuring Aesthetic Qualities: In terms of the paint's aesthetic components, color is checked by an experienced observer and by spectral analysis to see if it matches a standard desired color. Gloss is measured by determining the amount of reflected light given off a painted surface.

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Step 07: Packaging:

Paint being sensitive item requires careful consideration while packing and for that Berger pays sufficient attention on their packing material. Berger mainly outsource the containers from reputed suppliers of Bangladesh. But for some of the sensitive paints it outsource the containers from Indian suppliers.

3.3 Distribution
In the present context of our country, probably Berger has one of the most extensive and efficient distribution networks. Bergers two Warehouses located inside Chittagong factory and Dhaka factory complex. From there, products are supplied to Chittagong and Dhaka Sale office. From their finished products are distributed to other five depots located at Comilla, Rajshahi, Sylhet and Bogra. And at the end from both the sales offices and also from the five sales depots paints are distributed to the dealers and retailers and from there reaches to customers. Berger has almost 800 dealers around the country. In some occasion both sales office and depots also sell paints to the end users directly. But at recent time the practices are being discouraged due to the companies arises out of it and also to reduce the work load of those offices and depots. The figure drawn below shows the details of distribution

network of Berger.

Figure 3: Distribution Network of Berger Paints Bangladesh Ltd Source: Company

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3.4 Marketing
Price Strategy:
Price strategy of Berger can be spelled out in following manner. Provide high quality product at highly affordable price. At some places Berger had to charge higher price then that of their competitor due to strict compliance of quality and government financial law. Beside this Berger also consider commissions / discount to dealers and rretailers while preparing the pricing strategy. Berger supplies their product to dealers through some establishes discount basis. They also offer some special commission and discount rate for their premium dealers, who can cross the benchmark, set by Berger.

Promotional Strategies:
For the kind of product like Robbialac Acrylic Plastic Emulsion Berger conducts mainly 3 types of promotional activities. These are discussed below:

Advertising:
Berger uses different types of media like TV, Newspapers, Magazines, Signboards and billboards, Internet to promote their products and product related message to their customers.

Sales Promotion:
Involves the use of special short-term techniques, often in the form of incentives, to encourage customers to respond or undertake some activity. Most of the sales promotion of Berger is trade promotion which is given directly to the dealer like Commission, Discount, Gifts, Foreign tours, Credit sales, Etc. But they also use some consumer sales promotion. This includes providing gift items, scratch card facilities etc.

Public Relation:
Public relations involve the cultivation of favorable relations for organizations and products with its key publics through the use of a variety of communications channels and tools.
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Favorable media coverage about a company or product often reaches these audiences as well and may offer potential benefit to the marketer. For these Berger continues different types of public relation activities. The examples are given below: Young Painters Art competition Young Architects Award Sponsoring Delta Break Housing Fair

Chapter Four 4.1 SWOT Matrix

The major strength of Berger paints is their brand image and experience. Their huge distribution network also works as their strength. their weakness is that they dont concentrate on web based promotion, their website is informative but not interactive. High price is also one of their major problems. Their oppurtunities are mainly in the area of expansion of business by starting new service like architechture firm or interior decoration firm. They do have some threats like new competitor, poor quality raw material, harmful byproduct etc.

4.2 Recmmendation
It is really very hard for us to recommend Berger as they are really very experienced in what they re doing. It is very possible that they have covered all possible bases and the shortcomings that we are observing is due to our gap of knowledge. Though we would like to recommend them that they should re think of their price to remain competitve. They also should focus on web based advertisements. They also should keep contionous focus on quality.

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4.3 Conclusion

Robbialac Acrylic Plastic Emulsion is basically targeted towards the high middle class house holds who wants to use high class qualityfull paints for their home decoration. For this purpose Berger is charging pretty high than their competitors. Apart from this they are very quality conscious manufacturer. We are very fortunate to work on this interesting topic with some experiencedprofessional of a reputed organization. We are very hopeful that this report will be of wider use for different purposes. We tried our best to furnish this report with all the relevant information and facts and also tried to raise the right questions. But we do acknowledge that many anomalies might arise, which we are willing to change in light of further in-depth research or information. We will welcome any clarification and suggestion regarding this report.

References
Nahid Hasan, Planning Assistant, Supply Chain Management, Berger Paints Bangladesh Ltd. http://www.bergerbd.com/

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Annex
SWOT Matrix: Strength: Huge distribution network Brand image & Experience Weakness: Less web based promotion Higher price than competitors Oppurtunity: To extend the business in related industry like architechture firm or interior decoration house Threat: Substandard raw materials from suppliers which can decrease product quality New Competitor New innovation by competitor regulatory issues can arise if any harmful byproduct is produced while manufacturing paint

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