Indian Institute of Management - Kozikhode

Kone: The Monospace Launch in Germany

Case Analysis Note









By
S.N. Name Roll No. Designation Organization
1. Mr. Raj Kumar

EPGCMM-06-015 Key Account
Manager
Nestle India Ltd
2. Mr. Umesh R. Sonawane EPGCMM-06-024

Manager Corporate
Communications
Sahara India
Pariwar
3. Mr. Roshan Joseph Pauly

EPGCMM-06-016 Sales Manager Dell India Pvt.
Ltd.
4. Mr. Marripudi Jaya Rao EPGCMM-06-010 Area Business
Manager
Biogen Idec India

Private and Confidential
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1. Kone has targeted Monospace directly at Europes largest equipment market segment:
low-rise residential elevators. Put yourself in Hatalas Shoes and develop a detailed
marketing plan for launching the Monospace in Germany. Set a price for the MonoSpace
(to facilitate comparison with prices of existing products as given at the bottom of case
page 724, price a low-rise, 4floor elevator) and specify clearly how it is to be positioned
relative to the current product line (PH,PT,PU or PS). Based on the pricing and
positioning decisions propose a marketing and sales effort. Justify your decisions and
investments with anticipated sales and the associated contribution relative to the amount
you plan to spend.
Ans:
A. The German Market Scenario:-
i. Product:-

The elevator Market of 15500 units was to shrink by 15% from 1996-2000
48% of 1995 sales were residential & out of this:-
92% were PH (Least expensive)
6% were PT (Mid-Priced)
2% were PU (Lesser than most expensive)

ii. Price deciding factors:-

Legal approval needed in each state for the installation of Monospace
Brand building and differentiation efforts by the company
No subsidy from the government for the elevator industry
Headquarters suggestion to keep prices high due to lesser market share of corn

iii. Consumer:-

Price sensitive consumer
Quality conscious
Focused on service
Favors the energy efficient products

B. Pricing:-
Pricing of the MONOSPACE
Type of
Elevator
PH -
Hydraulic MONOSPACE
PT-
Gearless
PU-
Traction
PS-
Traction
Price (DM) 60000 65000 75000 80000 120000

i. Reasons for this pricing from the Customers point of view (Why they should pay
higher)

The energy consumption is much lesser. The customer can save the energy cost as
much as 1/6
th
of the cost of the MONOSPACE every year, which shows that he
recovers the 17% cost of MONOSPACE in 1
st
year only.
No machine room is required in the installation of MONOSPACE which means
customers can save that much of the space and can utilize it for some other
productive use.

Private and Confidential
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ii. Reason for pricing from Company point of view (Why moderate pricing is important)

The market pricing has been reduced by 8% for PH, MONOSPACE current pricing
is 8% higher than PH and if we count the reduced price, then it would be 16%,
which shows a fair revenue gain from a market which is due growing by 8%.
Installation time is 60 Hrs less than other elevators hence save on cost.
No oil is used in MONOSPACE which shows a lesser maintenance (after sale
service cost) which company can recover from the customer in the service contract.

C. Positioning:-
Energy efficient machine
No oil requirement
Fire and other environmental hazards are eliminated
Quick installation
Service with quality product

D. Marketing & Sales Strategy:-

A working MONOSPACE has to be created in Germany similar to Netherlands to
build the trust of the customers.
The productivity of the sales call without increasing in Number of person or hours
has to be reviewed and sales people to be trained accordingly.
Meeting with all the five stake holder which are required for decision making
which includes 01) Owner 02) Construction Company Manager 03) Architect 04)
Construction Company purchasing agent 05) Service Manager.
Involve the stakeholders for similar requirement at the common platform for dinner
and demonstrate them with the working MONOSPACE.
Articles in local and national architectural Journals and local newspaper which
focuses on saving energy and giving more space in the House.
Lucrative Incentive structure to the sales person on each conversion.

E. Marketing tools to be used: -

Monospace Brochure
Working model of Monospace for demonstration
Separate PowerPoint presentation for all 4 decision makers group
Direct mail
Events and road shows
CAD rendering of Monospace

F. Anticipated Sales and Investment
Total Elevators installed in 1995 15500
Elevators in 1996 (Shrink of 3% per year) 15035

Anticipated Sales as per Current Market Share
Company Market Share 1995 Projected 1996
Schindler 19.4% 3007 2917
Otis 11.6% 1798 1744
Thyssen 12.9% 2000 1940
KONE 9.2% 1426 1383
Others 46.9% 7270 7051
Private and Confidential
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Volume Value
Total Elevators installed in 1995 (Sale through V1) 15500 88033.00
Elevators in 1996 (Shrink of 3% per year) 15035 85392.01
Revenue by selling 1383 Units (DM '000)
92% MONOSPACE 1272 82703.40
6% PT (GEARLESS TRACTION) 83 6223.50
2% PU (TRACTION) 28 2212.80
Revenue earned by KONE in 1996 (DM '000) 1383 91139.70
Last year (1995) Revenue from V1 Sales (DM '000) 1426 88033.00
Growth over last year (DM '000) -43 3106.70
% Growth over last year 97% 104%

MARKETING SPENDS FOR THE LAUNCH (DM '000)
Article in the Journal 50
Gather the potential buyers for Dinner 250
Travelling cost in meeting with the Decision Makers 100
Sales Incentive Scheme 100
Sales Kit for all sales employees 75
Total 575

2. How do you expect competitors to react to your launch plan? How do you plan to manage
the competitors reactions?

Ans: The competition reaction would not be instant as for them this technology will be new and if
we pick up a faster pace of installation, the competition would be left behind and by the time they
react to the situation and come with the similar technology- we would have gained at least another
5 % of the market share.

Other probable reaction from the competition:-

Giving negative feedback to the customers on weak areas of Monospace
Competitors like OTIS and Schindler may get into price wars
As OTIS has tried such product in the past, they may re-launch with better technology


3. What key weaknesses in KONEs current capabilities need to be managed to ensure the
success of the product launch?

Ans: Following are the weaknesses Kone has to manage through their sales force strategy and
communication mix:

a. The MONOSPACE could not be used in the building with PENTHOUSE as public
access was necessary.
b. It was not suitable to use outdoor because its temperature has to be maintained between
5-40 Degree
c. Compare to other players Kone has smaller sales force
d. No proactive sales approach