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KONE MonoSpace

Prepared for: Professor John Durr


Prepared by: Roby Camagong, Balindal Suttatanachod, Katrina Kals, Wolfgang Feger, Branden Maes
November 25, 2013
Proposal number: 001

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TEAM 9 CONSULTANTS
Table of Contents

SITUATION ANALYSIS.3

STATEMENT OF PROBLEM AND GOALS3

MARKETING PLAN..5

MARKET AND COMPANY ANALYSIS...5

MARKETING STRATEGY...9

CONTROLS.12

CONCLUSION12
























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TEAM 9 CONSULTANTS
SITUATION ANALYSIS
1.0 Global
In the late 1970s and 1980s, there was a rise demand in elevators due to signicant restructuring and
consolidation. The key factors that drive demand in different regions comprised of urbanization, increased in
population in city area and government support in public housing. The revenue structure in elevator industry
business was divided into two sectors: new equipment and service. Interestingly, major revenues come from
service sector as many large companies tend to sell their product below the cost in order to gain share in the
market. This market has low entries barriers: simple technologies, steady demand and high margin which
made the market to be highly competitive. The market has reached the highest peak in 1995. However, during
1996, there was a drop in region-wide construction and product offering in the market was mostly
undifferentiated. As a result, demand was expected to fall respectively.
2.0 Germany
Germany was the Europes largest elevator market. From 1995, the construction boom had driven market from
8,000 units to 15,500 units compared to France 7,000 units, UK 3,300 units, and Netherlands 2,100 units.
The German market was dominated by residential construction. While there was a bust, the demand in new
elevator equipment expected to fall. However, 74% of demand in low-rise residential elevators did not expect
to drop during 1995 to 2000. Six majors players who dominant in market share during this period included
Schindler, Otis, Thyssen, KONE, Haushahn, and Schmitt & Sohn.
3.0 KONE
KONE, the worlds third largest elevator company. Their revenue come from 2 sides. One is from selling new
equipment. Another is from services, 38% and 62% respectively. Their product can be categorized into 3
segments: low-rise elevators, mid-rise elevators and high rise elevators. For almost 75% sales come from low-
rise elevators. During 1991 to 1995, net income has been dropped dramatically. Therefore, KONE research
and development team introduced new product to the market called Monospace, using new technology that
use Ecodisc instead of using old machine room, moreover it gain energy cost saving and gain more safety
because it required no oil. KONE had been test marketed in Netherlands, UK, and France before decided to
penetrate Germany market.

STATEMENT OF PROBLEMS AND GOALS
Due to the changes in region-wide construction slumps and low differentiation among competitive offerings, a
price competition has risen which in turn led to an erosion of margins and therefore to a nancial downturn of
KONE. This output contains the problems faced by KONE in entering the German market as well as several
global issues and our goals, in providing value to the company by offering strategic marketing plans and action
program.

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TEAM 9 CONSULTANTS
1.0 Marketing Level
1.1 Currently KONE is generating its sales in the EU (53%) and North America (29%). However, according to
the estimated demand by region for 1996 the regions which should be mainly targeted are low-rise residential
buildings in Europe, Middle East and Africa (65,000 units and almost 49% of total units in this segment) and
Asia and Australia (50,000 units and almost 38% of total units in this segment).
As a result our goal on a global level is to reshape our focus on Asia and Australia, because currently only
10% of sales are generated in this eld and with the launch of the MonoSpace (EcoDisc) several
opportunities await in these emerging economies. In addition our goal is to target the EU market even more
because of the companys experience in these markets and to benet on from previous efforts.
1.2 KONE is suffering from its organizational structure. For example the M. Elden (responsible for Germany
operations) has to not only coordinate and execute the operations in this country but also in Poland.
Furthermore, the sales department suffers from the same issues. A relatively small number of employees
(some full time and others part-time) have to engage in several different tasks at the same time
As consultants, we would recommend KONE to strengthen these segments by restructuring their
organization and hiring new employees to reduce the workload in order to handle its future engagement in
the German market. As we will later show these improvements will show vital as the success in the German
market relies on perfect execution on several levels (Strategy, Tactic, and Operation).
2.0 Pricing Issue
2.1 There is a prevalent mismatch in supply and demand.
Our aim is to enhance and design the products that will tailor t the needs and the demand of the market.
2.2 The new technology and current conditions in the German market present challenges to the market
entrant.
Our goal is to break the barriers to entry by developing an aggressive pricing strategy.
2.3 Misaligned perceived value of the customers to the products.
Our goal is to shape the perceived value of the customers by focusing on adding strategic service
differentiation strategies.
2.4 Launch options inefciencies due to not weak targeting of marketing strategies.
Our goal is to develop a marketing plan and strategy that will directly address the core customers of KONE.
3.0 Competition
3.1 Substantial market share by the mid-market players and small companies
Our goal is to steal the market share away from the mid-market players and small companies.

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MARKETING PLAN FOR KONE MONOSPACE

1.0 MARKET AND COMPANY ANALYSIS

1.1 TARGET MARKETS
Current Situation
Between 1995 and 2000, demand for new elevators is expected to decline by 15%. Currently, residential
construction is the dominate driver for elevator sales in Germany. This is a major factor for introducing the
MonoSpace to the German market, as KONEs low-rise elevators produce 75% of the companies equipment
sales. Of the low-rise residential sales, hydraulic makes up 60% of sales and geed traction generates 40% of
sales revenue.
Target Market Segmentation
KONE MonoSpace will target German low-rise residential buildings of 12 oors or less. The residential
construction market in Germany is dominated by 20,000 small contractors, making up 80% of the market; the
remaining 20% being dominated by four major contractors.

LOW-RISE ELEVATOR CONSUMERS

A. General Contractors
The general contractor is the largest decision maker for elevator purchases, choosing the type and brand of
elevator installed 50% of the time. The contractors exerts the greatest inuence on elevator purchase on the
developer. There are approximately 20,000 small contractors in the market that bid for jobs in the low-rise
residential construction market. In constructing a bid, the contractors request bids from elevator suppliers,
usually incorporating a low-cost offering into their construction bid. They possess little technical knowledge
and may often rely on the architect to select the elevator.

B. Architects
The architect is the second largest decision maker for elevator purchases, choosing the type and brand of
elevator installed 40% of the time. The architects design the needs of the property developers. In doing so, the
architect is concerned with maximising useful space of the building. Increase in useable space increases the
revenue generated from the additional space.

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C. Property Developers
The property developer is the least decision maker for elevator purchases, choosing the type and brand of
elevator installed 10% of the time. They are mostly concerned with overall costs, the investment value in terms
of quality, time of completion, and the costs of operating. The developer using a bidding process for acquiring
a contractor to build the property.

1.2 MARKETING DEMOGRAPHICS
Due to an abrupt end in the construction boom In Germany, elevator equipment is expected to fall by 15%
by year 2000. On the other hand, 74% of low-rise residential buildings are not expected to fall and therefore
KONE should focus on this segment. Furthermore, elevator prices have fallen between 5% and 7% the last
year. Therefore, it is likely that there will be a demand in Germany for a cheaper MonoSpace elevator.

1.3 MARKETING NEEDS
The need for new residential elevators in Germany is expected to decrease, while maintenance of elevators
most likely will stay the same:
Low-priced modernized product In order to keep up with the aggressive competition in the elevator
industry in Germany, KONE needs to differentiate itself and focus on a low-priced modernized product
Maintenance contracts Since the MonoSpace is a relatively new product, they need to build a close
relationship to customers.
Design modernization Architects, who account for 40% of the purchase decision-making are looking to
buy more modernized elevators in terms of appearance.

1.4 MARKET TRENDS
KONE should focus on differentiating itself from the other competitors by launching the MonoSpace as an
environment-friendly (energy-saving) elevator, which does not need oil. Moreover they should focus on making
cosmetic options for architects and make more modernised design elevators. Also, they should focus on
building long-term partnerships and build up a good reputation.
General contractors looking for prize reductions (competitive bidding)
Architects looking for cosmetic options
Property Developers looking for price reductions when they purchase elevators as they are
concerned with the overall cost when developing or renovating new buildings

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1.5 SWOT ANALYSIS
Strengths
MonoSpace(EcoDisc
Requires no oil
Lower energy costs
Better safety
Reduced installation time
Ride comfort
Energy-saving/energy-efcient
Machine room eliminated
Positive customer reactions to the MonoSpace
Weaknesses
Failure to match demand and supply
Unanticipated consumer worries in connection with MonoSpace
No provision for ventilation
Lack of approval for the MonoSpace
Cannot be installed in Penthouse Buildings
Not suited for outdoor use
Opportunities
74% of low-rise residential buildings are not expected to fall
Extend capabilities of the EcoDisc and MonoSpace product line
Long-term partnerships
Better reputation
Threats
Elevator regulations
Lower priced competitors
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Scare competition due to gained market share in Netherlands

1.6 COMPETITION
There are ve other major players in the German elevator market, approximately 30 mid-size players and the
so-called cowboys. KONE is the worlds third largest elevator company behind Otis and Schindler. (with a
market share of 8.2% (units) 8.5% (value)).
With the abrupt construction boom in Germany competition has become more aggressive. Due to the fall in
prices, many of the mid-size players have now moved their focus from new elevator equipment towards
service. Schindler is now focusing on gaining share and become a clear market leader in hydraulic elevators
and Otis has lost market share in the elevator business.
It is likely, that Schindler will use an aggressive marketing strategy as they have used it before when entering
the Asia and Eastern Europe. Otis will most likely focus on a growth strategy in order to gain its lost market
share back.
KONE should not go into a price war with these major market leaders, but should focus on differentiating the
MonoSpace as an environment-friendly and modernised product. They should use a low-priced strategy in
order to keep up with the competition, but without going into a price war. (More of the pricing will be
discussed in Section 2.6)

1.7 PRODUCT OFFERING
KONE should devote their time and resources in pursuing a signicant launch of MonoSpace as their new
agship product.

1.8 KEYS TO SUCCESS
The keys to success are reaching the right target market with the right pricing strategy, modernized
design of the product, and strategic di!erentiation strategies. Concurrently, KONE must also ensure
that they can meet market demand with the elevators by coming up with the total market potential number





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2.0 MARKETING STRATEGY FOR KONE MONOSPACE

2.1 MARKETING OBJECTIVES
Successfully enter the German market.
Develop an integrated marketing approach by using the right pricing strategy, modernised design of the
product and strategic differentiation strategies.

2.2 FINANCIAL OBJECTIVES
Increase revenues of the V1 business of KONE
Assure the steady growth of the V2 business of KONE

2.3 TARGET MARKETS

2.4 POSITIONING AND STRATEGY
KONE MonoSpace will be positioned to demonstrate the key benets of the EcoDisc, which include energy
efciency, small modernized motor, smaller fuse, oil-free, ultra lightweight, fast speed, and no more need for a
machine room. With no more machine room required, space is freed to property owners and developers which
enables an increase in revenue generating space in buildings. It will also be positioned as a low-priced elevator
with modern designs that come up with reliable high-performance services.
We will position the product and service mix to steal the market share of the mid-market players and the small
local companies.

Market Size Potential
via Sales Prediction
Units Projected Market
Share
Predicted Sales per
unit
1996 15,035 9.20 1383
1997 14,584 9.20 1342
1998 14,146 9.20 1301
1999 13,722 9.20 1262
2000 13,310 9.20 1225
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2.5 STRATEGIC DIFFERENTIATION SERVICE STRATEGY
Redesign processes and redene customer roles to simplify service encounters
Servicing elevators for clients is a very substantial part of KONEs business. It serves as the lifeblood of its
revenues and still remains as their most protable business segment. In this strategy, we encourage the
company to adopt a service program that will incorporate the suggestions and recommendations of clients in
enhancing the service quality of the rm. Customer empowerment or increased customer participation is they
key to consumer satisfaction. Moreover, consumers in the elevator business rely heavily on word of mouth than
advertising which diminishes the risk of purchase for new customers.
Set a better match in supply and demand through
On the demand side:
1. Differential Pricing - Price the products low enough to break the barriers to entry and steal market share
from mid-market players and small companies.
2. Complementary Service - Provide an outstanding service to clients with highly trained employees to
exceed customer expectation.
On the supply side:
1. Part-time employees - Hire part-time employees to do sales to steal market share from mid-market players
and small companies.
2. Increase consumer participation - Create a service mix to empower customers in customising and
managing services.
Service Marketing Excellence
1. External Marketing - KONE should describe the normal work of preparing, pricing, distributing, and
promoting the service to customers.
2. Internal Marketing - KONE should invest in training and motivating employees to serve customers well.
3. Interactive Marketing - KONE should market the employees skills in serving the client.

2.6 MARKETING MIX
Product
The MonoSpace is a new, beautifully designed and revolutionary elevator system employing the KONE
developed elevator machine EcoDisc. It is a thin, lightweight magnet which eliminates the need for bulky and
expensive components. It has a controlled speed commonly used by modern high speed elevators, providing
a more comfortable ride than hydraulic and geared elevators. The EcoDisc ts between elevator guide rails and
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the elevator shaft wall. By placing the lift system entirely in the elevator shaft, the need for a machine room is
eliminated.
Key Benets
- No machine room needed, due to EcoDisc technology
- Modernized design
- Extremely energy-efcient product, consuming half of the energy consumed by geared traction
elevators and one-third of the energy consumed by hydraulic elevators
- Savings in wiring and fuses, less wiring and fuses needs
- No need for oil, eliminating re hazard and environmental hazards
- 190 hour installation period, 60 hours less than traditional elevators
- Low-rise elevator, 8-13 person elevator
Price
MonoSpace will be priced at an attractive price slightly below the more expensive geared traction (PS and PU)
elevators currently offered. This will allow the product to be within reach of the budget of property developers
and contractors. This strategy keeps in mind the cost sensitivity of the contractors in the bidding process with
property developers, placing an elevator with less space requirements, modern technology, and shorter
installation time requirements at a slightly higher price to be easily integrated into successful contractor bids.
Construction in the rapidly growing in German low-rise construction market is key to an attractively priced
product relative to KONE substitutes. To keep the KONE at a stable sales price and to maintain the product
image in this market, MonoSpace will not be priced differently depending on market share acquired. If a higher
price point was used in the market, including the MonoSpace on contractor bids could increase the price of
those bids enough to make them no longer competitive. This could lead to contractors dropping the
MonoSpace from bids and including a cheaper elevator in order to become competitive again.
Place/People
The German residential construction market will be the primary focus of MonoSpace marketing efforts, as it is
the main source of revenue for KONE and the growing segment in the German construction market. Purchase
decision-makers in this market are contractors, architects, and property developers. Low-rise construction is
Germanys fastest growing construction market. Being a low-rise (12 oors or less), the benets of the
MonoSpace in low-rise residential buildings market
Promotion
MonoSpace will be promoted to the three main customer segments (contractors separated into small and
large contractors) and promotional material will be as follows:
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Launch events will be held providing breakfast and a presentation of the MonoSpace to provide key
the key benets and information of the product to small contractors, who dominate the elevator
purchase decision. This will create a pull effect of the product for a major decision maker in elevator
purchases.
Direct mail advertisements highlighting the key benets of the MonoSpace and the revolutionary
EcoDisc.
Press Kits designed by KONE will be supplied with MonoSpace specs disks to enable integration in
the contractor and architect design process, along with high value information on cost comparisons,
specs, building and planning guides, press releases, and a product presentation and technical
presentation.
Invitational mailings for one-on-one meetings will be marketed to to demonstrate the benets of the
MonoSpace and the differences compared to hydraulic and geared traction lifts.
Trade Press and Journals in construction and architectural publications once a month will be
employed to create a pull of demand from key decision makers in the elevator purchasing process.
Learning from the success of the MonoSpace promotional strategy in the Netherlands, the MonoSpace will be
promoted using a very similar method. Targeting the inuential decision makers directly through large launch
events, direct mail, press kits, invitational mailings, and o
POSITIONING
KONE MonoSpace will be positioned to demonstrate the key benets of the EcoDisc, which include energy
efciency, small modernize motor, smaller fuse, oil-free, ultra lightweight, fast speed, and no more need for a
machine room. With no more machine room required, space is freed to property owners and developers which
enables an increase in revenue generating space in buildings.

3.0 CONTROLS
The purpose of the marketing plan is to serve as an outline for the organization. The following areas will be
monitored to gauge the effectiveness of the marketing plan:
Customer
Segment
Launch Event Direct Mail
Advertisement
Press Kits Invitational
Mailings
Trade Press
and Journals
Architects X X X X X
Small
Contractors
X X X X
Big Four
Contractors
X X X X
Property
Developers
X
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Revenue: Monthly
Expenses: Monthly
Distribution of sales in terms of market categories
Customer Service Feedback System
Customer Complaints
3.1 MARKETING ORGANIZATION
Raimo Htl will be responsible for the marketing and operational activities.
3.2 CONTINGENCY PLANNING
Difficulties and Risks
An entry into a new market with a declining construction industry
Adopting a product and service mix in a highly specialised and competitive industry
Worst-Case Risks
Below expectations revenue results
Customer service failures
Consumers not buying the modernised design

5.0 CONCLUSION
Main Strategies: Low-Priced Products, Modernized Design, and Di!erentiated Service Mix.
By following the marketing plans, designed services, targeted launch options, and business strategies
presented above, market entrance and successful product launch will be successful, resulting in increased
revenue and market share for KONE.




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