1. Consider the time when Otisline was just being thought of.

To retain leadership position, Otis was in desperate need to do something drastic. Do you agree or
dont you? Justify your position

To assess the need of OTIS to maintain its leadership position in the market, the competitive rivalry
needs to be analyzed as per Porters competition model for both sales and service business segments.
1. Power of buyers
1.1. Elevator Sales : High , For a small building project the elevator manufacturer was selected
by contractor, architect or the building owner, with large projects involving all three parties.
There were a number of major elevator manufacturers, presenting a gamut of options for the
buyer, thus increasing the power of buyers.
1.2. Elevator Services : Medium , In the short run, an elevator manufacturer was typically
awarded most of service contracts, but as the building aged the service contracts became
predominantly price based.
2. Threat of Substitutes : Low, There is hardly any viable substitute for elevators, short of taking the
stairs. The threat of substitutes taking into account the current technological scenario is close to
zero.
3. Threat of new entrants
3.1. Elevator Sales : Low, Elevator is a high cost item, requiring advanced manufacturing
process. The major competitors of OTIS in the elevator space are quite large organisations.
The investment required to enter elevator business makes the threat of new entrants
relatively low.
3.2. Elevator Services : High, The service market attracted many competitors due to high demand
and profitability. Any service provider could service an elevator without microprocessor
control systems. Also this category did not require any major switching cost or capital
requirements.
4. Power of Suppliers :
4.1. Elevator Sales : Medium, Since OTIS also manufactured elevators, the input materials would
be in terms of steel and microprocessor parts. The steel suppliers would have low power due
to large number of manufacturers; However for specialized microprocessors the supplier has
a distinct advantage. However, it should be noted that in high volume businesses, the supply
of materials is usually governed by contracts, protecting the buyer from disruption in supply
4.2. Elevator Services : Medium , For elevator service industry the servicemen and repair
mechanics were the suppliers, who provided their service of expertise. They are primarily
affected by benefits provided by the company, and due to presence of many service providers
they could take their skills to other company in exchange for higher remuneration. However
in the long run new hires could be trained in elevator servicing.
In light of the above, the risk overall risk of OTIS is perceived as between medium to high. In such a
scenario it is imperative to do something drastic to maintain market leadership position.