Executive Summary Project Title Asian Paints – Challenges and Solutions in the Current Scenario Background Asian Paints is one of the top ranking paint companies of India and it is among the top decorative coatings companies in the world. With an annual turnover of USD 1. 1 bn, Asian Paints provides services in 20 countries and has 28 paint manufacturing units in the world, providing services to consumers in over 65 countries. It has received a large number of national and international awards. It works through six subsidiaries which have been merged with it.
Current Challenges to Asian Paints Paint Quality and Costs- Higher costs means improved quality Marketing Network –Good distribution network Product Portfolio – To cater to all levels of consumers Managing Inventories – Higher inventories lead to higher costs Low Capacity Utilisation -Poor capacity utilisation means less production Technology – Strong and better R&D to improve quality and reduced costs Strong Brands – Efficient print and media advertisements in the whole country Strategic Review of Asian Paints Expanding Reach Dealer Attrition Painting Solutions Fakes and Dumping
Raw Material Price Issues Use of Technology to Serve End Use Customers, Dealers and Employees to Increase and improve Productivity Major Challenge – Painting solutions so that customer gets value for money and can recall the brand. The aim is to provide quality solutions for painting so that customer loyalty is ensured. Implementation Plan – Major challenge is to retain top position in the Indian paints market. Conclusion Reference Listings Introduction Asian Paints is one of the top ranking paint companies of India and it is among the top decorative coatings companies in the world.
The Indian paint industry is characterized by the Industrial Paints segment (25%) and the Decorative Paints segment (75%) -Appendix A. With an annual turnover of USD 1. 1 bn, Asian Paints provides services in 20 countries and has 28 paint manufacturing units in the world, providing services to consumers in over 65 countries. It has received a large number of national and international awards. It works through six subsidiaries which have been merged with it. Group Subsidiaries Apco Coatings is a subsidiary of Asian Paints in the South Pacific islands.
Asian Paints operates in Australia, Fiji, Tonga, Solomon Islands and Vanuatu under the brand name of Apco Coatings. Asian Paints Industrial Coatings Limited has been set up to provide paint to the powder coatings market and is one of the fastest growing sectors in the industrial coatings market. Berger India Ltd became a part of the Asian Paints Group in November 2002. Today, the name Berger means quality and innovation. BIL is present across three regions viz. Middle East, Caribbean and South East Asia. SCIB Paints which started in 1979 is a respectable name and ranks amongst the top paint companies in Egypt.
SCIB Paints became a part of the Asian Paints group in August 2002. Established in March 1997, Asian PPG Industries Limited, a joint venture between Asian Paints (India) Limited and PPG Industries, Inc. USA with 50:50 equity sharing. Its objective is to provide paint solutions to the Indian Automobile industry. The joint collaboration brought together two leading companies together. Taubmans Paints Fiji, the fourth largest paint company in Fiji, became a part of the Asian Paints family in September 2003 – Appendix B. Current Challenges Paint Quality and Costs
It is very difficult to satisfy highly thinking consumers who demand for superior paints. To satisfy various consumer segments, more technical development work needs to be undertaken in the following areas – 1Highly durable finishes at much lower costs. 2Paint which can easily be used on poorly prepared surfaces. 3Preparation of good quality paint inspite of reduction in number of ingredients. 4Improving the quality of decorative finishes. 5Reducing high cost raw material ingredients like rutile without bringing down the overall performance. Marketing Network Marketing of paints requires proper and excellent dealer network across the country.
Since user base has no geographical boundaries, a company’s ability to enter new and far flung markets in the remotest areas of the country with better product awareness would be the key to maintaining its share in the market. A wider distribution network would help capture larger share of the market by reaching the consumer in small cities, towns and even villages, which actually would become the key drivers for future growth. Product Portfolio A wider product portfolio catering to a variety of consumers is instrumental in getting a larger share of the market.
India as a market is huge by all standards. The industry has become good at manufacturing paints of all qualities to suit all pockets. Even in the emulsions section, each manufacturer tries to operate at several price points. A wide product portfolio helps consumers to be loyal to their brand different applications – from putty to exterior paints. Managing Inventories As the industry is dependent more on a large amount of raw material, careful and detailed management is required in the planning stage to keep costs under control for higher profits.
Chief characteristics are: 1Working capital intensive. 2Seasonal nature of demand – high demand during festive seasons and low during monsoons. This leads to higher chances of a product becoming non saleable if the demand is more than supply and stock out costs. Industry is Characterised by Low Capacity Utilisation Unlike other manufacturing industries, there is low capacity utilisation in the Paint industry as most of the companies get the work done on ‘job work basis’. This is because of the longer processing time required. When paint is manufactured in smaller batches, the production falls.
Most of the plants operate at 50% capacity except Berger Paints which manages a capacity utilisation of around 70%. The main reason for this is that it manufactures both premium enamel and emulsions and does not switch between decorative and industrial paints like the other manufactures. There is great potential for the paints manufacturers in India. “The per capita consumption of paints in India is very low at about 0. 5 kgs per annum when compared with 4 kgs per capita in south-east Asian nations and 22 kgs in developed countries” (Mr Manu Ahuja, President of Indian Paints Association).
Economic liberalisation is attracting international paint giants like BASF Germany. Over the last 4 years, the government has reduced the excise duty from a high of 40% to 20% at present. Technology Technology is required for success in both decorative and industrial paints segments. With high costs of raw materials, there is a more inclination towards water based paints which are less expensive. Strong Brands Raw material costs play a vital role on the company’s profit margins, therefore methods need to be pre-planned and thought of to ensure that consumers continue to prefer them despite cost increases.
The advertising budgets are increasing keeping in mind what the consumer requires as their USP and investment today is to build popularity for their brand so that the product is easily available throughout the entire country. Strategic Review of Asian Paints Current Position of the Organisation In the last two years the Indian paint industry has seen a growth of 18-20 percent in demand. Due to high increase in housing and automobile areas, Asian Paints has been the largest beneficiary as it dominates the decoratives segment.
Asian Paints has seven plants in India, with the largest at Sripermbudur, currently under expansion to increase capacity to 100000 KL per annum. It is also building a 2500 tonnes a year auto paints plant in South India in partnership with US based PPG Industries. ‘The Indian paint market is poised to grow at a steady rate over the next decade fuelled largely by a growing economy and changing consumer attitudes (Devaraj, Parthasarathy)’. Expanding Reach Expansion means increasing the number of dealer openings. It is carried out in all branches and is directly linked to the performance of the branch and also the appraisal systems.
Distribution channel plays major role in the industry. Awareness and insight of a particular brand is more important than the value that the company projects. Asian Paints, the market leader has around 16,000 dealers in its network which are spread across the country. For example, Bangalore city branch has over 1600 dealers under its network. Therefore, there was a need to look at other options of expanding reach and thus Non Paint Outlets (NPOs) idea was born. NPOs are those stores that stock allied construction goods like sanitary ware, ceramic tiles, hardware, electricals etc.
NPOs were selected because these stores have good customer interaction and the customer is here even before he makes a decision to get his home painted, providing opportunity where the customer can be influenced. Dealer Attrition The company inspite of the growth in the decoratives segment because of the growth in the housing sector was trying to understand the reasons behind the low performance of dealers and trying to develop methods to stop and control poor performance. It clearly needed to recognise the factors for dealer attrition. Further, they needed to compare low nd high value stores in order to chalk out a path for progress of both low value and high value stores. Painting Solutions The aim of Asian Paints Home Solutions was a step towards combining complete painting service to the customer and not merely selling paint. Asian Paints Limited visualized a expert painting service that will set standards in the painting segment for painting procedures and best practices. Fakes and Dumping Mr Manish Choksi, Vice-President, IT & Strategic Planning, Asian Paints Ltd in an address said that his company faced no threat from imports, but “fake labels and abuse of trademarks was the biggest menace”.
Mr Ashwin Dani, vice-chairman and Managing Director, Asian Paints when asked about facing a threat from imports, especially from China said that the paint industry is not facing dumping from China, but dumping of goods is being done by some developed nations like the US. Press reports state that these goods are being dumped by big paint companies in the US and the cost of these goods is around Rs 30 per litre which is very low. It is shocking as this does not even cover the cost of titanium dioxide, a very important raw material for the paint industry. At present, the volumes are very low.
But the Indian Paint Association in cooperation with the government is working to stop this dumping. Raw Material Price Issues Other major challenges are the prices of raw materials that are required. Of the 300 odd raw materials, nearly half of them are petroleum products which are imported – Appendix C. Thus, any shortfall in global oil reserves affects the paint industry. The major raw materials like titanium dioxide, phthalic anhydride and peutarithrithol constitute 50 per cent of the total cost. Besides this, there are other raw materials such as castor, linseed, soybean oils and turpentine.
The raw materials cost sums up to a total of 70 per cent. Price rise of these raw materials affect paint prices since 30 percent of the raw material has to be imported. “It is estimated that 18-20% of the total raw materials used in the industry are imported”. Changes in import policies can affect the industry. The prices of packing materials such as HDPE and tinplate have reduced, but the decision of the Indian Government to ban import of tinplate waste could lead to a increase in the prices of the tinplate in the near future affecting the price of paints.
Use of Technology to Serve End Use Customers, Dealers and Employees to Enhance Productivity Technology must be used to make sure that it brings down costs and increases employee productivity. Use technology that connects the entire field-force across all branches in the country as well as globally. To ensure connectivity, Asian Paints have provided laptops and PDAs in the retail sales force sectors. Laptops with data cards are a solution for improved sales. Asian Paints have implemented VSAT, which is an early adopter in remote areas of the country.
Since technology is a vital factor for the growth of any organisation, it is important that Asian Paints uses the best available technology. The total investment is still about less than a percent, which is close to 0. 8% of annual net turnover. The technology is being put into use to connect to customers complaints and dealers problems. Major Challenge to be Addressed The biggest challenge has been meeting the high customer expectations that arise due to brand equity of Asian Paints in the organised, unorganised, rural, urban and remote areas of India.
The focus is always to provide good quality of painting and services. Asian Paints Home Solutions (APHS) aims at becoming one of the best painting service brands to customers. Customers might forget the brand purchased, but should not forget the services experienced. This in return would get brand loyalty automatically. The idea is to provide a “highly satisfactory” painting experience to a large number of customers, through a professional painting service and therefore get high customer loyalty and brand recall for the Asian Paints brand.
Thus lead to the start of Asian Paint Home Solutions in Hyderabad at the end of 2000. The idea was to reduce the difficulty from painting and increase the relation of painting with home decor for customers. The idea was to build the Asian Paints brand comparable to any of the admired service brands in the country. The challenge did not end here. Along with good service, they also had to keep costs under control without compromising with the quality so that they could provide customers value for money and still remain on the top in the decorative segment. Implementation Plan
To interact closely with the customers, painters, contractors etc and recognise the problems / opportunities in the field and take appropriate action to meet those requirements, Asian Paint Home Solutions has made sure that their executives and dealers attend to the customer responsibly, across all serviceable locations. APHS believes that there should be no compromise on quality and standards in the service. Convenience of a Professional Service When a customer telephones on a toll free number of Asian Paints, all he has to do is to leave details with the helpline.
APHS sales associate then visits the customer. Local service team also gets in touch with the customer and fixes an appointment for their first visit to the work site. Sales Associate to Answer all Painting Queries During the first visit, the sales associate observes the wall condition and carries out a thorough evaluation to identify any hidden problems in the areas to be painted and helps in deciding the best possible wall preparation method and products. All questions regarding any correction or preventive measures to be taken before the painting begins are handled here.
The setup at APHS service provider gives intensive technical and customer service training to all the contractors, painters, sales personnel and customer care executives. Transparency in the Process without Cost Over-Run The customer gets a complete estimate of every room to be painted. To help the customer in the painting budget, he is given an estimate of the cost of every room along with the measured paintable area by the sales associate. The painting estimate is worked out on the basis of the wall condition to be painted and customers needs.
If the customer wants some special theme or design for a wall, the sales associate also helps to select the right shades and designs. Supervision and Quality of Work The customer care executive supervises the work of the contractor and the painters. In the beginning of any paint job, precautions are taken in all respects especially in masking the edges in the walls to avoid any smudging of paint into unwanted areas, covering of furniture and electrical switches, fixtures and cleaning of the site after the end of painting every day.
The quality of applicators associated with APHS is maintained at a very high level through a very careful selection process, post which they are trained in the correct method of painting. It has been further reinforced by using professional tools like flip charts, site testing kits, sonic distance meters and moisture meters and selling / training inputs are used to provide good quality service. Professional Workmanship APHS painters and contractors are well trained to give best quality of painting.
All details are provided to the customer explaining the benefits of APHS and the process of painting to educate him on this subject. Same professionalism is also exhibited while doing the painting work by making sure that the site is supervised regularly. Assurance from APHS On every site the customer gets a warranty card for that site. There is a one year warranty to assure the customer on service quality. In case the customer faces any problem, he can contact Asian Paints through the Helpline, the special toll free number dedicated to customers who have any complaints.
Apart from trouble free painting Asian Paints Home Solutions also provides professional colour consultation services to costumers in selecting shades and colours, keeping in mind his specific demand such as theme finishes, like kids’ themes, wall fashions for other rooms and other special products with exclusive finish Royale Play. Asian paints goes by the motto “We don’t paint walls, we style them! ” Conclusion Asian Paints has been a market leader for many years. It can only retain that position by constantly introducing something new to the environment and by having a strong R & D ase to control increased costs / shortage of raw material. Besides using such forums as the Indian Paints Association to convey to the government the concerns of the paints industry, it has also done joint ventures with leading paint manufacturers who are strong in R & D and who in turn are seeking newer and larger markets. India affords such opportunities to them in collaboration with Asian Paints. With a very large customer base available in India, the effort is now towards semi urban and rural markets in remote areas which have remained out of the network of the main paint manufacturers.
However, they now need to focus and design products which are of low cost and environment friendly. “ The industry would also need to look at creating a ‘protracted model’ that will outlive the construction boom and other such extraneous factors that have been driving industry growth, and help to deliver exceptional growth year on year” (Mr Manu Ahuja, President of Indian Paints Association). To retain its number one position, Asian Paints needs to take stock of the following – Improved dealer network to include Non Paint Outlets especially in rural areas where there is very little scope to have purpose built outlets. On the other hand, convenience stores stocking a wide variety of hardware goods including paints will yield better results as far as sales are concerned. Value propositions need to address the fears of NPOs by showing them business opportunities / growth by adding to their inventory of goods in a rural market. 2Product portfolio needs to be broad based to cater to the pocket and the requirement of the rural markets.
It may not be the higher end of the paints spectrum, yet should be striking to meet the customer needs which have to be studied before stocking the required products on the shelves in rural areas. It also must take into account the vagaries of the sowing cycle and income generation from it, which will make the customer spend. In India, painting of households and commercial establishments are generally seasonal / connected with festivals / start of the new year. 3Investing in technology or forming joint ventures with companies that are strong in R&D, lends to keeping costs down as raw materials cost spiral upwards.
Environmentally too, as people get conscious, there is also a serious need to demonstrate Corporate Social Responsibility by utilising more of commonly available and naturally occurring substances and yet retaining the finish and style expected of the brand. Technology is also evolving with the times and the industry is steadily shifting to environment-friendly, water-based paints and moving away from solvent-based products, according to representatives of the Indian Paints Association. Water-based acrylic technology has advanced to the point that it is increasingly used in some of the toughest industrial coatings applications, where less desirable, solvent-based products have been traditionally used. These solvents create volatile organic compounds, or VOCs, which contribute to air pollution”. (Luis Fernandez, Vice President and Global Business Leader for Rohm and Haas) 4Well known brands need to be constantly marketed to reach the consumer in the farthest corners of India. Marketing and advertising spends needs to be allocated to the medium that has the greatest penetration in terms of reach pan India.
Television and the local language press and electronic medium help in this aspect tremendously. 5Technology initiatives on the customer service front include getting colors of customer’s preference. This needs to be expanded to the retail front through websites and dealers. Asian Paints also plan to have customized colors for consumers, wherein they can choose and make colors of their own. Currently, they have this facility only in metros and some big cities. The plan is to provide it across all towns and cities of India.
The second key initiative is for managing the customer service front and addressing customers’ complaints and issues related to support. The dealers are our customers, but it is becoming more and more important to serve the end-consumers, and address their problems. Reference Listing 1. www. asianpaints. com/homesolutions 2. www. asianpaints. com 3. www. capitalmarket. com/magazine/cm1522/face3. htm 4. www. indiainfoline. com/news/showleader. asp 5. www. delhipaints. com/paint_industry_2nd. htm 6. www. domainb. com/industry/paints/20012_paint_overview. html 7. www. blonnet. com/2009/02/07/stories 8. www. business-standard. com 9. www. ndiahousing. com/asian-paints. html 10. Coatings World, 01 May 08, online by Devaraj, Parthasarathy 11. Sustainability in the Global Paint Industry Performance Technology That Is Also Better For the Environment, By Laura Hadden, Oct 2007; Source: Rohm and Haas 12. http://www. blonnet. com/2007/01/22/stories/2007012200761100. htm 13. http://www. business-standard. com/india/news/home-paint-makers-bullish/272284/ 14. http://www. equitymaster. com/research-it/sector-info/paint/paint-inputs. html 15. http://www. business-standard. com/pdf/asian%20paints%20ltd. pdf Appendix A Appendix B Appendix C ———————– [pic] [pic] [pic]