Mini Project – II

GLOBAL MARKETING STRATEGY FOR

PAINT INDUSTRY

Submitted for the Partial Fulfillment towards the awards of the Degree in

Master in Business Management (MBA)

of

Dr. A.P.J. Abdul Kalam Technical University, Lucknow

By

RATNESH ANAND
2301920700323

Under the guidance of

DR. SONIKA SUMAN

at

GL Bajaj Institute of Technology and Management

Greater Noida

1
 G. L. BAJAJ
INSTITUTE OF TECHNOLOGY &
MANAGEMENT
Approved by A.I.C.T.E. & affiliated to Dr. A.P.J. Abdul Kalam Technical University

Date:

CERTIFICATE

This is to certify that RATNESH ANAND has undertaken this Mini Project-II titled

“GLOBAL MARKETING STRATEGY FOR PAINT INDUSTRY” for the partial

fulfillment of the award of Master of Business Administration degree from Dr. A P J

Abdul Kalam Technical University, Lucknow (U. P.), India.

I wish him/ her all the best for his/her bright future ahead.

Project Supervisor
Department of Management
Studies

Head of Department
Department of Management
Studies

2
 PREFACE

In an increasingly interconnected world, the paint industry has witnessed

significant transformations, driven by global economic shifts, technological
advancements, and evolving consumer preferences. As organizations seek to
expand their reach beyond domestic markets, crafting an effective Global
Marketing Strategy has become indispensable for achieving sustainable growth
and success in the international arena.

This MBA project delves into the dynamic realm of Global Marketing Strategy
within the context of the paint industry. The paint industry, which encompasses
decorative, automotive, industrial, and protective coatings, plays a pivotal role in
numerous sectors, including construction, automotive, aerospace, and
manufacturing. As economies continue to integrate, companies in this industry
face both lucrative opportunities and daunting challenges in penetrating new
markets and establishing a strong international presence.

The core objective of this project is to develop a comprehensive understanding of

the key factors influencing Global Marketing Strategy formulation and
implementation in the paint industry. Drawing upon extensive research, data
analysis, and real-world case studies, this study aims to provide valuable insights
into crafting effective marketing strategies that can propel paint companies
towards global success.

As an MBA student embarking on this research journey, I am motivated to

uncover valuable insights that will not only enrich my understanding of global
marketing strategy but also contribute to the body of knowledge in the paint
industry. It is my hope that this project will serve as a valuable resource for
industry professionals, academicians, and stakeholders, guiding them in
navigating the complexities of global markets and devising innovative strategies
for sustained success.

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 ACKNOWLEDGMENT

It is my pleasure to acknowledge and express my gratitude to all those who helped

me throughout in the successful completion of this project.

I would like to thank my Director, Prof. SONIKA SUMAN, for providing the
necessary facilities required for completion of the project.

I am grateful to Prof. SONIKA SUMAN G.L BAJAJ INSTITUTE OF

TECHNOLOGY AND MANAGEMENT, Greater Noida for his continuous
guidance to accomplish this project work, successfully.

RATNESH ANAND
2201920700023
Semester -II

4
 DECLARATION

I hereby declare that the work presented in this report entitled “GLOBAL
MARKETING STRATEGY FOR PAINT INDUSTRY” was carried out by me. I have
not submitted the matter embodied in this report for the award of any other degree
or diploma of any other University or Institute. I have given due credit to the
original authors sources.

For all the words, ideas, diagrams, graphics, computer programs, experiments,
results, that are not my original contribution. I have used quotation marks to
identify verbatim sentences and given credit to the original authors/sources. I
affirm that no portion of my work is plagiarized, and the experiments and results
reported in the report are not manipulated. In the event of a complaint of
plagiarism and the manipulation of the experiments and results, I shall be fully
responsible and answerable.

RATNESH ANAND
Roll. No: 2301920700323

5
 INDEX

SERIAL NO. CONTENTS PAGE

NO.

1 EXECUTIVE SUMMARY 7

2 INTRODUCTION TO THE TOPIC 8

3 LITERATURE 17

REVIEW

4 RESEARCH METHODOLOGY 19

5 ANALYSING THE TOPIC 21

6 CONCLUSION 35

7 BIBLIOGRAPHY 37

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 EXECUTIVE SUMMARY

Asian Paints marks a turning point in the concept of paint manufacturing and marketing
in Bangladesh from very beginning of its operation since 1953. The dealership chain
store has put the convenience of its target consumers the middle and lower middle class,
foremost in devising its marketing strategies.

Asian Paint attempts to an image and atmosphere that is consistent its pledge for quality
and customer satisfaction. The dealership stores occupy areas of the city and Town and
others under construction area and offered a wide assortment of paint and paints related
product that would mostly appeal to its target customer. Unlike many such paints
industry Roxy tries to remain ahead of its competitors by sponsoring innovation of local
innovations.

Asian is currently charging affordable retail price to its customer.

However, the management plans to offer prices lower than ones offered by the
competitor in the market.

Asian paints advertise through television and some selective approach to target the
selective market. The logo of Asian paints limited points to the importance of the image
factor which is important to their promotional strategy such as affordable price, durable
product quality, trade discount, closing end discount, incentive offer to its value chain
member (dealer, painter, sales force) and social work such as seminar, debate, workshop
on public welfare issues.

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 INTRODUCTION

Paint is defined as the group of emulsions, consisting of pigments suspended in a

liquid medium, for use as decorative or protective coatings. Today, contemporary
paints and coatings consist of countless compounds uniquely formulated to fulfill the
varied requirements of hundreds of thousands of applications. "Paint" ranges from
the broad group of environmentally sound latex paints that many consumers use to
decorate and protect their homes and the translucent coatings that line the interior of
food containers, to the chemically complex, multi-component finishes that
automobile manufacturers apply on the assembly line.

Paint made its earliest appearance about 30,000 years ago. Cave dwellers used crude
paints to leave behind the graphic representations of their lives that even today
decorate the walls of their ancient rock dwellings.

The utility of paints has evolved from a decorative use to a surface protection use.
Also, known as surface coatings, paints can be classified on the basis of end use,
solvent system and solid content.

End use classification: Under this heading, paints can be classified as

decorative/architectural paints and industrial paints. As the names suggest,
decorative paints are mainly used for household and construction purposes while
industrial paints are used as coatings for industrial productions. Main types of
decorative paints are enamels, acrylic emulsions, distempers and exteriors and post
a message primary types of industrial paints are marine paints, anti corrosive metal
coatings, etc.

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Solvent based classification: This includes paints, which use petro products or
water as the main solvent. Water based paints are gaining popularity due to their
environment friendliness.

Solid content: can be classified as liquid or solid (powder) paints. Powder coatings
find application mainly in the white goods industry.

The decorative segment dominates the market in India with a 70% share with the rest
accounted for by industrial paints. This is compared to the developed countries where
the share is the reverse with the industrial segments the major one. With increased
industrialization, the ratio in India is also likely to change in the favour of industrials
and both segments are likely to be equal partners by the end of five years.
Decorative Paints Segment Market Size (Rs mn)

Enamels 8600

Wall Finishes 4730

Primers 2150

Wood Finishes 430

Total 15910

INDIAN PAINT INDUSTRIES SECTOR REPORT

Products
Industrial Paints Segment Market Size (Rs mn)

Auto 4386

CRP 1075

Powder 860

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 Coil 94.6

Others 731

Total 7147

OVERVIEW OF PAINT INDUSTRY

 The Indian paint industry is a Rs 49 billion sector.

 The demand for paints is relatively price-elastic but is linked to the industrial and
economical growth.

 The per capita consumption of paints in India is very low at 0.5 kg per annum if
compared with 4 kgs in the South East Asian nations and 22 kgs in developed
countries. The global average per capita consumption is 15 kg.

 In India the organised sector controls 70 percent of the total market with the
remaining 30 percent being in the hands of nearly 2000 small-scale units.

 In India the industrial paint segment accounts for 30 percent of the paint market while
the decorative paint segment accounts for 70 per cent of paints sold in India.

 In most developed countries, the ratio of decorative paints vis-à-vis industrial paints
is around 50:50.

 All the industry majors have a vast dealership network and are required to maintain
high inventory levels.

 Most of the paint leaders have technical tie-ups with global paint leaders.

Sector comments

Paint is a mixture of four elements - solvents, binders, pigments and additives.

Solvents give the paint a liquid flow while the binder binds it to the surface. Pigments
impart colour and opacity to the paint and the additives give it special resistance
properties.

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Sector trends

The recession in the construction and automobile sector had thrown in shades of grey
across the Industry spectrum, but the revival in these sectors is cause for cheer for
the paint industry as well. The balance sheets of the industry majors are now painted
with bright colours.

Sector specifics

On product lines, paints can be differentiated into decorative or architectural paints

and industrial paints. While the former caters to the housing sector, the automotive
segment is a major consumer of the latter. Decorative paints can further be classified
into premium, medium and distemper segments. Premium decorative paints are
acrylic emulsions used mostly in the metros. The medium range consists of enamels,
popular in smaller cities and towns. Distempers are economy products demanded in
the suburban and rural markets. Nearly 20 per cent of all decorative paints sold in
India are distempers and it is here that the unorganised sector has dominance.
Industrial paints include powder coatings, high performance coating and automotive
and marine paints. But two-thirds of the industrial paints produced in the country are
automotive paints.

Market profile

The leaders in the organised paint industry are Asian Paints (India) Ltd. (APIL),
Goodlass Nerolac Paints Ltd. (GNPL), Berger Paints, Jenson & Nicholson Ltd.
(J&N) and ICI (India) Ltd.

Asian paints is the industry leader with an overall market share of 33 per cent in the
organised paint market. It has the largest distribution network among the players and
its aggressive marketing has earned it strong brand equity. The Berger Group and ICI
share the second slot in the industry with market shares of 17 per cent each. GNPL
has a market share of 15 percent in the organised sector.

The market can be further split into decorative paints and industrial paints. The
demand for decorative paints is highly price-sensitive and also cyclical. Monsoon is
a slack season while the peak business period is Diwali festival time, when most

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people repaint their houses. The industrial paints segment, on the other hand, is a
high volume-low margin business. In the decorative segment, it is the distribution
network that counts while in the industrial segment the deciding factor are
technological superiority and tie-up with automobile manufacturers for assured
business.

APIL dominates the decorative segment with a 33 per cent market share. The
company has more than 15,000 retail outlets and its brands Tractor, Apcolite, Utsav,
Apex and Ace are entrenched in the market. GNPL, the number-two in the decorative
segment, with a 15 per cent market share too, has now increased its distribution
network to 10,700 outlets to compete with APIL effectively. Berger and ICI have 9
per cent and 8 per cent shares respectively in this segment followed by J&N and
Shalimar with 1 and 6 per cent shares.

The share of industrial paints in the total paint consumption of the nation is very low
compared to global standards. It accounts for 30 per cent of the paint market with 70
per cent of paints sold in India for decorative purposes. In most developed countries,
the ratio of decorative paints vis-à-vis industrial paints is around 50:50. But, with the
decorative segment bottoming out, companies are increasingly focussing on
industrial paints. The future for industrial paints is bright. In the next few years, its
share would go up to 50 per cent, in line with the global trend.

GNPL dominates the industrial paints segment with 43 per cent market share. It has
a lion’s share of 70 per cent in the OEM passenger car segment, 40 per cent share of
two wheeler OEM market and 20 per cent of commercial vehicle OEM market. It
supplies 70 per cent of the paint requirement of Maruti, India’s largest passenger car
manufacturer, besides supplying to other customers like Telco, Toyota, Hindustan
Motors, Hero Honda, TVS-Suzuki, Mahindra & Mahindra, Ashok Leyland, Ford
India, PAL Peugeot and Bajaj Auto. GNPL also controls 20 per cent of the consumer
durables segment with clients like Whirlpool and Godrej GE. The company is also
venturing into new areas like painting of plastic, coil coatings and cans. APIL, the
leader in decorative paints, ranks a poor second after GoodlassNerolac in the
industrial segment with a 15 per cent market share. But with its joint venture

12
 AsianPPG Industries, the company is aggressively targeting the automobile sector. It
has now emerged as a 100 per cent OEM supplier to Daewoo, Hyundai, Ford and
General Motors and is all set to ride on the automobile boom. Berger and ICI are the
other players in the sector with 10 per cent and 9 per cent shares respectively.
Shalimar too, has an 8 per cent share.

Price sensitivity factors

Various factors that have influenced the pricing of paints are summarised below:

 The industry is raw-material intensive. Of the 300 odd raw materials, nearly half of
them are imported petroleum products. Thus, any deficit in global oil reserves affects
the bottomline of the players.

 The major raw materials titanium dioxide, phthalic anhydride and peutarithrithol
constitute 50 per cent of the total cost. Besides, this, there are other raw materials
such as castor, linseed and soybean oils, turpentine. The raw materials cost sums up
to a whopping 70 per cent. Any increase in the prices of these raw materials could
adversely affect paint prices.

 Most of the paint majors have to import nearly 30 per cent of their raw material
requirements thus changes in import policies can affect the industry.

SEGMENTATION
Paints – Products

Products
The products of the paint industry can be classified into two major segments
decorative (architectural) paints and industrial paints.

Decorative paints: The decorative paint segment can be classified into

interior paints and exterior or cement paints. 80% of the decorative paints
account for interior paints, which consists of premium, medium and economy
categories. The premium category consists of plastic emulsions, the

13
 mediumpriced 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/lustre finishes, enamels, emulsions (first quality),
and premium emulsions.

 Consumption of paints is skewed towards decorative paints which account for 70%
of paints sold in India. This is in a sharp 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.

 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 term of technological and funds requirements are relatively lower
in the paints sector. 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

14
 refinishes. The automotive and general industrial coatings occupy top slot in terms
of production.

FOREIGN COLLABORATION
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, GoodlassNerolac
is a major supplier to Maruti Suzuki because of Kansai, its Japanese collaborator and
Suzuki relations. It is for the same reason that Asian Paints (tie-up with PPG
Industries, USA) is a major supplier of paints to Opel Astra.

DEMAND AND SUPPLY SCENARIO

Paint demand is intrinsically related to economic development. The demand for
decorative paints in India mainly arises from two segments viz. Construction of new
buildings and retail demand for refurbishment, while the demand for industrial paints
comes from industries like automobiles, consumer durables, shipping, engineering,
etc.
The demand for paints has grown at 10% for the last five years. After a sluggish
growth in late 80s and early 90s, industry grew at a rapid pace of more than 12%
from 1992-96. High excise duties and lackluster industrial growth resulted in low
growth of 2-4% during 1987-92. After 1992, the industry picked up aided by
improving economic conditions and rationalization of excise structure. Almost the
entire growth can be attributed to volume increase as price realization has increased
at less than 5% p.a. Over the last two years, demand has slowed down due to the
economic slowdown.

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 According to Indian Paints Association, demand will rise from the current 0.6mn
tonnes per annum to almost 1mn tpa by 2003. Demand for decorative paints will be
led by the household construction industry which is expected to grow at almost 8%
over the next five years considering the extreme shortage of housing and the
government’s thrust on encouraging housing activity. The centers of housing activity
are also likely to shift more towards rural areas. The industrial segment will grow
faster due to the lower base and fast growth in major user industries like consumer
durables and automobiles.
The paint industry is not capital intensive. However, it has high entry barriers in the
form of distribution network and product branding. Thus, fresh capacity is likely to
come from existing players only. In fact, low capital costs encourage manufacturers
to increase capacity to cater to seasonal peaks (especially in decorative paints) rather
than incur inventory carrying costs, during lean periods.

MAJOR PLAYERS AND THEIR SHARES

The major players existing in industry are:

1. Asian paints

2. Goodlass Nerolac paints

3. Berger paints

4. ICI paints

5. Jenson and Nicholson paints

6. Shalimar paints

The leader in the high volume medium and mass segments of decorative paints, Asian
paints has been consolidating its market leadership over the past few years and now
has the biggest slices of 33% of the market of decorative paints where as Goodlass
Nerolac paints has the highest market share in the industrial paint segment.

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LITERATURE REVIEW
 To get a general overview of the Indian paint industry.

 To identify the major players.

 To a ascertain the reasons for the industry not picking up.

Questions Unanswered (Some recent Facts about the industry)

 Overall industry growth rate declined to 9%-10% in the current year from 12%. The
industry received a major setback in the fourth quarter due to the recent earthquake
in Gujarat. Though Asian Paints, GoodlassNerolac and Berger combined reported a
15% growth in sales in the first half of the current year, growth waned in the second
half, notably in the fourth quarter.

 The construction activity was subdued in the current year due to a less than average
monsoon and natural calamities in some of the key Eastern and Southern states. As
a result the decorative paint demand also declined. The Gujarat earthquake in the
fourth quarter was more pressing for paint companies.

 Industrial paint demand in the current year dropped due to a 7% decline in passenger
car sales and a fall in commercial vehicle volumes in the current year. One of the
key factors was the lower agricultural output, which affected the purchasing power
of the consumer, notably in the semi-urban and the rural markets. Despite interest
rates cuts and increase in depreciation rates, automobile demand did not show any
sharp uptrend in the fourth quarter also.

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 Rutile titanium dioxide prices moved up from US$ 1,800 per tonne last year to more
than US$ 1,950 per tonne , an increase of more than 11%. Since this account for
almost 50% of the raw material costs of paint companies, margins were strained.

Apart from this, prices of other raw materials like mineral spind and tarriyl also rose
by 20% and 18% respectively. Paint companies resorted to an increase in prices
during the current year, though not commensurate with the rise in input costs.

 Operating margins declined in the current year due to a rise in both raw material
costs as well increasing competition. The decline in margins was sharp for the
industrial paint segment, as these companies could not pass on the rise in costs to
their customers, primarily the auto companies (as these companies were also
witnessing declining sales).

 Exterior paint segment continued to grow at a faster rate compared with other
segments. The segment is estimated to be growing at CAGR of 15% per annum.
New product introductions from almost all the major paint companies in the exterior
segment performed well in the current year.

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 RESEARC METHODOLOGY

OBJECTIVES OF THE RESEARCH

 To get the general overview of the Indian paint industry.

 To study emerging trends and opportunities in the paint industry.

 To study the demand – supply scenario the industry.

 To identify the major players in the Indian paint industry.

 To study the marketing strategies of Asian paints and GoodlassNerolac paints.

 To ascertain the marketing segmentation criteria.

 To study the foreign /technical collaborations (if any) of major players.

 To carry on the SWOT Analysis of industry after studying the companies strategies.

 To study the market shares and major players in the industry.

TYPE OF RESEARCH

The research study under consideration is exploratory type. The reason for selecting

this type of research is the underlying definition of exploratory research. Basically,

there are two broad kinds of researches.

 Exploratory research: This seeks to discover new relationship.

 Conclusive research: It is design to help executive choose among various possible

courses of action.

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As research designs applicable to exploratory studies are different from objectives
firmly in mind while designing the research. Which have already been mentioned in
the starting. When searching for hypotheses, exploratory designs are appropriate;
when hypotheses have been established and are to be tested, conclusive designs are
needed. It should be noted, however, that the research process tends to become
circular over a period of time. Exploratory research may define hypotheses, which
are then tested by conclusive research; but a by-product of the conclusive research
may be a suggestion of a new opportunity or a new difficulty.

Other characteristics of exploratory research are flexibility and ingenuity which

characterize the investigation. As we proceed with the investigation must be on the
alert to recognize new ideas. As they can then swing the research in the new direction
until they have exhausted it or have found a better idea. Thus, they may be constantly
changing the focus of investigation as new possibilities come to attention.

It should be added here that formal design is the researcher is the key factor.
However, three lines of attack may aid in finding hypotheses of value: (1) study of
secondary sources of information; (2) survey of individuals who are apt to have ideas
on the general subject; and (3) analysis of selected cases.

The reason for selecting this mode of research for the topic is that it is probably the

quickest and most economical way for researcher to find possible hypothesis and

to take advantage of the work of others and utilize their own earlier efforts. Most

large companies that have maintained marketing research programs over a number

of years have accumulated significant libraries of research relating to their marketing

activities. Reports from research organizations furnishing continuing data. Trade

association sales data; and company records, such as those kept for accounting and

sales analysis, are other fruitful sources. There is now a large volume of basic

research reported in professional and trade journals and in government documents

that may stimulate hypotheses. These sources are often maintained in company

20
 libraries; and they are otherwise available in public libraries, as are more general

books, newspapers, and government documents. In a relatively short time researcher

can scan a large volume of published and unpublished ideas and data.

And this study aims to collect and present the happenings, reasons for these
happenings, and other significant things in the paints industry and their
interrelationships with each other.

Sample size
Inspite of many players existing in this industry I have taken a sample of two i.e.

Asian Paints and GoodlassNerolac as Asian paint is the market leader in decorative

paint segment and GoodlassNerolac paint is the market leader in the industrial paint

segment..

Sources of information/Data

The various steps I took in collecting the relevant data on the marketing strategies of
the Two paint companies:-

Asian Paints Limited

Goodlass Nerolac Paints Limited
The data that I have collected is strictly secondary data hunted on the internet. I
searched -

www.google.com www.indiainfoline.com and various sites. These sites could only

give me an overview of the paint industry and the company profiles.

The inability to collect data relevant to the marketing strategies prompted me to

interview some senior officers in the different companies who personally wanted that

they should not be named because of some strategic reasons. Still interviews were in

21
 depth and unstructured and aimed to grab out as much from the interviewer as

possible about the strategic plans of their respective companies in the immediate

future as well as their long term strategies. Officials were kind enough to help me out

search the data and get hold of the relevant data pertaining to the marketing strategies

of the two paint industries.

Information/Data Analysis method

The above discussion gives a brief introduction to the paints industry. In order to
understand it in greater depth, use is made of Porter’s Industry Structure Model. The
model has been reproduced on the next page:

PORTER’S MODEL

Environmenta
l Factors Threat of
Substitutes

Supplier’s Threat of Customer’s

Power Substitutes Power

22
 Barriers to
SUPPLIER’S POWER Entry
The bargaining power of each of the players in the industry
relative to the suppliers is low. The reasons for this are manifold. For instance, the
most important raw material, titanium dioxide, as already mentioned, is always in
short supply both locally and globally. For other raw materials too, the players are
forced to import in bulk due to local shortages. High import content means that the
input costs depend on global prices, where the industry players can only be price
takes. Moreover, it also exposes the industry players to exchange rate fluctuations.
These are the factors that result in the erosion of the industry’s bargaining power in
relation to the suppliers.

CUSTOMER’S POWER

Again, the bargaining power of the customer is high. In decorative paints, the
customers are widely spread geographically. Reach and distribution strength are of
paramount importance. Moreover, in addition to availability, the consumer’s choice
depends on several other factors such as the range of shade, the intensity of the
marketing efforts etc. In industrial paints, the customers are generally captive, with
each customer having at the most two or three suppliers, and quite often only one
supplier. But in this case, the customers are quite demanding. In addition to the tight
specifications regarding quality, technology is an important factor. In both the cases,
inventory holding involves a lot of cost for the industry. In the case of decorative
paints, a large inventory has to be held to ensure timely availability of a wide variety
of shades. On the other hand, in industrial paints the manufacturer needs to hold
sufficient inventories to ensure timely supply of paints to the end user, for whom
lack of supply typically means production problems.

BARRIERS TO ENTRY
In the decorative paints segment, the barriers to entry are low primarily due to the
fact that sophisticated technology is not prime requisite. The segment is flooded with

23
players in the unorganized sector who cater mainly to the local lower end market.
However, it is difficult for small and new players to achieve a significant national
presence due to the requirement of a wide distribution network. However, the cost
advantage of the smaller players is slowly being nullified by the downward
movement of excise duties on the organized sector. In the industrial paints segment,
the entry barriers are reasonably high due to the fact that this segment requires
sophisticated technology.

THREAT OF SUBSTITUTES

The paints industry does not face any real threat of substitutes, as one cannot foresee
a situation where paints will not be required. Technologies for using polymer based
construction materials (which can be imparted suitable colour during the
manufacturing process itself and hence do not need paint for building houses have
been tried out, but these failed to become popular.
ENVIRONMENT
The external environment has a significant effect on the industry. The chief reason
for this is that the demand for the industrial paints segment is a derived demand. It
depends on the user industries such as automobiles, white goods etc., though with
a time lag. The past year has seen a drop in demand for automobiles and hence the
industrial paints manufacturers expected a dip in sales this year.
Environmental concerns too can have an effect on the fortunes of this industry. For
instance the concern about toxic fumes being emitted from paints that use petroleum
products as solvents, has led to the invention of water-based paints. These are still
not very popular in India, though
GoodlassNerolac has launched a range of water-based paints recently (the
“Allscapes” range”.
Government regulations affect this industry as much as they affect any other industry.
Being import intensive, import duties being raised or lowered can cause drastic
changes in the cost structure of the players. The recent trends of import and excise
duties have been largely favourable to the industry.

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COMPETITION WITHIN THE INDUSTRY

The industry is characterized by intense competition. Roughly 50 per cent of the

volume comes from the unorganized sector, mainly due to the low entry barriers
and the history of high excise duties. The number of players in the unorganized
sector is greater than 2000 making them a force to reckon with. Within the organized
sector itself, the decorative paints segment is witness to intense competition due to
the fact that a large part of the customers perceives very little differentiation
between brands. The primary determinant of success in such a scenario is the
distribution strength. In the industrial paints segment, the competition is based more
on the technology that goes into the products. Also, because of this fact, the
unorganized sector is smaller in this segment. Players compete with each other to
gain captive end users for their products, as in the case with most industrial products

GOODLASS NEROLAC PAINTS LTD.

COMPANY PROFILE
BACKGROUND

GNPL was established in 1920, by Tata stable in collaboration with Goodlass of UK,
a part of the Cooksons group. The Tata's had a 40% stake in the Company, through
group company Forbes Gokak Ltd. In 1983, the Company entered into a technical
cum financial collaboration with Kansai Paints, Japan. Kansai who currently has a
stake of 40% is the other major shareholder. Manufacturing activities began with the
establishment of a paints unit at Parel in 1920. In 1971 another plant was established
at Thane. The Thane plant also has facilities to manufacture pigments, one of the

25
major ingredients in paint manufacture. In FY92, the company made a rights issue,
for par funding its new Kanpur plant, which was commissioned in August 93. Last
year Kansai bought over the stake of Tata's, thus making GNPL its subsidiary.

GNPL, The Indian arm of Japan based Kansai paints, is one of the leading players in
the Indian paints market with presence in decorative paints as well as industrial
paints, coatings, varnishes, enamels etc. it is the domestic leader in industrial paints
and has virtually half of the auto paints market.

Paints sector can be segmented as decorative paints and industrial paints. While both
are characterized by low capital costs and high working capital, industrial paints
require special technology. Capacities are normally set up close to markets, so as to
be able to offer a multitude of shades and colors to customers. Brand building and
dealer network act as effective entry barriers. Demand is seasonal in nature - low
during monsoon, high during festive seasons.

Domestic paints sector, dominated by decorative paints (70%), is expected to

undergo a structural shift towards industrial paints, as cross-border tieups in
industrial are becoming order of the day. Most organized sector players are
established with well-entrenched distribution network and established brands. Threat
of global competition is minimal. The under developed industrial paints market holds
maximum growth potential, albeit on a lower base. In future the industry will witness
brand competition, product innovations and superior distribution networks.

GNPL management has been focused on paints business in the last three decades.
GNP has a network of 10700 dealers & 550 computerized color dispensing machines.
With multi location manufacturing facilities helping it to have a very wide
geographic reach, it has an enviable leadership in Automotive OEM.

GNPL's prospects are inextricably linked to those of the user sectors in automobiles
and other industrial sectors. The two subsidiary companies primarily manufacture
paints & enamels for parent company on contract basis. GNPL has set a target for to
achieve a sales turnover of Rs 12bn and a market share of 25% 2002-03.

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ASIAN PAINTS
COMPANY PROFILE

BACKGROUND

Champaklal H Choksey, Chimanlal Choksi, S C Dani and A Vakil set up APIL, in

1942 as a partnership firm. In 1945, it was converted into a private limited company,
under the name of Asian Oil and Paint Co Pvt. Ltd. In 1965, the name was changed
to Asian Paints (India) Pvt. Ltd. In 1973, it was converted into a public limited
company.

APIL’s first plant came up in Bhandup in 1957. It has three other plants located at
Ankleshwar (1981), Patancheru (1985) and Kasna (1990). All the plants have captive
resin manufacturing facilities and are capable of producing the entire range of paints.
APIL also manufactures a key raw material Phthalic Anhydride, at its Ankleshwar
plant, 30% of which is captively consumed. Earlier APIL used to also manufacture
another raw material, vinyl pyridine latex, which was later hived off into a separate
company, under the name of Apcotex Lattices Ltd.

Capacity expansions have come in a phased manner. Productivity at the Bhandup

plant has been lackluster. Through a VRS scheme introduced in 1993, APIL was able
to cut back workforce. Investment in information technology, especially in the areas
of production and distribution logistics has helped APIL improve its operating
efficiency. In FY96 APIL’s ailing subsidiary Pentasia Chemicals Ltd. was merged
with APIL.

Locations
APIL has 4 paint manufacturing plants. The oldest plant is at Bhandup in Mumbai.
The other plants are at Ankelshwar in Gujarat, Patancheru in Andhra Pradesh and
Kasna in Uttar Pradesh. The Phthalic anhydride plant is located at Ankleshwar in
Gujarat. Penta plant (result of PCL merger) is located at Cuddalore in Tamil Nadu.

APIL, India’s largest Paints Company, is the market leader in decorative paints. It

has remained focused on core business and has consistently improved operating

27
 efficiencies. The company has registered a net profit of Rs 1064mn in FY01 as

compared to Rs 973mn in the previous year.

Paints sector can be segmented application wise, as decorative paints and industrial
paints. While both are characterized by low capital costs and high working capital
intensive, the latter requires special technology. Capacities are normally set up close
to markets, so as to be able to offer a multitude of shades and colors to customers.
Brand building and dealer network act as effective entry barriers. Demand is seasonal
in nature - low during monsoon, high during festivals.

Domestic paints sector, dominated by decorative paints (70%), is expected to

undergo a structural shift towards industrial paints, as cross-border tie-ups in
industrial paints are becoming order of the day. Most organized sector players are
established with well-entrenched distribution network and established brands. Threat
of global competition is minimal. The underdeveloped industrial paints market holds
maximum growth potential, albeit on a lower base. In future the industry will witness
brand competition, product innovations and a fight for superior distribution network.

Focussed on decorative paints segment, APIL is set to gain the maximum amongst
the peer members from the uptrend in the housing sector. The company is
restructuring its operations into three SBUs and has set target to be amongst the top
ten decorative manufacturers in the world by 2003. APIL is investing heavily in
dealer tinting machine "Colour World" and IT technologies to keep ahead of
competition. APIL has set a target of Gross sales of Rs21bn by 2003 and earnings
growth of above 20%. It also has set a vision to be among the top five paint
companies worldwide by 2005. On export front, the company is looking out for
alliances/ takeover in the emerging markets of Asia.

SWOT – ANALYSIS

Strengths:

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1. A major change in the consumption pattern within the decorative segment is the
preference for water-based paints. In India the most widely-used paints, till recently,
were the solvent-based paints even when water--based paints are more eco-friendly
and easy to use. The government regarded water-based paints as a luxury item and
consequently taxes on inputs as well the finished products were kept high thus
making them unaffordable to the middle class. While the western would was moving
away from solvent based paints for environmental reasons, India was, India was in a
way promoting the use of these paints. But with duties rationalised and costs and
prices coming down the most preferred ones are for decorative purposes.

2. Industrial paints are growing at a much healthier rate than decorative segment. The
main reason could be the entry of world majors in the Indian automobile sector. Till
recently the only foreign player on the Indian passenger car market was the Japanese
giant, Suzuki Motors. However, today there are at least six global car majors
operating in India. Korean major, Daewoo; French car manufacturer, Peugeot; the
German auto giants; Mercedes and Opel and the American Ford, are here to stay
having set up base despite some initial wrangles over export obligation. And, this
setting up of bases necessarily implicates towards their needs for industrial paints
which they will be procuring from domestic market, because otherwise it will be that
much costlier for them to export it from anywhere else.

3. The way companies operate have also under gone a drastic change --more choice for
the customer. The shade card game started by Asian Paints some eight years ago
with its slogan “Mera Wala green”, is now being played by mostly all major players.

4. While the customer gets a wider choice and better service the company benefits in
two ways. One, as stock has to be maintained only in one colour (the base colour,
white), the company saves inventory carrying costs. Second, as the mixing is done
only on orders the company does not take the risk of stocking pre-mixed colours
shades with the dealer which might not get sold at all. All this means financial
savings. Also, the trends to the most preferred shade can be determined by the
company and the production can be carried on accordingly.

29
 Weaknesses:
1. People would love to have coulourful walls, but definitely not dusty floors and oily
odorous. Sadly the former is not possible without the latter and it is the paint industry
which stands to suffer.

2. It may seem implausible, yet it is true. The inconvenience of painting alone is not
the cause for a slowdown in the paints industry. But it certainly adds on to the
following socio-economic factors :

1. Imbalanced consumption pattern- The per capita consumption of paints in India

is a low 0.32 kg as against 25 kg in the US. Further, the imbalance in consumption
takes two forms. First the ratio of paints consumed for decorative and industrial
purposes in India is 70:30. Elsewhere the ratio is diametrically the opposite, as it
should be. Thus due to neglect of industrial protective use of paints, India looses
over Rs. 4,000 crore on account of corrosion. (Industrial paints are made using red
oxide, aluminum, zinc chrome, bitumen etc. they posses properties like water and
electricity resistance and rust prevention and hence are widely used of protection of
steel concrete and wood).

Then there is also the rural-urban imbalance. Paints, being dubbed as luxury, continue
to be increasingly sold in the metropolitan cities and big towns. though paint
companies have stared to reach out to villages, a vast rural market still remains
untapped.

2. Primitive technology - The making of paints primarily involves the blending of 300
different items in various proportions. In most varieties of paints, the technology-
level is not very high. The capital cost per tonne is fairly low at Rs. 12 crore for
25,000 tonnes. This has enabled 2,000 small units to set up manufacturing facilities
and peck away at 50% of the total Indian paints market. the other 50% is accounted
for by 24 units in the organised sector.

3. High cost structure - The paints industry is raw material intensive. Nearly 70% of
the raw materials are perto-base (white spirit, xylene, toluene, butanol etc.). Another
major raw material titanium dioxide, has to be imported in large quantities. To top

30
 it all is the nearly 36% excise levy (a 6% rise in the latest budget). The irony is that
the government account for nearly 40% of the total paints sold in the country. So
industry sources argue that every increase in excise means a corresponding higher
government outlay on paints. The excise structure too reflects the luxury image of
paints.

4. Other factors - These include the monsoons and the growth in the housing sector.
In fact, monsoons have a dual effect on the industry. On the one hand there is very
little painting work done during the monsoons. But at the same time, a good
monsoon increases the purchasing power of the farmers paving the way for higher
sales.

Opportunities :
1. Unlike the decorative paints segment which is expected to grow at a slow rate of 3-
4%, the demand for industrial paints is rising at an average rate of 10%. Industrial
paints have fairly high value addition and d require a level of technology which
cannot be easily matched by the small sector. The market leader seem to have taken
congnisanceof this fact. For instance, Asian Paints has tied up with Devoe Marine
Coatings of the US for marine paintings. It has also tied up with Nippon Paints of
Japan for a coil coatings and powdered coatings. Likewise, GoodlassNerolac has
allied with Kansai Paints for sophisticated automotive sector paints.

2. Stagnant demand combined with intense competition has taken its toll on some small
units. A similar shake-up is expected in the orgainsed sector too. Hence, the fitter
units would be better off eyeing takeover targets for expansion rather than going for
fresh capacities.

3. India has been a continuous importer of titanium dioxide in spite of enormous

reserves of the raw material, ilmenite. Deposits of ilmenite found along the coasts of
Kerala, Tamil Nadu and Orissa, are estimated to be around 160 million tonnes or
12% of world resources. The quality is also reported to be of a higher grade. Thus
sooner or later world leaders of titanium dioxide technology (like Du Pont) will find
it viable to enter into joint ventures with Indian companies. That should reduce

31
 dependence on imported titanium dioxide, reduce costs and selling price, and lead to
higher sales and profits.

4. Finally, there is immense scope for product innovation. Like, in March 1991, MRF
introduced ‘Vapocure’, an industrial process for tinting glassware, plastics, etc. Yet
another popular product abroad is paints-cement. It is made by adding ceramic
compounds to the basic paint material and gives a better “Finish” to building
exteriors.

Blend all this with economic stability (leading to control over inflation) and good
monsoons over the next two years (implying overall higher purchasing power), and the
paints industry can rightly dream of a tomorrow, many shades brighter than today.

Threats :

When it comes to technology, the paints industry presents a strange case. The
manufacturing process of the final product is so primitive that every Tom, Dick and
Harry has mastered it! And, even the technology for only Tom, Dick, knows the
major raw material Titanium dioxide (TiO2) and harry!

In other words, manufacture of TiO2 is a closely guarded secret of only a handful of

players worldwide. These include Du point (USA), British Titanium Products
Ishihara (Japan) and Kronos (Australia). TiO2 forms the base- White, for all paints.
It comes in two varieties rutile (used for exteriors) and antase (preferred for paints
used in interiors).

In India there are two units both in the public sector, manufacturing titanium dioxide
- Kerala Minerals and metals (KMML) and Travancore Titanium Products (TTPL).
Domestic production however is stagnating around 16,500 tonnes against a capacity
of 37,000 tonnes. Further, the quality too leaves a lot to be desired. Hence, imports
of TiO2 continue at an increasing rate.

Nearly 70% of TiO2 produced/imported in India goes to the paints industry. Major
paint manufacturers have tried to go in for backward integration into some of the raw
materials (phthalic anhydride, co-polymers for plastic emulsions, etc.). But all efforts

32
 to make a foray into TiO2 have not met with success. World manufacturers of TiO2
find it profitable to sell the same rather than pass on technology to others. A
whopping 25 parties hold licenses/letters of intent for TiO2 but none have so far
materialised.

So as import bills of companies remain on the upbeat, thanks to the huge import
billings for TiO2, the margins continue to take a beating.

LIMITATIONS OF THE STUDY

The various limitations faced during the making of the project.

 Companies’ officials were not very co operative in giving out information regarding
the marketing strategies, as well as their immediate M & A plans, of their firms.

 Exact information regarding the marketing strategies specific to past 3 years was not
readily available, although general information was available. So, even after strong
efforts, there maybe certain instances of some missing links in the study, which is
regretted.

 Time and distance constraints were always there which may have affected the repor

➢ CONCLUSION

Investors, interested in any form of investing, should carefully look at the structure
of the paint industry. It has a large unorganised sector, which constitute
approximately 40% of the total production of paints. The organised sector comprises
of a handful of large units. The categorisation is important because of the differential
in excise duties faced by these two sectors. The differential, however, has narrowed
since 1993 and the excise duty for the organised sector is now at 18% (from the
highest of 40.25%). With the narrowing of the differential in excise duties between
the organised and unorganised sector, the market share of the organised sector is

33
expected to grow in the future. The small sector will probably start contract
manufacturing for the large units or may develop niche markets based on location.

The industry can further be divided into two broad segments -- decorative
(architectural) paints and industrial paints. The decorative segment is the dominant
segment, in terms of sheer volume, in contrast to the developed economies where
industrial paints normally have half the market. The decorative paints market can be
further be subsumed into emulsions, synthetic enamels, distempers and cement
paints. The essence of the small sector is in the easier to evaluate lower-end products
such as distempers and cement paints whereas the middle range enamels and the
premium range emulsions are the terrain of the large players.

The industrial paints segment comprises of the industrial coatings and the automotive
coatings segments. The main growth for the industrial paints market has been the
high growth in automotive coatings, with the entry of the auto majors
(multinationals) resulting in a literal boom in this sector.

There are more than 300 inputs going into the manufacturing process of paints of
which 70% are petroleum based. The raw materials are Pigments.

34
 BIBLIOGRAPHY
 www.business-standard.com

 www.asianpaints.com

 www.nerolac.com

 www.google.com

 www.indiainfoline.com

 www.amazon.com

 Marketing Research by S.L. Gupta

 Marketing Management by Phillip Kottler

 Business Today

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