The Elevator Industry

In the early 1990s Elevator Industry was dominated by Otis

(US),Schindler(Switzerland),Kone(Finland),Mitsubishi(Japan) & Thyssen(Germany).They
were all global competitors with regional stronghold. Toshiba & Hitachi of Japan and
Goldstar of Korea were competitors in growing Asian market. Otis was major threat as it
invested 1.6% and reengineered its production which resulted in increase in profitability. It
was dominant in US, Canada and good chunk of Asia. Schindler was shifting its Business
Model from Equipment maker to Service Provider. It also moved from Production to
assembly facility. Mitsibushi opened a new Asian factory, increased production and
launched 2 JV. On the other hand Thyssen only manufactured its strategic components and
outsourcing the rest.
Elevator Technology
Machine-room-less elevator had been a long compelling notion to elevator manufacturer as
it would reduce the total elevator cost by eliminating the machine room requirements
completely. Furthermore, it would give additional usable space for revenue-generation
purpose and greater architectural freedom to the customers.
Elevator Purchasing Decision:
The complexity of purchase decision varied with building type and design. Taller, costlier,
more complex a building and thus elevator, more people are involved in decision making
and more factors taken in consideration.
For high rise building elevator system, might involve property devloper,building
owner,construction contractor,architect,elevator consultant while The low-rise elevators
customers in Germany are mainly property developers, general contractors,architects.
Evolution Of KONE
KONE MONOSPACE: Machine room not required and replaced by ECO Disc, and high
comfort. KONE developed the Monospace elevator that uses revolutionary technologies. It
has various benefits, such as being the most energy efficient, not requiring oil and therefore
eliminating fire and environmental hazards and its lower installation time. KONE had
targeted MonoSpace at Europes markets directly and in the three countries where it was
launched construction business was stagnant. Residential buildings accounted for roughly
half of all construction activity. UK was popular for having one and five star buildings with
nothing in between which resulted in investment for elevators on extremes. Based on
pricing, the MonoSpace was priced as closely as possible to geared traction elevators,
which gave it a competitive advantage over the more costly competition. On the other hand,
as far as marketing strategies went, the company had different strategies for different
countries. For Netherlands, they invited close to 3500 architects, consultants etc. to review
the lift via one-on-one presentations, and ended up making about 100 presentations. In
France, they sent out over 22000 letters to existing customers to watch a television
program which detailed features of the elevator. In the United Kingdom, due to price
sensitivity, they stressed on the fact that KONE was a technology leader on the basis of
three presentations made at the Londons Science Museum where 220 people accepted the
invitation and 80 people attended it. Based on this, the sales results were quite amazing.
Within one year of launching MonoSpace, KONE controlled 62% of the Netherlands market
share and were worried about controlling too much of it, lest the competitors feel
threatened. However, the situation was not so jubilant in UK and France which barely
showed sales at all. The company learnt a lot from the European markets. It learnt that
using lower risers and sometime/process savings could amount to almost 5% savings. The
appeal of energy savings was also quite enticing for a lot of builders. They also had to affix a
warning label so that architects and builders could know of special instructions while
installing the machinery. They had to explain to the consumers that they would not be
looting them by charging extra because their image was important to them. There would
also be a clear cut instructions to detail about lower running costs of MonoSpace. They also
incorporated example installations to show that consumers werent being used as guinea
pigs.
After going for a successful launch in Europe, Kone now eyes the German market. Some of the
salient features of the same are as below:
The German market was dominated by residential construction of which elevator units
for low rise residential buildings comprised 74%. Further, by the type of elevator units,
the hydraulic elevators accounted for 60% of the above mentioned dominant market of
Germany.
Hence, Kones strategy to launch a low rise hydraulic market in Germany, seems to be
falling in line with the current trend of the market.
Due to a falling growth in the construction front, all the major players are incurring
losses as customers become highly price sensitive. Along with that, they also consider
timeliness of completion & operating costs as major purchase criteria. This is again a
right opportunity for Kone to enter with a low cost and energy & time efficient product
like Monospace as the big players are still in their recovery modes.
Out of the many launch options we suggest the following to Kone for advancing with
Monospace in Germany:
Trade press & journal advertising: Since the first step of the selling process (965 of
the times) is initiated by the customers with a request for specifications & bidding, we
suggest spreading a widespread awareness and interest through this cost effective
option. Further, we suggest advertisements in the weekly journals of 31000 circulation
(for the widest reach possible) costing DM 2700 per ad, to be used in all such building &
construction journals and such top 5 architectural journals.
Sales visit: Also, as salespeople become the main point of contact and influencer in the
entire procurement process, we suggest as a suitable launch option. These are not just
cost effective but also, a firm way to build relationships with the prospective customers,
which can later ease in procurement process and build loyalty.
Seminars: Further, to make their launch more effective, Kone can go for multiple
seminars which is more effective in attracting customers because of their preferential
treatment. This can help them to exhibit their offerings in a more engaging form. All this
can again be accommodated in a cost effective form.