{"id":4826,"date":"2015-12-09T16:41:53","date_gmt":"2015-12-09T21:41:53","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/axalta-we-paint-winners\/"},"modified":"2015-12-09T16:46:14","modified_gmt":"2015-12-09T21:46:14","slug":"axalta-we-paint-winners","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/axalta-we-paint-winners\/","title":{"rendered":"Axalta: \u201cWe Paint Winners\u201d"},"content":{"rendered":"

Axalta develops and markets coatings for a variety of applications including automotive and general industrial applications. Axalta generates 90% of its revenue in applications where it is the market leader. The Company’s\u00a0core automotive refinish business sells automotive coatings (paint) to collision centers to\u00a0repair automobiles that have been in accidents.<\/p>\n

Axalta (f.k.a. DuPont Performance Coatings) was divested by DuPont in 2012. Following the carve-out, Axalta\u2019s new management team realigned the business and operating models to reignite growth. Axalta\u2019s performance post-divestiture is a strong example of the impact of effectively aligning a company\u2019s business and operating models.<\/p>\n

\"\"<\/a>
Axalta is the official paint supplier of Hendrick Motorsports and sponsor of race car driver Jeff Gordon.<\/em><\/figcaption><\/figure>\n

Business model:<\/strong><\/p>\n

1. Focus on emerging markets growth <\/strong><\/p>\n

Axalta has identified opportunities for significant growth in emerging markets including China and Brazil. For example, China light vehicle production and car parc (the number of cars in the market) are expected to grow annually through 2017 at 7% and 15%, respectively. Increased production and a larger car parc will drive demand for coatings from OEMs and also for refinish. In addition, emerging economies tend to have higher collision rates due to poor infrastructure which increases demand for refinish products. Axalta plans to accelerate sales by focusing on these high growth markets.<\/p>\n

\"China\"<\/a><\/p>\n

2. Introduce new products in response to customer preferences<\/strong><\/p>\n

Axalta\u2019s business model aims to\u00a0increase sales by introducing\u00a0new products that meet evolving customer preferences. For example, Axalta introduced a line of waterborne coatings for customers who want an environmentally friendly alternative to conventional solventborne coatings. The Company has also introduced regulatory compliant solventborne coatings for customers who prefer solventborne but need to comply with VOC regulations.<\/p>\n

In addition, the Company has a growing\u00a0database of over 4 million colors which is particularly important in refinish applications where the coating must precisely match the rest of the car. OEMs value suppliers with extensive color libraries since appearance is one of the most important factors for drivers when purchasing\u00a0a car. Axalta\u2019s strategy of\u00a0introducing new products and colors leverages its extensive R&D operations.<\/p>\n

Operating model:<\/strong><\/p>\n

1. Expand production capacity and invest in sales force<\/strong><\/p>\n

In order to align its business and operating models, Axalta has invested significantly in emerging markets operations. For example, the Company recently expanded its plant in Jiading, China. Specifically, the expansion focused on increasing waterborne production capacity in anticipation of increasing demand for environmentally friendly products in China. In addition, the Company has invested significantly in its emerging markets sales force\u00a0in order to strengthen relationships with local\u00a0distributors and OEMs.<\/p>\n

\"Interior<\/a><\/p>\n

Interior of Axalta\u2019s Jiading waterborne facility.<\/em><\/p>\n

2. Invest in technology centers<\/strong><\/p>\n

Axalta\u2019s operations include seven technology centers located around the world to facilitate collaboration with local customers during the development process. The centers also provide customers with technical support and training giving the Company valuable data on their customers. For example, Axalta partners with leading OEMs when developing new colors of paint in order to leverage the OEMs\u2019 knowledge of end-consumer preferences. The technology centers enable Axalta to execute its strategy of increasing sales by developing new products that meet its customers\u2019 preferences.<\/p>\n

\"innovation<\/a>
New Global Innovation Center in Philadelphia, Pennsylvania to be completed in 2017.<\/em><\/figcaption><\/figure>\n

\u00a03.\u00a0<\/strong>Improve internal operations<\/strong><\/p>\n

In order to efficiently allocate capital to expansion and revenue growth initiatives, Axalta has implemented internal programs (Axalta Way and Fit-for-Growth) to focus on improving operations. One area these initiatives focus on is improving procurement by streamlining inputs and reducing sole-sourcing of raw materials. The programs also provide proposal guidelines for improvement projects which empower employees to identify high-return projects. These operational initiatives enable the Company to maintain its competitive advantage by reinvesting the savings in growth and expansion.<\/p>\n

 <\/p>\n

Although it\u2019s only been three years since Axalta became an independent company, realigning the Company\u2019s business and operating models has already positively impacted its financial performance. The Company has grown EBITDA at a ~13% CAGR and improved EBITDA margin by ~350 basis points from 2012-2014. The public has also recognized Axalta\u2019s growth potential with the stock price increasing more than 40% since the Company\u2019s initial public offering in late 2014. In addition, Warren Buffet has taken notice of Axalta\u2019s competitive advantage purchasing a ~9% stake in the Company in 2014. It will be exciting to see how Axalta adjusts its business and operating models in the future to continue its growth trajectory.<\/p>\n

 <\/p>\n

Sources:<\/strong><\/p>\n

http:\/\/www.sec.gov\/Archives\/edgar\/data\/1616862\/000119312515285147\/0001193125-15-285147-index.htm<\/a><\/p>\n

http:\/\/www.axaltacs.com\/content\/dam\/investors\/presentations\/1496-AXTA-2015-CMD-Full-Deck-(FINAL-with-changes).pdf<\/a><\/p>\n

http:\/\/www.forbes.com\/sites\/antoinegara\/2015\/04\/07\/warren-buffett-adds-to-automotive-bets-with-560-million-axalta-investment\/<\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Axalta, a market leader in coatings, has accelerated its growth following the recent realignment of the Company's business and operating models.<\/p>\n","protected":false},"author":643,"featured_media":4868,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-4826","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"\nAxalta: \u201cWe Paint Winners\u201d - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/axalta-we-paint-winners\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Axalta: \u201cWe Paint Winners\u201d - 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