Marketing KONE Case Analysis
KONE: Final Exam
1996 – KONE was about to launch Monospace
BUT: region-wide construction slumps & low differentiation among competitive offerings = significant price competition & margin erosion in the industry.
Now, CEO was looking for an opportunity to grow with Monospace.
Pricing
Positioning
Cannibalisation of own products?
The elevator industry (new equipment & services)
Number & types of elevators depended on urbanisation, population density, government support for public housing
3Cs
$22 billion market.
Market Penetration depends on urbanization, population density, and government support for public housing. Commoditized product/service – low differentiation between brands
Market for Germany
Market growing steadily until 1995, however expected to shrink by 15% until 2000.
48% of 1995 KONE’s sales in Germany were residential.
Hydraulic elevators represented 60% of the low-rise residential market and geared traction 40%. 74% of the low-rise residential installed elevators was not expected to change over 5 years.
Company
Established in 1910
1995 divested its non-elevator businesses and become through a series of 19 acquisitions, the world’s third largest elevator company, behind Otis and Schindler.
Two divisions:
2.2billion sales (16500 new units and 425000 service units). 1.5% in R&D (below main competitors)
V1 – New Equipment – 38% revenues – Several lines of elevators (low – 75%, medium – 15%, high-rise – 10%);
V2 – Services – 62% revenues (78% maintenance, modernization of existing elevators 22%).
Two headquarters: Helsinki and Brussels. Sales by market: EU – 53%; Rest of Europe – 4%; North America - 29%; Asia and Australia - 10%; Other Countries – 4%
KONE Aufzug – KONE’s Germany branch
48% residential sales. Geared sales - 92% PH (cheaper), 6% PT and 2% PU
Steady growth in sales of V2 services, however the decrease in V1 products is negatively affecting the profit that is decreasing.
Competition
5 main competitors worldwide:
Otis –
1996 – KONE was about to launch Monospace
BUT: region-wide construction slumps & low differentiation among competitive offerings = significant price competition & margin erosion in the industry.
Now, CEO was looking for an opportunity to grow with Monospace.
Pricing
Positioning
Cannibalisation of own products?
The elevator industry (new equipment & services)
Number & types of elevators depended on urbanisation, population density, government support for public housing
3Cs
$22 billion market.
Market Penetration depends on urbanization, population density, and government support for public housing. Commoditized product/service – low differentiation between brands
Market for Germany
Market growing steadily until 1995, however expected to shrink by 15% until 2000.
48% of 1995 KONE’s sales in Germany were residential.
Hydraulic elevators represented 60% of the low-rise residential market and geared traction 40%. 74% of the low-rise residential installed elevators was not expected to change over 5 years.
Company
Established in 1910
1995 divested its non-elevator businesses and become through a series of 19 acquisitions, the world’s third largest elevator company, behind Otis and Schindler.
Two divisions:
2.2billion sales (16500 new units and 425000 service units). 1.5% in R&D (below main competitors)
V1 – New Equipment – 38% revenues – Several lines of elevators (low – 75%, medium – 15%, high-rise – 10%);
V2 – Services – 62% revenues (78% maintenance, modernization of existing elevators 22%).
Two headquarters: Helsinki and Brussels. Sales by market: EU – 53%; Rest of Europe – 4%; North America - 29%; Asia and Australia - 10%; Other Countries – 4%
KONE Aufzug – KONE’s Germany branch
48% residential sales. Geared sales - 92% PH (cheaper), 6% PT and 2% PU
Steady growth in sales of V2 services, however the decrease in V1 products is negatively affecting the profit that is decreasing.
Competition
5 main competitors worldwide:
Otis –