KONE: The MonoSpace Launch in Germany

Presented by : Group 3 Nila Lohita (PGP/14/284) Rohith Acharya (PGP/14/292) Santanu Chowdhury (PGP/14/297) Vardhan Singh (PGP/14/311) Mukesh Meena (PGP/14/219)

German Low Rise Elevator Industry

The Hydraulic PH elevator has a market share of

60% The traction PT and PU elevator have market share of 40% Demand for elevator equipment is going to shrink by 15% by 2000 Choice of elevator is not an important aspect for constructors as not much price can be obtained during selling or renting of apartments Market is highly price sensitive and is facing a cut throat price war among competitors Buying decision is mostly taken by general contractor (50%), architect (40%) and property developer (10%) The contractors are high in number (around 20000)

Elevator Features and Specifications

Attributes Hydraulic PH Traction PT Traction PU Traction PS Monospace Speed(meters/s) 0.63 1 1 1 1

Load(kg)

630

630

630

630

630

Motor Size

11

5.5

5.5

5.5

3.5

Main fuse (amp)

50

35

35

35

15

Energy Consumption (KW) Oil requirements

7500

5000

5000

5000

2500

200

3.5

3.5

Weight (kg)

650

430

430

430

190

Machine Room (m square) Roping Arrangement

11

11

11

Simple

Simple

More complex

Most Complex

Simple

Price (DM)

60000

75000

80000

120000-200000

Monospace Value Proposition

Frees up space giving architectural freedom or

revenue generation EcoDisc gave elevator ride comfort similar to gearless drive system EcoDisc is extremely energy efficient compared to hydraulic and traction thus saving on energy cost No potential fire and environmental hazards as it doesnt use oil like hydraulic elevators Installation time is 60hrs less than the simplest elevator thus saving on set up cost

Monospace Marketing Plan

Product: POP Attribute wise Monospace is very similar to that of Traction elevators in terms of elevator speed, load, motor size, oil requirements POD No machine room requirement, low energy consumption, low set up time, simpler roping arrangement and low weight Fire and Environmental hazard free Position it as a better elevator than both traction and hydraulic highlighting the PODs

Monospace Marketing Plan

Price: As the Monospace saves lot of space which can be utilized and has a very low energy consumption rate, it can be priced at par Traction PU elevators i.e., DM 80000 The customer can benefit from the low operating cost (electricity cost), low set up cost (60Hrs saving) and utilizing the machine room space for renting or selling This price will capture the traction elevator market and also lure in the hydraulic PH market (60%) specially the replacement market due to the value proposition

Monospace Marketing Plan

Place: The German construction market is dominated by residential construction The proportion of elevator units in low rise residential apartment is 74% and is not expected to change much So the place of launching will be Germany and the target segment will be low rise residential apartment Promotion: Face to face, relationship based selling for the 4 large contractors and architects - giving discounts for word of mouth publicity Advertisement in building and architectural journals for architects

Monospace Market Estimates

The market is decreasing at a CAGR of 3.2% An optimistic assumption that Monospace will

capture 10% market share of Hydraulic PH in the first 2 years followed by 15% in the next 2 years and finally 20% in the last 2 years As Monospace is similar to Traction, it will capture 25% of Traction PU market share in the first two years, 30% in the next 2 years and finally 35% in the last 2 years As Monospace price is kept close to the Traction PT, it will capture 15% market share in the first 2 years, 20% in the next 2 years and finally 25% in the last 2 years The estimate of market share shows that

Monospace Market Estimate

Market Details

1995
Total Units Hydraulic PH Traction PU Traction PT 15500 9300 4133 2067

1996
15004.29 9002.575 4001 2001

1997
14524.44 8714.661 3873 1937

1998
14059.93 8435.956 3749 1875

1999
13610.27 8166.164 3629 1815

2000
13175 7905 3513 1757

Monospace Share in Hydraulic PH Share in Traction PU Share in Traction PT Total Market Share 930 1033 310 2273 14.67% 900 1000 300 2201 14.67% 1307 1162 387 2856 19.67% 1265 1125 375 2765 19.67% 1633 1270 454 3357 24.67% 1581 1230 439 3250 24.67%

Monospace Revenue Estimates

Revenue is obtained from both V1 and V2 sources For V2, 80% of the V1 sales will be available for

service contracts Service contract revenue is worth 1.7 times the sales revenue A marketing spend of around 5 million DM in the first 2 years will fetch a sales of 490 million DM in first 2 years In DM) ('1000 subsequent time, the advertisement spend can be 1995 1996 1997 1998 1999 2000 decreased as the elevator sells mostly on word of Revenue 181866.7 176050.3 228517.8 221209.5 268576.1 259986.7 mouth
Revenue from service Total Revenue 309173.3 491040 299285.6 475335.9 388480.2 616998 376056.2 597265.7 456579.3 725155.3 441977.3 701964

Competitors Possible Reaction

Competitors are large in size and have deep pockets and

any erosion in market share will result in tough reaction Competitors can cut price of the existing models of hydraulic PH and Traction PU and PT (V1) Competitors can cut the price of after sales service (V2) Competitors can imitate the Monospace and launch similar products in the market KONEs response: Price cut of competitors can be thwarted by showing the value proposition of Mono Space- reduction in operating and set up expenses A cut in after sales service price can be initiated from KONEs end as retaliation to the competitor steps First mover advantage will help KONE to produce more units and lower the cost of production through economies of scale

Weakness in KONEs Capabilities

The main channel of promotion is face to face,

relationship based selling of elevators and word of mouth as the decision makers are highly fragmented The Sales force of KONE in Germany is too small to achieve the forecasted sales figure (23 full time and 20 half time employees) Less presence in advertisements specially mass media Decreasing profit margin will make it difficult to support a large marketing campaign for Monospace in the first year Managing the Weaknesses: Recruit efficient sales person both full and half time Advertise in mass media to spread the value

Thank You