Kone Monosapace Launch Case Study

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Value proposition of Monospace

no requirement for Machine-room ( typically 25% of the total elevator cost hence better cost savings More comfortable ride High energy efficiency ( electrical fuse costs DG 60/yr Vs DG 1600 for hydraulic elevators and 800 for gear traction. Eco disc consumers 50% less energy compared to geared traction elevators and 33% less compared to hydraulic 8/5/12 elevators )

Importance of Monospace launch for Kone

Addition to product line : add benefit in terms of product differentiation and price Change in financials : Kones profit has decreased from 6.5% to 6% and PAT being Zero are serious causes of concern for kone to pull back things Launch of new product to aid in increase to market share
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German Elevator market

Hydrauli c elevators a key contribut or

74% of the market was residential

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Implication of Success & Failure

Success

Help Kone gain market share and establish in the market as a leading play and innovator Better margin hence increased profitability Early mover advantage in the category energy saving and compact elevator segment

Failure

Huge Losses in terms of Capital investment and advertising and promotion Reduce reliability of Kone to launch new products , decline in profits and market share Incur financial loses and impact further growth strategies
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Learning's from Test Market Launches

Energy suppliers are a major influencing group and target architects and general contractors effective communication of benefits by print, electronic media and personal meetings Install pilot systems before attracting customers Focusing on competitors activity is pivotal 8/5/12

Comparison of German markets

Saturation in the market and slump in construction industry led to fall in demand for equipment by 15% Highly price sensitive customers Skimming price strategy will not work Quality, efficiency and services orientation are priorities Legal approval required for installation of monospace No government subsidies
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Monospace Launch Plan

Kone was to launch monospace in the low-rise residential elevator market in Germany its largest country market in Europe market the product between hydraulic and geared traction Position it as a top of the line product

Approch 1: Rather than skimming the price kone should price the product similar to competition (schiendler and 8/5/12 Otis) but highlight monospace benefits

Positioning Map
P e rf o r m a n c e Gearl ess PT PU PS

PH

Monos pace
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Price

Monospace Pricing and performance

Price

Monospace was priced in line with equivalent and more expensive geared traction elevators Significant portion of savings will accrue of not building a machine room either the owner or construction company In France the cost per yr is less than FF 55,000 than a comparable elevator( plus cost of repaying the premium of FF 8/5/12 30,000 in 6 yrs)

Key Weakness

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 andarchitects) to enclose deals. currently, the salesperson s 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 monopoly, they could be left with less bargaining power as no competition was offering this technology . Convincing prospective customers in this front is a potential weakness Inadequate sales force building relationship is of utmost importance Legal tangles not to allow easy roll-out

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Propritory technology hence customers need to rely on kone for after sales