Tien Nguyen Amna Qureshi Rina Marie Abantao “Jotun - All the Colours in the World” Date: 04.06.2009 Program: Bachelor in International Marketing Fudan University & Norwegian School of Management “This paper is written as a part of the undergraduate program at BI Norwegian School of Management. This does not entail that BI Norwegian School of Management has cleared the methods applied, the results presented, nor the conclusions drawn” Jotun China – All the Colours in the World Executive summary Jotun Kemisk Fabrik A/S was founded in March 1926, operating only in Norway until 1962 when it began to expand internationally. Today Jotun operates in more than 70 countries, and is one of the world’s leading manufacturers of paints and coatings. Jotun has been in the Chinese market since 1983, initially focusing only on marine coatings and protective coatings where the brand became very successful. Encouraged by this, Jotun China decided to enter the Chinese decorative paint market in 2001 with the long term goal of becoming the market’s leading brand. However, after 8 years in the Chinese decorative paint market, Jotun China has not been able to replicate its previous successes. Therefore, we the authors of this thesis, working in collaboration with Jotun China staff, set out first to determine the viability of Jotun’s latest strategy for the Chinese decorative paint market, and second to suggest concrete steps to follow if and when executing this strategy. Our findings are based on extensive market research, as well as collection and analysis of both primary and secondary data. Our thesis is presented in six parts. In Part One, we provide an introduction to our thesis and background information of Jotun, define our problem statement, research aim, and research questions, and describe the types of difficulties we encountered. In Part Two, we give an overview of our research and data collection methodology. We describe how data was collected and analysed, and comment on its reliability and validity. In Part Three, we provide short summaries of the various theories used in our analysis of Jotun and its strategy for the decorative paint market in China. In Part Four, we detail our secondary findings, followed by our primary findings. The secondary findings consist of an overview of China’s decorative paint industry and real estate market, as well as the meaning and importance of Guanxi in China. The primary findings consist of summaries and analysis of interviews we conducted with Jotun China employees, key dealers and their employees, and other relevant industry experts. In Part Five, we present our internal, external, and SWOT analyses of Jotun China. In Part Six, we conclude by presenting our recommendations with regards to achieving Jotun China’s goals in the Chinese decorative paint market. We explain why Jotun should continue operating in this market, and provide specific steps to properly execute the company’s latest strategy. This section also includes our SPD, and revisiting Jotun China’s goals, CFS and its strategic alternatives. Page i Jotun China – All the Colours in the World Methodology Because the authors had little prior knowledge about the Chinese decorative paint market, an explorative design was applied in this thesis. To answer the problem statement, the authors based the research on published data, secondary data, and qualitative primary data collected through in-depth interviews and observations. The primary data was collected from Jotun employees, as well as dealers and their employees located in Shanghai, Kaiping and Shenzhen. The main purpose of the research was to explore how Jotun could positively influence its future placement in the Chinese decorative paint market. Findings The findings from the analysis and collected data indicate that Jotun is a global brand with quality products. However its knowledge and market orientation about the Chinese decorative market tend to be low. Jotun has no brand awareness amongst the Chinese consumers. Furthermore the competition in the paint industry is intense, and there exists many players, both local and international. If Jotun wants to remain in the market it must have a clear strategy and products with unique selling points. Moreover, because the dealers interact with customers every day and are familiar with their needs, Jotun should include them in the product development process. Finally, Guanxi is a cultural phenomenon that is vital to doing business in China. For Jotun to succeed in the Chinese market it must build and maintain Guanxi with its dealers. Page ii Jotun China – All the Colours in the World Acknowledgement The authors of this thesis would like to express their gratitude to all the people that have contributed and helped us throughout the thesis. First of all, the authors would like to thank Mr. Bjørn Naglestad, General Manager of Jotun China, for his support and guidance, and for giving us the opportunity to work with the people of Jotun China. Thanks to Mrs. Karin Bryntse for her guidance and constructive criticism. Her help has been invaluable to us. Thanks to the four key dealers and their employees for their cooperativeness. The authors would also like to thank the following for sharing their knowledge with us: Mr. Zhou Lai Chun (national sales director Jotun China), Mr. David Shen (sales and marketing Deco retail Jotun China), Mrs. Sharon Ding (brand manager Deco retail Jotun China), Mr. Koy He (marketing assistant Jotun China), Mr. Fredrik Berge (financial trainee Jotun China), the three salesmen that we interviewed and the rest of Jotun’s staff. In addition, the authors would like to thank Mr. Adrian Wall (CEO of Wall Capital Advisors) and Mr. Lester Lam (CEO of Lai Fung Holdings) for sharing their knowledge and expertise with us. Tien Nguyen Amna Qureshi Rina Marie Abantao Page iii Jotun China – All the Colours in the World Table of contents EXECUTIVE SUMMARY..............................................................................................................I METHODOLOGY ........................................................................................................................ II FINDINGS...................................................................................................................................... II ACKNOWLEDGEMENT............................................................................................................III TABLE OF CONTENTS..............................................................................................................IV LIST OF TABLES .....................................................................................................................VIII INDEX OF FIGURES ...............................................................................................................VIII ABBREVIATIONS .......................................................................................................................IX PART ONE: INTRODUCTION.................................................................................................... 2 1. INTRODUCTION...................................................................................................................... 2 1.1 BACKGROUND TO RESEARCH .................................................................................................. 2 1.2 PROBLEM STATEMENT ............................................................................................................. 3 1.3 RESEARCH AIM ....................................................................................................................... 3 1.4 RESEARCH QUESTIONS ............................................................................................................ 4 1.5 RESEARCH LIMITATIONS ......................................................................................................... 4 1.6 DIFFICULTIES .......................................................................................................................... 4 2. JOTUN CHINA........................................................................................................................... 5 2.1 JOTUN GROUP ......................................................................................................................... 5 2.2 JOTUN CHINA .......................................................................................................................... 6 2.3 JOTUN DECORATIVE CHINA .................................................................................................... 8 2.3.1 Product assortment of Jotun China .............................................................................. 10 2.3.2 Multicolour system ....................................................................................................... 12 2.4 DECORATIVE RETAIL CHINA STRATEGY : PAST , PRESENT , AND FUTURE ............................... 13 2.4.1 Past............................................................................................................................... 14 2.4.2 Present.......................................................................................................................... 15 2.4.3 Future ........................................................................................................................... 16 PART TWO: RESEARCH METHODOLOGY......................................................................... 18 3. RESEARCH METHODOLOGY ...........................................................................................