Case Study From Harvard Business

Case Study from Harvard Business Review Silvio Napoli and Schindler India (A)

Executive Summary The case study chosen for this analysis is Silvio Napoli and Schindler India (A) published by the Harvard Business School (2003) and extensively used in many international business, marketing, and operations courses globally. The synopsis of this case study is as follows: Silvio Napoli, a brash, highly talented manager with Schindler Corporation of Switzerland is send to India to establish a subsidiary. Apart from the cultural clashes, the lessons learned from managing a customization business in a nation where supply chains and infrastructure is sporadic is an excellent example of how globalization is difficult at best to achieve. Strengths . Chairman Alfred Schindler identifies India as a major growth market well ahead of the competition, starting in 1995. . Schindler is one of the worlds' most vertically integrated manufacturers of elevators, escalators and specialty moving products. . Silvio Napoli is Harvard-educated, highly talented and aggressive, and has moved up the ranks of Schindler Corporation quickly. His "swatch" strategy of product customization for the low-end of the Indian market is sound if applied to a highly industrialized society. . Strong internal focus on analytics and measurement of progress towards objectives. This mentality around highly quantified goals also applies to their move into India, where the company sets the goal of selling 50 units the first year, culminating in a 20% market share in five years. . Silvio Napoli creates an excellent Indian management team, recruiting heavily from the largest competitor Schindler faces in the market, Otis Elevator. Weaknesses . Schindler Corporation nor Silvio Napoli have ever had any previous experiences in setting up a subsidiary in any 3rd world nation, India included. . Schindler Corporation relies on outside advice from Boston Consulting Group on a go-to-market strategy for India, when neither company has ever been in country before and established operations. . Silvio Napoli was not a culturally strong fit for how Indian is accustomed to being managed. Mr. Napoli is brash, very direct and confrontational in his approach to management. He refuses to let delays, even from the sporadic performance of India's infrastructure, get in the way of his plans. . No previous experience in establishing supply chains throughout India, especially in the area of mass customized products. . Napoli's stubbornness to hold onto a "no customization" strategy in a market that demands high customization forces many conflicts inside and outside the company. . Lack of coordination and shared goals with manufacturing centers Schindler operations throughout other regions of the world makes transfer pricing problematic; the other factories are not cooperating with Napoli as they see low cost manufacturing as a threat. . Schindler's introductory elevator models, the S0001 and S003P, have not been designed to maximize margins and have little room in their cost structures for customization - which is a key requirement of the Indian market. Opportunities . Indian elevator market growth is very promising in the 1995 timeframe, which is when this case study takes place. The low-end of the Indian elevator market is experiencing 27% increases in unit shipments, and 17% unit increases overall. . The market itself is highly fragmented for elevators in India. 70% of the demand for elevators is at the low-end of the market; 20% at the middle-end, and 10% at the top-end. . High levels of recurring revenue are possible in the Indian elevator market due to the large installed base of elevators and the high maintenance fees Otis Elevator and other competitors have been able to charge. Threats . As the Schindler Elevator learned in their strategies to enter the Indian market with elevators (Columbus, 2005) the capricious and very damaging effects of fluctuating tariffs can put a halt to any light manufacturing or assembly in addition to the more intensive operations of building subassemblies for consumption in other areas of the world. . Otis elevator has a commanding market share and very high loyalty rates in the installed base of India, making it especially challenging for any new global competitor to move into the market. . Otis Elevator has pre-existing supply chain relationships and could feasibly drive any competitor out of the market that attempts to reach critical mass. In effect Otis could "shut out" any competitor in the market due to their dominance in specific supply chains. Recommendations . Revise the product strategy to allow for high degrees of customization and provide cost structures that allow for products that can be tailored to the needs of specific small and medium-rise businesses. . Create a "Replace Otis Now" strategy to target their competitor's largest installations and get them to switch to Schindler through aggressive pricing and 3 years of maintenance for free. If Schindler can be successful with this strategy, their growth will be established in India. . Acquire smaller competitors and play the role of market aggregator in the Indian market. Bring in the most seasoned of CEOs from these smaller companies to run the Operations Department. Silvio Napoli needs to be re-assigned to the Schindler headquarters in Switzerland. This growth by acquisition strategy also gains Schindler an advantage over tariffs on imported manufacturing components and also gains them supply chains already in place. References Columbus (2005) - Selling Into India: Lessons Learned From Silvio Napoli. CRM Buyer Magazine, April 22, 2005. Downloaded from the Internet on January 23, 2007 from: http://www.crmbuyer.com/story/42512.html