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Asian Paints Analysis
Asian Paints Analysis
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
Industry facts:
Ankur Tripathi
Section C, Roll Number - 150102019
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.
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
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
Sri Lanka
5.8
0.81
34.73
11.548
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
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
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