Silvio Napoli at Schindler India

Silvio Napoli at Schindler India

Amit Chanchal and Alicia Girot (Strategy and Management) ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Question 1

Schindler Schindler ma de the right choice in selecting Slivio Napoli as general manager of I ndia operations. operations. Indeed: y

Napoli was working at Schindler, and had a strong influence on the corporate executive committee, so he was credible as being named to run operations in India

y

His

9 months experience wi th BCG gave him a good knowledge of Indian

business scenario. y

Finally,

he knew the company, people and products, but was also a young and

flexible generalist who was willing to go to India. Question 2

Luc Bonnard must have been really disappointed discovering that the Indian subsidy  has not sold any elevator since the beginning of its business, 8 months earlier.

Nevertheless, Napolis objective was quite defensible: Schindler Schindler was the world leader in elevators elevators and saw i n India a great potential of  growth. This market is quite new and its needs are not as customized as existing subsidiaries. subsidiaries. So, Napolis Napolis goal wa s to test a new production production approach (be it compar ed to Schindler current activities or to Indias elevator busi ness) by standardizing standardizing the products and outsourcing. outsourcing. If this strategy was working it could be implemented elsewhere. To achieve this goal, Napoli recruited multi-faceted and high potential team, and created a lean and efficient organization. But, this organization was too unusual for the Indian market, and was not absolutely absolutely shared by Napolis team, who tended to accept to provide customized products. products. Then, Napoli didnt didnt expect a costs increase that jeopardized his outsourcing outsourcing stra tegy. Thus, Napolis Napolis initial objective w as really defensible but he realized that he was acting in a hostile environment and that he should have been wiser running a less unusual business. As Luc Bonnard, we would advise him:

y

to handle the current opportunities

y

to limit outsourcing t o local suppliers

y

to communicate a lot on its standardized offer, since the Indian market is r eally price sensitive

Question 3

Silvio business plan has been centered on two elevator models S001 and S300P which are highly standardized. When looking at prospects in India m arket Silvio considered that few adjustments in the design would meet the required Indian standards. After having orders specifically for elevator with glass walls, Napoli has two alternatives one to stick to his business and other to accept the orders and supply elevators with glass wall. From

the case it seems that though Napoli had understood the requirements in terms

of standards but he has not understood the market very well. In our opinion Napoli should accept the orders for elevators with glass wall and carry out an extensive market research to find out more about the consumer preferences and refine the product offering. As mentioned in the case , initial steps which includes engineering, production and installation involves 1/3 of labor and accounts for only 20% of profits. It would not be very difficult to allow for some customization in the initial stages. Certain level of customization on the standard product would be a good idea if it is economically feasible. This would ensure that schindler has more differentiated product in the market and with time wi th better understanding of the market they would be able to propose better product offerings.

Question 4

The issue of technical transfer and transfer pricing is very crucial one in this context. With increased import duties increase from 22% t o 56% and new transfer costing system Schindlers Indian operation would be hit severely. Only way which is seems reasonable now is to outsource to l ocal sources. The technical cooperation from Europeans plants too is not available at the moment and their response has not been quick. In the given scenario we suggest that Silvio should pressurize his European counterparts to provide them with the design details and production specification. If the negotiations dont work out and Silvio is not able to get the details he should offer to pay for the technology transfer and get the needed designs and specification. This would send a clear signal of the seriousness of  the matter.