Elevator Companies

Elevator Companies and Competition Abtract The history of business in almost industry is one of initial diversification as a number of different firms move in to a new field and attempt to establish themselves with their particular blend of skills and innovations. As the industry matures, a relatively small number of firms become dominant; in many industries a handful of firms rise to a position of prominence and even near-monopoly status.

The elevator industry is currently engaged in such a contraction of number of firms as the leaders in the industry (Otis, KONE and Schindler) are engaged in buying up smaller firms across the United States. In some cases the smaller and medium-sized firms are eager to be taken over by companies that can offer its workers better compensation and that can offer prestige and financial backing to the smaller firms.

Other smaller companies have been taken over through a financial version of force majeure - through the process of hostile takeovers. This research examines whether it is overall more advantageous in the current economic environment to be in the position of buying or selling a company that is engaged in a service industry, a sector of the economy that is especially vulnerable to economic uncertainty.

Are small companies likely to benefit from being taken over - even through a hostile takeover? Or are larger firms more likely to benefit from acquiring smaller firms through either friendly or hostile takeovers? Introduction The primary rule within the world of business has always been the same as in the natural world: Evolve or die. Businesses are always engaged either in the process of constantly changing to meet changing market conditions or are losing (or about to lose) market share to their competitors.

In the constant push to remain competitive and to increase productivity, quality and market share, companies and their leaders have a number of organizational weapons. One of these is the takeover: If one cannot compete successfully with another company, then one can simply buy it and fold it into one's own operations. Of course, this requires money (or the ability to borrow money) but the cost of acquisition is often worth it.

For, although some acquisitions end up being costly boondoggles for the parent company, in general acquisitions are beneficial to the acquiring company in a world in which small firms are increasingly less able to compete. This process of larger companies solidifying their market position through the process of acquiring small companies is happening at a dramatic rate today in the elevator industry.

Otis Elevator has recently purchased a number of smaller firms in an attempt to consolidate its position as the major elevator firm in the United States, and perhaps even in the world. The relatively weak financial position of many of these smaller companies (which have been weakened by the current economic downturn) has lead to a spate of acquisitions that have Otis is hoping will strengthen its overall position.

Whether or not this will turn out to be true over the long-term is one of the key questions that this paper focuses on. However, while there are certainly a number of business risks involved in a strategy based on acquisition, Otis has proven that it can pursue this strategy with a high degree of success over a number of decades, as the following description of Otis's movement in the European and Asian markets suggests. After Otis acquired the.