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Ankur Tripathi

Section C, Roll Number - 150102019


Case Analysis: ASIAN PAINTS LTD. INTERNATIONAL BUSINESS DIVISION

Asian paints is the largest paint manufacturer in India - 63% market share. Set up
the International Business Division under the leadership of Jalaj Dani in 1999 and
had reach in 21 countries by 2005. In 2004, for the first time the International
division as a whole had turned profitable but some of the individual markets were
still in red.
The market comprised of two categories Decorative Paints (construction sector)
and Industrial Paints (automotive sector).
Goals:1) The companys aims to be in the top 5 Decorative Paints Company by
2008
2) ROCE of global operation is less than 10% compared to 25% for domestic
operation. Target to improve International Divisions ROCE to 15%
3) Immediate goal was to improve profitability through consolidation
Global paint Industry
2 categories: Decorative and Industrial
Growth rate:5% pa (value); 3.5% pa (volume)
Rapid gains were expected from emerging markets.
Consolidation on demand side led to domino effect on the supplier side.
Competition was price based and global leaders were domestic leaders.
Customer Behavior

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

Ankur Tripathi
Section C, Roll Number - 150102019

Asian Paints and its International Business Division:


Focused on decorative segment.
Continuous innovation through customer and dealer feedback helped to gain
market share.
Streamlined internal operations through technology implementation to reduce
costs and lower working capital costs.
Globalization strategy: Focused on emerging markets, Localized manufacturing
and entered into Joint ventures instead of organic growth.
Regional Technology Centre to facilitate cross-pollination of best practices within
the global firm, thereby increasing efficiency.
Lead Technology Centers which would be information powerhouses for each
product line.
Marketing Strategy:
Distribution is one of the main focus strategy of Asian Paints. Advertising &
Promotional Expenditure started in 1980s. Brand Equity needed to maintain.
Managers need to be sent into International Markets so that they can attain the
overall know how of the trade practices that are prevailing over there, and
subsequently obtain total control over the foreign markets.
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).
It identified potential markets using a matrix:
a. Size of economy
b. Size of paint market
c. Nature of competition
d. Inv. Potential
e. GDP growth
f. Opportunity to become a leader in 5 yrs.

Ankur Tripathi
Section C, Roll Number - 150102019

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 little but it had little significance to
APL. APL was a niche player in these regions. Australia alone represented 90%
market opportunity and APL was only operating in Brisbane.
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 = 30%
Market Share= 30%
Per capita Usage = 20%
Market Size = 20%
There is one assumption made while selecting the countries. Only those
countries have been considered whose GDP is greater than equal to 5%.

Ankur Tripathi
Section C, Roll Number - 150102019

Lead Questions:-

Q1 Does global expansion detract the company from its local market?
The main aim of Asian Paints is to stick to the core values of the company,
ensuring product quality and improving on the same. Since APL is already
present globally in 21 countries, it has to decide whether being present globally
is adding positively to the companys profit or not.
Going by past data, APL has been fairly successful in international markets
ventures and contributes to up to 18% of its revenue
Profit has also been continuously increasing. Thus, we see that APL was able to
sustain its profitability in the domestic market.

Sales

PAT

2002

2003

2004

2005

APL

354.75

402.4

434.52

501.73

Consolidated

370.56

440.16

554.3

644.43

IB

15.81

37.76

119.78

142.7

APL

25.69

31.56

32.88

38.66

Consolidated

23.52

30.93

32.23

38.73

IB

-2.17

-0.63

-0.65

0.07

Ankur Tripathi
Section C, Roll Number - 150102019

IB
150
100

IB

50
0
2002

2003

2004

2005

IB
0.5
0
2002
-0.5

2003

2004

2005

IB

-1
-1.5
-2
-2.5

EBIT

Working
capital

ROCE

2002

2003

2004

2005

APL

52.91

61.89

64.79

72.37

Consolidated

53.02

64.41

71.97

81.77

IB

0.11

2.52

7.18

9.4

APL

129.57

142

144.74

152.74

Consolidated

139.94

181.16

182.85

201.52

IB

10.37

39.16

38.11

48.78

APL

40.83507

43.58451

44.76302

47.38117

IB

1.060752

6.435138

18.8402

19.27019

Ankur Tripathi
Section C, Roll Number - 150102019
ROCE for APL from Indian operation has been consistent which averages around
45%. IB ROCE has shown increase from 2003 to 2005. Also, data clearly suggests
that APL is close to its target ROCE in global markets.

Thus, the international operations did not detract the company from its domestic
operations. It continued to maintained profitability as well expenditure in
proportion to revenue increase.

Q2 Evaluate the course of action adopted by the company in different


markets.

APL had devised certain criteria on the basis of which it made investments in a
particular foreign country. A market that has enough growth opportunities for APL
that it can become one of the top 3 in 5 years of entry. A market that does not
offer very intense competition with MNCs. The market has a GDP growth in
excess of 6%. APL used a matrix strategy based on 4 parameters (GDP, market
size, per capita usage, market share).
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 = 30%
Market Share= 30%
Per capita Usage = 20%
Market Size = 20%
There is one assumption made while selecting the countries. Only those
countries have been considered whose GDP is greater than equal to 5%.
Country

GDP

APL
mkt
share

Weights

0.3

0.3

0.2

0.2

Bahrain

45

12.49

13.3

20.158

Barbados

3.1

48

11.73

15.24

20.724

42

4.07

8.07

15.028

Fiji

per
market
weighted
capita size(valu
avg.
usage e)

Jamaica

3.1

76

3.47

35.9

31.604

Nepal

5.8

34

0.2

5.25

13.03

70

0.4

0.93

21.266

62

2.62

0.67

20.188

SI
Tonga

3.1

Inference

should continue

should not continue

Ankur Tripathi
Section C, Roll Number - 150102019
Trinidad &
Tobago

3.7

36

4.39

19.59

16.706

Vanuatu

4.5

75

1.02

0.91

24.236

Bangladesh

5.8

0.23

90

19.786

Should continue

China

7.5

1.26

2421

486.702

should continue

Egypt

1.9

150

32.78

Malaysia

5.3

4.14

147

33.018

10

0.47

26

8.294

15.92

152.3

35.804

Myanmar
Singapore

4.2

no such info available

Sri Lanka

5.8

0.81

34.73

11.548

should continue as no.


of dealers are large and
also loss has decreased
significantly

Thailand

5.1

1.65

176.5

37.76

should continue

UAE

4.5

10

25.74

85.6

26.618

Australia

3.7

0.5

10.8

550

113.42

Oman

4.5

3.58

15.87

7.04

Bahrain- should continue as the company is making 17.1 % and 19.91% of


net sales in 2003 & 2004, although the weighted avg. is low and it has
100% stake

Nepal- should not continue as 8.9% and 2.3% of net sales in 2003 & 2004,
which is decreasing. Also the weighted avg. value is low

Bangladesh- weighted avg. is near about 20, its in loss however, change
in loss in 2003 is 81.4% and in 2004 36.06 % of net sales. Promising
market, 50% stake

China- weighted avg. is high, loss of 428% of net sales in 2003 and 123.6
% of net sales in 2004, growth is 10%pa, home ownership is the new
trend,100% stake

Malaysia- although weighted avg. value is high however no such info is


available to make a decision

Sri Lanka- weighted avg. is very low, loss is 27.07% of net sales in 2003
and 5.8 % of net sales in2004, large no of distributors, 100% stake-should
continue

Thailand- high weighted avg., loss of 5.89 % of net sales in 2003 and profit
of 1.7% of net sales in 2004, 75 % stake-should continue

Ankur Tripathi
Section C, Roll Number - 150102019