1. Introduction Kone is currently facing a precarious financial situation in an industry that competes on price rather than differentiation. Should the situation persist, losses for 1996 will be imminent. With the launch of Kone MonoSpace in Germany, however, the company hopes to make profits as it expands its product line in this very critical market. Germany’s elevator market is the largest in continental Europe and with a market size of 15,500 units in 1995, it is more than the market sizes of the Netherlands, France and the UK combined. The German market is, thus, critical because of its sheer market size and its potential to bring Kone back into a profit making business. This report seeks to address the key considerations of the MonoSpace launch in Germany, its launch strategy and implementation process. 2. MonoSpace’s Value Propositions Currently, MonoSpace can only be used in low-rise buildings because it can not operate on buildings with more than 12 levels. Value propositions of the MonoSpace include: 1. Machine-room-less A machine room is typically 25% of the total elevator cost for geared traction and slightly less for hydraulic elevators. Without the machine room, developers will have more area to rent out or sell. 2. More comfortable ride “ EcoDisc” offers a more comfortable ride as compared to a gearless traction elevator, the most expensive option for an elevator. 3. Extremely energy efficient The energy saved is considerable, ranging between one third to half of other elevator systems. In addition, electrical fuses required for the MonoSpace were $42 a year, significantly cheaper compared to $559 a year for geared traction elevator fuses and $1,119 a year for hydraulic elevator fuses. 4. No oil required Potential fire and environmental hazards are eliminated, as is the cost of oil. 5. Shorter installation time Requires 60 hours less time compared to the simplest traditional elevator 6. Lower construction and installation cost Cost savings can amount to 5% of savings for the construction company (should you quote this
3. Situational Analysis 3.1. MonoSpace Market Analysis When MonoSpace was introduced in the Netherlands, France and U.K, it was met with varying degrees of adoption rate. It was a great success in the Netherlands but fared very poorly in France and the U.K. A comparison study of the markets can give Kone Aufzug considerable insights to the MonoSpace launch in Germany. Price of PH Netherlands $40,625 France UK $24,308 Price of PT Price of PU Price of No. of Monospace Monospace sold in a year $43,125 630 $36,000 160 (estimate) $47,308 45 (estimate)
$38,750 $42,500 $30,000 $$46,154 -
Netherlands: 40% x 2100 x 75% = 630, France: 40 x 4= 160, UK: estimate based on poor adoption rate
For all markets, MonoSpace was priced at a premium as compared to the PH, PT and PU. As all products are used in the low-rise residential market, MonoSpace can be considered as a substitute to the existing products. In the Netherlands, MonoSpace was priced 6% more than the PH and 11.3% more than the PT. In France, MonoSpace was priced 20% more than the PT. In the U.K, MonoSpace was priced 95% more than the PH and 2.5% more than the PT. Pricing MonoSpace at a premium can denote that it is a novel product of superior quality, thus shifting the competitive landscape away from pricing and focusing more on differentiation. However, if priced too high, the potential benefits of this new technology may be outstripped by the cost of purchasing a MonoSpace. Pricing is especially crucial because the 2 groups that the MonoSpace will be marketing to in Germany, the developers and contractors, are very price sensitive. Good pricing, along with a strong emphasis on relationship-based selling efforts, could have been a reason for MonoSpace’s success in the Netherlands market. A premium of between 6% and 11.3% is not high enough to outstrip the potential cost savings and decision makers may have found the price...