INTRODUCTION

Chapter – I Introduction

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The purpose and scope of document is to study, analyze and understand the comparative analysis of market potential of Berger Paints India Limited. In order to achieve this objective, two stages were identified – Data collection stage and the Analysis stage. The first stage includes the data collected from various sources regarding the following: 1. The Origin, History of the company, its growth, The board of Directors, Operation units in India and abroad 2. The three closest competitors in the paint industry – Asian paints, Goodlass Nerolac, ICI. The analysis stage includes understanding the implications and relevance of the data collected and drawing conclusions about the company’s business and marketing decisions. India’s second largest decorative paint player, Berger Paints is headquartered in Kolkata and services the market through a distribution network of 82 stock points and more than 12,000 paint retailers. The Company wants to see the dealer’s perception and market penetration of Berger paints. It also wanted to open new marketing channels for Berger paints. The study aims to see the penetration and perception Vis a Vis other similar products available in the market like Asian paints, ICI, Nerolac etc. To achieve my aim, I worked with different sales persons and moved with them and their salespersons in the market to see the penetration of Berger paints. My sample size for retailer survey was 100. I did the survey in the market of Kodambakkam, Vadapalani, Porur, Saligramam, Tharamani, Thiruvanmiyur, Tambaram, Pallikarani, Medavakkam and adjoining markets. The objective of this study was to identify the drawbacks, why the market share of Berger paints is less when compared to other competitive products. The problem of capturing market is provoked by fact that the paint products market is already ruled by Asian Paints, which was like a monopoly. They also face heavy competition from other competitors like ICI, Nerolac, Agsar etc. The secondary data collection reveals that the maximum people can’t recall the ads and any other promotion by Berger paints. This shows that the company doesn’t leave the deep impact on the mind of customer. They should be more effective in terms of promotion techniques and communication. The retailer surveys revealed that Berger is available only in certain shops, which reveals that there is lack of network for distribution of their product .So, as far as the availability is

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concerned, it is in a poor position in the above mentioned areas compared to that of its competitors. There were few problems like those that of Price cuts, infiltration of one distributor into other's areas and of course tough competition from other products. The survey also revealed the retailer push that is required in the form of schemes, gifts, banner, boards etc. The survey also reveals that lack of awareness about the product is the major drawback of the Berger paints India limited.

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INDUSTRY STRUCTURE

Chapter – II Industry / Company Overview

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Indian Paint Industry is over 1000 years old. Its beginning can be traced back to the setting up of a factory by Shalimar paints in Calcutta back in 1902. Till the Second World War the industry consisted of small producers and two foreign companies. After the war, the imports stopped which led to the setting up of manufacturing facilities by local entrepreneurs. Still the foreign companies continued to dominate the market, which in a way is the current scenario as well. The initial decades saw the complete dominance of British Paint companies such as Goodlass Walls (now Goodlass Nerolac), ICI, British Paints (now Berger Paints), Jenson & Nicholson and Blundell & Eomite. The market size of the Indian paints sector has been pegged at Rs. 210 bn in value terms having grown by 15 % in FY 10 and is very fragmented. The per capita consumption of paints in India stands at 0.5 kg per annum as compared to 1.6 kgs in China and 22 kgs in the developed economies. India’s share in the world paint market is just 0.6 %. The Indian Paint industry can be divided as: • • The organized sector comprising of large and medium size units. The unorganized or small scale sector. The unorganised sector controls around 35 % of the paint market, with the organised sector accounting for the balance. In the unorganised segment, there are about 2,000 units having small and medium sized paints manufactured plants. Top organised players include Asian paints, Kansai Nerolac, Berger paints, ICI. Companies Berger Paints Asian Paints Kansai Nerolac ICI Paints Other Brand Paints Table No. 1 Market Share 19% 30% 20% 12% 19%

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Chart No.1 Recently, world leaders like Akzo Noble, PPG, Dupont and BASF have set up base in India with product ranges such as auto refinishes powders and industrial coatings. PRODUCTS The products of the paint industry can be classified into two major segments – decorative (architectural) paints and industrial paints. While the decorative paints are used in protecting valuable assets like buildings, the industrial paints are used for protection against corrosion and rust to steel structures, on vehicles, white goods and appliances. Decorative paints: The decorative paint segment can be classified into interior paints and exterior or cement paints. 80% of the decorative paint segment accounts for interior paints, which consists of premium, medium and economy categories. The premium category consists of plastic emulsions, the medium-priced category consists of synthetic enamels and the economy category consists of distempers. The products under the decorative finishes can be limestone coatings, primers, distempers, cement paints, matt/luster finishes, enamels, emulsions (first quality), and premium emulsions. Within the decorative segment, the exterior category, particularly exterior emulsions, is the fastest growing segment 20 % for the last three years. Consumption of paints is skewed towards decorative paints which account for 70% of paints sold in India. This is in a sharp

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contrast to the trend in developed countries, where the ratio is skewed towards the industrial segment. This segment is marked by the presence of a large number of players from the organized as well as unorganized sector. Competition is high and margins tend to be low in this segment. Products of this segment are relatively price sensitive. Asian Paints is the market leader in this segment. Demand for decorative paints is seasonal with bulk of sales taking place during the festival seasons from September to December. Besides, sales remain slack during the monsoon months from June to August. Entry barriers in terms of technological and funds requirements are relatively lower in the paints sector. It is estimated that a plant of 1 m tpa will cost around Rs 120 m. However decorative paints are marketing-savvy products and backed by large advertisement campaigns and dealership networks. These serve as high cost entry barriers for new companies in this business. The huge investments required in setting up a vast marketing and dealership network, to advertise and develop a brand over a period of time can only be afforded by companies in the organized sector. It is for this reason that smaller companies and small scale sector units are slowly losing market share to the organized sector. Industrial Paints: Industrial paints comprising 30% of the market include automotive paints, high performance coatings, coil coatings, powder coatings, marine paints and general industrial coatings. The automotive segment is further bifurcated into OEMs and auto refinishes. The automotive and general industrial coatings occupy top slot in terms of production. Goodlass Nerolac is the market leader in this segment. Demand for these paints is relatively price inelastic, but is prone to business cycles and depends on industrial and economic growth. Major end user industries include shipping, capital goods, white goods and heavy industries. The industrial paints segment due to specialized technology and high capital expenditure attracts fewer players. Most Indian companies have tied up with or are in the process of tying up with international paint majors to have access to the latest technology. A tie-up with a global paint manufacturer also enables the domestic company to supply to local customers of its partner. For example, Goodlass Nerolac is a major supplier to Maruti Suzuki because of Kansai, its Japanese collaborator and Suzuki relations. It is for the

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same reason that Asian Paints (tie-up with PPG Industries, USA) is a major supplier of paints to Opel Astra. Raw Materials: The paint industry is raw material intensive. Paint involves the mixing of various raw materials in various proportions. The raw materials are of a wide variety. On an average, raw materials account for 60% of net sales (industry average). In case of small-scale units it forms up to 70% of the net sales. High cost and erratic availability of raw materials mark the Indian paint industry. Around 300-400 raw materials are required to manufacture different kinds of paints. The high number of raw materials and finished goods highlights the working capital intensity of the sector. Most of the raw materials are petroleum based. Thus paint companies benefit when the petrochemical industry goes into its cyclical downswing. A hike in the price of petroleum products raises input costs negating the impact of a cut in import tariffs on raw materials. Raw materials frequently run into short supply, resulting in high inventory cost. The shortage of one specific material could result in severe manufacturing problems It is estimated that 18-20% of the total raw materials used the industry are imported. Most paint companies are hit by the fact that they do not make the raw materials themselves. For example, phthalic anhydride (PAN) is manufactured from orthoxylene and which goes into the production of paints along with titanium dioxide. Asian Paints is the only paint company that manufactures PAN. The other paint companies have to import their stock. Since PAN prices generally outpace international orthoxylene prices by almost 50% paint companies end up paying a fortune when prices rise. In such a situation Asian Paints benefits by selling PAN in the open market. Raw materials are divided into three major groups, namely, pigments (titanium dioxide, zinc oxide etc.), solvents (mineral turpentine) and resins and additives. Pigments are finely ground solids of different shades to give colour, durability, consistency and other properties to paint. It is also one of the major raw materials, accounting for one-third of the total raw materials cost. Amongst the vital pigments used in the process of paint manufacture is Titanium dioxide (TiO2) and the industry consumes around 60% of TiO2. This pigment is available in two grades: anatase and rutile, of which anatase is exclusively used in interiors while rutile is preferred in exteriors. India has abundant raw materials for the manufacture of TiO2, especially ilmenite of which it has 12% of the world’s deposits. It is ironical that the paint industry presently imports TiO2 in excess of Rs.1 bn - a figure that may

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touch Rs 2 bn by the turn of the century. TiO2 is responsible for the demand-supply gap. If the strong demand growth boosts domestic production of TiO2, there will be an increased usage in various sectors. If the raw materials are properly utilized, India has the potential to emerge as a net exporter of TiO2 in the next five years. Solvents are volatile organic compounds (VOC) used to dissolve, suspend or change the physical properties of other materials. They are generally used to bring down the viscosity of paints to the desired level, which also reduces the cost of paint formation. They constitute 70%75% of the paint liquid and ultimately escape into the atmosphere when the fluid dries. Solvents such as ethylene glycols and alcohols are finding wider use as co-solvents in new water-borne formulations. Binders are generally oils, resins and plasticisers that give paint its protective property. Most resin manufacturers make alkyds, polyesters, emulsion polymers, epoxy resins, amino resins, powder coating resins etc. Additives are added in small proportion to the paint to improve its performance characteristics in various ways. Skinning inhibitors, fungicides, wetting agents, driers are included in this category. DECORATIVE SEGMENT Interior Wall Paints Product Segment Exquisite Emulsion paint with Luxurious finish and Silky Glowing Appearance Emulsion with rich and matt finish and Asian Paints Royale Luxury Emulsion Berger Luxol silk Kansai Nerolac Pearl Luster Jenson Nicholson Special Effects ICI Dulux Designer Silk

Premium Emulsion

Rangoli

All Scapes 24 Carat

Robbaliac acrylic

Dulux Designer Silk Low

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superior quality Acrylic emulsion at the similar price as Distemper Water Based paint, long lasting & value for Money Water based paint At affordable Prices Tractor Emulsion Bison Emulsion Nerolac Premium Acrylic Emulsion -

Sheen Dulux Wash & Wear Dulux Wash & Wear

Tractor Acrylic & Synthetic Distemper

Bison Distemper

Nerolac Jensolin Acrylic Acrylic Distemper Distemper

Utsav Acrylic Distemper

-

-

-

-

Table No. 2

Exterior Wall Paints Product Segment Asian Paints Berger Weather Coat Goodlass Nerolac Excel 100% Acrylic Nerotex Matt Jenson Nicholson Special Effects exterior Armour Quartz ICI Dulux weather Shield garden Shades low Sheen Dulux Tuscan

Technologically Elastomeric high Hiend Performance product Exterior Paint Premium Textured Apex Textured

Walmasta

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Segment

Exterior Emulsion Ace Exterior Emulsion Duracem Suraksha Plastic Robbiace m Super Cement Paint

Non Textured Segment

Effects, Dulux Render Effects Dulux Weather Shield Low

Economy Segment

Ustav Exterior Distemper

-

Nerocem

-

Sheen -

Table No. 3

Enamels Product Segment Premium Segment Asian Paints Apco Premium Gloss Enamel, Apcolite Premium Satin Gattu Synthetic Enamel Berger Luxol Luster Goodlass Nerolac Jenson Nicholson ICI

Brolac Dulux Super Polyurethane Enamel High Enamel Gloss Umbrella Synthetic Enamel Dulux Super Enamel Semi Gloss -

Medium Segment

Luxol HiGloss, Luxol Satin

Nerolac Synthetic Enamel

Economy Segment

Utsav Enamel

Goody Synthetic Enamel Table No.4

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Apart from these there a certain specialty paints produced by these brands which are not produced by all the brands and cannot be categorized. Asian paints have an umbrella brand by the name of Utsav that covers the economy segment in all paint categories. The Utsav sub-brand is aimed at the Indian rural populace who are on the lookout for cheap but durable and beautiful paints.

CURRENT TRENDS The industry is riding high on the growth in the automobile industry, hectic constructions in the housing segment, improving infrastructure and overall feel good factor in industry. 30% of the paint business is contributed by painting of new construction area. In general the growth in the paint industry is often correlated with 1.5 times that of GDP growth. With the expected growth of 8.6% in FY11 and 9% in FY12, the paint industry is set to have a growth of 16-18% in FY12. Currently, the industry is facing the spike in the raw material cost. Any relief on the excise duty cut in the tio2 will help the industry COMPANY BACKGROUND BPIL was incorporated in 1923 and is headquartered at Kolkata. India’s second largest decorative paint player, Berger Paints is headquartered in Kolkata and services the market through a distribution network of 82 stock points and more than 12,000 paint retailers. It is present across all product segments, i.e. decorative (exterior and interior wall paints, wooden finishing) and industrial (automotive, protective and powder coatings) paints. The company is a leader in the non-auto industrial segment and an established player in other paint segments. It’s the 2nd largest paint company in India as far consolidated sales turnover is concerned. The company has strong brands like Jadoo, Illusion, Weather coat and Rangoli. Exports formed less than 1 % of the revenue for the company in FY10. The installed capacity as in FY10 for synthetic resin was 32,287 Metric Ton (MT) per annum while paints, varnishes and enamel together have an installed capacity of 240,315 MT per annum. BPIL has four direct subsidiaries, two step-down

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subsidiaries and two joint ventures. Its subsidiaries are located in India, Russia, Nepal and Europe whereas it has joint ventures with Becker Acroma (Italy) and Nippon Bee Chemicals Co Ltd (Japan). Other centers of Berger Paints India are located in Kolkata, Siliguri, Guwahati, Patna, Ranchi, Bhubaneswar, Raipur, Agartala, Shillong, Ludhiana, Bhatinda, Jalandhar, Chandigarh, Jaipur, Jodhpur, Faridabad, Jammu, Mumbai, Powai, Goa, Nagpur, Pune, Ahmedabad, Rajkot, Vadodara, Surat, Indore, Jabalpur, Aurangabad Navi Mumbai, Bhopal, Gwalior, Chennai, Coimbatore, Salem, Madurai, Bangalore, Mangalore, and Pondicherry among others.

COMPANY HISTORY - BERGER PAINTS 1940's – James Wilfred Adamson, founder of the British Paints Organization, embarked on his career as a traveling salesman. Adamson bought his first Oil and Colour business in 1909. By 1917 Adamson owned paint manufacturing companies in Rhodesia, Canada and the Caribbean. Elsewhere an Englishman, Mr. Hadfield, set up Hadfield's (India) Limited on 17 December, 1923, a small paint company in Calcutta. Towards the end of 1947 British Paints acquired Hadfield's (India) Limited and thus British Paints (India) Limited was incorporated in the State of West Bengal. What British Paints, (Holding), UK acquired was a company which at that time produced 150 tones of ready mixed stiff paints, varnishes and distempers. Our 1947 sales was a princely RS.25 lakhs, with a total employee strength of 100. The first Managing Director of British Paints was Mr.A.V.Niblett. 1950's – Sales offices were opened in Delhi and Mumbai and in 1951 a depot was started in Guwahati. Sales rose to Rs.6 million in 1952. The Company declared its first dividend and shifted the Head Office to 32, Chowringhee Road, Calcutta. By 1959, modernization of the Howrah Factory was completed and the first resin plant commissioned. With that, the Company entered the synthetics paints market. 1960's –

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Mr. R. A. Godwin took over as the Chairman & Managing Director in 1962 and initiated further modernization. By 1965 British Paints (Holdings) Limited, UK. was acquired by Celanese Corporation, U.S.A. As a result, the controlling interest of the Company passed on to CELEURO N.V., Holland. In 1969 Celanese Corporation sold their interest in the Indian Company to Berger, Jenson Nicholson Limited, UK. It was the beginning of the legacy of Lewis Berger in India which the Company would later take forward to enviable heights.

1970's – Mr. D. Madhukar took over as the Managing Director in the year 1973. Under his expert stewardship the Company took the giant strides that made it the fastest growing company in the paint industry. Developments took place in every sphere new sales offices added, newer products introduced, new markets opened up and new services offered. Sales reached over Rs. 160 million by 1978. 1980's – Mr. Biji K. Kurien takes over as Chief Executive in 1980. From 31 December 1983 the name of the Company was changed to Berger Paints India Limited (BPIL) with unanimous approval of the shareholders. By this time Berger's operations were divsionalised into the Retail Business Line (RBL) and the Industrial Business Line (IBL) in order to better cater to needs of our customers. Simultaneously, the Company started using the trade name and mark BERGER. From 1983 till date, for more than two decades, the Company has solely used and developed the name and trademark of BERGER and all its other variants in India. BERGER became a household name in India. During this period many new products were launched like "Luxol Silk" the first premium emulsion in India, Viton Refinish for cars, Bison Acrylic Distemper and Rangoli Acrylic Emulsion. 1990's – BERGER PROLINKS, a service aimed at providing paint and application related information to professionals was introduced marking one of our first steps into painting related services. In 1991, the controlling stake in the Company was acquired by Mr. K S Dhingra, Mr. G S Dhingra and their associates. At that time the total sales of the Company was Rs 1.15 billion.

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1994 witnessed top management change. Mr. Biji K. Kurien, who was the Managing Director of the Company for the last 14 years, stepped down and Mr. Subir Bose, a 10 year veteran in the Company, took over as the new Managing Director. The sales of the Company touched 2.76 billion by 1995-96. The latter half of the nineties saw BERGER attain the ISO - 9000 certification (1996) and establishment of BERGER's Quality Management System. COLOR BANK tinting system was also launched through which the consumer can select from a range of over 5000 colours and which are then made available in minutes. As part of its expansion program, a new paint-manufacturing unit at Pondicherry was commissioned in early 1997. A Joint Venture - Berger Becker Coatings Limited was started in Goa with Becker Industraifarg A. B., Sweden. "In 1999, Rajdoot Paints Ltd. was merged with the Company. The merger resulted in addition of two new factories at Goa and Sikandrabad, U.P., a joint venture company by the name of Berger Becker Coatings Private Limited, a network of new depots and several new brands." 2000 – The Company proposes to expand its operation through acquisitions, both internally and externally, and strategic partnership, preferably with foreign firms. Crisil has upgraded the fixed deposit programme of Berger Paints from FAA to FAA+. 2001 – Berger Paints India Ltd. has unveiled a new brand promotion strategy which it claims to be the first of its kind in the industry. Despite a slight increase in sales, the net profit of Berger Paints India Ltd has dropped by around 10 per cent for the half-year ended September 30, 2001. Berger Paints Ltd and ICI Limited have formed a 50:50 joint venture to manufacture auto and industrial coatings at Rishra in West Bengal. 2002 – Acquires 50% stake in Berger Auto & Industrial Coating Ltd. 2003 – BOD decided not to amalgamate Berger Auto & Industrial Coatings Ltd with the company. Posts 54% growth in the net profit to Rs.14.14cr for the second quarter end. 2004 –

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Delhi based Punjab National Bank (PNB) and Bangalore-based Vijaya Bank enter into a four-way partnership with Principal Financial of the US and Berger Paints to set up an insurance broking company. 2005 – The Motors & Industrial paints business of ICI India with its factory at Rishra, West Bengal was acquired as a 100% subsidiary Berger Auto & Industrial Coatings Limited and then merged with the Company in 2005. 2006 – Berger Paints India Ltd has entered into a Joint Venture Agreement (JV) with Nippon Bee Chemical Co Ltd of Japan for the purpose of formation of a Company for manufacture and sale of coatings for plastic substrates used in automobiles and parts thereof in India.

2007 – Berger Paints India Ltd has entered into a Joint Venture Agreement (JV) with Nippon Bee Chemical Co Ltd of Japan for the purpose of formation of a Company for manufacture and sale of coatings for plastic substrates used in automobiles and parts thereof in India. 2008 – Berger Paints India bought Polish firm Bolix SA, a leading provider of external insulation finishing system (EIFS) in the B2B segment. Berger Paints has bought for a net purchase price of $38.6 million (around Rs 1, 54.7 crore). Berger Paints India acquired the entire bloc in the Polish firm held by global private equity group Advent International. Berger Paints India Ltd has informed that Mr. Gerald Kenneth Adams has been appointed as a Director of the Company effective January 30, 2008. 2009 – Berger Paints India Ltd has informed that Mr. Pulak Prasad was appointed an Additional Director (non-whole time) of the Company under Section 260 of the Companies Act, 1956. 2010 – The Company's sales in the year ended 31 March 2010 was Rs 1822.7 crores. Berger Paints, the paint major, is quite bullish on the expansion front as the company is going to make an

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investment of Rs 300 crore in order to set up a water-based paint plant at Hindupur in Anantapur district of Andhra Pradesh. BOARD OF DIRECTORS
S.No. 1 2 3 4 5 6 7 8 9 Name Kuldip Singh Dhingra (Mr.) Gurbachan Singh Dhingra (Mr.) Subir Bose (Mr.) Gerald Kenneth Adams (Mr.) Anil Bhalla (Mr.) Gurcharan Das (Mr.) Kamal Ranjan Das (Mr.) Naresh Gujral (Mr.) Pulak Chandan Prasad (Mr.) Designation Non-Executive Chairman, Promoter- Director Vice Chairman, Non-Executive Managing Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director

Table No. 5 FACTORIES IN INDIA

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Figure No. 1

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THEORETICAL BACKGROUNDS

Chapter – III Theoretical Backgrounds

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MARKET RESEARCH BASICS Market research is the process of systematic gathering, recording and analyzing of data about customers, competitors and the market. Market research can help create a business plan, launch a new product or service, fine tune existing products and services, expand into new markets etc. It can be used to determine which portion of the population will purchase the product/service, based on variables like age, gender, location and income level. It can be found out what market characteristics your target market has. With market research companies can learn more about current and potential customers. The purpose of market research is to help companies make better business decisions about the development and marketing of new products. Market research represents the voice of the consumer in a company. A list of questions that can be answered through market research: What is happening in the market? What are the trends? Who are the competitors? How do consumers talk about the products in the market? Which needs are important? Are the needs being met by current products? A simple example of what market research can do for a business is the following. At the company Chevrolet they brought several disciplines together in a cross-functional team to develop a concept for a completely new Corvette. This team enabled the marketers to come up with an alternative concept, one that balanced 4 attributes: comfort and convenience, quality, styling, and performance. This was considered radical because comfort and convenience were not traditional Corvette values. However, market research demonstrated that consumers supported the alternative concept. As a result the new Corvette was a huge success in the market. With market research you can get some kind of confirmation that there is a market for your idea, and that a successful launch and growth are possible.

• • •

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MARKET RESEARCH FOR BUSINESS PLANNING Market research is discovering what people want, need, or believe. It can also involve discovering how they act. Once that research is complete it can be used to determine how to market your specific product. Whenever possible, try to reduce risks at the earliest possible stage. For example you could carry out market research early on and not wait until you are almost ready to enter the market. If early market research reveals that your business idea has real potential, you can use this information in planning the build-up of your business. For starting up a business there are a few things should be found out through market research in order to know if your business is feasible. MARKET INFORMATION Market information is making known the prices of the different commodities in the market, the supply and the demand. Information about the markets can be obtained in several different varieties and formats. The most basic form of market information is the best quotation and last sale data, including the number of shares, with respect to a particular security at a given time. Examples of market information questions are: Who are the customers? Where are they located and how can they be contacted? What quantity and quality do they want? What is the best time to sell? What is the long-term or historical price data over a number of years? What is the expected production in the country? Is there more demand for one product or another?

• • • • • • •

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MARKET SEGMENTATION Market segmentation is the division of the market or population into subgroups with similar motivations. Widely used bases for segmenting include geographic differences, personality differences, demographic differences, use of product differences, and psychographic differences. MARKET TRENDS The upward or downward movements of a market, during a period of time. MARKET SIZE The market size is more difficult to estimate if you are starting with something completely new. In this case, you will have to derive the figures from the number of potential customers or customer segments. MARKET ANALYSIS But besides information about the target market you also need information about your competitor, your customers, products etc. A few techniques are: Customer analysis Competitor analysis Risk analysis Product research Advertising research E-mail survey Using an e-mail survey can be an effective, low-cost method for staying in touch with your customers. It helps reduce churn and can easily generate more business from customers you’ve already spent a great deal of effort to win. Since there are no mailing and printing costs involved, it’s also very gentle to your bottom-line. Another benefit is the almost instantaneous delivery that e-mail affords. You don’t have to worry whether the Post Office will get the survey to your

• • • • • •

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customers in time for them to take advantage of a special offer. It’s simple to create and send e-mail surveys. Customers will appreciate the regular communication and you could be rewarded with more business from your existing customer base. MARKET RESEARCH METHODOLOGY Before the following five steps are discussed it is important to make a few comments about these steps. First although the list does strongly imply an orderly step-by-step process, it is rare that a research project follows these steps in the exact order that they are presented in the figure. Market research is more of an interactive process whereby a researcher, by discovering something in a given step, may move backward in the process and begin again at another step [Market research 2006] Finding some new information while collecting data, may cause the researcher to establish different research objectives. In the following the different market research steps are described. DEFINING THE RESEARCH PROBLEM The step defining the research problem exists of 2 main steps: (1) formulating the problem and (2) establishing research objectives. Defining the problem is the single most important step in the market research process. A clear statement of the problem is a key to a good research. A firm may spend hundreds or thousands of dollars doing market research, but if it has not correctly identified the problem, those dollars are wasted. In our case it is obvious that the problem here is setting up a business. But even if this is clear, you still need to know what exactly you need to know to make the new business a success and what specific related to the product is difficult to find out. Problems that may be encountered are: it is unknown what potential markets there are, what customer groups are interested in your products, who the competitors are? After formulating your problem, you need to formulate your research questions. What questions need to be answered and which possible sub-questions do you have.

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With the problem or opportunity defined, the next step is to set objectives for your market research operations. Research objectives, related to and determined by the problem formulation, are set so that when achieved they provide the necessary information to solve the problem. A good way of setting research objectives is to ask, “What information is needed in order to solve the problem?” Your objective might be to explore the nature of a problem so you may further define it, or perhaps it is to determine how many people will buy your product packaged in a certain way and offered at a certain price. Your objective might even be to test possible cause and effect relationships. For example, if you lower your price, how much will it increase your sales volume? And what impact will it have on your profit? Clear objectives can lead to clear results. An example of this is a situation at Camaro/Firebird. Auto manufacturers are sometimes criticized for creating expensive vehicles with unwanted features and technologies that do not meet the needs of the target market. To avoid this trap engineering team of this company turned to market research to evaluate how changes in performance and fuel economy would affect sales volume and customer satisfaction. It turned out that customers were willing to pay more for greater performance if the car also offered simultaneous increases in fuel economy. The problem description, the research question, sub questions and the research objectives are part of an overall document problem description. After describing and formulating the problem and the objectives, the next step is to prepare a detailed and realistic time frame to complete all steps of the market research process. If your business operates in cycles, establish target dates that will allow the best accessibility to your market. For example, a holiday greeting card business may want to conduct research before or around the holiday season buying period, when their customers are most likely to be thinking about their purchases.

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SELECTING AND ESTABLISHING RESEARCH DESIGN The step selecting and establishing research design consists of 3 main steps: (1) select the research design, (2) identify information types and sources and (3) determine and design research instrument. As stated earlier, every research project and every business is different. Still, there are enough commonalities among research projects to categorize them by research methods and procedures used to collect and analyze data. There are three types of research design: Exploratory research design Descriptive research Causal research Exploratory research is defined as collecting information in an unstructured and informal way. For example if the owners of a new restaurant often eat out at competitor’s restaurants in order to gather information about menu selections, prices and service quality. Descriptive research refers to a set of methods and procedures that describe marketing variables. Descriptive studies portray these variables by answering who, what, why and how questions. These types of research studies may describe such things as consumers’ attitudes, intentions, and behaviors, or the number of competitors and their strategies. Causal research design is conducted by controlling various factors to determine which factor is causing the problem. It allows you to isolate causes and effects. By changing one factor, say price you can monitor its effects on a key consequence such as sales. Although causal research can give you a high level of understanding of the variable you are studying, the designs often require experiments that are complex and expensive. IDENTIFY INFORMATION TYPES AND SOURCES There are two types of information available to a market researcher: primary data and

• • •

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secondary data. Primary data is original information gathered for a specific purpose. Secondary data refers to information that already exists somewhere and has been collected for some other purpose. Both types of research have a number of activities and methods of conducting associated with them. Secondary research is usually faster and less expensive to obtain than primary research. Gathering secondary research may be as simple as making a trip to a local library or business information center or browsing the Internet. There is already a lot of statistics about different businesses that can be used for this research. After determining which type(s) of information are needed, the methods of accessing data must be determined. There are several different methods of collecting data. These methods include telephone surveys, mail surveys, personal interviews or group surveys. The actual design of the research instrument, the data collection form that is used to ask and record the information is critical to the success of the project. There are two basic methods to collect information: by asking questions or by observing. The most common research instrument is the questionnaire. There are two types of forms: structured and unstructured. Structured questionnaires list close-end questions. These include multiple choice questions which offer respondents the ability to answer “yes” or “no” or choose from a list of several answer choices. Close-end questions also include scales refer to questions that ask respondents to rank their answers at a particular point on a scale. Unstructured questionnaires have open-ended questions. Respondents can answer in their own words. COLLECTING AND ANALYZING DATA Data collection is usually done by trained interviewers who are employed by field data collection companies to collect primary data. A choice has to be made between collecting the data yourself or hiring an external office who are specialized in interviews. Data analysis is needed to give the raw data any meaning. The first step in analyzing the data is cleaning the data. This is the process of checking the raw data to verify that the data has been correctly entered into the files from the data collection form. After that the data have to be coded. This is the process of assigning all response categories a numerical value.

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For example males = 1, females = 2. After that the data can be tabulated, which refers to the actual counting of the number of observations that fall in to each possible response category. FORMULATE FINDINGS After analyzing the data you can make your findings based on this data. Once the findings about the target market, competition and environment are finished, present it in an organized manner to the decision makers of the business. In this case report the findings in the market analysis section of your business plan. In summary, the resulting data was created to help guide your business decisions, so it needs to be readily accessible to the decision makers.

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OBJECTIVES

Chapter – IV Objectives

28

PRIMARY OBJECTIVE To identify the drawbacks, why the market share of Lewis Berger paints is less when compared to other competitive products. SECONDARY OBJECTIVE − To study the presence of other similar brands in the different channels and compare it with Berger Paints. − Our work comprised of visiting different places, to reach out to 100 retail counters in the specific area. − To find out the necessary steps to overcome the drawbacks Berger Paints.

29

RESEARCH METHODOLOGY

Chapter – V Research Methodology

30

The topic of study "A study and comparative analysis of market potential of Berger Paints” was descriptive in nature. It is a kind of study that is undertaken when the researcher is interested in knowing the characteristics of certain group such as sex, education level, occupation, income, Market potential measurement, Target market evaluation etc. The purpose of such a study is to ensure the "Who, What, When, Where and How" of the subject undertaken. Thus, the Research design used for study was descriptive research design. DATA SOURCE The various source of information can be broadly divided into two categories: 1) Primary source, 2) Secondary source PRIMARY SOURCE Source from where first hand information's are gathered directly are called primary source and information thus collected is called PRIMARY DATA. In case of the above study, the primary sources were PAINT DEALERS. SECONDARY SOURCE The source of information, already gathered for some other purposes are available, is called secondary source, and such data already collected earlier are called secondary data. With regard to my study, secondary sources were records of the company, and internet. DATA COLLECTION METHOD There are three types of method, survey, observation and experiment. Data is collected through survey method. For the survey method, the researcher will use unstructured personal interview. A questionnaire is kept in hand of the interviewer to aid the interview process. A

31

personal interview is a form of direct communication in which an interviewer asks respondents questions in a face-to-face situation. There are several advantages of personal interviews. • Probing complex answers. • The opportunity for feedback. • High participation. • Item non-response – the technical term for an unanswered question on an otherwise complete questionnaire. SAMPLING PLAN The sampling technique is a cross-sectional study as the data is collected at a single point in time. TARGET POPULATION Paint dealers in the geographical of areas such as Tambram to Thiruvanmaiyur, Vadapalani, Kodabakkam, Porur, etc SAMPLING FRAME There is no such sampling frame for paint dealers all paint dealers are considered for survey. SAMPLE UNIT Sampling unit consist of the knowledgeable respondents. Knowledgeable respondents consists of paint dealers who are able to give correct details for the survey questions SAMPLING DESIGN & SIZE The sampling design which has been undertaken is Random Sampling. In random sample all samples of the same size have an equal chance of being selected from the population. 1. For market penetration, I surveyed all the shops that are covered in different routes of different distributors. 2. For retailer survey, I took a sample size of around 100 retailers in various localities and areas.

32

DESCRIPTION OF STATISTICAL TOOL USED  Percentage method PERCENTAGE METHOD In this project Percentage method test was used. The percentage method is used to know the accurate percentages of the data we took, it is easy to graph out through the percentages. The following are the formula No of Respondent Total no. of Respondents

Percentage of Respondent =

x 100

From the above formula, we can get percentages of the data given by the respondents.

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DATA ANALYSIS, RESULTS AND INTERPRETATION

Chapter – VI Data Analysis, Results and Interpretation

34

1) BRANDS THAT DEALERS ARE DEALING TABLE NO: 6 Particulars Berger Asian ICI Nerolac Others CHART NO: 2 No. of Respondents 24 90 20 11 26 Percentage 14 53 15 6 12

INTERPRETATION From the survey it is clear that 53 % of respondents were dealing with Asian paints and only 15 % are dealing with Berger paints. This shows that Asian paints contribute about thrice the market share of Berger paints. As we can see from the results, Asian paints is ahead in this race in the dealership of paints are concerned.

35

2) MACHINES THAT THE DEALERS ARE USING TABLE NO: 7 Particulars Berger Asian ICI Nerolac Others No. of Respondents 14 73 12 3 5 Percentage 13 68 11 3 5

CHART NO: 3

INTERPRETATION From the survey it is clear that 68% of dealers are using Asian Machines, 13 % of dealers are using Berger machines. 11 % are using ICI machines, 3 % are using Nerolac machines, and 5 % are using other machines.

36

3) PAINTS SALES PER MONTH (IN LITRES) TABLE NO: 8 Particulars Berger Asian ICI Nerolac Others CHART NO: 4 0 - 500 L 501- 1500 L 1501- 3000L 9 4 6 20 12 17 9 5 4 9 1 1 15 7 3 3001-5000L Above 5000L 4 1 18 23 1 1 0 0 0 1

INTERPRETATION The survey shows that major amount of the Berger paints sales is limited within 500 litres per month. Only 4 % of dealers sell Berger paints above 5000 litres per month whereas it is much low when compared to its major competitor Asian paints which have sales of about only 22 % within 500 litres but they have major sales of about 26 % above 5000 litres per month. Berger paints is leading when compared to ICI, Nerolac and other company paints except Asian by having considerable of about 17 % within 1500 litres per month, 25 % of sales within 3000litres per month and 17 % of sales within 5000 litres per month.

37

4) PAINTS SALES PER MONTH (IN RS) TABLE NO: 9 Particulars Berger Asian ICI Nerolac Others 0 - 1 Lac 9 20 20 7 15 1 Lac - 3 Lacs 1 13 3 2 6 3 Lacs - 6 Lacs 4 13 3 1 2 6 Lacs - 10 Lacs 8 13 4 0 2 Above 10 Lacs 2 31 0 1 1

CHART NO: 5

INTERPRETATION The survey shows that major amount of Berger paints sales by dealers is limited within 1 lakhs per month which is about 38 % is in this category and about only 8 % of dealers are selling Berger paints above 10 lakhs per month. This is much lower when compared to Asian paints where their sale is about 34 %, is above 10 lakhs and they have more dealers in this category. Berger paints are having next major amount of dealers of about 33 % who sell the Berger paints around 10 lakhs and below, this is much higher when compared to other company paints, whereas Asian have only about 14 % but they have more dealers who sell above 10 lakhs hence, they are leading in the market.

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5) DEALERSHIP TABLE NO: 10 Particulars Paints Hardware Tiles Electricals Cement Steel 0-20 26 38 0 11 10 4 21-40 33 23 33 16 17 26 41-60 18 27 67 32 43 0 61-80 15 13 0 42 30 70 81-100 8 0 0 0 0 0

CHART NO: 6

INTERPRETATION The survey shows that 26 % of paint dealers receive income only 20 % of their total income by selling paints, 33 % of dealers receive within 40 % of their total income by selling paints, 18 % of dealers receive within 60 % of their total income by selling paints, 15 % of

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dealers receive within 80 % of their total income by selling paints and 8 % of dealers receive 100 % of their total income by selling paints. 6) CUSTOMER PROFILE

TABLE NO: 11 Particulars House owners Painters Contractors Engineers CHART NO: 7 Percentage 37 33 16 14

INTERPRETATION

40

From the survey it reveals that 37 % of customers are house owners, 33 % are painters, 16 % are contractors and 14 % are engineers. This reveals that house owners are more interested in preferring paints for their house. 7) HOUSE OWNERS BUYS PAINT ON WHOSE RECOMMENDATION

TABLE NO: 12

Particulars Painter Contractor Engineer Neighbour Own decision CHART NO: 8

Percentage 38 3 4 10 45

INTERPRETATION

41

From the survey it clear that 45 % of house owners are making decision by their own in choosing the paint, secondly 38 % of house owners are influenced by painters, 10 % by neighbours, 4 % by Engineers and 3 % by Contractors. It shows that house owners buy paints mostly by their own decision only. 8) DELIVERY PERIOD

TABLE NO: 13 Particulars Asian Berger ICI Nerolac Others CHART NO: 9 < 2 hrs 4 0 0 0 0 2 - 4 hrs 2 2 1 0 0 4 -6 hrs 7 2 1 1 0 6 -8 hrs 6 0 1 0 1 24 hrs 61 16 15 9 20 2 Days 10 4 2 1 5

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INTERPRETATION The survey shows that almost all brands of paints are delivering their products within 24 hours in Berger 67 % of its products are delivered within 24 hours and17 % are delivered within 2 days which can be reduced to 1 day to enhance the sale of the Berger paints. 9) MINIMUM LOT OF DELIVERY OF PAINTS

TABLE NO: 14 Particulars Asian Berger ICI Nerolac Others 1 case 88 24 19 11 24 20 lts 1 0 0 0 1 50 lts 1 0 1 0 1

CHART NO: 10

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INTERPRETATION The survey exhibits that paint companies are not expecting any minimum order; they are delivering any minimum amount that the dealer requires. The chart shows that above 90% of all paint companies are delivering even 1 case as minimum order. 10) DELIVERY PERIOD OF 1 CASE OF PAINT

TABLE NO: 15

Particulars Asian Berger ICI Nerolac Others

< 2 hrs 3 0 0 0 0

2 - 4 hrs 0 1 1 0 0

4 -6 hrs 1 2 1 0 0

6 - 8 hrs 4 0 0 0 0

24 hrs 71 17 14 10 21

2 days 11 4 4 1 5

44

CHART NO: 11

INTERPRETATION The survey shows that the time taken for 1 case delivery by all companies is almost 1 day. 11) DELIVERY PERIOD OF SLOW MOVING MATERIALS

TABLE NO: 16

45

Particulars Asian Berger ICI Nerolac Others

1 Day 20 8 6 1 3

2 Days 62 15 11 9 18

3 Days 3 0 2 1 5

Above 3 Days 5 1 1 0 0

CHART NO: 12

INTERPRETATION

46

The survey shows that the time taken for delivery of slow moving materials by all companies is about 2 days. 12) ACCOUNT STATEMENT OF PAINT COMPANIES

TABLE NO: 17 Particulars Asian Berger ICI Nerolac Others Excellent 82 24 18 10 19 Good 7 0 1 1 4 Average 1 0 1 0 2 Poor 0 0 0 0 1

CHART NO: 13

47

INTERPRETATION The survey exhibits that the Account statement given by paint companies is almost perfect. 13) ACCOUNT STATEMENT OF PAINTS IS WHETHER UNDERSTANDABLE OR NOT

TABLE NO: 18 Products Asian Berger ICI Nerolac Others Yes 80 24 19 11 25 No 1 0 1 0 1

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CHART NO: 14

INTERPRETATION From the survey it is clear that nearly 95 % of dealers say that the account statements of paint companies are easily understandable. Respondents say that sales representatives will explain about the account statement if they were unable to understand it. 14) SCHEMES OF PAINT COMPANIES

TABLE NO: 19

Particulars Excellent Good Average Berger 3 13 8 Asian 29 26 32 ICI 2 2 15 Nerolac 7 1 3 Others 11 1 12

Poor 0 3 1 0 2

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CHART NO: 15

INTERPRETATION The survey shows that the schemes offered by paint companies are average only, 64 % of dealers say that the schemes offered by Nerolac paints are excellent which shows that they are providing almost good schemes when compared to other brand paints. 15) SCHEMES OF BERGER PAINTS ARE UNDERSTANDABLE OR NOT

TABLE NO: 20 Particulars Asian Berger ICI Nerolac Others Yes 89 24 20 11 26 No 1 0 0 0 0

50

CHART NO: 16

INTERPRETATION From the survey it is clear that nearly 99 % of dealers who take schemes say that the schemes are understandable. 1 % of dealer says that they won’t take any schemes.

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CONCLUSION

Chapter – VII Conclusion

52

Berger is the 2nd largest paint company in India as far consolidated sales turnover is concerned yet there is lot to be done to achieve its vision of becoming a leading paint manufacturer in India. Berger Paints is following continuous growth strategy. The installed capacity as in FY10 for synthetic resin was 32,287 Metric Ton (MT) per annum while paints, varnishes and enamel together have an installed capacity of 240,315 MT per annum The major competitors are Asian and Nerolac . With proper marketing mix and strategy the company would be able to increase its dominance in the whole country.

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LIMITATIONS OF THE PROJECT

Chapter – VIII Limitations of the project

54

1. Since regions from where researcher has to collect the data was prespecified so some of the regions which were not stated were left out. 2. Some of the dealers were hesitant in providing the information due to lack of trust and familiarity with the researcher. 3. In some shops the real owners was not there so information may not be perfectively up to the point. 4. Some of the dealers were inflating their sales figures. 5. Only some areas were chosen for survey, so it cannot say the overall reports. 6. Few dealers don’t have the awareness about the survey, so they were scared to provide the data.

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RECOMMENDATIONS

Chapter – IX Recommendations

56

After analyzing the data obtained from the dealers it was evident that Asian Paints is the market leader. It enjoys the largest customer base. I came up with the following suggestions for improving upon the current customer base and expanding into other high potential sectors besides the decorative segment 1. The advertisement is given for only few brands like silk, weather coat, Luxol, Rangoli easy clean. Therefore the company needs to emphasize more on the promotion of subbrands. The advertisement can be made in a funny manner which would easily reach the customers. 2. Advertisements can be given in south Indian TV channels. Banners can be given to dealers as a part of promotional activity. People are not aware about the products of Berger paints so that promotional activities are very much necessary. 3. More and more women can be found perusing the shelves at paint stalls in search of the right type of paint for their homes. So the company can target this new set of interested customers by increased advertising in women magazines. 4. Distribution and transportation can be improved. 5. The services provided by the company on the website are not being used because of the low penetration of internet in India. So we recommend that these facilities should be made available at the point of purchase. 6. Berger could also target few new customers of the same area and give them gift item. This would make customers feel special and the positive word of mouth, a factor of customer loyalty, can be achieved. However it is suggested that this should be done on a trial basis, for a yearlong period. If the outcome is not fruitful, Berger can always terminate the idea.

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7. A one year period can be used for proper evaluation of the dealers, whether or not they are making proper used of the improved financial benefits. Upon assessment of the dealers after one year, few inefficient dealers could be terminated. This would increase competition within the dealers, and thus increase productivity. 8. As there are already many dealers in the urban areas the main focus can be to increase the sale of paints in rural areas by increasing the availability in the form of making new dealers. 9. Dealers need to improve their approach in selling the Color Bank option, for which Berger can give more emphasis towards the dealers. Dealers play a vital role to attract consumer and they are the one who can convince people buying behavior. Berger Paints is already in a good position and they successfully can keep good relation with the Dealer’s but their approach should be more dynamic and more prompt. 10. Online ordering system can be implemented so that dealers can directly submit their orders on the website itself and after ordering they can also make online payments through credit cards and track the status of their order to avoid any delay in processing of their order and its delivery. 11. More regular visits of company’s representatives are required to the dealers or sub dealers shop so as to build better relations. 12. Include weekend leaflets in more magazines.

58

Chapter – X Annexures

59

BIBILOGRAPHY BOOKS
1. Philip Kotler, “Marketing Management”, Pearson Custom Publishing, USA, Eleventh Edition, 2002, Chapter 4, Page 103. 2. Donald R. Cooper & Pamela S. Schindler, “Business Research Methods”, McGraw Hill International Edition, USA, 8th Edition, 2003, Chapter 7, Page 217. WEBSITES www.domain-b.com www.equitymaster.com www.economictimes.com www.bergerpaints.com www.marketresearchanalyst.com

DEALER QUESTIONNAIRE

60

1) Proprietor Name

_________________________________________

2) Town

_________________________________________

3) Area/ Taluk

_________________________________________

4) Shop Name

________________________________________

5) Address (with Pin Code)

_________________________________________

6) Telephone Numbers

_________________________________________

7) Fax Number

_________________________________________

8) E-mail

_________________________________________

9) Brands dealing with Berger Asian ICI Nerolac Others others others

10) Machine Berger Asian ICI Nerolac Others others others

11) Volume of business per month (in L)

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a) 0-500 L b) 501 L-1500 L c) 1501 L- 3000 L d) 3001 L- 5000 L e ) above 5000 L Berger Asian ICI Nerolac Others others others

12) Value of business per month(in Lacs) a) 0 – 1 lac b) 1 lac - 3 lacs c) 3lacs - 6 lacs d) 6 lacs - 10 lacs e) above 10 lacs Berger Asian ICI Nerolac Others others others

13) Dealers forPaints Hardwares Tiles Electricals Cement Steel others

14) Profile of customers in your shop (%) a) 0-20 House b) 21- 40 Owner Painter c) 41-60 d) 61-80 e) 81- 100

Contractor

Engineer

15) If a house owner comes and buys from you, on who’s recommendation does he buy paints Painter Contractor Engineer Neighbor Own Decision

16) When you place an order, within what time are the materials being delivered from the time of your call a) <2 hours b) 2 to 4 hours c) 4to 6 hours d) 6 to 8 hours e) 24 hours f) 2 days g) 3 days

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Berger

Asian

ICI

Nerolac

Others

others

others

17) What is the minimum lot of order delivered to you

a) 1 case Berger

b) 2 cases Asian

c) 20 lts ICI

d) 50 lts Others

e) 100 lts others

f) >100 lts others

Nerolac

18) If delivery is for 1 case only, what is the time frame for delivery

a) < 2 hours b) 2 to 4 hours c) 4 to 6 hours d) 6 to 8 hrs e) 24 hrs f) 2 days g) 3 days Berger Asian ICI Nerolac Others others others

19) If you order for any slow moving material, in how many days does it reach you? a) < 2 hours b) 2 to 4 hours c) 4 to 6 hours d) 6 to 8 hrs e) < 24 hrs f) 2 days g) 3 days Berger Asian ICI Nerolac Others others others

20) How would you rate the company in terms of timely Accounts statement?

a) Excellent

b) Good

c) Average

d) Poor

e) Very Poor

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Berger

Asian

ICI

Nerolac

Others

others

others

21) Is the company’s accounts statement clear for you to understand a) Yes b) No

Berger

Asian

ICI

Nerolac

Others

others

others

22) Which company’s schemes are attractive? a) Excellent b) Good c) Average d) Poor e) Very Poor

Berger

Asian

ICI

Nerolac

Others

others

others

23) Which company’s schemes are easily understandable? a) Yes Berger b) No Asian ICI Nerolac Others others others

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