Problem Statement:
By 1996, KONE’s financial condition in Germany had deteriorated compared to previous years. Forecasts were bleak indicating little to no improvement for the near future. KONE business director, Raimo Hatala anticipated the launch of KONE’s latest offering, MonoSpace to improve the company’s financial position. Conversely, as initial test markets began, fears about the product’s ability to master the German market were raised. Hatala contemplated a successful entry strategy that would position the product appropriately and permit the company to leave a durable impression on the German market. Before the launch of MonoSpace in Germany, it was test marketed in select countries. Merely 40 units were sold in France although 300 were expected, even worse, no units were sold in the United Kingdom. The market became saturated; the construction boom terminated abruptly and demand for elevator gear was projected to fall by 15 percent. Competition for new installations was intense, large companies sold their equipment at or below cost to customers. Service contracts were commonly closed with companies that originally installed the equipment. Six major companies dominated the German market in 1995: Schindler, Otis and Thyssen, with KONE placing fourth. 150 small local companies, as well 30 mid-size players comprised the total market share. This resulted in a fragmented market. The largest construction companies controlled 20 percent of the market, while 20,000 small contractors competed for the remaining. In view of the saturated market, intense global competition, and price-sensitive consumers, as well the company’s goal to enhance its financial condition, Hatala postulated that speedy, positive results from its German introduction were vital to success.” The pricing and product positioning strategies he set for MonoSpace in Germany would