Asian Paints : International Business Division

Brief

Objective
To be in top five paint companies of world

Challenge
Increasing revenue 10 times

Global Paint Market (1/4)

Global Paint Market (2/4)

Global Paint Market (3/4)

Global Paint Market (4/4)

Consolidated Sales Net Income Profitability ratio

700 600 500 400

2002 328.73 23.52 7.15%

9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00%

2003 386.92 30.93 7.99%

2004 499.27 32.23 6.46%

2005 576.85 38.73 6.71%

Profitability ratio

Sales

300
200 100 0 2002 2003 2004 2005

Net Income

2002

2003

2004

2005

APL Sales

2002 313.96

2003 353.24

2004 382.26

2005 438.94

Net Income
Profitability ratio
500 450 400 350 300 250 200 150 100 50 0

25.69
8.18%

31.56
8.93%

32.88
8.60%

38.66
8.81%

Profitability ratio
9.00% 8.80% 8.60%

Sales Net Income

8.40% 8.20% 8.00% 7.80% 2002 2003 2004 2005

2002 2003 2004 2005

IB Sales Net Income Profitability ratio

2002 14.77 -2.17 -14.69%

2003 33.68 -0.63 -1.87%

2004 117.01 -0.65 -0.56%

2005 137.91 0.07 0.05%

160 140 120 100 80 60 40 20 0 -20 2002200320042005 Net Income Sales 2.00% 0.00% -2.00% -4.00% -6.00% -8.00% -10.00% -12.00% -14.00% -16.00%

Profitability ratio

2002

2003

2004

2005

Global Expansion :

Financial performance of domestic market is good Innovation in domestic market is helping company to leverage it for International Business Reducing of cost in material in domestic market to finance the global acquisition Internationally paint market is growing Indian growth rate 10-11% whereas market in china has potential growth rate of 14-24% Berger growth rate 12.2% and Asian Paints International Growth rate 25.8%(sales)

M&A strategy
To enter the high-growth emerging markets Adopt a regional hub approach to international operations(for e.g. Dubai is a hub) Apply the emerging market business model:

Introduce new products suited to local needs Introduce new technology, accordingly Focus to improve all areas of operations, especially supply chain

M&A International Opportunities

No single MNC is present across emerging markets Plenty of scope to achieve significant presence in targeted countries Niches/segments available for Asian Paints in these markets Vast potential exists for Asian Paints, as most paint companies in these markets operate sub- optimally viz., in Supply chain, manufacturing, technology & marketing

Growth Markets Bangladesh China Egypt Malaysia Myanmar Singapore Sri Lanka Thailand UAE

Leadership Markets Jamaica Barbados Trinidad & Tobago Bahrain Nepal Fiji Solomon Islands Vanuatu Tonga

Turnaround Markets Australia Mauritius Oman Malta

Expansion Growth Matrix

Star Question Mark

Leadership Markets (High share and high growth) Indian Market (low growth and high share)
Cow

Growth Market (low share and high growth) Turnaround Market (Low share and Low growth)
Dog

Leadership Market
Market growth Rate potential -14%-24% Focus on market efficiency and expansion
45

In million $

55

APL Rest

Focus on cost efficiencies, supply chain etc

Gain market share from competition & maintain margins

Growth Market(1/2)

Value in Billion dollars

0.9 2.4

China Rest

APL typically hold 10% market share in individual market China has immense potential to grow Greenfield investment in Bangladesh

Growth Markets(2/2)
Rationalise product ranges Complete the product portfolio Improve supply chain & working capital management Implement cost structures for increased plant efficiencies, better overhead management & increased asset productivity Using information technology to maximise efficiency

Turnaround Market
Total market size $575 Million Placing profitability back on track Niche segment

Course of Action taken to enter into the market

Three parameter considered for entering into markets

I. Size of Economy II. Size of paint Market III. Nature of Competition and Investment Potential

Joint Venture is the preferred mode of venturing into the market Leveraging Technical know how of the APL

Countries

Size of Economy

Size of Competition Paint and Investment Market Potential Low market share of APL, per capita usage of paint is less than usage in developed economies Relatively high market share, Average consumption of paint Is low China s paint consumption is low, huge potential for investment

Characteristic of Market

Bahrain, GDP b/w 220.35 UAE, 4.5-5.8% million Oman, Srilanka , Banglades h ,Myamar, Nepal Carribean GDP b/w 73.24 3.1-4.5 % million

Consumer behavior is similar to India Building contractor are the major influence on the purchase Three layered distribution structure Climatic condition are same as India Technology transfer easy Distribution is the edge Berger is the main stay Personal Relationship is important with customer Local Acquisition in China Relationship is the main differentiation

China and GDP b/w 3657.8 Asia 7.5 % and 7 Pacific 3.7-5.3% million