Group 1- Mayank Mani, Rajat Kedia,

Ritesh Verma, Priyanshu Nishad, Subhash Mohan

KONE: The MonoSpace Launch in Germany

Introduction
KONE is the third largest elevator company. They have two sources of revenuesales of New Equipment ( 38%) and services(62%). Their product can be
categorized into three segments: low rise elevators, mid rise elevators and high
rise elevators where the low rise elevators gives the 75% of total sales. During
1991 to 1995, KONEs net income started dropping so they decided to launch a
new product to the market called MonoSpace using new technology that uses
Ecodisc instead of old machine room. It was also cost efficient and safer as it
required no oil. KONE had been test marketed in Netherlands, France and UK
before deciding to penetrate Germany. Germany was the Europes largest
elevator market. Six major players in terms of market share were Schindler, Otis,
Thyssen, KONE, Haushahn and Schmitt & Sohn. However, before launching the
MonoSpace in German Market, KONE needs to consider and analyse the
new products, current market situation as possible marketing strategies.
Issues

Issues Prior Launching MonoSpace in Germany

Issues with New Product:

Is MonoSpace the right product for the German market?

How MonoSpace would differentiate itself from the existing product line in
German market?

Issues with Current Market:

Does current German market situation support the launch of new product?
What would be the size of the German elevators market?
How competitive is the German elevators market?

Issues with Marketing Strategy:

What would be the right segment for the MonoSpace elevator in

Germany?
What would be the possible best pricing strategy?

What would be the perfect launching & advertising vehicle for MonoSpace?
There are many issues that KONE had to figure out prior to launching MonoSpace
in Germany.

Analysis
On New Product

No machine-room required
Comparable ride comfort like the gearless elevators

Group 1- Mayank Mani, Rajat Kedia,

Ritesh Verma, Priyanshu Nishad, Subhash Mohan

Extremely energy efficient, requiring only half of the energy of comparable geared tractions
and one-third of the energy required by hydraulic drive elevators
Does not require oil like hydraulic drive elevators
Environment and eco-friendly
Required significantly less installations-hours comparatively with the traditional elevators
Lower maintenance cost

On Current Market
KONE is not the market leader in Germany. It had only 8.5% market share while
players like Schindler,
Otis and Thyssen had 17.7%, 13.8% and 15.4% respectively. Furthermore, the
price of new elevator fell between 5% and 7% in 1994 and 1995. Even the midsize players and the cowboys (small local companies) were threat to KONE.
German market is not looking favourable for growth by considering the entire
situation.
Recommendations
Market Segmentation Strategy
It would be better for KONE to target low rise elevators as approx. 70% of market
share in Germany is captured by low rise elevators. And moreover KONE earned
about 485 of its total sales in 1995 from low rise market. The customers in low
rise market are general contractors, architects and property developers. So KONE
should target them.
Pricing Strategy

MONOSPACE
PRICING

DM

Monospace Cost
Discount (8% padding)
Retained value of savings (30%)

MONOSPACE
PRICE

60000
65217
6000

712
17

Keep the price at DM 71217 for each unit. 65217 is because we can give a
discount upto 8%. 8% discount will lower the price to 60000. The additional 6000
customers will pay because of the savings they make in machine room cost and
installation cost.
Promotion Strategy

Cost/ year
(DM)

Launch Options
Direct Mail
Road Show

NO
NO

(Kone had a limited experience

(Too expensive)

Group 1- Mayank Mani, Rajat Kedia,

Ritesh Verma, Priyanshu Nishad, Subhash Mohan
Telemarketing
Exhibitions/ Trade show
Sales Visit
Video Distribution
Video Dubbing
Seminar
Trade press/ Journal advt

Total Launch Cost

NO
NO
YES
YES
YES
YES

(Ineffective means of
communication)
(Cost too high relative to respo
96000 (Assuming 4 visits per week)
5000
20000
120000 (1 seminar per month)
19200 (Monthly journal)

260200

With the above mentioned strategies coupled with the uniqueness and cost
saving features of MonoSpace it is not hard to expect that it can shake up the
German market.