Question 3
I would advise Silvio to accept the order, even though after accepting this order the company might make a loss. The most important thing for Schindler at this point is to effectively enter the Indian market, although sometimes it is better to have a loss in order to recognize long term gains in the future. Furthermore, it is also necessary to accept this order as the Indian elevator market is dominated by huge and strong competition where the four major companies occupy around 75% of the market shares. Remaining market share is left with other players including Schindler. Therefore, this is the opportunity for Silvio Napoli to gain the acceptance of the customers in India by showing them the difference between Schindler and other players in the market.
Additionally, if Silvio Napoli accepts the order then there will be more chances that it will be accepted by the customers in the Indian market as this order delivers according to the demand of the customers. The loyalty of the customer is most significant for any business as it keeps the customers in touch with the company in order to make repurchase. Although it is always better for the company’s management to bind itself to the designed business plan, but sometimes it is important to make modifications in the business strategy in order to earn the success in the future. However, this will also allow the company to target larger customers and improve its market share.
The company until now has not received much acceptance in the market, therefore, by accepting the order for a government building of the elevators that have glass walls, will allow the company to enter into an important part of Indian market. By supplying the best elevators for the government building the company might give an opportunity to the Schindler to gain more orders when the need arises. Although the acceptance of nonstandard glass wall elevator order will cost more to the company, but most importantly, it will give the chance to the company to penetrate into the Indian market.
The plan to supply $001 elevators could not be delayed as currently this was only the available opportunity for the company to get success. The company also requires outsourcing the $001 elevators to the local suppliers as soon as possible. It would also be advisable to Silvio Napoli to inform Alfred Schindler about the current situation in order to get the help and support from him. It is also required to update Alfred Schindler regarding the European plans that are not working in a way that he needs. This would allow Silvio Napoli to overcome the challenges in the country as well as to work according to the changing market conditions.
Question 4
It is important for Silvio Napoli to keep the transfer prices low and try to limit the import because of the high charges. The transfer prices and limited technical cooperation from the European plants, both are the main issues that need fast consideration as both are impacting the efforts of the company in order to pursue success. The plan of the company to outsource its key manufacturing and logistics functions is the best way for the company to avoid the increased import duties and high transfer prices. Moreover, it also provides the opportunity to the company to maintain the low overhead cost. The most appropriate option for Silvio would be to remain focused with the plan of outsourcing as this would allow the company to reduce the cost. By implementing this, there would be no need for the company to import components from abroad as the company will deal with the items that are locally available.
Therefore, Silvio Napoli should focus on its approach of outsourcing as currently it is the best available way for the company in order to avoid the high transfer and import rates. In addition to this, it is important for Silvio Napoli to update Alfred Schindler about the current challenges since the European plant of the company appears to be slow in order to respond to the needs of the Schindler India. It would be beneficial for Silvio Napoli to identify few high quality suppliers of components from India, those with whom the company can collaborate. This would also help the company to learn from these suppliers about the Indian elevator market and the ways of doing business in India.......................................
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