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Asian Paints Limited :

International Business
Division
Case Study Analysis

Submitted By:
Ankesh Dev
1301-507
Section D

PGDM 2013-15

Asian Paints Limited: International Business Division

Set up in 1999, APLs International Business division has geographical reach to 23 countries.
Comprises of 21 subsidiaries by 2005:
o 4 JVs (Egypt, Samoa, Sri Lanka and Australia)
o 7 Greenfield Ventures (Oman, Fiji, Vanuatu, Nepal, Solomon Islands, Tonga and
Bangladesh)
o 10 acquisitions (Bahrain, Barbados, Jamaica, Trinidad & Tobago, China, Malaysia,
Myanmar, Singapore, Thailand and the UAE)
Objectives:
o To bring ROCE from the existing 10% to 15%.
o To secure a place among the top-five decorative paint companies in the world by the
end of this decade.
The decision to which market to enter was based on the following minimum parameters:
o The GDP of the target market should have a growth potential in excess of 6% per
annum.
o The target market should have a very limited competition with no multi-national
company (MNC).
o There should be enough opportunity available for APL to become the top three
brands within five years of entry.
For the identification of the market, the company used a matrix based on
o size of economy,
o size of paint market,
o nature of competition and
o investment period.
The company divided the market into three segments:
i. Leadership Markets: The Caribbean region, Bahrain, Fiji and Nepal were

identified as markets where APL was already a leader. Total market size is
$100million and APL had sales of $55million. IB would focus on efficiencies as
well as market expansions in these subsidiaries.
ii. Growth Markets: They were expected to drive APLs growth globally. Market
size was $3.3 billion. APL had less than 10% market share and Middle East
region was most fruitful growing at 30%.
iii. Turnaround Markets: Represented market size of $575 million but little but it
had little significance to APL. APL was a niche player in these regions.
Australia alone represented 90% market opportunity and APL was only
operating in Brisbane.
The per capita consumption pattern was like: 900 gm per capita consumption in
India compared to 2-6 kg in developing country and 10-20kg in developed countries.
IB had set up regional technology centres to facilitate cross pollinations of best
practices within regions.

Analysis
1) Does global expansion detracts the company from its core market?
The steps that a company needs to follow while entering a foreign market are:
i.
ii.
iii.
iv.
v.

Deciding whether to go abroad


Deciding which markets to enter
Deciding how to enter the market
Deciding the marketing program
Deciding on the marketing organisation

APL with its reach in 23 countries, has already made the decision to go abroad. Now in order to
decide upon which market to enter we can use the weighted average method to analyse the market
competencies of the various countries. The weightage assigned to the various factors of competency
is as follows:

GDP
Market Share
Per capita Usage
Market Size

=
=
=
=

40%
30%
20%
10%

There is one assumption made while selecting the countries. Only those countries have been
considered whose GDP is greater than equal to 5%.
Country

GDP(%)

APL's
market
share

Per capita
usage(kg)

Bahrain

45

12.49

13.3

19.328

Barbados

3.1

48

11.73

15.24

19.51

42

4.07

8.07

14.221

Fiji

Market
Weighted
size($million) average

Jamaica

3.1

76

3.47

35.9

28.324

Nepal

5.8

34

0.2

5.25

13.085

70

0.4

0.93

21.173

Solomon Islands
Tonga

3.1

62

2.62

0.67

20.431

Trinidad &
Tobago

3.7

36

4.39

19.59

15.117

Vanautu

4.5

75

1.02

0.91

24.595

Suggestions
Should expand
further

Should expand
further

0
Bangladesh

5.8

0.23

90

11.366

China

7.5

1.26

2421

245.352

Should expand
further
Should expand
further

Egypt

1.9

150

18.08

Malaysia

5.3

4.14

147

18.848

10

0.47

26

5.694

Mayanmar

Should expand
further

Singapore

4.2

15.92

152.3

20.994

Sri Lanka

5.8

0.81

34.73

8.655

Thailand

5.1

1.65

176.5

20.62

UAE

4.5

10

25.74

85.6

18.508

Australia

3.7

0.5

10.8

550

58.79

Withdraw

Oman

4.5

3.58

15.87

5.903

Withdraw

Should expand
further
Should expand
further

From the above, we can conclude that the company should expand in Bahrain, Nepal, Bangladesh,
China, Malaysia, Sri Lanka and Thailand. On the other hand, the company should withdraw its
operations from Australia owing to the fact that the market there is already saturated and three
largest players have a captive hold on the national market with 75% market share. Asian paints have
a very low presence in Australia that is only in Queensland and consumers present there also behave
in a different fashion. They believe in either Do it yourself or choose it yourself type behaviour and
Asian Paints LTD. Has not even broke even in the Australian market.
Also the profitability in Oman is too low and the market potential is very challenging and therefore a
very low growth opportunity. This does not fall in with the companys objective in getting enough
opportunities to become the top three brands in a span of five years. Therefore, a conclusion can be
drawn that APL should withdraw its operation from Oman as well.
In the period 2002-05 the profits for APL has grown consistently despite its global expansion. The per
capita consumption in India is still very low and the market is projected grow at 13 to 15 percent in
the next decade. Asian Paints enjoys strong brand equity in India which puts it on an advantageous
position in the highly commoditized industry. However, the company cannot be dependent on the
Indian market alone. It makes sense for the company to leverage its competencies in other emerging
market. The IB operations turned profitable in 2004 and APL must consolidate the gains. Moreover,
the company can exit the markets with relative ease. It can consider exiting the markets where it has
exhausted all its options.
2. Evaluate the course of action adopted by the company in different markets.
The company entered the different overseas market through
o
o
o

joint ventures
greenfield ventures
acquisition

The company took a de-risking approach to globalization. It made sure that its domestic operations
are on a strong footing before expanding globally. The markets were chosen carefully to minimize
business risks associated with international expansion. A country was chosen if it met three

minimum parameters: GDP growth potential in the excess of six percent, very limited competition
with no MNC present and a market that could provide APL with an opportunity to be among the top
three bands within five years of entry. The company entered into joint ventures in those markets
where organic growth was costly. IB categorized markets into three segments: leadership markets,
growth markets, turnaround markets. APL tailored its strategy of expansion in accordance with the
unique challenges and opportunities offered by each of these markets.
However, there were some pitfalls also. The company took a de-risking approach to globalization
and its decision to select the target market based on GDP was flawed, as GDP fluctuates over time.
Exhibit 6 also demonstrates the GDP in almost all target markets has dropped below 6 percent.

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