1. Asian Paints

2. ABOUT THE INDUSTRY
 The paint industry worldwide is classified into 2 segment viz. decorative
and industrial segment.
 Low interest consumer product.
 Low per capita consumption of paints
 Working capital intensive.
Cost of raw materials = 50% COGS
NOTE: Some of the raw materials were crude derivatives. Implies
fluctuation of crude oil prices and exchange rate effects the cost structure of
the company. => Need for effective cost control systems, efficient
technologies and working capital management for competitive
advantage.

3. Cntd.
 Demand drivers:
1. Building activity- for decorative paint segment
2. Economic development- for industrial paint segment.
 Price based Competition (especially in the decorative segment).
 Awareness and perception of specific brand is more important than the
corporate brand equity. Marketing operations fined tuned to local needs.
 Dealers, contactors, female customers- major influencers.
 Leadership was either regional or confined to specific segment of the
paints market.
 Distribution channel plays an important role in the industry.

4. Core Market
 APL, domestic leader in decorative paints.
 ROCE of 25% as compared to global avg. of 10-20%.
 Among the top 10 decorative coatings companies in the world
 Growing at a rate of over 15%

5. Focused towards developing competitive advantage on the following
dimensions:
1. Feedback from dealers and sales force=> helps identify the customer
needs=> Product adaption/invention
2. Product Innovation: Introduction of products covering all points in pricing
spectrum e.g. Tractor emulsion, Color World tinting system, AP Helpline, AP
Home Solutions, Kids World etc.
2. IT – usage of Mainframe computers, V-SATs, improve demand forecasting,
reduce inventory and WC cost, reduce loss of sales due to out stocking.
3. Size – More than twice the size of its nearest competitor => edge in
distribution, marketing, manufacturing and sourcing raw materials.
4. R&D Investments – Savings from efficiencies in formulations => lower cost
of operations.
5. Dealer relationship – network of 16000 dealers =>ability to serve remote
locations
6. Recruitment – Best managers from the best of business schools in India.
7. Brand Equity – higher price realization, key differentiator.

6. Global Expansion:
 Global demand (in terms of volume)- annual growth
rate of 3.5%
 Focus on Emerging markets then the developed
markets: India, China, South Korea, Latin America,
Eastern Europe, Mexico and Taiwan. Already done well
in India.
 Enter via JVs, Greenfield ventures and Acquisitions
 Funding of acquisitions from Cash generated out of
APL’s operations.
 Greenfield ventures preceded by extensive exports to
create brand awareness.
 Choosing markets where competition is not stiff =>
Minimizing business risk.

7. Asian paints used different factors like size of economy, size of paint
market, nature of competition to identify the markets where it would
establish a footprint.
APL believed that emerging markets like Asia-Pacific region, Latin
America and Eastern Europe were growing.
Localized manufacturing: asian paints had a manufacturing plant in
each overseas market with products were calibrated to meet local
consumer needs.
Growth through Joint Ventures: joint ventures ensured ready- made
platforms of distribution, brands and plant capacity, whereas organic
growth was costly.
Segmentation: IB had categorized markets into three segments:
leadership markets, growth markets and turnaround markets.

8. Leadership Markets Growth Markets Turnaround
Markets
Countries Bahrain, Fiji, nepal, South Asia ( Australia,Oman
solomon islands, Bangladesh, Sri Lanka),
vanuatu Middle East, South East
Asia (Thailand,
Malaysia)
Nature of Market leader Market Nicher Niche player
paint Market Share > 40% Market Share <10% Market Share<
competition 5%
Focus 1. Efficiency 1. Improvement in the To get
2. Acquisition for distribution channel Profitability as
further market 2. Market penetration presently
expansion as no operating at the
more possibility of BEP
penetration led
growth and to
make use of the
already established
distribution
network.
Investment Low as already a High High

9. 2005 2004 2003 2002
CONSLD CONSLDT CONSLDT CONSLDT INTN
TD APL INTNL D APL INTNL D APL INTNL D APL L
PAT(US$
MILLION) 38.73 38.66 0.07 32.23 32.88 -0.65 30.98 31.56 -0.58 23.52 25.7 -2.2
GROWTH(
%) 17.58% 110.77% 4.18% -12.07% 22.85% 73.27%
By the P/L account of the company
No, global expansion does not detract the company from its global market
Reasons:
• Financial performance of domestic market is improving. Refer the growth rates.
• The company took continuous innovation in operations in domestic market
• They play the domestic operation on a strong footing before looking outward.
• They also reduce the cost of material in domestic market to finance global
acquisitions => Cost cutting measure improves the profitability in domestic market.
• Doubled the sales and brought down working capital by 50% in domestic market
• We see that the growth in the international market has grown by 110.77% in 2005 as
compared to 2004. This implies that the international market still has a lot of potential
in term of growth and profitability