Kone: The Monospace Launch in Germany

KONE: The MonoSpace Launch in Germany

Group <#1>

Q1 -- How significant is the opportunity, how important the German launch for KONE?
(Hint: use the porter five forces and investigate the market size)

Before reaching to conclusion, we explain feature of overall elevator industry based on Porter 5 forces.  

The first point is entrant barrier, according to the statement, the entrant barrier of this industry is low. Since electro mechanical technology is low and also there is no competitive differentiation among the manufacturer. Therefore, many competitors include small and mid-size player exists.

 Second point is bargaining power of supplier and buyer. As a feature of this industry, bargaining power of supplier and buyer is high. As an evidence, equipment supplier usually has an advantage in winning contracts. The reason of this structure of industry is comes from low differentiation and low switching cost.

 From above analysis we found this industry is the industry which easily fall into price competition. In fact, from 1991 to 1995 profit of KONE was decreasing rapidly.

 However German market is relatively attractive market. One of the reason is market growth.

From 1988 to 1995, elevator market grew about two times by construction boom. In addition,

Majority of demand in Germany is low-rise elevator. It accounted for more than 20% of total EU residential low-rise(65,000unit) fortunately low-rise is accounted for approximately 75% of KONE total equipment sales. This is also the reason why Germany is attractive market  

Although EU market is big market as elevator industry, there are many cost sensitive customer especially in UK, in contrast, property developer which is decision maker in Germany, principally concerned with the overall cost of developing a new building or renovating and choice of elevator was viewed as having little impact on overall construction.

  From the feature of German market, we conclude this market is attractive market for elevator industry in terms of decision making process, market growth and market opportunity.  

The result of German launch were very important opportunity for KONE. Their new technology, MonoSpace elevator is very significant for Kone. If they can launch successfully their new technology, they can get not only the growth of the profit but also the growth of market size in Germany elevator market. And their sales will also increase in the global elevator market. That is why, KONE try to penetrate their new technology to the elevator market with strong marketing strategy.

 In this case they will use the Porter’s industry five forces analysis framework. Among these five forces, they will use “threat of new entrants” because they want to successfully penetrate their new products among German competitors.  

 By exhibit 9, when they launch MonoSpace in Germany, the following marketing resources were available: Advertisements, Direct mail, Launch events, Exhibitions, Customer visits, Public Relations, Road Show, Sales visit, Video, Telemarketing, Seminar, Trade Show and Trade press and Journal advertising. These are using one of porter five forces called “Threat of intense segment rivalry”.