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The Elevator And Escalator Industry In Sri Lanka Economics Essay

I am employed at ETA MELCO Executive (PTE) LTD for days gone by twelve months and I'm currently working as the Man Resource Professional. My company is a fully held subsidiary of ETE MELCO Elevator Co. L. L. C. and has its head office in Dubai, U. A. E. which is one of the ETA STAR GROUP OF COMPANIES. We represent Mitsubishi Elevators and Escalators in Sri Lanka and our activities cover the marketing, source, unit installation and maintenance of all types of Mitsubishi Elevators, Escalators, Moving Strolls and Vertical transport equipment. Mitsubishi Escalators and Elevators has earned a reputation among the innovative Elevator and Escalator produces on earth, offering 'firsts' in technology.

Let analyze in detail the Elevator and Escalator Industry in Sri Lanka and the market my company belongs in relation to the economic framework.

About the Group Company

ETA Superstar Group was established in the first 1973 and it is involved with know-how ranging from Civil Building to Electro Mechanical, Facilities Management and Elevator Executive. Today the ETA Superstar group entails in activities that cover 16 wide industry verticals. Namely: Development and Engineering, Trading, Shipping, Creation and Set up, Facilities Management, Vehicle Mobile, PROPERTY, Retail, Services, Travel and Leisure, Health Care, Aviation, Learning and Education, Insurance, Hospitality, Engine oil and Natural Gas. The group has a network of 140 entities and office buildings in 22 countries. As a group we provide job to over 72000 people. All group companies are guided through the group company's vision, "Quality is our single-minded pursuit in the use of new technologies. Inside our wide ranging diversity, we innovate consistently as we make an effort to provide complete satisfaction to our customers and shareholders". We've emerged among the largest corporate houses during the last 37 years of operations achieving excellence.

A look at the Industry

The Elevator and Escalator industry in Sri Lanka is highly depended on the structure industry. The building industry in Sri Lanka comprises of 'building, highway, bridge, drinking water source and drainage, irrigation and land drainage, dredging and reclamation and other constructions'. Based on the annual survey carried out by construction business, "the total value of believed work done by all sorts of structure activities in Sri Lanka was Rs. 56, 496 million in 2007". The building development sector was the highest contributor to the total value of work done adding 64. 1%. This contribution to the building development sector was created by the private and general population sector. The second greatest contributor to the total value of work done in the structure industry was the highway structure amounting to 25. 2% of the full total value of work done. The highest value of work done was reported from Colombo area amounting to 37. 2% of the full total output. Hambanthota and Kaluthara Districts contributed 11. 3% and 6. 2% appropriately. Jafna Region reported the lowest value of work done amounting to 0. 3% of the full total output.

A detail breakup constriction industry for the entire year 2007 is as follows:

Source: Annual Study of Construction Business 2008

To evaluate on the industry of Elevator and Escalator let's assess the detail break up of the building development industry.

Source: Annual Review of Construction Companies 2008

Elevators and Escalators are mainly utilized in Sri Lanka for high and medium climb properties that has being developed for residential rentals, hotels, shopping complexes and clinic complexes. The demand for elevator is based on the infra framework development in all these areas.

Based on the interview I needed with the Sales Manager he explained that the demand for elevators and escalators have being 238, 243, 219 and 171 for the years 2006, 2007, 2008 and 2009 respectively. This plainly helps us to understand the unexpected drop in the demand for elevators was due to the economic turmoil that influenced the constriction industry in our country in the mid 2008 and 2009. The projected annual demand for elevators for the year 2010 is expected to be 260 items.

However the swift development in the north and southern province in the united states following the 30 years of civil was is contributing favorably to the elevator and escalator market in Sri Lanka as many infra composition development programs are presently taking place. Several projects are authorities owned. Population expansion on the other hand too contributes hugely to the building structure industries. Due to scare resources such as land programmers are compelled to put on high climb apartment structures and complexes. Today even in the rural sector there are programs to up such building. Tourist industry too positively contributes to the elevator and escalator market as we have to develop many hotels and hotel apartments to keep up to the demand. Sri Lanka tourist board is presently concentrating on areas such as Trincomalee and Puthalam to be able to promote Dolphin, Wale watching and Browsing. Also areas such as Hambanthota, Jaffna, Baticalo receive preference. MEDICAL health care sector too in Sri Lanka provides high concern to the elevators which is seeing as a sector that is using a continual growth over the last decade.

Overview of the Organization

Taking into account the initial success achieved in the U. A. E. market in the early 1980s the ETA MELCO Elevator Co. L. L. C. create branch office in Sri Lanka in the name ETA MELCO Executive (PTE) LTD and 20 other countries. The Sri Lankan engineering industry became during very well in the early 1980s and this influenced the management to create businesses in Sri Lanka to provide vertical travelling facilities as there was a huge demand for products such as elevators, escalators and moving strolls and other related products for high increasing buildings, hotels, clinics, commercial buildings, domestic apartments etc. The products are supplied by Mitsubishi Firm.

Popularly known as the 'Elevator Folks of Sri Lanka' we've grown to be the biggest elevator specialist in your community enjoying a very high market show. We as a firm are singularly concentrate on growth by maintaining modern scientific changes and innovations. We have a fully fledge research and development team in Japan that keeps us kept up to date with movements that suites the industry tomorrow.

The saying that brands our products, "Quality in Action" is not just a catchy slogan but a statement of fact. We live influenced by the continual progression of technological improvement. The professionals in our company and through out the worlds practice "Quality in Action" every day. We not pay just emphasis to functional efficiency but also safeness and comfort. Were embodied by our mantra "Number one for Quality" to ensure we go over out customer requirements.

The plans of Mitsubishi Electric has made each one of these possible while fostering the ideals essential to harmonize our products and activities with the surroundings and local neighborhoods.

These will change based on customer's requirement for capacity, speed, goal, number of individuals, number of puts a stop to (floor surfaces) etc. Refer appendix for more details on our product range.

Market Share

The industry innovator in the Sri Lankan Elevator market is ETA MELCO Anatomist (PTE) LTD the agent for Mitsubishi Elevators in the country. We transfer Mitsubishi Elevators and Escalators under the HS code 84281010 - Lifts and skip hoists. Based on the import information details extracted from Data One Company our sales team analyzed the marketplace share for the year 2009 based on the number of items ETA MELCO (Mitsubishi) secured as against its competition. The data is as follows:

With mention of the analysis carried out it could be said with much certainly that this industry belongs to the Oligopoly (Imperfect) Market Structure as it includes a relatively small number of large firms. They sell differentiated products and include significant entry obstacles. Thus we have a few key industry players like Otis, Sanyo, Sigma, Dipra, Schindler, Johnson, Kone and Local Fabrications who deal with Elevators and Escalators in Sri Lanka.

Hence we export only three types of products - Elevators, Escalators and Moving Walks. We will be the only local company that exports these products from Mitsubishi we have better access to architects, clients, contractors, authorities and other programmers due to the good name we maintain safely, comfort, efficiency and superior quality. Nevertheless this industry is highly competitive as all the few players normally have to meet a demand of 175 - 200 elevators for annually. This leads to sever competition. We have to keep a breast of the ever changing technological advancements and we have to encourage our customer base on the present day products and improvements had a need to existing products every once in awhile to avoid our products being modernized or serviced by out rival companies.

Taking in to account the total market directly into consideration ETA MELCO is continuing to grow from strength to power enjoying the best market share in this section in comparison with its competitors. The business has to now focus on promoting vertical travelling products such as Elevators, Escalators and Moving walkers by moving in to the northern and southern geographical areas of the nation to remain as the marketplace leader as many developments are occurring.

The product by themselves is a luxury item and today the demand for Information on our becoming popular. The company also has it concentrate in discovering more customized products to cater to the market. In Sri Lanka by itself we have Home Elevators.

Market Structures

My findings suggest that this firm is one of the Oligopoly (Imperfect) market structure since it shows the next characteristics;

Major industry players' quantities to 9 competitors while there are few other mushroom companies that deals with maintenance of elevators and escalators. The company is relatively large compared to the overall market and has a considerable degree of market control. In a nutshell there are small amounts of large organizations.

Firms in oligopolistic establishments produce either similar or differentiated products. Equivalent product oligopolies also has learned as perfect oligopolies produce tend to process recycleables or intermediate goods that are being used as inputs in other market sectors. Notable samples are petroleum, metal and aluminum. Alternatively elevator and escalator comes into differentiated product oligopolies also is aware as imperfect oligopolies targets consumer goods (mostly luxury) to gratify the wide selection of consumer needs and needs.

Barriers to entry prevail as the company attain and preserve market control. Patents, brand names, recognition, resource possession, start-up cost, lowering average cost are the most typical barriers and the make it extremely difficult or impossible for potential companies to type in the industry.

Oligopolistic companies are diverse plus they posses several behavioral tendencies. The next behavioral characteristics were highlighted in my studies:

Interdependency among businesses as it takes in to accounts comparative size and market control. Which means that the actions of one firm will depend and make an effect on the activities of another company. The firm continues a close vision on the actions of the other firms on the market. Because of this the decisions created by one organization invariably have an impact on others and are invariably affected by others. Thus a firm's success will not only depend on its action but also those of the competitor.

A Rigid price strategy is accompanied by the company that keeps the price relatively frequent as the organization prefers to remain competitive in other ways that does not involve changing the purchase price. This is due to the fact if price reduces the competitor will try to match the same and can not take in to consideration the boosts in prices as the organizations do not gain much from price changes.

As the firm does not gain much from price competition they have a tendency to follow non-price ways of competition which include entry barriers, product differentiation and advertising, constant improvement in quality, after sale services, effective syndication, guarantees as the firm's target is to obtain additional buyers and simultaneously increase the market talk about while positioning the series on price.

Taking all businesses in the industry I wish to highlight that the organizations operate in co-operation through collusion within an oligopoly market. The factories of the companies that production elevator and escalators secretly acknowledge prices, development and other aspects in the market and react like they are operating as one organization - a monopoly. A formal approach to collusion is cartel which is found among international produces.

Operating in an Oligopoly (imperfect) market earns two important advantages to the firm. It could be elaborated the following:

The firm is commonly a excellent source for inventions that promotes advancements in technology and economical growth. This contributes to higher living specifications. These firms possess the motive and chance for advancement. Interdependent competition brings about motive and usage of abundant resuorses result in opportunity.

The firm is able to enjoy "economies of size" as it brings about a decrease in the expense of creation and prices. The company can "mass produce" at a minimal average cost. Elevators and escalators will be more significantly expensive if they were produced by a large amount of small firms that few large organizations.

Graphical Illustration of the marketplace Equilibrium

A kinked demand curve is utilized to demonstrate the brief run creation activity of an oligopolistic firm. To explain the purchase price rigidity within an oligopolistic firm the kinked demand curve is used. The kink of the demand curve is accessible at the existing volume (Qpm) and current price (Ppm).

This is basically because competitor firms won't match the boosts in cost as it'll loose its customer base and market show. It is noticeable that a tiny upsurge in price will lead to a relatively large decrease in quantity demanded. Similarly any price lowers will be matched up by competitor organizations and the businesses is unlikely to get customers or market share. If a company is to gain a small increase in quantity demanded a large decrease in price must take place. (This is not feasible to many firms)


With mention of my analysis on my organization ETA MELCO Anatomist (PTE) LTD I could state that we fall into Imperfect Oligopoly Market Composition. Hence I'll use the next results to justify my answer;

There are small amounts of large businesses (09 major industry players) in the elevator and escalator industry.

The company markets a range of differentiated products to match customer, consumer, architect, programmers' requirements and specifications taking in to account type of building, kind of elevator/escalator, range of stops (surfaces), travel velocity, capacity, and utilization thus falling in to imperfect oligopoly with no doubt.

Significant barriers to admittance prevail credited to brand, recognition, start up cost, lowering average cost, patent and learning resource ownership.

Interdependency among organizations exists.

A rigid price framework is adopted to keep price relatively constant. As any reduction in price will lead for the same action from competitor thus affecting the companies' customer bottom part and market share. Also any price increases will lead to a decrease in amount demanded thus affecting the customer bottom and market talk about.

Due to the above mentioned reason the business follows non-price methods of tournaments by promoting its brand image and reputation, quality products, personalized products, guarantees, cost effective after sales services and product differentiation.

The firm amounts competition among others through cooperation. We are able to identify collusion as a way used in the elevator/escalator industry. Price cartels are experienced in the factories that produce elevator/ escalators.

The company is heavily involved in improvements that promote innovations in technology and monetary growth.

The main factory of the business relishes economies of level through mass development thus resulting in low average cost.

Finally supplying all reasons, arguments and justification above like to conclude that ETA MELCO ENGINEERIN (PTE) LTD is working in an Imperfect Oligopolistic Market Composition.

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