Mr. Silvio Napoli joined Schnidler in 1994 after completing the MBA program at Harvard Business School. His position was quite important, and he was asked to directly report to the Chief Committee. The company saw great potential in him and viewed him as a person they could trust. So when the company decided to open a wholly owned subsidiary in India, Mr. Napoli was made in-charge of the same.
Mr. Napoli had a tough time adjusting in India with his newly started married life. He also had a hard time trying to find managers who would best suit the work profile at offer. There was quite tough competition as well from the existing players. Therefore, it was decided that the product would be uniquely structured and marketed. However, when the scheme was to be implemented the various variables went wrong such as break even costs, increase in transfer prices of outsourced local parts, government approvals etc. Mr. Napoli had set a first sale target of 50 units although he was yet to sell even one.
Strategic factor analysis
Brand image is the most important parameter for the Indian market and, for that sales calls need to be increased swiftly.
Perhaps the most important factor is that the Indian market is that it is extremely price sensitive. Therefore, Mr. Napoli has to ensure that his organization keeps strictly to its break even costs. Now that transfer prices have been dramatically increased and his European counterparts are not of particularly great assistance, Mr. Napoli should look at reconsidering the outsourcing of small parts, and rather buying them in the local market, before they can afford to set up a small manufacturing unit of their own like Otis.
Another strategically important factor is that the Indian customer looks for value for money as well as to the reliability of the product. Better customer feedback can also prove to be excellent marketing. Therefore, it is important, like all the existing players, to have an extensive help and support centre. This is also important as more than 80% of the profits are made in the period post-sale and installation.
Finally, it is important to keep in mind the structure of the Indian market. Close to 85% of the Indian market is low rise or below. The high rise market is only 1% currently. However, the present model adopted by Mr. Napoli focuses on high rise and to some extent on the middle rise. This must change, if the company has to achieve its break even costs and sales targets.
Many of the variables on which Mr. Napoli’s current model was based have failed him, and therefore it is imperative that he is open to modifications and that his team comes up with viable alternatives soon.
Firstly, the target audience needs to be changed, at least for the time being. There is no strong existing player in the lower range segment, and this should be exploited by Mr. Napoli and his man. They need to achieve their sales targets so as to establish their presence in their market, after which they can always diversify their product.
Another alternative which must be looked at is for the outsourcing of small parts. Due to the new developments, it is not economically viable to import them from their European counterparts. Further, it adds no brand equity to the product. It is much more economically wiser to buy them locally, until they are in a position to set up a plant of their own.
An alternative needs to be found to the present structure of the organization. The HR Manager is clearly failing to do his job effectively, which is to bridge the gap between Mr. Napoli and other employees due to the cultural barrier. Mr. Napoli can either look at a re-hiring of the HR Manager or a change to the organizational structure itself.
Finally, an alternative needs to be developed for the reporting system presently available to Mr. Napoli. At present, he reports directly to the Chief Committee back in his home country, which clearly lacks effective communication. The Indian operations being a wholly owned subsidiary of the parent company, it is important to have some stakeholder presence in India or at least India-focused.
It is recommended that the model decided by Mr. Napoli be entirely changed and the operations of the company delayed by a few months. A rethink of the strategy is essential. The product needs to start off as one targeting low rise and slowly moving up once a base in the local market is built.
The financial sanction from the parent company must be raised so that a support centre and possibly a local manufacturing unit can be thought of. These are vital for the Indian market.
The HR Manager should be replaced with an Indian who has spent some time in Europe, preferably Switzerland. This would help in removing the cultural barriers between Mr. Napoli and the rest of his employees.
The model as it currently stands is highly unlikely to succeed given that it has already hit so many roadblocks even before inception. It is better to re-think the whole of it rather than tweaking only few parts of it as the variables on which it depends are largely interdependent.
However, all is not lost for Mr. Napoli and his men. The Indian market is a growing one, and is bound to be an excellent investment in the long run. However, unrealistic models such as these can lead to wastage of considerable amount of resources without much business headway.