Michael Porter’s 5 Forces Model
Asian Paints -
1. Competitive Rivalry - Moderate
There is stiff competition in organized market since there are many players.
Advertising and distribution are the key to attract customers as there is minimal product
differentiation.
Asian Paints has certain advantages because it is the largest player and also has the
biggest distribution network.
2. Threat of New Entrants - Moderate
Since there are no major regulatory hurdles and relatively low fixed costs, starting the
business is easy.
However, scale, reach and brand are major barriers to entry.
Also, there is some element of technology involved in industrial paint segment which
may act as a barrier.
3. Bargaining Power of Customers - Low
Asian Paints is the largest player in the decorative segment. Since individuals are typical
customers here, they lack bargaining power.
However, in the industrial segment, the customers have high bargaining power since
they buy in bulk.
The company has strong presence in the decorative segment. Hence, bargaining power
of customers could be deemed as low.
4. Bargaining Power of Suppliers - High
Major raw material inputs include crude-based derivatives and certain solvents.
Crude prices move based on global demand-supply dynamics.
Availability of titanium dioxide is also scarce.
Hence, bargaining power of suppliers is high.
5. Threat of Substitutes - Low
The use of limestone as a substitute is limited to rural markets.
In urban markets there is no real substitute to paint.
As such, the threat a substitute is virtually absent.
Berger Paints -
1. Competitive Rivalry - Moderate
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 three players. However, the
competition can only increase from this point as market gets saturated but that will definitely
take some time
Competitor’s 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.
2. Threat of New Entrants - Moderate
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:
i. Brand equity of present players
ii. Distribution network
iii. Cost of modification of products
iv. Access to technology
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.
3. Bargaining Power of Customers – Medium to High
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 bringdown the bargaining power.
Therefore, the bargaining power of the buyers can be attributed as medium to high.
4. Bargaining Power of Suppliers - High
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.
5. Threat of Substitutes - Low
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.
Kansai Nerolac Paints Limited -
1. Competitive Rivalry - Moderate
Nerolac is a market leader in Automotive industrial segment, There is a certain advantages
because it is the largest player in this segment.
Competitor’s Business Models
i. Asian Paints: Overall market Leader due to cost leadership strategy
ii. Berger Paints India Ltd: A paint company based in India. The company is having
headquarter at Kolkata and has 14 manufacturing units in India.
2. Threat of New Entrants - Moderate
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.
3. Bargaining Power of Customers - Medium
The company has strong presence in the Automotive industrial segment. Hence, bargaining
power of customers could be deemed as medium.
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 bringdown the bargaining power.
Therefore, the bargaining power of the buyers can be attributed as medium.
4. Bargaining Power of Suppliers - High
Major raw material inputs include crude-based derivatives and certain solvents.
Crude prices move based on global demand-supply dynamics.
Availability of titanium dioxide is also scarce.
5. Threat of Substitutes - Low
The use of limestone as a substitute is limited to rural markets.
One more substitute mainly used in urban areas is wallpaper.
The emergence of glass walls in corporate offices and malls which reduces the usage of paints
can be one more major substitute
