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Silvio Napoli at Schindler India

Based Upon Harvard Business School Case Study

Opening Facts
Schindler is the world's leading supplier of escalators and moving walkways. On a worldwide scale, the Swiss based company is the second-largest supplier in the elevator industry. Chairman Alfred Schindler identified India as an area of unexploited growth/profit potential (1995). Silvio Napoli, a top level Schindler manager, developed a strategic plan and was subsequently charged with the planimplementation in the field. s
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Opening Facts
Schindler did not have wholly owned operations in India (1996).
Distribution Agreement w/ECE (1958) Technical Collaboration w/Bharat Bijlee (1985) Boston Consulting Group (BCG) retained to study India strategy 34 partners evolved into 8 candidates No one candidate stood out from the rest

Decision was reached to start a wholly owned Indian organization

Opening Facts
Napoli built Indian management team
MD was experienced in building organizations from the ground up Field Ops Mgr came from Otis and had direct elevator experience GM Engineering had over two decades of experience with Schindlercompetitor; Otis s HR Mgr displayed a genuine concern for employees CFO displayed high energy and attitude

Team building activities


Explanation of Schindlerhistory / heritage s Development of Indian business plan

Opening Facts
Napoli was energetic, impatient, hard driving and very communicative not the Indian way
Needed to be monk and half warrior half MD assisted with developing Napolimonk-like talents s

Indiaelevator market was divided into three segments s


70% Low end: intense competition/local companies 20% Middle end: demanding modern, safe, quality product 10% Top end: 24/7 service top line elevators

Compound annual growth rates


17% unit increase 27% value increase
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Opening Facts
Indian Elevator Market Share (Pre-Schindler)
60% 50% 40% 30% 20% 10% 0%
O

50%

22% 8.60% 8.80% 8.40% 1%


TI S L e EC E i its ub is h

1%
ai nd er O th

BB

Ko n

H yu

Opening Facts
Indian Elevator Census, January 1, 2001 (last year census taken) 75,000 elevators installed
67,000 Passenger elevators 7,500 Freight elevators

9,000 New installations occurred in 2000 Avg elevator cost ranges between $5,000 20,000

Indian Escalator Census, January 1, 2001 175 escalators installed 25 New installations occurred in 2000 Avg escalator cost is $70,000
Source: Brad Oguinse / Elevator World, Inc., 356 Morgan Ave., Mobile, AL 36660 (251) 479-4514 (Feb 2005 telephone interview)

Opening Facts
Short term objective: sale of 50 units within first year Long term objective: 20% market share within five years
Utilizing model S001 for low rise buildings
Outsourced / local suppliers

Utilizing model S003P for mid rise buildings


Imported

Non-customized strategy

All logistics and basic installation outsourced High recurring revenue opportunities from service maintenance contracts
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Opinions
Schindlercorporate culture and management s practices in relation to the Indian subsidiary s objectives, were misaligned Models S001 and S003P were generic product offerings and had thin profit margins
Did not fit well within the business plan of offering customized sales and service

Schindler would not be able to gain rapid growth with generic solutions
Sales objective of 50 units during first year of operation Market share objective of 20% within 5 years

Sales contracts not pegged to volatile government regulation subjected profits to rapid evaporation
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Analysis
Porter Diamond/Competitive Advantage

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Analysis
Factor Endowments
India has an established communication infrastructure, a skilled labor force, which is technologically advanced

Demand Conditions
India is currently the second largest elevator growth market in the world

Related and Supporting Industries


Increased commercial facility architectural design, materials supply / transport, and site construction

Firm Strategy, Structure, and Rivalry


Vigorous competition from companies focusing on a growing marketplace while improving efficiency levels
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Analysis
Corporate Strategy Non-customized elevators are in direct conflict with highly competitive marketplace requirements Organizational Structure / highly formal home office procedures not consistent with Indian field office requirements Behavior / Napoliskill set needed to expand to include s more monk expertise Intercultural Business Relations Similar to Corporate Strategy disconnect. Swiss policies and procedures did not easily transfer into the Indian market Strategy Implementations
Initial failure to achieve objectives requires ongoing evolution of the strategic business plan for India
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Schindler India - Installations

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India is a growing market with profit potentialChairman Alfred Schindler) ( India is developing into the worldsecond-largest growth market s
http://www.schindler.com/man/com/webmanen.nsf/pages/inves-fin-ann-market-emia03-01

Recommendations

Buy an existing Indian manufacturer/distributor Immediate revenue generation from established service base Opportunity to modernize current equipment (revenue)
Exploit most effect communication channel Sales calls (revenue)

Consolidation tends to focus the business operation Strength from local knowledge combined with world-wide expertise Product customization to some degree, as per local demands

New subsidiaries in foreign countries can only install new elevators


They begin with no service base New installations slowly begin to build a service base Can not modernize existing equipment
Customers tend to favor existing relationships Vendor change comes slowly
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Recommendations Supporting Documentation


Examples of acquisitions in similar situations
German industrial group ThyssenKrupp has acquired India's Kare Elevator & Engineering Co. Pvt. Ltd. for an undisclosed sum
http://economictimes.indiatimes.com/articleshow/994020.cms (1/18/2005)

ThyssenKrupp Elevator has undergone rapid expansion in the key Chinese market. With 25 percent growth in fiscal year 2001/2002, the company was well above the general sector trend in China. Encouraging business development was also achieved in Singapore, Hong Kong, Thailand, Malaysia and India, where ThyssenKrupp Elevator has its own local subsidiaries. "The company is actively exploring ways to strengthen its presence in the region, examining different forms of cooperation in line with varying market conditions. Although the competition is strong, we intend to increase our market share in Asia," says Gary Elliott, Executive Board Chairman of ThyssenKrupp Elevator AG, Dsseldorf.
http://www.thyssenkrupp.com/en/presse/art_detail.html&aid=771&oid=770 Press release, Feb. 24, 2003

Silvio Napoli when interviewed in 2001 stated company will cater to The orders from architecture houses both government and private to build custom made systems.
www.tendertimes.com/newspages/newsarchive/news03022k.htm

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