The Strategy and Structure of International Business

1
The Strategy and Structure of International
Business

• Discussion Section
• March 15, 2007
• Brian Chen / Sanny Liao

2
Agenda

• Return SMS/Keiper Case
• Diebold Case
• Review Class/Discussion

3
Grade Distribution

• Overall, great improvement in the quality of case
  write-ups
• Mean 20.59
• Max 25
• Min 10
• St. Dev. 3.03
• Median 21

4
Diebold

• Facts of the Case
• No initial interest in international business
  focused on US firms
• Began tentatively to expand into foreign markets
  via distribution agreement with Philips
  (manufactured in the US and exported to foreign
  countries after Philips made the sale)
• In 1990, Diebold pulled out of agreement with
  Philips and established JV with IBM.
• After 1997, Diebold purchased IBMs share
  (creating a WOS).
• Note WOS thus far was only a distributor
• Then Diebold decided to produce locally in
  addition to distributing locally
• To do so, Diebold went on an acquisition binge
• Brazils Procomp Amazonia Industria Electronica
• Frances Groupe Bull
• Hollands Getronics
• JV in China
• Diebold benefited from its purchase of Procomp by
  finding a new related business electronic
  voting machine
• What problems did Diebold face with their new
  subsidiary (current event)?

5
Discussion Question 1

• Before 1997, Diebold manufactured its ATM
  machines in the US and sold them internationally
  via distribution agreements, first with Philips
  NV and then with IBM. Why do you think Diebold
  chose this mode of expanding internationally?
• Diebold was able to use first Philips and then
  IBMs distributions systems, knowledge about
  international markets, and reputation.
• What were the advantages and disadvantages of
  this arrangement?
• A foreign consumer could trust IBM more easily
  than a brand of which it had never heard. These
  were advantages. Disadvantages were that Diebold
  could not control the attention its products
  received from Philips and IBM.

6
Discussion Question 2

• What do you think prompted Diebold to alter its
  international expansion strategy in 1997 and
  start setting up wholly owned subsidiaries in
  most markets?
• Diebold faced a saturated domestic market and
  increasing foreign demand, especially in
  developing countries like China, India and
  Brazil.
• Why do you think the company favored acquisitions
  as an entry mode?
• By pursuing acquisitions, Diebold could get a
  running start in these developing markets.

7
Discussion Question 3

• Diebold entered China via a joint venture, as
  opposed to a wholly owned subsidiary. Why do you
  think the company did this?
• In China, there were no possible acquisitions,
  and Diebold wanted access to local knowledge. A
  J-V gave them this.

8
Discussion Question 4

• Is Diebold pursuing a global standardization or a
  localization strategy?
• Diebold is pursuing a localizations strategy.
  The use of ATMs varies considerably by location.
• Do you think this choice of strategy has affected
  its choice of entry mode?
• Yes, entry mode was influenced by localization.
• How?
• The need for local knowledge was met by their
  acquisitions of partners.

9
Group Exercise

• You are a strategy consultant for one of the
  following companies
• Applied Materials
• TTM Technologies
• Sonic Solutions
• Microsemi
• Ceradyne, Inc
• Your job is to put together a plan for your
  company to expand internationally.

10
Questions to Consider

• What are your products? Who are your customers?
• Which market would you like to expand into?
• At what pace would you enter the market? Large
  scale entry of small scale entry?
• What mode of entry would you use? Exporting?
  Turnkey projects? Licensing? Franchising?
  Joint ventures? Wholly owned subsidiaries? Why?
• What are your core competences? How would you
  leverage your core competences in your market
  entry?
• If you decide to establish a wholly owned
  subsidiary, would you set up a Greenfield venture
  or make acquisitions?
• What kind, if any, of strategic alliances would
  you make?