Finnish Chamber of Commerce in Japan

FCCJ LUNCHEON MEETING 28 MAY 2004

Theme:
"The Kone-Toshiba Alliance"

Speaker: Thomas Hietto, Vice President,
Toshiba Alliance Development, KONE Corporation

RECAP

Strategic Alliance in Elevators and Escalators

Consolidation in the global elevator and escalator business has been dominating the market environment since the 1970s. Today the global markets are dominated by four Western and four Japanese companies.

The Japanese elevator and escalator market is dominated by five companies with 90% share of the total market, which makes it very difficult for a new company to enter.

Scale merit is a very important factor for success in the elevator and escalator business. However, both organic growth and growth through M&A have become more difficult. Therefore, the companies need to find new ideas in order to improve competiveness. For KONE, one of these has been the KONE-Toshiba alliance.

KONE and Toshiba formed a strategic alliance in 1998. In connection to this, KONE granted a license to Toshiba to manufacture and sell MonoSpace(r) machine-room-less elevators in Japan. Soon after, new forms of technology cooperation, such as joint development of escalators and component cross-sourcing, were started.

In December 2001, the companies reached a historic agreement that provided for an exchange of shares and an extension of Toshiba’s license to market elevators based on KONE’s innovative MonoSpace? elevator technology. According to the agreement, KONE acquired a 20% share in Toshiba Elevator and Building Systems Corporation (TELC) and TELC a 5% share in KONE Corporation. The 2002 KONE annual general meeting gave TELC one seat in the KONE board of directors. Similarly, the 2002 TELC annual general meeting gave two board member seats to KONE.

The newest form of cooperation was agreed in this year's April in the high-rise elevator business and as the first step, TELC will license its double-deck elevator technology to KONE.

Because of the different cultural background and home markets, KONE and Toshiba have faced some challenges in the cooperation. From experience, decision making process seem to be somewhat different in the two companies. There have also been challenges in communication. Nevertheless, during the years of cooperation the companies have learned to know each other better and how to work together. Human relationships and the role of integrators have played an important role in bringing the partners closer to each other.

For more information about KONE Corporation, see http://www.kone.com/en/main
For more information about Toshiba Corporation, see http://www.toshiba.co.jp/index.htm
For more information about Toshiba Elevator and Building Systems Corporation, see http://www2.toshiba-elevator.co.jp/elv/index_j.jsp

For questions concerning KONE and TELC alliance, please contact Kaori Kusumoto (KONE Japan), kaori.kusumoto@kone.com

IMAGES FROM THE MEETING

New FCCJ President Mika Mäkinen presides over his first luncheon meeting... successfully!	Thomas Hietto and Kaori Kusumoto from the Alliance Development Team.
Mr. Hietto starts his presentation	The main themes of the presentation are:...
Audience concentrating on the presenation...	...more audience follwing carefully.
Commissioner General, Mr. Pertti Huitu gave a short update of the Nordic Pavilion at EXPO 2005 AICHI. Left Ambassador Eero Salovaara, center former FCCJ President Timo Varhama.	Mika Mäkinen thanks Juha Markkanen, Counsellor at the Embassy of Finland, leaving Japan this summer, for his support of, and great cooperation with FCCJ.
The luncheon was attended by 29 members and guests