1

Table of Contents

1. Introduction ............................................................................................................................................. 4

1.1. Origin of the Report .......................................................................................................................... 4

1.2. Rationale of the Study ...................................................................................................................... 4

1.3. Objectives .......................................................................................................................................... 4

1.3.1. Broad Objective ........................................................................................................................... 4

1.3.2. Specific Objectives ...................................................................................................................... 4

1.4. Scope of the Study ............................................................................................................................ 5

1.5. Methodology ..................................................................................................................................... 5

1.5.1. Sources of Data ........................................................................................................................... 5

1.5.2. Instruments of Data Collection ................................................................................................... 6

1.5.3. Sample Design ............................................................................................................................. 6

1.5.4. Sampling Technique .................................................................................................................... 6

1.5.5. Sample Size ................................................................................................................................. 6

1.6. Criticalities and Limitations ............................................................................................................ 6

2. A Short Note on Berger Paints Bangladesh Ltd. .................................................................................... 7

3. Basic Strategy of Berger Paints Bangladesh Ltd. of Berger Paints Ltd ................................................ 8

3.1. Corporate Strategy ........................................................................................................................... 8

3.2. Business Strategy ............................................................................................................................. 9

3.3. Functional Area Strategy ................................................................................................................. 9

3.4. Operating Strategy Level ................................................................................................................. 9

3.5. Strategic Intent of BERGER Paints .................................................................................................. 9

4. Process of Executing Strategy of Berger Paints Bangladesh Ltd.of Berger Paints Ltd. .................... 10

4.1. Vision ............................................................................................................................................... 10

4.2. Mission ............................................................................................................................................ 11

4.3. Balanced Scorecard ........................................................................................................................ 11

5. Evaluation of External Environment of BERGER Paints Bangladesh Ltd. ........................................ 13

5.1. PESTEL Analysis of Berger ............................................................................................................ 13

5.2. Porters Five Forces Analysis......................................................................................................... 18

5.2.1. Intensity of Competition ........................................................................................................... 19

5.2.2. Threat of Entry .......................................................................................................................... 21

5.2.3. Threat of Substitutes ................................................................................................................. 23

2

5.2.4. Bargaining Power of the Buyers ................................................................................................ 23

5.2.5. Bargaining Power of Suppliers .................................................................................................. 25

5.3. Industry Attractiveness and Some Opportunities ................................................................................ 26

6. Evaluation of Resource and Position of Berger Paint ......................................................................... 27

6.1. Present Scenario of BERGER ......................................................................................................... 27

6.2. SWOT Analysis ................................................................................................................................ 28

6.3. Economies of Scale and Economies of Scope ............................................................................... 29

6.3.1. Economies of Scale ................................................................................................................... 29

6.3.2. Economies of Scope .................................................................................................................. 30

7. Generic Competitive Strategy of Berger Paint and Chemicals of Berger Paints Limited ............... 31

7.1. Superior Raw Material ................................................................................................................... 31

7.2. New Product Development ............................................................................................................ 31

8. Strategic Choice for Berger ................................................................................................................... 31

8.1. Market Segmentation ..................................................................................................................... 31

8.2. Target Market ................................................................................................................................. 32

8.2.1. The Marketing Mix ...................................................................................................................... 33

9. Ethical Business Strategies, Social Responsibility and Environmental Sustainability .................... 33

9.1. Business Ethics ............................................................................................................................... 33

9.2. Corporate Social Responsibility (CSR) .......................................................................................... 34

10. Building an Organization Capable of Good Strategy Execution ....................................................... 34

10.1. Market Growth Strategies............................................................................................................ 35

10.1.1 Place/ Distribution strategy ......................................................................................................... 35

10.1.2 Price Strategy ............................................................................................................................... 36

10.1.3 Environment strategies of Berger for marketing ......................................................................... 36

10.1.4. Promotional Strategies ............................................................................................................... 37

11. Managing Internal Operation ............................................................................................................. 38

12. Recommendation ................................................................................................................................ 39

13. Conclusion............................................................................................................................................ 39

14. Bibliography ........................................................................................................................................ 41

List of Figures

1. Balanced Scorecard of Berger12

3

2. Porters Five Forces Model19

3. Market Share of Industry ..27

4. Five Components of CSR ...34

5. Distribution Network of Berger 35

6. Organogram ..38

List of Tables:

1. Vertical and Horizontal Competition.19

2. Peak Time of Industry.32

4

1. Introduction

1.1. Origin of the Report

The report titled Strategic Analysis of Berger Paints Bangladesh Ltd is a partial

requirement for completion of the course Business Strategy (W 650).

1.2. Rationale of the Study

The study ventured forth into various applications of different concepts of Business

Strategy in the paint sector of Bangladesh. In an effort to do so, I have scrutinized the

strategic scenario of paint products, identified the major players in the industry, the market

structure, analysis on the various strategies and its implementation, cost behavior, and also

how their strategies are placing an effect on their business and consumers.

1.3. Objectives

1.3.1. Broad Objective

The broad objective of this paper was to carry out an intensive strategic study on Berger

Paints Bangladesh Ltd., i.e. gather and compile all possible relevant data regarding the

paint industry in Dhaka and provide an accurate depiction of the recent development in

this sector relating to the concepts of Business Strategy learned in classroom sessions till

date.

1.3.2. Specific Objectives

1. Understanding the principles of mission, vision, core values, objectives and their

application in respect of Berger Paints Bangladesh Ltd. and the relevant industry.

2. External and internal environment analysis (SWOT, PESTEL, Porters Five Forces) of

Berger Paints Bangladesh Ltd.in the sector.

3. Evaluation of resource and position of Berger Paints Bangladesh Ltd..

5

4. Analysis of generic competitive strategies for Berger Paints Bangladesh Ltd.

5. Identification of important business strategy choice and their effect on the overall

organization.

6. Investigation on the strategies for competing in the foreign market, ethical business

practices, managing internal operations and promotion of good governance.

7. Effects of balanced scorecard for Berger Paints Bangladesh Ltd..

8. Recommendations for enhancement and growth for Berger Paints Bangladesh Ltd.in

Bangladesh.

1.4. Scope of the Study

The geographic scope of this research is confined within Dhaka city. Information was

drawn from Berger Paints Bangladesh Ltd. officials, and existing and potential buyers

within Dhaka city. Additionally executives of Berger Paints Bangladesh Ltd. and employees

of the organization were interviewed.

1.5. Methodology

The study was conducted on two sets of population, one representing the demand side and

the other the supply side of the paint sector. On the demand side, the population consists of

existing and potential consumers, and the supply side consists of interview with employees

of the organization. Interviews and questionnaires consisted much of the way through

which information was gathered for this study.

1.5.1. Sources of Data

This study was conducted based on both primary and secondary data. The secondary study

was mainly required for the background study on this sector. Besides, some secondary

sources like small scale research reports conducted will also be used.

Primary sources will be from existing and potential clientele. Primary source of

information came from the interview and questionnaire conducted for the purpose of the

study.

6

1.5.2. Instruments of Data Collection

Various articles, websites and newspapers were taken into account to get the necessary

secondary information. Interviews enabled specific information relating to identifying

strategic decisions and their effects on the organization.

1.5.3. Sample Design

As mentioned above, this study was conducted on two sets of population, one representing

the demand side and the other the supply side of the paint sector.

1.5.4. Sampling Technique

Non-probabilistic sampling methods was selected because the complete sampling frame for

the target population was not available that is necessary to conduct the usual probabilistic

sampling techniques. Besides, limited time and budget guided the researchers to go for

non-probabilistic methods.

1.5.5. Sample Size

The sample size of the interviews was small. The interview sessions provided much in

depth knowledge and information required for the fulfillment of the study.

1.6. Criticalities and Limitations

While conducting the study there were few obstacles that constrained the effectiveness and

comprehensiveness of the study. Certain limitations hampered the accuracy of this study.

First of all, employees were reluctant to give out company information. The accuracy of

information provided by the company hampered the overall quality or success of the study.

Bangladesh does not have organized secondary data of this sector unlike most developed

countries. Thus the information generated from primary research may not reflect the

precise scenario of current needs and our limited sample size may not be large enough to

make accurate generalizations about the entire population.

7

2. A Short Note on Berger Paints Bangladesh Ltd.

Berger Paints is one of the oldest names in the paint industry, yet, it is one of the most

technologically advanced companies in the country. It is constantly striving for innovating

superior quality products and services. With more than 250 years of rich heritage, Berger

manufactures world class paints for all kinds of substrates and also provides unparallel

services.

Bergers inception was laid out in 1760 by a German national named Louis Berger, who

started dye and pigment making business in England. Louis involved his family into the

business and eventually changed the status of the company to Louis Berger & Sons Limited.

The company grew and expanded rapidly with a strong reputation for excellence in

innovation and entrepreneurship. In the initial years, Louis successfully refined the process

of manufacturing Prussian blue, a deep blue dye. This dye was widely used for the uniforms

of many European armies of that time. Production of dyes and pigments evolved into

production of paints and coatings, which till today, remains the core business of Berger.

The company grew rapidly, by establishing branches all over the world and through

mergers and acquisitions with other leading paint and coating manufacturing companies.

Berger Paints started painting Bangladesh since independence. Over the past few decades,

Berger has evolved and transformed itself in becoming the leading paint solution provider

in the country with a diversified product range that caters to all your painting needs.

Berger has heavily invested in technology and Research & Development (R&D) compared

to any other manufacturer in this market. Investment in technology and plant capacity is

even more evident from the establishment of Powder Coating and Emulsion plants at the

Dhaka factory. The state-of-the-art Dhaka factory is an addition to Berger's capacity,

making it the paint giant in Bangladesh. It sources raw materials from some of the best

known names in the world. The superior quality of Berger's products has been possible

because of its advanced plants and strict quality controls that match international

standards.

8

With its strong distribution network, Berger has reached almost every corner of

Bangladesh. Nationwide Dealer Network, supported by 8 Sales Depots strategically located

at Dhaka, Chittagong, Rajshahi, Khulna, Bogra, Sylhet, Comilla and Mymensingh has an

unmatched capability to answer to paint needs at almost anywhere in Bangladesh.

Berger's one of the prime objectives is to provide best customer support-connecting

consumers to technology through specialized services like free technical advice on surface

preparation, color consultancy, special color schemes etc. To bolster customer satisfaction,

Berger offers Home Decor Service from where one can get an array of services pertaining

to painting.

The product range includes specialized outdoor paints to protect against adverse weather

conditions, Color Bank, Superior Marine Paints, Textured Coatings, Heat Resistant Paints,

Roofing Compounds, Epoxies and Powder Coatings. In each of these product categories,

Berger has been the pioneer. Besides, Berger offers illusions-the first designer paint

solution in Bangladesh. The company also launched Power Bond adhesive, lnnova Wood

Coating in collaboration with Sherwin-Williams, Vehicle Refinish in collaboration with

world renowned PPG-USA, Texbond binder to cater to the growing needs of the customers.

3. Basic Strategy of Berger Paints Bangladesh Ltd. of Berger

Paints Ltd

We know that an organization has to go through four basic levels for strategy making. They

are:

3.1. Corporate Strategy

In corporate strategy, Berger Paints Ltd has to maintain synergy with its operations in

Bangladesh, India, Nepal and Sri lanka. In Bangladesh, It owns 100 percent share of Jenson

and Nicholson. The corporate level strategy is overseen by Regional Director and Managing

9

Director of Berger Paints.

3.2. Business Strategy

In this level, general manager of each segment of Berger Paints Ltd tries to find out how

they are going to secure growth in the market. Their concern is to establish competitive

advantage in the market also so that they can progress further. For this, they design

strategies for gaining competitive capabilities to run like a single business as well as

providing additional values to the root organization.

3.3. Functional Area Strategy

The different functional divisions are run by GM and Senior Managers who have many line

managers under them as head of departments, the head of each of the functional areas

evaluates that according to their functional capabilities and provides some suggestions that

will provide additional value for the root organization.

3.4. Operating Strategy Level

In this level, the game plan and work force distribution has been done to ensure the

strategy has been implemented in search of expected results. Berger has a very efficient

supply chain and production which is due to effective operating strategies undertaken by

management.

3.5. Strategic Intent of BERGER Paints

.Currently BERGER Paint is the market leader of paint industry in Bangladesh. They have

around 55% of market share. Now their objective is to hold this position by strategical

means and they are concentrating their full force of its resources aiming towards that

objective. Thus they are searching for opportunities like launching new product to hold its

position and responding as early as possible when they find an important one.

Today managers of paint industries are working hard to match the competitive advantages

of their new global rivals. The paint market is huge and multinational firms like Jotun,

Nippon are entering Bangladesh Market. When competitiveness still seems out of reach,

Berger forms strategic alliancesi.e. with Sherwin-Williams for Auto Refinish, With

Hempel for Marine Products that upset the competitive balance in the first place. This

10

strategic intent usually incorporates stretch targets, which force companies to compete in

innovative ways.

Characteristics of BERGER Paints Strategic Intent:

1. Making Quantum Gains:

BERGER paint is currently not concentrating only basic paint products; they are launching

premium paint products as there are available opportunities regarding this. Launching

these products along with basic paint items will ensure a quantum gain which will lead

BERGER Paint item to ensure a position for competing against key rivals like Asian Paints,

Jotun, Nippon etc so that it can hold its leader position in the marketplace, often against

long odds.

2. Establishing Feasible Performance Target:

For ensuring a sustainable position in the marketplace, BERGER paint needs to establish a

feasible performance target to hold its market leadership. Currently they are trying to

achieve a certain level of growth range to uphold its market leader position.

3. Entails Aggressive Actions:

BERGER Paint is approaching all possible consumers in Bangladesh, where its rival has

smaller segmentation target. As BERGER Paint is equipped with the most modern

technologies, they aim at bigger segments and take some definite aggressive actions. They

have a greater distribution network and established brand value to entail such actions.

4. Process of Executing Strategy of Berger Paints Bangladesh

Ltd.of Berger Paints Ltd.

4.1. Vision

Bergers vision statement is: To be the most preferred brand in the industry ensuring

consumer delight.

11

The vision statement is graphic and it provides a direction to the long term future as they

aspire to be the leading brand providing customer satisfaction. It is not vague and it is

feasible as they have already established themselves to be the leading brand in

Bangladesh. Although it should avoid superlatives like most from its vision statement.

4.2. Mission

Bergers mission statements are

We shall increase our turnover by 100 percent in every five years. We shall remain socially

committed ethical company.

They have been exhibiting growth of more than 18% over the past five years. So they have

been able to pursue their mission statement successfully. Also, they have taken initiatives

to be an ethical and socially responsible company through their community activities that

justifies their mission statement. The mission statement is in accordance with the vision

statement so it can be said the mission statement has been correctly formualated.

4.3. Balanced Scorecard

A balanced scorecard for Berger has been prepared based on the interview of Bergers GM

of Finance and GM of Sales.

The balance scorecard relates the financial target relating to any strategic decision

undertaken by the sales, marketing or supply chain department and reviews how

financially it would affect the company.

12

Figure 1: Balanced Scorecard of Berger

13 | P a g e

5. Evaluation of External Environment of BERGER Paints

Bangladesh Ltd.

5.1. PESTEL Analysis of Berger

The study analyzed the concept of PESTEL and the macroeconomic environment that

Berger operates in.

POLITICAL

The formation, maintenance and survival of any organization are dependent on the

stability of a countrys political and legal system. A comprehensive analysis of the

political and legal factors by Berger helps in ensuring stability in terms of its

operations. The legal consideration lies in the awareness of various laws regarding

import of raw materials and the like.

Political factors are basically to what degree the government intervenes in the economy.

Specifically, political factors include areas such as tax policy, labor law, environmental law,

trade restrictions, tariffs, and political stability. Political factors may also include goods and

services which the government wants to provide or be provided (merit goods) and those

that the government does not want to be provided. Furthermore, governments have great

influence on the health, education, and infrastructure of a nation.

Analyzing the political condition of Bangladesh, it is observed from 1991 to 2013, that none

of the major parties were able to hold the government position for more than one term

continuously. Recently Awami League has been elected twice. There is a shift; none of the

parties were capable to meeting the expectation of the public. Also they were unable to

mitigate the conflict between them, so they intentionally or unintentionally made it worse.

The people of the country are accustomed with increased unstable political condition

during the elections. Moreover, other issues like conflict over caretaker government, the

assassination attempt of Awami League chairperson Sheikh Hasina and a more pressing

14 | P a g e

concern regarding the several terrorists groups have been key disturbing factors making

the political condition of Bangladesh extremely unpredictable and unstable. And this

increased political instability is a bad influencer for the economy and the paint industry of

our country is also affected by it.

The organization also has to fund ruling political party campaigns in the name of chada in

order for their smooth operation of business, which in turn increases the cost of operating

while curtailing their profit margin. Due to the political instability and recent initiatives

taken Berger faces tough times ahead in order for the company to cope up with these

uncontrollable factors. However, throughout the previous decade Berger has maintained

positive relations with the government and is likely to benefit in the near future from its

beneficial relationship with the government.

ECONOMIC

Economic forces are of concern to businesses involves producing goods and services that

people want and pay for, as because the economy is an Indicator of the general health and

well-being of a nation. Berger takes into account various economic factors, preferably the

rates of inflation, the exchange rate and level of income. The prime reason for such is to

have a control over its allocated budget for domestic and imported raw materials, but

most importantly alertness of economic variables are necessary to determine Bergers

pricing strategy so that all segments of the population can afford to buy their products.

Economic factors include economic growth, interest rates, exchange rates and the inflation

rate. These factors have major impacts on how businesses operate and make decisions. For

example, interest rates affect a firm's cost of capital and therefore to what extent a business

grows and expands. Exchange rates affect the costs of exporting goods and the supply and

price of imported goods in an economy.

The GDP growth of Bangladesh has experienced many ups and downs since 2005. GDP

shows a cyclic up and down mostly due to cyclic political instability. The Bangladesh

15 | P a g e

economy is experiencing a continuous rise in inflation. Value of Taka against US Dollars has

decreased. Thus favoring the export of paint but badly hampering the import of raw

materials for production which has experienced increase in import duty for this.

Disposable Personal Income in Bangladesh increased to BDT 31079.56 in 2013 from BDT

29606.81 in 2012. Disposable Personal Income in Bangladesh averaged BDT 18543.01

from 1990 until 2013, reaching an all-time high of BDT 31079.56 in 2013 and a record low

of BDT 6808 in 1990.

For the last twelve years, on an average, the growth rate of consumption was 9.29 per cent

from 2000-01 to 2005-06, it had a rapid increase of 47.44 per cent and the growth rate at

present is 13.70 percent. According to a Household Income and Expenditure Survey of

2005, the domestic consumption growth rate is around 20%. This is a positive signal for

Berger as the increased spending by consumers results in increased sales for the

organization.

The total sales volume of the paint industry has increased over the years. Labor cost in

paint industry is comparatively low than those of competitor countries exporting paint. The

household spending has increased, portraying the fact that there will be an increase in

demand for the products of Berger. Higher GDP and higher consumption rate both look

constructive aspects to products of Berger. In short, the economic condition of Bangladesh

is mostly favorable for the growth of paint industry in our country.

SOCIAL

The socio cultural environment is made of institutions and other forces that affect social

values, perceptions, preferences and behavior. In the context of a predominantly Muslim

country like Bangladesh, Berger has customized its services according to the countrys

culture. While the producing paint, Berger puts strong emphasis in seeing that no haram

ingredients are used.

16 | P a g e

The demographic forces are of interest to marketing managers because it involves people

and people make up the markets. Demography shows the populations inclinations towards

certain social structure and the increase or decrease in certain age groups .For Berger

demographic factors are of advantage if it shows an increase in the number children and

teenage population (the most lucrative segment for the paint industry). Social factors

include the cultural aspects and include health consciousness, population growth rate, age

distribution, career attitudes and emphasis on safety. Trends in social factors affect the

demand for a company's products and how that company operates. For example, an aging

population may imply a smaller and less-willing workforce (thus increasing the cost of

labor). Furthermore, companies may change various management strategies to adapt to

these social trends (such as recruiting older workers).

The average household size in Bangladesh is 4.4 persons per family, down from 4.8 in 2001

and 5.5 in 1991. Clearly this statistic indicates an increase in the number of family sizes and

households, resulting mostly due to urbanization. Along with rapid urbanization, increase

in awareness and changes in lifestyle from ed and conventional families to fragmented and

professional families, peoples' attitude towards commodities has also changed. Preference

towards sustainable products has noticeably increased due to lack of spare time for

thorough self-inspection in product purchasing. Also inclination towards congenial and

sincere customer service has grown vastly due to competitive and strenuous urban lifestyle

which allows minimal time in elsewhere engagements.

Personal Savings in Bangladesh increased to 1771.53 BDT Billion in the fiscal year

2011/2012 from1536.82 BDT Billion in the fiscal year 2010/2011. From 1994 until 2012,

Bangladesh Personal Savings averaged 726.9 BDT Billion reaching an all-time high of

1771.5 BDT Billion in June of 2012 and a record low of 177.4 BDT Billion in June of 1994.

In summary, it can be said that, increase in family number, increased personal income has

increased the market size for this industry. And the attitude towards superior Product

Quality & Service has provided a positive sociological support for the paint industry of

Bangladesh.

17 | P a g e

TECHNOLOGICAL

One of the most pervasive factors in the environment, the impact of technology is seen as

the combination of skills and equipments that marketers use in their day-to-day

operations. In Berger, use of technology can be seen in terms of the automated cone baking

machines, chocolate making machines, injected deep freezers, chemicals processing

machines and others. These innovate machines are able to produce paints at a faster rate

while not undergoing any sacrifice in the level of quality, and thus their warehouse has

capacities in thousand liters. Paint industry in Bangladesh has not been exposed to massive

technological advancements like other industries in todays world. However, some of the

breakthroughs have changed the way of doing the paint related business.

Supply chain management has been changed due to the technological advancements. All

the paper work has been replaced by computer automations and Berger paint has an

automated supply chain system to receive the deliveries and also place the orders. Not all

the paint company can use the sophisticated technology as these technologies are

expensive to buy and operate. Berger paint has an edge over the competitors in this area.

Berger paint faces the threat of new innovations and discoveries. Mostly this company

focuses on the paint which targets their usual customer segment which is the upper-middle

to upper class. However, customers of this segment is these days preferring paint of

companies of imported brands and are willing to spend more for this brands too.

Therefore, their customer base is being hampered as Berger is falling behind in catering

and attracting this customer segment.

Product life cycle is becoming shorter in this fast era. Everyday more and more innovative

product is coming to the market that replaces the old one. This is an area where Berger

needs to focus because they are still making traditional paint. If a new solution becomes

popular, people usually do not want to buy the older version (such as the popularity of

weatherproof paint). Therefore, this company needs to focus on more innovations in design

18 | P a g e

and quality. They can also focus on making the paint more stylish than the competitors and

still can charge a high margin based on their brand value.

ENVIRONMENTAL

In todays environment, it is necessary to accomplish the goal of sustainable development

which means that the resources should be consumed in such way that the upcoming

generation will not face trouble. The rate of deforestation and industrialization is

increasing in an alarming rate. The concept of Green Business is widely adopted by

organizations throughout the world. However, paint related business is a business which

primarily relies upon chemicals.

Berger has taken recently environment friendly initiatives. They have gone for lower

organic solvent based paint products and are promoting water based paint products which

are environmentally friendly.

LEGAL

Many laws relating to the paint business has been enacted to make a fair business

environment as well as to encourage entrepreneurship. The Bangladesh Labor Act 2006

(Act no.42) requires that a any company should have minimum wage rate, compensation

for accidents, scope to have trade union, health security, welfare and condition of job and

environment, and concerned issues.

Berger Paints offer a lot of facilities in this respect to their employees including having the

same scale of salary with respect to its sister concerns in other countries, providing life

insurances and health insurances and also it has a legal team which acts against

adulteration and copyright infringement in the country.

5.2. Porters Five Forces Analysis

Porters five forces analysis points to the strength and weakness of any industry by

analyzing the five competitive forces contributing to the present situation. Among the five

19 | P a g e

forces, three of them constitute horizontal competition whereas the rest two provide

vertical competition.

Horizontal Competition Vertical Competition

Intensity of Competition

Threat of Substitutions

Threat of New Entrants

Power of Suppliers

Power of Buyers

Table 1: Horizontal and Vertical Competition

Figure 2: Porter's Five Forces Model

5.2.1. Intensity of Competition

As Berger has to face fierce competition in the paint industry of Bangladesh, traditional

economy denotes that this competition among rival firms may drive profitability to zero.

But it has been noted that competition is not absolutely perfect and firms are not core price

20 | P a g e

takers. Hence, paint firms have to strive for something which will provide competitive

advantage over their rivals.

As we are doing strategy analysis of BERGER Paints Ltd we found out that Economists

normally try to measure the rivalry among firms by indicators of industry concentration.

Factors regarding industry concentration are being described here for the Berger Paint of

Berger Paints Ltd.

A Large Number of Firms

Currently there are following paint brands available in our countrys industry:

1. BERGER Paints

2. Asian Paints

3. RAK Paints-

4. Jotun Paints

5. Dulux Paints

6. Roxy Paints

7. Romana Paints

8. Pailac Paints

9. Nippon Paints

10. Elite Paints

And each of them has their consumer share in the market. This sort of competition leads

towards fierce rivalry because all of these firms are going to compete for the same

customers and resources. We know the rivalry intensifies when the firms have similar

market share, which results in facing trouble to attain market leadership. Though BERGER

is currently the market leader of our paint industry, but ASIAN PAINTS is not that far. And

also Roxy is trying to capture a portion of their loyal consumer.

High Market Growth

As BERGER has to face certain pressure in the market from the competitors, it always has

to think about fighting for market share. As this is a growing market, paint firms are able to

21 | P a g e

improve their revenues always by taking necessary plans.

High Fixed Costs

In Paint Industry, fixed cost of the firm is almost constant as well as high. These reality

results in an economy of scale effect which leads the industry towards rivalry. To meet up

these costs, firms tend to sell more and thus they produce more. Then they compete in the

market for their target share and try to position their brand items in the selected market

segment. As Paint firms have similar market segment for their business, therefore rivalry

increases as well.

High Storage Costs

As Paint is a product which has to be frozen for protecting it from damage, firms need to

bear high storage cost. Thus, firms tend to sell product items as soon as they are being

manufactured. This is the case for all of the paint firms including BERGER paint . So

competition for customers intensifies as all the paint firms do attempt to unload their items

at the same time.

Low Switching Cost

From our study on the price of the paints available in the market, we conclude on a note

that switching cost is extremely low. So a customer can freely switch from one product to

another. This certainly intensifies the competition.

High Levels of Product Differentiation

The level of product differentiation is extremely low for the paint firms in Bangladesh. It

allows Berger to have competitive advantage by providing high quality product and latest

paint technologies to outrun the rivals.

5.2.2. Threat of Entry

In Paint industry of Bangladesh, it is not only incumbent rivals that pose a threat towards

BERGER paint; the possibility that new firms may enter the industry also affects

22 | P a g e

competition. Theoretically any firm should be able to enter and exit a market, and if free

entry and exit is possible, then profitability remains nominal. But in reality, industries

possess characteristics that protect the high profit levels of firms in the market and inhibit

additional rivals from entering the paint market, and BERGER is also doing the same. In

Porters five forces model, this is known as barriers to entry.

The threat of entry in paint industry depends on

1. The height of entry barriers that are present, and

2. The reaction entrants can expect from incumbents.

Barriers to entry in paint market have some factors:

1. Is Government Creating Barrier?

Although the principal role of government in a market is to preserve competition through

anti-trust actions, government sometimes restricts competition through the granting of

monopolies and regulations. From our study of paint industry in Bangladesh, we have

found out that government is not creating any sort of barrier in this particular industry.

2. About Patent and Proprietary Knowledge

Though the paint brand name is secured under proper patent methodology in Bangladesh,

but similar is not the case for the paint items. We have found out not much similar sort of

paints are sold in the market bearing the different brand name. This shows that anyone can

make similar type of paint without handling the patent issues from the first initiator. So, the

entry barrier is high as huge investment is needed in that respect.

3. Common Technology

As the technology is used for manufacturing paint is not similar for all available brands in

the Bangladeshi paint industry, it has become difficult for the new entrants in the market.

The technology used is costly and requires high volume of sales to sustain the fixed costs.

4. Supply Side Economies of Scale

Economies of scale in paint industry largely depends on whether or not buying raw

materials in bigger lots providing that it has any cost advantage since at the moment this

industry in Bangladesh is dominated by moderate tech-based instrument. BERGER tries to

23 | P a g e

ensure the most cost efficient level of production that is termed as Minimum Efficient Scale

(MES) by the economists. At this point, unit costs for the production are at minimum. We

have found out that there is not that much gap between the entry cost and paint industry

MES, which results in few entry barriers for this industry.

5. Demand Side Benefit of Scale

This issue is mixed with some advantages and disadvantages. As consumers are popular

with the BERGER brand for a long time, they are going to prefer BERGER products and this

preference is a big competitive advantage for BERGER to set an entry barrier. But also

switching cost for the customer is low, thus this preference is not that much strong to hold

that entry barrier always. As a result of this BERGER has to think about product

differentiation every now and then.

6. Limited Access to Major Distribution Channels:

To run a paint firm, a company must have the ability to deliver bulk products and distribute

it all over the country. This either takes a large investment to establish or the company can

become a partner brand with a proper distribution channels. This allows the distributor to

profit and keep the company in check with the threat of dropping them if they become too

competitive. For a new firm, this issue certainly poses some barrier for the entry against an

established system like BERGER already has.

5.2.3. Threat of Substitutes

While the threat of substitutes typically impacts an industry through price competition,

there can be other concerns in assessing the threat of substitutes. Paint Products do not

have many substitutes. Some products like floor paints can be replace by mosaic or tiles but

they are in very limited scale.

5.2.4. Bargaining Power of the Buyers

The bargaining power of customers is also described as the ability of customers to put the

firm under pressure, which also indicates the customer's sensitivity to price changes. Firms

can take measures to reduce buyer power, such as implementing a loyalty program. The

buyer power is high if the buyer has many alternatives. The main target markets are 1.

24 | P a g e

People with event wise demands. 2. Bulk purchase by enterprises or companies. 3. High

end customers who are price insensitive and quality sensitive.

Factors affecting bargaining power of customers:

Buyer concentration to firm concentration ratio

In Bangladesh Paint Industry, firm concentration is higher than buyer concentration. This

automatically gives some bargaining power to the hands of firms.

Degree of dependency upon existing channels of distribution:

The channel of distribution of paint industry is based on local available stores. Since its a

moderate to high cost product and requires a lot of space to store and also for big

supermarkets. Bargaining leverage, particularly in industries with high fixed costs: Because

of low switching costs of paint, buyers do not make impulse buying decision and hence give

them a tendency to bargain before buying.

Buyer information availability:

It is not possible for firms to get the entire buyers information. Thus firms cannot do

informed bargaining but buyers can bargain because they have market information about

other firms available in the paint industry.

Forcing down prices

Buyers do not have the ability to force down prices because of the product type. Though

paint is the type of product that buyers will buy frequently, but they have so many

alternatives.

Availability of existing substitutes products

Substitute of paint is not available in the market so bargaining power is low.

Buyer price sensitivity:

25 | P a g e

Buyers are always price sensitive. Since paint is a low cost item, small changes of price do

not affect demand that much.

Low Switch Cost:

Low switch cost provides buyer the option of alternating his choice regarding paint brand

and tastes.

5.2.5. Bargaining Power of Suppliers

For Berger Paints, the bargaining power of the suppliers is high as they have the necessary

input that would create differentiation in their existing products. So, sometimes Berger

needs to purchase in bulk quantity to have affordable and desired prices.

The bargaining power of suppliers in the paint industry is also described as the suppliers of

raw materials, components, labor, and services (such as expertise) to the firm can be a

source of power over the firm when there are few substitutes.

Potential factors

Supplier switching costs relative to firm switching costs:

In paint industry supplier switching costs are relatively higher as there are not many firms

who can provide quality raw materials for many of the ingredients. For some common

ingredients used vastly all over the world, the switching cost is low.

Degree of differentiation of inputs and impact of it on cost:

The more differentiated inputs are used the more bargaining power given to suppliers, e.g.

suppliers of top quality raw materials would have higher bargaining power as it has an

impact on the cost of finished paint item.

So, from the perspective of Bangladesh Paint industry, the bargaining power of suppliers is

high as they have considerable input on quality of paint.

26 | P a g e

5.3. Industry Attractiveness and Some Opportunities

As identified in the previous segments of this report on Berger Paints Ltd, there are several

driving forces behind the growth of paint industry in Bangladesh.

Trade and Infrastructural Level

Globalization has opened the market in all aspects of our life and Paint Industry is

not an exception too. Newer varieties have been introduced to the local products.

Many foreign companies are also entering the market as franchise so there has been

an increased competition and these franchises are setting higher standards for the

local manufacturers.

We have found out that present market growth is about 54% and BERGER is

currently playing a major role. Situations like expansion of national electricity grid,

better highway roads have made it possible to expand their distribution much more

efficiently throughout the nation.

With the help of developed technologies equipped with modern trade and recent

organized business approach of retailers, it has become possible for paint

manufacturers to penetrate into shops where they dont need to provide any

branded freezers.

We have seen a tendency among the customers regarding consuming more paint in

summer season. Recently weather change has been an issue, and it has put its

impact on increasing the length of the summer season, thus it can be expected that

consumption rate of paint will be increased as well.

New and improved technologies are being available now for the use in paint

production process. This particular technological advancement has provided the

quality, increased speed of production and made the process more cost effective.

Consumer Level

Few years back, only rich people could afford the premium paint items, but now it

has reached the level of Middle Class range. Paint companies are producing different

27 | P a g e

products with a wide price range for consumer for every class and status. BERGER

Paint has launched some premium quality paints as well, like, Black Forest, Orange

Chocolate mix etc.

As customers are becoming more media oriented these days, companies have the

opportunity to go towards their mind to create their brand mapping through

creative and meaningful promotional activities.

The improved standard of life and more modernized lifestyle of people is an

important reason for the increased consumption of paint that results in the growth

of this particular industry.

So we can conclude that for BERGER Paints, the market is still challenging to maintain its

market leader position as well new opportunities to expand its quality and growth has

made this market more attractive for them.

6. Evaluation of Resource and Position of Berger Paint

6.1. Present Scenario of BERGER

The market for paint is huge and it is growing at a good rate every year. A rise in peoples

income propels its demand and recently lots of companies have made their foray into this

prospective industry. In 2014, countrys annual market for paints is around TK 2,650 crore

and branded paints occupy nearly 92% of the total market. Paints of three brands Berger,

Asian Paints & Roxy accounted for nearly 72 percent of the branded market.

According to industry insiders, general customer perception and performance wise, Berger

is the market leader at present with a market share of around 54%. Bangladesh Brand

Forum has recently voted Berger as the number one paint brand in Bangladesh.

28 | P a g e

Figure 3: Market Share of the Industry

6.2. SWOT Analysis

SWOT is the planning exercise used by Berger, which provides a framework for identifying

internal strengths and weakness and the external opportunities and threats it faces.

STRENGTHS

Strong brand names

Good reputation among customers

Cost advantages from proprietary know-how

Exclusive access to high grade natural resources

Favorable access to distribution networks

WEAKNESS

High cost structure

High cost for importing raw materials

High Product Price

54

10

8 4

24

Paint Market Share in Bangladesh

Berger

Asian

Roxy

Romana

Others

29 | P a g e

OPPORTUNITIES

An unfulfilled customer need in some cases Arrival

of new technologies

Loosening of regulations

Removal of international trade barriers A

developing market such as the Internet

Mergers, joint ventures or strategic alliances

THREATS

Changes in the external environmental also may present threats to the firm

Shifts in consumer tastes away from the firms products.

Emergence of substitute products.

New regulations.

Increased trade barriers

A new competitor in home market.

6.3. Economies of Scale and Economies of Scope

For making a strategy analysis for an organization, we need to know the economies of scale

and economies of scope for that particular organization and its industry.

6.3.1. Economies of Scale

BERGER paint is currently enjoying the market leader position and its market share is

huge. As a result of its large market share and united distribution channels, BERGER paint

can attempt to produce more units via less unit cost. As the cost per is a sensitive issue to

disclose, we did not get the exact cost from the company personnel. However, they have

30 | P a g e

assured that the overall unit cost is less than the total industry average. For this reason

they have continuously been able to reduce cost and earn profit. In addition to that, the

employees are experienced and they have gained the expertise to do their job within less

time. This experience and the economies of scale have been an appropriate competitive

advantage over the existing competitors.

6.3.2. Economies of Scope

The following factors are playing definite roles in Economies of Scope for the BERGER

Paints

The industrys current growth potential is very high with opportunity for market

development.

The competition currently permits adequate profitability and the competitive forces

are becoming stronger with time.

Current industry driving forces are favorable for the future industry profitability.

In this era of internet, taste is also globally oriented for some people. People will

look for variety in paint that is not currently available. It is expected that any new

variety and flavor will be welcomed by consumers.

There is a gap in the market for balanced convenience through paint where

customers can get nutritional benefits for paint. Also, emotional attachment to paint

could further be improvised in promotional campaigns.

We have found out that there is high scope for market penetration and development

to increase frequency of paint consumption.

The risk level in this industry is very low as the consumer market is extremely huge.

Any product with a standard quality and careful pricing will be able to make

significant profit.

The geographic reach of the industry covers entire country.

31 | P a g e

7. Generic Competitive Strategy of Berger Paint and Chemicals

of Berger Paints Limited

Based on our survey and information provided by the company personnel, we have come

to the conclusion that Berger is a broad differentiator. The underlying reasons of that

conclusion are provided in the following sections.

7.1. Superior Raw Material

Berger always provides superior products and qualities compared to any other local

companies. It also has the quality even to be compared with the international franchises

such as Nippon, Jotun and so on. The following raw materials which are used to produce

quality paints are the base for the superiority of their products:

Skimmed chemicals which is imported from abroad

Two Factories with advanced facilities in Dhaka and Chittagong

Acquisition of Baker which does the packaging

7.2. New Product Development

For the purpose of new product development, regular market research is conducted

through which recently environment friendly product like Water base paints and Breathe

Easy Enamel which is devoid of paint smell has been introduced.

8. Strategic Choice for Berger

8.1. Market Segmentation

Before segmentation their product Berger segments its business through the year.

Generally the summer and winter is the peak season not only for Berger but also every

paint producer. October to June is peak season and July to September is the lean season for

the paint industry in Bangladesh, which is related to weather conditions.

The peak and lean months of the year, on the basis of the seasonality of the paint market, is

as follows:

32 | P a g e

Table 2: Peak Time for Industry

8.2. Target Market

Berger segmented its markets basing on the behavioral variables. This variable divides the

customer group basing on their benefit require. While dividing their customers considering

their benefits required Berger also pay due attention towards: Quality, Service and

Economy seeking attitude of their customer.

After market segmentation, Berger goes for designing, implementing and maintaining

marketing mixes intended to meet the needs of the target groups, resulting in mutually

satisfying exchanges.

Month/ period Conditions

January Peak

February Peak

March Peak

April Peak

May Peak

June Peak

July Lean

August Lean

September Lean

October Peak

November Peak

December Peak

33 | P a g e

8.2.1. The Marketing Mix

Berger paint Bangladesh limited mainly segments their product mainly on three

categories. These are

Decorative:

Premium emulsions, regular acrylic emulsions, distempers, first quality enamels, exterior finishes, textured finishes, automotive refinishes- Berger has leading brands in all these

categories

Industrial:

This is a different segment of Bergers wide range of paints mostly used for the industries

both as raw materials and as protective paints for the equipment and buildings. Berger

industrial paint covers both the concrete and steel structures and is a growing business

concern of the company

Marine:

To cater to the need of maintaining marine vessels & other constructions Berger has

introduced a wide range of Marine paints suitable to withstand rigorous marine weather

both at sea & sea-coasts and also at river & river-ports.

9. Ethical Business Strategies, Social Responsibility and

Environmental Sustainability

9.1. Business Ethics

Berger Paints Bangladesh Limited is committed to achieving total consumer satisfaction.

They commit to project themselves as an ethical and socially responsible company. Berger

commits to continue as the market leader through consistent sales growth, increasing

productivity and developing new products befitting consumer needs. It shall ensure

continual improvement in their operations through utilization of highly professional and

dedicated team, proper process management and participation of stakeholders. Berger will

set measurable targets at appropriate stages and shall continuously monitor them.

34 | P a g e

9.2. Corporate Social Responsibility (CSR)

Berger paints has been organizing Young Painters; Art Competition for the last nine (9)

years and also introduced Young Architects Award from 2003. The company regularly

contributes to a number of causes and social welfare institutions through donations and

sponsorships. These efforts results in a better image for BPBL, as minds of the general

public, who are, after all, consumers of their products.

Figure 4: The Five Components of a Corporate Social Responsibility Strategy

.

10. Building an Organization Capable of Good Strategy

Execution

35 | P a g e

10.1. Market Growth Strategies

10.1.1 Place/ Distribution strategy

Dhaka factory

Ctg factory

Dhaka Khulna Rajshahi Bogra Comilla Sylhet Chittagong

Depot Depot Depot Depot Depot Depot Depot

Direct Dealears Direct Dealears

Indirect dealers Indirect dealers Indirect dealers

End

Users

Figure 5: Distribution Network of Berger

36 | P a g e

With its strong distribution network, Berger has reached almost every corner of

Bangladesh. Their nationwide dealer network, supported by seven sales depots

strategically located in Dhaka, Chittagong, Rajshahi, hulna, Bogra, Sylhet and

Comilla has an unmatched capability of cater to the needs of the consumers of

paints products, almost everywhere in Bangladesh

10.1.2 Price Strategy

Price strategy of Berger can be spelled out in following manner. Provide high quality

product at highly affordable price. At some places Berger had to change higher price than

that of their competitor due to strict Compliance of quality and government financial law.

Beside this Berger also consider Commissions / Discount to Dealers and Retailers while

preparing the pricing strategy. Berger supplies their product to Dealers through some

establishes discount basis. They also offer some special commission and discount rate for

their premium Dealers, who can cross the benchmark, set by Berger.

Decorative paints are basically sold through Companys registered Dealers.

Industry and Marine paints are basically sold through personal selling.

10.1.3 Environment strategies of Berger for marketing

Berger is committed to main extinction the harmonious balance of our eco system and

therefore constantly seeks ways to manufacture and produce products in an ecofriendly

manner. From its inception, Berger has played a pioneering role in introducing new paint

and paint technologies to the Bangladeshi market; Bergers efforts have established it as

the most esteemed paint company of the country and have contributed significantly in its

growth. Berger intends to continue its ceaseless endeavors in the future years, and it is

expected that such efforts will contribute immensely to the sustained and growing success

of the companys business.

Technology orientation Berger has always been the most technology oriented Paint

37 | P a g e

Company of the country. It has the most modern state-of-the-art production facilities

installed in its Dhaka factory. Its Research and Development (R&D) and Quality Control

(QC) departments are equipped with the best technologies in this country. Such

technolo0gy driven strategy will definitely assist the future business growth of the

company.

Market responsiveness: Berger has always tried to respond promptly to market feedback.

AS a result, Berger enjoys competitive advantage over its competitors. It is expected that

Berger will enjoy more growth in the future, if it continues to be so be market responsive.

10.1.4. Promotional Strategies

Berger generates different slogans with different massages to promote their various

products. Paint your Imagination is Bergers unique selling proposition. In their

promotional activities they also promote different messages for their different products, so

that become familiar to their customer. And over the last few years Berger uses these

messages as one of the effective promotional tools

in most of their advertisement Berger focuses on product feature and benefit of the product

and Target group. And this is how company makes sure that their products are well known

to their potential customer with the benefit they wants to get. At the same time same time

Berger also promoted some advertisement for reducing the dissonance of their customer.

38 | P a g e

11. Managing Internal Operation

Figure 6: Organogram

Two major functional departments are Operation and Finance. Both these important

departments are headed by respective General manger. But considering the greater

importance and work load another General Manager and also two General Sales Managers

(Industrial and Decorative) are put under GM Operation. Beside these two plants manager

of Dhaka and Chittagong factory are also working under GM operation. On the other hand

Manager Finance and Manager Account work under GM Finance. In addition to that GM

Finance also performs the complicated job like Credit and Costing of the company.

The head of the Marketing Department is General Manager. His focus is both the

marketing and sales. Under GM Sales and Marketing there is a marketing manager and

a General Sales Manager.

39 | P a g e

12. Recommendation

Berger Paints should provide emphasis on customer demand. It should satisfy the

dealers demand and arrange product availability.

It should pay heed to the dealers growth rate, take initiatives to recover gap and

always monitor their activities.

Berger Paints should restructure its sales system. It can restructure through

employing more SOs, day to day sales and delivery system, enrich end-user activists

activities, frequent market visit, better communication with distribution.

Its general sales procedures like taking order, preparing invoice, categorization of

invoice, preparing rout plan, lining products for loading, final check and loading of

vehicles should be automated.

It should also organize distribution system through increase space for store

systematic way, frequently update its database systems which shows products, pack

size and color availabilities and increase the number of delivery van.

The advertisements should be more informative. Ads should provide information

regarding the functionality of the product (bases structure, feature, manufacturing

process)

Berger should have hotline customer care service. Where any sort of information

could be get like about the mixing of color, price of each color according to the

square feet the client want etc and the process should be easy. And the number that

is given in the ad should be active every time.

Dealers outlet should be more presentable and there should be enough places from

where customer can easily choose color.

Berger should provide weekend leaflets in more magazines and in the news paper

in every 2 weeks.

13. Conclusion

Berger Paints began its operation in Bangladesh since independence and now it is the

market leader of Bangladeshi paint industry. Current market share of Berger is all most

40 | P a g e

55%. Different researches show that customer demand and the brand image are the most

important assets of Berger for being the market leader of Bangladesh. Making this

customer demand is possible not only by the quality products but also proper marketing

strategies activities.

Again brand image is another important attribute for choosing the paint. Brand image and

the quality products of Berger create a huge market demand so that dealers are pulled to

keep Berger products. This aggressive marketing strategy is directly affected to the

structured distribution channel of Berger. To be the market leader of Bangladeshi paint

industry it is very much important to select proper and organized communication mix for

remain its brand image and increase customer demand.

The company has strong distribution network all over the country. It has more than 1000

direct dealers. In addition, numerous secondary dealers operating in the outskirts of the

major markets are engaged in selling the products of the company. BPBL introduced many

new products into the market. It also introduces home dcor service. It has good brand

image. Berger has been trying to increase its brand image further through more media

presence, arranging programmers like Berger Young Painters are competition, Berger

Young architects award, scholarship program for architecture students of BUET. It is

constantly working to improve its products quality through comparative study and

customer feedback in order to maintain competitive edge.

41 | P a g e

14. Bibliography

Thompson,A., Peteraf, M.A., Gamble, J.E., Strickland. A.J. & Jain.A.K, Crafting and Executing Strategy. 18th edition

Kotler, Philip (2003), Marketing Management, 11th Edition, Pearson Education.

www.bergerbd.com

http://en.wikipedia.org/wiki/Berger_Paints_India

http://dspace.bracu.ac.bd/handle/10361/3214

Mr. Sadeq Nawaz, Head of Marketing, Berger Paints Bangladesh Ltd.