Kone the Monospace Launch in Germany free essay sample

The German low-rise building market was divided, as in other European countries, in geared traction technology (PU and PT), and hydraulic technology (PH) that accounted for 8% and 92% respectively. KONE’s new product, MonoSpace, was mainly characterized for its new technology, the EcoDisc, which provided a more comfort ride, did not need for a machine room, and reduced energy consumption. Before the launch of MonoSpace in Germany, it was test marketed in France, United Kingdom (U. K. ) and The Netherlands. In the latest, MonoSpace was a complete success. It gave higher profits and 62% of the low-raise market (up from 52%). But in France only 40 units were sold of the 300 expected and in U. K. no units were sold during the first month after launch. Results that gave Hatala cause for concern. Finally, a pre-launch had been done: During November 1995, 4 PH customers converted their orders to MonoSpace and from January to June 1996, 30 MonoSpace elevators where arranged to be installed. We will write a custom essay sample on Kone: the Monospace Launch in Germany or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page All of them were asked to â€Å"keep quiet about the technology†. Decision to be made: Since the pricing and positioning strategy of MonoSpace will have a significant impact in KONE’s European and global image, Hatala has to decide with extreme caution each one of them. We will analyze price in deep. Alternatives: To set a price we have two alternatives, (1) to follow the indications at KONE’s Brussels headquarters: â€Å"to set prices above existing prices if KONE held less than 15% market share and in line with existing price levels if KONE otherwise† or (2) to set their own price according to the German market. Quantitative Let’s analyze each country individually. In France, the price was FF 30,000 over the price listed for a PT. This was done because it was expected to have a FF 5,000 cost reduction in energy and in consequence, be able to recover the investment in just six years. Nevertheless, it seems that this short-term gain was not enough to thrill the French market. As the market share in U. K. was above 15%, the price was to be kept in line with the most expensive geared traction. However, the PT only entailed 10% of the low-rise market and its price was almost the double than PH price, plus U. K. ontractors’ concern of leaving out the machine room for fear of a price gouging from KONE as being the only non-machine-room provider; lead to the absence of demand for the MonoSpace. On the contrary, in The Netherlands, PT and PU counted for 60% to 70% of the sales and as the in-line price for MonoSpace was set in only DG1,000 more than the most expensive geared traction elevator, allowed more customers to give a chance to this new te chnology, plus the fact that KONE was the market share leader by far. 1Most of the data is from Table D and page 6. Data from page 4. 3Data from Table C and Table E. 1Most of the data is from Table D and page 6. 2Data from page 4. 3Data from Table C and Table E. In conclusion, the suggestion given from Brussel’s managers left out the unique characteristics of each of the countries. Therefore for the case of Germany, we should take into consideration the fact that 92% of the low-rise elevators sales come from the hydraulic technology and only 2% come from the most expensive geared traction system, and that even the market share of KONE in this country is only 9. %, maybe the price should not be set above the existing ones. Qualitative: KONE Aufzug had very well identified their customers: (1) property developers –concerned mainly with the overall cost and the investment value of their properties, made the decision of which elevator to buy, 10% of the times. (2) General contractors –who sought for the more competitive offer through a competitive bidding process, made the decision 50% of the times, and (3) architects –that were more worried about the cosmetic options of the elevators. They were the ones in charge of the decision 40% of the times. Under these customers, we can see that for the general contractors, a low price, closer to the PH’s one would be more attractive. However, for the architect, it seems that the price may not be a real obstacle because they care more about the looks of the building rather than the final price of it. Recommendation amp; Rationale: After analyzing the data both quantitative and qualitatively, we have concluded that a price between both technologies would be better to introduce the MonoSpace into the German market. As we could see in the British market, a price that is more than double of the most inexpensive elevator won’t create enough interest to even ask about this new product, especially if the vast majority of the market prefers the lower price elevator. Thanks to the French’s experience, we can see that customers are not really interesting in investing in a technology that has not really been proved in the market, even when it promises a more comfortable ride, a cost reduction in energy, and the elimination of machine rooms and potential fire and environmental hazards. Finally, in the unique case that The Netherland presented, we can conclude that customers are willing to try something new and with many improvements for a small price increase. If we understand that all the elevators were priced very similarly and the market preferred the geared traction system instead of the hydraulic, we can understand why the price worked. Nevertheless, German market is a hybrid of all previous. A 92% of the lo-rise elevator sales come from the PH, leaving only 6% for PT and 2% for PU. We see that the price for the PU is DM 20,000 more than the PH. Hence, we can assume that even though the hydraulic system provided lower ride comfort and lower speed than the geared traction elevators, Germans are not willing to pay that difference to improve their experience. (Neither the British nor the French did). So a price closer to DM 60,000 of the PH would bring the most possibilities to have a success in the MonoSpace. To complete our discussion, we think that after setting the right price, it is of vital importance to generate a marketing kit that highlights the qualities of MonoSpace. It is highly recommended to create a communication strategy able to reach everyone involved in the process of buying the elevator, whereas is the final consumer or the architect that just has a building in mind. It is also important to create conscience of the MonoSpace so they have it in consideration for all upcoming projects. [ 1 ]. KONE: The MonoSpace Launch in Germany. Narayandas, D. and Swartz, G. Boston  : Harvard Business School Publishing, 2005, p. 7.