Case Analysis of KONE: The Monospace Launch in Germany

How important is this product launch for KONE? What are the implications of the
success or failure of the MonoSpace launch?

This product launch in Germany is very important for Kone considering that
Germany is the continental Europe’s largest elevator market and had been
contributing to Kone’s profits despite overall profits for Kone being almost zero.
Also, the product has performed not so well in two major markets in Europe –
France and U.K. A success or failure of this launch would effectively decide which
direction the acceptance of this technology would go. 60% of German low rise
market was occupied by hydraulic elevators and rest 40% by geared traction
elevators. This implied that Monospace could easily make inroads in to the low rise
market.

What can be learned from the test market and market launches in the other three
counties? How does the German market [and KONE’s position in and approach to it
differ from the other markets? What are the implications of these differences for
transferring experience gained in the other markets?

• The labour is very expensive in Germany compared to the other European

countries. The launch should focus on process savings.

• Construction industry was dipping in Germany, making price a very important

factor. The savings in the construction and installation cost have to be
prominently focused in the launch.

• In the trade press and journal advertisings, focus on the savings due to the
reduced service cost to the owners

• Target general contractors and the architects who are the major decision
makers in the final elevator purchase decision

• The successful installations in the Netherland and France should be used to

build the confidence of the builders, architects and owners in the launch in
Germany

• Energy Savings is one of the major USP for the Monospace. The Energy
suppliers group recommendations need to be included in the market launch
plan

How do you expect competitors to react to your launch plan? How do you plan to
manage competitors’ reactions?
The current reaction of the competitors indicate that they are caught unaware of
the technology used in Monospace. So, they are offering their customers certain
offers like owning the costs of constructing the machine room and so on. But the
advantages offered by this technology outweigh any such short term gains to the
customers. Since this product is based on a new technology, the competitors also
would start to investigate this technology and come up with their products in the
same line.

The best way to manage this reaction is to make aggressive launches in all the
major markets and capture the market share, specifically the property
developments and the constructions which are yet to start.

Where does the MonoSpace fit price‐ and performance‐wise relative to KONE’s and
its competitors’ current product lines? Or, does it potentially change anything? If
yes, how? What are the short‐term and long‐term implications of your approach?

Relative to Kone’s competitors, the Kone is a better performing product in many

aspects as listed in Exhibit 7. Due to the increasing demand for the land, the space
saving achieved due to this product would have a significant impact on the
constructions in future.

However, at the same time, with the better performance the Kone product would
reduce the need for the frequent servicing. Most of the elevator manufacturers
derive the major part of their revenues from the service. This will surely take a hit.

This also will have an implication on the pricing of this product. Since there is a
significant amount of savings in the short term as well as long term, the company is
right in demanding a premium price compared to the conventional products.

Considering that the hydraulic : Traction low rise market in Germany is split in the
ratio of 60:40, which is not high in the favour of any of the types, the pricing of the
Monospace should be done in the same way as it is done for Netherland market. i.e,
slightly higher than PU type.

What key weaknesses in KONE’s current capabilities will need to be managed to

ensure the success of the product launch?

KONE has a very small sales force compared to its competitors. When a new,
revolutionary product such as Monospace is to be launched, the launch and the
follow ups are to be very aggressive. This needs a larger sales force.

In addition, Kone appears not to be very competent in quickly getting the regulatory
approvals in each of the countries. This needs to be managed and the regulatory
approvals for its products are to be quickly obtained for the product launch to be
effective and successful