4. 3
1. Executive Summary
KONEis one of the leaders in the elevators and people mobility industry. But as any leader
it is now facing pressure to keep up with the new trends in their environment. The trends are
constituted by a change in the demographics, increased awareness about environmental issues, and
new technology that is being developed. The company’s ongoing strategy is based on delivering
superior returns on the investment for stockholders and securing above the market growth. This is
achieved through expanding the scope of their overarching strategy to three levels: operation
effectiveness (running smoothly the daily operation of the company), internal processes (people
management and best HR practices), and external process (management of the already existing
client base and prospecting the market for new clients).
Using state-of-the-art strategic analysis tools we identified potential strategies that can
foster growth. One of the strategies discussed is product development, that uses the expertise of
KONE and the new developed technology to diversify the product range and offer to their
customers up-to-date solutions. The overall product development strategy will be accompanied by
a digital marketing strategy that uses a mobile application to inform the users about the type of
technology the lift they are riding is using and how this can be improved by replacing the obsolete
technology with new one. In the end, the main trends and KONE’s strategies to tackle those trends
are summarized as a TOWS matrix.
2. Mission Statement and Corporate Objectives
2.1 Mission/Values Statement
KONE is aiming to be a global leader in its operational segment and offer the best service
to its customers, as well as enhance the user experience by matching the product with the needs of
the costumer. No matter how complex is the project, KONE strives to deliver the right solution.
Moreover, there is a particular interest in increasing the base of loyal customers.
What makes KONEa better competitor is that fact that they always strive to be the market leader
in regarding to technology used by them.
5. 4
A great example is when they invented the “Ultra rope” elevator lifting technology, it enabled lifts
to travel heights of over 1 kilometre, which is twice the distance currently feasible by their
competitors (KONE, 2015).
Because one of the main trends in the 21st century is that buildings are getting taller KONE has
huge advantage over its rivals thanks to the ultra-rope technology. As a result of this new
technology, it has helped KONE to get the Kingdom Tower contact in Saudi Arabia, which when
finished will be the tallest building in the world (KONE, 2014). Without the ultra-rope technology,
Kingdom Tower would have needed more than one lift just to go to the top floor, as the length of
the building is just over 1 kilometre.
KONE have learnt to adapt and have established many strengths within the industry and through
innovation of products have given them a competitive edge within the market (Please see
Appendix 12 for further details).
2.2 Corporate Objectives
KONE’s strategy revolves around the best user experience practices confined under the
umbrella-term “People Flow” (KONE, n.d.). KONE have two main objectives. Firstly, there is an
orientation towards operational effectiveness, including cost efficiency and process design that
allows for building the best solution for the customers. Secondly, the internal processes are
important in the overall strategy of the firm, including the management of people and leadership.
Eventually, the strategic objectives look at the external processes and the customer experience
delivered by the company.
3. Competitive analysis
This report uses Porter’s five forces, as it is a comprehensive way of analysing all the forces
that can take part in shaping the industry, and implicitly the company. The list of competitors was
generated using the data offered by Lift and Escalator Industry Association (www.leia.co.uk)
6. 5
4. External factors
External factorsare peripheral influencesthatcanimpactKONE whichtheydonot have muchcontrol
over.
A varietyof external factorscanimpactthe capability of KONE,toaccomplish itstactical goalsand
objectives. A PESTLE analysiswasappliedinrelationtoKONEwhich canbe foundat appendix 6
5. Internal Analysis
5.1 Internal factors
Thisreportwill lookatthe external factorsof KONEbyusingPortersFive Forces.Itisan essential tool to
understand where powerliesinabusiness environment(UniversityOf Cambridge,2015).A detailed
analysiscanbe foundat appendix 10.
5.1 Portfolio Analysis using GE McKinsey Framework
This report has identified 3 business units focused on products that the company offers, and 4
business units that cover the service side.
We can map the business units of KONE using GM McKinsey matrix using the computed scored
of industry attractiveness and competitive strength (see Appendix 1).
7. 6
source: compile by authors using GM McKinsey framework and Jan (2002)
The majority of the strategic business units of KONEare above the harvest /divest virtual
line. (See Appendix 13 for further details)
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5
harvest/divest
industryattractiveness
competitivestrength
Selectivity
8. 7
IndustryAttractiveness
When applying the GE matrix to KONE this report has the found the following;
1) Elevators Business Unit
2) Escalators Business Unit
3) Maintenance Business Unit
4) Modernisation Business Unit
(The graph is given below)
(More informationcanbe foundat Appendix 7)
5.2 Analysis of Strategic Capabilities.
One component in mapping out the competitive strength was VRIO resources (valuable,
rare, not imitable, organisation). KONE disposes of such resources, especially in the four service
areas in which the company operates. The value question of the resources and internal capabilities
show that KONE has made strategic steps in securing the resources against any threat on the
capabilities. For example, People Flow Intelligence is a trademark of the company that signals the
long-standing expertise in the field of elevators, escalators and devices used for people transport
2
3
4
1
Strength of Business Unit/ Products
9. 8
and mobility within buildings. However, rarity and limitability pose a threat to the internal
capabilities of KONE, as the elevator industry is driven by more companies that innovate and that
feed-back into the process of technology advancement (e.g. OTIS, Schindler, etc.). Therefore, it is
not easy for the company to lock in some technological know-how, but it is easier to embed the
expertise they gain from their customer base and their product line onto the core competencies.
Othercapabilitiesare the following:
1. Physical capabilities:Inhouse manufacturing.
2. People capabilities:Veryskilledemployees
3. Intellectual capabilities:Anadvantage againstcompetitors
(See Appendix 11for more details)
10. 9
5. 3 Strategic Marketing Framework
Analysis of Bowman’s Strategy Clock
Bowman Strategy Clock can be viewed as an extension of Porter’s generic strategies,
where the main characteristics of the strategies span across two axis: value and price (Carlisle &
Faulkner, 2005).
KONE uses several strategies to position itself in the industry. In the escalators business,
the company offers high added value of their products through a focused differentiation added by
the people flow intelligence capabilities and their service divisions. For example, the maintenance
and design services are capable of holistically providing services (KONE, n.d.).
Source: compiled by authors using Bowman’sStrategy Clock,Carlisle & Faulkner (2005)
Value
Price
11. 10
6. Strategic Choice
6.1 Ansoff analysis
Taking into consideration the prospects of growth, especially in the escalators sector,
KONE should focus on the global trends identified: rapid urbanization, aging urban population,
and safety (KONE Global Megatrends, 2015).
Therefore, to tackle the change in the urban landscape and the rapid urbanization, KONE
should use its core competencies to penetrate the market with the products they already honed,
targeting the increase of the customer base. The change in demographics and the aging of
population will require more products to be created in order to cater for increased accessibility
needs. Eventually, concerns about safety will require the company to invest in research and
development for either improving existing products, or creating new products.
The strategies are suitable because are oriented towards the major trends in the industry. Also,
KONE has the expertise, accumulated through years of operation, to execute the strategies and
allocate resource for product development and market penetration.
Source: Pettigrew et al. (2001)
market
penetration
product
development
market
development
diversification
12. 11
Market penetration
A marketing strategy according to the Ansoff’s Matrix that can be applied to KONE would be
Market penetration. This can be associated with the expansion of KONE’s market share in its
existing product market, therefore increase the company’s overall revenue.
Consider Intel for instance who actively pursued the "Intel Inside" campaign in order to gain
awareness with existing products while expanding its market share. The aim of such campaign
would be to build customers brand choice and enhance brand reputation for such company.
Building a strong brand name is important because it enables the company to enforce premium
prices and in such instances a market share becomes very profitable (Charles Hill, 2009).
With implementing market penetration strategy there are four approaches to be considered: -
(Free Management Ebooks, n.d.)
13. 12
Secure dominance of growth markets
In order for KONE to increase its market share “aggressive digital marketing “ can be
implemented as a means of heavily promoting their brand and show product differentiation for
existing products to new customers (business). KONE is a B2B business, however with most
companies becoming more attached to social media networks, #KONETHURSDAYS! On twitter
is a great way to show their brand and product strength across the social platform. Existing
customers (businesses) and new customers can be reached and would be more interested to
being attached with a company with increasing growing popularity. This is advantageous to
KONE as there would be minimal threat of new entry with aggressive digital awareness of their
brand. (Cooper & Nakanishi, 1988)
Maintain or increase the market share of current products
This is associated with focusing on the areas of sales and marketing responsible for managing
the pricing and promotion of the product.
Another market penetration strategy for KONE can be founded on three fundamental concepts
as used by Coca-Cola: affordability, acceptability and availability. If KONE can make their
product seem ubiquity, with it being more price competitive compared to its competitors, an
important factor in its market, because building managers, contractor want the best value for
money. With price promotions, price sales and loyalty prices KONE can expand their market
share (Cole, 2003).
Restructure a mature market by driving out competitors
In a matured market like KONE an important way to attain market share would be to take from
its competitors (Hill, et al., 2009).
Increase usage by existing customers
Another approach to market penetration is to persuade your existing customers to use your
product or service more frequently. There are several tactics KONE could use to do this,
including loyalty schemes, adding value to the current product, or making alterations to the
product that encourage greater use (Hill, et al., 2009).
14. 13
7. Strategic Implementation: Digital Marketing Strategies
“Digital marketing is the promotion of products or brands via one or more forms
of electronic media. Digital marketing differs from traditional marketing in that it involves
the use of channels and methods that enable an organization to analyze marketing
campaigns and understand what is working and what isn’t – typically in real time.” (SAS,
2015)
Different digital marketing strategies require both time and investments which are
important and costly resources, the sector in which KONE operates in is mostly based on B2B
relationships built in time. However, new developments in the market (change in demographics,
etc.) will require KONE to look at non-traditional ways of raising awareness about issues that are
concerning the company: environment, energy efficiency and safety (Wymbs, 2011; Global
Megatrends, 2015).
One proposed strategy that supports new product development is to focus on elevator users.
Most of the elevators are getting old and with technology becoming obsolete, KONE can
implement a digital strategy that can inform the stakeholders about the benefits of modernizing
existing elevators. The digital strategy should include mobile applications that can scan QR codes
on KONE products that when scanned, will provide more information about the technology used
as well as data about upgrades that are more efficient. The basic principle is that when people
spend time using KONEproducts, this time can be converted and used to deliver information about
the new technologies of KONE and about their benefits (Shin et al., 2012).
15. 14
The main objective of the strategy is to raise awareness about the benefits of implementing
new technology. The target audiences are represented by the customers that are already using
KONE’s products. Targeting existing clients can help the company have a better conversion rate
between old and new technology, and can secure their position as the brand of choice for
modernization. The channel used will be mobile application that have embedded the ability to scan
QR codes. The app will be developed to recognize the type of the technology used for the elevator
they are using, cost efficiency, impact on the environment, and alternative technologies that are
better and can replace the existing technology.
Key performance indicators that will be used to assess the strategy:
a) technological conversion rate (if the customers choose to switch to newer technology)
b) numbers of downloads
c) number of QR codes scanned
Other marketing strategies that can be used are the following
1) Creating a YouTube Channel:Secondbiggestsearchengine inthe world.More information
can be foundat appendix 3.
2) Creating a Discussion Forum: This can be a greatway to communicate withpotential
customers, whichthe othercompetitorsof KONEare doing. More informationcanbe foundat
appendix 4.
3) Creating a Mobile App: Duringintothe 21st
centuryConsumerbehaviourhasstarteda
mobile revolution,wherepeople can’tevenstayawayfroma mobile device forcouple of hours.
So if KONEcreate a greatapp that showcase itsvibrantproducts,itcan create some buzz
aroundtheirproducts (RafatAli,2015). (More informationcanbe foundat Appendix 5)
16. 15
4) Live chat on KONE’s website:Data collectedfromGoogle Analyticshasfoundthatvisitors
don’tgenerallyreadeverythingonthe websites,theyalsofoundthatmostof the usersdon’t
actuallystayon the website fortoolong.One of the bestwaysfor the user to stayon the
website istopromptthemwitha requesttochat. In thatway the userswill be connectedto
salespersonbefore he leavesthe website,becauseit’smore of a casual mediumof
communication,the userismore inclinedtoengage inaconversation(Curry,2013).
(In appendix 8, there is an image of how the chat box will look like will look like)
5) Forms: Any business need multiple ways for customers to communicate with them, so
KONE should have an opt-in form area (to collect customer’s information) and this form
will also estimate the cost of what the customer is looking to buy (Curry, 2013). So even
if the customer don’t get in touch with KONE, the sales can always contact the customer
directly when information provided by them in the form (Curry, 2013).
(An example of the form can be seen at appendix 9.)
17. 16
8. TOWS Matrix& Conclusion
Following the strategic analysis developed above, we have chosen the most important
element of each of the components of the TOWS matrix.
KONEhas a strong market position in the elevators and escalators industry. However, the
trends in the industry signal a major change determined by the need to replace obsolete
technology. Therefore, the company can use the expertise acquired until now to tap into the
newly created demand. KONEhas to take into consideration the threats posed by competition
18. 17
and try to start with its customer base the technological conversion. This can be done by either
creating new products, or adapting the range of products already extant in KONE’s portfolio.
What can hamper the implementation of new strategies is the lower growth that KONE is
experiencing the products services, but the know-how acquired by KONEthrough being a long-
standing competitor in the market can be coupled with their products to offer holistic packages.
19. 18
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&material%5B%5D=concrete&material%5B%5D=composite&material%5B%5D=concrete%2Fsteel&mate
25. 24
rial%5B%5D=steel%2Fconcrete&material%5B%5D=p
[Accessed27 march 2015].
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Available at:http://www.statista.com/statistics/281179/leading-companies-in-the-area-of-elevators-
and-escalators-by-revenue/
[Accessed13 March 2015].
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Available at:http://www.theguardian.com/environment/2015/jan/29/solar-power-in-the-uk-almost-
doubled-in-2014
[Accessed03 April 2015].
The Source,2014. The Service YouShouldn’t Have toThinkAbout. TheSource,16 December.
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Available at:https://www.youtube.com/user/ThyssenKrupp
[Accessed29 March 2015].
ThyssenKrupp,n.d. COUPL. [Online]
Available at:http://www.thyssenkruppelevator.co.uk/new-installation/elevators/passenger-
elevators/coupl/
[Accessed29 March 2015].
ThyssenKrupp,n.d. FAQon ThyssenKrupp Group. [Online]
Available at:https://www.thyssenkrupp.com/en/investor/faq_konzern.html#group2
[Accessed29 March 2015].
ThyssenKrupp,n.d. TWIN.[Online]
Available at:http://www.thyssenkruppelevator.co.uk/new-installation/elevators/passenger-
elevators/twin/
[Accessed29 March 2015].
ThyssenKrupp,n.d. UNIQ. [Online]
Available at:http://www.thyssenkruppelevator.co.uk/new-installation/elevators/passenger-
elevators/uniq/
[Accessed29 March 2015].
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UK Economic OutlookMarch (2015): UK EconomicProspects,accessedon24.03.2015, available from
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[accessed24.03.2015,]
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1.
2. .
28. 27
10. Appendix
Appendix 1
GE McKinsey Framework
Using Strategic Management Insight factors for attractiveness1 we compute the following:
Industry
attractiveness
factor
Weight BU 1 BU 2 BU 3 BU 4 BU 5 BU 6 BU 7
R W R W R W R W R W R W R W
Industry
growth rate
30 % 4 1.2 2 0.6 5 1.5 4 1.2 4 1.2 5 1.5 5 1.5
Industry size 15% 2 0.3 2 0.3 3 0.45 3 0.45 4 0.6 3 0.45 4 0.6
Industry
profitability
30 % 4 1.2 3 0.9 3 0.9 3 0.9 2 0.6 4 1.2 4 1.2
Industry
structure
10% 2 0.2 3 0.3 2 0.2 4 0.4 2 0.2 4 0.4 4 0.4
Trend of
prices
15 % 4 0.6 2 0.3 4 0.6 4 0.6 4 0.6 3 0.45 3 0.45
Total 3.5 2.4 3.65 3.55 3.2 4 4.15
Competitive
strength
factor
Weight BU 1 BU 2 BU 3 BU 4 BU 5 BU 6 BU 7
R W R W R W R W R W R W R W
Market
share
30 % 3 0.9 2 0.6 3 0.9 2 0.6 3 0.9 4 1.2 3 0.9
Profitability 20 % 2 0.4 2 0.4 4 0.8 3 0.6 3 0.6 3 0.6 4 0.8
Brand value 20 % 4 0.8 3 0.6 3 0.6 3 0.6 2 0.4 4 0.8 4 0.8
VRIO
resources
30 % 2 0.6 3 0.9 2 0.6 2 0.6 4 1.2 3 0.9 4 1.2
Total 2.7 2.5 2.9 2.4 3.1 3.5 3.7
N.B. the scores are computed using the Global elevator industry report 2
1 GE McKinsey Matrix, accessed on 24.03.2015, http://www.strategicmanagementinsight.com/tools/ge-mckinsey-
matrix.html
2 Global Elevator Industry Report (2014), available fromwww.researchandmarkets.com , [accessed 23.03.2015]
29. 28
Appendix 2
KONE’scompetitorswithinthe GreatBritainmarket are the following:
Source:(Statista,2013)
1) Otis GroupUK:
Strengths:
World'sleadingmanufacturerandmaintainerof elevators,escalatorsandmovingwalkways
with2.4 millionelevatorsandescalatorsinoperationworldwide (OtisElevatorCompany,2012).
Otisare currentlymakingfull use of digital marketingandhave made anefforttoestablishits
brand online,thisisevidentthroughitsYouTube Channel 'OtisElevatorCompany'
(OtisElevatorCompany,2012)
Otiscurrentlyofferaservice called'The Otis Maintenance ManagementSystem'(OMMS) which
basedon the usage and specof the elevator,recommendsandschedulesmaintenance and
componentupgradesforitsclientsfrom anon-boardcomputerinstalledonthe elevator.(The
Source,2014).
Duringcalloutsmechanicson-siteuse 'OtisROLE'(Remote On-Line Expert) whichconnects
themto an Otiselevatorexpertwithspecialisedknowledgetominimise downtime andreduce
repeatcallouts (The Source,2014).
'Otisline'whichisthe Otishelplineforreportinganyfaultshasbeennotedtorespondtocalls
and remotelyconnectandperformdiagnosticswithinminutes (OtisElevatorCompany,2012).
Otisprovide a'CompassSystem'whichisdesignedtohelpease congestionasitletspassengers
inputthe floortheywouldlike to goto before enteringthe elevator,the systemthendirects
30. 29
the passengertoan elevatorspecificallyassignedtothe requestedfloortoreduce the number
of stopspertrip,overall travel time andofferthe quickestroute tothe desiredfloor
(OtisElevatorCompany,2012).
Otishave made an assertive efforttoofferagreenerservice byopeningthe world’sfirstgreen
elevatormanufacturingfacility (OtisGroupUK,2015) and have since incorporatedsuch
environmental awarenessbypushingOtis:The WayTo Green,whichaimsto use greener
proceduresandprocesses (recycled water,smarterpackagingandthe use of solarpanels) from
the manufacturingthroughtothe delivery, fittingandmaintenance of itsproducts
(OtisElevatorCompany,2012).
2) SchindlerUK:
Strengths:
FoundedinSwitzerlandandhave astrong presence inAsiahavingprovidedelevatorsforthe
GreenlandFinancial Centre inChina,International Commerce Centre inHongKongandthe
BeijingNationalStadiumtoname afew (Jardine SchindlerGroup,2011).
Schindler's highlytrainedengineersare notonlyable tomaintainSchindlerproductsbutcan
alsomaintainnon-Schindlerproducts (JardineSchindlerGroup,n.d.).
Schindlerhave committedtoproductdiversificationbysupportinginnovative solutionssuchas
'Solar Impulse'whichisanaircraftthat usessolarpowerto travel aroundthe world (Jardine
SchindlerGroup,2015).
Schindlerofferthe 'PersonalOccupantRequirementTerminal'(PORTTechnology) which
presentspassengerswithaterminal oftenplacedjustoutside andelevatorthatacceptsIDcards
(foraddedsecurity),voice recognitionandoffersatouchscreenpanel withlistsof departments
whichpassengerscanselectfromeg'HR Department'as opposedto'3' (Jardine Schindler
Group, 2013).
Schindleroffer'DestinationControl'whichisatrafficmanagementsystemthatallowsSchindler
elevatorstoidentifyhowmanypassengershave calledthe elevatorandtherefore createsa
buffertoallowspare capacityfor unexpectedextratravellersmeaningpassengersonall floors
have a fair chance of accessingthe elevatorandnotjustthe top flooror bottomfloorcongesting
the elevatorsduringpeaktimesie lunchtimesandevenings (JardineSchindlerGroup,2013).
Schindleruse greentechnologyandinparticularhave developeda'RegenerationDrive'which
for everydescentof aPF1 elevatorthe builtintechnologygeneratesenergywhichcanbe used
inthe buildingbyotherelectrical installations (Jardine SchindlerGroup,2013), thisresultsin
reducedenergyconsumptionandoperatingcostsforthe entire building.
Schindlerhave ensuredtheyhave setupaYouTube channel whichislinkedtotheirmainwebsite
to furtherestablisheditsbrandonline(Jardine SchindlerGroup,2011).
31. 30
3) ThyssenKrupp:
Strengths:
ThyssenKruppisaGermanconglomerate andone of the largeststeel producersinthe world
that alsoinstall andmaintainelevatorandescalatorsystems (ThyssenKrupp,n.d.).
ThyssenKruppproduce 'UNIQ'elevatorswhichare completelycustomisable bespokeelevators
that can be especiallybuiltfromscratchto suitbespoke dimensionsanddesigns (ThyssenKrupp,
n.d.).
ThyssenKruppofferthe world'sfirstdual-cabinelevatorwhichoffersdouble the capacityby
permanentlyconnectingtwoelevators,one above the other,thatuse a single shaftandloads
passengerswithtwointermediate stops (ThyssenKrupp,n.d.).
ThyssenKruppoffer'TWIN'whichisan elevatorsystemthatusestwoelevatorsinasingle shaft
that can move independentlyfromeachother.Thisisideal forverytall structuresasitallows
short journeystobe made byone elevatorwhenthe otherelevatorisbeingsentona longer
journey (ThyssenKrupp,n.d.).
ThyssenKrupphasaYouTube channel thatis linkedwithitsmainwebpagewhichfurther
enhancesitsonline presence withinthe industry (ThyssenKrupp,2014).
Appendix 3
Creating a YouTube Channel:
The advantage of holdingaYouTube Channel isthatitis the 2nd largestsearchengine and3rd most
visitedwebsiteworldwide behindGoogle andFacebook(See image below) (MushroomNetworks,n.d.).
Such exposure will allowKONEto provide itsaudiencewithavarietyof waysto consume information
relatingtoKONEand the productstheyoffer.KONEwouldalsobenefitfromaddedcredibilityfrom
associatingitswebsite withthe YouTube channel,whichwill allowYouTube topresent more relevant
videoresultspointingtowardsKONEwhensomeonesearchesfor KONEortermsrelatingto elevators,
escalatorsandotherindustryrelatedsearches (McCoy,n.d.). ThisisnotconfinedtoYouTube,byKONE
creatinga channel andmarketingonYouTube,due to defaultsettingsonGoogle'suniversal search,
videos,articles,imagesandbooksare all blendedtogetherinGoogle'ssearchresults (Grow Team,n.d.).
What thismeansisby creatingand uploadingYouTube videosKONEcanbuildbacklinkstotheirmain
website meaningtheywill increase theirrankingonGoogle searchresultswhichisfree.Inthe longterm
thiscouldmeanthat KONEcouldrelylessonpaid ads,whichtheycurrentlyuse inan attempttocreate
leadsforthe salesteam (Appiah,2015).
33. 32
Source:(MushroomNetworks,n.d.)
Appendix 4
An internetforumisanarea ona webpage where ideasandviewsonaparticularissue canbe
exchanged (PCMag,n.d.).KONEcouldbenefitfromsuchaconceptby havingsomethingsimilareither
on itsmainwebsite orhavinga designatedaccountelsewhere.Thiswillallow clientsandpotential
clientstopostand ask questionsregardingKONE'sservicesthata KONErepresentative couldrespondto
whichwill helptackle andaddressnegative experiencesthatcoulddamage KONE'sbrand in the long
termbut alsohas the potential togenerate leadsfromenquiries(See image below ) (Digital Advisor,
2011).
34. 33
Source: (The Economist, 2015)
Appendix 5
Withmobile internetusage projectedtoovertake desktopinternetusage inthe nearfuture (Dubienski,
n.d.),itiswithinKONE'sinteresttoensure itcapitalisesonthe salespotential mobiletrafficcanbring.
Creatinga mobile apphasmultiplesadvantagessuchascustomerengagement (Varshneya,2013). As
free messaginghasbecome more popularincomparisontoSMSmessaging(See image below) thishas
leadto mobile phone usersbecomingmore inclinedtoengage viafree mediums (The Economist,2015)
whichbycreatinga mobile appwill giveKONEthe opportunitytointeractwithbusinessesinreal-time to
gainvaluable feedbackwhichcanbe usedto improve KONE'sproductsandservices.
By creatingan app withthe abilityforbusinessestoengage andinteractwithKONEdirectly,thiswill
leadto improvedcustomerrelations (Dubienski,n.d.).ForKONEtobe able tocommunicate directlywith
itsclientsandvisaversait can ensure businessrelationsare keptpositive asproblemsorissuescanbe
raisedanddealtwithquicker,ensuringmaintenance contractsfromexistingclientsare retainedwhich
KONErelyon as ongoingrevenue streams (Jones,2015).
As mentionedpreviouslymobileappsofferstrongsalespotential inthatpromotionscanbe offeredto
existingclients (The Economist,2015).These promotionscouldincludeareferral scheme were existing
clientscouldreferotherbusinessesorevenuse theirownup-and-comingprojectstogaindiscounts.
KONEwouldbenefitfromnewcontractsand improvedcustomerrelations.AlternativelyKONEcoulduse
mobile appstopushpromotionsthatup-sell itsexistingclientsandentice themtoupgrade theirexisting
productsfor newversionandadditional services.
Anotheradvantage of KONEusingmobile appsisthattrafficandinteractioncanbe trackedand
monitoredmeaningKONEwill be able tomonitor first-handanytrendsinsuccessful mobile campaigns
deployed.Thisdatacan be invaluable andcanbe usedto make such campaignsmore effective and
provide informationtostrategiesforthe future.
35. 34
Source: (Digital Advisor, 2011)
Appendix 6
External Analysis
KONE is mainly operating in the elevators and escalators industry, as well as doors and
loading bays. Besides the production and installation of those systems, KONE provides
maintenance of the installed product, as well as modernization of existing installations. The
business is structured around two areas: services and new equipment. Additionally, the company
has a customer experience unit devoted to executing the strategy for delivering high quality
services for the existing base of customers and as well as acquiring new ones.
PESTEL analysis and macro-trends.
Political & Legal
The main law defining the regulations that govern the installation of elevators and
escalators is the amended Lifts Regulations 1997 (GOV UK, 2014). The most important
obligations are related to the health and safety requirements of the installed cars and the suspension
of the cars. However, the Government rules that the installed lifts and escalators must provide easy
access to disabled persons. There is an increase in the attention given to the inclusion of people
36. 35
with disabilities and the ways in which businesses and organisations can facilitate the access of
those persons (Office of the Deputy Prime Minister, 2006). Perhaps this is the political drive that
can help KONE in growing the customer base. Therefore. KONE’s products can be classified as
merit goods.
Another political and legal factor that will affect KONE is the amount of skyscrapers that’s been
authorised to build in Great Britain. Below are some of the building that are currently in
construction now (skyscraper center, 2015).
All EU member states must follow the Energy Performance of Buildings Directive. This requires that: all
properties (homes, commercial and public buildings) must have an Energy Performance Certificate when
built (EU, 2012).
37. 36
There is also an election in 2015 and the major parties have declared that there will be more houses build
to supply the ever growing demand, this could work for KONE. As some of these houses are going to be
flats, they would also need lifts (Labour, 2015) (BBC, 2015) (Liberal Democrats , 2015).
Due to deregulation (ukgbc, 2014)the current market tend to be quite prices sensitive as KONE
along with Otis, Schindler and ThyssenKrupp offer similar products meaning companies will
often look at price as the determining factor for purchasing. This has made the market very
competitive.
Economic:
United Kingdom’s economy is interconnected with the global economic environment,
therefore it has been greatly impacted during the 2007/8 financial crisis. The British economy is
prone to financial contagion and there are several trade linkages that present risk of shock
transmission(Chowla, Quaglietti & Racher, 2014). Even though KONE Great Britain operates
within the country, there should be a contingency plan regarding the global shocks that can affect
the industry. There are three type of shocks, each of which have a different degree of impact for
KONE.
The British economy is under recovery. There is an expected growth of 2.5 % this year,
with the GDPlevelling at a 2.3% growth annually (UK Economic Outlook, 2015) There is an
economic risk presented by turbulences in the Eurozone.
The British economy is under recovery. There is an expected growth of 2.5 % this year,
with the GDPlevelling at a 2.3% growth annually (UK Economic Outlook, 2015) There is an
economic risk presented by turbulences in the Eurozone.
There is also a high level of foreign investment invested in Great Britain, due to the country
successfully coming out of the recession (WEST, 2014). And that of the state of the British
economy, as it is seen as a safe haven for investment, due to it being the fastest growing developed
country (Hobson, 2014) and having a very stable government.
In total 1,773 investment projects were set up by foreign businesses in the UK during the
2013 to 2014 financial year. In Scotland alone, there were 122 projects while Wales registering an
18% increase in the number of investments coming to them (Gov UK, 2014). All these investment
38. 37
is creating more opportunity and new customers for KONE and the market as a whole is getting
larger. One of this indicator is the every changing skyline in all of Great Britain’s major cities. The
graph below shows the number of tall buildings planned by all the London boroughs.
(Sedghi, 2014)
39. 38
The image above is the View of Manchester’s skyline. Across all the projects underway
in Manchester, there are 1,426 houses and apartments being built, 325,000 sq ft of office space
and four hotels (Jupp, 2014). These are some of the examples of the types of projects that are
happening all over Great Britain.
Social Trends:
The social trends that can impact KONE’s operations are described as change (UN Enable,
2003; UK GOV, 2012)owards accessibility when designing buildings, as well as raising awareness
about the needs of disabled people for access to transportation, buildings, etc. Therefore, KONE
can benefit from the social factors that will drive demand for solution for disabled people.
Source: compiled by the author using UK Economic Outlook (2015)
As KONEsupplyona businesstobusinessbasisitisconcernedwiththe social elementof PESTLEwithin
a corporate contextasit doesnotsell directlytothe public.Asthe Britishpublichasbecome
increasinglyeco-conscious (Harvey,2015) as too have corporate institutionsunderthe publiceye. In
turn greateremphasishasbeenputoncompaniestoimplementgreenereco-friendlytechnologywhich
has leadtocompanieschangingthe wayinwhichtheyoperate notonlyto attract consumerswhoare
green-sensitivebuttoalsomake use of the longtermsavingsas a product of implementingenergy
efficientmeasures (Shankleman,2015).
Withurban infrastructure systemsagingandnew technologiesemerging, national andinternational
safetycodesandstandardsplaya keyrole indeterminingthe safetylevel of elevatorsandescalator
world demand shocks (decrease in the consumer spending and in the
consumer confidence in the market)
•medium priority for KONE as the focus of the business istheinternal market. The demand in the
other economies can impactadjacentindustries thatarein connection with KONE suppliers and
buyers, but the transmission of the shock is,however, lower.
world supply/price shocks
•highest priority.The company depends on the supply of materials (aluminum,technological parts,
etc.) from businesses operatingin variouscountries.Disruption in thesupply of certain parts
needed for KONE's products can jeopardizethe internal operations of the company
world financial shocks
•high priority.Financial shocks areoverarching,meaningthat disturbances in the financial market
can affect all sectors of economic activity.Moreover, KONE is listed on the financial market,thus
financial shockswill affectthe shareholder's confidencein the company.
40. 39
(HSE,2008). Strictsafetylegislationwhichensuresall producersof elevatorsandliftsmustoperate and
provide safetytoa setstandard (DepartmentforBusiness,Innovation&Skills,2009),combinedwith
majormarket share holdersadaptingtoincorporate agreenerservice hasleadtoverysimilarproducts
and servicesbeingoffered,thishasleadtosome corporate consumersbeingmore price sensitive with
theirdecisionmaking (Jones,2015).
Technological trends
Technology is advancing at a fast pace, and the elevators industry makes no exception. The
trend in the installation of elevators and escalators is to save space (that is anyway very expensive)
in order to give more flexibility to architects and designers (KONE Elevator Technology, 2010).
Moreover, according to KONE, elevators can consume up to 10 % of the energy billed for an office
building. Making elevators and escalators more energy efficient is in trend with the cost reductions
demanded by the companies nowadays. Other technological trends that will impact KONEare the
size and shape of buildings that require more complex systems of transportation (McGar, 2015).
KONEensures it remains competitive in terms of quality with technological advancements
such as the KONE EcoDisc motor which as of 2012, uses a copper winding system that reduces
the amount of energy lost as heat, thus making KONE elevators more energy efficient (KONE
Corporation, 2015).
KONE are more recently responsible for developing KONE UltraRope which uses super-
light rope technology, that having been tested under extreme conditions, offers a lifetime that is
twice as long compared to conventional steel rope, less sensitive to building sway and more
importantly can reduce energy consumption rates of elevators with a travel height of 500 meters
by 15% which could increase to a further 45% if travel heights increase to 800 meters (KONE
Corportation, 2015).
Environmental trends:
According to (Hussain, 2014) the environmental factors in Great Britain has been
developing because of rapid growth in the country and as a developed country, United Kingdom
have a high concern over environmental issues. Previously the Government had a significant role
in minimizing the greenhouse gas emissions; it achieved the target of decrease in greenhouse gas
emission of 12.5% in 1990 given by the institute of united nation for climate change and up till
now the Great Britain Government is implementing polices in cutting of 20% the greenhouse gas
emission. People are also becoming more environmentally conscious and would rather go for
environmentally friendly products (Harper, 2012). The result of this can be seen by the number
41. 40
of houses in Great Britain with solar powered panels (The Guardian, 2014). As a result of this
more and more businesses are looking into being more environmental friendly so that they can
use it as an advantage when selling a product.
Appendix 7
Table Information
Data has beencollatedfrom the followingreferences
http://cdn.kone.com/www.kone.com/en/Images/kone-financial-statements-2013.pdf?v=4
http://cdn.kone.com/www.kone.com/en/Images/KONE-interim-report-2014-Q4-
presentation.pdf?v=4
http://cdn.kone.com/www.kone.com/en/Images/kone-corporate-responsibility-report-
2013.pdf?v=3
Weights:- This indicateshow vital a factor is in accomplishingsustainable competitive advantage for
KONE. A weightnumber is assigned for each competitive strengthfactor in comparison to the
businessunit.
Factors are rated between1-10, where 1 indicatesweak and 10 strong.
COMPETITIVE STRENGTH BUSINESS UNIT
(ELEVATORS)
BUSINESS (ESCALATORS)
WEIGHT RATING WEIGHTED
SCORE
RATING WEIGHTED
SCORE
MARKET SHARE 1 7 1 8 1.5
RELATIVE MARKET
GROWTH
2 7.5 0.5 8 1
PROFITABILITY 3 6 1.5 8 1.5
BRAND VALUE 5 8 1 8 1
42. 41
TOTAL =
10
TOTAL =
4.5
TOTAL =
5.5
COMPETITIVE STRENGTH BUSINESS UNIT
(MAINTAINANCE)
BUSINESS (UPGRADING)
WEIGHT RATING WEIGHTED
SCORE
RATING WEIGHTED
SCORE
MARKET SHARE 1 8 3 7 1.5
RELATIVE MARKET
GROWTH
2 8 1 6 1
PROFITABILITY 3 8 3 6 2
BRAND VALUE 5 8 3 8 3
TOTAL =
10
TOTAL =
7
TOTAL =
7.5
Appendix 8
44. 43
Appendix 10
Porter’s five forces
Threat of newentry: The threat of new entrants of an industry to compete with KONE is low.
KONE is well known in Great Britain within an industry that is highly matured therefor in order
rivalry
entrants
buyers
substitution
suppliers
45. 44
for new entrants to compete with them it would require substantial capital investment and even so,
difficulties would arise as potential consumers would unlikely choose a new entrant which is
untested.
Competitive Rivaly: Even in such a matured market, KONE’s rivals in the industry hold a
stronghold in the market and requires KONEto consistently match it rivals in terms of quality and
having to price their services competitively, in an attempt to gain an increased market share.
According to STATISTA (2013), KONE ranks third in revenue sales, still having to constantly
build the market share. Therefore for KONE the rivalry would range from MEDIUM to HIGH
Power of Suppliers: KONE collaborates with internal and external stakeholders, this could be
medium and high; According to (KONE, 2014), KONEbuys 80% of its components, systems
supply and raw materials externally, and from this point of view this could be a risk that their
supplier has power over them, because most of their product are from external sources.
Alternatively it could be argued that KONEsuppliers might not have much power over the
supplies because KONE is a well-known industry brand name and research suggests KONE has
more than 100 suppliers in the UK located around their industry centres, so therefore, there is
enough substitute suppliers available for KONEto utilise and there is no switching cost from one
supplier to the other. (University Of Cambridge, 2015)
Bargaining power of Buyers: For KONEthe bargaining power of buyers is medium, as the
competition is quite intense and customers are free for alternative options offered by other
elevator and lifts industries such as Otis, Schindler and ThyssenKrupp as well as, local industries
producers. (Dudovskiy, 2014)
Threat of substitution: Threat of Substitute is medium to high as there not a lot services and
products available that can substitute the demand for Escalators and lifts. (Dudovskiy, 2014). So
therefore this benefits KONEand other escalators industries since there is no threat of substitute,
from this they can be sure that the builders, architects, house developers have choice in
demanding for lifts and escalators. Even though there are no direct substitution available to
elevators, which other than staircases, there are generic substitutions which businesses could
otherwise invest in such as buying more delivery vans, building a new loading bay, investing in
information technology systems, not upgrading existing elevators….etc.
46. 45
Appendix 11
1. Physical capabilities:Inhouse manufacturing.
ReferencingtoKONE’sseminarthatwascarriedout inGSM London (Appiah,2015), KONEhave said
that theymanufacture everysingle elementof itsproducts,withmanufacturingplantsstrategically
placedaroundthe worldwitha relocatedandexpanded(largest)plantinChinatosupportpeople
flow,productsandsolutions.IncontrastOtiselevatorrequiresthe servicesof MAFELECa company
responsible inthe productionof itselevatorbuttonsamongstotherthings (GoodNewsFinland,
2013).
2. People capabilities:Veryskilledemployees
KONEwithdecliningsalesinproductinthe mid1990’s KONE developedaresearchteamthat
periodicallyintroducesnewproductstobe extremelycompetitivewiththisrivals. Thisresearch
teamhas gone off to introduce products intothe marketinnovativewithefficiencyandaidingthe
companysteadilyitsmarketshare whichiscurrently of itsmarketshare salesinEurope,inwhich
Great Britainisa part of (KONE,2015).
Most of KONE’sservice professional attainover50hoursof technical,customerservice,firstaidand
safetytrainingeveryyearimprovingitscustomer’ssatisfactionall yeararound.Thishasproved
highlyproductive witharecordhighorderintake inthe monthsof Jan-March 2014 inGreat Britain
(KONE,2014).
3. Intellectual capabilities: Anadvantage againstcompetitors
KONEhas many Intellectual propertiesintheirbooksandthe mostvaluedisthe Ultrarope,which
has helpedtheminsecuringthe kingdomtowerorderforlifts. Whenfinisheditwill the tallest
buildingonthe planet (KONE,2014). Using ultrarope liftscango up to 1km highand travellingat
the speedof 10m persecond,incomparisontoits competitorsOtisthatdeliveredandmaintainsthe
elevatorsinthe Empire state buildinginNew York, whichhoweverrequiresthree differentliftsto
reach the topmostfloorina much lattertime.
OthermajorIntellectual propertiesKONEPolarisandKONEIDE300
KONEPolarisImprovedsecuritysystemthroughintegrationwithbuilding’s accesscontrol system
withtouchscreencapabilities.Withgreaterconvenience tenantsabletocall elevatorsthroughtheir
mobile devicewiththe smartphoneapp (KONE,2015).
KONEIDE300 provide accesssystems, whichisunified withthe buildingdoorsandelevators
providingeasyaccess,thissystemrecognizesthe resident,opendoors,callslights,callselevatorand
take residentstotheirexactapartmentresidence (KONE,2015).
47. 46
Appendix 12
KONE have an advantage against their competitor’s, the following are some of their other
advantages/ new technologies that KONE possess;
1. Their elevator systems, automatic residential and industrial door systems are all
environmentally friendly ( As shown below: They have made over 70% reduction in their
energy consumption from 2008 to 2012),
2. A technology called Eco Disc, which makes the ride comfort much better for the
passengers and it also makes the elevators even more energy efficient (KONE,2015).
3. KONE’s “ IDE300” access system incorporates automatic building doors and elevators.
It also offers hands free access to buildings and elevators for the users (KONE,2015).
4. KONE’s “ Polaris” technology provides their users with improved security, touchscreen
technology and a highly intuitive user interface which ensures an effortless user
experience (KONE,2015).
5. KONE’s “InnoTrack” auto walk systems allows the movement of people quickly and
smoothly over long distance (KONE,2015).
6. KONE“MonoSpace, KONEMiniSpace, and KONENanoSpace , are some of the
another technology that KONE invented, which is specially made for residential and
office buildings and is very space efficient (KONE,2015).
48. 47
Along with these technological advantages and others not mentioned has allowed KONEto
compete against their rivals and one day become the market leader.
Appendix 13
