PAINT INDUSTRYPESTEL ANALYSIS

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FIVE FORCE MODEL

PESTEL ANALYSIS

POLITICAL FACTORS

Political situation is stable. ModiNomics promises to drag India's economy into the 21stcentury

Make in India and various infrastructural development programmes will pave way forrevenue generation in Paint Industry

The fiscal incentives given by the government to the housing sector have immenselybenefited the housing sector. This will benefit key players in the paint industry for longterm…………………….

ECONOMIC FACTORS

The market for paints in India is expected to grow at 1.5 times to 2 times GDP in the next five years……………………………………………………………………………………………………………………………………………………………………………………………..

With GDP growth expected to be between 6.9% levels, the top three players are likely to clock above industry growth rates inthe future, considering they have a strong brand and good reach…………………………

Rise in disposable income and education, increasing urbanisation, development of the rural market and various launches of many innovative products have fuelled the paint industry’s growth……………………………………………………………………………………………..

SOCIO CULTURAL FACTORS

Rise in price of raw material……………………………………………………………………………………………………………………………………………

Import of raw material…………………………………………………………………………………………………………………………………………………..

TECHNOLOGICAL FACTORS

Cross-border tie-ups in industrial paints are becoming the order of the day with massive investment thrusts in automobilesand consumer durables. None of the Indian paint manufacturers possess the requisite technology to manufacture auto-paints.

All the paint majors have tie-ups with global paint leaders for technical expertise. Asian Paints has formed a JV with PPGIndustries Inc to service the automotive OEMs.

The lack of technology also affects the chances of Indian paint companies in setting up manufacturing units abroad. …………

Modernization of paint like (waterproof paints, Teflon coating, creating colours shops etc) …………………………………………………

ENVIRONMENT FACTORS

Low-VOC and other environmentally preferred paintsVolatile organic compounds are gases emitted by various solids or liquids, many of which have short- and long-termadverse health effects. Solvents in traditional paints often contain high quantities of VOCs. Low VOC paints improve indoorair quality and reduce urban smog. The beneficial characteristics of such paints include low odor, clean air, and safertechnology, as well as excellent durability and a washable finish.

Heavy metalsHeavy metals are used in paints and have raised concerns due to their toxicity at high levels of exposure and since theybuild up in the food chain.

Lead paintLead paint contains lead as pigment. Lead is also added to paint to speed drying, increase durability, retain afresh appearance, and resist moisture that causes corrosion. Lead, a poisonous metal, can damage nerveconnections (especially in young children) and cause blood and brain disorders.ChromiumPrimer paint containing hexavalent chromium is still widely used for aerospace and automobile refinishingapplications. Zinc chromate has been used as a pigment for artists' paint, known as zinc yellow or yellow 36. It ishighly toxic and now rarely used.

LEGAL FACTORS

Pollution Control Law……………………………………………………………………………………………………………………………...………………..

Health and Safety Law……………………………………………………………………………………………………………………………………………….

Environmental Law………………………………………………………………………………………………………………………………………………………....

FIVE FORCE MODEL

BARGAINING POWER OF BUYERSMajor Customers

Households Industries

For housing requirements the buyers can be customers(Building contractors who buy in bulk) and end customers(people who paint and repaint their house).

Customers are price sensitive due to variety of optionsavailable

Decisions are made based on quality, price anddifferentiating factors like whether protection, eco-friendly paints

The unorganized market has also have a large chunk ofmarket share providing many options to lower incomesegments

Industrial segment is low in margin but high revenuegenerating business

Buyers are highly knowledgeable about their requirements

Price comparison is done effectively by buyers…………………

However, industrial paint suppliers have their expertise intheir favors which limit the bargaining powers

BARGAINING POWER OF BUYERS IS MEDIUM

Highly raw material intensive industry with more than 300 products going into the manufacturing of final products

Major raw materials

– Titanium Dioxide

– Pigments

– Additives

– Solvents

Titanium Dioxide is one of the key pigments used in the production and is facing a global shortage

Supplier of this raw material has a solid bargaining power

BARGAINING POWER OF SELLERS

BARGAINING POWER OF SELLERS IS MEDIUM TO HIGH

COMPETITIVE RIVALRYCompetitive Rivalry

Organized Sector Unorganized Sector

Accounts for 65% of total paint market……………………………..

Major players include……………………………………………………….. Asian Paints Berger Paints Nerolac Paints Akzo Nobel

Large players getting larger………………………………………………..

Organized sector players concentrates on brand buildingand product differentiation

Accounts for 35% of the paint market……………………………….

Highly fragmented……………………………………………………………..

There are about 2500 units having small and mediumsized manufacturing plants

Unorganized sector players concentrates mainly on price…

Currently, the Rs. 40, 600 Crore paint industry is likely to see a 20% Compounded Annual Growth Rate (CAGR) until 2016due to rapid urbanization and development of infrastructure. Therefore, competition will be intense till it reaches asaturation point.

AVAILABILTY OF SUBSTITUTE

The issue of substitute is slowly but surely, irking the paint industry ……………….…………….

Colorful patterned wallpapers and wall paneling are being preferred by some forarchitectural use instead of regular emulsion paints …………………………………………………

In terms of industrial use, the use of coatings for office equipment is decreasingsignificantly. Equipment suppliers prefer to use metallic finishes and oxidation processto give a more matt and sleek look to the equipment

The issue of substitute is slowly but surely, troubling the paint industry ……….……………….

Also these, metallic options are considered more hassle-free as there are no issues of paint chipping and repair…………………………………………………………………………………………………

THREAT OF SUBSTITUTE IS MEDIUM TO HIGH

THREAT OF NEW ENTRANTS

The paint market in India is dominated by few players, making it difficult for anyone newentering the industry to compete

Since new technologies are also available to shorten the production life cycle of paint,the threat of new entrant is low

But if a foreign player who is highly competitive in terms advanced technology theIndian market then the picture might change

THREAT OF NEW ENTRANTS IS MEDIUM TO HIGH