Otis Elevator Korea rides on early success

Early start, great business model continuing success indicators for his company, says local unit chief

Sometimes, it’s good to be first.

The multinational leader in the elevators, escalators and moving walkways business began operations in Korea more than 100 years ago, when it installed the nation’s first service elevator in 1910 for the Bank of Korea and the first passenger elevator for the Westin Chosun Hotel four years later.

And Otis Elevator Korea has continued riding on its early success.

“It’s an absolute of our business to (build) on our good reputation, and we are particular about landmark buildings we try to win,” the current president and CEO, Ken Muller, said in an interview with The Korea Herald in Seoul.

The Otis Elevator Co., a subsidiary of the UTC Group, offers a wide selection and top-of-the line products. While much of Otis Elevator Korea’s business deals with elevators such as GENII, one of the “greenest” and most environmentally-products currently available in the market, it also makes, installs, and services “moving walkways,” or escalators.

Worldwide, the international branches of Otis Elevator Co. have installed elevators in locations such as the John Hancock Center in the United States and do business in approximately 180 countries, according to the company.

Its elevators in Korea so far have been installed in landmark locations such as ASEM Tower, 63 Building and Incheon International Airport. Projects in the pipeline include Lotte World Tower, which upon completion will be “the second-tallest building in the world,” Muller said.

This strategy of targeting important landmark buildings has proved successful, he said, because the good reputation has a trickle-down effect.

The bulk of the new construction business is in low-rise buildings, “where all the (business) volume is,” he said. So making a good impression through its landmark skyscraper buildings helps win other contracts down the line, he said.

The Korean branch of the company offers both construction as well as services in the vertical transportation business.

Both its service as well as construction sides currently occupy about 25 percent of the market in Korea, the Australian business executive said.

The construction side offers new installations for high-rise and low-rise buildings in Korea, according to Muller. This means that the company works in partnership with builders, general contractors, developers and architects to install its products.

The company is also unique in that it operates two factories, one in China and one in Korea, to manufacture and install these products for customers in countries other than Korea, Muller said.

It is unusual for a local branch of a foreign company to export locally-made products to other markets, he said.

But even with high-quality standards, products can break down over time, so “elevators older than 15 years need to be refurbished and modernized to (current guidelines),” he said.

The local branch chief credited its strong service division with helping the company survive through rough market conditions.

In terms of the business model, the installation side of the business goes through “peaks and troughs. It’s unstable,” Muller said.

But the service business is “always stable, (and helped the company) last through world wars, recessions, depressions and (more),” he said.

Otis Elevator Korea is in the top five of Otis (Global)’s service portfolio, so it’s “clearly an important part and market” for the parent group, according to Muller.

The company also operates under what Muller dubs a “multi-domestic” business operations model.

This means that while the Seoul regional office does receive overall guidance from headquarters, the actual running of daily operations is geared towards the domestic office, and offers more flexibility over the long run, he said.

Muller said his current outlook for the domestic industry is very positive.

He expects high-rise construction to boom again starting from 2013, and the overall Korean economy to bounce back from what he called a “depressive” period that started in 2008.

The Australian business executive also said that he expects the marketplace conditions to change as Koreans grow more aware of environmental concerns.

“There’s a growing environmental awareness happening in Korea...but it’s not as progressed as other regions (such as Europe and Australia),” Muller said.

Currently, Muller said that Koreans seem to take notice of environmental concerns only when “it gets really hot,” due to concerns over insufficient energy reserves.

But he expects Korea to reach a tipping point where this environmental awareness will grow and spread to the general population, sometime within the next two years.

“It’s a fairly short progression, so (Korea) needs to be fully prepared,” he said.

Otis Elevator Korea will be well-positioned to help when the company reaches this pivotal crisis point. Its factories already produce eco-friendly products such as “GenII,” which fits LEED standards and acts as an energy generator for buildings in which it’s installed, conserving up to 75 percent of energy, according to the company.

Muller said he also hopes the transparency of regulatory controls in Korea will change in the future.

“Lawmaking is not as transparent (in Korea) as it is in other countries,” which does not give companies, especially foreign ones, enough time to lobby or comment on laws before they go into effect, Muller said.

But in general, Muller said he is satisfied with business conditions here.

Its global headquarters and affiliates have achieved many “world firsts,” and Otis Elevator Korea plans to work even harder in the coming years to set future benchmarks, Muller said.