LAHORE SCHOOL OF ECONOMICS

SALES FORCE MANAGEMENT

Written Analysis of Case Study

Case Study: Berger Paints Regaining the lost glory

Table of Contents
1.

Introduction:........................................................................................................ 3

2.

Qualitative Facts................................................................................................... 4

3.

Quantitative Facts:................................................................................................ 5

4.

Problems & Issues:................................................................................................ 7

5.

Core Problem & Justification:.................................................................................. 8

6.

Solutions & Recommendations:................................................................................ 9

7.

Conclusion:....................................................................................................... 10

APPENDIX A:......................................................................................................... 11

Page 2 of 15

1. Introduction:

Company:Berger Paints.
The company started operations in1950.
Type of company: Public Limited (as of 1974)
Major Shareholders:Firstly the majority of shares were held from 49.38% by Pakistani
investors and 50.62% by Jenson & Nicholsan Parent Company
Major Shareholders: Later on in 1991, Slotrapid Limited an English company
acquired the companys through 50.62% shares.
Initial operations started from Karachi representing that the major infrastructure was
based and monitored through Karachi (which is why the financial performance could be
linked to the fire incident of Karachis facility)
The company had a competitive advantage at that time to be the first paint company in
the organized sector in Paint Industry of Pakistan as well as provision of wide variety of
products.
The industrial development era created demand for companys products.
The company offered a diversified product mix with products and their application
categories as follows:
Decorative Paints(20% share of the market)
General Industry Finishes(Industrial Paint)
Automotive Paints (Industrial Paint)
Road Markings (through Joint Venture with a Malaysian Company)
Government & Marine Projects
Resin Chemical
Powder Coatings(Industrial Paint)
Printing Inks
Adhesives
Construction Chemicals
Protective Coatings(Industrial Paint)
Vehicle Refinishes
The external environment of the company revealed the following competitors:
ICI
(National Level) 30% share of the market
Kansai
(National Level) 8% share of the market
Nippon
(National Level)5% share of the market
Juton
(National Level)
Diamond
(Regional Level)
Brighto
(Regional Level)
Master
(Regional Level)
Happilac
(District Level)
Nelson
(District Level)
Gobis
(District Level)
Black Horse etc. (District Level)
Companies other than ICI, Kansai and Nippon had a collective 35% market share.

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2. Qualitative Facts

The Managing Director of Berger Paints was Mahmood Ahmed evaluating the financial
performance of the company an immediate consequence of destruction of facility in
Karachi with very long cycled loss impact.
The management shifted operations in Lahore, and made financial arrangements from
insurance claims (Rs. 8 billion) and bank borrowings.
The manufacturing unit of Lahore was 4 times bigger than that of Karachi.
The company also acquired 20% shares of Buxly Paints Limited which was a local
company operating since 1948. The agreement was that Berger will produce and sell
Buxly decorative paints under franchising terms. The strategy was aimed to compete with
companies like ICI which had an established market share already.
The company retained selective distributors and used direct selling by setting up display
centers in Lahore.
The company used a commission based compensation plan for its sales force salaries.
The sales regions were divided as follows:
SOUTH:
Sindh & Baluchistan
CENTRAL:
Lahore, Gujranwala, Faisalabad & Multan
NORTH:
Islamabad, Jhelum, Northern Areas & Afghanistan (First Paints Co)

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3. Quantitative Facts:

The company faced huge losses except in 2009 which can be attributed to insurance claim
cash inflows.Graphically represented below:

After Tax Profit

60000
40000
20000
0
2008
-20000

2009

2010

2011

2012

2013

After Tax Profit

-40000
-60000
-80000
-100000
-120000
-140000

Earning per Share

10
0
2008

2009

2010

2011

2012

2013

-10

Earning per Share

-20
-30
-40
-50

This negative relation was also linked with high administration costs.

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The most recent analysis of quarterly ratios revealed the following trends:

ROE
0.5

0
Q1
-0.5

Q2

Q3

Q4
ROE

-1

-1.5

-2

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ROA
0.1

0.05

0
Q1

Q2

Q3

Q4

-0.05

-0.1

RO

-0.15

-0.2

-0.25

-0.3

-0.35

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The major sales revenue came from the decorative paints category i.e. 75% of total revenue. Other
major source of sales revenue was from the Allied Paints (imported by acting as sole supplier of
Allied paints in Pakistan) providing paint to public sector of the country including Army.

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4. Problems & Issues:

Theproduction facility of the company located in Karachi was destroyed in a fire accident
in 2008.Due to fire accident, the company was not able to produce like before, fulfill
demand and therefore the gained market share was lost.
Along with the losses from Karachi unit, the company was also alleged with serious
charges against other damages and human losses.
In the meanwhile, Karachi as well as other areas and provinces were also a victim of
severe political unrest and terrorism which could be directly linked decline in
construction activity and eventually decline in product demand.
There was competition from the unorganized sector which was not regulate properly by
the government, therefore creating hurdles for businesses that were conforming to the
governments regulations especially through payment of heavy taxes levied upon
members of organized sector because the unorganized sector did not pay taxes
accordingly.
The growth of organized sector was being stalled by unorganized sector.
The demand for companys products was almost proportional to the National GDP
Growth percentages but it was unable in meeting the public sectors demands.
The company did not use above the line advertising. It used below the line advertising
(consists of in-store promotions and selling terms with franchises involved)

NOTE: The above the line advertising consists of advertising targeted at mass level. I.e. the
use of radio, television, billboards, magazines and newspapers etc.

The first ever television commercial was launched very late in 2014.
Due to the fire incident of 2008, a public sector project is also under construction. It was
for the PEPCOs Nandi Purr power project.
Another problem was decreasing sales trend from 2011 to 2013 including significant
decline in 2012 of Industrial Paints (& Automotive Paints) and Allied Paints.
The market share in small cities was also being taken down by new entrants having
higher distribution in these areas.
Dealers started engaging in backward integration by building their own low quality (&
price) brands in the unorganized market.
HR department was also not much developed & formalized. The common recruitment
was done from referrals of senior managers.
Employee turnover was high (especially withinfinance departments audit unit because
the internal audit head stayed on average only 6 months)eventually increasing recruitment
and training costs (another contributor of low profits).
There was no bonus allocation system in compensation plan and promotion (career
advancement) opportunities were also low and usually promotions resulted after 2 years.
Decrease of investors confidence in the company and energy crises lead to low sales.

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5. Core Problem & Justification:

The core problem in the case was that the sales of company were stagnant and the expected
growth was not being achieved.

The justification for regarding stagnant sales as the core problem can be emphasized through
following points:

The sales decrease was first of all attributable to the loss faced by the company after
the fire incident of 2008.
In order to recover from the incurred losses, the company had to shift its operations
and faced high administration costs while doing so.
Market share was being lost due to unmet production needs and other external sources
like national political unrest and unorganized paint sectors also contributed to
deteriorate the sales of the company.
The approach of the company towards marketing was less intense, the market share
was being captured by players in small areas and promotional activity was also not
very proactive.
Finally, the internal factors of the company like negligent and informal human
resource department also contributed in creating a mismatched policy towards the
type of company involved.

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6. Solutions & Recommendations:

The recommended solution for growth in sales isas follows:
1. Refine the safety of production units making it a safe workplace:
The first thing the company needs to do is first of all eradicate any future probable reasons
that would create an incident of such a level like that which happened in 2008. Strict
workplace refinements and safety standards should be implemented and asked by workforce
in the production unit to follow and communicate thoroughly.

2. Focus on above the line advertising:

The company should find the right market segment and target the segment using appropriate
above the line advertising tools like local newspapers and magazines at least (if television and
outdoor marketing is expensive) in order to make consumers aware of the product and its
features.

3. Seek governments assistance with other players to regulate the unorganized sector &
tax collection:
The members of the organized sector should form an influential group and raise voice and
media campaigns in order to request the government to regulate the unorganized sector with
proper business operation conformances and tax collection so that the industry doesnt get
biased and a fair market competition could be established.

4. Expand distribution to smaller cities and redefine distribution system:

The company should also increase the product availability in smaller areas where high sales
have already been reported by other market players so that another income generation source
should be identified and utilized by the company.

5. Revise organizational structure& human resource planning policies:

The organizational structure should be revised. The prominent link between the boards of
directors head of audit should be removed so that all activities come under single functional
departments hold i.e. that of CFO. Moreover the company should establish a dedicated
marketing department in order to emphasize and adapt major marketing activities.
Finally the roles of head distribution as well as human resource planning should be closely
monitored so that a formal and more proactive functional team could be established enabling
systematic inflow of skilled labor and managers and allow a smooth and widely spread
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product outflow through the distribution system. The company should also increase
advancement opportunities and bring in bonuses in order to motivate sales force.

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7. Conclusion:
The overall conclusion from the observation of this case study reveals, that for companies
dealing with production of highly flammable products, there should exist a very safe and fool
proof system in case any such incident happens again. The standard operating procedures as
well as contingent aids should be specialized in order minimize such human as well as
monetary loss in the future. Moreover, companies cannot succeed without pursuing highly
aligned marketing strategies with other functional departments like the finance (internal
audits) and human resource planners. The company should use balanced above the line
promotion and try to find out the media tools that would help to locate and cater needs of the
right segment and boost up sales revenues eventually. Moreover, the company should broaden
its distribution in smaller areas also as they also contribute a major market share. Finally,
when foreign companies invest in the country, the form a source of monetary activity and
flow within the GDP so whenever they discover that there is some flaw within the relevant
industry, they should raise voice and request the government to provide help in such
situations.

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APPENDIX A:
Page 14 of 15

Proposed Organizational Structure:

Page 15 of 15