Org - Ashian Paints

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ACKNOWLEDGEMENT

Preparing a project of this nature is an arduous task and I was fortunate

enough to get support from a large number o persons. I wish to express my deep

sense of gratitude to all those who generously helped in successful completion of this

report by sharing their invaluable time and knowledge.

It is my proud and previledge to express my deep regards to Respected HOD

Prof. Y.S. Thakur, Head of Department Miss. Devagya Shrivastava Department of

Business Management , Dr. Hari Singh Gour University Sagar for allowing me to

undertake this project.

I feel extremely exhilarated to have completed this project under the able and

inspiring guidance of Miss. Devagya Shrivastava she rendered me all possible help

me guidance while reviewing the manuscript in finalising the report.

I also extend my deep regards to my teachers , family members , friends and

all those whose encouragement has infused courage in me to complete to work

successfully.

(PARMANAND GOUND)

B.B.A II Semester


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DELCLARATION BY THE CANDIDATE

Date :

I declare that the project report titled " ASIAN PAINTS " on Market

Segmentation is nay own work conducted under the supervision of Miss. Devagya

Shrivastava Department of Business Management Dr. Hari Singh Gour Uniersity

Sagar To the best of my knowledge the report does not contain any work , which has

been submitted for the award of any degree , anywhere.

(PARMANAND GOUND)

B.B.A IInd Semester


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CERTIFICATE

The project report titled "ASIAN PAINTS " been prepared by

Mr. Parmanand GoundB.B.A II Semester , 16th Batch under the guidance and

supervision of Miss. Devagya Shrivastava for the partial fulfillment of the Degree of

B.B.A.

Signature of the Signature of the Signature of the

Supervisor Head of the

Department

Examiner

PREFACE


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As a Student of B.B.A. (Hons.) 16th Batch, the survey on Company

Profile on Asian Paints has been provide to me by my department, under the

guidance of Miss. Devagya Shrivastava.

I conducted this work in Sagar City. It presents synoptic review the

research methodology. Objective, limitations and regarding the existing

product. A field survey was conducted with the help of questionnaire in Sagar

City.

The main aim of this survey is to know about the level of Company

Profile on Asian Paints in Sagar City. it also includes product utility.

PARMANAND GOUND

BBA II SEM. 16TH BATCH

TABLE OF CONTENTS


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TOPIC TITLEPage No.

1. Preface

2. Acknowledgement

3. Declaration of the Candidate

4. Certificate

5. Scope of the Study

6. Introduction of Asian Paints

7. History of Asian Paints

8. Research Methodology

9. Market Segmentation

10 Company Comparison

11 Data analysis & Interpretation

12 Swot Analysis of Asian Paints

13 Findings

14 Limitation of the Study

15 Conclusion

16 Bibliography

17 Questionnaires


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SWOT ANALYSIS

STRENGTHS

Core knowledge of Asian

Paints

Product as competitive

advantage

Strong Brand Image

Product Development

Strength

Strong Distribution Network

Highly Advertised

WEAKNESS

High price (Paints)

Limited differentiation

OPPORTUNITIES

Market Development

Export opportunities.

Innovation

Increasing income level of the

middle class

THREATS

Existing Competition

Highly Amount Spend on

Advertisement


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INTRODUCTION OF ASIAN PAINTS

A major focus of channel of distribution is delivery. It is only through

distribution that public and private goods and services can be made available for

use or consumption. Producers of such gods and services are individually Asian

Paints able of generation only the form or structural utility for their products and

services. They can organize their production Asian Paints abilities in such a way

that the products they have developed can, in fact, be seen, analyzed and sold in the

market. The emergence and arrangement of a wide variety of distribution oriented

institutions and agencies, typically called intermediaries because they stand

between productions on the one hand and consumption.

Intermediaries can improve the efficiency n the other, can be explained in the

following terms: of the process.

They help in the proper arrangement of routes of transactions.

They help in the searching process.

They help in the sorting process.

Marketing channels are set of interdependent organizations involved in the process of

making a product of service available for use or consumption.

According to American Marketing Association, A Channel of distribution, or

marketing channel, is the structure of intra-company organization units and extra-

company agents and dealers, wholesale and retail through which is a commodity, product

or service is marketed.


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According to Phillip Kotler, Every producer seeks to link together the set of marketing

intermediaries that best. Fulfill the firms objectives. This set of marketing intermediaries

is called the marketing channel (also trade channel of channel of distribution).

According to William J Stanton, A channel of distribution for a product is the route

taken by the title to the goods as they move from the producer to the ultimate consumers

or industrial user.


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HISTORY

INFORMATION: Middlemen have a role in providing information about the

market to the manufacturer. Developments like changes in consumer demogr Asian

Paints hy, psychogr Asian Paints hy, media habits and the entry of a new competitor or a

new brand and changes in customers preferences are some of the information that all

manufacturers want. Since these middlemen are present in the market place and close to

the customer they can provide this information at no additional cost.

PRICE STABILITY: Maintained price stability in the market is another function

a middlemen performs. Many a time the middlemen absorb as increase in the price of the

products and continue to charge the customer the same old price. This is because of the

intra-middlemen competition. The middleman also maintains price stability by keeping

his overheads low.

PRIMITON: Promoting the products in his territory is another function a

middleman performs. Many of them design their own sales incentive programmes, aimed

at building customers traffic at the other outlets.

FINANCING: Middlemen finance manufacturers operation by providing the

necessary working cAsian Paints ital in the form of advance payments for goods and

services. The payment is in advance even through the manufacturer may extend credit,

because it has to be made even before the products are bought, consumed and paid for by

the ultimate customer.


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TITLE: Most middlemen take the title to the goods, services and trade in their

own name. This helps in diffusing the risks between the manufacturer and middlemen

This also enabled middleman to be in physical possession of the goods, which in turn

enables them to meet customer demand at vary moment it arises.

HELP IN PRODUCTION FUNTION: The producer can concentrate on the

production function leaving the marketing problem to middlemen who specialize in the

profession. Their services can best utilized for selling the production where the rate of

return would be greater.

MATCHING DEMAND AND SUPPLY: The chief function of intermediaries is

to assemble the goods from many producers in such a manner that a customer can affect

purchases with ease. According to Wroe Alderson, The goal of marketing is the

matching of segments of supply and demand.

PRICING: In pricing a product, the producer should invite the suggestions from

the middlemen who are very close to the ultimate users and know what they can pay for

the product. Pricing may be different for different markets or products depending upon

the channel of distribution.


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SCOPE OF THE STUDY

The study was done primarily with the following objective in mind.

To study the brands of Two-Wheeler & consumers perception Aabout the

product of Two-Wheeler.

To know why people buy Two-Wheeler and why some people prefer other

company.

To study the features of different brands that give a good idea of various

products and services offered by the company.

To understand the competitive environment in which the company is

operating and is desired to meet customer need and satisfaction.

To provide useful information to the company about the product features of

various competing companies.

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LIMITATIONS OF THE STUDY

The method will be unsuitable if the number of persons to be surveyed is

very less as it will be difficult to draw logical conclusions regarding the

satisfaction level of customers.

Interpretation of data may vary from individual depending on the individual

understanding the product features and services of the company.

The method lacks flexibility. In case of inadequate or incomplete

information the result may deviate.

It is very difficult to check the accuracy of the information provided.

Since all the products and services are not widely used by all the customers

it is difficult to draw realistic conclusions based on the survey.


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RESEARCH METHODOLOGY

Asian Paints segment the market based on the usage :

BRAND POSITIONING

It is how the Asian paints enabled people to form a mental image for their products

in the customers mind. The strategies that they followed where as follows,

Brand Image

The ways in which Asian Paints attempted to meet the customers psychological

and social needs.Indian paint industry is a low involvement industry. Till 1990s

people will just tell their budget for painting their house to their contractors. And

few customers will also mention the colour they need. During that period Asian

Paints analyzed the customer market and found that people where not brand

conscious but their concern was only the price of the paint. To meet this needs of

the customer

Asian paints reduced the cost of the raw materials by backward integration in

order to reduce the cost of the paints

Established an advertising strategy with created an emotional touch among the

customers

All these strategies helped them in creating a Brand Image for their products

among people and people started realizing the need for brand conscious in this

industry.


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Umbrella Brand

In 2004 the company realized that though they have almost 20 brands only few

products like Apex emulsion, Royale interior emulsion, Apcolite and Touch wood

had high recall among the customers. Therefore they decided to promote the brand

as a whole, to create a corporate image and the various products under their

Umbrella Brand Asian Paint, which became their mother brand. This created a

Brand Awareness as a whole among the customers.

Brand Portfolio:

It was realized that instead of spending on individual brands and in promoting them

it was logical to promote their corporate image and allthe brands under their

umbrella brands ...

Asian Paints has embarked on an umbrella branding policy encompassing all its

products and services. The project includes a new visual identity that establishes

the company name as the dominant reason for purchase. Tractor, Royale, Utsav

and Apcolite names are no longer the focus on the can, rather consumers will be

buying "Asian Paints." Some key brand names are being retained for the time

being--to signal a position in the market rather than a product or surface. For

instance, Tractor will represent the "value for money" brands.

The immediate advantage is obvious. Rather than spread resources thinly across

brands and sub-brands, a company centric portfolio can synergize communication

efforts. To be competitive in a world of fragmentation and rising costs, traditional

mass media, such as television, can be prohibitively costly.


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With the umbrella-branding move, Asian Paints can also afford to move forward

from a mere functional platform for each individual product to the high ground of a

mood-based emotional dimension.

An Underlying Theme

At Asian Paints, the underlying theme is "har ghar kuchh kehta hai," or "every

home has something to say." The depth and texture visualized by this line goes into

the customer's basic psyche of owning a home, and will carry through various

messages emanating from the company, which is the leader in the decorative

coatings market in India.

11.ANSOFF Matrix

Asian Paints value for the customers was build through innovative package

(size),distribution , and communication .In 1970s they decide to computerize and

network their 30 depots round the country ,to provide proper feedback of market

needs ,resulting in quick response to meet the needs.

They planned a new distribution structure , smaller packages and

computerized communication networks. Asian paints differentiation strategy starts

from market segment, distribution & packaging .

With increasing volumes in chosen segments Asian Paints achieved

economies of scale for cost leadership .With their dominant position they

diversified in product range as also market and geographic segment.

1. They diversified into manufacturing raw materials for paints.

2. product diversification also included industrial paints .Now with a large market

share ,they have strong distribution network even in metros.


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Asian paints strategy of quick response translates into supplying 95% of the order

supply in 48 hrs which is a positive competitive advantage .Their R&D has

developed new products to later to industrial & scientific segments . The paint

industry is in growth stage in India as construction activity has a high priority.

With 27% market share, they enjoyed double the market share than their nearest

competitor .In order to maintain this leadership position they have drawn up the

following strategy.

Asian Paints went to backward vertical integration by getting into manufacturing

raw materials for paints.

With liberalized economy more international brands are likely to enter the Indian

markets as entry barriers are low in the Paint Industry.

To keep their dominant position Asian Paints should pursue vigorous R & D for

innovative products ,increase the number of depots for covering the entire country

advertise separately for each market segment & average continuous market

research to enhance their competitive advantage.

12.Future Plans :

The company plans to consolidate its dominant position in India by launching new

products in line with the market developments in both decorative paint and

industrial coating segments. The company is focusing on further improving the

operations of all of its subsidiaries in India and abroad and has already launched E-

Strides, an ERP initiative through which all the overseas ventures are being

covered for sharing of global knowledge, best practices and better control on


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operations. The companys objective is to be among the top three players in each

market where it is currently operating or plans to operate in the future

Introducing Water based Paints

Repositioning of existing Brands in Rural Market

Broadening of Distribution Network

Adding more choices for shades and effects

Enhancing Better Quality

Demand will be generated through the new

constructions coming in housing and industries

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MARKETING SEGMENTATION :

A flow is a set of function performed in sequence by channel members. In

the flow process, producers, wholesalers, retailers and consumers are linked. The

functions that need to be necessarily performed in a channel system include

transfer of ownership through transportation, order processing, inventory carrying,

storage, sorting negotiations and promotions. The same function in a give channel

system, may be performed at more than one level and, in such a case, the workload

for the function would need to be shared between channel members.

A channel symbolizes the path for the movement of title, possession and payment

for goods and services.

CHANNELS OF DISTRIBUTION FOR INDUSTRIAL PRODUCTS:

Figure below Shows channels commonly used is industrial marketing. An

industrial-goods manufacturer can use its sales force to sell directly to

industrial customers. It can sell to industrial distributors, who sell to the

industrial customers, or it can sell through manufacturers representatives or

its own sales branches directly to industrial customers, or indirectly to

industrial customers through industrial distributors. 1-1-2-level marketing

channels are quite common in industrial marketing channels.

TYPES OF INTERMEDIARIES

SOLE-SELLING AGENT/MARKETER: when a manufacturer prefers to

stay out of the marketing and distribution task, he Asian Paints points a

suitable agency as his sole-selling agent/marketer and entrusts the marketing


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job with him. A sole-selling agent or a marketer is usually a large

marketing intermediary with large resources and extensive territory of

operation. He will be having his own network of

distrinutors/stokists/wholesalers, semi-wholesalers and retailers. He takes

care of most of the marketing and distribution functions on behalf of the

manufacturer. Obviously, a sole-selling agent/marketer will earn a large

margin/commission compared to other types of intermediaries.

C & F AGENTS (CFAs): In many cases, manufacturers employ carrying

and forwarding agent, often referred to as C & F Agents, or CFAs. The

CFAs can be describe as special category wholesalers. They supply stocks

on behalf of the manufacturer to the wholesale sector or the retail sector.

Their function is distribution. Their distinguishing characteristic is that they

do not resell products, but act as the agent/representative of the

manufacturer. They act so behalf of the manufacturer and as his extended

arm. In essence, they are manufacturers branches.

WHOLESALER/STOKIST/DISTRIBUTOR: A wholesaler or stokist

or distributor also a large operator but not on a level comparable with a

marketer of sole selling agent, in size, resources, and territory of operation.

The wholesaler/stokist/distributor operates under the marketer-soleselling

agent, where such an arrangement is used by the manufacturer.

SEMI-WHOLESALERS: Semi-wholeseller are intermediaries who buy

product either from producers or wholesellers in bulk, break the bulk or

resell the goods (mostly) to retailers in assortment needed by them. Like the

wholesalers, semi-wholesellers too perform the various wholesaling


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functions that are part of the distribution process. In some cases, they may

also perform the retailing functions. Their strength is specialization by

region. They assist the producer in reaching a large number of retailers

efficiently.

RETAILER/DEALER: retailers sell to the household/ultimate consumers.

They are at the bottom of the distribution hierarchy, working under

wholesalers/stokists/distributors/semi-whosalers,as the case may be. In cases

where the company operates a single-tier distribution system, they operate

directly under the company. The retailers are also sometimes referred to as

dealers of authorized representatives. They operate in a relatively smaller

territory or at a specific location; they do not normally perform stock-

holding and sub-distribution functions. The stocks they keep are operational

stocks necessary for immediate sale at the retail outlet.

VALUE-ADDED RESELLERS: they are intermediaries that buy the basic

product from producers and add value to it or, depending on the nature of the

product, modify it and then resell it of final customers.

MERCHANTS: They are intermediaries that assume that ownership of the

goods that they sell to customers or other intermediaries. Marchants usually

take physical possession of the goods that they sell.


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COMPANY COMPARISON OF ASIAN PANTS

Asian Paints, Goodlass Nerolac, ICI (India), Berger, Jenson & Nicholson

and Shalimar are the leading companies in the organized in the organized

sector. The top six manufacturers account for about 80 per cent of the market

in the organized sector in value terms. ASIAN PAINTS is the industry

leader, with an overall market share of 33 per cent in the organized sector.

Threat of global competition is minimal in the industry.

ASIAN PAINTS dominates the decorative segment, with a 38 per cent

market share. Goodlass, a Tata

Market Shares of Five Major Players

Company Market share (%)

Decorative Industrial Overall

1. Asian Paints 38 15 33

2. Goodlass Nerolac 14 41 18

3. Berger Paints 9 10 9

4. ICI Paints 9 9 9

5. Shalimar 6 8 7

company, is number two with a 14 per cent market share. Berger and ICI

have 9 per cent and 8 per cent shares, respectively, in this segment followed

by Shalimar, with 6 per cent.


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Goodlass dominates the industrial paints segment, with 41 per cent market

share. ASIAN PAINTS is a poor second here, with a 15 per cent market

share. Berger, ICI, and Shalimar are the other substantive players in the

sector, with 10 per cent, 9 per cent and 8 per cent shares, respectively.

The dominance of Goodlass in industrial paints is largely the result of its

technical association with the JAsian Paints anese paint major, Kansai

Paints, which has a 29.5 per cent equity stake in the company. Goodlass has

a lions 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. Goodlass also holds 20 per cent to the white-goods segment.

THE COMPANY

As already mentioned, Asian Paints is Indias largest paints company and

the market leader in decorative paints. ASIAN PAINTS manufactures and

markets a wide spectrum of coatings and ancillaries, which include

decorative, production paints and heavy-duty coatings. The manufacturing

facilities of the company for paint products are currently spread over four

locationsBhandup, Mumbai, which was established in 1955; Taloja,

Maharashtra, where ASIAN PAINTS established its second unit in 1980;

Ankelshwar, Gujrat, where operations started in 1981; and Patancheru,

Andhra Pradesh, where manufacturing started in 1985.

Asian Paints offers the widest range of paints in terms of products and

shades, as well as pack sizes, Availability of wide range of shades is in fact,


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one major critical success factor in the decorative paints business. And

ASIAN PAINTS scores high in this factor. ASIAN PAINTS manufactures

and markets more then 2,800 items of paints (SKU).

PERFORMANCE

ASIAN PAINTS has been consistently turning out a good performance

over the years. For more than two decades now, it has been the market

leader. Besides, the company has also consistently proved its excellence in

operating performance.

Exhibit 1 gives details of ASIAN PAINTS s sales performance during the

last four years.

Exhibit 1 gives some other important details of ASIAN PAINTS s

performance.

ASIAN PAINTS has set a target of gross sales of Rs 2,100 crore by 2003. It

aims to be amongst the top ten decorative paints manufacturers in the world

by 2003 and among the top five by 2005.

ASIAN PAINTS STRIKES A NEW PATH IN DISTRIBUTION

At the time ASIAN PAINTS entered the Indian paint business, distribution

was the most crucial task for any new entrant. Both physical distribution and

channel management posed formidable challenges. The foreign companies


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and their wholesale distributors dominated the business. The foreign

companies Asian Paints pointed a few traders as their wholesale distributors

and allowed them to perpetuate a situation of monopoly. Each distributor

was assigned a large territory and was given the right to operate the

exclusive channel of the company in the assigned territory. The trade terms

were also very liberal. The companies also extended virtually unlimited

credit to the distribution. The credit outstanding for the supplies made

throughout the year were required to be settled by the wholesales distributors

only at the year-end, at Diwali time.

These distributors had neither the compulsion nor the motivation to invest in

distributions infrastructure. They were not required to move out to semi-

urban and rural areas. They concentrated on big cities where they could

make the sales without much investment in distribution infrastructure and

market development. Also, they were shutting the doors on any new paint

company seeking an entry into the business. In other words, these

distributors controlled the paint business and were making it impossible for a

new paint company to enter and establish itself in the business.

ASIAN PAINTS sized up the scenario correctly and formulated a unique

distribution strategy. In the normal course, a firm entering the industry in

this scenario would have opted for the low risk strategy of gaining a limited

access to the wholesale traders and be satisfied with a small share of the

existing business. But ASIAN PAINTS went in for a strategy that differed

totally from the existing pattern. ASIAN PAINTS s strategy, in fact, meant

the polar opposite of the established/existing pattern.


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Chart presents the elements of ASIAN PAINTS s distribution strategy. We

shall see the details in the page that follow.

ASIAN PAINTS Bypasses the Bulk Buyer Segment and Goes to

Individual Consumers

Bulk buyer segment was the major segment of the paint business in the

earlier days and any

Chart Elements of ASIAN PAINTS s Distribution Strategy

ASIAN PAINTS bypassed the bulk buyer segment and went to individual

consumers of paints.

ASIAN PAINTS went slow on urban areas and concentrated on semi-urban

and rural areas.

ASIAN PAINTS went retail

ASIAN PAINTS went in for an open-door dealer policy

ASIAN PAINTS voted for nationwide marketing/distribution

Paint Company needed a share of this major segment for sheer survival.

Though this segment was dominated totally by foreign companies and their

wholesale distributors, a new entrant to the business like ASIAN PAINTS

would normally have rushed to this segment and tried to garner a share of it.

ASIAN PAINTS , however, had a totally different game plan. Seeing that

this segment was not a growth segment, though it was certainly the major

segment at that point of time, ASIAN PAINTS decided to ignore this


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segment for the present and go to individual consumers. And that was crucial

decision. It influenced every subsequent decision ASIAN PAINTS took in

the realm of distribution. Over time, ASIAN PAINTS proved to the paint

industry that there existed a large and bottomless segment in the paint

business of India, outside the bulk buyer segment, comprising of individual

consumers.

ASIAN PAINTS Goes to Semi-Urban and Rural Areas

Along with the decision to go to individual consumer segment leaving aside

the bulk buyer segment, ASIAN PAINTS also decided that within the

individual consumer segment, semi-urban and rural areas would constitute

ASIAN PAINTS s priority market. Prior to ASIAN PAINTS s entry, the

paint business was by and large concentrated in the urban areas. All the

major paint companies and their wholesale distributors were content with the

market that was available in the urban areas. In contrast, ASIAN PAINTS

clearly saw that a large market for paints was emerging in the semi-urban

and rural areas, and felt it wise to tAsian Paints this market. ASIAN

PAINTS also understood that a new entrant like ASIAN PAINTS had also

a compulsion to go to the semi-urban and rural areas. The major companies

and their wholesale distributors were not giving any worthwhile opening in

the big cities for new entrants. ASIAN PAINTS found it difficult to attract

the wholesalers in the cities to deal in its products. It had to necessarily turn

to the semi-urban and rural areas for support. ASIAN PAINTS wisely

decided against committing all its resources on a head on collision with the

foreign companies and their big wholesale distributors in the urban areas.


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ASIAN PAINTS Goes Retail

Going directly to retail dealers was the next major strategic decision of

ASIAN PAINTS in the realm of marketing and distribution. Here too,

ASIAN PAINTS totally broke with the prevailing distribution practice. As

mentioned earlier, the foreign companies, who were the main players, were

practicing a wholesale distributor-dependant marketing system. ASIAN

PAINTS did not see any great merit in the system. It totally bypassed the

well-entrenched wholesale distributors and went directly to the retailers.

While ASIAN PAINTS s competitors remained content with their linkage

with a handful of wholesale distributors, ASIAN PAINTS preferred direct

contact with hundreds of retail dealers.

ASIAN PAINTS Goes in for an Open-Door Dealer Policy

ASIAN PAINTS followed an open-door policy in the matter of adding

retail dealers to its network. The prevailing trend in those days was to limit

the number of dealers to the barest minimum. ASIAN PAINTS broke this

trend and chose to use practically everyone in the trade, who was willing to

function as its dealer. It was a combined result to the policy of going directly

to retailers and the policy of open door to dealership that ASIAN PAINTS

s dealer network swelled rAsian Paints idly. Even after achieving stability

and maturity in distribution, ASIAN PAINTS continued to follow a policy

of continuous expansion of dealer network. By 1990, ASIAN PAINTS was

having a 7,000 strong dealer network. By the year 2000, the number had

swelled to 12,000. And even now, on an average, ASIAN PAINTS is

adding 200 to 250 new dealers every year.


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ASIAN PAINTS Votes for Nationwide Marketing/Distribution

ASIAN PAINTS took yet another important and strategic decision in

the realm of distribution. Those days, nationwide distribution/marketing was

not the standard practice in the paint business. On the one side, there were

the 1,000 odd small paint companies who, as a class, believed in marketing

their paints in limited territories in and around their point of production. On

the other side were the big companies, who as a class, believed in limiting

their distribution to the big cities. In contrast to both these existing practices.

ASIAN PAINTS voted for a nationwide distribution/marketing. It wantedto have an active presence throughout the country, in the geogrAsian Paints

hical zones, states and territories.

THE IMPLICATION OF ASIAN PAINTS S DISTRIBUTION

STRATEGY

ASIAN PAINTS s distribution strategy described in the preceding

paragrAsian Paints hs had its associated implications. ASIAN PAINTS had

to take due note of them and face them squarely.

Going to Individual Consumers Implied Wide Product Range and

Complex Distribution

Had ASIAN PAINTS concentrated on the bulk buyer segment. It could

have managed with a limited product range, at least, in the initial years. But,

ASIAN PAINTS s decision to turn to the individual consumers necessarily

meant a wide product range. In the nature of things, the individual consumer


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segment involves a very wide choice in terms of products, materials, shades

and pack sizes. On top of this, ASIAN PAINTS believed in making

products based on the preferences of consumers. It gathered feedback from

the consumers and turned out products, shades and pack sizes on the basis of

such feedback. This policy resulted in a further burgeoning of the product

range.

Smaller Packs Proliferated the Product Depth Further

At the time of ASIAN PAINTS s entry, paint companies were supplying

paints in containers of 500 ml or larger. ASIAN PAINTS saw that there

was a felt need in the market for paints in smaller packs. All end uses did not

require a large quantity. Moreover, it was common practice for consumers to

buy paint initially in a larger quantity and supplement it with small size

purchase to complete the job. ASIAN PAINTS decided to harness the

business opportunity and started supplying its paints in small packs-in 200

ml and 50 ml packs. This proliferation in pack sizes also contributed to

ASIAN PAINTS s growing product range. ASIAN PAINTS was by now

manufacturing and marketing as many as 2,000 distinct items of paints, none

of which was strictly a substitute for the other.

Wide Product Range Implied Distribution

The policy of having the widest range of products, colurs and pack sizes had

its implication on ASIAN PAINTS s distribution. When 2,000 different

items had to be made available to the consumers, it automatically meant that


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the company had to be prepared for high inventory holding in its various

depots/retail outlets. Accounting and sales arrangements had also to be

provided for on a matching level. Naturally, distribution was becoming more

complex and expensive for ASIAN PAINTS .

Going to Semi-Urban/Rural Markets Further Enlarged Distribution

The decision to go to the semi-urban and rural markets instead of confining

to the urban markets also meant enlargement of the distribution function.

ASIAN PAINTS had to go in for more dealers in order to serve the

scattered semi-urban and rural market. The decision also meant that ASIAN

PAINTS could not opt for a simple, centralized distribution of its products

form its factory. It had to go in for a decentralized, field-focused distribution,

with a network of depots located all over the country/marketing territory.

Without such extensive and intensive distribution network, it would not have

been possible for ASIAN PAINTS to cover the semi-urban and rural

markets.

Going Retail Implied Deep Involvement in Channel Management

Through its decision to go retail, ASIAN PAINTS was getting deeply

involved in physical distribution and


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Chart Main Steps in the Implementation Process

ASIAN PAINTS s created a

large network of dealers.

It established a network of

company depots to service the

dealers. It created a marketing

organization that matched its

distribution.

It successfully resolved the cost-

service conflict in distribution.

(i) A strong commitment to

distribution cost control without

compromising service level.

(ii) Effective inventory management

(iii) Effective control of credit

outstanding

(iv) IT initiatives in distribution cost

control

Channel management. In the system chosen by ASIAN PAINTS , thephysical distribution cum channel management task was far more

demanding, compared to the wholesaler-oriented system practiced by the

other paint companies. While, for companies that embraced the wholesaler-

oriented system, it was enough to service a handful of distributors, ASIAN

PAINTS had to service a network of thousand of retail dealers. Having

taken the decision to go retail, ASIAN PAINTS necessarily had to create

and service a vast dealer network. It also had to create the physical

distribution facilities required for servicing such a large network.


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National Marketing Necessitated Nationwide Organisation

Extend of marketing territory and complexity of distribution organization are

interrelated. The moment ASIAN PAINTS voted for nationwide marketing,

it was getting into intensive as well as extensive physical distribution and

channel management. ASIAN PAINTS thus had to create a nationwide

distribution-cum-marketing organization.

DISTRIBUTION BECOMES ASIAN PAINTS S SHOWCASE FUNCTION

ASIAN PAINTS s strategies made distribution the most important

elements of its marketing mix. And, ASIAN PAINTS give to distributions

all the inputs that were demanded by it. In fact, the rest of this case study is

essentially a description of how ASIAN PAINTS managed its distribution

activities-how it chalked out its distribution programmes, how it

implemented them, what problem it encountered in this task, how it tackled

them and how through distribution success, it achieved marketing and

corporate success.

THE IMPLEMENTATION PROCESS

We shall see low ASIAN PAINTS went about the actual management of

the distribution function. The main steps in ASIAN PAINTS s

implementation process are shown in Chart 2.

Let us see the details.


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ASIAN PAINTS Creates a Large Network of Dealers

An extensive network of dealers, and a matching physical distribution

infrastructure play a crucial role in the decorative paints segment. This is

essential for ensuring easy accessibility of the product to customers. In this,

Asian Paints scored over its competitors with a massive network of 15,000

dealers spread over 3,500 towns across the country. ASIAN PAINTS has

the largest distribution network among all the players. Goodlass has a

network of 8,000 dealers.

ASIAN PAINTS Establishes a Network of Company Depots

ASIAN PAINTS established a large chain of company operated

depots/stock points throughout its vast marketing territory, from where the

retail dealers could conveniently pick up their requirements. ASIAN

PAINTS s basic strategies explained in the earlier sections necessitated a

liberal Asian Paints proach in the matter of stock points/depots. It also

meant that the depots had to be company operated. After all, ASIAN

PAINTS did not have any wholesale distributors to whom the responsibility

for operating the stock points could possibly have been assigned. As shown

in Exhibit 32.4 established a network of 30 company-run depots, spread

through out the country and serviced its retailers from them. The number of

depots varied from city to city. For example, Bangalore had just one depots

while Mumbai had four depots. The depots typically supplied to about 200-

300 dealers.


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ASIAN PAINTS Creates a Marketing Organisation that Matched its

Distribution Intensity

Effective control of the large number of depots, each having substantial

stocks of 2,000 odd distinct items necessitated a matching marketing

organization structure. ASIAN PAINTS set up a marketing organization

consisting of four regional sales offices, 35 branch sales offices and a large

number of sales supervisors and sales representatives spread all over the

country. The marketing organization of the company is presented in Exhibit

32.5. It can be seen from the chart that a very extensive structure has been

created in the consumer division. It is primarily meant for taking care of the

massive distribution task involved in this sector. Each branch sales office has

its own depots and the various items are stocked in the depots under the

control of the concerned branches. The branches service the dealers and

customers in their territories.

These are supported by six regional distribution centers, which cater to 55

depots. Each depot has a branch manager for supervision of several

salesperson who cater to more than 14,500 dealers in the more that 3,500 big

and small cities all over the country.

ASIAN PAINTS faced many challenges. Of these, the cost-service

dilemma was no doubt, the most important one. And, that is the aspect in

which we are mainly interested in this case study.

Managing the cost-service conflict was the main challenge that ASIAN

PAINTS faced in the implementation of its distribution strategy. ASIAN

PAINTS met this challenge successfully.


36/48

We have seen that ASIAN PAINTS has over 15,000 dealers in 3,500 towns

in India. ASIAN PAINTS caters to all of them directly. As a result, for

ASIAN PAINTS , the distribution task gets tremendously extended and

distribution cost becomes a significant business parameter.

Demand for decorative paints is characterized by seasonality. Demand drops

during monsoons and picks up around a month-and-a-half before the festive

season. Major part of the sales take place in the second half of the financial

year. Manufacturers have to array huge inventories during the lean period.

As a result, distribution cost becomes all the more significant.

Naturally, distribution cost emerged as a major hurdle that ASIAN PAINTS

had to cross. The strategy It went in for a very high service level in

distribution. Service level is measured in terms of the number of stock

keeping units (SKUs) available in stock as a percentage of the number of

SKUs that should have been in stock. ASIAN PAINTS s service level is

more than 85 per cent whereas that of other large paint companies falls

between 50 and 60 per cent. This meant a further rise in ASIAN PAINTS s

physical distribution costs. ASIAN PAINTS had to resolve this cost-service

conflict.

In the chAsian Paints ter on Physical Distribution and Logistics

Management, we had seen that a cost-service dilemma is inherent in any

physical distribution situation. A high service level in physical distribution-

in transportation, warehousing order processing and inventories-necessarily

means a high level of costs. Every firm has to face this cost-service dilemma

and work out a compromise. ASIAN PAINTS voted for a high service level


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and without compromising this service level, it tried to contain the

distribution costs. Interestingly. ASIAN PAINTS succeeded in this

endeavor.

When we go in to the details as to how ASIAN PAINTS actually resolved

the cost-service dilemma, four factors started out:

A strong commitment to distribution cost control, without compromising

service level

Effective inventory management Effective control of credit outstanding

IT initiatives in support of distribution cost control

Strong Commitment to Distribution Cost Control

While following a totally customer-oriented distribution strategy, ASIAN

PAINTS could not afford to ignore the cost angle. ASIAN PAINTS was in

no position to pass on any additional costs to the consumers. ASIAN

PAINTS s marketing philosophy demand that the consumer price of its

paint should be on the lower side, so as to suit the pockets of the average

Indian. Moreover, ASIAN PAINTS s business growth demand more and

more investment in manufacturing and distribution. ASIAN PAINTS had to

find the resources. This Asian Paints art, the intensity of competition had

also been on increase. Naturally, profitability was coming under greater

strain in these circumstance. ASIAN PAINTS had to control its distribution


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costs in order to maintain its profitability and market leadership. The

question was how to control the costs without sacrificing the service level.

Effective Inventory Management

Effective inventory management is the first major component of ASIAN

PAINTS s strategy on distribution cost control. And, ASIAN PAINTS

achieved high efficiency in this regard. Actually, in inventory cost, ASIAN

PAINTS took the lowest position in the industry. ASIAN PAINTS s

average inventory level equals only 28 days sales, while the industry average

is 51 days sales. This right away provided a 45 cent edge in inventory costs

to ASIAN PAINTS compared to its competitors. ASIAN PAINTS s stock

of finished goods was just 7 per cent of its net sales while for the other in the

industry it was nearly twice that level. What is particularly striking in this

achievement is that ASIAN PAINTS offered customers and dealers a high

level of service in product delivery compared to its competitors and yet kept

the inventory costs down by 45 per cent compared to the competitors.

Control of Credit Outstanding

Large credit outstanding, running beyond two months or more, was natural

concomitant of the distribution strategy chosen by ASIAN PAINTS . The

dealers are required to maintain stocks of all the SKUs that are on demand in

the territory. It pushes up inventory levels at the outlets. They need credit.

ASIAN PAINTS allowed 15-21 days credit for dealers located in the major

towns and 22-30 days credit for dealers in upcountry regions.

ASIAN PAINTS had to pull of a smart credit control strategy for survival.

It resolved the thorny problem through an innovative dealer incentive


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scheme. ASIAN PAINTS stipulated that each of its dealers should pay for

the supplies within a specified time norm and offered them an attractive

incentive scheme for doing so. It consisted of two components:

(a) A special discount of 3.5 per cent. This was referred to as the discount for

perfection in payments. It was passed on at the end of the year, provided

each and every payment throughout the year was made within the stipulated

time norms.

(b) A cash discount of 5 per cent. This was paid for all outright cash purchases.

It was given whenever payments were received within 24 hours of the

supply/invoice. In respect of outstation accounts, the payments should have

been made in advance by draft in order to be eligible for the discount.

The scheme was a grand success. ASIAN PAINTS s credit outstanding

always stood below 25 days, while the outstanding of the other major

companies were in the range of 40 days and above. Systematic

computerization also helped ASIAN PAINTS maintain the credit

outstanding within limits.

IT Initiatives in Distribution Cost Control

ASIAN PAINTS s IT initiatives in respect of distribution-inventory control

and control of credit outstanding, in particular-helped it no control

distribution costs without lowering the service level. ASIAN PAINTS went

in for a fully computerized distribution system. ASIAN PAINTS did this

not only with an eye on distribution cost control, but also for the sake of


40/48

distribution effectiveness per se. But for such an Asian Paints proach,

ASIAN PAINTS s distribution management would have gone haywire.

Here was a situation where 2,000 different items of paints, manufactured at

four different plants, had to be distributed to 15,000 dealers in 35,00 towns

spread all over the country. Through 55 depots. ASIAN PAINTS

accomplished this, maintaining the average service level at 85 per cent, a

clear 25 per cent above that of competition. The IT initiatives also ensured

prompt billing, accurate customer accounting and effective control of credit

outstanding.

Computerization also enabled ASIAN PAINTS to process recent sales data

for the 100 fastest moving SKUs. This analysis was used to project sales of

specific products, which helped plan production and raw material purchases.

With computerization, ASIAN PAINTS was able to analyse past trends to

arrive at a 90 per cent accurate sales forecast. Corrections were made every

month between the sales projection and actual sales. Production was thus

evened out month-to-month. Sales statistics were maintained, classified by

product, month, salesman, branch, region and dealer. Such computerized

planning and control of production, sales and inventories helped ASIAN

PAINTS cut distribution costs without compromising on the high level of

service sought by it in physical distribution.

ASIAN PAINTS later hired from the Department of Telecommunications,

satellite time and got all its offices in the country networked. They transmit

data daily to the corporate had office in Mumbai, which uses it for sales and

production planning. ASIAN PAINTS has consistently improved its IT

systems over the years. It has linked all its factories and 55 depots through


41/48

V-SAT terminals, and derived big benefits in terms of streamlined

distribution. More recently, ASIAN PAINTS has implemented supply

chain management software from i2 technologies. ASIAN PAINTS plans

to upgrade its communication infrastructure through VSAT leased lines and

ISDN lines all over India. It is also implementing an ERP solution from

SASIAN PAINTS to be completed in 2001.

ASIAN PAINTS Acquires a Competitive Advantage Through Its

Inventory Management and Credit Control

One can grasp the full import of ASIAN PAINTS s success in this sphere

only when due not is taken of the fact that ASIAN PAINTS has achieved

the lowest distribution cost as well as the highest differentiated position in

the industry. ASIAN PAINTS s Asian Paints colite, the largest selling

brand of paint in the country, is available in different shades and in eight

different pack sizes. Being in the business of colours, ASIAN PAINTS

utilized colour to achieve differentiation, and none of its competitors could

match ASIAN PAINTS in this aspect. Simultaneously, ASIAN PAINTS

also achieved the lowest cost position in the industry. Normally, when a firm

consciously opts for the differentiation route with a wide product line, it

automatically point towards higher inventory levels and consequently higher

inventory and other costs. But ASIAN PAINTS , through its effective

distribution management, inventory management and control of credit

outstanding, in particular, managed to retain its inventory size and inventory

costs at the lowest possible level.

ASIAN PAINTS actually saved so much on inventory carrying costs that it

almost earned its promotion budget through these savings. This is again

praiseworthy because ASIAN PAINTS spends as much as per cent of its


42/48

sales on promotion, the highest in the industry. It has to spend so much in

order to maintain its differentiation advantage. But strikingly, it has kept its

total marketing costs the lowest in the industry. The two factors together-the

lowest cost position as well as the highest differentiation position-has

conferred a significant competitive advantage on ASIAN PAINTS .


43/48


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SHORT ANALYSIS

Robust financial performance of Asian Paints seems to havepeaked out though demand conditions continues to be

favourable. Asian Paints has significantly surpassed analysts estimates

even after adjusting for change in the accounting period ofsubsidiaries for June 2009 thanks to a volume growth of over10% and two price hikes (about 4%) undertaken in May 2010.

Consolidated net sales grew a robust 25.3% year-on-year (y-o-y)and an adjusted rate of 22.8% at Rs 1,830 crore despite a higherbase. This has been largely led by domestic revenues, whichhave grown at 28 per cent highest quarterly growth in the past

two years at Rs 1,491 crore. While analysts had expected a y-o-y decline of 3% in operating

profit and 200 basis points (bps) contraction in operating profitmargin due to escalating raw material prices namely titaniumdioxide and mineral turpentine oil (material cost index up 6.5% inthe quarter), the company has in fact reported a jump of 26% inoperating profit at Rs 347 crore and margins of June 2009quarter at about 19% - one of the highest levels in past fivefinancial years - have been maintained despite operating profit

jumping 60% y-o-y last year. Even net profit margin at 12.1% has been maintained (that too

on an adjusted basis) in contrast to a 30 bps dip expected byanalysts despite the 20% rise in taxation.

Favourable domestic demand conditions especially in decorativepaints, which contributes 90% of total revenues, will continue tosupport high volume growth especially from tier-II and tier-IIIcities, though the scenario for international subsidiaries and

industrial segment is still challenging and yet to pick up fully.

FINDINGS

1. he company manufactures its product in advance and they stocking to the market

after two or three months, so the spoilage of the chances of product becomes higher.


45/48

2. The company doesnt provide facility of replacement of spoiled products to its

retailers or distributors.

3. There is discrimination in the prices of distributors or the prices at which retailers

directly purchase from the market (Distributors prices are higher than market).

4. There is no advertisement from the company like dangleas, posters, hoarding, and

Neon sign boards, glow sign boards.

5. The company is not giving any motivational incentive to the retailers.

6. There is unfrequent visit from the company representative to the retailers.

7. The company has captured 72% market in the butter segment.

8. The prices should be kept low to capture more percentage of total market.

9. The company distributors do all their business in cash only.

-

CONCULSION

LEADERSHIP THROUGH DISTRIBUTION EXCELLENCE


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The story of Asian Paints is a story of distribution excellence. ASIAN

PAINTS achieved an enviable leadership position through the distribution

route. While ASIAN PAINTS did not ignore any of the other function of

marketing, it was by mastering the distribution function that ASIAN

PAINTS gained a distinct and powerful competitive advantage. ASIAN

PAINTS s distribution strategy was truly innovative; it broke new ground

in every aspect of distribution. In the final analysis, excellence in distribution

led the company to marketing and corporate excellence.

BIBLIOGRAPHY ASIAN PAINTS

Widening the Net. Business India Intelligence, Auguest

2001,p2,2p.

Anand, M Diary of Sales Associate. Business World. 21 October,

2002


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Brown James R, Fern Edward F., Conflict in Management

Channels: The Impact of Dual Distribution. International Review of

Retail, Distribution & Consumer Research, Asian Paints ril92, Vol.

Issue 2, p121, 12p

Moriarty, Rowland T and Moran, Ursula Managing Hybrid

Marketing Systems. Harvard Business Review,

November/December 1990,

Vol. 68 Issue.

Marketing Management by Kotler / keller 2005 Edition.

Marketing Management ICFAI Center for Management Research

Marketing Management Planning, Implimentation & Control by V

S Ramaswamy / S Nmakumari

www.asianpaints.com

www.mouthshut.com/product-

reviews/Asian_Paints_Royale_Luxury_Emulsion-

en.wikipedia.org/wiki/Asian_Paints

www.novAsian Paints aint.org/webasia.html

www.domain-

b.com/companies/companies_a/asian_paints/index.html

FACULTY OF MANAGEMENT STUDY

DR. HARI SINGH GOUR UNIVERSITY SAGAR (M.P.)

QUESTIONAIRE

Researcher's Name : Name of Person : ___________________

Class : B.B.A. II Sem Age : _____________________________

Gender : Occupation : ________________________
http://www.asianpaints.com/http://www.asianpaints.com/http://www.asianpaints.com/http://www.mouthshut.com/product-reviews/Asian_Paints_Royale_Luxury_Emulsion-http://www.mouthshut.com/product-reviews/Asian_Paints_Royale_Luxury_Emulsion-http://www.mouthshut.com/product-reviews/Asian_Paints_Royale_Luxury_Emulsion-http://www.mouthshut.com/product-reviews/Asian_Paints_Royale_Luxury_Emulsion-http://www.mouthshut.com/product-reviews/Asian_Paints_Royale_Luxury_Emulsion-http://www.mouthshut.com/product-reviews/Asian_Paints_Royale_Luxury_Emulsion-http://www.novapaint.org/webasia.htmlhttp://www.domain-b.com/companies/companies_a/asian_paints/index.htmlhttp://www.domain-b.com/companies/companies_a/asian_paints/index.htmlhttp://www.domain-b.com/companies/companies_a/asian_paints/index.htmlhttp://www.domain-b.com/companies/companies_a/asian_paints/index.htmlhttp://www.domain-b.com/companies/companies_a/asian_paints/index.htmlhttp://www.domain-b.com/companies/companies_a/asian_paints/index.htmlhttp://www.asianpaints.com/http://www.mouthshut.com/product-reviews/Asian_Paints_Royale_Luxury_Emulsion-http://www.mouthshut.com/product-reviews/Asian_Paints_Royale_Luxury_Emulsion-http://www.novapaint.org/webasia.htmlhttp://www.domain-b.com/companies/companies_a/asian_paints/index.htmlhttp://www.domain-b.com/companies/companies_a/asian_paints/index.html


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Q.1 Do you know about Asian Pain ?

a. Yes. b. No.

Q.2. Have you used Asian Paint ?

a. Yes. b. No.

Q.3 How Often Sales Promotion Schemes are offered on Asian Pain

a. 6 months 1 year b., 3-6 months c. less than 3 months.

Q,4. Rate the following factors you consider are important for building brand

Image.

a.Price b. Clarity c. Durability

d. Looks e. Quality

Q 5. What do you look for while purchasing Asian Pain ? Please rank in order of importance?

a. Comparative Advantage b. Price

c. Scheme/Discount/Free Gift d. Quality

Org - Ashian Paints

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