1. A
PROJECT REPORT
ON
“Implementationof Systematic Analysis, Monitoring
and Control in Small Enterprise in Paints Industry
for Better Productivity and Performance”
UNDERTAKEN AT
“Austin Paints & Chemicals Private Limited., Kolkata”
IN PARTIAL FULFILMENT OF
POST GRADUATE DIPLOMA IN PROJECT
MANAGEMENT
MIT SCHOOL OF DISTANCE EDUCATION,
PUNE.
GUIDED BY
PROF. YUVRAJ KALAPURE
SUBMITTED BY
Mr.PINAKI ROY
Registration No. 2012004299
MIT SCHOOL OF DISTANCE EDUCATION
PUNE-411 038
YEAR 2013-2015

2. AUSTIN PAINTS & Chemicals Private Limited
3, Ambika Mukherjee Road, Kolkata 700 056
Tel No 033 25647407, Email:austinkolkata@gmail.com
CERTIFICATE
This is to certify that the project work entitled “Implementation of
Systematic Analysis, Monitoring and Control in Small Enterprise
in Paints Industry for Better Productivity and Performance’’carried out
by Mr.Pinaki Roy, a Bonafide student of MIT School Of Distance Education,
Pune, in partial Fulfillment for the award of PostGraduate Diploma in Project
Management (PGDPM), during the year 2013 - 2015.
It is certified that he completed the project satisfactory.
Name and Signature of Guide Name and Signature of
In Organization/Company. HOD in MIT SDE
(With seal) (Official use)

3. DECLARATION
I hereby declare that this project report entitled “Implementation of
Systematic Analysis, Monitoring and Control in Small Enterprise
in Paints Industry for Better Productivity and Performance” is a bonafide
record of the project work carried out by myself during the academic year 2013-2015, in
partial fulfillment of the requirements for the award of POST GRADUATE DIPLOMA IN
PROJECT MANAGEMENT (PGDPM) of MIT School of Distance Education, Pune.
This work has not been undertaken or submitted elsewhere in connection with any other
academic course.
PINAKI ROY
(Name of Student and Signature)
Date of Submission: 20th November 2014

4. ACKNOWLEDGEMENT
I would like to take this opportunity to express my sincere thanks and gratitude to
Dr.Chinmoy Bhattacharya of Austin Paints & Chemicals Pvt.Ltd, Kolkata for giving me
an opportunity to do my summer training in the esteem organization and it has indeed been a
great learning and enjoyable experience.
I would like to express my deep sense of gratitude and profound thanks to all staff members
of Austin Paints & Chemicals Pvt.Ltd, Kolkata for their kind support and cooperation
which helped me in gaining lots of knowledge and experience to do my project work
successfully.
I would like to acknowledge my sincere gratitude to Course Administrator of my institute
Mr.Yuvraj Kalapure as my Project Guide for helping me in this project.
At last but not least, I am thankful to my Family and Friends for their moral support,
endurance and encouragement during the course of the project.
Pinaki Roy
(Students’ name and Signature)
Student ID: 2012004299
Date of Submission: 20th November 2014

5. EXECUTIVE SUMMARY
This project is basically relates to the Small & Medium Enterprises as popularly
Called the SMEs in industry parlance and the shortcomings and difficulties in implementing
Some proper planning and control mechanism and analysis to understand the actual
Profitability, liquidity, productivity of inputs and various other important financial,
Operational, efficiency and effectiveness measures and aspects which are
Utmost necessary for the management to understand, act and implement to make the
Establishment competitive, cost effective and sustainable in the long run.
In India it is very much common that the entrepreneurs in the SME segment does not always
have the knowledge and understanding of the various management philosophy and
techniques specially in financial and supply chain management discipline and although many
of them have the sound technical knowledge, knowhow of the Products and how to
manufacture them but seldom knows the parameters which actually help them to understand
the strategic objectives and the means to achieve them both in short run and long run. These
shortcomings ultimately results in not knowing the important facts about where the
establishment presently is and where it wants to stand in certain future time frame. The
direction and the speed at which they are moving also sometimes not very clear and well
below the acceptable standard.
This Project is an attempt to familiarize them with some of the universally well accepted
techniques and models which they can adopt in the business in all the major three vertical of
the Management namely

6. 1) Strategic Management(Positioning/aims):
This is valuable when analyzing and planning the strategic position of a company and
help to answer strategic questions
2) Tactical Management (design/organization):
These ideas and tools can be useful to organize company processes, resources and
people. They address important ‘how to’ questions when analyzing and designing
Organizations
3) Operational Management (implementation/execution):
These are the areas where best practices are implemented. It address the ‘who, what
, when’ questions that are asked when analyzing and improving implementations
.
Ideas that help to optimize the the effectiveness of operational processes and
activities are included in this category.
The functions areas which have been chosen are mainly from:
a) Finance& Governance
b) Supply Chain& Procurement and
c) Marketing and Sales
I hope this write up will bring some light in the thinking process and allow them to look at
Some of the avenues which they can probably implement based on the size and nature of their
Respective business endeavors.

7. TABLE OF CONTENTS
Chapter No. Title Page No.
1 Introduction 1 - 2
2 Organizational Profile 3 – 10
3 Research Objective and Scope 11 - 12
4 Research Methodology and
Limitations
13 - 31
5 Data Analysis, Interpretation
and Presentation
32 - 44
6 Conclusion and Suggestions 45 - 47
7 Annexure 48 - 49
8 Bibliography 50

8. CHAPTER – 1
INTRODUCTION
The Project Have been undertaken at a Kolkata based SME named Austin Paints &
Chemicals Private Limited (erstwhile Proprietorship firm in the name Of Austin Paints &
Chemicals) which was converted into a private limited Company with effect from June 2011
Under Registrar of Companies, West Bengal.
The basic objects of the company is to carry on in India or elsewhere the business to
produce,process,manufacture,convert,commercialize,formulate,condense,distill,rectify,grade
manipulate,develop,refine,derive,prepare,extract,mix,supply,import,export,buy,sell,wholesale
Retailing all varieties, mixtures, descriptions, specifications, coverage’s, characteristics and
application of all types’ colours & chemicals, oils, paints including plastic paints, emulsion
paints, epoxy paints, metallic paints, distempers, melamine paints, coatings, dyes primers,
Oxides, resins, varnishes, thinners, coatings, pigments, enamels, polishes, water proofing
paints and chemicals, consumables, powders, putties, washers, containers, liquids,
ingredients and to do
All incidental acts and things necessary for the attainment of the company objective.
The Company is an SSI Unit and also registered under NSIC. The Company also got certified
in ISO 9001: 2008 & 14000 from BSI. It has got more than 8000 square feet factory located
inside a city Industrial estate and comprises of 6 factory sheds and go downs in the same
area. The company is headed by Dr.Chinmoy Bhattacharya, who has got more than 35 years
of experience in the Paints Industry and allied research activities both in India and abroad.
The major customers are mainly from the Govt.establishments mainly Rail Coach Factories
and also some big private players.

9. Brief Overview of the Indian Paints Industry
The Indian Paint Industry which is pegged at around 210 billion rupees has undergone a
phenomenal evolution in the recent past both in terms of structure & portfolio. It has been
growing at over a CAGR of 15 percent owing to the increase in demand for utilitarian or
artistic works and introduction of some new liberalization policies.
The Indian paint industry was initiated in 1902 when Shalimar Paints set up its factory in
Kolkata. The industry consisted of small producers and two foreign companies then. The
aftermath of World War 2, saw the uprising of small manufacturing units by the local
entrepreneurs. Though the imports ceased but the foreign dominance still continued. Being
restrained by Foreign Exchange Regulations Act and Monopolies & Restrictive Trade
Practices Act, most of the players were not allowed to increase production capacities until
the nineties. With liberalization, as the excise duties got drastically reduced from 40% to
16%, these shackles were removed and the industry recorded a healthy growth of 12-13%
annually.
The paint industry can be broadly classified into the Organized & the unorganized sector.
The unorganized sector controls around 35% of the paint market accounting for the balance.
Most of the organized companies in India’s paint market have a nationwide presence with
multi-location manufacturing facilities. Top players in this sector include Asian Paints (30%
market share), Kansai Nerolac (20% market share), Berger Paints (19% market share) and
ICI (12% market share). The companies in the unorganized sector are mostly regional and
deal in low value products and have been consistently losing market share to the organized
sector.

10. CHAPTER – 2
ORGANISATIONAL PROFILE
 History
The erstwhile proprietorship firm M/s Austin Paints & Chemicals was incorporated in
The year 2004 by Dr.Chinmoy Bhattacharya, doctorate in Polymer Chemistry from
Indian Association of Cultivation of Science, Kolkata. He has done post doctorate
research on Cellulosic liquid crystals at Laval University, Quebec, Canada. He also
got special training in Automotive Paint in NOF Centre, Japan on behalf of ICI Ltd,
where he was employed as Development Manager, R&D for more than 6 years.
Dr. Bhattacharya also published 6 papers in International journals on Polymer Science
and is fully conversant with technology of high performance Automotive and
Industrial Polyurethane and Epoxy paint.
Dr Bhattacharya with his varied knowledge and experience in the field of Chemical
Paints wanted to form his own company which would specialize in some core
chemical products which requires high level research and customization and was
quite successful in starting his new venture. He approached banks with his plan and
after much deliberation got finance for procuring required factory land and
Machinery& equipments through Term Loans. He also obtained the required

11. Working capital loan for conduction his regular operational activities.
He then appointed Mr.S.N.Chakraborty, Ex R&D of ICI India Ltd having 35 years of
experience in Paint Research and Development as Production in Charge.
Initially the firm started its operation with only one R& D lab and a small adjacent
office mainly to do research & development activities and to find out the usefulness
of the end product and its marketability primarily in the state of West Bengal and
later in rest of India. Mr.N.K.Naskar who has got widespread experience in Quality
Control and Testing has been appointed after some time.
When the research, development and testing phase is over in order to develop
customer base and Mr.Bijoy Sarkar has been appointed later as Head of Sales &
Marketing in the year 2007. Mr.Sarkar brought with him 25 years of Selling
experience in Consumer Durables, FMCG and Industrial Sales & marketing, both in
Public and private sectors.
During all these years the company obtained various licenses and certifications
necessary to enter the govt. and big private sectors. These helped the company to
widen the client base and magnify the sales.

12.  About the organization
Austin Paints & Chemicals was formed in the beginning of the year 2004 and started some
commercial productions during last quarter of 2004. Initially it only operated with one R&D
with adjacent office. In 2004-05 financial years they acquired one factory shed and started
production of some key chemical products and paints with 3 to 4 major clients. Subsequently
with the sanctioning of bank finance it acquired more factory sheds and godowns, purchased
more machineries and equipments and increased in installed capacity manifold.
Presently it has got an installed capacity of seven lakhs kilo liters of finished goods per year.
Its Major Govt.sector customers include Rail Coach Factory (Kapurthala, Punjab),
Chittaranjan Locomotive Works (West Bengal), Eastern Railway Work Shop (West Bengal),
East Coach Railway (Bhubaneswar), Central Railways (Mumbai/Nagpur), Integral Coach
factory (Chennai), Ordinance Factory Board (Kolkata), GRSE(Kolkata), Balmer Lawrie,
HAL, North Eastern Railways (Gorakhpur), BHEL (Bhopal) and ONGC. From private
sector it’s major clients includes Texmaco Ltd, Bridge &Roof Co India Ltd, Braithwaite &
Co Ltd,Tantia Construction Ltd, Rashmi Cement, Besco Ltd, Burn Standard &Co, Jupiter
Wagons Ltd. to name a few.

13. The firm/company is a registered vendor/supplier for RCF (Kapurthala), CLW (Chittaranjan),
GRSE (Kolkata), OFB (Kolkata) and approved supplier in ICF (Chennai).
The firm also obtained Product Quality Certificate from Exide Industries Ltd. Other than this
it has got Performance Certificate from CLW, RCF and Exide Industries.
The firms’ turnover have increased from 55 lakhs in 2004-05 to 3.4 crore in the year
2012-2013. In 2013-14 the company achieved a turnover of 3.87 crore.
To strengthen its present capacity and diversifying into new product line and segment of
business and reducing additional financial burden the company got merged with one M/s
One plus Fashion Pvt Ltd., a company engaged in Garment manufacturing and export who
wanted to diversify into a new business line to reduce risk and increase overall profitability
in the third quarter of FY 2012. This has resulted in infuse of owned capital and thus lesser
dependency on banks/financial institutions to fund the above plan. Presently Austin Paints
& Chemicals P Ltd have 3 directors with Dr.Chinmoy Bhattacharya as one of the director.
Presently the company is looking at an opportunity to shift to an integrated plant where all
The facilities will be modern and up to date with the advantage of warehousing facility
within a single compound. This should increase productivity, reduce overhead cost thus
increase profitability.

14.  About your Department
Our Department looks after the entire backend and support activities covering the
entire group which consists of 5 companies. The functional areas includes Accounts,
Finance, All banking transactions, New Project viability and Planning and
Monitoring, Audit etc. We also prepare various analysis, Management report and
MIS as routine activities and on adhoc requests. The department also does
analysis of the various processes which are followed and are responsible to suggest
improvement in terms of Profit enhancement and cost reduction from time to time.
Austin Paints & Chemicals Pvt. Ltd is one of the 5 companies mentioned above and
one of the newest inclusions in the group.
The team size of the department is 10 members including members posted at various
factory sites. The factory backend are also responsible for the factory administration,
compliances and payroll administration of their respective factories.
3 out of the 10 members are professionally qualified accountants and the remaining
are from commerce background with a total experience in the industry varying from
5 to 12 years.

15.  Timeline
Since the merger took place only on November 2012, we have taken time line
for data extraction and analysis for the Financial Year 2012-13 (remaining 5 months)
and 2013-14 (full financial year)
SWOT ANALYSIS
STRENGTH WEAKNESS
1) Strong Technical Knowledge
and Research Team, thus more
ability to make customized
products.
2) Highly Experienced Marketing
Head with strong networking.
3) Experienced Labour Force
4) Big Govt. and Private Parties as
fixed clients
5) Quality Certifications
1) Lack of Commercial and
financial knowledge and
understanding in the
management team.
2) Poor quality of accounts and
data maintenance of actual facts
3) Highly leveraged and high cost
of loan capital.
4) Employee Morale and
motivation for long term
association not present.
5) No measures available for
Productivity & Efficiency
6) Eroded Working Capital
OPPORTUNITIES THREATS
1) Retail Business - where profit
margin are high and collections are
faster.
2) Development of an integrated
modern factory with proper
warehousing facility under one
roof.
1) Profit Margin is less specially
for Govt. orders which are
based on Tender.
2) Shortage of Cheap Fund for
Operation and future expansion
3) Inability to enroll as 1st choice
supplier within given timeframe

16.  Management Team
Mr.P.K.Biswal - Managing Director
Has got more than 25 years of experience as entrepreneur in various Manufacturing,
Trading and Mining industry. He has also got varied experience in Import, Export
and Foreign Collaborations especially in Garment Industry.
Dr. Chinmoy Bhattacharya – Director
– Post-doctoral research on Cellulosic liquid crystals at Laval University, Quebec,
Canada. Doctorate in Polymer Chemistry from the Indian Association for the
Cultivation of Science, Kolkata, India. Worked as a Development Manager at ICI
India Ltd., R&D Paints Division for 6 years. Special training obtainedonAutomotive
Paint in NOF Center, Japan on behalf of ICI India Ltd.Fullyconversant with the
Technology of high performance Automotive & Industrial Polyurethane and Epoxy
Paint. Published 6 papers in International journals of Polymer.
Mr.R.Biyani – Director
-Got multifaceted experience in management of various industries.
Mr.S.N.Chakraborty – Production- in-Charge
-Ex Research & Development ICI Ltd. Have got 35 years of experience in paint
research & development
Mr.Bijoy Sarkar– Sales & Marketing Head
-Having more than 25 years of experience in Consumer durable, FMCG and Industrial
Paints.

17.  ProductProfile
Austin Paints & Chemicals Pvt.Ltd. mainly deals with various Varieties of Industrial
Paints under the following 6 categories:
1) Top Coat
2) Surfacer
3) Putty
4) Primer
5) Thinner and
6) Chemicals
Some of its main Product type includes:
01) 2 Pack Polyurethane Primer
.
02) 2 Pack Epoxy Primer.
03) 2 Pack Polyurethane Finish colours of different shades.
04) 2 Pack Epoxy Finish colours of different shades.
05) 2 Pack Polyurethane clear.
06) 2 Pack Epoxy Filler.
07) 2 Pack PU Filler.
08) PU Thinner.
09) Epoxy Thinner.
10) 1K Primer.
11) High Build Epoxy Paint
12) High Performance Anticorrosion Epoxy Coating

18. CHAPTER – 3
RESEARCH OBJECTIVE AND SCOPE
 Primary Objectives :
The primary objective of this project is to familiarize the SME owners with some well
accepted management principles and models concerning mainly in the areas such as
Finance, SupplyChain and Marketing.
The targeted owners after understanding the concept may implement the concept
as per the nature &size of their business. Before such implementation they are well
advised to do a cost/benefit analysis of the same and based on the result take any
action on implementing the same.
The concepts and Models have been explained with definition, how it works and most
importantly when these can be used and also what can be loopholes associated with
these models and concepts.
 SecondaryObjective.
The secondary objective may be taken as to advise the management of Austin Paints
& Chemicals Pvt.Ltd the measures they should ideally adopt to overcome on its
Internal Weaknesses and Challenges and keep a close watch on the external threats
and also to build up on its internal Strengths and how to grab the external
Opportunities. Lastly we would try to show some financial facts based on
actual records and try to find out some important measures and ratios.
We would also narrate some of the control measures companies should adopt in
various areas of business planning and operations.

19. SCOPE OF RESEARCH
Scopefrom researcher point of view:
The Concept, Theory and Models which have been discussed and suggested in the project do
not guarantee the desired result which is sought by people willing to implement them. The
result will vary from company to company, firm to firm based on their nature, size, and
knowledge and efficiency of the management team through which these are understood and
implemented. These will definitely provide them with an idea, a Roadmap for understanding
what systematic analysis and management controls can achieve, how proper implementation
of these concepts can result in better productivity of inputs, better efficiency in processes and
cost control and thus more profitability which are sustainable.
The measures suggested are mainly quantitative but some of them also throw light on the
qualitative aspects of the business.
Scopefrom Organization Point of view:
The scope is limited to the data available for 18 months or so and other facts and figures
available from the entrepreneur and key personnel of the organization working for substantial
period of time. The decision to adopt, apply and implement any of the given concept and
suggestions thereof completely depends on the management of the company.
The suggested concepts are generalized in nature and it is advisable that the management of
Austin Paints & Chemicals Pvt.Ltd. understands these in depth and only on their full
satisfaction goes ahead with implement some or all of them

20. CHAPTER – 4
RESEARCH METHODOLOGY AND LIMITATIONS
RESEARCHMETHODOLOGY
1. “Definition of Research Methodology”
The first of the idea falls under “Strategic Management” and is called “Core Competencies”1
this is something unique that a firm has, or can do, strategically well. The concept of core
Competencies is based on the idea that an organization’s inimitable and valuable tangible and
intangible assets are key aspects of a firm’s sustainable competitive advantage.
When to Use it
The Core Competencies model is a strategic tool to determine the unique assets that can be
used to create and offer value to customers. The process of defining core competencies
encourages management to think about the strengths and capabilities that set the company
apart from competitors.
How to use it
The starting point for understanding core competencies is to realize that a business needs to
have something that it can do well and that meets the following three conditions:
1) In provides consumer benefit.
2) It is not easy for competitors to imitate.
3) It can be leveraged widely to many products and markets.
A company that identifies, develops or acquires unique assets with which to build valuable
products may create long-lasting competitive advantage. The managers are encouraged to ask
fundamental questions such as:
1) What value will we deliver to our customers in, say, 10 years time?
2) What new competencies (a combination of skill and technologies), will we need to
develop or obtain to prove that value?
1 Chapter 8 Reference 1

21. 3) What are the implications with regard to how we interact with our customers?
The fundamental question is where this uniqueness comes from, and how it can be
sustained. Thinking about and trying to define a company’s core competencies will
stimulate management to rethink and ideally mobilize the organizations intrinsic
strengths. Foresight is a key ingredient in this process. The future will see the
introduction of products and services that is not yet feasible. New industries and
products will exist that are unimaginable today. Management needs to realize the
impact of these uncertainties, and to consider what the competitive arena might look
like in future. Once management has an idea (foresight) of what core competencies
the company has or should have; it must build the strategic architecture. This is not a
business plan, but a framework that prepares the company to capture a potentially
large share of the future revenues in emerging opportunities. The strategic
architecture addresses issues and timing for what is called a broad opportunity
approach:
 What competencies have to be developed?
 Which new customer groups must be understood?
 Which new channels should be pursued?
 What are the new development priorities?
Final Analysis:
Even with the benefit of hindsight, it is apparently difficult to identify core
Competencies. Furthermore, it is frequently obvious that core competencies are
not as unique and inimitable as management would like to think. Finally if
these core competencies are locked inside the heads of people who walk away
from the organization, one may want to reconsider what the core
Competencies really are.

22. 2. “Definition of Research Methodology”
The second concept also falls under the “Strategic Management” category and called Market
Driven Organization2which shows the multidisciplinary process of translating a corporate
Strategy into a marketing and sales policy and the client-related activities those are integral to
the process. The marketing and sales plan of an organization should derive from corporate
strategy. The plan needs to be made measurable in terms of specific activities and behavior
of all employees, whether they are focused on customers from within the organization, or
are more outward-facing. The label market driven implies that the customer is the central of
focus in the organization, and that all activities and systems are designed from a customer’s
perspective. Using the market driven organization framework ensures that all processes in
the organizations are aligned with corporate goals.
When to Use it
The model can be applied to two specific situations, each with its own questions:
 Effectiveness of the operation.
Specify or evaluate the marketing and sales policy by asking:
 Segmentation of the market: Which customers should we focus on?
 Differentiation of the proposition: How should we approach these customers?
 Target Setting: What level of sales, revenues or market share should we strive for?
 Efficiency of the operation.
Organize or evaluation both front and back office by considering
 Lowering costs: How can we improve the efficiency of the marketing and
sales department?
 Building synergies : what can we do to improve co-operation between
2Chapter 8, Reference 2

23. departments, so that we focus more effectively on results?
 Balancing marketing/sales and operations: How can we deliver tailor-made
products in the front office without negatively affecting efficiency in the back
office?
How to use it
In order to plan for appropriate marketing, sales and other support activities, it is necessary to
decide upon:
 Market segmentation : markets in which the company has to be active
 Customer focus : which customers are most relevant in each market; and
 Company targets : which goals the company wants to achieve in each market segment
The optimal marketing mix will combine clear knowledge of the specific needs of the chosen
market segments with a deep understanding of customer’s priorities and the criteria that
influence their buying decisions. A key performance indicator (KPI) is a metric used to help
an organization defines and measure progress toward an organizational goal. Using three to
five KPI’s for each of the elements will ensure that marketing and sales activities are realized
efficiently and effectively. The benefits packages for sales employees should align with these
KPIs, as rewards should not be based solely on sales or profits. The KPIs are then
incorporated in the standard monthly or quarterly reports of the company. It is important to
ensure that the results are evaluated frequently, and that the outcomes of the evaluation are
fed back into the company.
Final Analysis:
The market driven organization model is important when analyzing the Marketing and Sales
Policy and assessing the organizational set up of marketing and sales departments. A Closed
Plan-Do-Check-Act circle must be implemented to enhance the effectiveness of this model.

24. 3. “Definition of Research Methodology”
Our third concept is from the parlance of ‘Tactical Management’ and is called
Benchmarking3. Benchmarking is a systematic comparison of organizational processes and
performance based on predefined indicators. The objective of benchmarking is to find the
gap between the best practices and the present performance of the organization in order to
create new standard and/or improve processes.
There are four basic types of benchmarking:
1> The Internal Benchmark – a comparison of performance and practices between parts
of an organization, e.g. between business units
2> The Competitive Benchmark – a comparison of the indicators and performance of an
organization and its direct competitors.
3> The functional benchmark – a comparison of the indicators and performances of an
organization and a number of organizations within the broader range of the industry.
4> The generic benchmark – a comparison of the indicators and performances of an
organization with organizations from unrelated industries to find overall best
practices.
All types of benchmark can be helpful: they given an organization insight into its strength
and weaknesses; they are objective; they uncover problems and indicate possible
improvements; and they point out norms, new guidelines and fresh ideas to improve an
Organization’s performance.
When to Use it
The use of benchmarking depends on the goal. Bearing in mind the difference between
intention and action, we can define the objective of benchmarking as the provision of an
answer to any one of the following questions:
 How good are we at what we do?
 Are we as good as others at what we do?
 How can we get better at what we do?
The scope of benchmarking project is determined by the impact it may have on the
3chapter 8, reference 3

25. organiation; the degree to which the results can be communicated freely, in order to
increase the success rate of corresponding improvement projects; and on the level of
effort required to achieve results that are valuable in practice.
How to use it
Ideally, the organizations (or peers) that are being used in benchmarking, should
Perform better than, or at least equally as well as the target organization (or peers).
In general, peers are identified via industry experts and publications. However,
differences in products, processes, structure, or the type of leadership and
management style, make it difficult to make direct comparison between
organizations.
It is possible to overcome this difficulty is a practical way. Research indicate that it is
possible to compare organizations in cross-section for some indicators, based on
explanatory factors. Reliable delivery of a product, for instance, depends on the
complexity of the product. Therefore, a group of firms that has a similar level of
product complexity will have similar indicators and will be a suitable peer group for
benchmarking reliable delivery performance. Assumptions made about the
performance of the target firm can be made more accurate by benchmarking the
indicator (for example ‘delivery reliability’) according to a number of explanatory
factors.
Table 4.1
Average Score, 8
Deliveryreliability
Best Practice
Benchmarking : finding bestpractices

26. Benchmarking entails the following (sometimes overlapping) steps:
1. Determine the scope of the project
2. Choose the benchmark partner (s)
3. Determine measure(s), units, indicators and the data collection method
4. Collect the data
5. Analyze discrepancies – get the facts behind the numbers
6. Present the analysis and discus implications in terms of (new) goals
7. Generate an action plan and/or procedures
8. Monitor progress by continuously performing a benchmark
Final Analysis:
Benchmarking is nor straightforward. Too often, semi-committed managers or consultants
perform benchmarking without the use of predetermined measurements or the proper tools
for detailed analysis and presentation. Undoubtedly, many benchmarking projects end in
dismay; an exercise often justifiably portrayed as being as futile as comparing apples and
peers.
By applying explanatory factors, benchmarking can provide not only comparative data that
may prompt management to improve performance (indeed it highlights improvement
opportunities), but also indicate original, but proven solutions to apparently difficult
problems. It is therefore argued that it is precisely the difference between the firms in the
peer group that should be encouraged, rather than trying to exclude organizations because of
so called ‘non comparable’ products or processes.

27. 4. Definition of Research Methodology”
Our fourth model deals with purely financial data and is from Tactical Management category
Called ‘DuPont Analysis’4 . It can be used to illustrate how different factors impact on
important financial performance indicators, such as, the return on capital employed
(ROCE), the return on assets (ROA), or the return on equity (ROE). While these ratios can
be
calculated by using a simple formula, the model provides more insight into the underlying
elements that make up the ratios. It is similar to sensitivity analysis, in the sense that the
model makes it possible to predict the effect of variation in one or more input variables.
The tool is well known in purchasing management, as it shows the tremendous impact
effective purchasing can have on profitability.
When to Use it
The model can be used in several ways. First, it can be used as the basis for benchmarking
(our third concept), i.e. comparing different companies in an industry to answer the question
of why certain companies realize superior returns compared to their peers. Second, it can be
used to predict the effect of possible management actions. The DuPont analysis will show
big differences between industries. If one looks at the ROE, a high score can be caused either
by ‘operational efficiency’ or by ‘capital eficiency’. High turnover industries (e.g. retailers)
tend to face low profit margins, high asset turnover and a moderate equity multiplier. Other
industries, such as fashion, depend on high profit margins. In the financial sector, the ROE is
determined mainly by high leverage: gaining large profits with relatively low assets. It is
essential to choose peers carefully when analyzing how to improve the profitability of a
specific company.
ROE = Profit Margin X Asset turnover X Equity multiplier
(Profit/Equity) (Profit/Sales) (Sales/Assets) (Assets/Equity)
Return on Equity= Operational efficiency AND Capital efficiency
4 chapter 8 reference 4

28. Table 4.2
How to use it
The following steps have to be performed in a DuPont analysis:
1. Insert basic information into the model. In particular, identify the information on
sales, interest free liabilities, total costs, equity, current assets and non-current assets
2. Calculate the other parameters using the formula in the figure. This provides one with
the basic view of current profitability.
3. Determine which possible improvements can be made, and how much impact they
will have on costs, sales and assets. The effect of a measurement (potential
improvements) can be calculated and used as input in the model, whereas the model
shows the effect on the ROCE, ROA and ROE.
4. Compare different potential performance-improving actions with respect to the

29. required investments (time, money and organizational pressure) and their impact on
profitability.
Final Analysis
The DuPont analysis helps to determine the factors that most influence profitability. However
identifying these factors is only part of the story. The next step is to find appropriate actions
that will improve profitability. Managing this improvement project in the real world is a
challenging task. Root Cause Analysis/Pareto Analysis (will be explained later) may help to
determine which actions are appropriate. The balanced scorecard (including key performance
indicators) can also be used to measure a company’s progress regarding critical parameters.
However the DuPont analysis focuses only on financial parameters, and excludes other
important factors such as employee motivation, whereas these non-financial factors are often
very important.
5. “Definition of Research Methodology”
The fifth concept is also a Tactical Management tool in supply chain and purchase function
called‘Kraljic’s purchasing model’5 . This model is used to determine an adequate
purchasing strategy per product (or service) that optimizes the trade-off between costs and
risks. Appropriate guidelines can be derived from it to manage the relationships with various
suppliers, by categorizing supply items in a two-by-two matrix. The general idea of Kraljic’s
purchasing model is to ‘minimize supply vulnerability and make the most of potential buying
power’. The model categorizes products on the basis of two dimensions: financial impact
5Chapter 8 Reference 5

30. and supply risk. This results in four quadrants, each of which requires a distinct purchasing
strategy:
 Strategic items - have a high supply risk and a high financial impact. In general,
these items are scarce, high value materials, such as rare metals and high –value
components. Depending on the relative power position of the parties involved, the
purchasing strategy of strategic items is aimed at partnership or collaboration.
 Leverage items - are items with low supply risk, but high financial impact. An
abundant supply is available, however, the items are very important to the
organization. Electric motors and heating oil are examples of leverage items.
Leverage items requires a purchasing strategy based on competitive bidding
or tendering.
 Bottleneck items – have a low impact on the profit of the organization, but these
items do have a high supply risk. Mostly, this supply risk is due to production based
scarcity, and global, predominantly new suppliers with new technologies. Example of
bottleneck items are electronic parts and outside services. The purchasing policy for
bottleneck items aims at securing continuity of supply. Furthermore, alternative
products and suppliers must be developed in order to reduce dependence on suppliers.
 Non-critical items – items that have low supply risk and low financial impact are
labeled non-critical items. An abundant supply is available, and the items are needed
simply for functional efficiency. Examples of non-critical items are all types of
commodities, such as steel rods, coal and office supplies. As the handling of non-
critical items often takes more money than the value of the product itself, these
products require a purchasing strategy aimed at reducing administrative and logistical
complexities.

31. Table 4.3
inancialimpact
Leverage items Strategic itemsHigh
Non-critical items Bottleneck itemsLow
Low High
Supply risk
When to Use it
Kraljic’s model is used to determine distinct purchasing strategies per product (or service)
that enables an organization to develop different strategies for each of the suppliers, so that
each supplier will receive the appropriate amount of attention. The model is an effective tool
for supporting the discussion, visualization, and illustration of the possibilities of
differentiated purchasing and supplier strategies. The model enables an organization to make
its purchasing function more effective and efficient due to the structured and systematic
approach the model offers.
How to use it
In order to fill in two-by-two matrix and subsequently determine the adequate strategy, all
products (and services) must first be segmented. A good rule of thumb for grouping products
logically is to evaluate whether products can reasonable be purchased from one or more
suppliers(s). Second, the financial impact and supply risk are determined for each of the
product segments:

32.  The financial impact – concerns the impact on the profit of a given supply item,
measured against criteria such as: purchasing volume; the percentage of the total
purchase cost; product quality; and business growth. The higher the volume or
amount of money involved, the higher the financial impact.
 The supply risk – relates to the complexity of supply, assessed according to criteria
such as: availability; number of suppliers; competitive demand, make or buy
opportunities; storage risk; and substitution possibilities, sourcing a product from
just one supplier without an alternative source of supply generally indicates a high
supply risk.
Finally, the lines that divide the quadrants must be determined, because what exactly
distinguishes high from low, both supply risk and financial impact, is more or less
arbitrary. This will result in a mapping of the segments in the matrix and a
recommendation of the purchasing strategy to follow. It is to be noted, however, that
the appropriate purchasing strategy is not merely determined rationally by classifying
the products, but also by the strategic choices of the organization. Emotional and
relational aspects are also important when choosing or maintaining suppliers.
Final Analysis
Kraljic’s model provided the first comprehensive portfolio management approach for
purchasing and supply management. Kraljic’s basic ideas and concepts have become the
dominant approach in the profession. The Kraljic matrix has become the standard in the field
of purchasing portfolio models. Its terminology has been generally accepted, and has become
the standard for both scientists and practitioners.

33. 6. “Definition of Research Methodology”
Our sixth concept or model deals with Operational management and is commonly known as
‘Risk Reward Analysis’6. The risk reward analysis charts potential rewards of strategic
options against the associated risk. The result is an assessment of the attractiveness of
strategic options, serving as a basis for decisions to allocate resources. The risk reward
analysis works in the same way as a risk return analysis for evaluating financial products
such as bonds and options.
When to Use it
The risk reward analysis can be performed at any level of detail. The CEO could do it on the
back of an envelope, or he might ask a team of analyst to perform a full-fledged analysis,
including extensive market research, ROI calculations, scenario development and sensitivity
analysis. The fundamental steps remain the same.
By using this tool one can compare completely different types of projects and combination of
projects. Combining projects may add up to a balanced resource allocation that fits the
acceptable risk profile of the company. The inter-connectedness of the strategic options,
however, is not taken into account.
How to use it
Management should draw up a list of viable strategic options and their potential rewards. For
example, options might include international market development; new product introduction;
Professionalizing the purchase department; and outsourcing production. Together
investments, additional savings and/ or reduced costs represent a potential reward that can be
quantified. In addition, the choice might be rated based on qualitative factors such as
improved image, expansion of strategic long term freedom or the development of capabilities
in an emerging field (e.g. technology).
6Chapter 8, Reference 6

34. A thorough analysis must be carried out for each strategic option to assess the associated
risk. Factors to consider in this respect include the level of investment, industry threats, cut-
off from other options, effect on supply chain relations and exit barriers.
Once all the options are plotted in the risk reward analysis chart, a brainstorming session is
useful to find out ways to reduce the risk associated with options that have high reward
potential. In a similar vein methods must be found to increase of relatively safe options. The
risk reward analysis can be extended with a third dimension to become a risk reward
resource analysis. The amount of resource required is then represented in the diagram by
bubbles-size.
.
Options that require large amounts of resources are plotted with larger bubbles than options
that require fewer resources. This enables one to trade off risks, rewards and resources or to
find the best options. Ultimately, the objective is to balance risks, rewards and resources
according to the company’s desired risk profile. Organizations with an aversion to risk will
focus on decisions for the long term continuation of the organization, and will therefore
accept fewer possible rewards. A more entrepreneurial, risk seeking company might accept
higher risks as it chases higher rewards. Nevertheless, there should be a positive balance
between the two.
Final Analysis
One of the prevailing pitfalls in strategic management is that the decisions are made with
limited information and a lack of multiple perspectives. Inaccurate, optimistic or unrealistic
predictions about the potential rewards of strategic options push risk analysis in the
background. The estimated risk on the other hand, tends to be under-estimated. The result is
an over-valuation of the strategic options. To maximize the effect of the use of the risk
reward analysis, it is advisable to compare the possibilities extensively to minimize the
number of strategic options. Furthermore it is recommended that the details of all potential

35. risks and rewards are sufficiently analyzed.
7. “Definition of Research Methodology”
The seventh and the last tool which is discussed here is an Operational Management
technique called as ‘Root Cause Analysis/Pareto Analysis’7. RCA is a class of problem
solving methods aimed at identifying the root causes of problems or events. It is based on the
Ishikawa diagram (also called fishbone diagram or cause and effect diagram) named after its
founder Kaoru Ishikawa. The diagram shows the causes of a certain event. It was first used
in 1960s, and is considered one of the seven basic tools of quality management, along with
Histogram, Pareto Chart, check sheet, control chart, flowchart and scatter diagram. This
Principle is used in root cause analysis and tries to explain the variations in a particular
process. The analysis is generally used at the beginning of a business process redesign
(BPR) project, or a quality management programme. That is the reason this model have been
ranked as operational.
When to Use it
RCA is used to explain the variation in any process (or outcome of a process). A certain
amount variability is normal and does not necessarily cause significant disturbance,
However, unwanted variation can cause serious losses or damage, delays and reduced
productivity, especially if it occurs in critical processes. the first essential step is to find the
causes of variation and to quantify the effect. The main causes, those are generally easy to
solve, should be taken care of first. The technique is particularly valuable for the analysis of
critical processes that show undesirable variances.
7Chapter 8 Reference 7

36. Table 4.4
46
29
9
6 4 7
Frequencyofcauses
Types of causes
Pareto Diagram for variation in size of cookies (do not fit packaging)
Supplier error variance in packaging size Wrong leaven
Temperature oven Machine Settings Other causes

37. How to use it
RCA usually starts with the formation of a project team, including managers, suppliers,
customers and employees. Next, the team defines the problem and decides which variation
causes the most critical disturbances in the system under study. Then the tem maps out the
process and identifies the issues that can cause variance in the data-evidence-gathering
phase. Next, issues that contributed to the problem are identified and their root causes found.
However, the root cause might not be immediately evident, in which case brainstorming
techniques are required. Subsequently, the root cause identified (usually large in number) are
illustrated on a whiteboard in order to discuss and sharpen the findings. Recommendations
for solutions then have to be developed and actually implemented.
The root cause can be organized by categorizing them, and by distinguishing between main
root causes and smaller effects, this provides the input needed to draw a ‘cause and effect’
diagram. The diagram provides an overview of the possible causes of variation. It is essential
to study the possible root cause in the diagram in detail, to see the extent of cause of
variation. The Pareto diagram is often used to present findings. Analyzing root cause
generally shows that 80 per cent of the variation is caused by 20 per cent of the causes.
Final Analysis
Root cause analysis is not a single, sharply defined methodology; there are many different
tools, processes and philosophies regarding RCA. To maximize the effect of the use of RCA,
it is advisable to start with the most critical processes and /or the most disturbing variance.
This ensures that success will propagate the broader use of the model. However one should
try to avoid finding causes of variation that have only a small effect on the lead-time,
productivity or costs.

38.  Type of Universe: Concepts used are universally accepted. Data Analysis
and interpretation is done based on single entity: Austin Paints & Chemicals
Pvt.Ltd. Kolkata comparing with Indian Paints industry as a whole
 Sampling Unit: Austin Paints & Chemicals Pvt. Ltd. Kolkata
 Sample Size: 17 months financial data (2012-13) and (2013-14)
 Type of Sample Design : Continuous
 Method of Data collection: Required facts and figures are being fed
primarily into MS-Excel and required output derived.
 Primary and Secondary Data Sources: Primary source- Books of
accounts financial reports. Secondary source – factory visits and management
interview. Industry comparative data have been obtained from write ups on
paints industry from internet websites.
LIMITATIONS:
The biggest challenge which is being faced is convincing management about the practical
utilities of the proposed analysis and models. Being in SME segment the cohesiveness and
integrity of data was also not kept at par as the generally acceptable corporate standard and
accounting principles. Many a times in view of non availability of exact facts and figures,
certain assumptions have to be made which afterwards was re confirmed with the
management team.

39. CHAPTER – 5
DATA ANALYSIS, INTERPRETTION AND PRESENTION
 Satisfaction Analysis, Interpretation and Presentation
1. The Core Competency of Austin Paints & Chemicals Pvt. Ltd. is to prepare
industrial and specialized paints of various nature. The internal strength of the
company lies in its research & development activities to prepare acceptable multi
end use paints products at comparatively low cost. Thus it has able to empanel itself
with certain Govt. and some well known private institutions as a preferred supplier.
Let’s see how the company is able to satisfy itself to the core competency basic three
conditions:
a) Does it provide consumer benefit? Certainly yes, mainly because of its low price
and acceptable quality.
b) Is it easy for competitors to imitate? The competitors (which are not may in this
particular segment) can definitely prepare the end products, but it is not easy to
maintain the same price and quality and satisfy the present set of customers to the
extent as is done by the company presently.
c) Can it be leveraged widely to many products and markets? – To some extent Yes.
First of all the company has the resources to make end products for retail market
also which was not used so far. Also with the innovation and technology
improvement many by products can also be produced which can add definite
value to the existing as well new set of customers.
Austin Paints & Chemicals should actually try to build up the strategic
architecture to capture a potentially large share of future revenue opportunities
as given below :

40. a) Which competencies have to be developed? The answer is to find out the
areas such as increasing productivity per employee, controlling unnecessary
expenditures, smart purchasing and stoking of raw materials so that no
production bottleneck happens etc among others in order to compete in the
market. Actions on these areas needs to be taken immediately without any
further delay.
b) Which customer groups must be understood? There are a large market in the
private sector which needs paints of various kinds, a typical example is the
ever growing Real estate sector which is still going very strong in West
Bengal. Further the company is well advised to increase its customer base in
the more private industrial institutions where the margins are better than
Govt. sector as well as the payments are prompt.
c) Which new channels should be pursued? The most promising and lucrative
should be the retail sector, developing own brand, developing distributors and
dealers in the entire state.
d) What are the new development priorities? Developing core team in the R & D
and Production Floor, developing sustainable relationship with the dealer and
distributors, reinforcing the entire supply chain for economic procurement,
management of stock etc are some of the immediate priorities of the
company.
The ultimate challenge for the present management is to throw away the
existing notions of what the company is or could be and the processes which
is used or can be used.

41. 2. Market driven organization concept for Austin Paints can be implemented in certain
areas to increase the effectiveness of operation such as –
Target Setting: What levels of sales, revenues or market share should the company
strive for – part answer to this will be an analysis of the existing break-even point and
margin of safety of the company. Based on the data the management need to forecast
what level of sales the company can achieve in say next one year (short term goal)
and 3 to5 years horizon (long term goal). At each level production quantity needs to
be noted down and needs to be checked whether excess capacity needs to be created
for this and the associated cost of the excess capacity building. At any point of time
the company should strive for bringing down the fixed overhead costs over a period
of time.
Another very important factor in improving the efficiency of the operation for Austin
Paints is the improving the co-operation between departments, so that more focus can
be given effectively on results. There should be a centralized accounting system
(ERP) which can cater at least 3 important functions – Accounts, Inventory and
Payroll. MIS and dashboards should be few, simple and understandable and
everybody in management as well as operation should refer to the same set of data.
All departments Front end and Back end should work as a team and have to be result
oriented rather than doing works which does not add value to the ultimate
stakeholders. The unnecessary works and activities should be brought down to close
to zero and each member of the office should be made accountable for their own
work. At the same time the management should also look into the area of improving
the efficiency of the marketing and sales staffs.

42. 3. Benchmarking
Internal Benchmark – not relevant for Austin Paints as it operates with only one business unit
Competitive benchmark – data for direct competitors not available as most of these
competitors falls in the unorganized sector and as such published data is not readily
available.
Generic benchmark – not very relevant for Austin Paints as benchmarking from organization
from unrelated industries will not make any sense.
Functional benchmark - Comparisons of indicators and performances with a number of
organizations within broader range of industries.
Table 5.1
Sr.
No
Parameters/Indicators Benchmark
Indices
Austin
Paints
Indices
Remarks
1. Growth Rate 15% 14% Fairly Competitive
2. Raw Material Cost 56% 60% Fairly Competitive
3. Selling & Administrative
Expenses
23% 12% Because of absence of
comprehensive sales force &
retail network
4. Employee Cost 12% 16.47% Uncompetitive
5. Financial Cost 6 to 7% 12.29% Most Uncompetitive
6 Net profit Margin (after tax) 9 to 10% 0.5% Most Uncompetitive
7 Net profit Growth rate 20% 20% Competitive
8 Stock Turnover Ratio 6 times 2.33
times
Very uncompetitive
9 Debtors Turnover Ratio 5 times 1.62
times
Very uncompetitive
10 Current Ratio 2.00 1.80 Fairly Ok
11 Debt Equity Ratio 2 to 3 8.97 Most concerning
12 ROE (Return on Equity) 15% 7.13% Far below benchmark indices
13 Asset Turnover 2.38 0.82 Highly unproductive

43. 4. Du-Pont Analysis8 for Austin Paints :
A. Net Profit Margin = Net Profit(after tax)/Net Sales = 203864/38688299 = 0.53%
B. Asset Turnover = Net Sales/Total Assets = 38688299/47126364 = 0.82 times
C. Financial Leverage = Total Assets/Net Worth = 47126364/2858929 = 16.48
times
Therefore ROE (Return on Net Worth) = Net profit/Net Worth = 203864/2858929 = 7.13%
Which can be explained by multiplying the above 3 ratios A, B and C as shown below:
N.P Margin(O.53%) X Asset Turnover (0.82 times) X Financial Leverage (16.48) = 7.13%
It can be clearly seenfrom the above 3 basic ratios and their underlying relationships
that presently the company is under heavy burden of outside liabilities and their
financial leverage is very high. The company can get into serious financial liquidity
problems if long term owned fund is not pumped in immediately in the system.
At the same time the company must increase its sales revenue which is abnormally low
compared to the assets value implying that its assets are not generating any revenues at
all. Further Its Net Profit margin is almost negligible implies it is not being able to
generate any internal funds as its cost component is 99.47% of its revenue.
Now let’s see its cost breakup:
Gross Profit = Sales – Cost of Goods Sold = 38688299 – 22616527 = Rs. 16071772
Therefore G.P Margin is 41.54% which is more or less at par with the industry standard.
Employee Benefit Expenses % = 6373095/38688299 = 16.47% which is around 4 to 5%
above the industry standard.
Financial Costs % = 4755748/38688299 = 12.29% of Sales which is actually a very heavy
burden on the company bottom line.
Therefore it can be seenthat instead of an industry average of 9 to 10% for net profit
margin, the company because of poor cost control efficiency only manages to obtain a
negligible 0.5% net profit margin.
8 Data available at the end Chapter 7, Annexure I and II

44. Now let’s look at the components of Assets:
Fixed Assets/Total Assets = 13595246/47126354 = 28.85% which should normally in the
region of 35 to 40% .Current Assets/Total Assets therefore should be 100 – 28.85 = 71.15%
which should not be more than 60 to 65%
The net Working Capital (which is the difference between current assets and current
liabilities) position of the company is as below:
Current Assets = Rs.33531118 and Current Liabilities = Rs.18576741. Therefore the working
capital of the company as on 31st March 2014 is Rs.152235623 and Current Ratio (CA/CL)
is 1.80 which is more or less satisfactory. But the picture will look totally different when we
analyze the detail component of current assets as under:
Inventory% = 8697995/33531118 = 25.94%,
Inventory Turnover Ratio = COGS/Average inventory = 22616527/9682805 = 2.33 times i.e.
More than 5 months per cycle, which is very high and implies non moving goods piling up
to a very large extent which should be immediately looked into.
Trade Receivables% = 22772343/33531118 = 67.91% which is abnormally high and
implies huge money blocked in debtors which is causing such a great deal of liquidity
problem and high chances of many of them moving to bad debt in due course.
Debtors Turnover Ratio = Cost of Sales/Average Receivable = 32255858/19837276 = 1.62
times i.e. more than 7 months for debtors to move into cash, which itself shows why the
company is in such a liquidity crunch position.
Lastly if we look at the Debt Equity Ratio i.e. the relationship between Owned capital and
Long Term External Liabilities we find:
Owned Capital + Reserves = Rs.2858929, Bank Borrowings = Rs.25647362
Debt Equity Ratio = 8.97 times which is abnormally high leverage and falls in a very very
high risk category. The company cannot expect to obtain any kind of future borrowings with
this kind of risk profile.

45. 5. Kraljic’s Purchasing Model implication for Austin Paints :
There are generally 6 types of raw materials that are being used by the company as
below:
 Resins
 Pigments
 Solvent
 Extender
 Additive and;
 Packing material
Titanium dioxide is one of the major raw materials and price fluctuations in its cost have
direct and substantial impact on the cost of production. Crude oil derivatives are the other
major raw materials and have similar impact. Apart from these a large number of other raw
materials are used for adding/giving specific properties to the wide product range offered by
the industry.
However for simplicity, let’s put these groups individually in the model to see if we can
gather some take way in regards to their purchasing strategy:
Table 5.2
Financialimpact
Leverage items
Solvents
Certain types of Pigments and
Resins
Strategic items
Resins
Pigments
High
Non-critical items
Packing Materials
Bottleneck items
Extenders
Additives
Low
Low High
Supply risk

46.  The competitors
These are mainly divided into 2 sectors –
1) Organized and;
2) Unorganized
Austin Paints & Chemicals falls mainly into the organized sectors but because of its size
some comparison with the big players of the unorganized sectors can also be drawn.
 Competitive Analysis, Interpretation and Presentation.
The Indian Paint industry, estimated to be a Rs.23,000 Cr. industry, has been growing at a
rate of above 15% for the past few years. The organized players of the industry cater to about
65% of the overall demand, whereas the unorganized players take care of the remaining
35%, in value terms. The unorganized players mainly dominate the distemper segment.
The industry consists of two segments, namely
 Decorative segment – caters to the housing sector and
 Industrial segment - consists of powder coatings, floor coatings and other
protective
coatings catering to the automobile, marine and other industries.
In the domestic market, Decorative segment accounts for 70% of the total demand for paints
whereas the industrial segment accounts for the remaining 30%. Globally, the demand for
paints is almost equally distributed, where both the segments account for close to 50% of
demand.
Growth of the paint industry has been consistent with the growth of Indian GDP. Paint
industry has been growing at a rate of 1.5 to 2 times of Indian GDP growth. The Decorative
segment shows a seasonal trend with sales peaking during the festive seasons in the months
of September to November, whereas the demand is low in the monsoons.

47. Table 5.3
The top 5 companies make up more than 80% sales of the organized market. The market
share of the organized sector is continuously improving as consumer preference is shifting
towards better products offered by the leading brands. Established Foreign companies have
entered the Indian market by acquiring existing Indian companies. Kansai Paints, Japan
entered the Indian Market by acquiring Nerolac, Akzo Nobel, the world’s largest Paint
company, entered the Indian market by acquiring ICI Paints (now Akzo Nobel India.)
Asian Paints is the market leader in the Indian Paint Industry and gets the major portion of its
revenue from the Decorative segment. Over the years, it has outperformed its peers in every
aspect by wide margins. This is mainly due to its strong (competitive advantage) which lies
in its strong Brand Equity and an extensive Distribution Network. The company’s Net sales,
Net Profit and Book Value have grown with a 5 year CAGR of 22%, 27% and 28%

48. respectively. Also the company’s debt is very low and its ROIC has been 40% on an average
over the last six years.
Kansai Nerolac holds the second position in the Indian Paint market, and is the market leader
in the Industrial Paint Segment, owing to its leadership position in the Automobile Paint
segment. It is the subsidiary of Kansai Paints Ltd., the leading Japanese paint company.
Berger paints has the third position and derives its major revenue from the Decorative
segment. Akzo Nobel (former ICI Paints) is the subsidiary of the world’s largest Paint
Company and is at the fourth position. Shalimar Paints is at the fifth position.
Growth drivers of the industry
Increasing level of income and education – The increasing proportion of young population
along with increasing disposable incomes is leading to a change in consumer habits. The
Indian economy is shifting from a savings economy to a spending economy. With more
income at their disposal, people are now ready to pay for better products and paint is no
exception.
Educated consumers are more brand conscious and seek value in what they consume. Thus,
paint companies offering value-added features like non-toxicity, weather protection, texture,
eco-friendly production, etc. will attract more demand. These value-added products enable
the manufacturers to earn a better premium as compared to the regular paints, thus offering
higher margins.
2. Increasing Urbanization: Urbanization is leading to a shift from temporary houses to
permanent houses. Urban houses are well-designed in its interior as well as exterior aspect.
This calls for more houses being painted using medium and premium paints. For urban
houses, interior design is becoming a fashion statement and a lot of paint is used to decorate
the interiors. This will lead to an increase in the per capita consumption of paint which will
l increase the overall demand of paint. Urbanization also brings more nuclear families. More

49. nuclear families mean more number of houses even for the existing population thus further
driving the demand.
3. Increasing share of organized sector: Decrease in taxes on key raw materials will
improve the position of the organized players. The Organized sector is expanding its
distribution network and adopting the installation of tinting machines at retail outlets. These
tinting machines offer a wide variety of colour shade options to choose from. The
unorganized players are not in a position to offer such facility as it is comparatively capital
intensive. Shift in use, from distemper segment towards premier segment is also shifting
market share from the unorganized sector to the organized sector.
6. Development of the Realty, Automobile and Infrastructure sector: The growth of
the paint industry is largely dependent on the development of the realty and housing
sector, as decorative segment generates about 70% of the total paint demand from
this sector. The Automobile segment generates more than two-third of the demand
for Industrial paints, and hence is the growth driver for Industrial Paints. The
Infrastructure segment creates direct demand for paints as well as creates indirect
demand through supporting the growth of the realty, automobile, FMCG and other
industries where paint is used.
The growth potential in the above 3 sectors is immense, the paint industry being dependent
on these 3 sectors is expected to grow along with them.
7. Availability of financing options: Easier housing finance and auto finance is
expected to favour more people to buy houses and travel in personal vehicles. This
will drive the growth of housing and automobile sector, of which the Paint industry
will get its share.
8. Increasing Penetration in the Rural Markets: Paint usage in rural areas is generally
in the distemper segment, hence dominated by the unorganized players. Demand in

50. rural areas are dependent on agriculture, which is dependent on the monsoons. With
the development of irrigation facility, the dependence of agricultural output on
monsoons will be on a decreasing trend. Also, with the modernization of agriculture
and accompanying development of rural India, consumer preferences are expected to
improve. Paint companies are expanding their distribution network in rural parts of
India, which is a relatively untapped market for the organized players. These factors
supported by the increasing penetration of the paint companies will help drive the
demand for paints.
Concerning Issues:
Cost of raw materials: The Cost of Raw materials is an important factor as the industry
is raw material intensive. Fluctuation in the prices of Titanium dioxide and Petroleum
directly affect the production cost. This is more of a concern for the Industrial segment as
compared to the Decorative Segment, as it is comparatively easier to pass on the costs in
case of decorative paints. Also, a large portion of raw materials are imported, leaving the
cost factor vulnerable to exchange rate fluctuation.
• MNC’s entering the Indian Paint Market: The entry of Established foreign players in
the Indian market may increase the competition among the players of the industry. This may
lead to price competition which may impact the profit margin of the companies. As a result,
the increase in volume growth may not equally reflect in the profit growth for the companies.
Future Outlook
The Indian paint Industry has a wide potential for growth which is demonstrated by the fact
that the per capita consumption of paint in India is merely around 1 kg as compared to about
20 kg in the developed countries or a global average of about 15 kg. So, the absolute
consumption of paint in India is definitely expected to rise.
The market share of the organized sector is on an increasing trend. Also, the contribution of

51. industrial segment will increase with the continuing economic development of the country.
With India moving towards becoming a developed economy, the decorative to industrial
paint ratio of 70:50 is expected to move towards the global average of 50:50. Thus the
Indian paint industry is in its growth phase and is expected to grow at a rate faster than that of
GDP. The future prospects of the industry are strong.
Austin Paints and Its Market Share and in Organized and Unorganized sector and its
future outlook:
It we look at market share at the national level for organized sector, it is negligible for Austin
Paints. But it is to be remembered that Austin Paints is basically a regional level SME with
presence in both organized and to some extent in unorganized sector in Industrial paints only
at present. Austin Paints is also an enlisted vendor for Indian Railways for Locomotive and
Wagon paints. It is capable of making Customized products for end users in short time and
with competitive costs. Thus there are not many firms with such flexibility in supplies for
such wide variety of end products. The company during its tenure of 9 years has already
established itself a preferred supplier for many other private parties also. Because of its
technical knowledge in paints and excellent marketing and inter personal skills of the
marketing head the company have a consistent and rolling work orders in hand.
Therefore to judge its market share only by numbers would not be correct. However below
we present the names of some present competitors (in terms of size and nature of business)
and try to quantify the market share for each of them
Table 5.4
Company Name Market Share
(in terms of
Sales Revenue)
Remarks
Anupam Enterprise 10% Heavy industry paints
Provalac Paints 20% Specialized in Synthetic Enamel paints
Shalimar Paints India Ltd 30% Heavy industries & Decorative
Austin Paints & Chemicals P Ltd 10% Industrial paints

52. CHAPTER – 6
CONCLUSIONS AND SUGGESTIONS
 Conclusions about the future growth and present system of the
organization.
Austin Paints and Chemicals Pvt. Ltd. has definitely has a growth potential. The compounded
annual growth rate (CAGR) of 10 to 12% can be easily achievable by the company in next
financial year itself. This is so because the company, it its segment has limited number of
competitors, already established good relationships with its existing customers, already
possesses quality and other standard certifications and overall have a strong and dependable
research & development team. Further the company has a specialized and skilled labour
force associated with the company over a reasonable period of time. The company also
posse’s factory and all its godowns within same locality under an industrial estate. This
facilitates easy and un-interrupted movement of raw materials and stocks from one place to
another. With the specific thrust by the present Govt. to promote SMEs and make the
business model easier and transparent, the company can take the advantage of all such
schemes and facilities being provided in near future. Overall the outlook of the industry itself
is positive with emphasis of new and technically sound SMEs to increase the marker share
which at the present is 80% comprises of 4 to5 big players.
However, the company in its entire period of existence lacked control aspect on its
operations. The productivity and efficiency parameters have never been analyzed with
seriousness and thus slowly but surely it has contributed to capital erosion which at present
has assumed serious proportions. The success of the company in carrying its operations
further to the desire level depends largely on how it can reduce the burden of external
liabilities, to be more specific bank loan and how a systematic appraisal and control process
in all activities is carried out.

53.  Suggestions about the growth and improvement areas of organization.
Below are the specific areas, described function-wise which are necessary for the company to
sustain and grow in long run:
Finance: The company should strive immediately to reduce the burden of bank cash credit
loan, majority of which has been eroded. This is the prime target the company should
attempt immediately. Owner’s contribution in terms of either equity share or long term
interest free loan should be raised to enhance the net worth of the company. Utilization of
Cash Credit account to be done judiciously with proper justification for each payment. Non-
funded facilities like Letter of Credit (LC) should only be used for material procurement.
HR & Personnel:
The system of proper HR system delegation of work and corresponding responsibility and
accountability should be implemented for each staffs. Written KRA (Key Result Area)
should be prepared, signed of, circulated and documented. Quarterly/Half yearly/Annual
review system should be put in place and based on the appraisal necessary decisions should
be taken. Arrangement should also be made for proper training in all areas. At least one day
in a month should be allotted as “Training & Development” day.
Accounts & Inventory:
It should be recognized by all that all the transactions and movements should necessarily pass
through the accounting package (ERP) which is already in place. Data and information on
Receivables, Payables, All type of Stock etc should only be valid if these are part of the
accounting system. To start of a thorough clean up and restructuring of the package should
be done so that the accounting system shows the correct and accurate picture of the state of
affairs of the company. It should be remembered that the primary input of management
decision is accurate data. Another major area for this cleaning process is to conduct a
Debtors and Creditors reconciliation process with the concerned parties, so that the end of it

54. only the actual and accepted figures are incorporated in accounts. Inventories of all kind
should be properly grouped and uniformly maintained. Periodic Stock taking, reconciliation
with accounts and passing necessary entries in the same period should be made mandatory.
Persons should be made responsible and accountable for correct and time capture of all data
in the accounting package.
The company have to evolve and implement a Month wise Budgetary Control Process for the
next financial year/s with projected activity level, Sales Revenue, associated costs and
residual income (profit). These figures should be mapped against actual figures each month
and variances with reason should be discussed and decisions taken immediately. At the same
time it should develop and circulate an “Authorization/Approval Matrix” which should be
followed for all expense authorization. A Cost Conscious culture should be developed within
all staffs and proper justification should be given and approved for any deviation in the
authorization process.
Marketing & Sales:
The company should strategically plan to get into the decorative segment as this segment has
more potential as well as more profit margins. But for this company have to create its own
brand and start to create its own channel and dealer network. This will be a long term
strategical decision, but the groundwork should be started now, probably to appoint one or
two sales people for market study and gathering informations.At the same time the company
should try to broaden its existing customer base and slowly move towards Private parties
mainly for two reasons – greater margin and prompt payment.
Overall the management of the company should start analyzing facts and figures and can take
clues from the various concepts and models discussed in this project and take the ideas to
implement them systematically for success and future growth which at present may be
impossible to conceive.

55. CHAPTER – 7
ANNEXTURE I
AUSTIN PAINTS & CHEMICALS. PVT. LTD.
Profit & Loss Account for the period ended 31st March, 2014
Particulars
Note
No.
Figure for the
year ended
31st March
2014
Figure for
the year
ended 31 St
March '2013
Amount Rs. Amount Rs.
INCOME :
Revenue from operations 13 38,688,299.00 13,659,062.30
TOTAL REVENUE (i) : 38,688,299.00 13,659,062.30
EXPENSES :
Cost of materials consumed & Mfg. Exp. 14 22,616,527.37 9,156,882.86
Employee benefits expenses 15 6,373,095.00 49,688.00
Finance Cost 16 4,755,748.69 1,798,388.00
Depreciation and amortization expenses 17 1,405,878.34 1,405,878.34
Other expenses 18 3,266,235.58 405,943.00
TOTAL EXPENSES (ii) : 38,417,484.98 12,816,780.20
Profit/Loss before exceptional and
extraordinary items and Tax (i - ii) 270,814.02 209,703.00
Profit/Loss before exceptional and
extraordinary items and Tax 270,814.02 209,703.00
Extraordinary items -
Brought Forward Loss
Profit/Loss before exceptional and
extraordinary items and Tax 270,814.02 209,703.00
Tax Expenses :
Current Tax (34,898.00) (29,142.00)
Deferred Tax Liability (32,052.00) (11,280.00)
Profit/Loss for the period from 203,864.02 169,281.00
continuing operations (iii) - 209,703.00
Profit/Loss from discontinuing operations - -
Tax expenses of discontinuing
operations - -
Profit/Loss from discontinuing
operations after Tax (iv) - -
Profit/Loss for the period (iii - iv) 203,864.02 209,703.00

56. Annexure II
AUSTIN PAINTS & CHEMICALS. PVT. LTD.
Balance Sheet as at 31st March, 2014
Sl
No.
Particulars
Note
No.
Figure for the year
ended 31 St March
'2013
Figure for the
year ended 31
St March '2012
Amount Rs. Amount Rs.
EQUITY & LIABILITIES :
1) Shareholder’s Funds
a) Share Capital 1 2,500,000.00 2,500,000.00
b) Reserve & Surplus 2 358,929.00 155,063.64
2)
Share Application money pending
allotment -
3) Non-Current Liabilities
a) Long term borrowings 3 25,647,362.02 26,931,958.92
b) Deferred Tax liabilities 43,332.00 11,280.00
4) Current Liabilities
a) Short term borrowings 4 13,177,236.00 7,941,890.00
b) Trade payables 5 3,496,769.00 5,743,484.00
c) Short term provisions 6 1,902,736.00 591,790.00
TOTAL 47,126,364.02 43,875,466.56
II ASSETS :
1) Non-Current Assets
a) Fixed Assets :
i) Tangible Assets 7 13,093,916.12 14,480,834.46
ii) Intangible Assets -
b) Non-Current Investment - -
c) Other non-current Assets 8 501,329.69 413,198.00
2) Current Assets
a) Inventories 9 8,697,995.21 10,667,615.10
b) Trade receivable 10 22,772,343.00 16,902,210.00
c) Cash & Cash equivalent 11 718,880.00 563,045.00
d) Other current Assets 12 1,341,900.00 848,564.00
TOTAL 47,126,364.02 43,875,466.56

57. CHAPTER – 8
REFERENCES
1. Barney, J.B (1991). Firm resources and sustainable competitive advantage.
Journal of Management 17: 99-120
2. Kotler, P (2000) Marketing Management: The millennium edition (10th edition).
New York Prentice Hall.
3. Watson, G.H (1993) Strategic Benchmarking: How to rate your company’s
performance against the world’s best. New York: John Wiley & Sons
4. Ross, S.A., Westerfield, R. and Jaffe, J. (1999) Corporate Finance, 5th Edition.
Maidenhead: McGraw-Hill.
5. Kraljic, P. (1983) ‘Purchasing must become supply management’. Harvard
Business Review 61 (5) September/October: 109-17
6. Sperandeo, V. Trader VIC II: Principles of professional speculation. Hoboken,
NJ: John Wiley & Sons.
7. Blanchard, K, H., Schewe, C., R. and Hiam, A (1996) Exploring the World of
Business, New York: W.H Freeman.

58. Do and Don’ts
 The Font Style should be TIMES NEW ROMAN and the Font Size 12 for
the content, 14 for Sub Headings and 16 for Headings.
 Always follow 1 line Spacing
 If Images taken from the Internet should be followed by the Source link,
from where the images where taken.
 Tables and Figures should be numbered.
Ex: Table 1.1 represents 1st table in Chapter 1
Table 1.2 is 2nd table in Chapter 1
Similarly, Table 2.1 represents 1st Table in Chapter 2
 Abbreviations used in the Entire report should be mentioned in a
separate page right after the Index page.
 The Report cannot have more than TWO Spell errors in a Chapter.
 Spell errors in Project Reports are subjected for Negative Marking.
 The Report cannot have copied content from the Internet, however the
student is permitted to take reference from Internet and Write it in his
own Language.
 The Report which does not follow any of the above mentioned formats
and chapters will not be considered for Evaluation.