Asian Paints Expansion Strategy in Middle East

Contents Asian Paints Expansion in Middle East...........................................................1 Acquisition of Berger...................................................................................... 1 Product/Market Mix........................................................................................ 2 Organizational Structure and Organizational culture...............................3 Divestments..................................................................................................... 4 References.......................................................................................................... 5 Appendix.............................................................................................................. 6 Asian paints Subsidiaries.............................................................................. 6 Asian paints International Expansion – Timing & Mode...........................6

Asian Paints Expansion in Middle East The company classified different regions in three broad categories: growth markets, leadership markets and turnaround markets. With an influx of foreign investments in the Middle East (Egypt, UAE, Bahrain and Oman), construction has reached new heights in terms of large-scale infrastructural and industrial projects. Hence this region was identified as a Growth Market. It therefore adopted acquisition strategy in this market. Asian paints has a long history of operating internationally since 1960s. The pace of expansion paced up after 1990s when Mr Dani came over. Asian Paints strategy was to expand into the emerging markets as no single paint firm operated broadly in these markets and as many of these operations were not properly coordinated and

organized.

Acquisition of Berger Berger International Ltd. was one of the oldest firms in the paint and specialist coating industry, tracing its history back to its founding in London in 1760. In the 1990s, it had operations in 11 countries, and was headquartered and listed in Singapore. Asian Paints (India) Ltd., the largest paint manufacturer in India, announced plans to acquire a controlling 50.1% stake in Berger International Ltd. (November, 2002), a Singapore-based coatings producer with operations in 11 countries in Asia, the Middle East and the Caribbean. Asian Paints said the acquisition is largest outside India, and will expand its operations to 23 countries. This acquisition provided entry into high-growth markets in China and Southeast Asia.

Ashwin Dani, Asian Paints vice chairman and managing director, said the purchase is "in line with our vision of becoming a leading player in emerging markets." Company knew that it would be able to recover the cost of acquisition without any difficulty.

Product/Market Mix Asian Paints said it sells more than 200,000 metric tons of paint annually in domestic and export markets in Asia-Pacific, the Middle East and Africa.

Products offered in Middle East Berger had strengths in protective, industrial and marine coatings, and offered comprehensive range of products. Berger International manufactures a variety of coatings, including protective, industrial and marine products. Manufacturing & Distribution Strategies Berger had manufacturing plants in Singapore, Bahrain, Malaysia, Thailand, Malta, UAE, China, Myanmar, Toboda with total manufacturing capacity of 50,000 tons. It had three R&D laboratories developing products specific to regional markets. In Berger, AP’s strategy was to focus on shareholder value by improving supply chain management in the subsidiaries. For increased plant efficiency and asset productivity it planned to implement cost structures in Berger’s operations worldwide. It focussed on working capital management and introduced information technology in areas where required. It planned to innovate and develop new products for individual units of Berger International to boost top line sales. The company has thrived against foreign competitors by developing its local assets, notably an extensive distribution network. Asian Paints brings substantial advantages to these countries.

Customers Its managers are used to dealing with the kind of marketing environment there— thousands of scattered retailers, illiterate consumers, and customers who want only small quantities of paint that can then be diluted to save money. Asian Paints knew that even after they develop a low-end paint product, the competitors (multinationals) will still have a long way to go to catch up in emerging markets. Asian Paints already knows how to speak the language of these customers.

Organizational Structure and Organizational culture

After Berger and SCIB acquisition company faced serious issues of diversity. They had to deal with new brands, new customers and new people. People were from different backgrounds, cultures and languages. While trying to ensure operational efficiency company made sure that it did not impose itself on people. It was present in all five continents of the world, in 13 out of 24 time zones and in 22 countries. “We were a multinational. We had to deal with new brands new people and new customers, and most importantly, manage the complete integration of this new organization, Our people came from different backgrounds, different cultures, and different languages. How could we tackle the people issues?”

Creation of shareholder wealth was paramount and delivering on the plans was the way to achieve that. Managers spent the first six months visiting all of their subsidiaries and getting this message across and talking about values and other corporate issues. This was important because people need to connect and belong Employee Satisfaction Initiatives They addressed the emotional issues. Reached out to people and convinced them that the company is committed to growing the business and servicing the customers. People should feel that they are adding value, but at the same time they did not compromise on growth. The top line had to grow, costs had to come down. Balance sheet had to improve. Inventory management was absolutely critical. To address these issues. Asian Paints held a Global Managers' conference in February 2003, attended by senior managers and unit heads from 23 countries in order to share ideas and cultivate a sense of belonging.

During the conference, they defined four guiding principles for business and success: Responsibility, Entrepreneurship, Continuous improvement and Trust. These four values determined their actions in all markets in which they were leaders and others in which they aspired to be. Knowledge Sharing and Team Building Asian Paints also realized that lack of knowledge sharing was a critical issue Berger, for example had had four CEOs during the six years prior to its acquisition. Asian Paints implemented a knowledge-management and information-sharing system, the starting point of which was collecting data about the brands in every region and systematically registering all intellectual property including logos, trademarks and designs. It also began benchmarking best practices within member countries and companies. The company formed Lead Technology Centers and Regional Technology Centers. The latter were responsible for driving regional technology development, local sourcing, manufacturing equipment and for reacting to needs. The Lead Technology Centers were expected to provide technological expertise in specific areas—e.g. Dubai was the Lead Technology Center on wood finishes outside India.

Divestments In 2007 the company identified its focus as scaling up existing foreign operations rather than expanding geographically. It was especially encouraged by its performance in the Middle East markets In Egypt, for instance where 6 operated through SCIB Paints, production increased fourfold between 2002 and 2007 In Oman. Dubai, and Bahrain production had more than doubled over the four years up to 2007. To rationalize its portfolio, Asian Paints also carried out a number of divestments. 

In May 2004 it sold its Malta plant, which it had acquired though Berger and licensed the Asian Paints brand name and technological knowledge to the acquirers.

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In April 2005 it announced plans to divest itself of its Mauritius subsidiary in a plan to exit the country as the Mauritian paint market was stagnant, the company had been making losses, and the contribution of the unit to the overall group’s results was insignificant. In 2006. Berger sold as 30 percent stake in Dutch Boy Philippines for about US$1.

Products for South East Asia Its paint formulations and packaging practices make for an extremely low-cost product—one that, its managers have discovered, holds considerable appeal in other developing countries. Small SKUs for customers who want paints in small quantities. Multinational rivals, by contrast, have built their operations around the demands of affluent customers looking for a wide choice of colors and finishes.

References 1. Asian Paints growth Strategy. Retrieved December 7, 2002, from http://www.siliconindia.com/shownews/Asian_Paints_announces_growth_strat egy-nid-17940-cid-3.html 2. Asian Paints – Berger Acquisition news, Retrieved October 2, 2002 from http://www.pcimag.com/articles/84116-asian-paints-india-to-acquire-majoritystake-in-berger-ltd 3. Asian Paints Group Subsidiaries from https://www.asianpaints.com/company-info/about-us/group-subsidaries.aspx 4. Asian paints Middle East Expansion Strategy from https://books.google.co.in/books?id=iiJaCAAAQBAJ&pg=RA3-PA14&lpg=RA3PA14&dq=asian+paints+middle+east+expansion+strategy&source=bl&ots =_Ns7OsHKgU&sig=prdavjQHfemj5DJgntEMzb49gvo&hl=en&sa=X&ved=0CE gQ6AEwBmoVChMIq83HjPCqxwIVQwOOCh0h7Q68#v=onepage&q=asian %20paints%20middle%20east%20expansion%20strategy&f=true 5. Asian paints Middle East Expansion Strategy from https://books.google.co.in/books? id=FtDRz1uBxekC&pg=PA584&lpg=PA584&dq=asian+paints+middle+east+ expansion+strategy&source=bl&ots=5kIJgIjC8&sig=8yUHtKNxPjlX10kYGpJ_fXb1bM&hl=en&sa=X&ved=0CEUQ6AEwBWoVChMI__uSkP2sxwIVFwiOCh1IGQ LA#v=onepage&q=asian%20paints%20middle%20east%20expansion %20strategy&f=false

Appendix Asian paints Subsidiaries

Asian paints International Expansion – Timing & Mode