Professional Documents
Culture Documents
25/May/2011
Submitted By:
Ali Arshad MBA02093 152
Table of Contents
I. II. Note...................................................................................................................................... 4 Companys Introduction ................................................................................................... 4 A. Vision Statement .................................................................................................................. 4 B. Mission Statement & Analysis............................................................................................. 5 III. IV. V. Paint Industry in Pakistan ................................................................................................ 5 Market Trend & Market Growth .................................................................................... 6 External Environmental .................................................................................................... 7
A. PESTLE Analysis ................................................................................................................ 7 1. 2. 3. 4. 5. 6. 7. VI. 1. 2. 3. 4. 5. Political & Legal: ............................................................................................................. 7 Economic:......................................................................................................................... 7 Socio-Cultural: ................................................................................................................. 8 Technological: .................................................................................................................. 8 Environmental: ................................................................................................................. 8 Global: .............................................................................................................................. 8 Demographic: ................................................................................................................... 8 Five Forces Model of Competition ................................................................................... 9 Threat of Substitute Products: Medium ........................................................................... 9 Threat of New Entrants: High .......................................................................................... 9 Bargaining Power of Buyers: Medium............................................................................. 9 Bargaining Power of Suppliers: Medium ....................................................................... 10 Rivalry among Competitors: High ................................................................................. 10
B. Competitive Analysis ......................................................................................................... 10 VII. Internal Environment Audit ........................................................................................... 11 A. Value Chain Analysis ........................................................................................................ 11 1. 2. Primary Activities .......................................................................................................... 11 Secondary Activities ...................................................................................................... 12
B. SWOT Analysis: ................................................................................................................ 12 VIII. Interview with the officials of Diamond Paints ............................................................. 13 A. Opportunity Identification & Concept Generation Stage .................................................. 13 1. How did Diamond Paints generate the concept to introduce Durasilk? ......................... 13
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B. Evaluation Stage ................................................................................................................ 18 1. How have you made the percentages for ATAR model? ............................................... 18
C. Launch Stage:..................................................................................................................... 18 1. What were the strategic platform decisions Diamond Paints made at the launch of Durasilk? ................................................................................................................................ 18 2. More than 90% products fail at launch stage. What did Diamond Paints do to avoid this? ........................................................................................................................................ 19 IX. X. References ........................................................................................................................ 19 Questionnaire ................................................................................................................... 20
A. Opportunity Identification & Concept Generation: ........................................................... 20 B. Concept Evaluation: ........................................................................................................... 20 C. Development Stage: ........................................................................................................... 20 D. Launch Stage:..................................................................................................................... 20
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I.
Note
This report is prepared from sources and data which we believe to be reliable, but we make no representation as to its accuracy or completeness. The report is provided solely for informational purposes for New Product Development and is not to be construed as providing advice, accurate recommendations or representations of any kind whatsoever. Opinions and information provided are made as of the date of the report started.
A.
Vision Statement
To become the largest manufacturer of quality paint and coating products
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Diamond Paints mission is to become a global leader in Paints & Coatings industry, serving the needs from customers to small companies to multi-national corporate. Our mission and responsibility as a paints and textures provider is to: Provide the best paint available in the country Maintain the highest level of customer satisfaction and service Form strategic alliances and partnerships
S.N 1 2 3 4 5 7 8 9
Elements
Product and Service Customers Market Technology Philosophy Concern for Society Concern for Employees Core Competition
Analysis
Product & Service Both Satisfaction in Paint Quality Integrated Latest Quality and Reliability Quality Conscious Training and Motivation Own Resin Manufacturing
V. External Environmental
A.
1.
PESTLE Analysis
Political situation is vital for any business to run smoothly. Pakistans political instability has led to uncertain environment in the paint industry, which is also a threat for any business including Diamond Paints. Change of government leads to change in Rules & Regulations which affects the smooth flow of business for Diamond Paints. For example, last government introduced subsidies for the chemical sector but the current government has finished all subsidies. The political instability has also crucial impact on Law & Order situation in the country. The high costs of the petroleum products, energy crisis and lack of infrastructure are the major hurdles in the growth of this industry. Political instability and bombings had inverse effect on the confidence of foreign investors. Anyhow, the current government is supporting the paint industry and has given legal reliefs on paint industry. It has also reduced 10% central excise duty on paint products.
2.
Economic:
Inflation remains the biggest threat to the economy. The surge in global petrol prices and thus local petrol prices hurt the buying power of consumers that reduce the demand for products. Due to inflation the cost of doing business has also gone higher. Government has imposed 16% sales tax and heavy duties on imports of raw materials. Paints industry of Pakistan import 75% of its raw materials so import duties have increased the production cost thus decreasing the profit margin. Recessionary conditions continue to prevail as the government pressed on with its efforts to document the economy. The depressed construction industry and the slow trading industry and the slow trading environment resulted in an overall market shrinkage in the decorative business by 10%. Against this back drop the business however has able to increase its market share by 1% through its advertising and promotional campaigns and effective after sale service. The industrial
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3.
Socio-Cultural:
Increasing globalization has amplified the influence of Western Culture in Pakistan. The lifestyle of Pakistani population is changing rapidly. People are more conscious about their houses presentation. Pakistans current population is 187,342,721(2011 est.) and it is increasing at a rate of 1.573% (2011est.). Consequently, to meet the demands of a rapidly increasing population, there is an increase in the number of construction projects in Pakistan which is a positive sign for Diamond Paints.
4.
Technological:
Technology in paint industry has improved significantly in past few years. According to a market research, the technology in paint industry has changed more in the last eight years than in the past eighty years. Diamond Paints is no exception to others. They are equipped with latest machinery and they are the only company in Pakistan which is producing its own resins as well as powder coating products.
5.
Environmental:
In recent years, paint industry has shown a lot of concern for society. Industry is very conscious about environmental pollution which occurs because of the production of paints. The industry has huge focus on the SH&E. The paint producers are trying to produce those products which are free from the harmful chemicals. With these concerns, Diamond Paints has introduced lead-free paints for home users which are not harmful for children and adults.
6.
Global:
Globally Diamond paint has not entered many countries. Diamond Paints has limited its market to neighboring countries only and they have a major distribution in Afghanistan. They get 15% of the total sales from Afghanistan. In future, they have plans of entering the Middle Eastern and central Asian markets.
7.
Demographic:
Diamond paints market is distributed among two groups, consumers and distributors. In consumers the target market is further divided into two segments i.e. Quality conscious and Price conscious. For quality conscious consumers, Diamond paints have launched Ace. This is a 8|Page
VI.
1.
Although products such as distemper (choona), wallpaper, tiles etc are available but customers are not likely to substitute them for paints as it would compromise on quality and at the same time would not server the purpose. The growing share of companies in the unorganized sector provides a low price substitute.
2.
With regard to the paint industry in Pakistan, there is a high threat of new entrants. The main reason for this being low entry barriers, as there is no requirement of high capital investment to enter the paint business. Also, there are no proprietary product difference and low switching costs which puts the phrase brand loyalty into jeopardy. What make the paint industry attractive for newcomers is also the ease of acquiring skilled people, material and supplies. Moreover, lack of long term contracts also contributes towards the attractiveness of the industry for the newcomers. However, there are established brand identities as well as consolidated distribution channels to be accessed which would result in strong retaliation to be faced by the newcomers. Such is an example of Nippon who set up its business in Pakistan recently.
3.
Bargaining power of the intermediaries is high because the industry is divided into the structured and unstructured market and doesnt act as a unified whole to leverage the bargaining power in its favor. The more the channel sells each product, the higher the margin they keep for the company. Page | 9
4.
Bargaining power of suppliers is low in the decorative segment as inputs required are commodities and there are numbers of suppliers available who are fighting for a small market. However, since big companies fight on the quality dimension and cannot switch their suppliers are in a position to negotiate their terms upon providing the desired raw material which makes the overall bargaining power of suppliers moderate.
5.
The paint industry can be characterized as a fragmented industry divided into the organized and unorganized sector. The unorganized structure is the biggest threat for established brands.
B.
Competitive Analysis
Diamond paints is facing strong competition from Berger Paints, Master, ICI, Silky, Buxluy and Silver Sand. Because of these competitors, Diamond paints Pakistan is facing a serious problem in attracting new customers and retain their existing customer. In order to meet the competitors, Diamond paints has to spent more money on advertising, promotional activities and area coverage for their customer satisfaction. Recently new competitors are coming in this industry, which is the sign of the Growth of paint industry. According to industry analysts, this tough competition, high promotion strategies and increasing trend toward paint industry are the clear chances of the high growth in the paint industry.
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Primary Activities
a) Inbound Logistics: Diamond paints mainly imports Titanium, Coconut oil, Lamonin and Colors/Dyes. The titanium are imported in large quantity i.e. containers from USA. The coconut oil is used in Resin manufacturing and it is imported from Philippine and Thailand. Lamonin is used in Resin and it is imported from China. The colors and dyes are of various colors are imported from china by road. The trucks and containers are brought on rent when they cross Pakistan border. b) Operations: First of all the material brought is unloaded to the factory and is being stored in necessary environment and all the stock record is maintained. The production hall sends the requisition to storage for paint manufacturing. The lab approves the requisition. Then the required quantity is delivered from storage hall to production hall. The production hall produces the batch of paints and some of the samples are given in the lab and the lab approves its quantity and standard. Once approved, it is sent to filling hall. After the filling the boxes are sent to distribution. The distribution department delivers the paint boxes to the dealers on the FIFO basis. All the pains and their shade cards are also given to the dealers which are approved by the labs.
c) Outbound Logistics: The Company uses its own transportation that includes light and heavy vehicles for the purpose of providing the paint which includes the paint, the samples, the emulsions, enamel paints and their after sales services. The paint is distributed to different cities, from Gujranwala to Gujarat. Diamond paints is also exported to Afghanistan in rented containers.
d) Marketing & Sales: Diamond paint uses shop boards as a marketing tool for their different products. Mr. Qayyum is their marketing supervisor. The have giveaways for the painters and executives. To painters they give key chains, caps, shirts and wallet whereas executives get folders, wallet and dairies. Their branding is also done in the marketing department where activities are involved from designing to packaging. Some part of advertising is outsourced to Synergy where they make TVCs, media campaigns and BTLs.
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2.
Secondary Activities
a) Procurement Department: All the purchases are made by Syed Zafar. He is the head of Procurement department and also handles the accounts and purchasing for the company. He also deals with all the vendors and dealers and negotiates with them on rates. b) Human Resource: Mr. Hamza is the head of HR department. There are three sub departments under Mr. Hamza. The first department is responsible for recruitment and selection of the employees and the second department is compensation and benefit department. There are few other department known as training and development department and Safety, health and environment department. The final decisions of all departments are made my Mr. Hamza. c) Top Executives: Meer Shuaib is the CEO of the company and is solely responsible for the decision making regarding the budgets and the strategies that the company pursues.
B.
1. 2. 3. 4. 5.
1. 2. 3. 4.
Financial Stability Largest supplier to Fan Industry Technological Advantage Widest range of products Nationwide Distribution
Opportunities
International Expansion Increasing demand in Automotive Industry Use OOH Advertising Open own Retail Outlets for Direct Selling
Threats
1. Multinational & National Competitors 2. Energy Crisis 3. Wrong perception of economical & cheap
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A.
1. Did diamond paints used product platform planning for making Durasilk? Product platform planning was used extensively in making Durasilk. From Brand name, logo and technology to mode of transportation, production plant and distribution channel product platform planning was used. The ingredients of the paints more or less remain the same. The change that comes is mixing, quantity and quality of the ingredients. Resin is the primary ingredient of any paint and in Durasilk the highest quality of resin is used. The product platform planning was used as the resin plant, the production and the mixing plant remained the same. The distribution channel also remained the same as diamond paints used the same mode of transportation and retailers to distribute Durasilk. Durasilk has its own unique packaging and designing but the logo printed on the packing and the Ace trademark remains the same. So we can conclude that Diamond paints used product platform planning heavily in the making of Ace Durasilk. Recommendations: As we can safely say from the information above that diamond paints relies heavily on their existing infrastructure to make new products such as Ace Durasilk. It works for them at the moment but the load on the existing assets or infrastructure may become too much in future. So they should also think about enhancing their infrastructure so that in the future, they can keep making new products without having to put extra burden on their existing resources.
2. How did Diamond Paints generate the concept to introduce Durasilk? With the interview conducted with Mr. Shakeel Ahmed, we came to know that the companies in paint industry use various methods for concept generation of their new products. Without this they cannot launch a successful new product. Same is the case with Diamond Paints. They are using problem-based ideation to recognize the opportunities for concept generation of Ace Durasilk.
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The company identified the above mentioned five problems that the customers were facing. They also analyzed how frequently customers faced these problems and how much they are bothered by it. This analysis led to the concept of Ace Durasilk. Before ace Durasilk, the companys approach was more or less reactive i.e. as all the national paint companies used to only react to any step ICI, the paint giant, used to take. With Ace Durasilk, Diamond paints has become the first national paint company to act in a proactive manner and make this product with superior properties than the large multi nationals. Scenario analysis was not used for any new product idea as paint industry is Pakistan is relatively new as compared to the international companies and they are far from achieving the maturity stage as they are still in developing stage and scenario analysis is a step where paint industry in Pakistan has not reached yet.
Recommendations:
National paint manufacturers should start acting in a proactive measure as they have the advantage of knowing and understanding the local market better than the foreign companies. Diamond paints has not used scenario analysis for the concept generation of Ace Durasilk and they should opt this for their future idea generation. Diamond Paints only used 5 factors in their problem analysis and in future they should research and use for factors for their new product concept generation.
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4. Did Diamond Paints use any of the Analytical Attribute Techniques? Yes, Diamond paints used two of the Analytical Attribute techniques i.e. GAP analysis and Tradeoff analysis. This was told to us by the marketing head of Diamond paints i.e. Mr. Shakeel Ahmed. The interpretations of both analyses are given on the next page.
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GAP
Silversand Master
1
Happilac Berger
2 3
ICI-Dulux Nippon
Turlac
Corona Low Class Paints
2
Nelson
As we can see in the above shown GAP Analysis, Durasilk found a clear edge over all its competitors it generated the concept of both highly washable and durable paint. This relationship is such that how durable a paint is with regular wash to keep the walls clean. Turlac and Brighto paint products are also highly washable but their durability is questionable when washed. ICI Dulux is the closest competitor of Diamond Paints Durasilk as is evident from the above analysis. As the above analysis show that the gap existed in highly washable and at the same time highly durable category and this is where Diamond paints Durasilk came in and filled the GAP.
b) Trade-Off Analysis: As per the interview with Mr. Shakeel Ahmed, the company used various questions in trade-off analysis. However he mention only few of them in which one of them was. How much Durability you expect from your product? How much washable paint you want? What type of finish you want from their paints?
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Durability
8 6 4 2 0 1 - 2 Yrs 3 - 4 Yrs 5 - 6 Yrs 7 - 8 Yrs > 8 Yrs 10 8 6 4 2 0 Every Week
Washable
Never
Finish
9 8 7 6 5 4 3 2 1 0 Matt Texture Silky Glossy
As we can see the customers wanted more durable, washable and paint with a silky finish. Durasilk fulfills all three of the above mentioned requirements. With these features in mind the concept of Durasilk was finally made and put forward to the evaluation stage. Recommendations: The company has made only one GAP analysis for both perspectives i.e. customer and managerial. They should opt for both maps in their future GAP analysis. The company has not used conjoint analysis in their new product development. They should use conjoint analysis in their future new product developments The company didnt approach the end user for their feedback which can be used for analytical purposes. Instead they assumed distributors and contractors as their end user in this new product development. They should approach the end user in their future products.
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Evaluation Stage
How have you made the percentages for ATAR model?
The company did not provide us the accurate sales evaluation for ATAR model but they did give us the evaluation in liters. This is what we came up with after evaluation. Potential Market: 40 Million Awareness: 80% Trial: 60% Availability: 80% Repeat: 50% Profit Margin: 1350 1000 = 350 Profit: 40M * .8 * .6 * .8 * .5 * 350 = 268,800,000 Diamond paints did not use the full screening model as they had a clear dimension about what the customers wanted using the analytical and problem based ideation. So they had only one option in mind i.e. Durasilk. Recommendations: The company did not use the full screening model and compared multiple options to pick one out of them. They should have more than one option and generate multiple ideas and concepts so that they can have the choice of going for the best possible option in the evaluation stage.
C.
1.
Launch Stage:
What were the strategic platform decisions Diamond Paints made at the launch of Durasilk?
a) Type of Demand Sought: As per the interview with Mr. Shakeel Ahmed khan, diamond paints aimed for the customer migration. As emulsion paints were already being offered by diamond paints but they wanted their existing upper and upper middle class users to migrate from the emulsion to high quality superior emulsion i.e. Durasilk. The aim was also to catch the attention of competitors customers as well by offering the most superior silk emulsion paint.
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e) Resources and Funds: The company didnt provide us with the exact figure of the funds allocated to the launch campaign but the Marketing Manager did stress on the fact that the launch of Durasilk was one of the most aggressive and expensive one as far as the Pakistani paint industry is concerned. 2. More than 90% products fail at launch stage. What did Diamond Paints do to avoid this? Mr. Shakeel Ahmed khan was of the view that most of the products that fail at this stage are either copy of the existing products in market or are not needed by customers. In order for a product to succeed, it must be a new idea which is also required by the market. Diamond paints also worked on these lines to make sure Durasilk was a requirement of market and was also unique in its category.
IX. References
Azhar, A. (2009). ICI Paints. Market Trends of Industry. Ebrahim Khrais, A. (2008) The Paint And Vernishes Industry In Jordan. WWW.ULUM.NL . Khurshid, A. (2009). Parget Paints. Market Growth of Industry. Rashid, A. (2010). ICI Paints Pakistan Limited. Paint Industry in Pakistan.
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Questionnaire
Opportunity Identification & Concept Generation:
How DP identify opportunity for introducing Ace Durasilk in the market? What sort of idea generation technique D use for Ace Durasilk Does DP use lead user process for generating ideas for NPD? If yes, than how can DP search for lead user? Does DP use the open networks for idea generation? What number of ideas DP generates for introducing Ace Durasilk? Did DP use Problem-based ideation technique for developing new products? How DP face problems while listening to customers for new product idea generation? How DP do industry analysis ad find opportunities for ND? What are the internal sources of idea generation at DP? i) Is it a creative team? ii) R&D cell? How did the NPD team of DP place outcome based interview? How did DP translate ideas into concept? What are the main attributes you think paint has? Does DP conduct OBI interview from distributors, retailers and stakeholders?
2.
14) 15) 16) 17) 18)
Concept Evaluation:
How does the idea screening process take place at DP? Does DP make product brief of Ace Durasilk for concept evaluation? How does DP make sure that the right ideas should be selected? Should DP depend on conventional marketing research techniques for decision making? Does DP make and prototype sample of Ace Durasilk before the development stage?
3.
19) 20) 21) 22) 23) 24) 25) 26)
Development Stage:
How the NPD process is inter-connected with firm strategic directions? Does DP ensure the NPD process adheres to sound ethical principles and conforms to public policy issues? How DP managing creative environment which is important for innovation in NPD process? What were the challenges, issues and threats DP faced in manufacturing of Ace Durasilk? Which of your key technologies do you want to strengthen for developing new product? Which technology do you to acquire that help to better compete with rivals in developing new products? Did DP use product platform planning to achieve economies of scale? What was the role of your technical staff in developing Ace Durasilk?
4.
27) 28) 29) 30) 31) 32)
Launch Stage:
What sort of marketing plan is sketch for Ace Durasilk before launching in the market? Does Ace Durasilk use test marketing of Ace Durasilk before executing it into the market? What kind of marketing strategies your organizations use to compete with competitors? Does DP use feasibility testing technique before it launch in market? How DP plan to position the Ace Durasilk in the market? More than 90% products fail in launch stage, How DP reduces this risk?
B.
Audio Transcript
The CD for Audio Transcript of the interview is attached with the report. 20 | P a g e