KONE: The MonoSpace Launch in Germany Harvard Case Solution & Analysis

QUESTION 1

KONE has targeted MonoSpace directly at Europe’s largest new-equipment market segment: low-rise residential elevators. Put yourself in Hätälä’s shoes and develop a detailed marketing plan for launching the MonoSpace in Germany. Set a price for the MonoSpace (to facilitate comparison with prices of existing products as given at the bottom of case page 4, price a low- rise, 4-floor elevator) and specify clearly how it is to be positioned relative to the current product line (PH,PT, PU, or PS). Based on the pricing and positioning decisions, propose a marketing and sales effort. Justify your decisions and investments with anticipated sales and the associated contribution relative to the amount you plan to spend.

Taking the product to the customers at the right time and to the right customers determines the future success of the project. Considering the market analysis and the unique characteristics and features of the project it is recommended for the KONE’s management to undertake the launching and advertising plan for the new product by targeting the low rise residential elevators market. The mid size elevator could also be targeted by the launch of the new product. The low rise residential elevator market has been recommended for the company because it occupied around 74% of the total market share of the German market which is not going to change over the next few quarters at least. Apart from this, the mid high size and the mid size occupied around 26% of the total German market.

MARKET POSITIONING STRATEGY AND VALUE PROPOSITION

KONE should differentiate Monospace in the market by emphasizing on all the values that are going to be created by the new EcoDisc technology which would include energy efficiency, low maintenance cost, eco friendliness, and machine-room less and liberty in the building design. These are the set of the perceived value propositions which would be perceived by the customers for purchasing the Monospace elevators for their buildings. The latest technology of this product had brought the complete set of the values which the customers were looking since a very long period of time. On the other hand, the management of the company should also take a functional positioning strategy as this new technology is going to resolve most of the issues related to the functional areas of the elevator systems. Also due to the fact that KONE is a well established brand in the major markets therefore, it would be easy to position the new product on the basis of the functional aspects and the market of France and Netherlands would also play a major role in furnishing this strategy. The company should also take steps to avoid the single supplier issues by setting up campaigns for the long term partnerships and also preserving the reputation in the German market.

PRICING STRATEGY

Setting the most competitive price for Monospace is a very difficult task. Looking at the acute competition in the German market, the cannibalization of the existing low rise residential elevator sales and the decrease in the price of the existing products from the 5% to the 7% level, the managers of KONE from the Brussels headquarters had stated that the new product should be priced above the existing price if the market share held by KONE was less than 15%. Therefore, the most recommended price for a single unit of Monospace should be around DM 66000.00 per unit. This price is set with an aggressive pricing strategy to increase the share of the market rapidly and also the profitability.

As the company would be targeting the low rise residential elevator buyers who are going to mainly buy the hydraulic elevators therefore, the price of the final single unit of Monospace has been set equal to the hydraulic elevator price since these customers are interested in the final cost rather than the long term benefits or the savings that would arise from the maintenance and fuel. The additional 10% that would be charged to the customers for the additional features would be likely paid by the customers since they would be saving money from the machine room construction cost. Approximately around 25% or less than 25% is accounted for as the machine room cost for the hydraulic elevator of the total cost....................................

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Focused on new product launch lift in Germany. In 1996, the global recession and the construction of low differentiation among competitive offerings has resulted in significant price competition and margin erosion in the elevator industry. In these circumstances, KONE, one of the global players in the industry, has developed a product Monospace elevator, which uses the revolutionary technology. This new product is expected to have a significant effect on current production lines KONE and its competitors. Company test market the product in the three European countries' markets with varying degrees of success. Currently, the company is planning to launch a new product in Germany, the largest country market in Europe and is vital to the overall success of KONE.

Kone The Monospace Launch in Germany Case solution

With little room for error and the future of the company at stake, the German subsidiary of KONE is necessary to develop a detailed plan to start Monospace in Germany. "Hide
Narayandas by Das, Gordon Schwartz Source: HBS Premier Case Collection 21 pages. Publication Date: May 21, 2001. Prod. #: 501070-PDF-ENG

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