Expanding operations into emerging markets is a growing trend for many businesses, including manufacturing.
management
Description
Schindler India
Expanding operations into emerging markets is a growing trend for many businesses, including manufacturing. In 1925, elevator manufacturer, Schindler, stepped foot in India and pressed for market penetration since then. In the 1950s the company established local presence, but at the turn of the century decided to make India a strategic market with a wholly-owned subsidiary. The goals of this new subsidiary were to sell 50 units in the first year and win a 20% share of the market in five years. The current market was comprised of four major competitors along with a handful of local manufacturers (see Exhibit 1). Because of the commoditization of elevators, there were price pressures. The top three factors affecting elevator sales were price, service, and reliability or quality. The company faced many challenges in this fledgling market, namely the strategies to sell only standard elevators and outsourcing. The standard elevators with no customization were problematic when many orders were coming in for small customizations, such as glass walls. Outsourcing posed problems with cost. Transfer rates for importing parts were 30% above original estimates. In addition to transportation costs, a 34% increase in the import duty was imposed by the Indian government. In order to overcome these challenges and become a key player in the Indian elevator manufacturing market, Silvio Napoli should focus his team on gaining market share by price, which means coming up with a better manufacturing process. This process must minimize part costs as well as maximize efficiencies in production. Secondly, Schindler India needs to identify the market segment with the greatest potential to penetrate market share. In addition the management style has to adapt to the local business culture in order to succeed. We will explore some different alternatives for approaching these goals.
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