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Amit Chanchal and Alicia Girot (Strategy and Management)



  

Schindler made the right choice in selecting Slivio Napoli as general manager of India
operations. Indeed:

á| Napoli was working at Schindler, and had a strong influence on the corporate
executive committee, so he was credible as being named to run operations in
India
á| ½is 9 months experience with BCG gave him a good knowledge of Indian
business scenario.
á| inally, he knew the company, people and products, but was also a young and
flexible generalist who was willing to go to India.

  

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Nevertheless, Napoli͛s objective was quite defensible:

Schindler was the world leader in elevators and saw i n India a great potential of
growth. This market is quite new and its needs are not as customized as existing
subsidiaries͛. So, Napoli͛s goal was to test a new production approach (be it compared
to Schindler current activities or to India͛s elevator busi ness) by standardizing the
products and outsourcing. If this strategy was working it could be implemented
elsewhere.

To achieve this goal, Napoli recruited multi-faceted and high potential team, and
created a lean and efficient organization.

But, this organization was too unusual for the Indian market, and was not absolutely
shared by Napoli͛s team, who tended to accept to provide customized products. Then,
Napoli didn͛t expect a costs increase that jeopardized his outsourcing strategy.

Thus, Napoli͛s initi al objective was really defensible but he realized that he was acting
in a hostile environment and that he should have been wiser running a less unusual
business.

As Luc Bonnard, we would advise him:

 á| to handle the current opportunities
á| to limit outsourcing to local suppliers
á| to communicate a lot on its standardized offer, since the Indian market is really
price sensitive

  

Silvio business plan has been centered on two elevator models S001 and S300P which
are highly standardized. When looking at prospects in India market Silvio considered
that few adjustments in the design would meet the required Indian standards. After
having orders specifically for elevator with glass walls, Napoli has two alternatives one
to stick to his business and other to accept the orders and supply elevators with glass
wall.

rom the case it seems that though Napoli had understood the requirements in terms
of standards but he has not understood the market very well. In our opinion Napoli
should accept the orders for elevators with glass wall and carry out an extensive
market research to find out more about the consumer preferences and refine the
product offering. As mentioned in the case, initial steps which includes engineering,
production and installation involves 1/3 of labor and accounts for only 20% of profits.
It would not be very difficult to allow for some customization in the initial stages.

Certain level of customization on the standard product would be a good idea if it is

economically feasible. This would ensure that schindler has more differentiated
product in the market and with time with better understanding of the market they
would be able to propose better product offerings.

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The issue of technical transfer and transfer pricing is very crucial one in this context.
With increased import duties increase from 22% to 56% and new transfer costing
system Schindler͛s Indian operation would be hit severely. Only way which is seems
reasonable now is to outsource to l ocal sources.

The technical cooperation from Europeans plants too is not available at the moment
and their response has not been quick. In the given scenario we suggest that Silvio
should pressurize his European counterparts to provide them with the design details
and production specification. If the negotiations don͛t work out and Silvio is not able
to get the details he should offer to pay for the technology transfer and get the
needed designs and specification. This would send a clear signal of the seriousness of
the matter.