China Case Study: KONE
As one of the most successful foreign companies in the Chinese market, the Finnish company KONE is a striking example of how the right strategy can turn your business into remarkable profits.
KONE in China
Since its market entry in 1996, the Finnish company KONE has seen rapid growth in the past 20 years. It has become the market leader in elevator and escalator solutions in China, which accounts for 60% of the global demand and contributes 30% to KONE’s global business (~3bn EUR in 2020). As of today, the company has around 20,000 employees deployed in 600 different locations in China.
Concerning its sales share, KONE is in China currently still focused on new equipment sales (installation model), but aims to increase the share of service business to up to 40% over the coming years:
Several key factors (laid out in a clear China strategy) led to the success story of KONE, which is also Finland’s largest company operating in China:
- Development of products ‘in’ China ‘for’ China: Mainly local production with adoption to local needs, including sales of latest product technology in the Chinese market
- High level of localized management team in China: Close collaboration between global and local team with high emphasis on local talent development
- Nationwide footprint: Coverage across tier-1 to tier-4 cities with focus on less-visible projects such as residential housing
- Expansion of service network: Forerunner in China of selling service in combination with equipment; wide national footprint in order to be close to the client
- Implementation of a dual brand strategy: Giant KONE, subsidiary brand of KONE, mainly used in tier-3 and tier-4 cities to compete with domestic competitors, while the brand KONE is mainly used in tier-1 and tier-2 cities to compete with global brands
- Governmental alignment and partnerships: Aligned with governmental goals to cut carbon emission and close partnerships with real estate developers
The Chinese real estate market is expected to grow at a CAGR of 6% from 2019 to 2024, fueling the demand for elevator and escalator solutions within the country. Given the continuous growth, KONE has well-positioned itself in the Chinese market with the right business strategy.
As China is playing an increasingly economical role and offers large business potentials, foreign companies need to reconsider their China business and establish a second-home strategy.
With a strong expertise in the fast-evolving Asian market, EAC has helped various companies in developing and executing their China strategy. Contact us for more details or a first exchange on how we might be able to support you