CHAPTER 1

INTRODUCTION

INTRODUCTION

This is a study on various concepts and aspects impacting sales performance of select paint companies in Bangalore. It analyzes various factors and forces that impact the sales performance of the respective firms. This is done considering the companies in Bangalore. The select companies’ chosen for conducting the study are the market leaders in the industry with a market share of over 70% all over India.

Sales Performance refers to the ability of a company’s sales professionals to “win” at each

stage of the customer’s buying process, and ultimately earn the business on the right terms

and in the right timeframe. It is the constant effort of an organization to sell its products and

services effectively and efficiently in the market to achieve their goals and objectives. Sales

performance has historically been used to describe a category of technologies and consulting

services aimed at helping companies improve their sales results. It measures the performance

of a sales force and of individual salespeople.

Improving sales effectiveness is not just a sales function issue; it’s a company issue, as it

requires deep collaboration between sales and marketing to understand what’s working and

not working, and continuous improvement of the knowledge, messages, skills, and strategies

that sales people apply as they work sales opportunities.

Sales performance uses raw data concerning the number of customers a sales associate speaks

to compared with the number of actual sales. By reviewing the sales performance of an

employee, a sales performance manager can determine his strengths and weaknesses.

Sales performance can indicate the rate of customer loyalty to the business or a specific

employee. Customer loyalty refers to customers who regularly purchase products from the

business and refer other customers to the store. Enhancing sales performance can

automatically enhance the number of loyal customers.

“By analyzing sales force performance, managers can make changes to optimize sales going

forward. Toward that end, there are many ways to gauge the performance of individual

salespeople and of the sales force as a whole, in addition to total annual sales."

Effective sales performance management is a critical initiative by any company that aims to

drive sales transformation or reduce operational costs. Sales performance management is the

discipline of marrying performance data with business improvement processes to drive sales

effectiveness. The business impact of sales performance management grows when other

critical processes are added, such as territory and quota management, analytics and dash

boarding, and coaching.

Statement of the problemThe in depth study of both internal and external factors of sales performance of select

companies. These factors influence in making strategic decisions to explore more markets

and improve their sales performance. It defines the factors that decides the overall sales of the

company that has a direct impact on its business and existence in the market.

Overview of paint industry

The major change that has taken place in the coatings industry during the last twenty years

has been the adoption of new coating technologies. Until the early 1970s, most of the

coatings were conventional low-solids, solvent-based formulations; waterborne (latex) paints,

used in architectural applications, accounted for 30–35% of the total. In the late 1970s,

however, impending government regulations on air pollution control focusing on industrial

coating operations stimulated the development of low-solvent and solvent less coatings that

could reduce the emission of volatile organic compounds (VOCs). Energy conservation and

rising solvent costs were also contributing factors. These new coating technologies include

waterborne (thermosetting emulsion, colloidal dispersion, water-soluble) coatings, high-

solids coatings, two-component systems, powder coatings and radiation-curable coatings.

The paints and coatings industry in the United States, Western Europe and Japan is mature

and generally correlates with the health of the economy, especially housing and construction

and transportation. Overall demand from 2011 to 2016 will increase at average annual rates

of 1–2% in the United States and 1.5–2.5% in Western Europe. In Japan, however,

consumption of paints and coatings will experience relatively slow growth during this period

(0.3%) as a result of no growth in major markets such as automotive OEM, machinery and

appliances.

In the emergent countries of the world, coatings are growing at a much faster rate. The best

prospects for growth are in Asia Pacific (8–10% growth per year in the near future), Eastern

Europe (6%) and Latin America (6%). Growth of coatings in China is expected to continue at

8–10% per year, and in India and Indonesia at 5–10%. Growth in value terms will be even

higher as a result of the production of relatively higher-valued coatings. Most of the major

multinational paint producers, including PPG, Akzo Nobel, Kansai Paint, Nippon Paint,

BASF, DuPont, Chugoku Marine Paint, Valspar, Sherwin-Williams and Hempel, have

production in China. The multinational producers should gain even more presence in the

developing world as living standards increase and per capita consumption of coatings rises.

Through the next five years, air pollution regulations will continue to be a driving force

behind the adoption of new coating technologies. Despite the relatively slow growth in

demand anticipated for coatings overall, waterborne and high-solids coatings, powders, UV

curable and two-component systems appear to have good growth prospects.

Paint industry in India

The Paint diligence has been subjected to an unremitting growth ever since the last decade

and has come the length of a long way since then. The section is heading towards a

diversified market in general. The segment has witnessed the entry of major foreign players

in the Indian Market scenario and exploring opportunities wavering around both in organized

(65% of the paint market) and the unorganized (35% of the paint market) sector. The

organized sector itself comprises of 70% of the market share, again within which the

decorative paint segment holds a maximum share of 70-75%. The research psychoanalysis

tries to emphasize the opportunities taken to forecast the expected sales of the market leader

in the Paint industry. Efforts have been taken to understand the positive cues about the effect

of major forecasting components like the trend, seasonal and cyclical component on the sales

of the company and also how forecasting leads to better distribution planning, planning the

production process based on inventory levels, promotional exercise etc.

Asian paints: Asian Paints is India's largest paint company and ranked among the top ten

Decorative coatings companies in the world with a turnover of INR 66.80 billion. Asian

Paints along with its subsidiaries have operations in 17 countries across the world with 23

paint manufacturing facilities, servicing consumers in 65 countries through Berger

International, SCIB Paints – Egypt, Asian Paints, Apco Coatings and Taubmans. Asian

Paints aims to become one of the top five Decorative coatings companies world-wide by

leveraging its expertise in the higher growth emerging markets. Simultaneously, the company

intends to build long term value in the Industrial coatings business through alliances with

established global partners.

Berger paints: Established in 17th December, 1923, the company then known as Hadfiled's

(India) Limited; was a small paint company based in Kolkata having its only manufacturing

facility at Howrah, West Bengal to produce ready mixed stiff paints, varnishes and

distempers. Post independence, towards the end of 1947, British Paints (Holdings) Limited,

U.K acquired Hadfield's (India) Limited and thus British Paints (India) Limited was

incorporated. From a production capacity of 150 tonnes and sales turnover of around Rs. 25

lakhs in 1947, the company has come a long way to become at one point of time; a part of the

worldwide BERGER group in 1983 and thereby acquiring its present name Berger Paints

India Limited to having subsequently gone through further ups & downs as well as ownership

changes to gain its present status wherein the majority stake is with Delhi based Dhingra

brothers and business revenue close to Rs.2000 crs.

Kansai Nerolac Paints: Kansai Nerolac Paints Limited (KNPL) is India’s second largest

paints company and a leader in the Industrial Coating segment. The company is the Indian

subsidiary of Japan's Kansai Paint Company Ltd. KNPL with a total capacity of2 lakhs

tonnes p.a., is present in the decorative and the industrial segment. Established as Gahagan

Paints and Varnish Co. Ltd. in 1920, it became a Public limited company as Goodlass

Nerolac Paints in 1968. The company changed its name to the current form in 2006. In

recognition of its commitment to quality, technology and innovation, the company received

the prestigious Golden Peacock Award 2010 for innovative ‘3 coat 1’ bake in auto painting.

Review of Literature

The diversified market opportunities in the paint industry has brought in innovation, brand

positioning, competence and market awareness among the hotshots in the sector which in turn

has necessitated to educate the consumers about the wide variety of products available in the

market. The segment has witnessed the entry of major foreign players in the Indian Market

scenario and exploring opportunities wavering around both in organized (65% of the paint

market) and the unorganized (35% of the paint market) sector (Dani Ashwin; 2001). The

organized sector itself comprises of 70% of the market share, again within which the

decorative paint segment holds a maximum share of 70-75%.(Babu Ajith, Batch 16 FK-1511;

Rebecca Thomas). The demand of paint is very high in the market because of broad customer

choice, increasing priority given to the decorative paints and the boom in real estate sector.

So providing the right product at right time to the right person is very important in today’s

scenario while maintaining an efficient and smooth supply chain so that they don’t have any

problem in future in inventory management and logistics management. The companies are

trying to gain a successful competitive advantage by combining customer insight with

superior production, logistics and distribution platforms. Anything to everything from adding

value through ambition, expertise, innovation, and commitment does matter to overcome

immense competition and gain an impressive market share. . In the face of uncertain demand,

balancing the need for cost reductions with the flexibility critical to productive operation of

extended supply chains and the desire for increased risk management confronts most

companies today (JCT Coatings Tech, 2005).The major hurdle in implementing SCM

practices in Indian manufacturing industry is ‘overcoming traditional practices’ (Soni

Gunjan, Kodali Rambabu ; 2011).

Companies with sound and effective supply chain enjoy an upper hand in the market

over its competitors in terms of providing superior customer service at a lower cost, operating

with lower working capital. The operational and the performance function are so well

integrated through well knitted channel of intermediate operations that it helps attain together

the corporate goal and the market demand simultaneously thereby fulfilling both the internal

and external customers.

The paper emphatically carries out a sequence of objectives. Firstly it deseasonalises the

available past 7 year sales figures of the companies concerned here. Subsequently the future

sales of the company is forecasted which leads on to estimating the trend of the companies.

The last part of the research mission aims to determine the possible swing in market share of

the abovementioned companies. The aim is to reckon the unevenness and furthermore

manipulate the compound annual growth rate of market share over the phase.

Objective of the study To understand the effect of seasonality on sales and there by deseasonalize the sales

figures accessible of the respective companies and to identify the cyclical and

random factors associated.

To identify customer preferences about the paint brands available in the market.

To estimate the Industry trend by taking the sectoral performance of the Asian

Paints, Berger paints and Kansai Nerolac Paints.

To determine the feasible swing in market share of the aforementioned companies.

To forecast the sales for future years for all individual companies.

Methodology

Estimating the trend and identifying the sales outline was the main intention of this research.

Time series modeling has been used as a statistical tool. Using the least square method the

trend components are developed. Multiplicative model has been applied to recognize the

effect of seasonality, random and cyclical variables on sales. Assessment of the actual trend

after deseasonalizing the sales figure was an important part of the research.

The data will be collected from 50 respondents for studying the consumer perception towards

the various paint brands available in the market. A structured questionnaire is framed as it is

less time consuming, generates specific and to the point information, easier to tabulate and

interpret. Moreover respondents prefer to give direct answers.

The study requires data to be collected from both

1. Primary source:

Primary data is collected from the questionnaire responses or from the reviews of

the product / from the personal interviews.

2. Secondary source :

Secondary data will be collected from magazines, journals, internet or company old

records, employees, etc.

Type of Study

The research carried out is Descriptive Research. The study will be carried out as a

fact finding investigation with adequate interpretations. This being the simplest type of

research it focuses on particular aspect of the study. It is designed to gather descriptive

information based on which further research can be done.

Sampling Plan

The convenience sampling as well as simple random sampling is adopted for data

collection

Sample Size: The sample size of the customers is taken as 50.

Sample Design: Questionnaire method

Plan of analysis

The research uses various techniques and interprets the data processed in form

of various charts, diagrams and graphs. Data collected would be compiled, classified

and tabulated for analysis. Analysis would be done using the statistical tool of

comparative techniques. Inferences would be drawn from the analysis, conclusions

would be made and suggestions would be given.

Data collection

The quarter wise sales figures of the paint companies are being furnished from the

financial statements made available by the companies.

Questionnaire method is being adopted to identify the customer preference.

LIMITATIONS OF THE STUDY

No research is complete without admitting the limitations that was faced while conducting a

study which will contribute to present learning. This study too like the others have certain

constrains which has been discussed below.

The study was restricted to Bangalore city only

The study is mainly concentrated on market leaders in the industry

The sample of the size will be limited to time and resources

The information will be collected valid until there is no any technical change or any

innovation

The result is assuming that respondents have given accurate information

Business Forecasting-An introduction:

Demand forecasting is the activity of estimating the quantity of a product or service that

consumers will purchase. Demand forecasting involves techniques including both informal

methods, such as educated guesses, and quantitative methods, such as the use of historical

sales data or current data from test markets.

Forecasting is important in both forms of supply chain namely- built-to-order and built-to-

stock. Built-to-order is also known as pull strategy wherein a firm has to forecast its

production capacity so as to meet consumer orders. Built-to-stock is also known as push

strategy wherein a firm has to forecast the consumer demand before planning the production.

COMPONENTS OF DEMAND FORECASTING:-

For any product, there are six major forecast components. All components need not be

included in each forecast. However, all of them have to be monitored and considered. The

components include the following-

Base component

Seasonal component

Trend component

Cyclic component

Promotional component

Irregular component

1. BASE COMPONENT : It is the average of sales over a given time period. This figure

can be taken as the right forecast if the product demand is not impacted by the

seasonal, trend, cyclic and promotional factors.

2. SEASONAL COMPONENT : It refers to repeated pattern of increase or decrease in

demand over a period of time. Demand pattern may show a high seasonal variability

or a low seasonal variability at different times of the year depending upon the

seasonal nature the product.

3. TREND COMPONENT : It refers to the long term pattern of movement of demand

over a period of time. The trend may be positive (demand is increasing), negative

(demand is decreasing), or neutral (change in demand is negligible) over a period of

time.

4. CYCLIC COMPONENT : It refers to change in demand patterns which exist for more

than one year. These changes may show an upward or downward movement.

5. PROMOTIONAL COMPONENT : It refers to changes in demand that occur due to

promotional campaigns undertaken by the firm. It is one of the key factors that impact

demand especially for FMCG and consumer appliance companies, whose sales are

more depended on promotions. Unlike other components, this component is

controllable by the firm.

6. IRREGULAR COMPONENT : It refers to all those variations in demand that cannot

be attributed to any of the above five factors. This factor is difficult to predict because

of its random nature.

FORECASTING TECHNIQUES:-

Forecasting techniques are statistical tools which gives the firm a clear picture about the

future demand position. Forecasting techniques are broadly classified into three

categories, namely-

Qualitative technique

Time series technique

Causal forecasting method

1. QUALITATIVE TECHNIQUE : It depends primarily upon the personal

judgement. Forecasts are made, based on the ideas and experience of experts who

are involved in forecasting process. It is highly subjective in nature.

2. TIME SERIES TECHNIQUE : It uses historical data to make forecasts. It provides

firms with a proper approach for evaluating the past demand behaviour pattern.

This method is suitable when the demand behaviour pattern is stable over a period

of time. It is not suitable for new or innovative products.

3. CAUSAL FOECASTING METHOD : It is used when a variable that is to be

forecasted depends on various environmental factors. It considers two types of

variables- dependent and independent variable. Dependent variable is the one on

which the forecast has to be made whereas independent variable is the one which

influences the dependent variable. This method establishes a relationship between

dependent and independent variables. Regression analysis is a widely used causal

forecasting method.

TIME SERIES FORECASTING METHOD:-

It refers to a collection of well defined data, which is obtained through repeated measurement

over a period of time or observation recorded in accordance with the time of occurrence. The

data collected is said to be well defined because it is collected at regular time intervals.

The components of time series method are- trend (T), seasonal variations (S), cyclical

fluctuations(C) and irregular or random movement (R).

MEASUREMENT OF TREND:-

There are four different methods which are commonly used for measurement and isolation of

secular trend in a time series:

Free hand (or graphic) method

Semi –average method

Moving average method

Method of least square (fitting mathematical curves)

From the above methods e will be using the method of least square,which has been

discussed below.

METHOD OF LEAST SQUARE:-

It is logical to fit mathematical trend to such a series for reliable forecasting and prediction.

This method consists in selecting an appropriate mathematical equation for trend and

estimating the constants of the chosen equation on the basis of the given time series data.

1. In case of a straight line trend i.e. y=a + b x be assumed between the given time series

values (y) and time (x) then the normal equations determining the values of a and b are

given by:

∑ y = n a + b ∑ x ........ (1)

∑ x y = a ∑ x + b ∑ x2 ......... (2)

2. In case of parabolic trend i.e. y = a + b x + c x2, the normal equation determining the

values of a, b and c are given by:

∑ y = n a + b ∑ x + c ∑ x2 ........ (1)

∑ x y =a ∑ x + b ∑ x2 +c ∑ x3 ......... (2)

∑ x y = a ∑ x2 + b ∑ x3 + c ∑ x4 ....... (3)

DESEASONALISATION OF DATA:-

Deseasonalisation of data means the elimination of the seasonal effect from the original time

series data.

Additive model - deseasonalised data = y – s

Multiplicative model – deseasonalised data = y / s

CALCULATING MODIFIED MEAN:-

By removing the highest and lowest values for each quarter, the extreme irregular variations

are removed.

Modified sum - addition of the remaining values.

Modified mean – total of modified sum / number of quarters.