Kshitij Gupta

Aarohi Surya
Devika Singh
Shubham Sogani
Sunny Gupta

Kone Case Analysis Group 8

Kone is amongst the largest manufacturing and service company for elevators in the world
with a revenue of around $2.2 billion during 1995 out of which 68% was from service
contracts and 38% from new equipment sale. But the global competition in the elevator
market is very intense so Kone needs to compete with the other top elevator companies such
as Thyssen, Mitsubishi, Otis and Schindler and many other small regional and local
manufacturers.

To remain ahead of its competitors in the market the company came up with a new
technology called the Eco Disc technology which eliminated the need for there being a
machine room for the elevator to be installed which cuts down the cost and even saves space
for the company. This technology was designed to replace the traditional elevators in for the
mid size and low rise elevators. The company had launched this technology in France,
Netherlands, and UK but received a mixed feedback from the markets. The companys
offering was a huge success in the Netherlands but UK and France was not so good. Kone
Aufzug the german counterpart of the company wasnts to launch this new technology in
Germany which is considered as one of the largest elevator markets in Europe for elevators.
But before launching the company must take into account the current market scenario, the
product market fit and the marketing strategies they would implement to launch the product.

About the New Product:

An elevator without the machine room had been a long due upgrade in the elevator market as
it would be very effective in reducing the total cost of the elevator and provide extra usable
space in the building. The features of the new Mono space technology were:

No requirement for a machine room

Almost same ride comfort
Energy consumption would be cut down to half of what was required in the current
models
No requirement for oil
Less time to install
Maintenance cost would be lower
Could be used with the existing models of the company
 Kshitij Gupta
Aarohi Surya
Devika Singh
Shubham Sogani
Sunny Gupta

Some drawbacks of this new technology were that it could be used only for up to 13 person
cabin elevators. It could not be used for outdoor elevators as the driver requires a certain
temperature to run. Some consumers were also apprehensive that as this technology would be
supplied by a single supplier they might have to pay the price asked by the company.

The German Market:

The use of the new technology in the German market would be mostly for the mid size and
low rise elevator segments and the low rise segment comprised of almost 75% of the German
elevator market. This would mean that the new technology had a lot of application in the
same market giving the company desire to position in this market.

The mono space technology already had positive feedback from the customers in the other
European markets which would give it an edge in this market and the benefits of this
technology would also appeal to the low rise segment of the elevator market. But the success
would depend on how the company would market its product to the target customers.

Competition and performance Analysis of the German Market.

There was a boost in the construction industry which in turn gave a boost to the elevator
market until 1995. However after 1995 the growth rate of this industry ended causing a
downfall in demand for the elevators and also leading to a reduction in the prices if the
elevators. The elevator market in Germany was dominate by residential construction having
almost 74% share. The segment which the company was targeting, the low rise residential
segment was mainly occupied by the hydraulic elevators and the remaining is by the geared
or gearless elevators.

The market is currently served by 6 companies including Otis, Thyssen, Schindler, Haushahn,
Kone and Schmit. Even after being among the top 6 companies Kone was not the market
leader there.
 Kshitij Gupta
Aarohi Surya
Devika Singh
Shubham Sogani
Sunny Gupta

Recommendations for Marketing Strategy for the Launch of Monospace in Germany.

Kone has to take the product to the right customers for it to have success of the new product.
By performing Market analysis and the features of the product Kone Aufzug should do
advertising and launch the product in the low rise elevator market for the residential market
while also targeting mid side elevators where the number of floors is less than 12. The low
rise segment is recommended because it constitutes 74% of the total German market. Kones
sales in 1995 also comprise of 48% from the low rise elevators which means that they have a
good understanding of this segment and can use it to their benefit.

The customers for the low rise elevators in Germany include mainly contractors, architects,
property developers and there are 4 larger contractors who do almost 20% of the total
construction and the rest is covered by small contractors. The final decision making takes
place by the contractors 50% of the time, by architects 40% of the times and the remaining by
property owners. So they should mostly target the architects and contractors for better results.

Market Positioning and Value Proposition strategy:

Kone should differentiate it products by emphasizing on the points of difference of the

products, which are the benefits including the no machine room, extra space for use in the
building, easier and faster installation and energy saving. These would be the values which
the customers have been looking for and they would be ready to switch to the new products
for this.

As the mono space would be solving many functional areas of the elevators the positioning
the company should adopt is the functional positioning, and as Kone is already a famous
brand in the country it would be easier for them to position the product as they can
incorporate the feedback they have from the previous launch in the other 3 countries. They
should also convey long term partnership in order to avoid any single supplier worries they
customers might have.
 Kshitij Gupta
Aarohi Surya
Devika Singh
Shubham Sogani
Sunny Gupta

Strategy for Pricing the Monospace

The pricing of the monospace would be a tricky issue for the company as there is intense
competition in the market and also the prices have dropped by 5-7% in the previous years.
The managers at Kone had suggested that the company should price the product above the
current prices of the existing products supplied by Kone but we thing that the price of the
Monospace should be in accordance to the prices of the competitors currently in the market to
increase the market share of the company in the German market.
As we have already discussed that the decision making in the low rise segment of the
elevators is done mostly by the contractors and architects who are more concerned about the
purchase price of the elevator rather than the long term cost, it would be better that the
company prices are at par with the competitors if not lower to attract the target customers.

Advertising and communication Strategy:

By keeping in mind the knowledge they gained from the launches in Netherlands, France and
UK we recommend that Kone should use all round approach using a combination of
advertisements, Seminars and launch events.

Keeping a launching event and inviting architects, contractors and construction

companies as they are the main decision makers in the buying process. Also the media
should be invited to get full coverage on the event in the news papers and magazines.
As they had mentioned in the case they should try to convince more existing
customers to replace their current elevator systems with the new technology as this
with spread good word of mouth about the product in the industry.
Advertise in famous building and construction journals and architectural magazines.

The company should also keep conducting seminars each month to increase awareness of
the customers so they have the brand recall. They should also use their current sales force
in the Germany promote the Monospace as they are already aware of the customers and
have their own networks which would make it easier for the company to penetrate in the
market.