The Blue ocean strategy was conceived by Chan Kim & Renée Mauborgne. It champions the idea of diversifying a business to sustain growth.
Once the market is flooded with competitors, the growth opportunities tend to sink. ‘Blue Ocean’ companies create and capture uncontested market space. They expand their business into a completely new market or innovate on an existing product/service line.
Deploying a Blue ocean strategy has immensely benefited the domestic paint major Asian Paints (APNT). The company has evolved through constant diversification over the last quarter of a century. Even today, the company is attempting to diversify, in order to sustain its growth for decades to come.
Asian Paints’ phenomenal growth story:
Paint major Asian Paints has delivered staggering growth since its inception in 1942. During this long phase, the company has managed to identify each trend associated with the sector. Innovation has been constant at Asian Paints. From lime wash to paints; within paints from distemper to premium emulsion, the company was able to consistently innovate and grow.
Now, the company finds itself at an inflection point. It is looking for new avenues to sustain its growth. This is when the growth leverages for its core business (the decorative paints) are still intact.
With growing urbanization, the rural market is witnessing rapid growth in housing demand. Even in the urban middle-class, there is a desire for improvement on existing living standards. It has fanned demand for premium products within the paint segment. However, the opportunities are less attractive than what they were 20 years ago.
Asian Paints’ new market-Home Decor:
It’s always better to build a shelter before it starts to pour. Considering that, the company had to identify new growth areas while the core business continues to perform consistently. Hence, the company started to put its efforts behind finding a blue ocean.
In 2013, Asian Paints identified the home decor segment as a new vertical for growth. Home decor services are closely related to the paint business. Hence, the transition was natural. Asian Paints has expanded its offerings to Kitchen, Bathroom, Waterproofing, Adhesives, Wallpaper and Interior Décor. This diversification will expand the addressable market by 2x for the company.
The competitive landscape:
Today, India’s home decor market is estimated at around $20-25bn. It includes the furniture and décor categories. The competitive landscape is at ease with only a handful of organized players. The industry is dominated by the lakhs of individual interior designers spread across the country.
One-Stop-Shop Home Décor stores, Godrej Interio, IKEA, Urban Ladder, Pepper Fry, @home etc. are attempting to bring an organized structure to the industry. However, their operations remain at a nascent stage. And, the scope is huge for organized players like Asian Paints with a strong brand pedigree.
Entry into the Home Decor segment ticks all the boxes of a perfect Blue Ocean strategy for Asian Paints. Within Home decor, the company is looking to create an uncontested market place. Once it deploys its strategy, the competition will become less relevant. It is a natural extension for its existing business lines and provides new cross-selling opportunities amongst existing clients.
With increasing income, a large number of customers aspire to build a house of their dream. Post lockdown, the need of having one’s one house has increased many folds. Hence, the consumers are expected to see the home decor category in a new light. Formalization of the industry is also expected to accelerate, providing room for companies like Asian Paints to gain market share.