Silvio Napoli At Schindler India

Questions:

Ð'„X Evaluate the logic of Silvio Napoli's strategy for selling standardized elevators in India.

Ð'„X What should Silvio do about the order for non-standard elevators?

To understand Silvio Napoli's strategy for selling standardized elevators in India, let us first take a look at the Indian markets using the CAGE framework:

Culture Economic

- Sensitivity of Indian employees to organizational power and relationships

- Different management styles of Indian managers Ð'ÐŽV "friendly and easygoing"

- Huge curve to adjust to Indian living conditions Ð'ÐŽV housing, school, doctors, grocery shopping, etc.

- Mostly untrustworthy middle-men offering all kinds of services

- Difficult to find office space

- Inability of the market to deliver on timing ("can't set your watch by Indian trains")

- Traditional sales structure has different people to handle sales, technical and installation

- Market need for small degree of customization in elevators Ð'ÐŽV custom glass pod elevator, glass wall, etc. - Large income disparities between urban (metros) and rural regions

- Expanding tourism; growing demand for top-quality, high-rise office facilities

- Elevator market: price-sensitive/value-based, need for excellent after-sales service, brand-sensitive; not as much focus on reliability

- Significant long-term differences between European and Indian markets in costs, willingness-to-pay, etc.

Administrative Geographic

- Excessive paperwork for government regulations and legal proceedings

- Huge tariffs/duties on imports of non-core goods such as elevators

- Mostly joint-ventures and domestic companies in the elevator market - Complex infrastructure

The case indicates that the Indian elevator market was divided into three segments:

Ð'ÐŽV 70% Low end: intense competition/local companies

Ð'ÐŽV 20% Middle end: demanding modern, safe, quality product

Ð'ÐŽV 10% Top end: 24/7 service top line elevators

Silvio was aware that due to the high import tariffs, their manufacturing costs would quickly rise if they were to import elevator components from overseas. To reduce these costs, Schindler would require building their elevators in India using as many locally sourced parts as possible.

To support this, the logistics, manufacturing and basic installation of the elevators was to be all done in India. But, this meant that the original Swiss policies and procedures used at Schindler's operations in Europe would need to be transferred over to their manufacturing in India. Based on his research of the Indian market and its culture, Silvio was aware that it would not be an easy task for their Indian manufacturing to learn and incorporate the procedures.

So, Silvio decided to minimize the learning curve burden for their manufacturing operations by picking only two elevator configurations that Schindler India would build:

Ð'ÐŽV Model S001 for low-rise buildings Ð'ÐŽV completely outsourced to local suppliers

Ð'ÐŽV Model S003P for medium-rise buildings Ð'ÐŽV imported

He also decided that these elevators would be standardized and no customization would be allowed for the Indian market. This was to keep complexity and costs low and to make Schindler an efficient manufacturing operation.

However, there were several problems with this