CASE STUDYKONE:The Monospace Launch in Germany Business Marketing Submitted By: Avishek Tarun Nikit Tyagi Rajesh rai Saurabh Mathur Syed Mehtaj International Management Institute, New Delhi company s worsening financial position will improve and its market share in residential elevator market will improve.5% to 6% and profit after tax has come down to 0%. It will give an early mover advantage to Kone in this new. Dwindling profits Profits for Kane has decreased from 6. If it fails. It might cannibalize other low price elevators that have been offered by Kone. it will be huge loss in terms of capital invested in advertisement activities such as road shows. seminars and other PR activities.In order to enhance its financial position in a saturated elevator market and intense global competition. it will help Kone in increase its profits. Implications of success y y y y It will help Kone in gaining a significant market share and establish itself as a leading innovator and technological superior company. not requiring oil and therefore eliminating fire and environmental hazards and its lower installation time. Test Market Launches: Unit sales and Market share Units KONE Otis Schindler Thyssen . and comfortable elevator segment. The pricing and product positioning strategies set for Monospace in Germany would have a significant impact on the long-term success prospects for KONE. energy saving. If Monospace launch is successful. So. Need to compensate the unsatisfied customers who have already purchased the Monospace elevators. It s an improved product which eliminates the requirement of machine room. For gaining market share The launch of Monospace will cater to a new segment which should increase the market share of Kone. Importance of Monospace launch for KONE and implications of success or failure The launch of Monospace is very important for Kone. 2. The reasons can be summarized as following y y y Value addition The launch of Monospace will add value to Kone in the form of product differentiation instead of competing on price. It is important for Kone to launch a product which is advanced in terms of technology. 1. consumes only half of other elevators and no need of hydraulic oils. It has various benefits. It will reduce reliability of Kone in the market as it can t develop a successful product even after investing large amount of money. As it has a better margin than existing elevators. KONE developed the Monospace elevator that uses revolutionary technologies. such as being the most energy efficient. Implications of failure y y y If the product fails. company will further incur financial losses and hence company s future growth strategy will get affected. Rather. install the pilot plants. and customer service oriented. Target the architects and general contractors.e. which is successful in other countries can¶t be applied in Germany. With the low rise builders rarely using scaffolding and use cranes. as well as its lower installation time will appeal to German customers. Before attracting the customers. but also quality. who are not just price sensitive. and service oriented customers Legal approval for Monospace to be installed in every state throughout the country Government does not subsidize the elevator industry Property developers consistently used the bid process to pressure contractors for price reductions. Comparison of German market with respect to other markets y y y y y y y Saturated market and construction slumping Germany led to fall in demand for elevator equipment by 15 percent Price sensitive customers due to market saturation Skimming pricing strategy will not work in Germany Also quality. where consumers are extremely price-sensitive due to market saturation.France UK Netherland 7000 3300 2100 14 20 40 41 30 19 20 10 13 18 10 6 Learning from the test market launches y y y y y y Target the major influencing group. Price skimming strategy.Basically KONE has two options. such as being the most energy efficient. energy suppliers. i. efficiency. we need to focus on which segment to target. 1. efficiency. 3. They could market the product either in-between the hydraulic and the geared traction . not requiring oil and therefore eliminating fire and environmental hazards. Monospace benefits. which was its largest country market in Europe and vital to its overall success. Focus on the activities of competitors and work accordingly. Launch Plan of Monospace KONE was to launch the Monospacein the low-rise residential elevator market in Germany. but emphasize on Monospace benefits. electronic media and personal meetings. Communicate the benefits of the new technology by print. KONE should price the Monospace similar to products offered by Schindler and Otis. KONE will have to conduct a lot of marketing activities such as Product launch. Since there was less demand for new elevator installation. They could position it as top of the line 4. so that it should not self cannibalize its own products and should be differentiated among its competitors.000 per year less than that of a comparable elevator (repaying a premium of FF 30000 in 6 years In UK was dictated primarily by the 15000 pound TF which put it near the PT price Performance A new drive system all other elements of which were identical to other KONE low-rise elevators. advertising etc. Approach 1: Rather than adopting price skimming strategy in extremely price sensitive German market. Monospace fit price and performance wise relative to other products Pricing Monospace was priced in line with equivalent and more expensive geared traction elevators Monospace be priced above existing prices if KONE held less than 15% market share and in line with existing price levels if KONE otherwise A significant portion of the savings of not building a machine room would accrue to either the owner or construction company motivating them to specify the Monospace In France cost was FF55. Therefore.2. Approach 2: KONE should position Monospace above the gear traction products. Monospace fit relative to product lines Based upon above mentioned two options of Monospace launch plan. Key weaknesses in KONE s current capabilities y The current Brand of KONE is not at the same level when compared to already settle bigger brands such as Schindler. market its distinctive features with high-end price and keep the hydraulic as their low-end model. Extremely positive reactions from the customers No ventilation due to decreased thermal loss The benefits of eliminating the machine room and reduced consumption and the manner in which the roping worked with emphasis on feasibility and reliability 5. . Thyssen present in Germany. in order to fully demonstrate its current capabilities to the prospective buyers. but emphasize Monospace benefits to customers. KONE should price the Monospace similar to products offered by Schindler and Otis. KONE can have following two strategies to position Monospace in elevator market. Otis. KONE should focus on profits and not on market share generated from following low cost strategy. Legal regulations of target market countries may or may not allow easy roll out of the latest technology. is much lower and outnumbered by four or five to one by other big firms such as Thyssen.y KONE will have to work with its current network of salespeople in order to convince the purchase decisions makers (general contractor and architects) to enclose deals. Building continuous relationship is of paramount importance in a Business Market scenario. Therefore. Currently. KONE current capabilities will play a major role. To succeed in the new market. property owners felt they could be left with very little bargaining power as there was no other competitor offering this technology. Otis. y y y y Property owners fear of a monopoly : As the machine-room-less elevator was a revolutionary technology started by Kone. which operates in Germany. and Schindler. the salesperson s strength that KONE has for KONE AUFZUG. . This means lesser visits per week in a given region. Sales force of Kone was comparatively lesser than it s competitors. in order to effectively mange its selling team in Germany with lesser number of employees. it is very important KONE leverages its competitive advantage that it has in the form of technology (EcoDisc) and directs all their marketing strategies on this line. Proprietary technology means customers have to rely on Kone throughout the lifecycle of the machine as other local service providers have no/very little knowhow about this technology. May get caught in Red-tape issues. Convincing prospective customers on this front is a potential weakness.