The Strategy and Structure of International Business Discussion Section March 15, 2007 Brian Chen / Sanny Liao

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

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

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 IBM’s 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” Brazil’s Procomp Amazonia Industria Electronica France’s Groupe Bull Holland’s 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)?

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.

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.

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.

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.

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.

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?