The KONE Case Executive Summary

Essay by URUCUniversity, Master'sA, February 2005

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In 1996, global construction slumps and low product differentiation in the elevator industry resulted in significant price competition and margin erosion. KONE developed the Monospace elevator that uses revolutionary technologies. It test marketed the product in three European countries with varying degrees of success. KONE was to launch the product as a strategic dominant of the low-rise residential elevator market in Germany, which was its largest country market in Europe and vital to its overall success. This company is faced with the problem of how they should market it without cannibalizing their existing product lines.

Basically KONE have two options. They could market the product either in-between the hydraulic and the geared traction or they could position it as top of the line. Considering the decreasing profit of KONE, I would recommend that KONE position MonoSpace above the gear traction products, market its distinctive features with high-end price and keep the hydraulic as their low-end model.

Since there was less demand for new elevator installation, KONE should focus on profits and not on market share. In this way, the new product could neither cannibalize their existing geared traction line nor their low-end market.

However, this segmentation might allow MonoSpace erode its high-end geared market. But since the product could be used only as 8-13 person elevators for up to 12 floors buildings, the erosion is limited. Another problem we learned from the preliminary markets was that customers worried that KONE would be able to price gauge them since KONE was the only one with this sort of technology. KONE might have to provide some kind of service guarantee to fix the problem.