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”

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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
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–
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–
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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
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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?