COMPETITIVE STRATEGY ANALYSIS

OF BERGER PAINTS
Gourab Biswas 1301070
Priyanka Dewri 1301084
Siddhartha Mondal -1301098
Samantha Saradhy -1301111

By
PROJECT REPORT
ABSTRACT: WHAT ARE THE MAJOR COMPETITIVE STRATEGIES FOLLOWED BY
BERGER PAINTS IN CONTEXT TO THE INDIAN PAINT INDUSTRY

BERGER PAINTS COMPETITIVE STRATEGY ANALYSIS
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TABLE OF CONTENTS
TABLE OF CONTENTS .......................................................................................................................1
INDIAN PAINT INDUSTRY A BRIEF HISTORY ..............................................................................2
INDUSTRY STRUCTURE ....................................................................................................................3
INDUSTRY SEGMENTATION ............................................................................................................4
PORTERS FIVE FORCES ANALYSIS ................................................................................................5
UNDERLYING DRIVERS OF EACH FORCE.......................................................................................7
PROFITABILITY OF THE INDUSTRY ................................................................................................9
CONCENTRATION RATIO .................................................................................................................9
4-FIRM CONCENTRATION RATIO............................................................................................... 10
HERFINDAHL INDEX ................................................................................................................... 10
NON MARKET FORCES IN THE PAINT INDUSTRY ....................................................................... 10
COMPETITIVE STRUCTURE OF INDIAN PAINT INDUSTRY ......................................................... 11
ORGANIZATIONAL COLLABORATIONS........................................................................................ 13
BERGERS GROWTH STORY ........................................................................................................... 13
RESOURCE BASED VIEW ................................................................................................................ 14
VRIO FRAMEWORK ......................................................................................................................... 15
VALUE CHAIN ANALYSIS............................................................................................................... 16
VARIATION OF COSTS OF BERGER WITH INDUSTRY ................................................................. 17
COMPARATIVE ADVANTAGE BERGER Vs INDUSTRY.............................................................. 18
INDUSTRY DISTRIBUTION & SELLING COSTS....................................................................... 18
BERGER-SELLING & DISTRIBUTION COSTS ............................................................................. 18
COMPARITIVE DISADVANTAGE BERGER VS ASIAN PAINTS .................................................. 18
BERGER PAINTS IN LIGHT OF THE PORTERS FIVE FORCES ...................................................... 19
THE INDUSTRY OUTLOOK AFTER 5 YEARS ................................................................................. 19
BERGER PAINTS FUTURE STRATEGY ........................................................................................... 21
Appendix ............................................................................................................................................ 22
References .......................................................................................................................................... 25



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INDIAN PAINT INDUSTRY A BRIEF HISTORY
The Indian Paint Industry is more than 100 years old. Its first origin can be traced back to the inauguration
of Shalimar Paints in Kolkata back in 1902. Till World War II, the whole industry comprised of two foreign
players and rest small players. After the war ended, the import came to a standstill so the only option left
was to locally manufacture paints in India. Therefore local entrepreneurs started showing interests and
they set up local facilities. Still the foreign players were the dominant forces i n the market which is the
current scenario as well. British paint companies such as Goodlass Walls (now Kansai Nerolac), ICI, British
Paints (now Berger Paints), Jenson & Nicholson and Blundell & Eomite enjoyed the complete dominance in
the market. One notable mention during the post independent Paint Industry would be of AsianPaints, a
completely Indian firm which started on a very small scale and finally grew so large that today it is the
market leader of the Indian Paints industry.
The post-independence era also saw the growth of many small Indian manufacturing units which got
started in various places like Kanpur, Calcutta and Bombay. The British units though small in number were
superior in terms of technology and financial strength and they still enj oyed the dominant part of the
market share. This era saw a huge growth in the Indian Paint industry with a mere Rs. 200 million turnover
in 1950 to Rs. 1400 million in 1990.
But despite all these, paint was seen a luxury item in Indian households. Only the rich people used paints
on their walls and that too it was only for decorative purposes. The concept of paints being used a
protective coating on the walls was still unheard of. The industrial segment which produced lower
revenues than the decorative segment carried a similar notion. As a result of this misconceived notion, the
Government increased the duties in the early nineties on the paint segments in order to augment
exchequer revenues. The consequence was unavoidable. It resulted in a downturn in the economy of the
industry. The highly elastic products showed a negative growth rate. The next year was not a good one.
The industry grew only by 1% supporting the fact that the industry requires lower duties in order to grow
according to its potential. Finally in consequence with the liberalized policies and with subtle
understanding that Paint is not a luxury item, the Government started progressively reducing the duties
from 1993-94.
This move by the Government helped the industry to grow. Also the opening up of the economy allowed
the Indian firms to foray into foreign markets. All these factors contributed in double digit growth figures
for the industry. From a decent growth of 8% in 1993-94, the growth touched to 12% in one year 1994-95.
Rapid industrialization and the rising growth of infrastructures such as telephone, transport and energy
have further promoted the Indian Paint industry. In aid with the liberalized policies introduced by the
Government, many foreign players have started investing money in this sector further bolstering the
growth. There has been a constant rise in demand of decorative and protective paints in the last decade
resulting in technological innovations and indigenous developments.
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INDUSTRY STRUCTURE
The Indian Paints Sector is valued 6800 crores in value terms and is highly fragmented. The current
demand is estimated to be around 650,000 tonnes per annum and is seasonal in nature. The per capita
consumption stands at 1.0 Kg per annum compared to 1.6 Kg in China and 22 Kgs in developed economies.
Indias share in the world paint market is just 0.6%.
The Indian Paint industry can be divided as
The organized sector comprising of large and medium size units.
The unorganized or the small scale sector.
There are now twelve players in the organized sector with a market sector of 70%. This is in contrast to
55% which was there few years back. The major companies in this sector include Asian Paints (44% market
share), Berger Paints (15 % market share), ICI (12% market share), Kansai Nerolac (15% market share),
Jenson Nicholson (6% market share), Shalimar Paints and Rajdoot Paints. The organized sector has grown
at a rate of 11.5 % in the previous five years. The unorganized sector comprising of over 5000 units has a
market share of 30%. Recently market leaders like Akzo Noble, PPG, DuPont and BSF have set up base in
India with product ranges such as auto refinishes powders and industrial coatings. Kansai Paints of Japan,
which entered into collaboration with Kansai Nerolac in 1984, is now the holding company of Kansai
Nerolac with 64.52% equity holding. PPG has a joint venture with Asian Paints to manufacture industrial
coatings.



0.00
50.00
100.00
150.00
200.00
250.00
2008-09 2009-10 2010-11 2011-12 2012-13
Industry Sales (in billion Rs.)
Industry Sales (in
billion Rs.)
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INDUSTRY SEGMENTATION
The industry segmentation of the Indian Paint Industry is as follows:














1. Decorative Segment This segment caters to the housing sector and it consists of products like
enamels, emulsions, distempers, wood finishes and exterior coatings. These products are
witnessing a steady growth in the last few years. A steady increase in real estate can be one of the
prime causes for this. In this sector the types of paints available in the market and their utility are:
Acoustic Paint: specially designed for acoustic tiles
Alkyd Resin Paint: good trim, doors, faux finishes and other maximized use areas
Drip less Paint: This paint is thicker and is most suitable for application on ceilings
Latex Paint: good for applicability and it dries much quickly & easier to wash.
One-Coat Paint: It is the more expensive version of the latex and alkyd paints and is mostly
chosen for surfaces that require flawlessness in color.
Primers: paint used in the initiation for all interior paint works.
Rubber-Base Paint: This is best for concrete and bri cks.

Indian Paint
Industry
Decorative Segment
(70%)
Industrial Segment
(30%)

Enamels Emulsions
Exterior
Coatings
Distempers
Coal
Coatings
Powder
Coatings
Wood
Finishes
Automotive
Paints
Machine
Paints
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2. Industrial Segment Industrial paints comprising of 30% of the market share include automobile
paints, general industrial coatings, machine paints, coal coatings, powder coatings, marine
coatings and high performance coatings. The automobile segment is further bifurcated into OEMs
and auto refinishes. The automotive paints and the general industrial coatings occupy top slot in
terms of production. Kansai Nerolac is the market leader in this segment. Demands for these
plants are relatively price inelastic but it is prone to business cycles and depends on industrial and
economic growth. The industrial segment due to its specialized technology and high capital
expenditure attract only few investors. Most Indian companies have tied with one of the foreign
firms in order to get access to capital and technological advancements.

PORTERS FIVE FORCES ANALYSIS

Industrial Paints : Demand by Sectors
Automotive
Marine
General Industrial
Coal Coatings
High Performance Coatings
Powder Coatings
Existing
Competitors
Rivalry :
Medium
Threat of
New
Entrants :
Medium
Bargaining
Power of
Suppliers :
High
Threat of
Substitutes:
Low
Bargaining
Power of
Buyers :
Medium

Power of
Compliments:
Medium

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1. Existing Competitors Rivalry -The current condition of the market looks bright with ample
growth opportunities for all the players. Almost 80% of the organized market share is occupied by the top
four players. However the competition can only increase from this point as market gets saturated but that
will definitely take some time. Till that point the competitors can co-exist and keep satisfying the customer
with a healthy profit margin. The rivalry between the existing competitors therefore can be said as
Medium.

Competitors Business Models
i. Asian Paints Overall market Leader due to cost leadership strategy
ii. Kansai Nerolac Market Leader in Industrial Paints Segment, also present in decorative paints
segments.
iii. Akzo Nobel Major revenue comes from decorative segment. Also present in automobile paints.
iv. Shalimar Paints Oldest Company. Mainly into decorative and non-automobile paints.

2. Bargaining Power of the Buyers The main customers of the decorative and industrial paints are
households and automobile industry respectively. For household paints, the customers can be contractors
(who can buy in bulk) or the end-users (people who paint/re-paint their houses). These buyers are very
price sensitive as they have the power to choose between the brands. Their decisions are based on quality,
price and other differentiating factors (weather protection features for protective coatings). The
unorganized sector also provides the customers with cheaper options which further increased the buyers
bargaining powers. However the players each one of them have their own market expertise which brings
down the bargaining power. Therefore the bargaining power of the buyers can be attributed as medium
to high.Shalimar paints although being the oldest company in the industry has failed to cope with the
changing attitude of buyers and could not produce proper product mix. With more and more players
coming into the picture and more products available, buyer power will be more intense in coming years.

3. Bargaining Power of the Suppliers The Indian Paint Industry is a very raw material intensive
industry with as many as 300 manufacturers involved in the whole manufacturing process. The raw
materials can be of different categories like solvents, pigments, additives. Titanium dioxide is one major
constituent of the raw material the price of which is fixed globally. Besides, many of these suppliers are
trying to enter the industry themselves. All these factors result in solid bargaining power of the suppliers.
There the bargaining power of the suppliers can be said to be high.

4. Threat of New Entrants: As stated before the Indian Paint industry is dominated by few key
players and many of these are almost century old firms. So the new entrant will find it difficult to match
the knowledge base which they have gathered through all these years. The entry barriers of the industry
are as follows :
Brand equity of present players
Distribution network
Cost of modification of products
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Access to technology
Technical Servicing
However new technologies are available which can reduce the life cycle of production and the new
entrants can use these technologies. Therefore, the threat of new entrants is medium.In recent years
international players like PPG, DuPont and Sherwin Williams are entering the market with their
international experience and resources. In coming years this force may act as major game changer in the
industry.
5. Threat of Substitutes: The number of substitutes available for paint is very minimal. In the rural
areas, one substitute which is conveniently used is lime wash. One more substitute mainly used in urban
areas is wallpaper. In the urban areas, the emergence of glass walls in corporate offices and malls which
reduces the usage of paints can be one more major substitute. But still now, the threat of substitutes is
low as the alternate measures are not yet developed. But this threat has the potential to increase in the
subsequent years.

6. Power of Compliments: Apart from these five forces the paint industry has complements too.
Housing industry is the complement to the paint industry in the decorative segment and automobile
industry is the complement to the industrial segment. As the real estate business is booming so it is
positively affecting the business of the firms in the paint industry.

Moreover the automobile industry in India is fast growing and there is more demand for automobiles, so
the paint industry is benefitted by this industry. The decorative segment is cyclical in nature with sales
linked to festival season.
UNDERLYING DRIVERS OF EACH FORCE
1. Competitive rivalry:
Few major players: Market is highly concentrated and it is an example of oligopoly where the entry
barrier is very high. The players have different strategies to sustain their businesses. Asian paints have
a huge line of products that gives it an adequate product mix. Nerolac strives by capturing the
industrial segment. Shalimar is serving the low end customers thus competing with the local
unorganized sector players.
Price sensitivity is high for the customers and there is a chance of price competition also due to less
scope of product differentiation. The oligopolistic nature may prevent a bitter price competition
among the existing players to sustain profitability.

2. Threat of New Entrants
Increase in rivalry: As there are already established players in the market so the need to fight for
market share is strong, and this will lead to price war. This will in turn make the existing players keep
their prices down.
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3. Bargaining Power of Buyers
Changing nature of market and consumers: There is also increase in urbanization, income and
education among the population. The consumer habits are also changing due to the increase of these
factors. Now, the customers are more educated and are brand conscious.

4. Bargaining Power of Suppliers
Suppliers include Chemical Manufacturers, Petrochemical manufacturers.
Oligopolistic Nature of suppliers: The paint industry is raw material intensive. Paint involves the mixing
of various raw materials in various proportions. 300 products are used in the manufacturing of the
final product. Hence bargaining power of suppliers is strong.
Suppliers are unique and differentiated- pigments, solvents, binders, additives are specific raw
materials that are bought from specific players. The main raw materials are color, solvent, pigments
etc. Most of which are petroleum by-products. Petroleum industry being of oligopolistic nature it has
huge power over the prices of the materials it supplies. Also some raw materials are produced by 1-2
petroleum companies like Reliance industries, giving them a monopolistic power over the prices of the
products it supplies to the paint industry.
5. Threat of Substitutes
Availability of Substitutes is medium and in most of the cases either very costly or of inferior quality.
Repetitive cost of painting: Painting is a cyclic process that needs to be done after a certain time
period periodically. The time and cost incurred for the process is huge. Metallic finishes and oxidation
process are used to give the product a more matt and sleek look in case of industries. Also, these
metallic options are considered more convenient as there are no issues of re-painting etc.
Cost: Painting being a costly item with respect to economic condition of most of the Indians, rural
population and lower income group people refrains from using paints.
By assessing the overall industry and the five forces we have arrived at a conclusion that all the forces in
the paint industry are low to moderate. It can be concluded that that the paint industry is facing a lot of
challenges from all directions in the competitive scenario and they have to stay informed in this highly
competitive market. The success of the paint industry will now depend on the brand image built by them.
To prosper in the market the companies will have to do more than just sell paints.


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PROFITABILITY OF THE INDUSTRY
As you can see from the Exhibit, the profitability (profit margin) of the industry has increased year to year
with a sudden dip in 2010-11(shown in the graph below) which can be traced to the increase in the cost of
Titanium Dioxide during that time. So even the sales margin increased, the profit margin plummeted. On a
whole, the Indian Paint industry can be said as a profitable industry.


CONCENTRATION RATIO
The concentration ratio is the measure of the percentage market share in an industry held by the largest
firms within that industry. In general percentage of combined production of leading four or eight firms in
the industry is calculated for analysis. This gi ves us an idea about whether the said industry is competitive
state or going towards concentration or an oligopolistic or monopolistic industry. A comparison between a
previous period and current period would give us a better view of the trend of the industry. Indian paint
industry is dominated by mostly 4 large players. Using them we get the below 4 firm concentration ratio.




0
50
100
150
200
250
Sales Revenue
PAT
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
Profitability
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4-FIRM CONCENTRATION RATIO
Name Sales Total Sales Sales/Total Sales Market Share
Asian Paints Ltd. 105017 2,10,359.30 0.499226799 49.92267991
Kansai Nerolac Paints
Ltd.
33736.3 2,10,359.30 0.160374654 16.03746542
Berger Paints India
Ltd.
33454.3 2,10,359.30 0.159034091 15.90340907
Akzo Nobel India Ltd. 24642 2,10,359.30 0.117142432 11.7142432
If concentration ratio is 1-50% then there is a low concentration and the competition can be called as near
perfect competition. Similarly if the percentage is 50-80% the competition becomes concentrated for a
few bigger players in the market. A 80-100% concentration, in this case, signifies oligopolistic competition.
HERFINDAHL INDEX
Herfindahl Index is a commonly accepted measure of market concentration. It takes into account the
market share of the competitors. The summation of their squared values designates the value of the Index.
The value ranges from 0 to 10,000.
The closer a market is to being a monopoly, the higher the market's concentration and the lower its
competition. For a monopoly the value would be a perfect 10,000 and for a perfectly competitive market
the value would be nearly zero.
Name Sales Total Sales Sales/Total
Sales
Market Share Square of
Market share
Asian Paints
Ltd.
105017 2,10,359.30 0.499226799 49.92267991 2492.273969
Kansai Nerolac 33736.3 2,10,359.30 0.160374654 16.03746542 257.2002972
Berger Paints 33454.3 2,10,359.30 0.159034091 15.90340907 252.9184201
Akzo Nobel 24642 2,10,359.30 0.117142432 11.7142432 137.2234938
Shalimar Paints 6030.3 2,10,359.30 0.028666667 2.866666698 8.217777959
Here considering only 5 top players of the paint industry we get the Herfindahl index as 3150 units. From
the value it can be said that the industry is very much concentrated for the top 5 players.
NON MARKET FORCES IN THE PAINT INDUSTRY
Paint industry as a whole gets affected by one serious concern, its impact on the environment. Various
components, such as heavy metals like lead and chromium used in the paints as ingredients remains a
serious health issue all over the world. Paints are considered as a major reason of indoor air pollution.
Conventional paints can make indoor air a chemical cocktail, even long after they have dried, as they
continue to release petroleum based solvents, called Volatile Organic Compounds (VOCs) as they cure.
Heavy metals are mainly used in industrial paints is a big concern. Weak health and safety norms at work in
India puts workers at high risk to these health issues.
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Institutions: Environmental concerns have traditionally been low in India, putting government as the sole
actor to enact regulations and check usage of such elements in the paints. General public is still not much
aware about the impacts of paint on the environment. Also, heavy and indispensible use of industrial
paints in military prevents government from forming stricter regulations against use of unsafe materials in
paints. Unavailability of proper substitutes is also to be blamed.
Interests: The main interest is health and safety of the users and workers of paint industry who are
exposed to the environment. Government has also to keep in consideration the essentiality of the usage of
paints. Growth in infrastructure, industries, military etc. requires a balanced approach towards any
restrictive regulations.
Information: As of now use of VOCs, heavy metals are discouraged to be used in decorative paints as a
means to prevent serious health related issues. However unavailability of substitutes has been an issue.
Industrial paints are of absolute necessity and going to be the major part of paint industry in future as a
country grows towards development.
COMPETITIVE STRUCTURE OF INDIAN PAINT INDUSTRY



38%
14% 9%
8%
6%
25%
Market Share of Decorative Paints
Asian Paints
Goodlass Nerolac
Berger Paints
Azko Nobel
Shalimars
Others
41%
15%
10%
9%
8%
17%
Market Share of Industrial Paints
Goodlass Nerolac
Asian Paints
Berger Paints
Azko Nobel
Shalimars
Others
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Indian paint industry can best categorized as organized and unorganized players at first. The major players
in organized sector are,
Asian Paints: Asian Paints is an Indian chemical company which produces paints for decorative and
industrial use. Starting its journey in 1942 today it has become Asias 3
rd
largest and Indias largest paint
company with a 44% market share in India paint industry. Its an undisputed leader in decorative and
paints sector and a close second for industrial paints India. It has the most diversified presence in all
segments with established brands. Its main business line is wall paintings with famous brands like PRPEX,
PROPIN, PAD, Apex Duracast etc. It started venturing in the SAARC countries and Asia pacific with its
subsidiary brand Apco Coatings. It also has respectable presence in Middle East and Caribbean Islands. It
entered into automotive paint Industry in India through a joint venture with PPG groups in 1997. As of
2012-2013 it had sales revenue of 8971.70 crores and net profit of 1050 crores. Its current market cap is
45,528.32 crores.
Kansai Nerolac Paints Ltd.: Kansai Nerolac is the second largest paints company in India with a leading
position in industrial paints sector. It is a fully owned subsidiary of Kansai paints Ltd, Japan. It was founded
in Mumbai in the year of 1920 and started its journey with the name of Goodlass wall Pvt. Ltd. It has
almost 40% market share in Industrial sector and 14% market share in decorative sector making it the
second largest paints company in India. However, in the last 10 years it has seen stagnated growth in net
income and share prices has dropped dramatically. Its current market cap is 5261.47 crores.
Akzo Nobel India Ltd.: Akzo Nobel is the fourth largest company in India in Paints industry. It started its
paints business in 1987 under ICI group. In 2008 Dutch multinational Akzo Nobel acquired the company
and renamed it as Akzo Nobel India Ltd. It has a formidable presence in premium decorative segments
with its premium brands of Dulax series. It has seen a fluctuating growth in net profit. However it has
recovered in recent years. It registered a net profit of 219 crores against 294 crores in 2009. Its current
market cap is 3,698.53 crores.
Shalimar Paints Ltd.: Shalimar Paints was started in 1902 by two British Industrialists. Currently it is the 6
th

largest paints company in India. Although it has seen steady growth in revenue but its net profit has
increased marginally over the years. Its current market cap is 139 crores while it has posted a net profit of
11 crores against 10 crores in 2010.
Indian Paints sector is highly concentrated with the top 4 companies controlling more than 80% of the total
organized sector. Some other players like BASF India Ltd., Jenson & Nicholson, Snowcem paints, British
paints etc. are present in the market but with negligible market share.

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ORGANIZATIONAL COLLABORATIONS
Most of the paint companies in India lack one thing in common, better technology. This has led to much
technical collaboration with mostly foreign companies. Specifically in Industrial paints sector technology
plays a key role for market domination.
COMPANY COLLABRATION AREAOF COLLABORARTION
Berger Paints Herber sons GmbH
Valsper
Teodur BV
Auto Coatings
Heavy duty coatings
Power coatings
Asian Paints PPG
Sigma
Nippon
Electro deposition Primers
High performance coating
Power coating
Akzo Nobel ICI Plc Auto refinish
Nerolac Kansai group Auto and Industrial coatings

BERGERS GROWTH STORY
Bergers beginning traces all the way back to 1923. Mr. Hadfield, an Englishman had set up a small
company in Kolkata in 1923 and was known as the Hadfields India Limited. Mr. Niblett, the companys
first managing director, realized the importance of expansion and opened sales offices in Delhi and
Mumbai in 1950 and even a depot was started in Guwahati in 1951.
After the approval of all the shareholders, in 1983, finally the Company was coined the name Berger Paints
India Limited (BPIL) under the chief executive Mr. Biji K. Kurien. Almost 4 decades after the inception of
this company is when it acquired the name Berger which later it took to enviable heights. This also saw the
company targeted its customers with respect to segmentation and split the operati ons into Retail Business
Line and Industrial Business Line. The name of the Company did not undergo any more changes and had at
last come to a standstill in the 1980s and Berger paints became a common household name in India.
This phase of the company also observed the introduction of many products and branding each of them
respectively. Berger launched some landmark products like Luxol Silk, Rangoli acrylic emulsion, Bison
Acrylic Distemper and various such similar products. Apart from the name Berger, these products and
brands also started gaining importance in the paint industry and created a name for itself.
In the 1990s, Berger was the first among the competitors to realize that the paint industry could be made
into a service industry as well and started its service business with BERGER PROLINKS. Around the same
time, the controlling stake of the Company was acquired by the Dhingra brothers and their associates. Mr.
Subir Bose to become the managing director of Berger paints. The Company also attained ISO 9000
certification and established Quality Management system in this period in late 1990s.
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Berger Paints were quite advanced in their thinking maybe due to the presence of international influence,
that they understood that a digital color palette would be extremely useful for all the users. Therefore by
1996, a Color Bank Tinting system was launched where the consumer could select from a range of over
5000 colors through a computer interface.
Berger paints went on to acquire the entire bloc in the Polish firm from Advent International and bought
Bolix SA which was the leading provider of insulation finishing system. With the acquisition, Berger Paints
went about expanding overseas and started its own operations in Russia, Poland and Cyprus. Othe r
international expansion included operations Bangladesh and Nepal.
Currently after being in the market for so many years, Berger is identified as third highest market share in
the country in the paint industry.
RESOURCE BASED VIEW
After discovering the entire growth of Berger, some of the key resources of Berger are identified as follows
1. Quite a wide range of products, shades and packet sizes. For instance, in the decorative paints
segment alone, the company had 8 different stock keeping units
2. Berger Paints India Ltd had a strong distribution network of about over 15000 dealers. Though the
highest market leader Asian paints had about 33000 dealers, compared to the rest of the
competitors Berger paints emerged with a pretty strong distribution network
3. Berger appeared as breakthrough in the 1990s when it was the first among its competitors to
introduce Berger Pro Links which was the first service provider in the paint industry. Along with
this, Berger also introduced the Color Bank Tinting system which gave the customer to choose
from 5000 colors through computerized interface
4. Berger Paints had far the best control in storing inventory. Where the industry average was about
51 days, Berger usually maintained an average of not more than 28 days
5. The Company also had manufacturing units spread across the country which made it more
beneficial in terms of transportation, planning and inventory control. Berger ensured that these
locations were used efficiently to its advantage
6. Berger Paints India ltd also identified the importance of not being too dependent on decorative
and industrial paints and started diversifying into automobile coatings and plastic substrates.
Berger also expanded its operations internationally to Nepal, Bangladesh, Russia, and Poland and
also had collaborations with Becker of Sweden and Japans Nippon Paints.
7. Mostly it was all in house production and hence there was hardly any outsourcing. Enabled the
company to have more reliability, controllability and assure quality standards throughout
8. One of the most important resources for Berger has been its various products and the respective
branding that Berger was able to achieve in each of them. Some of the key brand names such as
Luxol, Rangoli and Bison were popularized in such a way that these names were commonly known
in the household. The company also believes their recent brand ambassador Katrina Kaif has also
helped increasing the brand equity of the Company.
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VRIO FRAMEWORK

The VRIO framework is used to analyze the two main important resource of Berger and identify if the
resources have been effective and how effective they could be in the future. The two resource that have
been recognized are
Bergers expansion within the country and international operations as well as the product
diversification Berger was involved in
Bergers constant branding of its sub products such as Luxol, Rangoli, Bison etc
Valuable: It could be identified that both these resources were of significant value to the Company.
Product diversification into automobile coating and plastic substrates put Berger Paints at a much stronger
foothold and made them enter into these markets that the competitors had not entered yet. Also, the
branding were increasing the importance and value of these products more and more.
Inimitable: These resources are not inimitable by any of the competitors and in fact Asian paints had a
very strong brand image. The competitors could also identify the same sectors to enter and try buying
more manufacturing units. However, branding a product and making it attain substantial popularity would
take some time and these already existing popular products would have an edge over it.
Rare: The manufacturing units that were acquired within the country and the collaborations with
Japanese Nippon Paints and Becker of Sweden were indeed rare and it would not be possible for the
competitors to attain. Although similar brand strategy could be adopted by the competitors, the specific
brands such as Luxol and Rangoli specifically belonged only to Berger and the competitors would be not be
able to own it.
VRIO
Valuable
(Yes)
Inimitable
(No)
Organized
(Yes)
Rare
(Yes)
BERGER PAINTS COMPETITIVE STRATEGY ANALYSIS
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Organized: Berger Paints knew how to take advantage of these resources and used it to leverage its sales
as much as it could. Berger paints in Bangladesh was doing fairly well in the market and the success boi led
down to the Indian market as well. Similarly, Berger paints understood the importance of marketing its
products and continuously kept branded its products and ensured that it did not ever lose its popularity.
VALUE CHAIN ANALYSIS






Inbound Logistics: The Indian Paint industry is a raw material intensive industry. The biggest chunk of the
expense goes to the raw material. Berger Paints try to keep the raw material cost minimal. The
methodology followed has been shown in the cost driver analysis in the next section.

Operations: Berger has differentiated its products in A, B and C categories. It uses some storing norms
while inventorying the products. It helps them in easy access to the products. Also looking on t hese
product norms, Berger decides how long to keep the product in the market. This is how Berger decides
how much product it should produce. It also has strict maintenance norms in place helping in efficient
production.
Outbound Logistics: The head office of Berger is located in Kolkata. But the distribution network is spread
throughout the length and breadth of the country. In total, it has more than 85 depots, 2000 dealers,
seven manufacturing facilities in India, and also four facilities overseas. Outbound goods are sent to
depots of Berger where depot managers decide on the inventory to stock and depending on the scenarios
finished goods are sent to dealers and in turn to end customers. Customer feedback flows in exact reverse
path. Recent days has seen online feedback system for every element in the supply chain.



Inbound
logistics
Operations
Outbound
logistics
Marketing
& sales
Services
Quality Control
Receiving
Raw Materials
Supply
Schedules
Manufacturing
Packaging
Production
Control
Maintenance
Finishing Goods
Order Handling
Dispatch
Delivery
Invoicing
Customer
Management
Promotion
Sales Analysis
Market Research
Paint upgrades
Berger Pro Links
Service
BERGER PAINTS COMPETITIVE STRATEGY ANALYSIS
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VARIATION OF COSTS OF BERGER WITH INDUSTRY




38.00%
39.00%
40.00%
41.00%
42.00%
43.00%
44.00%
45.00%
46.00%
47.00%
48.00%
1 2 3 4 5 6
RAW MATERIALS COSTS AS A PERCENTAGE OF SALES
Berger Industry
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
1 2 3 4 5 6
PURCHASE OF FINISHED GOODS COST AS A PERCENTAGE OF
SALES
Berger Industry
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
1 2 3 4 5 6
SELLING & DISTRIBUTION COSTS AS A PERCENTAGE OF
SALES
Berger Industry
BERGER PAINTS COMPETITIVE STRATEGY ANALYSIS
18 | P a g e

COMPARATIVE ADVANTAGE BERGER Vs INDUSTRY
Effective inventory management is one of the major components of Berger Paints strategy on distribution
cost control. When compared to industrys distribution cost, Bergers distribution cost is less, which is
advantageous. Bergers average inventory level is much lesser than the industry average. This provided an
edge in inventory costs to Berger paints compared to its competitors. Berger Paints India Ltd had a strong
distribution network of about over 15000 dealers. Though the market leader Asian paints had about
33000 dealers, compared to the rest of the competitors Berger paints emerged with a pretty strong
distribution network.
INDUSTRY DISTRIBUTION & SELLING COSTS
The organized sector is expanding its distribution network and adopting the installation of tinting
machines at retail outlets. These tinting machines offer a wide variety of colour shade options to choose
from. And that helps them reduce the inventory holding cost.
BERGER-SELLING & DISTRIBUTION COSTS
By means of inventory management software like CBInvent, accurate demand forecasting is done
and helps Berger to target the kind of markets that have specific needs
CBInvent is a web based system which facilitates distribution centers of Berger to serve the
dealers in the installation of Color Tinting Machines booked by them
This application provides Berger seamless integration to bring in efficiency and transparency in the
entire network of timely dispatch and installation against booked orders at the dealers location
The orders are collected by the sales executives and passed on to the nearest depot. The depots
are fed by regional warehouses. These depots maintain a minimum order quantity which is arrived
at from the monthly demand forecast
The booked orders will be consolidated at Head Office and based on the stocks in the regional
distribution centers, the Purchase orders will be generated against approved vendors for items
required
Generally some orders of the same region are clubbed together and dispatched in trucks. Finally,
the truck is unloaded and the small orders of the dealers are dispatched to them
Berger has put up a Centralized Help Line and number of Regional Distribution Centers (RDC) in
key locations which helps them to continue to venture into alternate channels of distribution for
better access to the population
COMPARITIVE DISADVANTAGE BERGER VS ASIAN PAINTS
Berger paints have a competitive disadvantage over Asian paints on the purchase of finished
goods. The reasons are as follows:
Backward Integration:
Asian Paints outsources only part of the printed cans to the external suppliers. Baba containers
are one of the suppliers of 20litres tins to the company. In order to reduce the cost for reducing
the cost of purchase for finished goods, the company went for backward integration and the
company itself produces part of the 20 litres printed cans. Asian metal container is another
supplier for the printed cans to Asian paints.
BERGER PAINTS COMPETITIVE STRATEGY ANALYSIS
19 | P a g e

Berger on the other hand does not manufacture itself the printed cans and outsources it to the
external vendors. The cost of purchase of finished goods for Berger paints is 15% higher compared
to Asian Paints. The cost of purchase of finished goods as percentage of sales for Berger paints is
only 1.5 compared to industry average of 3.5 and this in turn provides competitive advantage to
Asian paints.
Plastic cans:
Another cost advantage for Asian paints is its switching from Metal container to plastic container.
Initially the cost for the purchase of finished goods was higher but switching to plastic container
helped them to reduce the cost further because the metal container was costly compared to
plastic container.
BERGER PAINTS IN LIGHT OF THE PORTERS FIVE FORCES
The power of suppliers ranges from medium to high in the paint industry. However it could be understood
that most of the inputs were usually produced internally itself for Berger Paints. The Company ensured
that they were not too reliable on the suppliers. Hence, this reduced the power of suppliers and Berger
Paints had more control on the quality as well as the cost effectiveness of the raw materials.
The existing competitor rivalry has been indeed high in the organized sector of the paint industry but
Berger paints has been one of the strong competitors in the market. Though Asian paints was the market
leader and Berger paints came only about half of Asian Paints market share, Berger paints still had a very
strong foothold in the market and the competitors have always been aware of the past effective
innovations introduced by Berger Paints.
Switching costs for the buyers are very low and hence branding and product differentiation becomes a key
in surviving the market. Berger paints decided to attract the premium market and have introduced
number of products known for its enamel finish, emulsion and weather resistant paints. Also, the branding
of the products and creating a trust worthy name has also helped in reducing the buyer power and
increase the loyalty of the customers substantially over the years.
THE INDUSTRY OUTLOOK AFTER 5 YEARS
The paints and varnishes industry has been doing very well in terms of growth perspective in the l ast 20
years. Per capita consumption has been grown so has number of users. A new segment of low end
customers, who are switching from lime painting to low priced paints, has been pushing the market for
some time. Small towns are the growth market for the whole industry. Also growth in architectural paints
segment due to rapid development in urban housing can be observed. The industry becoming
concentrated as top 4 players are holding most of the organized sector. Some key trends which are going
to govern the sector are,
1. Ageing youth of India: Average age of Indians in current date is 25. Over the next 5 years the age
of average Indian will be approximately 29 years. This signifies that average paint buyer will also be
BERGER PAINTS COMPETITIVE STRATEGY ANALYSIS
20 | P a g e

young. This will affect the type of paints Indians buys today. As that youth population will be
inclined to buy more designer paints to suit their lifestyle as they start to invest in their houses
much earlier. 41% of current paint buyers are of 25-34 years age group and the percentage is
about to go to 50% by 2018. (Indian readership survey 2010)

2. Growing Income: The growth of the services industry gives rise to the median income of the
population. . Increasing affluence leads to lifestyle upgrading. As income grows, people invest
more in homes; this will give rise to the neo middle class nuclear families that will spend their
income more than their predecessors. Premium segment is also set to rise to 30% against current
20% of total buyers. Per capita consumption will also rise.

3. Growth of automobile industry: India has seen a rapid growth in automobile usage in terms of
personal cars. The growth is stagnated but still the growth rate is expected to be 9-11% in coming
years. Automobiles form the major sector in Industrial paints segment. This will contribute heavily
to the overall growth of paint Industry.

4. Consciousness about health and environment: As more and more people are becoming concerned
about health issues and environmental side effects of using paints, usage of raw materials will
become important. Lead free, Low or no VOC; no smell will be the future trend for these type of
customers.

5. Educated customers: Five years back most of the advertisements were directed towards teaching
people about the profits of using paints over lime painting. But this has shifted now towards other
benefits of using their paint brands, indicating that customers are more educated today and
conscious about what they want and at what price.

The total paint market is set to grow at 14-15% CAGR for the next 5 years. By 2017 the overall paint market
is estimated at Rs. 495 billion of which decorative segment will continue to have a larger share than
industrial segment. Water based paints is set to become an important factor. Industry concentration is
expected to increase as smaller players will exit the market. Also it is expected that with the growth of
established brands presence in smaller cities, unorganized players will start to give away. Tougher
environmental norms and customer consciousness will also have a positive effect on the growth of
organized business. However, with more foreign players coming into the picture and with their huge
resources it may have a serious impact on the overall industry structure.
BERGER PAINTS COMPETITIVE STRATEGY ANALYSIS
21 | P a g e

BERGER PAINTS FUTURE STRATEGY


Defend: Bergers main market is Urban segment who are of the mid or moderately high income
group. Most of the competitors are vying for this segment. Berger needs to protect its customers
of this segment by providing adequate product mix to serve the changing needs.
Deepen: Berger needs to increase its presence in this segment. Automobile industry is going to be
the major customer of this segment. In the decorative front it is taking steps to increase its
presence in West and South India by acquiring Sherwin Williams decorative paints business. It will
give a major push to its capacity as well as its customer base of low end customers. Russian and
Polish market, where Berger has presence through Bolix SA is going to be in future expansion plan
overseas. With former MD and current additional director Subir Bose taking charge of the business,
one can expect greater market presence there.
Discover: Berger also needs to find new markets for its products. With Russian and polish markets
in its fray, it can focus on the matured market of Europe. It is in the process by tying up with
foreign companies to develop new technologies for stricter environmental rules. It has currently
tie ups with companies like Valspar, USA, Orica, Australia, DuPont, France etc.
Develop: The main challenge in Indian market is to educate customers about the usefulness of
paints, marketing should be focused towards this goal, as well as constantly understanding the
changing buyer behavior towards buying paints. New product development which will be free of
VOCs, Lead and other heavy metal are being given priority to serve eco-conscious customers.
As a long term goal Berger has to focus on all these aspects of future strategies. However in short term, as
in coming 1-3 years, it needs to mainly focus on increasing market share. As it have been trying to do in
West and South Indian markets. Capacity increase will be a major step towards capturing the market.
Discover
Exploit new
markets by creating
new products or
utilizing existing
competencies
differently
Develop
Build new
competency to
create future
Defend
Defend existing
market by
strengthening
competencies
Deepen
Build
complementary/
new competency to
fortify position in
existing market
NEW
Existing
Existing
NEW Distinctive
Competencies
Market
Opportunities
BERGER PAINTS COMPETITIVE STRATEGY ANALYSIS
22 | P a g e

Appendix
Exhibit 1:

Berger: operating expenses as percentage of sales



Berger Paints India Ltd. Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13
Currency: Rs. Million (Non-Annualised) 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths
-
Operating expenses as % of Sales
Total operating expenses 91.3 92.5 90.4 90.7 90.8 90.2
Raw materials, stores & spares 45.2 46.7 45.6 46.2 47.2 43.3
Raw material expenses 45 46.4 45.5 46 47 43.1
Stores, spares, tools consumed 0.2 0.2 0.2 0.2 0.2 0.2
Purchase of finished goods 5.2 5.5 6.2 5.1 5.6 6.9
Packaging and packing expenses 7.6 8.3 7.9 8.1 7.2 6.6
Power, fuel & water charges 1 1 1 1 0.8 0.8
Compensation to employees 4.4 4.5 4.9 4.5 4.1 4.1
Indirect taxes 11.9 10.5 7.4 8.6 8.4 9.5
Excise duty 11.8 10.4 7.4 8.5 8.4 9.5
Royalties, technical know-how fees, etc 0 0 0 0 0 0
Rent & lease rent 0.5 0.6 0.7 0.6 0.6 0.7
Repairs & maintenance 0.3 0.2 0.2 0.2 0.2 0.3
Insurance premium paid 0.1 0 0 0 0 0
Outsourced manufacturing jobs 1.1 1.1 1.1 1.1 0.9 1
Outsourced professional jobs 0 0 0 0 0 0
Non-executive directors' fees 0 0 0 0 0 0
Selling & distribution expenses 11.3 11.5 12.5 12.5 12.9 13.5
Advertising expenses 3.4 3.7 4.2 4.3 4.6 5
Marketing expenses 3.4 3.3 3.4 3.2 3.4 3.5
Distribution expenses 4.4 4.5 5 4.9 5 5
Travel expenses 0.8 0.8 0.8 0.7 0.7 0.7
Communications expenses 0 0 0 0 0 0
Printing & stationery expenses 0 0 0 0 0 0
Miscellaneous expenditure 1.9 1.8 1.9 2.1 2 2.6
Other operational exp of industrial ent 0 0 0 0 0 0
Other operational exp of non-fin services ent 0 0 0 0 0 0
Operating Expenses as per cent of Sales
BERGER PAINTS COMPETITIVE STRATEGY ANALYSIS
23 | P a g e


Exhibit 2:

Paint industry: income & expenditure summary
Income & Expenditure Summary : Paints & Varnishes Industry
(percentage of sales)
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Sales 100% 100% 100% 100% 100% 100%
Industrial sales 98% 98% 98% 97% 96% 97%
Income from non-financial services 2% 2% 2% 3% 4% 3%
Income from financial services 1% 1% 2% 1% 1% 1%
Interest income 0% 0% 0% 0% 0% 0%
Dividends 0% 0% 0% 0% 0% 0%
Income from treasury operations 0% 1% 2% 1% 1% 1%
Other income 0% 0% 0% 0% 0% 0%
Prior period and extra-ordinary income 0% 2% 0% 0% 0% 1%
Change in stock 0% 0% 2% 2% 2% 2%
Total expenses 95% 96% 94% 95% 95% 95%
Operating expenses 89% 90% 87% 89% 90% 90%
Raw materials, stores & spares 42% 44% 43% 46% 47% 44%
Purchase of finished goods 4% 3% 3% 3% 4% 4%
Packaging and packing expenses 7% 7% 7% 7% 7% 7%
Power, fuel & water charges 1% 1% 1% 1% 1% 1%
Compensation to employees 5% 5% 5% 5% 4% 4%
Indirect taxes 12% 11% 8% 9% 9% 11%
Royalties, technical know-how fees, etc 0% 0% 0% 0% 0% 0%
Rent & lease rent 1% 1% 1% 1% 1% 1%
Repairs & maintenance 0% 0% 0% 0% 0% 0%
Insurance premium paid 0% 0% 0% 0% 0% 0%
Outsourced manufacturing jobs 1% 1% 1% 0% 0% 1%
Outsourced professional jobs 0% 0% 0% 0% 0% 0%
Non-executive directors' fees 0% 0% 0% 0% 0% 0%
Selling & distribution expenses 14% 14% 15% 14% 14% 14%
Travel expenses 1% 1% 1% 1% 1% 1%
Communications expenses 0% 0% 0% 0% 0% 0%
Printing & stationery expenses 0% 0% 0% 0% 0% 0%
Miscellaneous expenditure 2% 2% 2% 2% 2% 2%
Other operational exp of industrial ent 0% 0% 0% 0% 0% 0%
Other operational exp of non-fin services ent 0% 0% 0% 0% 0% 0%
Share of loss in other enterprises 0% 0% 0% 0% 0% 0%
Financial charges 0% 1% 0% 0% 1% 0%
Fee based financial services expenses 0% 0% 0% 0% 0% 0%
Fund based financial services expenses 0% 1% 0% 0% 1% 0%
Interest paid 0% 0% 0% 0% 0% 0%
Financial charges on instruments 0% 0% 0% 0% 0% 0%
Provisions 0% 0% 0% 0% 0% 0%
Non-cash charges 2% 2% 2% 2% 1% 1%
Depreciation 1% 1% 1% 1% 1% 1%
Amortisation 0% 0% 0% 0% 0% 0%
Write-offs 0% 0% 0% 0% 0% 0%
Prior period and extra-ordinary expenses 0% 0% 0% 0% 0% 0%
Provision for direct tax 3% 3% 4% 4% 3% 4%
PBDITA 13% 14% 17% 15% 14% 14%
PBDITA net of P&E&OI&FI 12% 10% 14% 13% 12% 12%
Profit after tax 7% 8% 11% 9% 8% 9%
PAT net of P&E 7% 6% 10% 9% 8% 8%
BERGER PAINTS COMPETITIVE STRATEGY ANALYSIS
24 | P a g e

Exhibit 3:

BERGER PAINTS COMPETITIVE STRATEGY ANALYSIS
25 | P a g e

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