Schindler India ~ Case Study

Prepared by : Rajesh SrivastavaRoll No. : 20Batch : EPGDIM (2010-12)

CONTENTS• History of Schindler

• Characters in the case study

• Profile : Silvio Napoli

• Indian operations

• Schindler India strategy: The swatch project

• The Indian entry project

• Indian Organisation

• Man mgmt: Developing the Relationship

• The India business plan

• The Indian Elevator Market

• Segmentation

• Competition

• Product strategy

• Outsourcing strategy

• Business challenges

• What went Wrong?

• Conclusion

• Current scenario

History of Schindler• Robert Schindle established the company in 1874 in Switzerland

• Company began manufacturing elevators in 1889

• Did not have a local market base in India until 1950s by appointing a local distributor

• Alfred N Schindler took over the company in 1987; becoming the 4th generation in line

• 1998 : Schindler increased revenue worth $ 6.6 billion around the world

• Company has over 38,000 employees in 97 subsidiaries

Characters in the Case StudySchindler Top Management Staff:

• Alfred N Schindler (Chairman & CEO)

• Luc Bonnard (Vice Chairman of the Board & Member of Executive Committee)

• Alfred Spoerri (Member of the Board of Directors & Executive Committee)

Schindler India key Manager Profiles:• Silvio Napoli (VP, Schindler South Asia)

• Meher Karan Singh (MD)

• T.A.K Mathews (VP-Field Operations)

• Ronnie Dante (GM- Engineering)

• Jujudhan Jena (CFO)

Name : Silvio Napoli, 33 yrs

Position : Vice President, Schindler South Asia

Date of Birth : August 23, 1965

Education : 1992-1994 :: MBA, Harvard University , Graduate School of Business Administration Bostan, Massachusetts

1984 – 1989 :: Graduate degree in Materials Science Engg. Swiss Federal Institute Tech, Switzerland;

Lausanne University; rugby captain (1987)

1983 – 1984 :: Ranked amongst top 20% foreign students admitted to EPFL, One Yr compulsory selection

program, Swiss Federal Institute of Tech. (EPFL)

Profile : Silvio Napoli

Napoli’s First Project in Schindler

• The project goal was to develop a standardized elevator at a lower cost than the existing, more customized product

• The outcome was the S001 an elevator that can’t be customized

• Used many parts supplied from outside

• Used newer process

• The entire supply chain was restructured

• Cycle time was reduced to half of the standard 20- to 30- weeks

Schindler :: Indian operations • 1925 – The First elevator by Schindler in India installed

• 1958 – Long Term Distribution Agreement with ECE (an Indian Organisation)

• 1985 – Termination of Distribution Agreement with ECE

• 1985 – Technical Collaboration with Mumbai based company Bharat Bijlee Ltd.BBL was authorised to manufacture, market & sell Schindler products in Indian market After acquiring 12% equity stake in BBL, Schindler became the No.2 player in Indian elevator market.

A decade later they maintained 10-15% share in market

• 1995 – Alfred Schindler visited Indian market to review the market potential, he found there was huge growth potential in Indian elevator market & found it was similar to

China

• 1995 – To take management control in Indian market, Schindler proposed BBL a new JV, but negotiation proved difficult & finally collapsed

• 1996 – Collaboration with BBL ended and Schindler began considering options to establish own operations in India.

• 1998 – March ‘98, Silvio Napoli was sent to establish Schindler business in India

The Indian Entry Project

• Boston Consulting Group (BCG) was engaged by Schindler to look for alternative local partners as negotiations with BBL broke down in India

• It was now legally feasible to start up wholly owned company in India for a multinational

• A business plan for Schindler Market entry was approved by the Corporate Executive Committee (VRA) in October’95

• Mr. Napoli was offered the job of creating the Indian subsidiary

• In November’95, Mr. Napoli came to India for the first time

Schindler India Organisation Chart

Silvio NapoliVP S Asia Operation

Agent in PakistanAgent in SrilankaAgent in Bangladesh

M.K. SinghManaging director

T.A.K. MathewsField Operation

Ronnie DanteEngineering

Pankaj Sinha Human Resources

J. Jena Finance

Executive

Administrative Support

Hade of Logistics

Executives

Technical Development

VendorDevelopment

Commission

Support

New Installation

Account Management

Support

Trainees

Existing Installations Team leader/Team member

Hade of Existing Installations

Man Mgmt.: Developing the Relationship• There were initial clashes of timetable of the senior staff as they were still not

finished with their previous job

• Different management styles of the top executives also led to problems

• Silvio Napoli was regarded as a tough and aggressive manager by the staff members

• The scenario greatly differed from where Mr. Napoli came from and India

• The internal environment of the organization was informal according to the employees

The Indian Business Plan

The plan had two basic elements :

• Sell a focused line of standard products

• Outsource key manufacturing and logistics functions

The business had many opportunities coming up in India after the liberalization of Economy in 1990’s

• Construction industry was reviving

• Rapid urbanization

• A ban on collapsible gate elevators was enforced by the Indian Standards Institute (ISI)

The Indian Elevator Market :

•Otis was leading the segment

•Manual Elevator’s contribution was highest with 50% MS

•Service was the key parameter followed by Price

Competition

Schindler India faced the competition from four major companies; they were:

1. Otis ( market leader, with 50% market share)

2. Kone ( market challenger, 8.8% market share)

3. BBL (Market Follower, 8.6% market share)

4. ECE( market follower, 8.4% market share)

Otis was a threat for Schindler India because it already had a good customer base, 61.5% of which were under maintenance contracts

Education : Highly qualified (MBA + Engineer)

Work Exp : Rich experience of 7 years , mainly in European markets

His candidature : 1. He was Head of Corporate Planning in Schindler

2. Aware with Schindler’s Mission & Vision, he was participating in VRA meetings (Corporate Executive

Committee) & was responsible to make MOMs & to follow with respective person for achievement

3. Was coordinating with Boston Consulting to shortlist potential partners in India for business expansion

4. Assigned to establish Schindler in India along with Head of Schindler’s M&A Department

5. Spent 9 months to understand India elevator mkt. mainly ; the mkt. size, legal environment & competitive situation

6. Made Schindler’s business plan for India which was approved by VRA

Candidature of Napoli for Indian operations

Napoli was the right candidate for Indian Operations

Business Challenges

• Sales force was bringing in orders, but not for the standard products

• The transfer cost of S001 has increased

• The import duties on elevators has also increased

• There was lack of motivation in the organization about the sales strategy

• Things were not going well

Outsourcing Strategy

• Silvio Napoli's business plan was to outsource the production of 90% of the components of S001 from local suppliers

• the safety equipment would be imported from Schindler plant in south-east Asia

• The basic on-site assembly work would also be outsourced

• Eventually they would install their own dedicated plant to manufacture the parts

STP• Strategy was to make the Swatch project

products as their core competence ( S001)

• To cater mid-rise segment they were planning to introduce S300P

• Target was to first hit low-rise segment as scope was highest (Govt. banned the manual elevators)

• Break-even was predicted at four years, with the sales reaching a double digit growth figure eventually

• To establish Schindler in mid-rise segment with Customized product

Non-cooperation from theSchindler’s European plants

Competition was very strong & there was a push from

regional players (25) as well

Porters 5- Forces

Customers were asking for customized products

Mitsubishi & Hyundai

•Increase in import Duty•Increase in transfer rates•New Budget of Indian Govt led to increase in import duties

PESTEL : Strategy

•Indian economy was growing at a faster rate•Tourism & Hotel industry was expanding

•Rapid urbanization was taking place•Cities were taking shape of metro•Traditional building were becoming more sophisticated & professionalized•Technological advancement in elevators was

taking place •Customers were looking for better services & facilities•Small but growing demand for top-quality, high rise office facilities

•Govt. banned low-tech manual elevators•This step was well accepted by other states & enforced to follow

With growing economies, the Indian Governmental was emphasising on environmental protection

Correct Strategy

Napoli Strategy: Napoli adopted Frontal attack strategy with competition considering;• Napoli’s primary target was low rise segment with S001 model then for mid-rise with S300P

• the chosen segment was highly competitive (70% residential)

• 23% of the segment was price sensitive

• Competition (Otis) was very strong with 50% MS & was having highest brand pull

• The low rise segment was highly scattered & Co. was not having big market coverage

• Last but not the least this was third time entry of Schindler in Indian market, so there might be some negative word of mouth of the company

My Suggestion: As the company was new in India & was having limited resources they must have focused on Bypass attack..

Bypass attack : As per the data available urbanization in India was taking place & cities were converting into metros, Tourism & Hotel industry was increasing at a faster rate so company must have focused in Two-speed higher Technology elevators. For this category they had to focus on limited towns with key customer base. As soon as the co. grows they must have increased their customer base. There was less competition in this segment & this was the emerging category so highest scope was there to get established.

As Co. was already selling with help of ECE then with BBL there might be a huge existing customer base who would be looking for good after sales services & customer might be dissatisfied with Co.’s products.

OTIS might be servicing those Schindler’s customers & generating revenue.

Schindler must have focused on maintenance contracts, as it was a profitable business and was the key attribute for a customer to make a decision.

They might able to get new business from those maintenance contracts as well.

Meeting Customer Expectation is the key to Success

Conclusion• The business plan was partially successful

• Lack of contingency measures, however their lack of enthusiasm to follow them

• Value congruence was not achieved in the organization

• Lack of goodwill had an impact on the sales

• Communication problems with the European superiors increased pressure

• Non-cooperation from the European plants

• Commitments to the booked orders

• Need of the customers were judged wrongly

• Lack of vision

Current InformationSilvio Napoli CEO at Jardine Schindler Location Hong Kong

1. Mumbai (HQ)2. Delhi3. Ahmedabad4. Kolkata5. Jaipur6. Kochi7. Bangalore8. Hyderabad9. Pune10. Chennai11. Lucknow12. Goa

Schindler Offices in India :

I extremely thanks to

Mr. Silvio Napoli for

sharing this valuable

case with managers

of tomorrow.