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Market
Situation
Analysis
Global paint
Industry
Global demand was expected
to increase by 5% of value and
3.5% of volume by 2007.
88% of the global paint production capacity was in North
America, Western Europe and Asia.
Rapid gains were expected from emerging markets.
Latin America and Eastern Europe expected above average
growth.
India, Taiwan, and South Korea are good prospects.
North America and Western Europe would have slow growth:
Were 50% of the global market capacity in 2007.
Consolidation on demand side led to domino effect on the
supplier side.
Competition was price based and global leaders were
domestic leaders.
The market comprised of two categories: Decorative paints
(Construction Sector) and Industrial paints (automotive
sector).
CAGR of 3.5%.
Market Trends
Low interest consumer products.
Trading up to high performance and high priced.
Dealers and contractors are major influencers.
Female customers are generally the decision
makers.
There has been a shift from thinner to water based
paint.
Industry facts:
Working capital intensive.
50% of the COS comprised of cost of raw
materials
Heavy bulk product hence local production facility
required.
Price of crude based raw materials fluctuated
Hedging is the only recourse among major
industry players.
Challenges
As competition within industry was price based, thus Brand
Equity was an important source of differentiation.
Do it yourself trend was growing among developed market
Controlling at least 20% of the revenue in key market is
crucial.
Leveraging the domestic strength is important to the success
of global operations.
Managing working capital is the only home grown
competency that has been leveraged at the global level.
By 2004, IB accounted for 12% of companys consolidated
revenue.
Asian paints had followed the path of inorganic growth
because organic growth was very expensive.
Segmentation
The company divided the market into three segments:
Leadership Markets:
The Caribbean region, Bahrain, Fiji and Nepal were
identified as markets where APL was already a leader. Total
market size is $100million and APL had sales of $55million.
IB would focus on efficiencies as well as market expansions
in these subsidiaries.
Growth Markets:
They were expected to drive APLs growth globally. Market
size was $3.3 billion. APL had less than 10% market share
and Middle East region was most fruitful growing at 30%.
Turnaround Markets:
Represented market size of $575 million but it had little
significance to APL. APL was a niche player in these
regions. Australia alone represented 90% market
Marketing
Rural Marketing Initiatives since 1970.
Strategy
Distribution is one of the main focus strategy of Asian
Paints.
Advertising & Promotional Expenditure started in 1980s.
Advertising Methods- Radio, TVCs, Print, Internet, OOH,
POP, Retail Outlets, Seminars, Workshops.
Company is using different techniques such as advertising
Campaign, sales promotion, personal selling, direct
marketing and public relation to increase sales.
Online marketing for urban customer as well as Asian
paints has started customer helpline service (24x7).
Marketing Entry
In order to decide upon
which market to enter
we can use the
weighted average
method to analyze the
market competencies of
the various countries.
The weightage assigned
to the various factors of
competency is as
follows:
GDP = 40%
Market Share= 30%
Per capita Usage =
20%
Market Size = 10%
There is one
assumption made while
selecting the countries.
Only those countries
have been considered
whose GDP is greater
As given in Exhibit 3a, we can see that, since 2002 till 2005,
APL has consecutively made more profits from its domestic +
international operations rather than that from domestic
operations alone.
PAT
%
increas
e
IB
2005
2004
2003
2002
Consolidate
consolidate
Consolidate
consolidat
d
APL d
APL d
APL ed
APL
38.6
32.8
31.5
25.6
38.73
6
32.33
8
30.93
6
23.52
9
20% 18%
0.07
5%
4%
-0.55
32% 23%
-0.63
EBIT
GROWT
H
CAPITA
L
ROCE
2003
2004
2005
INDIA
IB
INDIA
IB
INDIA
IB
61.89
2.52
64.79
7.18
72.37
142
5%
39.16
44%
144.74
6%
185%
38.11
45%
12%
31%
152.74
19%
9.4
57.78
47%
16%
Asian Paint Ltd. Main aim was to ensure product quality and
improving on the same. It has been decently successful in its
international ventures, which contribute almost 18% of the
revenue of the firm. In Egypt it is among the top 5 companies in
the world. From the table above, it can be seen that the PAT of APL
in the domestic market has been increasing year on year from
2002 to 2005, thus it can be seen that international expansion has
not affected domestic operations at all. Also, if we see the
consolidated PAT from 2002 to 2005, it has been increasing year
on year.
ROCE for APL from Indian operation has been consistent which
averages around 45%. IB ROCE has shown increase from 2003 to
2004 but has decreased in 2005. But data clearly suggests that
APL is close to its target ROCE in global markets.