Case 15: Asian Paints
CASE 15: ASIAN PAINTS
Core Issues:
1. Fall in demand expected for home building, renovations and repainting work in Indian market due to financial crisis.
2. Excess capacity due to aggressive expansion by players in the Indian paints industry during the economic boom period of 2003 – 2007. Foreign firms entering into the Indian market also exacerbated the excess capacity.
3. Difficult choices that Asian Paints would have to make:
• Whether to further rationalize its portfolio by exiting underperforming markets.
4. Asian Paints has a goal of becoming one of the top 5 decorative paints company in the world. Can it accomplish this goal through:
• Acquisitions within India or by international expansion?
• How else can it do to gain even greater success in the international market?
• Should it focus on the Chinese market?
Current Strategies:
1. Corporate-Level
Asian Paints uses the dominant-business diversification strategy. Despite being cash-rich, Asian Paints did not diversify into other businesses. Instead, it used cash to add new product categories to its portfolio of products and worked to grow these segments. (Pg 177) The Indian market accounted for 80.6% of its sales in 2007.
2. Business Level
Asian Paint’s main focus is on decorative paints business, which accounts for about 75% of total market in India. Strongest presence in decorative paints was in wall-finish paints (emulsions, distempers and primers)
Uses strong advertising and branding through the “Gattu” mascot
.
Internal Analysis:
1. Accounting (Financial Ratios)
[pic]
2. Finance
Means of financing and risk management
Means of financing for Asian Paints include debt and equity issuance. Since 2000, Asian Paints has been voted the 4th most admired company in India and had been described as the ‘bluest of the blue chips’. Asian Paints also has a large amount of reserves and surplus, Rs 8,326 million as of FY2008, so financing
Core Issues:
1. Fall in demand expected for home building, renovations and repainting work in Indian market due to financial crisis.
2. Excess capacity due to aggressive expansion by players in the Indian paints industry during the economic boom period of 2003 – 2007. Foreign firms entering into the Indian market also exacerbated the excess capacity.
3. Difficult choices that Asian Paints would have to make:
• Whether to further rationalize its portfolio by exiting underperforming markets.
4. Asian Paints has a goal of becoming one of the top 5 decorative paints company in the world. Can it accomplish this goal through:
• Acquisitions within India or by international expansion?
• How else can it do to gain even greater success in the international market?
• Should it focus on the Chinese market?
Current Strategies:
1. Corporate-Level
Asian Paints uses the dominant-business diversification strategy. Despite being cash-rich, Asian Paints did not diversify into other businesses. Instead, it used cash to add new product categories to its portfolio of products and worked to grow these segments. (Pg 177) The Indian market accounted for 80.6% of its sales in 2007.
2. Business Level
Asian Paint’s main focus is on decorative paints business, which accounts for about 75% of total market in India. Strongest presence in decorative paints was in wall-finish paints (emulsions, distempers and primers)
Uses strong advertising and branding through the “Gattu” mascot
.
Internal Analysis:
1. Accounting (Financial Ratios)
[pic]
2. Finance
Means of financing and risk management
Means of financing for Asian Paints include debt and equity issuance. Since 2000, Asian Paints has been voted the 4th most admired company in India and had been described as the ‘bluest of the blue chips’. Asian Paints also has a large amount of reserves and surplus, Rs 8,326 million as of FY2008, so financing