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Ari Bousbib
President of OTIS Elevator Company
Frank Bakker
SCH-MGMT 689: Organizational Planning & Strategy
University of Massachusetts Amherst
Isenberg School of Business
Introduction
Mr. Bousbib, Otis is currently the largest manufacturer, installer, and servicer of
elevators, escalators, and moving walkways in the world. The company’s successful
history, entrepreneurial mindset and strong process focus puts Otis ahead of the
curve. However, it is also evident that some of these key differentiating factors are not
sustainable as staying ahead of the competition gets harder by the day as the
operational excellence methods are imitated by our competitors and next to this new
Mr Bousbib for this it is critical that our recommendations are followed up to ensure
that the issues and threads are tackled so that Otis continues to be the market leader.
We analyzed the elevator hardware and service industry using Porter’s Five Forces
model (Appendix A) and we reviewed your recent interview with the Harvard Business
Services account for about 75% of the revenues and profits in the more mature
markets. The cost of services is at this moment the selection criteria for the building
servicing our elevators. The current trend is leading to lower margins and a lower
market share.
Strong competition from other high quality multinational companies using
Otis has been very much focused on operational effectiveness and this was necessary
to achieve superior profitability. This however is not sufficient, as staying ahead of the
competition gets harder every day. The most obvious reason for this is the rapid
Recommendations
Service strategy
Otis needs to protect and stabilize the margin erosion in the service part of the
business. A new strategy will tackle this topic. Items to be included in the new service
strategy are: long term contracts, implement IT systems which can only be serviced by
Otis, make IT systems more intelligent so that potential failure is detected earlier and
Innovation strategy
Otis should continue with the operational/service excellence strategy, however this is
that Otis takes a strategic position which is different than our competitors. A core
being different!
Appendix A: Porter’s five forces model of the elevator industry
Buyers have a rather large pool of The threat of new entrants for supplying
competitors to choose from and coupled new products is limited as entry barriers are
with low costs of switching, there is a real high, for services this is not the case more
threat. and more small companiers are offering
services.