Silvio Napoli was a young an eager executive that had a bold and aggressive business plan for entering the Indian elevator market for his company, Schindler. Having developed the business plan for entering the Indian elevator market, Silvio was selected by his company to lead the development of Schindler India, a wholly owned subsidiary of the Swiss based company. His plan was to differentiate by selling “core, standardized products,” in a market where customization and a wide range of elevator products was the norm.
He also proposed keeping costs down and avoiding high Indian tariffs by outsourcing all logistics and manufacturing activities to local suppliers. From an outside prospective this is a good plan with the ability to establish Schindler as a differentiator in a new country while leveraging existing strengths in the new market, but the reality of establishing operations in India proved much more difficult. The market in India already had established competition where the top four companies owned three-quarters of the market.
Otis was the largest competitor with a hold on 85% of the high end market and an established reputation for quality and service in India. The Indian market for elevators was also highly price sensitive. Silvio’s plan was hinged on keeping the prices down by offering only two standardized elevator models without any customization. While he had communicated this to all his managers, they were still establishing contracts with customers for customized versions of Schindler elevators, in contrast to Silvio’s business plan.
Silvio’s plan to keep costs low so that the elevators could be priced competitively for the Indian market was also having challenges. Establishing local suppliers was being held up because Schindler’s plants in Europe were not forthcoming with design plans and specifications. As a result Silvio was still reliant on the European plants as the suppliers and initial estimates for the transfer costs from those plants were 30% higher than Silvio had projected. At the same time, the Indian government had increased import duties on elevators from 22% to 56%, considerably increasing the costs for the new subsidiary.
The major challenges facing Silvio are due to poor strategy implementation. As a driven and focused manager from a Swiss corporation, Silvio was not prepared for the cultural differences that he encountered in India. Productivity in India moved slower and was less efficient. His Indian managers expressed understanding and commitment to Silvio’s important business plan, but they still deviated from it by offering customizations to their customers. As a leader, Silvio needs to ensure that he has the complete understanding and commitment of his managers, because the success of his business plan centers on this.
It is also essential that Silvio gets his local suppliers established as quickly as possible to avoid the increasing temporary costs of having the suppliers located in Europe. However, it is unacceptable that the same Schindler suppliers in Europe are withholding or slow with producing the necessary plans and specifications that the suppliers in India will need. Silvio will need to ensure that corporate management in Switzerland assists with this if he cannot get the European supplier’s cooperation.
Courtney from Study Moose