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KONE SWOT & PESTLE Analysis

ID : 52293153 | Oct 2017 | 11 pages

COMPANY PROFILE - KONE

Business Sector : Engineering and service

Operating Geography : Finland, Europe, Global

About KONE : KONE Corporation is an International engineering and service company, founded in 1910. It is headquartered in Espoo, Finland. It is operating in more than 60 countries around the world, serving 450000 customers and employing over 52000 people. It has 8 global R&D centers and 7 global production sites and a worldwide network of authorized distributors. It evolved as global leader in elevator and escalator industry. It also provides innovative solutions to new and existing buildings for the smooth people flow.

KONE Revenue : $8.784 billion – FY ending Dec 2016

Competitive Analysis of KONE

The SWOT analysis for KONE is presented below:
Strengths
Weaknesses
1. Strong brand in elevator and escalator industry
2. High customer retention
3. Sustainability in its operations
4. Expansion through acquisitions
5. Continual investment in people and innovation capabilities
1. Exposed to strategic, operational and financial risks
2. Less expansion in lower-tier cities
Opportunities
Threats
1. Expansion of business to other nations
2. Entry to new market segments within industry
3. Huge potential in modernization and maintenance markets in North America
4. KONE is a data intensive company

1. Strong competitors across geographical areas
2. Declining orders more than anticipation

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Detailed SWOT Analysis of KONE

Strength

1. Strong brand in elevator and escalator industry: It is the only elevator and escalator building company that has ever entered top 50 of Forbes list. It is ranked as one of the World’s most innovative company by Forbes magazine. It has evolved as a pioneer within the industry with innovation being the key success factor. KONE is also setting a benchmark in the industry with its strategic moves. It entered a new phase for the current period called ‘Winning with customers’ with the lofty objective of differentiating its offerings by putting needs of customers and users at the center of development. It offers modernization solutions for aging equipment. KONE is trying to accelerate the speed of launching its new suit of solutions to the market by close collaboration and co-creation with clients, vendors and stakeholders.

2. High customer retention: It maintains high customer retention by offering services in new equipment, maintenance and modernization categories to add value to the lifecycle of any building. It strives to make people’s journey safe and convenient in taller smart buildings through collaborative innovation and new competencies. It offers customer-centric solutions and services. It serves customers with a 'true service mind set'. Also, it follows fast and smart execution of ideas due to its passion for performance and delighting customer. KONE has defined these as some of the strategies in its "Ways to Win" approach for accomplishing its goals.

3. Sustainability in its operations: It offers innovative and sustainable new equipment solutions. It strives to strengthen its positions as industry leader in sustainability by supporting green building initiatives and transformation of urban environment into smart eco-cities globally, primarily through innovations and resource efficiency. It continues to develop energy efficient solutions through environmental excellence program. CDP, an international non-profit organization focusing on environmental performance, identified KONE as a World leader for its actions in response to the environment. They ranked 56th in the Forbes List of most innovative companies which is another feather in their hat.

4. Expansion through acquisitions: KONE has spent 43.7% of its total capex expenditure in 19 acquisitions by the end of FY 2016. The acquired businesses are specialized in elevator, escalator and automatic building door business. Its larger acquisitions included majority of stakes in Citylift in Spain, City Elevator Company in United States, acquisitions of maintenance businesses in Europe and in the United States. In 2015, KONE's acquisitions of Advanced Elevator Technologies, of Boston, and Continental Services LLC, of Defuniak Springs, Fla., both of which have expertise in elevator maintenance, repair and modernization strengthened its presence in Boston, Florida and Southern Alabama markets, respectively. Expansion through acquisitions is one of the key strategic factors that the company believes in to strengthen its operations.

5. Continual investment in people and innovation capabilities: R&D expenditure went up from 121.7 million EUR in 2015 to 140.5 million EUR in 2016. KONE opened a Centre of Supply Excellence in 2016 which was home to an R&D department which help strengthen capabilities from product design to installation. KONE's R&D is now globalized, with centers in all continents and a footprint close to the client. In 2016, they expanded R&D capabilities in Chennai, India, and Allen alongside an extension of Tytyri high-rise testing laboratory and launching a 236m long test tower in Kunshan.

Weakness

1. Exposed to operational and financial risks: KONE is exposed to risks that may arise from its operations or changes in the operating environment. Weakening of global economic environment could result in deterioration of market environment. Digitalization and new customer requirements and ecosystems will have significant impact on the industry, thus giving rise to more competitiveness in the companies involved. Majority of its sales is denominated in currencies other than Euro, which exposes it to risks arising from foreign exchange rate fluctuations. Due to its strong brand reputation, incidents of product quality issues will have high impact on the company.

2. Less expansion in lower-tier cities: Though modernization of market continues to grow in higher-tier cities of the world, the demand in lower-tier cities is less relatively. KONE is expanding rapidly in high-tier cities until now but not in lower-tier cities, due to which its reputation is not that widespread in these cities. Also, soon a saturation point will reach before urbanization has carpeted most higher-tier cities and there will be a fervent need to look out for unexplored territories in lower tier cities.

Opportunity

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Threat

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The PESTLE / PESTEL analysis for KONE is presented below:
Political
Economical
1. Local regulations and geopolitical tensions1. Economic environment
2. Foreign exchange rate fluctuations
Social
Technological
1. Increasing Urbanization1. Technological disruption
2. Making elevators and escalators smarter
3. Renewed approach to innovation
Legal
Environmental
1. Issues with suppliers1. Carbon footprint
2. Energy consumption
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Detailed PESTLE Analysis of KONE

Political

1. Local regulations and geopolitical tensions: Engineering and service industry has various local regulatory requirements. Sudden changes in regulations, equipment standards may result in need for process or technological adjustments that could adversely affect in KONE’s profit. Increased geopolitical tensions or rise in regulatory protectionism will result in challenging market conditions that will impact company’s operations. Also, changes in trade agreements or restrictions in trade policies by government will also impact operations of the company.

Economic

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Social

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Technological

1. Technological disruption: Upcoming technologies and connectivity add value to the customers in new ways that meet their specific needs. Thus, with increase of technology, KONE can increase speed of its operations and collaboration with customers. Also, it is important for the firm to anticipate and update the technological changes as per the technological developments to provide businesses with best quality products and services.

2. Making elevators and escalators smarter: By introducing microprocessor control, controlling key functionalities automatically, integrating access control and elevator groups with the aid of destination control systems, introducing automatic warning capabilities and remote diagnostics and most profoundly boosting operational functions with artificial intelligence, KONE equipment surely have a long way to travel. Monumental innovation was brought about by the introduction of UltraRope – steel rope was replaced with carbon fibre rope, elevator ride was doubled upto 1 km besides adding flexibility and value to the structure.

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Legal

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Environmental

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Copyrights and Disclaimer

KONE SWOT and PESTLE analysis has been conducted by Kancharla Venkata Sri Harshita and reviewed by senior analysts from Barakaat Consulting.

Copyright of KONE SWOT and PESTLE Analysis is the property of Barakaat Consulting. Please refer to the Terms and Conditions and Disclaimer for usage guidelines.