Silvio Napoli at Schindler India (a)

Case Brief

Silvio Napoli, a Harvard-educated MBA was selected as head of India expansion project from Schindler Holding Ltd. Napoli was involved in the planning of the Indian subsidiary and had worked closely with key Schindler executives on other strategic initiatives. Schindler Holding Ltd, a Swiss based organization headed by Alfred Schindler, was technology leader in elevator and escalator manufacturing. Worldwide it had revenues of $4 billion and employee strength of over 38,000 in 97 subsidiaries. Schindler was confident that the Indian market provided significant opportunities for growth and learning from Indian market can be employed at other locations as well.

India was going through a phase of liberalisation and it was feasible to start up a 100% wholly owned company in India. The rapidly expanding residential segment accounted for 70% of the Indian market, followed by commercial segment with 20% share. Rest was accounted by hotel (4%) and others (6%). Major players accounted for more than three fourths of Indian market value with Otis (50%), BBL (8.6%), Finland’s Kone (8.8%), and ECE (8.4%). Mitsubishi and Hyundai Elevators were other significant players. Remaining 23% of the market, price sensitive low end, was controlled by 25 regional players. Indian market was highly price sensitive and price pressures were expected to increase. However, surveys indicated that service was also important in buying decision, as were financial terms.

Schindler decided to enter India on the basis of the business plan that Silvio Napoli prepared. Rather than focusing on Schindler’s success with custom equipment, the India operations would focus on simple, standardized products with no allowance for customization. Model S001 was to be used to win share in low-rise segment and then pickup in mid-rise segment with S300P. In addition, Schindler planned to outsource all of the manufacturing of components to local Indian suppliers with a few critical (safety related) components being supplied by its European subsidiaries.

Napoli appointed the top executive of 5 members and shifted his base to India. Business plan had first year target of selling 50 units but even after 8 months of entry into India, the company had not installed a single elevator. Although one order was accepted and other four were in pipeline but they expected to be customized with glass wall. There were other problems like increase in transfer pricing of parts sourced from the company’s Europe facilities, increase in import duties etc.

Q1. As Luc Bonnard how would you evaluate Silvio’s first seven months as general manager of the Indian company?

Although Napoli was nowhere near to completion of finishing targets for the first year but still he had performed commendable results under testing conditions in India. This was a new venture and had to be built from scratch. Resistance from European plants of Schindler to get design details and specifications which made it difficult to outsource production of S001 by local suppliers. This at backdrop of rise in transfer price and rise of import duties from 22% to 56% made matters worse.

Silvio did excellent task of assembling his team. He made sure that the appointed people were aligned with the requirements of the company and were compatible with the corporate policies and culture of the company. His choices of management seemed to be very logical and well thought of. The selection of experienced managers with a background in India was extremely needed. Another positive attribute was his desire to get buy-in, from the management team, to his business model from the start. 50% of Indian market constituted of manual elevators followed by low rise elevators (35%). Silvio did right to remain away from largest segment as Schindler had no product in manual elevator category. Surveys indicated that service was also important in buying decision, as were financial terms. The strategy that Napoli and his team were planning to adopt was to give standardized product, but follow it up with differentiated service. This seems to be an excellent strategy keeping in view the market conditions and the customer demands.

From a negative standpoint, Silvio was too determined to follow his business plan even if the market demanded adjustments. Customers were too keen and clear in their requirement and this indicates customization would be necessary as simple plain standard product won’t suffice. Silvio’s decision to club his family relocation and company setup too did not go fine. He could have done it one after another in any order to do justice to both responsibilities.

Q2. What are the strategic, organizational, and political challenges facing Napoli as a new country manager