Asian Paints Ltd

Table of Contents Executive Summary 1. Company History 2. Industry Structure 3. Environment 4. Products 5. Price 6. Distribution Network 7. Promotion 8. Financial Analysis 9. Customer Survey Analysis 10. Suggestions 11. Appendix a. Sample Customer Questionnaire b. Sample Dealer Questionnaire c. Financial Statements d. Bibliography 2

Executive Summary The purpose and scope of document is to study, analyze and understand the busine ss and marketing practices of Asian Paints Limited. In order to achieve this objective, two stages were identified Data collection stage and the Analysis stage. The first stage in cludes the data collected from various sources regarding the following: 1. The Origin, History of the company, its growth, The board of Directors, Operation units in India and abroad 2. The three closest competitors in the paint industry Goodlass Nerolac, Berger Paints, ICI , their origin and growth 3. Financial statements of the Company 4. Information about the 4 P s of marketing Product, Price, Place and Promotion in the Orissa market 5. A customer and dealer survey in Orissa to understand their decision making process The analysis stage includes understanding the implications and relevance of the data collected and drawing conclusions about the company s business and marketing decisions. Asian Paints (AP) Limited is an out-an-out Indian firm in the paint industry tha t manufactures and markets a wide spectrum of decorative as well as industrial pai nts. Though it had a corporate position of a focused national paint company by cateri ng to industrial and household customers in Indian market in the past, it has been systematically repositioning itself in the recent years to become a global playe r by entering into a number of other country markets. The Indian Paint industry is mainly divided into two segments decorative paints segment and industrial paints segment. Asian Paints is the market leader in the decorative paints segment with a market share of 44 % followed by Berger Paints (17 %), Goo dlass Nerolac (15 %) and ICI (12 %). However in the Industrial Paints, Goodlass Nerola c is the leader followed by ICI, Berger Paints and Asian paints. Known for its innovative marketing and distribution strength, Asian Paints is on e of the consistent performers in the Indian corporate scene. The company has a tr ack record of profitability, transparency in operations and strong balance sheet. Fa ctors that have been given emphasis here include the low per capita consumption of paints ( 1.0 kilogram), growth in construction sector (it is being offered industry status) &

growth in the auto/white goods market respectively spurring demand for decorative & indust rial paints. The impact of recent issues & trends (like raw material costs, excise du ty rationalizations, quality consciousness in user segments) on the industry dynami cs can also be seen. The industry has also witnessed increased activity in the industri al variety of paints with the entry of Multi-National Companies in auto, consumer durables etc , which has been gaining steadily over decorative paints in the last one decade. With th e industry to grow at a CAGR of 8-9 % for the next five years with growth level of 27.4 % f or cars and 8.9 % for two wheelers we see a lot of opportunity in the automobile sector for the paint industry. Moreover housing industry is also likely to do well in the curre nt year with the growth rate for the last year being 35 %. So the expected rate of growt h for paint industry for the next five years is around 9-10 %. 3

At present industry requires highest efficiency in physical distribution as companies not working on operational efficiency business models have been losing . On account of this, companies need to invest in sophisticated Supply-Chain Manageme nt tools. Companies need to work on improving internal efficiencies to retain profi ts which are under pressure on account of dropping prices. The customer (retailer for the company) is seen to be dictating terms so companies have no choice but to lure m ore customers through incentives. At the same time, companies also need to attract f inal consumers by offering value-added services. So we came up with the following recommendations: To take up trade promotions, to build up relations with the intermediaries, a need to improve cur rent inventory levels to cut down costs, a need to promote sub brands so as to increa se subbrand awareness among the customers, improve advertising strategies for targetin g female customers who have assumed a greater role in decision-making and a need t o expand in industrial segment by forming strategic partnerships to take advantage of the upcoming industrial growth at national and regional levels. 4

Asian Paints Limited 1. Company History In 1942, four partners got together to manufacture paint in a garage in Bombay. The company was named Asian Oil and Paint Company; a name picked at random from a telephone directory. Up against giant international paint companies, Asian Paint s hit on the innovative marketing strategy of reaching consumers in the remotest corners of the country with its small, conveniently sized packs. During the 1950 s the company gr ew from being a family-managed, small-time paint manufacturer to a professionally managed organization competing with the best companies in the world. By 1967, th rough innovative R&D and ambitious grass-roots marketing, forming strong relationships with thousands of paint dealers in small towns all over India, the company jolted its multinational competitors by emerging as India s number one paint company. For the next thirty years they maintained their position as market leader throug h i. Excellent marketing ii. Intensive distribution, and iii. Leadership in Information Technology In 1996-97 the total sales of Asian Paints reached $175 million, almost double t hat of Goodlass Nerolac Paints, (1996-97 sales $94 million) the number two paint compan y in the country and Asian Paints continues to be a market leader in the decorative p aints segment till date. In 1998, the company embarked on a major restructuring strate gy under the guidance of management consultants, Booz Allen & Hamilton. The restructuring was done to bring greater focus to its business, improve efficienc ies, control cost and strengthen its leadership position. After the completion of the restruc turing, the vision for the company was stated. The company is committed to realizing its vis ion and has chartered a complete plan of action for realizing its vision. At present, Asian Paints is one of the ten largest decorative paint companies in the world, and is largest exporter exporting directly to 20 countries. Recently, it changed its name to Asian Paints Limited as a part of its global strategy. Board of Directors Mr. Mr. Mr. Mr. Mr. Ms. Mr. Ashwin C. Choksi (Chairman) Ashwin S. Dani (Vice-Chairman and MD) Abhay A. Vakil (Managing Director) Mahendra C. Choksi Amar A. Vakil Tarjani Vakil Deepak M. Satwalekar

Mr. Mr. Dr. Mr. Mr. 5

Dipankar Basu Rajendra A. Shah Swaminathan Sivaram Mahendra M. Shah Hasit A. Dani

Group Subsidiaries Apco Coatings Asian Paints Industrial Coatings Limited Asian PPG Industries Limited Berger International Limited Taubmans Paints Scib Paints Limited. Asian Paints is one of top 10 decorative coating companies in the world. Along w ith its subsidiaries, it now has 29 paint manufacturing facilities in 22 countries, spre ad across the world. The distribution of its operations in the world is given as below: Regions Countries Operating Companies South Pacific Australia , Fiji, Solomon islands, Samoa, Tonga, Vanuatu Asian Paints and its subsidiaries South East Asia China , Malaysia ,Myanmar, Singapore, Thailand Berger International and its subsidiaries South Asia India, Bangladesh, Nepal, Sri Lanka Asian Paints and its subsidiaries West Asia Bahrain ,UAE Oman Berger International Limited and its subsidiaries Asian Paints and its subsidiaries Caribbean Barbados, Jamaica ,Trinidad and Tobago Berger International and its subsidiaries Africa and others Egypt SCIB paints Table-1 Berger International Ltd. has no operations in India. The shareholding pattern of Asian paints as on March 31, 2005 is as follows: Directors ,relatives and associates 42.86% Individuals 17.51% Domestic companies 0.88% Financial institutions 12.98% Non-resident Indians 2.26% FII s and OCB s 21.15% Mutual funds and Banks 2.36% Table-2 At present the total equity paid up capital of the company is Rs. 959.20 million 6

2. Industry Structure Indian Paint Industry is over 1000 years old. Its beginning can be traced back t o the setting up of a factory by Shalimar paints in Calcutta back in 1902. Till the Se cond World War the industry consisted of small producers and two foreign companies. After t he war, the imports stopped which led to the setting up of manufacturing facilities by l ocal entrepreneurs. Still the foreign companies continued to dominate the market, whi ch in a way is the current scenario as well. The initial decades saw the complete domina nce of British Paint companies such as Goodlass Walls (now Goodlass Nerolac), ICI, Brit ish Paints (now Berger Paints), Jenson & Nicholson and Blundell & Eomite. The Indian Paints sector is valued at Rs 6,800 crores in value terms and is very fragmented. The current demand m and is seasonal in nature. The per .0-kg p.a. as compared to 1.6 kg in China re in the world paint market is just is estimated to be around 650,000 tonnes per annu capita consumption of paints in India stands at 1 and 22 kg in the developed economies. India's sha 0.6%.

The Indian Paint industry can be divided as: the organized sector comprising of large and medium size units the unorganized or the small scale sector. There are now twelve players in the organized sector with a market share of 70%. This is in contrast to the 55% share that the sector commanded a few years back. Major companies in this segment include Asian Paints (44% market share), Berger Paints (17% market share), ICI (12% market share), Goodlass Nerolac (15% market share), Jens on Nicholson (6% market share), Shalimar Paints and Rajdoot Paints. The organized s ector has grown at a CAGR of 11.5% in the last five years. The unorganized sector comp rising of over 2000 units has a combined market share of around 30%. The major players are Asian Paints, Goodlass Nerolac, Berger, ICI and Shalimar. Recently, world leaders like Akzo Noble, PPG, Dupont and BASF have set up base i n India with product ranges such as auto refinishes, powders and industrial coatin gs. Kansai Paints of Japan, which entered into collaboration with Goodlass Nerolac in 1984, is now the holding company for Goodlass Nerolac with 64.52 % equity holding. PPG has a joint venture with Asian Paints to manufacture industrial coatings. Jenson & Nicholson and

Snowcem India are no longer active players because of dwindling sales in recent years. In the 1990s, helped by a growing economy, the paint industry had recorded a hea lthy growth of 12-13 % annually. This was mainly due to a drastic reduction in excise from a staggering 40% to 16%. However, the growth was restricted in 2000-03 to single d igits. There was a revival in 2003-2004 with a robust growth of 13%. 7

The per capita consumption of paint in India is 700 grams against 19 kg in the U .S., and 2.7 kg and 5.8 kg in other developing countries like China and Brazil. As the consumption goes with affordability, the low Indian figure is not a surprise. High excise duties, low technology and low capital costs for production led to t he incidence of a high number of units in the small scale sector. However, since 19 92 the government has been consistently lowering duties from 40.5% in 1992 to around 16 % currently. This has led to lowering of price differential between the organized and unorganized sector. Moreover the paints sector was also allowed to claim MODVAT credit on petro-based products, thus lowering the excise incidence further. Products The products of the paint industry can be classified into two major segments - d ecorative (architectural) paints and industrial paints. While the decorative paints are us ed in protecting valuable assets like buildings, the industrial paints are used for pr otection against corrosion and rust to steel structures, on vehicles, white goods and app liances. Decorative paints: The decorative paint segment can be classified into interior paints and exterior or cement paints. 80% of the decorative paint segment (about Rs. 36 40 crores in the organized sector) accounts for interior paints, which consists of premium, medium and economy categories. The premium category consists of plastic emulsion s, the medium-priced category consists of synthetic enamels and the economy categor y consists of distempers. Fig-1 The products under the decorative finishes can be limestone coatings, primers, distempers, cement paints, matt/lustre finishes, enamels, emulsions (first quali ty), and premium emulsions. Within the decorative segment, the exterior category, particu larly exterior emulsions, is the fastest growing segment 20 % for the last three years . Consumption of paints is skewed towards decorative paints which account for 70% of paints sold in India. This is in a sharp contrast to the trend in developed coun tries, where the ratio is skewed towards the industrial segment. This segment is marked by th e presence of a large number of players from the organized as well as unorganized sector.

Competition is high and margins tend to be low in this segment. Products of this segment are relatively price sensitive. Asian Paints is the market leader in this segmen t. Demand for decorative paints is seasonal with bulk of sales taking place during the festival seasons from September to December. Besides, sales remain slack during the monsoon months from June to August. Entry barriers in terms of technological and funds requirements are relatively l ower in the paints sector. It is estimated that a plant of 1 m tpa will cost around Rs 120 m . However decorative paints are marketing-savvy products and backed by large advertisement campaigns and dealership networks. These serve as high cost entry barriers for n ew companies in this business. The huge investments required in setting up a vast m arketing and dealership network, to advertise and develop a brand over a period of time c an only be afforded by companies in the organized sector. It is for this reason that sma ller companies and small scale sector units are slowly losing market share to the org anized sector. Industrial Paints: Industrial paints comprising 30% of the market include automo tive paints, high performance coatings, coil coatings, powder coatings, marine paints and general industrial coatings. The automotive segment is further bifurcated into O EMs and auto refinishes. The automotive and general industrial coatings occupy top slot in terms of production. Goodlass Nerolac is the market leader in this segment. Fig-2 Demand for these paints is relatively price inelastic, but is prone to business cycles and depends on industrial and economic growth. Major end user industries include shi pping, capital goods, white goods and heavy industries. The industrial paints segment due to specialized technology and high capital exp enditure attracts fewer players. Most Indian companies have tied up with or are in the pr ocess of tying up with international paint majors to have access to the latest technology . A tie-up with a global paint manufacturer also enables the domestic company to supply to local customers of its partner. For example, Goodlass Nerolac is a major supplier to M aruti Suzuki because of Kansai, its Japanese collaborator and Suzuki relations. It is for the

same reason that Asian Paints (tie-up with PPG Industries, USA) is a major suppl ier of paints to Opel Astra. 9

Table-3 Raw Materials: The paint industry is raw material intensive. Paint involves the mixing of various raw materials in various proportions. The raw materials are of a wide variety. On an average, raw materials account for 60% of net sales (industry average). In case of small-scale units it forms up to 70% of the net sales. High cost and erratic ava ilability of raw materials mark the Indian paint industry. Around 300-400 raw materials are r equired to manufacture different kinds of paints. The high number of raw materials and f inished goods highlights the working capital intensity of the sector. Most of the raw ma terials are petroleum based. Thus paint companies benefit when the petrochemical industry go es into its cyclical downswing. A hike in the price of petroleum products raises in put costs negating the impact of a cut in import tariffs on raw materials. Raw materials f requently run into short supply, resulting in high inventory cost. The shortage of one spe cific material could result in severe manufacturing problems It is estimated that 18-2 0% of the total raw materials used the industry are imported. Most paint companies are hit by the fact that they do not make the raw materials themselves. For example, phthalic a nhydride (PAN) is manufactured from orthoxylene and which goes into the production of pai nts along with titanium dioxide. Asian Paints is the only paint company that manufac tures PAN. The other paint companies have to import their stock. Since PAN prices gene rally outpace international orthoxylene prices by almost 50% paint companies end up pa ying a fortune when prices rise. In such a situation Asian Paints benefits by selling P AN in the open market. Raw materials are divided into three major groups, namely, pigments (titanium di oxide, zinc oxide etc.), solvents (mineral turpentine) and resins and additives. Pigments are finely ground solids of different shades to give colour, durability , consistency and other properties to paint. It is also one of the major raw mater ials, accounting for one-third of the total raw materials cost. Amongst the vital pigm ents used in the process of paint manufacture is Titanium dioxide (TiO2) and the industry consumes around 60% of TiO2. This pigment is available in two grades: anatase an d 10

rutile, of which anatase is exclusively used in interiors while rutile is prefer red in exteriors. India has abundant raw materials for the manufacture of TiO2, especia lly ilmenite of which it has 12% of the world s deposits. It is ironical that the pain t industry presently imports TiO2 in excess of Rs.1 bn - a figure that may touch Rs 2 bn by the turn of the century. TiO2 is responsible for the demand-supply gap. If the strong dem and growth boosts domestic production of TiO2, there will be an increased usage in v arious sectors. If the raw materials are properly utilized, India has the potential to emerge as a net exporter of TiO2 in the next five years. Solvents are volatile organic compounds (VOC) used to dissolve, suspend or chang e the physical properties of other materials. They are generally used to bring down th e viscosity of paints to the desired level, which also reduces the cost of paint f ormation. They constitute 70%-75% of the paint liquid and ultimately escape into the atmos phere when the fluid dries. Solvents such as ethylene glycols and alcohols are finding wider use as co-solvents in new water-borne formulations. Binders are generally oils, resins and plasticisers that give paint its protecti ve property. Most resin manufacturers make alkyds, polyesters, emulsion polymers, epoxy resin s, amino resins, powder coating resins etc. Additives are added in small proportion to the paint to improve its performance characteristics in various ways. Skinning inhibitors, fungicides, wetting agents , driers are included in this category. Current trends The industry is riding high on the growth in the automobile industry, hectic con structions in the housing segment, improving infrastructure and overall feel good factor in industry. 30% of the paint business is contributed by painting of new construction area. G DP growth projections of 6-6.5 % in the current year mean a growth of 9-10 % in the paint business. The growth will be about 12-13 % in the industrials and 8-9 % in the decoratives. 3. Environment The chief competitors to Asian Paints are Goodlass Nerolac, Berger Paints, ICI a nd Shalimar. In order to understand the environment, we need to look at each of the competitors.

Goodlass Nerolac This company s paint decors every third car in the country. It is the market leade r in the industrial paint segment supplying over 90% of the requirements and has planned to increase its presence in the decorative segment through aggressive new product development and brand building. They are the second largest company in India in the 11

decorative segment with a market share of around 20%. They are the leaders in po wder coatings. Goodlass Nerolac Paints Ltd is a subsidiary of Kansai Paint Company Limited, whi ch is the largest paint manufacturing company in Japan and among the top ten coating companies of the world, with a human asset of over 1900 professionals and a sale s turnover of Rs. 925 crores. This company started in 1920 as Gahagan Paints and Varnish Co. Ltd. at Lower Par el in Bombay. In 1930, three British companies merged to formulate Lead Industries Gro up Ltd. In 1933, Lead Industries Group Ltd. acquired entire share capital of Gahaga n Paints in 1933 and thus, Goodlass Wall (India) Ltd. was born. Subsequently, by 1946, Go odlass Wall (India) Ltd. was known as Goodlass Wall Pvt. Ltd. In 1957, Goodlass Wall Pv t. Ltd. grew popular as Goodlass Nerolac Paints (Pvt.) Ltd. Also, it went public in the same year and established itself as Goodlass Nerolac Paints Ltd. In 1976, Goodlass Ne rolac Paints Ltd. became a part of the Tata Forbes Group on acquisition of a part of t he foreign shareholdings by Forbes Gokak. In 1983, Goodlass Nerolac Paints Ltd. strengthene d itself by entering in technical collaboration agreements with Kansai Paints Co. Ltd., Japan and Nihon Tokushu Toryo Co. Ltd., Japan. In 1986, Goodlass Nerolac Paints Ltd. turned into a joint venture of the Tata Forbes and the Kansai Paints with the la tter acquiring 36% of its share capital. In 1999, Kansai Paints Company Ltd., Japan t ook over the entire stake of Tata Forbes group. During this journey, Nerolac has entered into technical collaborations with othe r industry leaders such as E.I. Du-Pont de Nemours & Company Inc., USA and Oshima Kogya Company Ltd., Japan for different products. Berger Paints This company started in 1947 as British Paints when it acquired Hadfield's (Indi a) Limited, a paint company that produced 150 tonnes of ready mixed stiff paints, v arnishes and distempers. Sales offices were opened in Delhi and Mumbai and in 1951 a depot was started in Guwahati. Sales rose to Rs.60 lakhs in 1952. The Company declared its first divi dend and shifted the H.O. to 32, Chowringhee Road, Calcutta. By 1959, modernization of th e Howrah Factory was completed and the first Resin Plant commissioned. With that,

the Company entered the Synthetics Paints market. By 1965 British Paints (Holdings) Limited, UK. was acquired by Celanese Corporat ion, U. S.A. As a result, the controlling interest of British Paints (India) Limited passed on to Cel. Euro N.V., Holland. In 1969 Celanese Corporation sold their interest in the Indian Company to Berger Jenson Nicholson Limited, UK. In 1975, the foreign holding of the Company was reduced from 60% to 45% through a Public issue. A year later the for eign holding was diluted to below 40% by sale of a portion of the shares to the UB Gr oup. 12

In 1983, the name of the Company was changed to Berger Paints India Limited (BPI L) and by this time the Berger's operations were divisionalized into the Retail Bus iness Line (RBL) and the Industrial Business Line (IBL) in order to better cater to the nee ds of the customers. During this period many new products were launched like "Luxol Silk" the first premium emulsion in India, Viton Refinish for cars, Bison Acrylic Distempe r and Rangoli Acrylic Emulsion. In 1990 s, Berger Pro Links , a service aimed at providing paint and application rela ted information to professionals, was introduced marking one of the first steps into painting related services. In 1991, the stake of the UB Group in the Company was purchase d, by Mr K S Dhingra, Mr G S Dhingra and their associates. The sales of the company to uched 276 crores by 1995-96. The latter half of the nineties saw Berger attain the ISO - 9000 ceritification (1996) and establishment of Berger's Quality Management System. Color Bank tinting system w as also launched through which the consumer can select from a range of over 5000 co lors and which are then made available in minutes. As part of its expansion program, a new paint-manufacturing unit at Pondicherry was commissioned in early 1997. Berger Paints Home Decor a complete painting solutio n service was launched making painting a hassle free activity for consumers. Illus ions multi chrome finishes was also introduced as "designer finishes for walls" allowing co nsumers to transform their walls into fashion statements. This is a first for the Indian paint industry. ICI ICI India was the subsidiary of the $15 billion British multinational company IC I Plc. Brunner Mond & Co., one of the four Companies that combined to form ICI in UK in 1926, opened a trading office to sell alkalis and dyes in Calcutta. In 1923, Bru nner Mond & Co. (India) was incorporated and the company's name was subsequently changed t o Imperial Chemical Industries (India) Ltd., in 1929. During its 70 years in India , ICI had created six subsidiary companies in businesses such as research, chlorine, caust ic soda, paints, rubber chemicals, explosives, polyester fiber, urea, agro-chemicals, see ds, pharmaceuticals, specialty chemicals, polyurethane, nitrocellulose, and surfacta

nts. In 1984, all ICI companies consolidated in one of the largest mergers in Indian cor porate history. By 1997, as a part of a restructuring exercise ICI had exited or was pl anning to exit from several non-core businesses. The 1996 sales break up was as follows: P aints 43%, Explosives 28%, Rubber chemicals 17%, Pharmaceuticals 8%, and Other Product s 4%. ICI (India) ranked No. 4 in the paint business, after Asian Paints, Goodlass Ner olac Paints and Berger Paints. Unlike the other paint companies ICI (India) was a div ersified unit and paint constituted 43% of its net sales. ICI (India) s turnover in 1996-97 was $180 million and paint amounted to $77.4 million. 13

ICI identified paints as a thrust area and was aggressively moving to improve th eir position. They invested $11 million in a new decorative paints plant near Bombay and were constructing a $16.7 million plant for industrial paints near Chandigarh in North India. ICI (India) intends to go on an offensive with a target of achieving tenfold growth in 10 years. The 10X Plan , as it was called, envisaged a strategy based on acquisi tions, take-overs and alliances. 4. Products Paints can be generally divided into decorative paints and industrial paints. In dustrial paints consist of the automotive category also. Decorative paints can be further divided into interior and exterior wall paints, wood and metal enamels. Each of these pr oducts has a range of products varying from the premium segment to the economy segment. Decorative Segment Interior Wall Paints Product Asian Berger Goodlass Jenson ICI Shalimar Segment Paints Nerolac Nicholson Exquisite Royale Luxol silk Pearl Special Dulux Hussain emulsion Luxury Luster Effects Designer Collection paint with Emulsion Silk luxurious finish and silky glowing appearance Emulsion Premium Rangoli All Robbaliac Dulux with rich Emulsion Scapes 24 acrylic Designer and matt carat Silk finish and Low superior Sheen quality Acrylic Tractor Bison Nerolac -Dulux Superlac emulsion at Emulsion Emulsion Premium Wash & Acrylic the similar Acrylic Wear Emulsion price as emulsion distemper Water Tractor Bison Nerolac Jensolin Dulux Shalimar based Acrylic & Distemper Acrylic Acrylic Wash & No 1 paint, long Synthetic Distemper Distemper Wear lasting & Distemper value for money 14

Water based paint at affordable prices Utsav Acrylic Distemper ----Table-4 Exterior Wall Paints Product Asian Berger Goodlass Jenson ICI Shalimar Segment Paints Nerolac Nicholso n Technologi cally high end product Elastomer ic-HiPerforma nce Exterior Weather Coat Excel 100% Acrylic Special Effects exterior Dulux Weather shield Garden Shades Paint Low Sheen Premium Textured Apex Textured Walmasta Nerotex Matt Armour Quartz Dulux Tuscan Xtra Premium Segment Exterior Emulsion Effects, Dulux Acrylic finish

Render Effects Non Ace Duracem Suraksha Robbiace Dulux Premium Textured Exterior Plastic m Super Weather Acrylic Segment Emulsion Cement shield Distemper Paint Low Sheen Economy Ustav -Nerocem --Segment Exterior Distempe r Table-5 Enamels Product Segment Asian Paints Berger Goodlass Nerolac Jenson Nicholson ICI Premium Segment Apco Premium Gloss Enamel, Apcolite Premium Satin Luxol Luster -Brolac Polyurethane Enamel Dulux Super Enamel High Gloss 15

Medium Segment Gattu Synthetic Enamel Luxol HiGloss, Luxol Satin Nerolac Synthetic Enamel Umbrella Synthetic Enamel Dulux Super Enamel Semi Gloss Economy Segment Utsav Enamel Goody Synthetic Enamel -Table-6 Apart from these there a certain speciality paints produced by these brands whic h are not produced by all the brands and cannot be categorized. Asian paints has an umbrella brand by the name of Utsav that covers the economy segment in all paint categories. The Utsav sub-brand is aimed at the Indian rura l populace who are on the lookout for cheap but durable and beautiful paints. Apart from these all the paint brands also make some miscellaneous products like surface primers , stainers, varnishes, thinners, aluminum paints, etc. Industrial Segment All the paint brands produce industrial paints like epoxy based paints, metal pr imers, polyurethane coatings, etc. In the Orissa market Shalimar paints is the leader i n this segment. 5. Price In the paints industry price is the used only as a differentiator between the va rious segments in the same product line. The prices of different brands in the same se gment remain more or less similar, with just a difference of 30 to 40 paise per square feet. Some of the speciality products, which are not produced by all brands, may be priced at a higher price. Pricing decisions in the paint industry largely depend on the price of the input s like petroproducts,

other raw materials, excise duties and taxes and the general operating profits. Generally increase or decrease of prices is effected across all brands in the ma rket. Most of the paint companies offer a 5% margin to the dealer. Due to internal com petition, the dealers pass on this advantage to the customers by reducing their own margin s to 23%. This is a cause of concern for the paint companies because they have to keep a constant check on the prices offered in the market. The dealers offer more of di scounts and the companies are not able to firm up the prices. Paint companies offer a lo t of discounts like cash discounts, volume discounts, seasonal discounts and allowanc es. The dealers take advantage of these discounts to gather more business. 16

6. Distribution network Asian Paints has six manufacturing locations all over India and 70 sales branche s. Each of the manufacturing plants makes different products. The distribution system is taken care by area sales managers and executives. The executives keep canvassing the m arket and meeting the dealers to get the orders. Asian paints has around 15000 dealers who are catered to by the sales executives. The orders are collected by the sales execut ives and passed on to the nearest depot. The depots are fed by regional warehouses. These depots maintain a minimum order quantity which is arrived at from the monthly demand forecast. The material is dispatched from the depot in the name of the dealer. G enerally some orders of the same region are clubbed together and dispatched in trucks. Fi nally the truck is unloaded and the small orders of the dealers are dispatched to them. Th e The sales executives are also responsible for the collection of outstandings. Ge nerally paint companies allow a maximum outstanding of 2-3 lakhs for 45 days. Other jobs of the sales team consist of grievance redressal and customer feedback. Manufacturing Units Regional Depots Dealers fig-3 7. Promotion The paint industry until 1999 was concentrated mostly on increasing sales by int ensive trade promotion wherein the dealers, contractors and other components of the sup ply chain. There was little emphasis on theme advertising directed towards the custo mer. a recent trend that is emerging in the Indian paint market is that the major brand s have all identified the importance of reaching out to the common man instead of just limi ting themselves to the intermediaries. 17

Fig-4 Asian Paint s advertising has created brand awareness, highlighted what the brand has to offer and has consistently brought all of it top-of-the-mind for the customer. B ut the outreach effort does not end there. Asian Paints has recognized the importance o f communicating to and involving key players who influence the final brand choice. These include channel partners, contractors and painters, on whom Asian Paints focuses by initiating and developing innovative activities and promotions. This helps build the Asian Paints family so that customers get a high degree of personalized service and pr ofessional guidance to facilitate their final decision. Advertisements: Asian Paints has had several memorable advertising campaigns. Th ere are two current favorites. One for their exterior paints where they show the man , his wife, his car, in fact everything, except the exterior paint ageing. People absolutely adore that advertisement. In fact, when you start seeing take-offs on a creative effort, yo u know it has really caught the imagination of people. A couple of take-offs have been not iced on this TVC. The colourful, almost lyrical Har ghar kuch kehta hai... campaign, which was lau nched nationally in February, is essentially about the relationship people have with t heir homes. Specifically, the spots look at the effort and the strong emotions that go into doing up a home. The ads are a reflection of the fact that people are a lot more involved i n doing up their homes now. But while the choice of paints forms an important part of the p rocess, it is not the highlight; instead, there are glimpses of hand-picked furniture, trea sured pictures, the intimacy of the family and the pride that comes at the end of the process. The creative idea behind the campaign is that a home speaks volumes about the pe ople who live in it. This is expressed through a montage of visuals of the family int eracting with the home -painting it, decorating it and simply living in it. The visuals a re complemented by a voice-over that is really a poem that expresses the home's tho ughts about its residents. 18

One of their most successful campaigns has been the

mera wala green . It has a very

subtle way of telling the people that all possible colors in all possible shades are available with them. The performer in the katthakali make-up symbolizes a wide range of co lors. The lady looking at all those colors take a long time to choose her color. This symbolizes the idea that Asian Paints has the color range to satisfy even the most selectiv e of customers. Pneumonic: The company s mascot Gattu (designed by R.K. Laxman in 1954), an impish boy with the paint tin and brush, is most popular and easily recognized, one of the epitomes of the ideal mascot. 19

However, in line with the new branding strategy, the brand has gotten a facelift , with new packaging, a contemporary logo and corporate colours. Hence, Gattu has been drop ped from the communication except as an inch-high pneumonic on the back and lids of the paint tins. The new look (Asian Paints is the logo, in yellow and red, with the vertical of the p converted into a brushstroke), gives all the company s products a uniform look whi ch is very much more contemporary, urban and up market. This has been incorporated in the advertisement. Services: Asian paints offer a number of services to the customers. The aim of t hese services is to provide the customer with a way to make an informed judgment as t o which product would be the most suited to their particular needs. Color world: Asian Paints provides the color mixing facility which is known as t he color world . It features a visual array of Asian Paints shades to help one make th e right shade decision. It features 8 color families of purples, blues, greens, greys, c reams, beiges, peaches and pinks. Each color family features a collection of popular As ian Paints shades in that color family... these colors are then manufactured on the spot by mixing various colours. This provides the customer with virtually indefinite number (ar ound 1500) of shades to choose from. Asian Paints Screen Test service: through this service the customer is able to i dentify whether a particular shade will suit their rooms. In this facility the customer can send a picture of his room and the company using computer techniques identifies the col or most suited to the room Asian Paints Color Genie: 'Asian Paints Color Genie' is a concept that can get t he shade of any sample in the paint to be applied on the wall. It is based on the use of an instrument known as the 'Spectrophotometer' which can read the color of the samp le and convert it into a formulation to arrive at the same color for the paint on the w alls. This service can be availed very easily. Asian Paints Samplers are 200 ml paint tins which can be used to sample shades on the wall. These come in a range of shades that are a vailable through an Asian Paints Color World outlet. It is currently available in Asian P aints

Royale Luxury Emulsion. Thus, all one need's to do is pick up these sampler tins at a nominal price from any of the select Asian Paints Color World retail stores and experiment in one's own house. Asian Paints Trufinish: Asian Paints Trufinish is a unique paint finishes' displ ay palette that allows you to touch and feel the finishes' of popular Asian Paints products . This is available in select stores of the Asian Paints Color World Stores. Thus, you can get a first 20

hand feel of the final finish that paint would deliver on the walls at the paint store itself. Further product features for each of these products is also available in the for m of information panels. Sales Promotion: The company has been concentrating more on sales promotion than on advertising. On analyzing the customer survey data it becomes evident that since the customer is returning to the store after an average of about three years it is better to con centrate more on the dealers who are in the business through out the year. Keeping this in min d the company s decision of doing more sales promotion than advertising stands justified . Sales promotion can broadly be divided into two categories: 1) Customer promotion this section includes all the sales promotion activities directed towards the customers. Scratch cards that are provided with specific si ze of packages are examples. The company comes out with many different sales promotion schemes during the festival season, especially the durga pooja festival in Oriss a and West Bengal. Fig-5 There are a number of gifts and schemes on the larger packs. Coupons and free gi fts are offered on packs of more than 10 kgs. The company also offers a large number of services to the customers to assist them in their buying decisions. These servic es are offered on the company s website to make it accessible to a very wide range of customers. 2) Trade promotion As part of the company s policy, huge emphasis is given on trade promotion. The dealers and contractors who are a part of the distribution chain are given special attention. The company comes up with several incentive schemes for the dealers. The most popular schemes include cash discounts, foreign trips, gifts s uch as 21

refrigerators etc for dealers who succeed in meeting or exceeding pre-determined sales targets. The company also organizes regional dealer meets regularly. Here the de alers are briefed about the company s new products and the technical details and application procedures of these products. The company also aims at building and retaining de aler loyalty through these meetings. 8. Financial Analysis The Indian paint industry has come a long way from the days when paints were considered a luxury item. Today the awareness level on preventing corrosion thro ugh paints is relatively high, a development that should be a huge boost to the pain t industry. The Indian paints industry offers lucrative scope for stable revenue streams to manufacturers of both decorative & industrial paints. Known for its innovative m arketing and distribution strength, Asian Paints is one of the consistent performers in t he Indian corporate scene. We have analyzed the financial statements of Asian Paints for the last six years and those of the competitors in order to come up with some implications of the data repres ented. The company has a track record of profitability, transparency in operations and strong balance sheet. Factors that have been given emphasis here include the low per capita consumptio n of paints (1.0 kilogram), growth in construction sector (it is being offered indust ry status) & growth in the auto/white goods market respectively spurring demand for decorativ e & industrial paints. The impact of recent issues & trends (like excise duty ration alizations, quality consciousness in user segments) on the industry dynamics can also be see n. The industry has also witnessed increased activity in the industrial variety of pain ts with the entry of Multi-National Companies in auto, consumer durables etc, which has been gaining steadily over decorative paints in the last one decade. Traditionally, Asian Paints has been the Market Leader in the Decorative Paints Segment. This segment however has been characterized by stagnant growth rates. The fiscal is expected to grow at around 8 per cent. Traditionally, margins have also been low er in this segment. But an important characteristic is the lower volatility of cash flows. The demand for decorative paints is a function of the growth in construction activit y and the demand for re-painting. The growth in the construction activity leads to first-t ime

demand for the new structures coming up. The re-painting, or replacement, demand arises usually during festivals, when people paint their homes. Therefore, the wider di spersion of consumers reduces the overall risk, leading to lower volatility of cash flows . Housing Loan disbursements, tax incentives and lower levels of interest rates wo uld encourage the customers to invest in homes and thereby a growth in the construct ion activity. However, the propensity to re-paint houses seems to have dropped over the last few quarters because of the deceleration in economic activity. Consumers seem to have decided to postpone their re-painting decisions, affecting off-take. 22

Given that the growth rates are likely to be modest in the near term, profitabil ity can be driven by pushing volumes and by entering new markets. The ability to innovate a nd enter new markets or unveil new products would also be crucial. One such sub-seg ment in the decorative segment is the fast-growing exterior emulsion paints. It is a high-end product but volumes have been improving and margins are also high. This should h elp the company to some extent in maintaining margins. Growth in exterior paints is expected to be around 40 per cent, which is significant for the decorative segme nt. Keeping this in mind, the company has adopted the strategy of increasing its adspend. Paints have taken on some of the traits of FMCG products. Therefore, to push vol umes companies have to make sure that their products are visible. Rising competition means customers now have access to a wider range of products. Therefore, keeping both these factors in mind sales promotion through advertisement should play a crucial role in maintaining growth rates. Raw Material is the major cost-driver in the paint industry. The company has und ertaken aggressive cost cutting measures, whereby raw materials consumed as a percentage of net sales has come down from 62.2% in FY97 to 58.2% in FY01 and is still decreasing. Considering the Cash Flow Statement of Asian Paints over the past 6 years given in the appendix, we can observe that the Cash from Operating Activities (CFO) is positi ve whereas the general trend of Cash from Financing (CFF) and Cash from Investing Activities (CFI) is negative. CFI is negative as the company is paying off the l oans which improves the cash flows as the interest becomes lower and lower with the payment of the loans. Over the last few years, Asian Paints has been increasing its sales and promotio nal expenses. For instance, sales and administrative expenses as a percentage of tot al sales have risen from around 10 per cent in 1993 to around 14 per cent in 2001. In the same time span, the share of expenditure on advertisement rose from around 9 per cent to around 21 per cent. Given the current slowdown in demand, the company is likely to put more pressure on the advertising effort to try and at least maintain its current growth rates. In the recent past most major paint manufacturers, including Asian Paints, have reduced

prices of their products. The prevailing over-capacity situation in the world ma rkets for titanium dioxide, a major raw material for the paint sector, and the subsequent fall in input prices have led to the reduction in prices. The decision by the main playe rs to pass on to customers the gains of the falling costs clearly indicates a demand squeez e. Though demand is constrained, the company does not foresee this situation to continue f or long. The company has initiated steps to increase capacity, and acquisitions cannot be ruled out. Therefore, in the medium- to long-term, the outlook continues to be positiv e. 23

Ratio Analysis: Liquidity Ratios: Mar 2005 0.119 0.15 1.075 29.29 22 53 Table-7 Current Ratio (= current assets / current liabilities): It is the ability of the company to pay its short term liabilities. Hence it is also a measure of the company s financ ial strength. There is a declining trend in the current ratio in Asian Paints over t he six years. A ratio of 1.075 in 2005 is too close for comfort. Some ways to improve this cou ld be: Paying some debts Increasing your current assets from loans or other borrowings with a maturity of more than one year Converting non-current assets into current assets Increasing your current assets from new equity contributions Putting profits back into the business Interest Cover (= net profit before interest/interest paid): It indicates the sa fety margin that the business has in terms of being able to meet its interest obligat ions. As can be seen from the ratios in the appendix, the interest cover shows a considerable increase in the past six years. A high interest cover ratio means that the business is ea sily able to meet its interest obligations from profits. Due to the increase in the profits A sian Paints is able to meet its interest obligations. Average Number of Debtor Days (= Average no of Debtors/ Average Sales): This is an indication of the number of days of sales reflected in the Balance Sheet as D ebtors. The trends in the past six years show almost a consistent value of debtor days. Since the sales have been increasing in the past few years, the debtors also must be incre asing in order for the ratio to remain the same. Average Number of Creditor Days (= Average number of Creditors/Purchases per day): It indicates how many days on average it takes the company to pay its cred itors. This has consistently been increasing in the past six years. It says that the bu

siness is taking full advantage of the trade credit available to it. Debt Equity Ratio (= total liabilities/shareholder s equity): A measure of the company's financial leverage calculated by dividing long-term debt by shareholde rs equity. It indicates what proportion of equity and debt the company is using to finance its assets. From the table, one can conclude that the D/E is well below 1:1 and has been 24

reducing over the past few years, and hence the company is chiefly financing its elf using equity rather than debt. This could also mean too little which means that the co mpany is not realizing the full potential of its business and may actually hurt your over all profitability as in such a large company, shareholders want a higher reward (div idend rate) than lenders (interest rate). To reduce its operational risk profile, Asian Paints has opted to go the global route. It now has access to some of the deficit markets such as Bangladesh, Sri Lanka and Russia among others where market penetration is relatively low and expected growth rate s quite high. Asian Paints (AP) has recently obtained permission from the Registrar of Companies, Maharashtra to change its name from Asian Paints India Ltd. to Asian Paints Ltd as a part of its Think Global strategy. The industrial segment which also includes the automobile segment is the fast gr owth segment where Goodlass Nerolac is the market leader. Asian Paints has a presence in the form of AsianPPG, a joint venture with PPG, a world leader in industrial paints. But the industrial paints segment constitutes only around 4 per cent of the turnover. He nce, its impact on the valuation is unlikely to be significant The unorganized sector is a strong force and controls almost 35 per cent of the industry involving estimated 2,500-3,000 players. A decade earlier, the unorganized segme nt used to have a much higher share of the market but this is slowly changing. Today's c onsumer is evolving and has become quality and brand conscious. In addition, the reducti on of excise duties from a high of 40 per cent to 16 per cent in the last decade has r educed the advantage of the unorganized segment. Increase in raw material costs will equall y affect both the organized and the unorganized sector. 2004-2005 There were some significant events in 2004-2005 which have impacted the company s financial position during the year. Inflation and shortage of raw materials, gro wth of the housing finance sector supported by government policies, a longer painting seaso n (with Diwali occurring in mid-November as opposed to October in 2003) and introduction of VAT were some of the reasons for the fluctuations observed. On the raw material front, the prices of crude oil were extremely volatile throu ghout the year. Because of this, the prices of many raw materials and packing materials us

ed by the company witnessed a large unexpected surge. Some of the effect of this price hik e in Crude oil and raw materials is alleviated by the proposal in the Budget that has reduced peak Customs duty from 20 per cent to 15 per cent and the appreciating rupee. On the demand side, with the Budget announcing a deduction of up to Rs 1 lakh fr om the taxable income, housing loans have become a compelling proposition. The fillip t his would provide to housing demand was a substantial plus for Asian Paints, as it d erives a significant portion of its revenues from the decorative paints space. 25

9. Customer Survey Analysis: The objective of this survey is to understand the consumer s decision making proce ss. We approached 40 customers and analyzed their purchase behavior. This is a very sample small size and covers customers in the state of Orissa only. We cannot vouch tha t the responses of customers all over the country will be the same. As we found that c ustomer had little awareness and say in the final purchase of a particular product, we m et about ten dealers to understand the customers perceived behavior and their influence on the final decision making by the customer. The generic buying process of a consumer is given below. However, all these stages do not occur in every purchase as the cus tomer skips some of them. Fig-6 The buying process starts with need or problem recognition. At this stage, the c ustomer recognizes a problem or need and in this case for example: I have to paint the h ouse so I need to buy some paint. How often does this need arise? Question: How often do you paint? The analysis of the surveyed data suggests that there is an interval of around 2 .7 years between any 2 consecutive purchases by the same customer. 26

Frequency of Usage 0 5 10 15 20 25 1 Year 3 Years 5 Years No. of years interval No.of customersSeries1 Frequency of Usage 0 5 10 15 20 25 1 Year 3 Years 5 Years No. of years interval No.of customersSeries1 Fig-7 An aroused customer then needs to decide how much information (if any) is required . If the need is strong and there is a product or service that meets the need clos e to hand, then a purchase decision is likely to be made there and then. If there is a defi ciency in information, the customer is likely to start a process of information gathering. He/she can gather information from several sources: Personal sources: family, friends, neighbors etc Commercial sources: advertising; salespeople; retailers; dealers; packaging; poi nt-ofpurchase displays Public sources: newspapers, radio, television, consumer organizations; specialis t magazines Experiential sources: handling, examining, using the product We found that the commercial sources play the major role in the customer decisio n making process. The painters were found to be the most dominant. Decision-Influencers 0 5 10 15 20 25 30 Architects PaintersContractors Dealers Categories No. of customersNo.of customers 27

Fig-8 Public sources also play a significant role in pull strategy for the consumer. Of the public sources, Television plays the most influential role as is shown below. Ma ny customers identified, Television as the most effective media in influencing buye r s decisions for the purchase of paints. It scores much higher than the other audio -visual sources of media. Media Advantage 0 5 10 15 20 25 30 35 40 45 TV News Papers Hoardings Word of mouth Media No. of customersNo. of customers of Asian Paints Fig-9 In the evaluation stage, the customer must choose between the alternative brands , products and services. An important consideration in this is the degree of invol vement of customer in the purchase. Since this involves high expenditure and risk, it is a highinvolvement purchase and the customer is likely to conduct an extensive evaluati on. Hence the marketer would need to provide extensive information regarding the pos itive effects of buying the product. This evaluation can be influenced by the TOMA. Th e results of our TOMA analysis are given below. When you think of paints what are the brand names that come to your mind? When customers were surveyed for naming any 4 brands in the paint industry that first came to their mind, majority of the respondents gave Asian Paints as their first preferred choice. Asian Paints had the best brand recall. 28

Brand Appeal 0 5 10 15 20 25 30 35 40 45 AsianpaintsNerolacBergerICI(Dulux)Jenson &Nicholson Brand No of CustomersNo. of customers Brand Appeal 0 5 10 15 20 25 30 35 40 45 AsianpaintsNerolacBergerICI(Dulux)Jenson &Nicholson Brand No of CustomersNo. of customers fig-10 We need to also look at the importance the customer gives to particular attribut es of a product and its comparison with the competitor s products. We have looked at the following attributes: Price, Durability, Color variety, Availability and Coverag e. Price: PRICE 26% 30%17% 15% 12% Asian paints Nerolac Berger ICI(Dulux) Shalimaar fig-11 From our experience in the marketing survey, we came to the conclusion that pric es do not play a significant role in evaluating different brands because the prices ar e more or less the same for a particular product category across different brands. From th e survey that we have conducted on a limited sample, Nerolac was found to have the highes t preference by a customer who evaluated different brands based on price.

29

Durability: Durability 28% 23%17% 16% 16% Asian paints Nerolac Berger ICI(Dulux) Shalimaar fig-12 From the survey, we found that the durability of Asian Paints and Nerolac as per ceived by the consumer was more or less the same and the other brands were perceived to have a lower durability. Color Variety: Range of Colours 30% 23% 22% 15% 10% Asian paints Nerolac Berger ICI(Dulux) Shalimaar Fig-13 Asian Paints was perceived as a brand which offers the highest range of colors/ shades for the customer, followed by Nerolac and Berger. We also found that color is an important driver of purchasing behavior and many buying decisions are based on c olor alone. 30

Availability: Asian Paints is perceived to be readily available by consumers in the market whi ch indeed is so. The easy availability of paint is one of the reasons of consumers higher demand for the product. Availability 31% 21%19% 14% 15% Asian paints Nerolac Berger ICI(Dulux) Shalimaar Fig-14 Coverage: Coverage 28% 25% 23% 14% 10% Asian paints Nerolac Berger ICI(Dulux) Shalimaar Fig-15 We found that coverage did not play a significant role in the decision process a nd it depended mostly on the application of the paint interior or exterior. The interi or of a house for example underwent a very little wear and tear but exterior was affecte d by external factors such as sun resistance, rains etc. The final Stage is the post-purchase evaluation of the decision. It is common fo r customers to experience concerns after making a purchase decision. This arises f rom a concept that is known as cognitive dissonance . The customer, having bought a produ ct, may feel that an alternative would have been preferable. In these circumstances that 31

customer will not repurchase immediately, but is likely to switch brands next ti me. However, in this case the repurchase decisions do not occur immediately and the paint is evaluated for its durability over time. Customer responses suggest that Asian Pa ints scores highest on durability and this leads to repurchases by the customer. Dealer questionnaire analysis : Since dealers turned out to be the major influencers in the decision making proc ess, we questioned all the Asian Paints dealers in Bhubaneshwar. The objective was to understand the dealers perception of Asian Paints and the competing brands.These are the responses from the dealers. Market Pull: On being asked, how they decide which brand to sell, most of them r eplied that customer demand for the brand was the major deciding factor. Some of them w ere also induced by profit margins and availability of shades. Prerequisites for becoming a dealer: Earlier the company used to give dealership to only a select few depending on the monetary might of the businessman. But this i s not a consideration now a days because the company wants to capture the market by incr easing its distribution network. Prevalence of the brand: Most dealers responded that Asian Paints is the most pr evalent brand because its brand awareness is the highest. Their advertisements are the m ost effective and stay with the audience. The dealers also said that people perceive that Asian Paints provides best quality and the widest color range. Services provided by dealers: Most dealers provide the services like painter ref erences, cost calculation, color mix selection and application of product. Incentives given to dealers: Incentives include cash discounts on bulk buys, for eign trips and expensive gifts on surpassing sales targets. This is indicative of the companies aggressive trade promotion. Collection of customer feedback: Most of the dealers did not collect customer fe edback. Successive purchases by the customers were taken to be the customer s approval of the brand. Who is the influencer of the customer decision: It was observed that customers a re mostly influenced by dealers, painters and contractors. This shows that the cust omers are

not informed themselves and depend more or less on advice from the above. One mo re observation was that many of the customers were brand loyal and therefore did no t switch brands. Best marketing strategy: Most dealers were of the opinion that Asian Paints has the best marketing strategy because of more efficient sales-force, more effective TV prom os and wider color range. 32

Dealer feedback: The dealer is not taken into consideration for marketing decisi ons. Since the intermediaries play a very vital role in the value chain of Asian Pain ts the company should devise methods to map the views of the dealers. Supply to the industrial segment: Asian Paints has a minimal presence in the ind ustrial segment. The dealer perception is that Shalimar paints is the leader in the indu strial segment in the Orissa market. 10. Suggestions After analyzing the data obtained from the consumers and the dealers it was evid ent that Asian Paints is the market leader. It enjoys the largest customer base in the Or issa market. Our group came up with the following suggestions for improving upon the current customer base and expanding into other high potential sectors besides th e decorative segment 1. Since the intermediaries play a very important role in the marketing of the bran d, the company should take initiatives like painter training programme with Asian Paints certificates. This will increase the creditability of the painters in the market and they will become brand loyal. 2. The inventories as a proportion of net working capital are increasing from aroun d 200 in the year 2000 to more than 800 in the year 2005. Moreover with larger product diversification inventory management becomes costlier and tedious. Though Asian Paints is the first company to employ eBPO for inventory management, still it needs to take initiatives to reduce its inventory levels. 3. As per the feedback obtained the customers were unable to associate sub brands like Apex, Tractor, Apcolite and Utsav with the parent brand. Therefore the company needs to emphasise more on the promotion of sub-brands. 4. More and more women can be found perusing the shelves at paint stalls in search of the right type of paint for their homes. So the company can target this new s et of interested customers by increased advertising in women magazines. 5. The services provided by the company on the website are not being used because of the low penetration of internet in India. So we recommend that these faciliti es should be made available at the point of purchase. 6. For decorative range of products it is difficult for international companies to set up shop on a standalone basis because of existing barriers like strong network o f existing players, brand image and distribution logistics. But this may not apply on the basis of industrial products in which tie-ups in home countries and their OE M

customers, the required stock can be made and sold. In the face of cut-throat competition and new technology, Asian Paints requires new associations and strategic partnerships to move ahead in the industry segment which contributes t o 30% of the paint business. 7. Asian Paints has a marginal presence in the industrial segment particularly in Orissa. This decision was justified till now because there were very few industr ies in Orissa. Recently Orissa has signed a lot of MoUs for FDI and this will bring in a lot of industries into the state. So Asian Paints should start focusing on thi s 33

segment and take the first mover advantage. This segment is highly paying because of the low distribution cost and bulk orders. 8. Efficient working capital management has been the strength of the company for years. However recently towards the end of 2004-05 there has been increase in level of inventory due to VAT uncertainties and in anticipation of higher materi al prices. Increased working capitals lead to diversion from productive investments . Though Asian Paints has employed i2 SCM to cut costs, the present scenario still requires unifying the planning down to the plant level. 34

Appendix Customer Questionnaire Name of the customer:______________________________________________ 1. How often do you paint your house/ office? a) 1 yr b) 3 yrs c) 5 yrs or more 2. When you think of paints what are the brand names that come to your mind? List any four_____________________________________________________ 3. How did you get to know about these brands? a) Newspapers b) TV c) Hoardings d) Friends/Family e) Dealer 4. Which of these medium is most effective? 5. Which brand advertisement has the greatest appeal? a) Asian paints b) Nerolac c) Dulux d) Shalimar 6. Given here are some product attributes and some paint brands. Arrange these brands on the basis of the order of preference for each product attribute. Asian Paints-AP; Nerolac-N; Berger-B, ICI (Dulux) -D; Shalimar-S Price 35

Durability Coverage Colour variety Availability Low High 7. Whom do you consult while taking painting decisions? a) architects b) painters c) contractors d) dealers 8. What are the services offered by paint companies that you know of? a. Colour mixing machine b. consultancy services c. cost calculators d. online services 9. Which company do you associate these products with? a. Royale (Asian/Nerolac/ICI) b. Utsav c. Tractor d. Apex e. Dulux 36

Questionnaire for Asian Paints Dealer Dealer: M/S __________________________________ 1. 2. 3. 4. 5. 6. 7. 8. How do you decide which brand you sell? Which brand do you think is most prevalent and why? What services do you provide to promote your brand? What are the schemes that paint companies offer for sales? What do you do to collect feedback from the customers? How do consumers make their final selection? According to you which company has the best marketing strategy? Is dealer feedback taken into consideration while taking marketing decisions?

9. What are prerequisites for becoming a dealer of Asian Paints? 10. Do you supply paints in the industrial segment? 37

Audited Result for the years 2000-2005 Mar 2005 12 mths 1414.31 269.16 83.69 325.55 316.06 268.45 169.65 13.73 158.43 691.28 586.29 572.22 95.92 67.96 640.18 545.21 15.02 17.2 11.36 16.71 9.74 15.1 13.76 13.36 7.17 15.98

15.51 8.33 38

89 36 22 53 1.84 3.22 36 22 53 1.84 3.22 d. Bibliography 1. www.asianpaints.com 2. www.bergerpaints.com 3. www.dulux.com 4. www.jensonnicholson.com 5. www.nerolac.com 6. www.adfags.com 7. www.tutor2u.com 8. www.superbrandsindia.com 9. www.myiris.com 10. ISI emerging markets database 11. CMIE database 12. The Hindu-Survey of Indian Industry,2005 Philip Kotler 13. Marketing Management 14. Strategic Market Management- David Aakar 39

Filename: Marketing Management Project ( Asian Paints) Directory: C:\Documents and Settings\tapan\Desktop Template: C:\Documents and Settings\tapan\Application Data\Microsoft\Templates\Normal.dot Title: Environment-Industry-Company (EIC) Analysis for Asian Paints Subject: Author: ximb Keywords: Comments: Creation Date: 12/13/2007 3:07 PM Change Number: 2 Last Saved On: 12/13/2007 3:07 PM Last Saved By: tapan Total Editing Time: 1 Minute Last Printed On: 12/13/2007 3:07 PM As of Last Complete Printing Number of Pages: 39 Number of Words: 10,212 (approx.) Number of Characters: 58,214 (approx.)