CASE STUDY

KONE:The Monospace
Launch in Germany
Business Marketing

International

Submitted By:
Avishek Tarun
Nikit Tyagi
Rajesh rai
Saurabh Mathur
Management
Institute,
Syed Mehtaj

New Delhi

In order to enhance its financial position in a saturated elevator market and

intense global competition, KONE developed the Monospace elevator that uses
revolutionary technologies. It has various benefits, such as being the most
energy efficient, not requiring oil and therefore eliminating fire and
environmental hazards and its lower installation time.
1. Importance of Monospace launch for KONE and implications of
success or failure
The launch of Monospace is very important for Kone. The reasons can be
summarized as following

Value addition The launch of Monospace will add value to Kone in the
form of product differentiation instead of competing on price. Its an
improved product which eliminates the requirement of machine room,
consumes only half of other elevators and no need of hydraulic oils.
Dwindling profits Profits for Kane has decreased from 6.5% to 6% and
profit after tax has come down to 0%. So, It is important for Kone to launch
a product which is advanced in terms of technology.
For gaining market share The launch of Monospace will cater to a new
segment which should increase the market share of Kone.

Implications of success

It will help Kone in gaining a significant market share and establish itself
as a leading innovator and technological superior company.
As it has a better margin than existing elevators, it will help Kone in
increase its profits.
It might cannibalize other low price elevators that have been offered by
Kone.
It will give an early mover advantage to Kone in this new, energy saving,
and comfortable elevator segment.

Implications of failure

If the product fails, it will be huge loss in terms of capital invested in

advertisement activities such as road shows, seminars and other PR
activities.
It will reduce reliability of Kone in the market as it cant develop a
successful product even after investing large amount of money.
Need to compensate the unsatisfied customers who have already
purchased the Monospace elevators.

If Monospace launch is successful, companys worsening financial position will

improve and its market share in residential elevator market will improve. If it
fails, company will further incur financial losses and hence companys future
growth strategy will get affected. The pricing and product positioning strategies
set for Monospace in Germany would have a significant impact on the long-term
success prospects for KONE.

2. Test Market Launches:

Unit sales and Market share

France
UK
Netherla
nd

Units

KONE

Otis

7000
3300
2100

14
20
40

41
30
19

Schindle
r
20
10
13

Thyssen
18
10
6

Learning from the test market launches

Target the major influencing group, i.e. energy suppliers.

Target the architects and general contractors.
Communicate the benefits of the new technology by print, electronic
media and personal meetings.
Before attracting the customers, install the pilot plants.
Focus on the activities of competitors and work accordingly.
With the low rise builders rarely using scaffolding and use cranes, we need
to focus on which segment to target.

Comparison of German market with respect to other markets

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, efficiency, 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.

Monospace benefits, such as being the most energy efficient, not requiring oil
and therefore eliminating fire and environmental hazards, as well as its lower
installation time will appeal to German customers, who are not just price
sensitive, but also quality, efficiency, and customer service oriented. Price
skimming strategy, which is successful in other countries cant be applied in
Germany, where consumers are extremely price-sensitive due to market
saturation.Rather, KONE should price the Monospace similar to products offered
by Schindler and Otis, but emphasize on Monospace benefits.

3. Launch Plan of Monospace

KONE was to launch the Monospacein the low-rise residential elevator market in
Germany, which was its largest country market in Europe and vital to its overall
success.Basically KONE has two options.
1. They could market the product either in-between the hydraulic and the geared
traction
2. They could position it as top of the line
4. Monospace fit relative to product lines
Based upon above mentioned two options of Monospace launch plan, KONE can
have following two strategies to position Monospace in elevator market, so that it
should not self cannibalize its own products and should be differentiated among
its competitors.
Approach 1: Rather than adopting price skimming strategy in extremely price
sensitive German market, KONE should price the Monospace similar to products
offered by Schindler and Otis, but emphasize Monospace benefits to customers.
Approach 2: KONE should position Monospace above the gear traction products,
market its distinctive features with high-end price and keep the hydraulic as their
low-end model. Since there was less demand for new elevator installation, KONE
should focus on profits and not on market share generated from following low
cost strategy.
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 FF55,000 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.
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. Key weaknesses in KONEs current capabilities

The current Brand of KONE is not at the same level when compared to
already settle bigger brands such as Schindler, Otis, Thyssen present in
Germany. Therefore, KONE will have to conduct a lot of marketing
activities such as Product launch, advertising etc. in order to fully
demonstrate its current capabilities to the prospective buyers.

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. Currently, the salespersons strength that
KONE has for KONE AUFZUG, which operates in Germany, is much lower
and outnumbered by four or five to one by other big firms such as
Thyssen, Otis, and Schindler. Therefore, in order to effectively mange its
selling team in Germany with lesser number of employees, KONE current
capabilities will play a major role.

Property owners fear of a monopoly : As the machine-room-less elevator

was a revolutionary technology started by Kone, property owners felt they
could be left with very little bargaining power as there was no other
competitor offering this technology. Convincing prospective customers on
this front is a potential weakness.
Sales force of Kone was comparatively lesser than its competitors. This
means lesser visits per week in a given region. Building continuous
relationship is of paramount importance in a Business Market scenario.
Legal regulations of target market countries may or may not allow easy
roll out of the latest technology. May get caught in Red-tape issues.
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.

To succeed in the new market, 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.