Differentiation Strategy of Asian Paints

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Corporate Strategy of Asian Paints

1Identification of Industry Dynamics7

1.1Industry description7
1.1.1Industry Structure- Decorative:8
1.1.2Industry Structure-Industrial Paints:9
1.1.3Industry Characteristics:10
1.1.4Margins and Industry Attractiveness10
1.1.5Decorative Paints industry: Working capital intensive13

1.2Segmentation14
1.2.1Price based segments in architectural paints15

1.3Current Scenario16
1.3.1Market Size16
1.3.2Growth Rates17
1.3.3Manufacturing Bases & Capacities18
1.3.4Raw Materials19
1.3.5Backward integration21
1.3.6Distribution methods22
1.3.7Forward integration23
1.3.8Technology23
1.3.9Branding24
1.3.10Duty Structure24

1.4Porter’s Analysis24
1.4.1Substitutes24
1.4.2Threat of new entrants25
1.4.3Buyer’s power25
1.4.4Supplier’s power26

1.5Global Trends26

1.6Expected growth in each segment30

1.7Changes in segmentation30

2Identification of Competitors32

2.1Main Competitors32

2.2Identification of focus areas of competitors34

2.3Entry of Global Players, Recent Joint Venture agreements34

2.4Important brands of competitors35

3Key drivers of success36

3.1Key drivers in past, present and future for each of the three segments36 3.1.1Industrial Segment36
3.1.2Urban Decorative38
3.1.3Rural Decorative Segment39

3.2Other Factors39
3.2.1Branding40
3.2.2Inventory Management:40

3.3Drivers for growth of Industry40

4History of Asian Paints Ltd.42

4.1The initial years42

4.2Financing growth42

4.3Capacity expansion42

4.4Modernization43

4.5New Product Offerings43

4.6International Exposure44

4.7Colourworlds – A revolution in the paints industry44

5Historical strategies adopted by Asian Paints45

5.1Market Leadership through Distribution Excellence.49

6Asian Paints Performance Analysis51

6.1Financial Performance52

6.2Market Performance53

6.3Management of working capital by Asian Paints55

7Asian paints strategy58

7.1Corporate Strategy58
7.1.1Asian Paints Overall Corporate Strategy62

7.2Asian Paints Acquisition targets63
7.2.1Possible acquisition of Snowcem65

7.3Business Strategy66
7.3.1Urban strategy67
7.3.2Rural strategy69
7.3.3Strategy for international markets69

7.4Differentiation and the role of branding69
7.4.1Branding70
7.4.2Classification of paint71
7.4.3Shift in brand strategy77

8Possible Future Changes:79

9Exhibits82

10Bibliography86

Identification of Industry Dynamics

1 Industry description

The Indian paints industry has been valued at Rs. 43 bn. with annual consumption of 0.6 million tons. The industry has been growing at a CAGR of 8% to 10%. The industry can mainly be segmented into decorative and industrial paints with a rough distribution of 70% to 30% in favor of the former. This distribution is expected to move towards a 50:50 distribution. The demand for decorative can be split into first time demand and demand for repainting. The first time demand is a derived demand and the growth in the demand for decorative paints is linked to the state of the housing sector and the government infrastructure sector. In turn the housing and infrastructure activity is dependant upon the state of the country’s economy. Cement and Steel are the first sectors that reflect the state of the economy, followed by the housing and infrastructure sectors, which affects the paints industry. Therefore, the demand for new paints follows the economic cycle with a lag of about 12 to 18 months. Empirical evidence shows that the paint industry grows at about 1.5 to 2 times the GDP growth rate.[1] The demand for repainting is a slow growing area, since India, as of now has not developed the culture of using paint as a fashion tool, therefore repainting is not done...
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