Schindler India ~ Case Study

Prepared by Roll No. Batch

: Rajesh Srivastava : 20 : EPGDIM (2010-12)

CONTENTS
History of Schindler Characters in the case study Profile : Silvio Napoli Indian operations Schindler India strategy: The swatch project The Indian entry project Indian Organisation Man mgmt: Developing the Relationship The India business plan The Indian Elevator Market Segmentation Competition Product strategy Outsourcing strategy Business challenges What went Wrong? Conclusion Current scenario

History of Schindler
Robert Schindle established the company in 1874 in Switzerland Company began manufacturing elevators in 1889 Did not have a local market base in India until 1950s by appointing a local distributor Alfred N Schindler took over the company in 1987; becoming the 4th generation in line 1998 : Schindler increased revenue worth $ 6.6 billion around the world Company has over 38,000 employees in 97 subsidiaries

Characters in the Case Study

Schindler Top Management Staff:
Alfred N Schindler (Chairman & CEO) Luc Bonnard (Vice Chairman of the Board & Member of Executive Committee) Alfred Spoerri (Member of the Board of Directors & Executive Committee)

Schindler India key Manager Profiles:

Silvio Napoli (VP, Schindler South Asia) Meher Karan Singh (MD) T.A.K Mathews (VP-Field Operations) Ronnie Dante (GM- Engineering) Jujudhan Jena (CFO)

Profile : Silvio Napoli

Name Position : Silvio Napoli, 33 yrs : Vice President, Schindler South Asia

Date of Birth : August 23, 1965 Education : 1992-1994 :: MBA, Harvard University , Graduate School of Business Administration Bostan, Massachusetts 1984 1989 :: Graduate degree in Materials Science Engg. Swiss Federal Institute Tech, Switzerland; Lausanne University; rugby captain (1987) 1983 1984 :: Ranked amongst top 20% foreign students admitted to EPFL, One Yr compulsory selection program, Swiss Federal Institute of Tech. (EPFL)

Napolis First Project in Schindler

The project goal was to develop a standardized elevator at a lower cost than the existing, more customized product The outcome was the S001 an elevator that cant be customized Used many parts supplied from outside Used newer process The entire supply chain was restructured Cycle time was reduced to half of the standard 20- to 30- weeks

Schindler :: Indian operations

1925 The First elevator by Schindler in India installed 1958 Long Term Distribution Agreement with ECE (an Indian Organisation) 1985 Termination of Distribution Agreement with ECE 1985 Technical Collaboration with Mumbai based company Bharat Bijlee Ltd. BBL was authorised to manufacture, market & sell Schindler products in Indian market After acquiring 12% equity stake in BBL, Schindler became the No.2 player in Indian elevator market. A decade later they maintained 10-15% share in market 1995 Alfred Schindler visited Indian market to review the market potential, he found there was huge growth potential in Indian elevator market & found it was similar to China 1995 To take management control in Indian market, Schindler proposed BBL a new JV, but negotiation proved difficult & finally collapsed 1996 Collaboration with BBL ended and Schindler began considering options to establish own operations in India. 1998 March 98, Silvio Napoli was sent to establish Schindler business in India

The Indian Entry Project

Boston Consulting Group (BCG) was engaged by Schindler to look for alternative local partners as negotiations with BBL broke down in India It was now legally feasible to start up wholly owned company in India for a multinational A business plan for Schindler Market entry was approved by the Corporate Executive Committee (VRA) in October95 Mr. Napoli was offered the job of creating the Indian subsidiary In November95, Mr. Napoli came to India for the first time

Schindler India Organisation Chart

Silvio Napoli VP S Asia Operation Agent in Pakistan Agent in Srilanka Agent in Bangladesh

M.K. Singh Managing director

T.A.K. Mathews Field Operation New Installation Account Management Support Trainees Hade of Existing Installations

Ronnie Dante Engineering Technical Development Vendor Development Commission Support

J. Jena Finance

Pankaj Sinha Human Resources Executive Administrative Support Executives

Hade of Logistics

Existing Installations Team leader/Team member

Man Mgmt.: Developing the Relationship

There were initial clashes of timetable of the senior staff finished with their previous job as they were still not

Different management styles of the top executives also led to problems Silvio Napoli was regarded as a tough and aggressive manager by the staff members The scenario greatly differed from where Mr. Napoli came from and India The internal environment of the organization was informal according to the employees

The Indian Business Plan

 The plan had two basic elements : Sell a focused line of standard products Outsource key manufacturing and logistics functions

 The business had many opportunities coming up in India after the liberalization of Economy in 1990s Construction industry was reviving Rapid urbanization A ban on collapsible gate elevators was enforced by the Indian Standards Institute (ISI)

The Indian Elevator Market :

Segment
Manual Low Rise Mid Rise High Rise

Stop
2-8 2-15 16-25 >25

Speed MPS
0.5-0.7 0.6-1.5 1.5 >1.5

Schindler Products
NIL S001 S300P S300P

Manual Elevator s contribution was highest with 50% MS

Otis was leading the segment

Service was the key parameter followed by Price

Competition
Schindler India faced the competition from four major companies; they were: 1. 2. 3. 4. Otis ( market leader, with 50% market share) Kone ( market challenger, 8.8% market share) BBL (Market Follower, 8.6% market share) ECE( market follower, 8.4% market share)

Otis was a threat for Schindler India because it already had a good customer base, 61.5% of which were under maintenance contracts

Candidature of Napoli for Indian operations

Education Work Exp His candidature : Highly qualified (MBA + Engineer) : Rich experience of 7 years , mainly in European markets : 1. He was Head of Corporate Planning in Schindler 2. Aware with Schindler s Mission & Vision, he was participating in VRA meetings (Corporate Executive Committee) & was responsible to make MOMs & to follow with respective person for achievement 3. Was coordinating with Boston Consulting to shortlist potential partners in India for business expansion 4. Assigned to establish Schindler in India along with Head of Schindler s M&A Department 5. Spent 9 months to understand India elevator mkt. mainly ; the mkt. size, legal environment & competitive situation 6. Made Schindler s business plan for India which was approved by VRA

Napoli was the right candidate for Indian Operations

Business Challenges
Sales force was bringing in orders, but not for the standard products The transfer cost of S001 has increased The import duties on elevators has also increased There was lack of motivation in the organization about the sales strategy Things were not going well

Outsourcing Strategy
Silvio Napoli's business plan was to outsource the production of 90% of the components of S001 from local suppliers the safety equipment would be imported from Schindler plant in south-east Asia The basic on-site assembly work would also be outsourced Eventually they would install their own dedicated plant to manufacture the parts

STP
Segmentation
Strategy was to make the Swatch project products as their core competence ( S001) To cater mid-rise segment they were planning to introduce S300P

Schindler
Positioning
To establish Schindler in mid-rise segment with Customized product

Targeting
Target was to first hit low-rise segment as scope was highest (Govt. banned the manual elevators) Break-even was predicted at four years, with the sales reaching a double digit growth figure eventually

Porters 5- Forces
Competition was very strong & there was a push from regional players (25) as well

Substitutes
Mitsubishi & Hyundai

New Entrants

Schindler

Customer
Customers were asking for customized products

Supplier
Non-cooperation from the Schindler s European plants

PESTEL : Strategy
Increase in import Duty Increase in transfer rates New Budget of Indian Govt led to increase in import duties Govt. banned low-tech manual elevators This step was well accepted by other states & enforced to follow

Political

Legal

Economical
Indian economy was growing at a faster rate Tourism & Hotel industry was expanding

With growing economies, the Indian Governmental was emphasising on environmental protection

Schindler
Environment al Technologic al Social

Technological advancement in elevators was taking place Customers were looking for better services & facilities Small but growing demand for top-quality, high rise office facilities

Rapid urbanization was taking place Cities were taking shape of metro Traditional building were becoming more sophisticated & professionalized

Correct Strategy
My Suggestion: As the company was new in India & was having limited resources they must have focused on Bypass attack.. Bypass attack : As per the data available urbanization in India was taking place & cities were converting into metros, Tourism & Hotel industry was increasing at a faster rate so company must have focused in Two-speed higher Technology elevators. For this category they had to focus on limited towns with key customer base. As soon as the co. grows they must have increased their customer base. There was less competition in this segment & this was the emerging category so highest scope was there to get established. As Co. was already selling with help of ECE then with BBL there might be a huge existing customer base who would be looking for good after sales services & customer might be dissatisfied with Co. s products. OTIS might be servicing those Schindler s customers & generating revenue. Schindler must have focused on maintenance contracts, as it was a profitable business and was the key attribute for a customer to make a decision. They might able to get new business from those maintenance contracts as well.

Napoli Strategy: Napoli adopted Frontal attack strategy with competition considering; Napoli s primary target was low rise segment with S001 model then for mid-rise with S300P the chosen segment was highly competitive (70% residential) 23% of the segment was price sensitive Competition (Otis) was very strong with 50% MS & was having highest brand pull The low rise segment was highly scattered & Co. was not having big market coverage Last but not the least this was third time entry of Schindler in Indian market, so there might be some negative word of mouth of the company

Meeting Customer Expectation is the key to Success

Conclusion
The business plan was partially successful Lack of contingency measures, however their lack of enthusiasm to follow them Value congruence was not achieved in the organization Lack of goodwill had an impact on the sales Communication problems with the European superiors increased pressure Non-cooperation from the European plants Commitments to the booked orders Need of the customers were judged wrongly Lack of vision

Current Information
Silvio Napoli CEO at Jardine Schindler Location Hong Kong

Schindler Offices in India :

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Mumbai (HQ) Delhi Ahmedabad Kolkata Jaipur Kochi Bangalore Hyderabad Pune Chennai Lucknow Goa