ICI Paints Business

ICI Paints

IntroductionICI Paints Business

ICI is the world’s largest manufacturer of the paints and

industrial coatings. ICI paints is headquartered in Berkshire,

UK and operates 55 manufacturing sites in 25 countries. In

this sector its main strength are in

Decorative paints

Industrial paints

Refinish paints for vehicles.

Its main customer industries are housing and construction

automotive refinish, can manufacturing, commercial and

industrial maintenance.

There is an emphasis on customer service,

innovative technology and strong branding with familiar

names as Dulux, Glidden, Maxilite and Paintex.

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ICI Paints Business Lahore

In 1965, ICI UK acquired a 50% interest in the paints

company named as “Fullers Paints Pakistan Ltd” situated at

Ferozepur Road, Lahore. Its name was changed to Paintex

limited and it was converted into a public limited company in

1973. the capacity of the plant was upgraded and enhanced

in 1981 and since then the business has proceeded

progressively to consolidate the market share in the major

segments of decorative paints. Industrial and automotive

paints market. ICI paints business Pakistan has become an

undisputed leader in the decorative motor and refinish

segments of Pakistan’s paint market.

With production of 14milion litres, ICI Pakistan touches the

lives of painters, architects, paints retailers and home

owners with color throughout the country. ICI’s Dulux,

Glidden, Maxilite and paintex brands have become as much

a part of painter’s vocabulary as color choice, quality, variety

and durability are the criteria for the selection of the paints

by the end-users.

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ICI Paints Brands In Pakistan

Dulux Weather Shield (Acrylic Based). (Decorative)

Dulux water repellent (D)

Dulux matt enamel , (D)

Dulux Gloss (Industrial)

Dulux Pentalite (D)

Dulux Pentalite Natural Whites (D)

Paintex Plus Emulsion. (D)

Glidden Higloss (I)

Glidden Ultrahide (D)

Glidden Ultratex (D)

Maxilite (D)

Dulux Pearl Glo Matt Finish Enamel (I)

Dulux once (D)

Dulux Super Gloss Enamel (I)

Dulux Aluminium Paint Dual Pack (I)

Dulux Synthetic Clear Varnish (D)

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Paints Production Process

Paint contains three main classes of material:

1) A resin or mixture of resins, which forms the paint film.

This is known as the binder and on its own gives a clear film.

The type of resin used can be varied to enable the paint to

have whatever final properties are required.

2) Pigments to give colour to the paint film and also to

enable the coat of paint to hide what is underneath.

3) Solvents to dissolve or suspend the binder and give the

paint the correct consistency (viscosity) for easy application.

They must also evaporate after application to allow the paint

to dry.

A mixture of resin and solvent is called the “vehicle” for the

pigment. Most paints also contain small quantities of various

additives e.g. driers to speed up the drying process,

substances to adjust pH of the paint, etc.

This section describes the way the paint chemist blends the

“vehicle” and pigment together to make paint.

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Pigments are supplied industry in the form of dry powders.

These consist of “primary particles” which are sized to give

the best results in paint films. For example, white pigments

(Titanium dioxide TiO2) scatters light most efficiently

(whiteness and opacity) when the particle size is 0.22

microns. Some pigments are much smaller, some larger.

The small primary particles of pigment clump together when

the powder is dried and stored to form relatively large

clumps (A ‘clump’ of Titanium oxide may contain 5,000,000

primary particles)

These clumps are known as aggregates and it is in this

aggregated form that the pigments are supplied. To produce

good paints, it is necessary that the pigment should be at its

primary particle size when mixed with the vehicle. Otherwise

most of the expensive coloured pigment could not be used

efficiently, and the dry film will not be smooth, glossy,

opaque or have the correct colour.

It is therefore necessary to break down the aggregates of

pigment particles in the presence of the vehicle and to

prevent them from re-aggregating. For this reason, it is not

normally possible simply to stir the pigment into the vehicle:

rather, work has to be done on the mixture in order to break

down the aggregates and ensure that the resin coats the

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small particle surfaces. This process is known as “pigment

dispersion”, and the following processes must occur:

1) “Wetting” of the pigment surface by the vehicle.

2) De-aggregation of the pigment aggregates to small

primary particles.

3) “Stabilisation” of these small particles by the resin to

prevent re-aggregation.

A resin which is to perform well as a pigment dispersant

must therefore be composed of molecules consisting of two

parts:

1) An “anchor group”, which wets the pigment surface and

becomes associated with it.

2) A “stabilising chain” which is soluble in the solvent used

and therefore stretches out into it.

As mentioned previously, pigment particle surfaces contain

areas of electrical charge. The “anchor group” in a

dispersing resin is chosen for its ability to be attracted to

some of these charged areas. In this way, during dispersion,

the original surface of the aggregate, and the new surfaces

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exposed during grinding are covered by molecules of the

dispersing resin. This process is known as “wetting”.

Many different types of dispersion machinery have been

developed but they all use one or both of two mechanisms to

break up aggregates.

The machinery falls into two groups:

1) Those that use “dispersion media”, usually ceramic balls 9

to 12mm in diameter or glass beads 1 to 3mm (like marbles)

in diameter. Dispersion occurs where the balls touch each

other by a combination of impact and shear depending on

the conditions.

2) Those that do not use media - these disperse entirely by

shear.

Pigments are always dispersed at the highest concentration

possible for technical and economic reasons. Finished paints

contain only enough pigment to give the desired properties

for the same reasons.

Millbases are therefore converted to paint by mixing with

film forming resins, with solvents and any necessary

additives. This must be done carefully, mixing the

ingredients in the right order to get the best results.

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Obviously the resins and solvents must be compatible but

problems may arise if components with large differences in

resin solids, viscosity or temperature are mixed - “pigment

shock” - reaggregation of the pigment particles may occur.

For these reasons pigment dispension are usually “second

staged” when dispersion is complete - they are diluted with

resin and solvent to give a recipe which is still more

concentrated than the final paint but much easier to use

than the dispersion recipe. Waterborne millbases and paints

must have the pH adjusted at this stage.

To be converted to paint, dry pigment powder must be

dispersed in resin solution. During this process, aggregates

must be broken up into primary pigment particles, the

surfaces of which must be coated with resin. This resin

stabilises the pigment dispersion and prevents the particles

from reaggregating.

A lot of mechanical energy is needed to carry out this

process. Various machines (or “mills) are used.

After pigment dispersion, the millbase is mixed with further

resin, solvent and additives to give the final paint

composition.

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ICI Vision

The company vision is to compete in the industry by

emphasizing on customer needs and to build and promote

a culture of continuous improvement .

Mission Statement

“The ICI paints team intends to remain market leader in

the paints business. We wish to be recognized for offering

the best products and excellent customer service. We will

run a high quality, profitability and growth oriented

business in an exciting and safe environment.

Goals

1. Total adherence to SHE.

2. Dedicated involvement of every employee at all

levels of the organization to the total quality

management concepts.

3. a complete focus or prevention of non

conformance through cohesive team work.

4. Constant emphasis on “doing it right the first time

and every time”.

5. Improving the quality of every thing we do, to the

complete satisfaction of our internal and external

customers.

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Objectives

To be No. 1 in all its 6 Pakistani businesses

To achieve turnover of 20% in 2002 from over all

business portfolio.

To reduce its industrial wastes by 50% till 2004.

To contribute at least 25% in overall ICI Pakistan profits.

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Situation AnalysisINTERNAL ANALYSIS

SWOT Analysis

After studying the ICI paints strategies, and its

performance we have identified some strengths, weakness

opportunities and threats.

Strengths

1. ICI’s Positive Image

ICI has positive image and reputation in the minds of

customers so far them it’s a great strength because

its helps in the sale of their products.

2. Financial Strength Of The Business

The paints business is financially very strong as

mentioned by present annual report.

3. Established Nation- Wide Infra-Structure

The ICI paints business has established nation-wide

infrastructure. It has network of dealers in all

over the country, which will help in the sale of

company’s products.

4. Committed and enthusiastic staff

5. Up To Date Technology

ICI paints has up to date technology in its production.

ICI paints Pakistan claim that they offer 6134 colors to the

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customers out of which customer can demand any color

and then they will make that color for customer. For that

they have latest machinery in which they just give name

of the colour that customer want and then machinery

gave them the formula which will produce that particular

color a then they will produce that color for the customer.

Weaknesses

1. No Distribution Network

The major weakness of ICI paints business is that they

don’t have their own distribution network. They just have

dealers in different cities which carry their products and

then retailers have to use their own means to get paint

from those dealers and then make it available for sale for

the customer.

Opportunities

1. Increase Quality Awareness Among The

Customers

One of the greatest opportunity for ICI paints is that now a

days people are very much conscious about the quality of

the paints and they are aware of the fact that good quality

paint is long lasting. As ICI is producing high quality paints

so it will increase the demand of company’s so it is a great

opportunity for ICI paints.

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2. Increasing Paints Markets

Another opportunity for ICI is that as now a days in

Afghanistan re-construction of the country is taking place

so there will be great demand for paints and ICI paints can

reap this opportunity by exporting paints products to

Afghanistan and can earn great profits.

Threats

1. Decrease in Construction Activity

Due to decrease in the construction activity in the country

the company’s sales are decreasing as compared to

previous few years.

2. Increased Competition From Cheap Paints

Producers

Cheap paints producers capture almost 60% of the

market share of paints so it’s a great threat for ICI paints

because other companies will share the market as well.

Performance Analysis

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The paints business continued its focus on operating

excellence and productivity improvement and in this regard

capital expenditure of Rs. 27 million was undertaken to

upgrade production facilities and to achieve further

operational improvements. Consequently the business was

able to enhance production capacity by 1.5 million litres.

Despite pf recessionary condition, which are prevailing in the

market due to slow trading environment the ICI decorative

paints, was able to increase its market share by 1% through

its strong advertising and promotional campaigns and

increasing effective after sale service.

The industrial business continued to deliver a robust

performance driven by a penetration of new market

segments within the general industry sector. Consequently

despite a decline in the traditional Automobile and projects

segment the industrial business was able to increase its

sales by 10% over last year.

The market for the Refinish business however remained

static with no increase in sales volumes over last year.

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Financial Analysis

Due to very significant decline in the size of the decorative

market the ICI paints business registered an overall

reduction in sales volume of 4% compared to the previous

year. However gross margin increased by 6% through

improvemeNt in product mix and efficiencies in

procurements and manufacturing, which coupled with

stringent control over fixed costs resulted in an operating

profit improvements of 14.4% over last year to Rs. 262.9

million.

99 2000

Sales Rs. 3090.09M 2966.4864 4%

Gross profit Rs. 500.593114 530.6286 6%

Operating profit Rs. 230.22M 262.9 14.4%

Ratios

Gross Profit Margin

Gross Profit Margin = gross profit / net sales

1999 2000

16.2% 17.8%

The gross profit margin has increased from 16.2% to 17.8%

despite of in sales. This shows that the firm has controlled

its cost of sales.

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Operating Profit Margin

1999 2000

7.7% 8.86%

The operating profit margin has also increased as compared

to previous year.

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External Analysis

5 FORCES ANALYSIS

Threat of new entrants

ICI is enjoying No.1 position in paints industry they are

having 25% of total market share. They do not consider now

entrant as threat for themselves.

Because of unstable economy and decrease in trend of

construction, there is not much attraction in paints industry

for the new entrants.

Threat of existing rivalry

ICI has to compete with a large number of paint makers. But

the threat is from two major competitors.

Those competitors are Master Paints and Berger Paints.

Berger paints is having market share of 10% - 12% of the

paints market. Their hot selling brand is Berger Robbialac.

Other major competitor is Master Paints. Master Paints is

having market share of about 2% to 3%. All other

competitors are having a very small portion of market and

are not considered as threat for ICI paint.

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Threat of substitutes

There are not many substitutes available for the paints. For

past few years there is an increasing trend of use of

designed tiles and coloured bricks.

But ICI do not think that they are under any threat as far as

substitutes are concerned.

Bargaining power of buyers

Bargaining power of buyer is a considerable threat for ICI

paints. Because many competing brands are available in the

market. It is necessary for ICI to satisfy their customers as

far as price and quality is concerned. Otherwise the

customers will switch to other brands.

Bargaining power of suppliers

There are two major suppliers as far as ICI paints is

concerned.

If any of the suppliers offer the terms and conditions that do

not suit ICI, they would switch to the other supplier. So ICI

people think that supplier do not have much bargaining

power.

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PEST Analysis

Political and legal analysis

Politics and govt. rules and regulations have a critical role in

fostering the success or (creating problems for any

organization.

Similarly in case of ICI political instability in recent years has

affected the sales and growth rate immensely.

Govt has imposed 15% sales tax and heavy duties on

imports and raw materials.

As ICI paints import 75% of its raw materials so import duties

have increased the production cost thus decreasing the

profit margin.

Economic analysis

Recessionary conditions continued to prevail as the

government pressed on with its efforts to document the

economy.

The depressed construction industry and the slow trading

industry and the slow trading environment resulted in an

overall market shrinkage in the decorative business by 10%.

Against this back drop the business was however able to

increase its market share by 1% through its strong

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advertising and promotional campaigns and increasingly

effective after sale service. The industrial business continued

to deliver a robust performance driven by penetration of new

market segments within the general industry sector.

Consequently despite a decline in the traditional Automobile

and projects segment the industrial business was also able

to increase its sales by 10% over last year.

The market for the refinish business however remained

static with no increase in sales volumes over last year.

Although decorative business increased market share by 1%

and industrial sales also increased because of the very

significant decline in the size of the decorative market, the

points business registered or overall reduction in sales

volume of 4% compared to the previous year.

However gross margin increased by 6% through

improvement in product mix and efficiencies in procurement

and manufacturing, which coupled with stringent control

over fixed costs resulted in as operating profit improvement

of 14.4% over last year to Rs. 262.9 million.

Societal Analysis

In recent years ICI has shown a lot of concern for society.

Organization is very conscious about safety and health of its

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employees. The business successfully completed its fourth

year without any reportable injury.

At present, ICI is the leader in following SH&E guidelines. The

company wants to maintain its leadership role in the

protection of the environment.

Rs. 27 million was undertaken not only to upgrade

production facilities and achieve further operational

improvements but also to be more environment friendly by

installing plants and machinery that do not cause any

damage to environment.

Technological Analysis

ICI paints have got the latest technology with them as

compared to their competitors. Their production process is

highly automated. They can offer any colour as demanded

by the customer. Customers can ask for any of 6134 colours.

For every shade of colour there is a specific formula

that states about composition of constituents and their

proposition.

High level of automation is one of the critical success factors

of ICI that differentiates then from their competitors and

serves as a source of competitive advantage.

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Competitor Analysis

ICI is the largest manufacture of paints in Pakistan. There are

hundreds of competitors competing with ICI. But their

market share is very small as compared to ICI. Mainly there

are only 2 major competitors i.e Burger paints and Master

paints.

Company Market share

ICI paints 25%

Berger paints 12%

Master paints 3%

Silky paints 1%

All other companies are having market share less than 1%.

Let us have a look at hot selling brands of above mentioned

paint manufacturers.

Company Market share

ICI paints Dulux

Berger paints Burger Robbialac

Master paints Master

Silky paints Silky

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Problem StatementDue to depression in construction industry and the slow

trading environment in Pakistan the ICI Paints has faced

tremendous market shrinkage.

Because of this very significant decline in the size of

decorative market the paints business registered as overall

reduction in volume by 4% compared to the previous year.

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Existing Strategies

Corporate Level Strategies

HORIZONTAL DIVERSIFICATION

ICI Pakistan is a vast group which is involved in several

businesses so it is following the strategy of Horizontal

diversification as it is involved in unrelated industries.

A brief description of its different business is as under.

Pure Terephthelic Acid

At port Qasim near Karachi, a plant for the manufacture of

pure terephthelic acid, an essential raw material for the

polyester staple fiber and PET bottle polymer industries is

constructed. It has capacity of 400,000 tons per annum, thus

making Pakistan self sufficient in PTA and also providing a

small surplus for export.

PTA plant has a major contribution in the sales and profits of

ICI group. The investment of $450 million in the PTA plant

would move ICI Pakistan becoming the first billion dollar

company on the basis of assets.

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ICI Soda Ash

The Soda Ash plant of ICI is situated in Khewra, district

Jhelum. Soda Ash is an industrial raw material used in the

manufacturing of glass, glass products, paper and chemicals.

It is also used in the formation of soaps and detergents. The

plant was established in 1994 with the capacity of 18000 tpa

[tons per annum].

Currently it is operating at the capacity of 300,000 tpa. ICI

Soda Ash business supplies over 80% of the total of country.

ICI Polyester Staple Fiber Business

ICI Pakistan’s polyester staple fiber plant is situated

Sheikhopura, near Lahore. It was established in 1982 at a

cost Rs. 630 million and at that time, capacity of the plant

was 12,000 tpa. Capacity was expanded to 19000 tpa in

1989 with the expenditure of about Rs. 450 million. Now a

days, this plant is operating at 28,000 tpa.

Currently, ICI is the second largest PSF producing company

after Dewan Salman Fibers limited, who has a capacity of

108,000 tpa.

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Agrochemicals And Seeds Business

ICI Pakistan Agrochemical division was expanded in 1984

when the company entered into direct distribution. Since

then it has become the fastest growing business of the

company. Operating in the competitive market, ICI

agrochemicals in Pakistan has been able to diversify and

increase its products range to meet the needs of the

country’s developing agriculture.

Company hopes that the seeds business will continue to

maintain its dominance in the agro and seeds business.

Pharmaceuticals & Animals Health

ICI Pakistan pharmaceuticals business markets prescription

drugs with a strong portfolio of innovative products from

Zeneca (formerly ICI pharmaceuticals) and Syntax. These

products have a leading position in the treatment of

cardiovascular diseases, breast cancer, prostate cancer as

well as anesthetics. Recently, the product range has been

extended to include an antibiotic.

As the ICI Pakistan got a novel technology in the

pharmaceutical business it earns a lot for the company’s

total earnings.

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ICI Consumer Products

ICI Pakistan entered in the consumer products business in

1993 offering a range of domestic insecticides under the

brand name of Zapit for the control of all types of crawling

and flying insects normally found in the house.

By deepening the product range, active support of

advertisement and promotional programs, ICI consumer

products business will be able to mature into a big profit

center for ICI Pakistan limited in the next few years. Through

increasing brand loyalty and share consolidation.

ICI Chemicals

1) Specialty Chemicals

ICI’s specialty chemicals plant was commissioned at Karachi

in 1968 with the capacity of 1500 MT per annum. It was

primarily designed to manufacture a range of Textile

auxiliaries. Today, with the capacity of 3600 metric ton per

annum, it manufactures and formulates over 40 products

used in industrial processing that call for specialty chemicals

applications.

II) General Chemicals

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The general chemicals products offered by ICI chemicals are

used for variety of applications by nearly all industries of

Pakistan including fertilizers, cement, polyester oil and gas,

plastic and paints. Sales of these products are packed by a

technical laboratory services for which sales staff is specially

trained.

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Business Level Strategies

Differentiation

ICI paints division operates in three areas:

1. Decorative paints

2. Industrial paints

3. Refinished goods

The most important and successful area comprises of

decorative paints.

The two hottest selling brands of ICI paints are

Dulux

Glidden

Their major competitors are:

Burger paints

Master paints

Burger Paints

The share of Berger paints in paint market is 12%. Their hot

selling brand is Berger Robbialac.

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Master Paints

The share of master paints in paint market is 3%.

Their hot selling brand is “Master”

ICI Paints

ICI are market leaders in paints business. Their market share

in paints market is 25%.

As discussed above their hot selling brand are Dulux paints

and Glidden paints. ICI paints are relatively more expensive

than those of their competitors.

A unique feature of ICI paints is they offer 6134 colours to

their customers. So the customers have got more choice.

They can demand any of those 6134 colours. This facility is

not available with any other paints market. They have got

the automation formula.

So they just put the material according to the formula and

the desired colour is manufactured. For this unique feature

they change extra cost.

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Operations Level Strategy

Total quality management (TQM)

TQM is what ICI paints follow in each and every operation

they perform. They want quality in every thing they do. Total

quality management is one of the basic objective of the

company and they do not compromise on quality at any

cost.

To ensure TQM ICI offers various training programs to its

employees.

Training package is offered at all levels of employees.

Training courses are offered 3-4 times per year.

LUMS, Pearl Continental Hotel Lahore, Avari hotel Karachi

are the Locations where those courses are often organized.

Performance of every employee is monitored every month.

ICI is very concerned about efficiency and effectiveness of

employees. They discourage wrong deliveries and late

deliveries.

The focus on improving productivity has continued during

the year achieving a further gain of 20% in man power

productivity.

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The company continues to remain committed to training and

development of its staff. As discussed earlier that previously

training courses were offered 3 – 4 times per year. But

recently new initiatives taken in this area resulted in a total

of 28 courses being offered inhouse accessed by 879

managers during the year. On average each management

staff in the company was provided approximately 5 days of

training during the year. Special training of high potential

staff was also stepped up and 7 staff was provided with

specialized high quality training opportunities abroad.

They emphasize on customer satisfaction. Customer can

register their complaints regarding wrong delivery and late

delivery of products. They put their best effort to minimize

the number of complaints and increase the number of

satisfied customers.

ICI is ISO 9001 certified company that is proof of their

continuous efforts towards total quality management.

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Societal Level Strategies

ICI is very much concerned with the betterment of society.

They are involved in social welfare and community work

programs.

At ICI, hospital Khewara they support eye clinic programmes

with assistance of the doctors of Lyton Rehmatulla

Benevolent Trust (LRBT).

They are also very conscious about environment friendly

operations.

ISO 14001 certifications proves ICI to be environment

friendly organization. They try their best to ensure that their

operations do not cause any harm to the environment and

society.

They also are for safety and health of their employees.

Employees are trained that how can they avoid accident.

They make it sure that employees are provided with safe

working conditions.

In case of any accident or injury to any employee, they have

got all needed facilities to handle the situation and minimize

as well as financial loss.

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There are doctors, ambulances, fire extinguishes etc to cope

up with any accidents.

Carrying lighters and smoking in plant is prohibited. Concern

for safety, health and environment is their main objective.

The intense focus maintained by the company on its safety

performance resulted in the continued maintenance of its

excellent injury prevention second and no (RIA)/ reportable

injury accident occurred at any of its operating sites.

During the year paints business completed 21 million man-

hours without any RIA. Based on it’s excellent SH&E

performance the company received considerable recognition

with ICI group worldwide.

ICI Pakistan was declared the winner of chief executive’s SHE

leadership award in product steward ship in the paints, Soda

Ash, agrochemicals and pharmaceuticals business received

recognition for sustained safety, health and environment

excellence.

With a view to maintain its leadership role in the protection

of the environment, the company becomes a voluntary

participant in the Pakistan Environment Protection Agency’s

“Self monitoring” program (SMART) strict operating

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standards and monitoring of all its effluent treatment plants,

resulted in an assurance that the company has met all the

national environmental quality standards (NEQS) applicable

to its manufacturing activities.

Product Development

ICI paints Pakistan has a well-established R & D department

in Lahore at their paints division. There all people are

continuously making tests to develop new products and

that’s the main reason why the company is able to launch its

new products frequently into the market. The top

management has allocated good budgets for this R&D

department. ICI Paints has qualified and competent people in

the field of R&D activity. After about 2-3 months they launch

their new brands in the markets, which will help them to

maintain their competitiveness. Recently they have launched

following brands.

1. ICI Glidden Hi glass

2. Dulux water repellent

3. Dulux pearl G10 Matt finished Enamel

4. ICI Glidden ultra hide

Demand Management

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ICI paints mange its demand by first identifying its customer

needs through market research and then introduce its

products to customers. The media they use for

advertisement are TV, sign boards etc.

Order Fulfillment

ICI paints uses 2 approaches for its order fulfillment process.

For decorative business they have customized brands and

they send their brands to dealers then deliver it to retailers.

While for industrial business they first receive demand for

the paint to be delivered and then they make paint for them

and then deliver to them and for that they charge high price.

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Alternative StrategiesThere are several strategic options for ICI paints Pakistan.

They can reduce their competition, and market share by

using any of the following strategies.

These strategies are:

1. Forward integration

ICI at the moment is depending on dealers for the sale of

their products. These dealers store company’s products,

retailers have to get ICI products from these dealers & then

offer customers for sale.

If ICI instead of depending on dealers use their own on

distribution to supply products to retailers then they can

increase the sales of their products by giving products to

every possible retailers and in this way they can get

acceptance of every retailer to get their product and offer it

to customer for sale.

2. Backward integration

Presently ICI Pakistan is purchasing its raw material from

both local as well as foreign suppliers. About 75% material is

purchased from foreign countries and 25% is purchased

locally.

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As such as huge quantity of raw material is purchased from

foreign countries that’s why change in government import

duties have a great impact on prices of raw material and

now a days government is continuously increasing its import

duties so it rents in reverse in prices of raw material which

also increase the prices of finished products.

Therefore if ICI acquires local suppliers for start making its

own raw material then it can save itself from such

fluctuations in prices, which could result in the stabilization

of prices, and customers can purchase the products at low

prices.

3. Acquisition

At present ICI is the largest manufacturer of paints in

Pakistan. Its market share is 25%. There are several

companies in paints business having a small portion of over

all market.

ICI can increase its market share by acquiring a few

companies like master paints, silky paints etc.

As a result of this acquisition ICI can increase its market

share up to 30%.

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ICI Paints

4. Combination

Business strategy of ICI includes differentiation and quick

response. Recently ICI has introduced master palette that

offers plentitude of 6134 colours to match every

environment and mood. ICI offers premium quality product

at premium prices. Although ICI offers brands like Glidden,

Paintex and Maxilite, which are quite economical yet they

are comparatively expensive as far as brands of, competitors

are concerned.

As ICI brands are of higher price so other companies get

benefit and capture the lower end of the market.

If ICI starts offering cheaper products it can increase not only

its market share but also its sales volume.

Combination of differentiation and cost leadership can be

very fruitful for the organization.

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ICI Paints

Recommended Strategies

Backward Integration

Seeking ownership or increasing control over firm suppliers

can be very fruitful strategy.

ICI paints imports 75% of raw material from its foreign

suppliers only 25% of raw material is purchased from local

suppliers. In past few years govt. has increased import

duties. As a result cost of production is increased.

If ICI gains control over their local suppliers by ownership

and take charge of their operation then a significant cost

cutting is possible. After getting ownership if ICI start

manufacturing all or most of the required raw material

locally then they can significantly reduce the volume of

import thus avoiding the heavy import duties imposed by the

govt. It will result in decrease in cost of product and ICI

would be able to offer its product at a relatively cheaper

price.

Acquisition

Acquisition or horizontal integration refers to seeking

ownership or increasing the control over firm’s competitors.

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ICI Paints

As mentioned above; there are several competitors of ICI.

But most of them are quite smaller companies having a very

small portion of market.

If ICI acquires a few of those competitors, it would be very

beneficial. It would not only reduce the no of competitors but

there will be a notable increase in market share as well.

By getting ownership over some of its competitors ICI would

be able to follow a combination of business strategies. It

could follow cost leadership by offering brands of those

acquired companies and at the same time it could follow

differentiation and quick response strategy when offering its

own brands like Dulux.

Following such sort of strategy will not only result in increase

in sales volume but also in profit margin and ICI can capture

both the upper end market and lower end market at the

same time.

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ICI Paints

Implementation Plan For successful implementation of the strategies that we

have recommended, ICI should emphasize on the following

main points to implement those strategies.

Budget

For above 2 strategies, which we have recommended there,

should be separate budget allocated for the implementation

of the recommended strategies.

In this context the finance department personnel should

work to develop budget for these alternative and then the

top management should approve that budget so that the

actual work can be executed. Because without top

management’s approval the whole task can’t be

implemented.

Human Resources

ICI should believe in their people’s potential and ability. They

should invest in them and consider them as most valuable

assets. Because business goals can be best realized through

people.

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ICI Paints

Before bringing any change employees should be

communicated about why the change is necessarily and

what are the objectives and goals that company want to

achieve through those changes. Employees should be given

training so that they can better adapt to those changes.

Employees are vital to the profitability of the company

because they directly contribute to the success of the

organization. Human resource department should strive to

ensure that a professional and caring environment continues

to be fostered so that the creative energies of staff are

released and fully utilized while developing their potential

Sales

As the company will undergo backward integration and

combination strategies therefore it should increase its sale

by exploring new geographical areas and markets which will

result in increase in profitability for the company and the

company will have funds for the new strategies to implement

Production

For selling more definitely the company should also increase

its production so that the product should be readily available

for sale.

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