Swot Analysis
Content
SWOT ANALYSIS
Kansai Nerolac Pvt. Ltd. Asian Paints
Submitted to : Prof. Rajeev Kamble Submitted by: Pragati Vishwakarma (2012209)
KANSAI NEROLAC PAINTS LIMITED (KNPL)
Kansai Nerolac Paints Ltd (formerly known as Goodlass Nerolac Paints Ltd) is largest in industrial paint and second largest decorative paint company based in Mumbai. It is a subsidiary of Kansai nerolac paints, JAPAN.It is engaged in the industrial, automotive and powder coating business. It develops and supplies paint systems used on the finishing lines of electrical components, cycle, material handling equipment, bus bodies, containers and furniture industries STRENGTHS A Well Known Brand This brand has a rich heritage of over 97 years is on an aggressive mode in Indian paint market.. The company was a part of the Tata Group till 1999 when its technological partner - Japan based Kansai Paint Co Ltd took a controlling stake in the company from the Tata Group. Now Nerolac is a subsidiary of Kansai Paints and the company has been rechristened as Kansai Nerolac Paints Ltd. Being market leaders in automotive category they have most coveted customers like Maruti Suzuki, Toyota Kirloskar, GM, Tata Motors, HM, Yamaha, Honda, Volvo India, Ashok Leyland etc.. Leader in Industrial Paints Segment Kansai Nerolac is the second largest coating company in India and a market leader in Industrial coating. Pan India Presence & Strong Distribution Network Headquartered in Mumbai, company’s manufacturing facilities are located at Uttar Pradesh, Maharashtra, Tamil Nadu and Haryana.In India the company has presence in Assam, Goa, Gujarat, Haryana, Himachal Pradesh, Madhya Pradesh, Orissa, West Bengal, Rajasthan, Maharashtra, Punjab, Uttaranchal, Bihar, New Delhi, Tamil Nadu, Uttar Pradesh and many more. Nerolac has a wide distribution network of over 11,000 dealers which one of the key strength of company. Company also operates through 66 depots. Technological Edge IT has transformed Nerolac's function-based legacy system into a process-based organized system by investing and implementing the SAP R/3 solution. Nerolac has always followed a robust Information Technology roadmap and during the last decade it has implemented core SAP applications like SAP R/3, SAP Supply Chain and supported Dealer and Vendor portal Company's Hallmark- Innovative Products Company’s R&D facility focuses on improving its manufacturing processes and innovate its products. This facility has officially recognized by the Department of Science and Technology (DTI), Government of India. They always focus on product innovations. Huge Capacity Expansion Plans Kansai Nerolac Paints made an investment of Rs. 400 crore for capacity expansion in the year 2012. It gave a positive signal to all its stakeholders to invest in the company.
Almost Debt Free The company is almost debt free. The trick is that it also survives on what it calls sales tax deferrals, which came to a nice Rs 878 m at year end. Furthermore, it is also cash rich. The value of its investments at year end amounted to Rs 4 bn. The company generates quite some cash, as it has to dole out only minimum credit for sales, and with control over inventory management and manageable capex on the one hand, and being able to squeeze creditors on the other, it generates 'moolah' faster than it can spend it, in a normal year. WEAKNESSES Dependence on Industrial Coatings Nerolac should also focus on the decorative segment. It is a leader in the industrial coating segment. But as it is not focusing on the decorative segment it is losing a lot of potential business customer in the same. Being too much dependent on industrial coating segment can hinder the growth of the company. Pricing Power Limited In Industrial Coatings As the industries buy the product in bulk, it negotiates on the price being offered by a company. As the industries have several other options the pricing power in limited in the industrial coating segment. Changing customer taste and perception In decorative paints Industry Customer tastes and perceptions change very fast and products may become obsolete with change in trends, hence production planning and inventory problem is one of the issues in this segment. OPPORTUNITIES Environment Friendly Paints: Awareness about the environment friendly paints which are lead free and have low VOC is increasing among the masses. KNPL being a pioneer in this has initiated many steps to garner market share on this front. KNPL is prepared to face regulation of environmental laws with lead free, low VOC paints. Housing Loan Interest: The year saw subdued activity in the housing infrastructure segment. During the last quarter of the year there was are duction in interest rate by the central bank. This could signal a change in the fortunes in the housing sector and could lead to better demand in the future Capitalizing on Growth potential in rural India and Infrastructure development There is a ample scope in the rural segment and focusing on the same can boost the growth of the company. . Low Per Capita Consumption Of Paints In India-Room For Growth also in an indication for opportunity.
Expansion initiatives Expansion initiatives can be considered as economies of scale and possibility of exporting to neighboring emerging economies then comes into the picture. THREATS Raw Material & Crude Oil Petroleum based raw material and crude oil is the backbone of the business. The prices of raw material continuously rose for a greater part of the year. Crude oil prices also showed an uptrend. Continued increase in raw material prices could create pressure on bottom-line. Inflation: There is lot of uncertainty about inflation. This has impacted consumer sentiment Currency Depreciation: During the whole year exchange rate was unfavourable and the Rupee touched its lowest ever value. If the rupee further continues its downfall, costs of imported spares, technology royalties, raw materials and capital goods can significantly shoot up, impacting the Company’s bottom line. The Company is meeting these threats through a series of internal programs aimed at reducing the impact. Changing Customer preference: One of the most important risk factors is changing customer choices and sustainability of the business. The Company is prepared to handle it through environment friendly products, world class technological innovations, speed of response and operational excellence which are important attributes for risk handling. Rules and Regulations Stringent Government rules and regulations regarding the quality of products and manufacturing facilities as Environment policies are given more emphasis Stiff Competition Competition from national and international brands as they target India owing to its large market. Slowdown In Auto And Non-Auto Industrial Segment This can be a crucial issue. As Nerolac is more into industrial coatings, the slowdown in the auto and non auto industrial segment can significantly impact the company. ---------------------------------------------------------------------------------------------------------------------
ASIAN PAINTS
Since its foundation in 1942, Asian Paints has come a long way to become India’s largest and Asia’s third largest paint company, with a turnover of Rs. 109.70 billion. Asian Paints operates in 17 countries and has 25 paint manufacturing facilities in the world servicing consumers in over 65 countries.
STRENGTHS Well known brand Most renowned brand in Indian Paint Industry & its strong customer focus and innovative-spirit has made it market leader since 1968. They have maintained their brand name and increased awareness by unique ways of advertising and roping in celebrities like Saif Ali Khan. Largest paint company The largest paint company in India and third largest company in Asia. They have over 50% of market share and are clear leaders decorative paints and are strong competitors to Kansai Nerolac to be leaders in Industrial paints and coatings. Global presence They operate in 17 countries and have 24 manufacturing facilities providing service to 65 countries all over the world.Asian paints has strong international presence with its four 4 subsidiaries; Berger International Limited, Apco Coatings, SCIB Paints and Taubmans. Coverage of market Comprehensive nation wide coverage of the market – urban, semi-urban and rural areas. They have quite a number of brands, covering all segments and filling all gaps. For example, they have brands in different price slots like Utsav for rural lower-end markets and Apcolite for high endmarkets. Presence in urban as well as rural Unlike its competitors who concentrate only in urban areas, AP is found everywhere. It has a country wide distribution Superior Technology Superior technologies deployed to achieve maintain the competitive edge for eg. Supply chain management system that integrates plants, regional distribution centers, outside processing centers etc. hence they have strongest supply chain system with Financials The company has strong financials. Leader in profit and operating margins, ROI of AP is 40% while ROI of the rest of the industry is 22%, Net worth of Rs 204 crores against Rs 58 crores of Nerolac and Rs 41 crores of Berger. WEAKNESSES Limited market share in industrial paints Limited market share in industrial paints segment with Kansai Nerolac and Akzonobel giving stiff competition. In industrial paints, AP has only a 15% market share. It is far behind the leader Goodlass Nerolac, which has a market share of 43%. Since this is going to be the major growth segment in the future, a lag in this segment will end up as a major weakness Technology in industrial paints AP has a major weakness on the technology front in industrial paints. Most paint firms have technology tie-ups with manufacturers abroad. For example,Goodlass Nerolac has a tie-up with Kansai paints, which has provided the company with Cathodic Electro Deposition (CED)
technology. Since Kansai is the supplier to Suzuki, Japan, Goodlass with its Kansai connection finds it easy to tap Maruti in India. AP has not been able to make any significant advances either with Maruti or the auto segment in general. Berger has a technical tie up wuth Herbets, Germany,for automotive paints, Valspar Corp, USA for heavy-duty coatings and Teodur NV, Holland for powder coatings. Ever expanding product mix Widening product mix puts strain on production distribution, accounting and administration. Ever expanding product mix throws some strain on inventory management as well. OPPORTUNITIES Developing industrial paint market There is a good scope for growth especially in industrial paints category, especially in automobile industry which accounts for 50% of Industrial paint market. More investment in technology Competitors are going for Hi-tech process and Asian paints with good financial and intellectual capital can go for hi-tech. Competitors have gone in for hi-tech with instacolour spot mixing. For example, J&N’s instacolour offers 626 shades THREATS Capture of Industrial market Since both Nerolac (43%) and Berger’s (14%) have a higher market share than AP’s (14%), it is possible that in the future, they may capture the entire industrial paint market; Rules and Regulations Stringent Government rules and regulations regarding the quality of products and manufacturing facilities as Environment policies are given more emphasis. Changing Customer preference: One of the most important risk factors is changing customer choices and sustainability of the business. The Company is prepared to handle it through environment friendly products, world class technological innovations, speed of response and operational excellence which are important attributes for risk handling. Inflation: There is lot of uncertainty about inflation. This has impacted consumer sentiment
Kansai Nerolac Pvt. Ltd. Asian Paints
Submitted to : Prof. Rajeev Kamble Submitted by: Pragati Vishwakarma (2012209)
KANSAI NEROLAC PAINTS LIMITED (KNPL)
Kansai Nerolac Paints Ltd (formerly known as Goodlass Nerolac Paints Ltd) is largest in industrial paint and second largest decorative paint company based in Mumbai. It is a subsidiary of Kansai nerolac paints, JAPAN.It is engaged in the industrial, automotive and powder coating business. It develops and supplies paint systems used on the finishing lines of electrical components, cycle, material handling equipment, bus bodies, containers and furniture industries STRENGTHS A Well Known Brand This brand has a rich heritage of over 97 years is on an aggressive mode in Indian paint market.. The company was a part of the Tata Group till 1999 when its technological partner - Japan based Kansai Paint Co Ltd took a controlling stake in the company from the Tata Group. Now Nerolac is a subsidiary of Kansai Paints and the company has been rechristened as Kansai Nerolac Paints Ltd. Being market leaders in automotive category they have most coveted customers like Maruti Suzuki, Toyota Kirloskar, GM, Tata Motors, HM, Yamaha, Honda, Volvo India, Ashok Leyland etc.. Leader in Industrial Paints Segment Kansai Nerolac is the second largest coating company in India and a market leader in Industrial coating. Pan India Presence & Strong Distribution Network Headquartered in Mumbai, company’s manufacturing facilities are located at Uttar Pradesh, Maharashtra, Tamil Nadu and Haryana.In India the company has presence in Assam, Goa, Gujarat, Haryana, Himachal Pradesh, Madhya Pradesh, Orissa, West Bengal, Rajasthan, Maharashtra, Punjab, Uttaranchal, Bihar, New Delhi, Tamil Nadu, Uttar Pradesh and many more. Nerolac has a wide distribution network of over 11,000 dealers which one of the key strength of company. Company also operates through 66 depots. Technological Edge IT has transformed Nerolac's function-based legacy system into a process-based organized system by investing and implementing the SAP R/3 solution. Nerolac has always followed a robust Information Technology roadmap and during the last decade it has implemented core SAP applications like SAP R/3, SAP Supply Chain and supported Dealer and Vendor portal Company's Hallmark- Innovative Products Company’s R&D facility focuses on improving its manufacturing processes and innovate its products. This facility has officially recognized by the Department of Science and Technology (DTI), Government of India. They always focus on product innovations. Huge Capacity Expansion Plans Kansai Nerolac Paints made an investment of Rs. 400 crore for capacity expansion in the year 2012. It gave a positive signal to all its stakeholders to invest in the company.
Almost Debt Free The company is almost debt free. The trick is that it also survives on what it calls sales tax deferrals, which came to a nice Rs 878 m at year end. Furthermore, it is also cash rich. The value of its investments at year end amounted to Rs 4 bn. The company generates quite some cash, as it has to dole out only minimum credit for sales, and with control over inventory management and manageable capex on the one hand, and being able to squeeze creditors on the other, it generates 'moolah' faster than it can spend it, in a normal year. WEAKNESSES Dependence on Industrial Coatings Nerolac should also focus on the decorative segment. It is a leader in the industrial coating segment. But as it is not focusing on the decorative segment it is losing a lot of potential business customer in the same. Being too much dependent on industrial coating segment can hinder the growth of the company. Pricing Power Limited In Industrial Coatings As the industries buy the product in bulk, it negotiates on the price being offered by a company. As the industries have several other options the pricing power in limited in the industrial coating segment. Changing customer taste and perception In decorative paints Industry Customer tastes and perceptions change very fast and products may become obsolete with change in trends, hence production planning and inventory problem is one of the issues in this segment. OPPORTUNITIES Environment Friendly Paints: Awareness about the environment friendly paints which are lead free and have low VOC is increasing among the masses. KNPL being a pioneer in this has initiated many steps to garner market share on this front. KNPL is prepared to face regulation of environmental laws with lead free, low VOC paints. Housing Loan Interest: The year saw subdued activity in the housing infrastructure segment. During the last quarter of the year there was are duction in interest rate by the central bank. This could signal a change in the fortunes in the housing sector and could lead to better demand in the future Capitalizing on Growth potential in rural India and Infrastructure development There is a ample scope in the rural segment and focusing on the same can boost the growth of the company. . Low Per Capita Consumption Of Paints In India-Room For Growth also in an indication for opportunity.
Expansion initiatives Expansion initiatives can be considered as economies of scale and possibility of exporting to neighboring emerging economies then comes into the picture. THREATS Raw Material & Crude Oil Petroleum based raw material and crude oil is the backbone of the business. The prices of raw material continuously rose for a greater part of the year. Crude oil prices also showed an uptrend. Continued increase in raw material prices could create pressure on bottom-line. Inflation: There is lot of uncertainty about inflation. This has impacted consumer sentiment Currency Depreciation: During the whole year exchange rate was unfavourable and the Rupee touched its lowest ever value. If the rupee further continues its downfall, costs of imported spares, technology royalties, raw materials and capital goods can significantly shoot up, impacting the Company’s bottom line. The Company is meeting these threats through a series of internal programs aimed at reducing the impact. Changing Customer preference: One of the most important risk factors is changing customer choices and sustainability of the business. The Company is prepared to handle it through environment friendly products, world class technological innovations, speed of response and operational excellence which are important attributes for risk handling. Rules and Regulations Stringent Government rules and regulations regarding the quality of products and manufacturing facilities as Environment policies are given more emphasis Stiff Competition Competition from national and international brands as they target India owing to its large market. Slowdown In Auto And Non-Auto Industrial Segment This can be a crucial issue. As Nerolac is more into industrial coatings, the slowdown in the auto and non auto industrial segment can significantly impact the company. ---------------------------------------------------------------------------------------------------------------------
ASIAN PAINTS
Since its foundation in 1942, Asian Paints has come a long way to become India’s largest and Asia’s third largest paint company, with a turnover of Rs. 109.70 billion. Asian Paints operates in 17 countries and has 25 paint manufacturing facilities in the world servicing consumers in over 65 countries.
STRENGTHS Well known brand Most renowned brand in Indian Paint Industry & its strong customer focus and innovative-spirit has made it market leader since 1968. They have maintained their brand name and increased awareness by unique ways of advertising and roping in celebrities like Saif Ali Khan. Largest paint company The largest paint company in India and third largest company in Asia. They have over 50% of market share and are clear leaders decorative paints and are strong competitors to Kansai Nerolac to be leaders in Industrial paints and coatings. Global presence They operate in 17 countries and have 24 manufacturing facilities providing service to 65 countries all over the world.Asian paints has strong international presence with its four 4 subsidiaries; Berger International Limited, Apco Coatings, SCIB Paints and Taubmans. Coverage of market Comprehensive nation wide coverage of the market – urban, semi-urban and rural areas. They have quite a number of brands, covering all segments and filling all gaps. For example, they have brands in different price slots like Utsav for rural lower-end markets and Apcolite for high endmarkets. Presence in urban as well as rural Unlike its competitors who concentrate only in urban areas, AP is found everywhere. It has a country wide distribution Superior Technology Superior technologies deployed to achieve maintain the competitive edge for eg. Supply chain management system that integrates plants, regional distribution centers, outside processing centers etc. hence they have strongest supply chain system with Financials The company has strong financials. Leader in profit and operating margins, ROI of AP is 40% while ROI of the rest of the industry is 22%, Net worth of Rs 204 crores against Rs 58 crores of Nerolac and Rs 41 crores of Berger. WEAKNESSES Limited market share in industrial paints Limited market share in industrial paints segment with Kansai Nerolac and Akzonobel giving stiff competition. In industrial paints, AP has only a 15% market share. It is far behind the leader Goodlass Nerolac, which has a market share of 43%. Since this is going to be the major growth segment in the future, a lag in this segment will end up as a major weakness Technology in industrial paints AP has a major weakness on the technology front in industrial paints. Most paint firms have technology tie-ups with manufacturers abroad. For example,Goodlass Nerolac has a tie-up with Kansai paints, which has provided the company with Cathodic Electro Deposition (CED)
technology. Since Kansai is the supplier to Suzuki, Japan, Goodlass with its Kansai connection finds it easy to tap Maruti in India. AP has not been able to make any significant advances either with Maruti or the auto segment in general. Berger has a technical tie up wuth Herbets, Germany,for automotive paints, Valspar Corp, USA for heavy-duty coatings and Teodur NV, Holland for powder coatings. Ever expanding product mix Widening product mix puts strain on production distribution, accounting and administration. Ever expanding product mix throws some strain on inventory management as well. OPPORTUNITIES Developing industrial paint market There is a good scope for growth especially in industrial paints category, especially in automobile industry which accounts for 50% of Industrial paint market. More investment in technology Competitors are going for Hi-tech process and Asian paints with good financial and intellectual capital can go for hi-tech. Competitors have gone in for hi-tech with instacolour spot mixing. For example, J&N’s instacolour offers 626 shades THREATS Capture of Industrial market Since both Nerolac (43%) and Berger’s (14%) have a higher market share than AP’s (14%), it is possible that in the future, they may capture the entire industrial paint market; Rules and Regulations Stringent Government rules and regulations regarding the quality of products and manufacturing facilities as Environment policies are given more emphasis. Changing Customer preference: One of the most important risk factors is changing customer choices and sustainability of the business. The Company is prepared to handle it through environment friendly products, world class technological innovations, speed of response and operational excellence which are important attributes for risk handling. Inflation: There is lot of uncertainty about inflation. This has impacted consumer sentiment
