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Executive Summary The case discusses the period when Schindler, a manufacturer of elevator and escalators, first made

its decision to establish a fully owned subsidiary in India under the leadership of Mr. Silvio Napoli, a young Harvard graduate. The case highlights the difficulties faced by Mr. Napoli in setting up operations in a country, which was almost a total contrast to his home country Switzerland. As an expatriate in India, Mr. Napoli had to first acquaint himself with the culture of the country. His problems were augmented by Indias protectionist tariff policies, cost considerations and staff who doubt his ability to get things done his way. All these threatened to keep him from starting operations in accordance with his business plan and in turn threatened to finish off his career as well. Napoli found himself hard pressed for time to come up with a cost effective solution to make and sell core, standardized products in India. The case also describes how Mr. Napoli started the Indian operations from the scratch, beating the cultural differences. One of his first steps was to create a cohesive top management team who then worked as a combined unit to propagate his ideas further. This also helped him overcome the initial resistance and reluctance for the Indians to take orders from a foreigner. It also helped create a culture within the organization that was compatible with the Indian culture In this report, we have focused on the national context of the two countries, the difficulties posed by the cultural differences and even the differences in management styles between the two countries. We have tried to highlight these differences and also to understand what prevented Mr. Napoli from being able to proceed as per his plans. Finally, we have given a few recommendations that would make the journey smoother for both Schindler and Mr. Napoli. Established in 1874 in Switzerland by Robert Schindler, the company began manufacturing elevators only 15 years later in 1889. Alfred Schindler was the fourth generation to lead the company in 1987. Being young and dynamic, he transformed the companys culture from an engineering-based manufacturing company to a customeroriented service company. Within a decade, the worldwide revenues touched 6.6 Billion Swiss Francs (US $ 4 Billion), and was perceived as the technology leader in elevators and its number one producer in the world. It employed 38000 people in 97 subsidiaries, but failed to have its own operations in India. Schindler did not have a very great experience in the Indian market. Although its first elevator was installed in 1925, it was not until 1958 that it entered into a long-term distribution agreement with ECE. In 1985, it terminated its agreement and entered into a technical collaboration with Mumbai- based Bharat Bijlee Ltd. to manufacture, market and sell its elevators. It acquired 12% stake in this venture and supported it completely, resulting in it climbing up to the second spot in the Indian elevator market and a market share of about 10-15%. In 1995, Schindler took time off his regular schedule just to review the companys longterm strategy. He travelled to China, Japan and several other Far-Eastern markets to

explore opportunities. He spent several weeks in India and saw a huge growth potential. In 1996 when a separate joint venture talks did not materialize with Bharat Bijlee Ltd., it started considering options to establish its own operations in India. Napoli, who had spent nine months developing a detailed analysis of the market size, legal environment and competitive situation, and had made a business plan based on his research, was put incharge of the new subsidiary set-up. The India Business Plan Challenges Napoli worked to gain commitment to his business plan that had two basic elements: Need to sell a focused line of standard products (different from competitors strategy of customization) Ability to outsource key manufacturing and logistics function. Competition was quite fierce Otis (50%), BBL (8.6%), Finlands Kone (8.8%) and ECE (8.4%). Indian market was highly price sensitive. Service was an important factor in buying decisions. Napoli decided on an outsourcing strategy to keep overheads low with neither in-house manufacturing nor a logistics infrastructure. This would help maintain low costs as the import duties had also been increased. He believed he could set up a local manufacturing network that would preserve Schindlers quality reputation.

Strategy Analysis of Schindler Schindler's manufacturing cost structures were compatible with customization, not commoditization Silvio said that was one of the biggest challenges he faced as getting transfer costs for elevators to a price point internally where building elevators made sense. The case study details the very slow ramp for sales -- Silvio says this was a great lesson learned as a young manager. Exchange rates and unforeseen duties further frustrated market development efforts Making the transferred sub-assemblies even more expensive was the fact that there were exchange rate fluctuations favoring Indian currencies, and the duties that were increased from 22 to 56 percent for non-core goods during the first summer of Silvio's efforts. The transfer pricing and the lack of technical cooperation from the European plants are crippling the organization. Both of these problems need Silvio's immediate attention. The business plan's main objective was to develop a unique competitive advantage by outsourcing the manufacturing to local companies. This would allow Schindler India to

avoid the excessively high import duties and transfer pricing while keeping overhead cost extremely low. Silvio needs to take the lack of 3

Silvio Napoli at Schindler India: Cross-Cultural Analysis honoring transfer pricing and supplying technical information to Mr. Schindler. Mr. Schindler can use his influence to insure Silvio can meet the very aggressive time frame that has been established. Creating a sourcing function in India took longer than expected To overcome the duties and equalize the exchange rates, Silvio and his recruited management team started sourcing efforts in India. These efforts took more time than expected. Cultural differences were immediate and costly This sounds like common sense, but Silvio said its one thing to say it, and quite another to live it. From reading the case study its clear that Schindler manufacturing sees high customization driving higher gross margins, and that this new Swatch strategy is a definite threat to their approach to business. Don't confuse tactical wins with strategic victories in foreign markets Within six months Silvio had opened offices in New Delhi and Mumbai, hired five Indian managers, each one very skilled in local elevator markets, and begun to aggressively implement the business plan for the subsidiary. Still, no new business was won. Tactically the execution had been perfect, yet strategically the swatch strategy was not winning any deals. Bottom line: Silvio should sit down with his management team and re-evaluate the business plan. One area of concern is centered on the intended market place. Silvio's business model requires high levels of growth, even within the first year. The business plan also laid out a business model that had never been attempted in the Indian Elevator market. Lastly, neither the business plan nor Silvio allowed flexibility. Flexibility is generally required in a highly competitive market. Each of these items are obstacles that need to be conquered prior to experiencing growth. Most of these items are in direct conflict with a target of high growth in a short time period.

. Understanding Cultural and Management Challenges faced by Napoli Through Hofstedes model Here we are analyzing the culture of Swiss and India using the Hofstedes model. We consider only the French - speaking Swiss as it is

relevant to the case (Exhibit 2) Switzerland as per Hofstedes analysis has: . High power distance (French speaking), while the German speaking segment has low power distance 6

Silvio Napoli at Schindler India: Cross-Cultural Analysis Strong uncertainty avoidance (well-oiled machine) High Masculine and individualistic attributes Short term orientation While India has: High power distance Weak uncertainty avoidance (Family tribe) High Masculine and collectivistic attributes Long term orientation Through Trompenaars model We now use the Trompenaars model to analyze the cultures of these countries Parameters Universalistic vs Particularistic Communitarianism vs Individualism Neutral vs Emotional Specific vs Diffuse Ascription vs Achievement Time Environment Application of the models to Schindler Switzerland Universalistic Individualistic Emotional Specific Achievement Synchronous, future oriented Inward directed India Particularistic Communitarian Emotional Diffuse Ascription Sequential Outward directed

The Swiss are very high on uncertainty avoidance and hence cannot tolerate high risks. This can be seen in the case as illustrated by the reactions displayed by the Swiss colleagues of Napoli when they felt he was taking a huge risk by undertaking the project in India. However, Italian born Napoli unmindful of the future outcomes took up the project in India. Napolis Indian staff described him as driving very hard, impulsive, and over communicative. All these are traits attributed to his Individualistic nature, focusing on deadlines (Future oriented) and highly inward directed. Despite his friendly relations with the managers, it can be noticed that his subordinates still hold him as a paternalistic figure and refer to him as boss. There seems to be a clear divergence in his management style and the one desired by his Indian staff. 7

Silvio Napoli at Schindler India: Cross-Cultural Analysis Silvio Napoli as an Italian Another dimension of analysis is to look at Napoli as an Italian who graduated from US. Again using the Hofstedes dimensions and the score of Italy (Exhibit 2), we see certain attitudes and behaviors of Napoli towards being an Italian and not a Swiss as he supposed to be. Power Distance - Italy features lowest in the power distance indicating that they are more informal and do not give much importance to hierarchy. This is evident in Napolis decision (along with the top management) to have an informal, open-door policy towards employees at various levels. Individualism & Masculinity - Italy tops on both closely followed by Swiss Uncertainty Avoidance - Clearly the high uncertainty avoidance of both Italy and Swiss is exhibited is detailed planning that is done and Napoli revisiting the plans time and again. Long-term Orientation - The short-term orientation of Napoli is exhibited as he pushes his strategy of core, standardized product in a market that values customization. The Indian managers, on the other hand, were not willing to let the customers go and have accepted the order for a non-standard elevator. The Leading Team Silvio Napoli has been very careful in choosing the right people for key positions in the newly formed Indian subsidiary. Though he found them as a good fit, he did not consider various aspects before their on-boarding. Age Hierarchy - Indians give importance to the age and are quite hierarchical especially

during 1998 it was more prevalent. The statement that M.K. Singh makes on him working with someone of low age and experience can be interpreted as sarcastic as well. Focus - The focus of business differs, in general, among the Indians and Europeans. The Europeans are process-oriented whereas Indians have a tendency to be more targetoriented. When Napoli wanted the subsidiary to focus on standardized products, the Indian managers, looking at the sales lag, decided to accept orders for non-standard products. Employee Confidence - The employees of the Indian subsidiary seems to subscribe more to M.K. Singhs way of polite and calculated management than Schindlers aggressive and open management. Employees motivation is affected greatly by the leadership style and it is essential to have a leadership that they are comfortable with. Otis Culture - Most of the employees including few in the top management have worked in Otis which is a US based elevator company. The impact of Otis culture on them is another aspect to consider and Napoli has to decide how he would remove it and imbibe Schindlers culture into them. 8

Silvio Napoli at Schindler India: Cross-Cultural Analysis Managing Expatriate Assignments One of the dimensions in this case that we have tried to examine is how did the organization manage Napolis assignment which was of great significance to the company strategy. The following analysis tries to understand how well Schindler handled the entire expatriate assignment lifecycle and whether the current business and cultural challenges being faced by Napoli was on account of shortcomings in this regard. Expatriate Selection-The first question that needs to be tackled is that how to identify the right man for the job. Did Schindler do the right thing by selecting Napoli for this assignment? The following parameters can help us assess this decision Selection Criteria Our Assessment

Cultural Toughness

This parameter involves how well an individual can withstand cultural shoc assumed that since Mr. Napoli was young he will be flexible to cultural chan that reality was totally different. Mr. Napoli represented a typical western st aware of the organizational relationships. He depended on Mr. Singh for und

Physical and Emotional

Silvio Napoli was young and was in good health based on the information g

Health Age, Experience, Education

could handle the hardships.

Mr. Napoli had done his MBA from Harvard and had performed well in the successfully managed an important project for his organization still he did n complex assignment like India

Motivation for foreign assignment

Mr. Napoli was highly enthusiastic about this project and had done the who plan. When other candidates refused, Napoli was given the offer which he a the beginning

Family Issues

Mr. Napoli relocated to India with his wife and two children. His wife had c headquarters were in Mumbai. Mr Napoli kept shuttling between the two cit family encountered a lot of health issues and he never felt settled which affe

Silvio Napoli at Schindler India: Cross-Cultural Analysis Selection Criteria Leadership Style Our Assessment

Mr. Napolis leadership style was centered around hard factors like deadline for results etc whereas in India soft factors like managing relationships, exer there was misfit between his leadership style and the requirements of his Ind

Interpretation - From the above table it is clear that with regards to leadership style, cultural toughness and experience Mr Napoli was not the ideal candidate. Further as a family man he needed greater support which was lacking and hence, a lot of time and energy was wasted by him at this front. However the organization could not find suitable candidates for this position and decided to offer it to Napoli on account of his education, age and motivation in drawing up the business plan and willingness to work on this assignment. Managing the Adjustment Process - It is clear from the case that Silvio Napoli was on his own. He received no support from his organization with respect to managing housing, education and health requirements of his family. He spent a lot of time in arranging accommodation and schooling for his children. Further, he decided to have his third child in Italy. All this took a toll on his work life and added to the stress. Further, he had no connection with the headquarters. His boss Luc Bonnard could have been supportive during the transition. Training - Training, a significant aspect in any expatriate assignment was completely missing here. Mr Napoli had no prior experience on working on an international assignment. Hence, it is imperative that he be trained on the cultural issues. Further he

was new to India and needed to be acquainted with the business nuances of the country. A technical element should have been introduced as he was a generalist and may not have in-depth knowledge regarding handling marketing and operations for elevators in emerging markets like India. Frequency of Updation - Napolis entire strategy was based on transfer pricing and government regulations, whose details were outdated. For any expatriate assignment to be successful, he should have kept himself tuned to the dynamic changes of the emerging market. Performance Appraisal - Mr Napolis business plan outlined a target of 50 units to be installed in the first year. However it seemed unlikely that this target would be achieved as his sales team had committed to orders that required significant modification of his product as against the standardized version envisioned by him. Also a new transfer price system adopted in the company had raised costs while the budget increased the expenditure involving imports of specific non-core goods by a whopping 24%. The assignment was a high risk career move for Silvio Napoli and given the external factors that were impeding his performance he felt a high 10

Silvio Napoli at Schindler India: Cross-Cultural Analysis amount of stress. In addition, he had very little contact with the headquarters and was primarily on his own. As a result he faced the dilemma whether the headquarters would understand his situation or take an adverse stance which may affect his career progress. Cultural Issues Faced Napoli had faced a hard fought battle between family relocation and company start-up in India. Though he and his family had been on a look and see visit to India, Napoli still found it difficult to build trust with new faces and had to adapt his management approach accordingly. Feasibility of the business plan: Several of Napolis managers were not convinced with his business plan particularly with the strategy of selling only standard elevators. The concept of outsourcing in this industry was also new. As a result, during his visit to Italy, key managers in India signed contracts that were against the strategy of the business plan. Impact of Transfer pricing on costs: The new Indian Budget had increased import duties on specific non core goods including elevators. This could not meet Napolis strategy of containing costs to the extent he had planned for originally. Local sources for elevator components could not meet requests coming from

Schindlers European plants. This shows Napolis lack of understanding of Indian business culture. Indians are very complacent when it comes to time. They always push things to the last minute. But this is not the way Napoli functions. This factor acted as a huge deterrent to Schindler Indias smooth functioning. Another characteristic of Indian workers is that they over-promise but under-deliver. When it comes to projects, they invariably bite more than they can chew. This characteristic goes against the Swiss habit of precision delivery. Indian top management are usually willing to customize while Napolis irritation of not sticking to the business plan can be attributed to the Swiss fetish for orderliness. Clubbing this along with their task oriented nature may give the reason why the Indian staff considered Napoli to be a hard- driver, impulsive and impatient (while Singh to be friendly, easy going and patient). In terms of communication, India tends to be high context while the Swiss appreciate a low context communication style which may be why Napoli was considered over communicative. 11

Silvio Napoli at Schindler India: Cross-Cultural Analysis Is there a Solution? Yes, there is a solution. First, the strategy should be revisited with inputs from the top management of the Indian subsidiary and considering the cultural, economic and technological elements of India and Schindlers target market. Once the strategy is revisited, the top management of the Indian subsidiary should be empowered to operate and take decisions on their own to a certain extent. As a VPS for Asia Operations, Napoli should focus only on the high-level regional decision making. These steps would take care of the cultural issues as most of them are bound to be addressed at the strategy formulation level when all the stakeholders are involved. Conclusion The case brings out the nuances of culture among the countries in which a global business is set to operate. A detailed analysis on the cultural dimensions has been conducted through Hofstede and Trompenaars model. A brief picture of the national

context is given to understand the environment that influences the issues faced by Silvio Napoli. After analyzing the backgrounds of the countries and people involved, the cultural issues are identified and a very high-level solution has been provided.