NARSEE MONJEE INSTITUTE OF MANAGEMENT & HIGHER STUDIES
(Deemed University)
Department of Distance Learning
Course: PGDBM II, PGDMM II, PGDFM II, PGDHRM II
Subject: Business Strategy/Corporate Strategy
17.05.2006
Time: 10.00 a.m. to 1.00 p.m.
Marks: 100
Date:
Answer any five of the following questions
1. a) Explain the purpose of a mission statement.
b) Prepare a two-page typewritten mission statement for your company of your
choice or for a business school.
c) List five potentially vulnerable areas of a firm without a stated
company mission.
2.
Define the term social responsibility. Find an example of a company action that
was legal but not socially responsible. Give a few Indian example of Indian Firms
that have incorporated Social responsibility in their mission and vision statements.
3.
What key emerging changes do you see in the global environment and
What are their implications for strategy?
Why do Company’s diversify?
4.
Explain the relevance and the implication of Porter’s generic strategies and the
five competitive forces. Can mass customization outdate his generic strategies on
an industry widespread basis?
5. Why are Joint Ventures formed? Are they relevant in the current WTO
regime? What are the characteristics and strategic issues involved in JV’s and
why do they fail?
6.
Describe the different types of co-operation strategies and illustrate each with
examples. Explain the utility of the SWOT exercise.
7.
Write short notes on any 3 of the following:
1.Stakeholder expectations
2.The Value Chain
3.Franchising & Licensing
4.Core competency & sustained competitive advantage
5.Vision & Mission statements
Q8
Case Study Asian Paints Ltd – The Indian Giant Success
Asian Paints has been the number one paints company in India since 1967. Today, from
being the biggest manufacturer of paints, the company is moving towards greater focus
on service. By 2005, the firm wants to be known as the global coating firm, with home
decoration solutions. The three thrust areas it is covering in that direction are, its brand
image and identity, its product portfolio, and its packaging innovations. Before
understanding its new focus, it will be a good idea to see its financial picture, which is
listed in Table C12.1
Table C12.1 The Financial Picture of Asian Paints Ltd
Figures
in
crores of
rupees
1998
1999
2000
2001
2002
Sales
Operating
profits
950
1,074
1,312
1,525
1,656
131
139
191
210
238
Interest
Net Profit
Loans
20
22
20
22
15
68
77
97
106
115
193
217
174
227
111
Market
cap
1,252
815
1,705
1,580
2,106
Asian Paints is into solutions for painting homes, better than what has been done by local
paint applicators.
BACKGROUND OF ASIAN PAINTS
Mr. Choksey, the father of Indian Paint industry, belonged to the laidback business
community of India. Yet his vision was to ‘See Indian homes painted in a variety of
colours from a truly Indian company.’
His mission statement read ‘To provide paints as per market demand, ensuring
desired level and quality of customer (dealer) service, continued availability of the right
product mix of right quality at the right time.’
With the near servile attitude of their dealers, MNCs took pride in serving metros
and large cities through dealers who also supplied the products to semi-urban markets;
however, they were concentrating on metros and found rural market non-existing. The
business environment was hostile to the Indian paint industry, and more so to a new
entrant.
Suppliers of raw materials were favoring MNCs because of their money power.
MNCs kept the metros satisfied with their service. The goal of Asian paints was to set up
manufacturing facility for a large variety of paints.
Its strategy was to build a paint company that could be a role model of
outstanding performance.
The divide between the poor and rich continued. The lot of farmers in Punjab,
Haryana and Andhra Pradesh was improving. In the east, the youth in Bihar took to guns
to combat poverty, and the local mafia started to thrive in Orissa. Generally, political
changes had started to take place in the 1970s. People had rejected the imposition of
Emergency and the government had changed hands. The business climate, however, did
not change much. Entry of new foreign companies was severely restricted through
government controls. Population was growing again at around 23 per 1,000, as
compulsory family planning had failed. Most citizens remained poor, with pockets of
excessive wealth. Migration of workers from Bihar and Orissa to Bengal and Punjab
continued. Industries in Bengal and Kerala suffered due to the Marxists’ role in labor
unrest.
Competitive Environment: The market for paints was stagnant. It was totally dominated
by MNCs, with the Indian companies being looked down upon. MNCs had a cartel
approach and had dealers with long-standing relationship in an oligopoly market. There
were no entry barriers into the business as paints were low tech and low capital projects.
Brand loyalty was a remnant of the Raj days. The alternative was lime based and low
cost, and used by most in poverty-ridden India. In rich homes and offices, wood paneling
was being increasingly used.
Mr. Choksey found that to fight MNCs, he had to explore the market segment that
they had neglected so far. He surveyed the market and found that semi-urban and rural
markets lay completely unexplored. However, they had special needs. ‘Low cost paint in
small containers.’ The segment needed a new distribution system as well.
Asian Paints’ value for the customers was to build through innovative package
(size), distribution, and communication. In 1970s they decided 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 a computerized
communication network.
Mr. Choksey did not have any animus towards MNCs, who had shown hostility
and created entry barriers for him.
Asian Paints differentiation strategy starts from market segment, distribution, and
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 segments.
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.
Asian Paint’s strategy of quick response translates into supplying 95 per cent of the
orders supply in 48 hours, which is a positive competitive advantage. Their R&D has
developed new products to cater to industrial and scientific segments. The paint industry
is in the growth stage in India, as construction activity has a high priority. With 27 per
cent market share, they enjoy 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 for Backward Vertical Integration by getting into manufacturing raw
materials for paints. Mr. Choksey’s style of functioning was informal as he kept
friendly relations with the depot staff and the sales team, and could be seen having tea in
some rural dealers’ shops. He started overseas operations to expend his horizons further.
Today, in 2005, the firm believes that the customers are more inclined towards its
brand. The firm’s share price has gone up from Rs.258 in August 2000 to Rs.338 in
August 2002. They have set up regional laboratories in the South Pacific and one in the
Middle East, to fulfill its global commitments. With liberalized economy, more
international brands are likely to enter the Indian market, 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, and arrange continuous market
research to enhance their competitive advantage.
Questions
1. What should be the communication strategy of Asian Paints to stay market leader?
2. Can Asian Paints plan a yearly advertising plan? If yes, for what benefits should the
plans be made? If no, why not?
Maintaining and improving brand equity for Asian Paints is the very purpose of
keeping the student quality of the product. Discuss.