Team D

Wirtschaftsuniversität Wien © 2011

CEMS - MIM

Global Strategic Management

Competing Case:

Silvio Napoli at Schindler India

TEAM D

Alexandra Breitner

Annick Verhoeven

Catarina Figueiredo

Denise Embregts

Sophia Oshchebska

Competing Case: Silvio Napoli at Schindler India

India

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1. INTRODUCTION

1.1 Schindler in India

Schindler is the technology leader in elevators with a strong customer focus. After having

ended the collaboration with Indian BBL, Schindler enters this high growth potential

market independently in 1987.

Silvio Napoli, Head of Corporate Planning at Schindler Switzerland, created Schindler’s

business plan to expand to India and was appointed to lead the top management team of

the new subsidiary.

The Business plan relied on two main pillars: standardization and outsourcing. Only one

type of fully standardized elevator (S001) was to be marketed in India; customized orders

were not to be taken. This strategy aimed at reducing complexity of operations and a quick

penetration of the market. The outsourcing strategy was expected to reduce costs by

avoiding tariffs and excessive overhead expenditures.

2. PROBLEM STATEMENT

2.1 Challenges in the current situation

Despite the carefully prepared business plan, its feasibility was challenged. The first

orders, taken in Napoli’s absence, were not consistent with standardization and required

considerably higher costs. An unexpected 30% rise in transfer prices from Europe and an

increase of the import duties further set back break-even objectives.

2.2 Problem Analysis

a. Indian environment

Indian culture, according to Hofstede (2009), is long-term oriented and traditional; people

are more perseverant in their views and reluctant to rapid changes. This explains why

Napoli’s team behaved inconsistently with the strategy. The low uncertainty avoidance

ranking (Hofstede, 2009) explains the Indian reluctance to rules and regulations (see:

Appendix a). In general, this environment requires more patience and flexibility than

Napoli expected.

b. Napoli’s personality

Schindler’s top management was convinced Napoli was the right candidate for this job as

he was young and risk-taking. Nevertheless, his team described him as authoritative,

impulsive and impatient. Napoli had difficulties adapting to culture and local complexities

both at a company and personal level. He was persistent in making his developed business

plan work, and unwilling to adapt.

c. Business strategy

The strategy was aggressive and somewhat overoptimistic. The Indian market is price

sensitive, which could make a cost-effective standardized product attractive and an

Competing Case: Silvio Napoli at Schindler India

India

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interesting opportunity for Schindler. However, there is no one in charge of marketing and

sales, and the Indian consumers are not educated about the cost-efficient and

standardized product S001. This could be perceived as a lack in service, which is

important to Indian consumers (see: Appendix b).

d. The management team

The management team consists of different personalities. Additionally, Singh has no

experience in the elevator business; he lacks knowledge about this sector and the different

products available. He has contacts in the hotel industry, whereas clients for standardized

elevators are found in other industries.

e. Schindler Corporation

Schindler Europe is inactive and does not provide Napoli with necessary training or

support. By increasing transfer prices without warning, the parent company shows lack of

attention towards the subsidiary.

2.3 Goal

For Napoli, the main goal is to set up profitable operations as soon as possible. Also, the

future growth potential of the strategy must be ensured.

3. ALTERNATIVES

3.1. Maintain the business plan

The original strategy of standardization and outsourcing stays in place, but the current

problems have to be solved. First, Schindler must provide Napoli with a thorough cultural

training and offer personal support during the difficult start-up phase. Also, transfer prices

have to be negotiated. Further, Napoli has to engage in a more two-way oriented

communication and his team needs to be educated about the business plan to prevent

them from taking customized orders. Moreover, to achieve stable sales of S001, attention

has to be paid to marketing. The consumer has to be educated about the new cost-effective

product.

3.2. Revise the business plan

In this alternative, elevators are customized to serve demand without changing customer

habits. Singh should be given increased control over operations, as he has knowledge

about the culture and experience in providing customer service. Additionally, Napoli needs

a cross-cultural training in order to tackle his adaptation problems. Specific standardized

components can be outsourced; however, customized elevators have to be assembled in-

house.

3.3. New entry strategy

Another possibility is to enter the Indian market with a completely different, long-term

approach. Schindler should offer high-end elevators focusing on leading technology and

Competing Case: Silvio Napoli at Schindler India

India

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service, as it is an important decision criterion for customers. Schindler needs to set up

own local production sites in order to protect know-how. Transfer prices are not an issue

as safety parts are produced locally. Also, a new manager with specific knowledge about

the new plan should replace Napoli.

4. ISSUES

4.1. Market & growth potential

The in alternative 1 targeted low-end and price-sensitive segment is highly attractive, as

50% of market - manual elevators - must be rebuilt because of legal changes. Elevators are

expected to become a commodity, allowing for low-priced standardized elevators. With

strategy 2, Schindler targets a broader market including the middle-priced segment,

driven by urbanization. In alternative 3, Schindler could profit from the trend towards

higher technology demand; tourism is also expected to grow which will boost the high-end

segment. See Appendix c for industry analysis.

4.2. Competitive situation

Due to current developments, the low-end segment, characterized by local players lacking

funds and technological know-how, will become more attractive to international players.

Schindler could be the first international mover. In alternative 2, Schindler would not

target any specific niche, which means that it would face high competition. In alternative 3,

the high-end segment is very competitive as Otis and other MNCs are already well

established.

4.3. Capital requirements

In alternative 1 the capital requirements are rather low although marketing expenditure

has to be increased. Regarding alternative 2, the costs will be on a medium level as the

customized elevators incur higher production costs. Also, overheads are increased to

assure retention of technological know-how. In alternative 3, capital requirements are

very high, as Schindler has to invest heavily into developing production plants.

4.4. Restructuring issues

Although Napoli is likely to accept alternative 1, it may cause tension between Schindler

India and Schindler Europe. Alternative 2 will cause tension between Napoli, Singh and the

team. The radical change in alternative 3 will potentially cause the most difficulties as

Schindler has to start from scratch.

5. CONCLUSION

According to the analysis and the scoring model (see Appendix d), it is suggested to

implement alternative 1 in order set up profitable operations and to ensure future growth

potential. Schindler is enabled to take advantage of the first mover position in the low-rise

elevator market, which is expected to grow by double-digit numbers in subsequent years.

Competing Case: Silvio Napoli at Schindler India

India

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By offering a standardized product, the price-sensitive Indian consumers can be optimally

served. Greater marketing and sales efforts are needed to turn S001 into a high-growth

product (see Appendix e).

6. APPENDIX

a. Geert Hostede’s Cultural Dimensions

PDI – Power distance index

IDV – Individualism

MAS – Masculinity

UAI - Uncertainty

avoidance

LTO Long-term

orientation

Source: http://www.geert-hofstede.com (12/11/11): Itim International; Geert Hofstede Cultural

Dimensions, 2009

b. SWOT ANALYIS: Napoli’s business plan

Competing Case: Silvio Napoli at Schindler India

India

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c. PORTER’S FIVE FORCES: elevator industry in India

d. SCORING MODEL

Issues Market growth &

potential Competitive

situation Capital

requirements Organizational

issues TOTAL

weights 0,4 0,3 0,2 0,1 1

score weighted score weighted score weighted score weighted

A 1 2 0,4 3 0,6 3 0,6 3 0,6 2,2

A 2 3 0,6 2 0,4 2 0,4 2 0,4 1,8

A 3 1 0,2 1 0,2 1 0 1 0,2 0,6

e. PORTFOLIO ANALYSIS