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Business Consulting - Kone Monospace Case Study

Topics: Elevator, Otis Elevator Company, Germany Pages: 5 (548 words) Published: September 22, 2012
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Kone: MonoSpace Launch
Going Up or Down?

Table of Contents

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Background Illustrative Product Monospace vs. Competiton Marketing Plan Test Markets & the German Difference Implications of Success or Failure Competitive Reactions Kone Weakness Managed

Background
KONE - The world’s third largest elevator company, after Otis and Schindler Sales 13%

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- 1995 KONE’s revenue: $2.2 B (38% from V1, 62% from V2 (78% maintenance, 22% for modernization) 48%

38%

- Germany is the major Market for KONE - R&D: EcoDisc -> MonoSpace V1 New Equipment sales V2 maintainance V2 Modernization

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Illustrative Product
Elevator Asset Class Applications … Machine Room
High-Rise

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Low … Mid … High Low-Rise

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Illustrative Product
MonoSpace Elevator

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EcoDisc
- Machine Room Absence

- Half Energy Consumption
- No Oil - Eliminated Fire Hazards - Reduced Installation

- Less Expensive

Configuration

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Monospace vs. Competition
Major Players: Schindler, Otis, Thyssen, Mitsubishi Electric

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All operate through Germany, 24-hour service network, new elevator sales, installation braches and manufacturing facilities in Germany and Broad Mid-Size Players: about 30, new equipment sales 100-300 annually, regional operation and outsourcing manufacturing Cowboys: 150, operated within a single city, no manufacturing, focusing in purchase, assembling and installation and local service.

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Test Markets & the German Difference
The Netherlands: 100 presentations, 12 articles per month (40 – 60 inquires) Result: 70% target within 10 months, 62% of low-rise market share France: 22,000 letter ( TV Promo), 20 Breakfast meetings, On-site visits Result: 300 Units sold (70% of annual residential sales) United Kingdom: 3 presentations, 220 accepted “ tech leader” Result: No units sold after 1 month

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Germany: Real Estate decline expected 15%, Primarily Residential, Commercial saturated Units 2,100 7,000 3,300 KONE 40% 14% 20% Oits 19% 41% 30% Schindler 13% 20% 10% Thyssen 6% 18% 10% Others 22% 7% 30%

Netherlands France United Kingdom

Low Rise Units Sold: France 90%, Nederland & U.K. 70%

Netherlands France United Kingdom
USD

PH Hydraulic 40,625 24,308

PT Traction 38,750 30,000 46,154

PU Traction 42,500 -

Monospace 43,125 36,000 47,308
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Marketing Plan

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Target: Contractors (50%), Architects (40%), Developers (10%) - Asset: Commercial, Retail, Corporate; non-cannibalize our PH Hydraulic Channel: Customer Visits “Lunch & Learn” Content: Specifications, Detailed Drawings

Duration: 8 – 15 months
Influencing Decision Makers: Quality, Information, Service, Bidding, SME’s (Likeability) Concerns: Expanding too Quickly … Waking up Giants Pricing - Pricing levels

maintained - Focused Bundling ( VI & VII ) - Long-term outlook contracts 1

Competitive Reactions
Overall Fear .. Don’t Scare Competitors
- Otis types could buy KONE for cash - If competitors dropped price KONE can’t compete - KONE

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fears reaction

Reaction
- Competitors

Silence - Machine Room Paid - Downgrading MonoSpace (e.g. no ventilation) - Only 10 Have been approved in France

Implications
- Success: Total profit increase, Strategic positions for German construction up-cycle - Aggressive price reduction - Failure: Decreased market share, eroded customer segments - Limited market movements

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Kone Weakness Managed Our Weakness - Sales Force (limited numbers of people) - New Business Development Approach - Untapped Service Contracts (4.9% units 9.2%)

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KEY POINTS

Bundling: Key to look into maximizing potential revenue Segmentation: Asset class, corporate accounts International: Geographic scope and real potentials 1

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