BUSINESS PLAN OF PAINT:

The focus of Paint Company is to provide high-quality surface preparation,

finished painting, and refinishing services to residential, commercial,

municipal building, and facilities clients primarily in the most-populated

area within the tri-county communities defined as Wayne, Oakland, and

Washtenaw counties.

INTRODUCTION

MISSION & PRINCIPLES

BUSINESS OBJECTIVE RAW MATERIALS FOREIGN INVESTMENT DEMAND EXPORTS TYPE OF PAINTS SERVICES AND DESCRIPTION TYPE OF PAINTS PACKING DISTRIBUTION/ PLACEMENT PROMOTION MARKET SEGMENTATION

GROWTH, MARKET, & CLIENTS WE SERVE

COMPETITION & MARKET POSITION

MARKETING STRATEGY

KEY PARTNERS

LEGAL CONSIDERATIONS

INTRODUCTION

Local paint industry operates both in organised and unorganised sectors. The data regarding production and number of units of the unorganised sector is not available, therefore, it is difficult to have complete data about the production and number of units of the paint industry. According to an estimate, over 350 units of paints and varnishes are operating in the unorganised sector. Their products are substandard though their cost of production is comparatively low. Many of them also avoid payments of excise duties and therefore, are in a better position to compete in the local market.

Tale-V depicts that the production of paints and varnishes has been erratic during 1990-91 to 1997-98. The tip in production may be attributed to the shortage of raw materials, contraction in demand for certain paints due to slump in paint consuming sectors and low level of efficiency etc. The production of paints has been reduced to half in 1997-98 as compared to 1990-91. During the same period varnishes have also registered a declining trend.

To start a paint factory all one needs an excise licence and perhaps one or two mixers. The government tolerated this for a long time as a concession to small industry, but the situation was abused until 1992 when the government developed a new policy to prevent tax evasion. Information was obtained about all the excise-licence holders manufacturing paint in Pakistan and a survey was conducted to ascertain what each unit expected to pay. But even then it got no cooperation from factory owners, and so the government established a fixed rate of tax, possibly with the assistance of the small manufacturers. No one was concerned at that time as to whether or not the figure was fair.y these companies. The implications are clear:

MISSION & PRINCIPLES

Painting will be known for providing a high-quality service product. We will become known as a premium provider of custom and commercial painting and finishing services, operating at multiple levels within our prospect and existing client community.

To achieve our mission, Paint will have to succeed at doing the following:

Provide unique, practical, and professional services to our clients on a timely basis, applying and leveraging time-tested, and state-of-the-art techniques and practices. To succeed at meeting our goals, our first responsibility is to our customers.

Maintain a strong financial environment to allow us to establish ourselves as a multifaceted service provider in the regional market we serve.

Behave with the philosophy that our customers are entitled to a professional service that performs to above expectation satisfaction, in a reasonable, agreed-to amount of time and at a competitive, attractive price.

Treat our partners, employees, and customers with fairness and consideration.

Bring value to our business operations community and client community.

We expect that through the effective application of these philosophies and principles we will succeed in achieving our mission.

GROWTH, MARKET, & CLIENTS WE SERVE

Market factors have indicated a current trend of moderately increasing income and commercial budgets with a pent-up demand for convenience and beautification services. It will not be unreasonable for the number of potential residential and commercial customers to increase 10 to 30 percent each year.

Market and Prospect Client Base

Who: Ko-Bas Painting Company serves a marketplace made up of commercial and residential clients. Our ongoing focus is to develop and serve the correct blend of work to ensure ongoing revenue requirements. Our market focus is typically made up of an even split of residential and commercial clients. Our commercial clients are made up of municipal buildings, school buildings, and private businesses (manufacturing and/or retail).

Where and Why

We choose our clients in this market to ensure that we do not extend our operations beyond reasonable areas of service, primarily, to manage and moderate costs in drive time, customer follow-up servicing, quoting, and inspections.

BUSINESS OBJECTIVE

Grow the company to a targeted achievement of more than 15 to 20 percent operating margin year-to-year.

We've maintained an objective view and take a conservative approach in developing and attempting to achieve our business goals. The financial data and business model provided is based on a year-to year running operational and growth plan that is developed on an as-needed basis, typically by quarterly review. Thus, the numbers provided are based on a blend of real and approximated costs using the most conservative expense expectations available (and are based on our considerable experience).

Raw Material

Paint industry uses about 300 different types of raw materials for producing various kinds of paints. About 15 per cent raw materials of the industry are petroleum based. In 1971 between 80 to 90 per cent requirements of the materials were met through imports which currently have been reduced to about 40 per cent due to increased production of indigenous raw materials. The major imported raw materials include pigments,

zinc oxide and titanium oxide. Most of raw materials is available locally. At times raw materials are imported in large quantities compared with their demand which affects quantity of imports.

The imports of major raw materials of paint industry are shown in the Table-V. The major raw materials produced locally include mineral turpentine, resins, vegetable resins, red and yellow and gums. The, availability of indigenous raw materials has gradually been increasing and in a few items the country has attained self sufficiency. For instance, marine blue is produced in a large quantity that it allows even some exports. The reduction in imports of various raw materials is due to enhanced production of these in the country. As mentioned earlier, since about 15 per cent raw materials of the paint industry are petroleum based, with the rising production petroleum at home, the availability of raw materials also increases. The development of chemical industry will further ease the supply of raw materials and will cut its import. The future prospects to increase local production of raw material for paint industry are quite bright. Projects for the manufacture of Titanium Dioxide and Lithopone have started pro duction already.

FOREIGN INVESTMENT

Foreign companies in Pakistan's paint industry have been fairly active. In fact quite a few of the leading paints manufacturing units were sponsored by foreign manufacturers and are operated in collaboration with local entrepreneurs. Two of these foreign-sponsored paints manufacturing enterprises are public limited companies whose shares, after being offered for public subscription, are quoted on the local stock exchange. The interest of foreign investors in this industry appears to be due to the fact that most of these companies began their operations in Pakistan as importers and traders of paints which were manufactured by their principals in the home country. After the imposition of restriction on the import of paints, through high tariff barrier, these companies have established their own factories and are manufacturing their well-known brands.

Foreign investment in paints industry was estimated to be in the vicinity of Rs. 10 million.

Some of the local paint manufacturing enterprises have also established paint manufacturing factories in the Middle East countries in collaboration with the host country's investors. Such joint ventures by Pakistani sponsors are reported to have been established in Kuwait, Afghanistan and Lebanon while more such opportunities are being explored in Saudi Arabia, Iran and other countries of the Gulf.

DEMAND

The main consumers of paints and varnishes are Government and semi-government organisations such as Defence Service, Shipyard, Railways. WAPDA, Tarbela Dam; Government Road Transport Agencies etc. The private housing sector is estimated to account for 20 per cent of total paint consumption in the country.

The demand for paints and varnished is derived from expansion in construction, building, manufacturing, transport and other sectors. The country has yet to go a long way in its development efforts, for the pursuit of which a five year plans have been formulated Moreover, a favourable turn in the investment outlook in the private sector, brought about by a desired change in the industrial and economic policies of the Government, is expected to contribute to a pick-up in the private industrial sector. In view of this, there appears to exist a sizeable potential for further strides in the country's paints industry.

The demand for paints in conservatively estimated to increase by 20 per cent annually during the next five years. Moreover, the development of chemical industry is also taking place and in view of this, most of the raw materials used by the paints industry, are expected to be produced and manufactured locally during the next five years. The paint industry would thus find a favourable raw material for further expansion and growth.

EXPORTS

Pakistan's export performance in regard to paint and varnishes is not very encouraging. In terms of value exports touched the highest in 199798 at Rs. 122,907 million. As compared to this exports touched the lowest at Rs.5.665 million 1989-90 as illustrated in the following table-III.

Major exports of paints and varnishes include colours prepared, enamels, paints oil, paints prepared, pigments and varnishes. In term of value, the average share of these items in total exports of paints and varnishes was about 86 per cent during the last five years.

Pakistan exports paints and varnishes to a number of countries, prominent amongst them being Saudi Arabia, Japan, UAE, Dubai, Bangladesh, Iran, Singapore, Sri Lanka and Oman. Export prospects of paints and varnishes is not much bright under the present conditions. Pakistan exports mainly conventional type of paints mainly to Middle Eastern countries. In Middle Eastern market, Pakistan faces tough competition with the products of the Western countries which enjoy an upper edge as their cost of production is relatively low. Secondly, their products are well established and Pakistan has joined their rank with a few type of paints. Thirdly, a large number of foreign companies are operating in these markets in different sectors of the economy which prefer the products of their own countries, if available.

To increase exports, it will be necessary that a number of other products should be developed which have a potential market abroad. Secondly, Pakistan has to diversify its market. Currently Middle Eastern countries are in process of establishing different type of industries including paint industry, therefore, dependence of these countries for exports will not be much useful.

Paint's exporters also need incentives as provided by the Government to other industries. Multiple taxation system is a hurdle in the development of exports. This has increased the prices of paints in international market and Pakistani exporters face difficulties in competing with other countries.

SERVICES

Paint offers comprehensive interior and exterior painting services for both the residential and commercial markets.

DESCRIPTION

Paint services include:

Full prep work. Dry wall contouring. Fine detailing. Small carpentry work. Specialty wall coatings. Refinishings. Acoustical ceilings. Pressure washing/roof cleaning.

TYPES OF PAINTS

Paints are made to serve hundreds of specific purposes and in view of this, they are classified into innumerable types. For instance, the paints which serve the purpose of protecting the surface of any article may be made to resist acidity, moisture, heat etc. Similarly, decorative paints may be of several types, some of which may give luminous effects and some types may give simple effects of different colours. However, paints are broadly classified into three main types viz (i) Primers (ii) Undercoaters and (iii) finishing paints.

These types are exclusive of water thinned materials such as distempers or emulsion paints. Within the aforesaid three categories, some of the paints may be described in brief as under

1)Resisting Enamels:

These paints give resistance to acidic atmosphere and environmental conditions. These are made with pigments and media. Synthetic resins are used in the media.

2)Aluminium Paints

In the manufacture of this type of paint, the basic pigment, e.g. white lead, zinc oxide is replaced by aluminium powder. The outstanding quality of an aluminium paint is to give resistance to moisture and heat. Such paints are made with a variety of media depending on the specific purpose it is intended to serve. Head-tested oils, varnishes (either natural resin or synthetic resin), cellulose lacquers, chlorinated rubber and spirit varnishes are among the materials which are used to manufacture this type of paint. The important consideration however is that what is employed as media should be low in acid value.

3)Anti-Corrosive Paints

: Special paints are made for use in ships to counter - act corrosive effects at the bottom of the ship. These are manufactured by incorporating toxic ingredients, e.g. oxides of mercury, which have quick drying properties.

Bitumen Emulsion Paints: The paint is made like the ones which are oil - bound and thinned in water. After application, the water evaporates and the surface, which is painted, is left with a film of bitumen and pigment.

4)Bitumenous Paints:

These are generally of dark shades due to the fact that the basic ingredient is bitumen, the property of which is difficult to conceal. It is prepared by mixing bitumen in driving oil.

5)Fire - Retrading

Paints: Such paints are generally used to protect wood material if exposed to fire. If the wood materials are painted with fire retarding paints, the fire is not likely to spread quickly although a greater intensity of fire may destroy and consume paints to the extent, of the degree of thickness of coatings and the nature of paint.

6)Fungicidal Paints:

Several types of paints are manufactured to resist the growth of fungus. Such paints incorporated agents, which are toxic.

7)Heat - Resisting Paints

By using pigments which stable at high temperatures combined with short-oil synthetic resin media (Melamine resins), paints are made to stand temperature up to 350 degree Fahrenheit or even more without any change.

8) Hydro-Additive Paints:

These paints may be successfully applied to damp surfaces where ordinary paints fail to work: These are available in the form of primers, under coatings and finishes in which suitable substances are added to develop the properties for adhering to damp surfaces.

9)Luminous Paints

The luminous paints which are generally used for decorative purposes are divided into two types viz phosphorescent and fluorescent.

10) Machine Paints:

These are enamels specially formulated for use on machines and tools. These are available for use by brush and also for spraying.

11) Metallic Paints:

These types of paints are heat-resistant and are generally used to paint radiators and heating pipes. These are made of aluminium and bronze powders, which are treated in oil or varnish, synthetic resin or cellulose. The colours of these paints are generally pale gold to dark bronze.

12) Wet-on-Wet Paints:

These paints are made with specially treated oils so that coats can be applied at short intervals of about 30 minutes to one hour. They are intended mainly for spray application.

13) Wood Preservation:

These paints are classified into three types: (i) Creosote and coaltar derivatives, (ii) organic solvent types and (iii) water solution types.

14) Glue:

Glue in the crude form of gelatin, prepared by boiling animal bones, clippings of hides, skins, horns etc. The main use of glue in the paint industry is in the preparation of washable water paints.

Paint Removers: These are products, which if applied, soften the paint or varnish so that it could be removed easily with a knife. The two main types are Alkaline Removers and Spirituous Remover.

PACKING

Paint has four in packing style.

1)Quarter (0.91 liters) 2) Gallon (4.oo liters) 3) Bucket ( 16.56 liters)

4) Contract pack (20.00 liters)

DISTRIBUTION/ PLACEMENT

Place includes company activities that make the product available to target consumers.”

Placement is the process in which the final good or service is made available to the end customer. The channels used for this purpose are known as “Marketing Channels”. Marketing channels are defined as “set of independent organization involved in the process of making a product or service available for the use or consumption by the consumer or business user.

Every region is headed with Regional Sales Manager and in every Region there are further Area/Territories. The supply activities are carried out with keeping the region and areas. One region can not carry out supply in others region same in the case with areas/ territories. The product is only delivered to the company approved dealer or distributor. Distributor can sale to the customer which is not approved dealers of the company. Main consumption of paint is on dealer /retailers counter. The delivery is made through 2 modes

1) Distribution Vehicles

2) Freight On Road ( goods transportation service)

By these 2 means the distribution and placement of products to be available for their customers and consumer

PROMOTION

Before getting a product into the market, culture is to invite its business partners (dealers/distributors) to give them orientation regarding new product what ICI is going to launch, with what features and how it will work. After this first step when product is introduced to the business partner’s second step is its promotion how the promotion is done.

1. T.V Advertisement on different channels

2. Radio Advertisement , F.M 100

3. Bill boards almost in every big city

4. Posters / Banners

5. Small gifts for dealers/distributors to push new product sale

6. Small gifts for painters / contractors who are labor force who apply paint

7. Painters party to introduce them new product

8. T – Shirts printed with product logo on them

9. Caps

10.Key chai

SALES FORECAST

See Sales Strategy.

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Sales Forecast

Year 1 Year 2 Year 3

Sales

Commercial Buildings 179,0000 315,1300 455,4040

Residential Buildings 157,5000 165,3750 173,6440

Total Sales 336,50000 480,52505 629,0428

Direct Cost of Sales Year 1 Year 2 Year 3

Commercial Buildings 40,480 78,783 100,189

Residential Buildings 47,250 52,920 55,566

Subtotal Direct Cost of Sales 87,7300 131,703 155,755

MARKET SEGMENTATION

The paint will focus on two markets within the industry, the residential segment (including apartment buildings) and the commercial segment which includes buildings used for professional purposes. The company can handle any size building that needs its services. It is the goal of the company to eventually have approximately one-third of all business coming from the

commercial segment, since this generates the greatest cash flow. Furthermore, this segment has the lowest percentage of variable costs. The residential segment is considered to be the company's cash cow. Even during the slow winter months, the company can expect to have a small number of residential contracts.

Initially the company will focus on the two segments in just the Pakistan, Lahore area. However, by the end of the three year projections, the company expects to be serving the entire Punjab

COMPETITION & MARKET POSITION

The competitive environment and the upswing of local and national economies put us in an enviable position for the last two years in terms of the demand for convenience services and client custom/commercial coatings requirements. This created a positive competitive environment, as there were not enough service providers to satisfy the body of available work. Needless to say, time changes everything, the economic downswing as of late has put moderate competitive pressures on the painting services provider community at large, creating a developing environment of cutthroat pricing and job leverage.

It is our position that by changing our mix of business, competitive client pursuit, and pricing practices we have been able to remain competitive and most importantly growing. Ko-Bas competes on service and price. We gather market-based information on an ongoing basis and develop our pricing and cost strategies based on market norms specific to our client profile and geographic considerations.

Our competitors range from the small independent 1-2 man painting service for residential and light commercial work to the medium-size 10-20 man commercial-only shops. To find out who to beat and who's getting the work, we need not look further than the local Yellow Pages and more importantly, by having those tough discussions with our client prospects that select another provider and asking them "Why weren't we chosen?"

We have found that dealing with reality and modifying our tactics with reality has helped us keep an edge when it comes to beating the competition.

On any given day, in our particular market segment we have to keep an eye out for an average of 10-15 competitors in our

market, particularly in the commercial and municipal service sector.

MARKETING STRATEGY

Our marketing strategy is simple—use the available channels appropriately to impact growth, gaining considerable name recognition through word of mouth. Contracting for painting and finishing services in our commercial and municipal markets is not an impulse decision, so the primary thrust of the marketing strategy is to inform our prospective clients of reference work similar to the services they require.

In rank order we have identified where our priorities lie in developing market presence to acquire clients.

1. Word of mouth 2. Client testimonials 3. Local business associations 4. Traditional print media, Internet advertising, and

miscellaneous promotion technique

KEY PARTNERS

We view our partners and network of business contacts as a reflection how we get business done. Without the partners and business contacts we could not operate as an operationally lean company and most importantly, leverage this network for continued sales and business growth. The following list provides

a window into the depth and breadth of engagement required to make our business go.

Paint product and supply manufacturers Commercial/retail suppliers at large Financial institutions Community-based business network Business associations Better Business Bureau

CONCLUSION

The future looks bright of Paint and we fully expect to be recognized in the marketplace and we will be able to achieve growth and sustain profitable operations through reputation and adherence to our most basic operating philosophies for maximum competitive advantage.