Shuntres L. Willis
Global Mkt. 3420
Dr. George Nakos
19 November 2012
Diebold

1. Why do you think Diebold choose this mode of expanding internationally? What were the advantages and disadvantages of this arrangement? Diebold was able to use Philips first and then IBMs distributions systems and gained knowledge about international markets, and reputation. By the 1970s and 1980s the growth of the Diebold was driven by the rapid expectance of ATM in the USA. The company initiated to sell ATM machines in foreign markets in the 1980s. Diebold forged a distribution agreement with the large Dutch multinational company Philips. With this agreement, Diebold manufactured ATMs in the United States and exported them to foreign customers after Philips had made the sale. Therefore, the company selects the entry mode of exporting which is usually the first step for a firm which intend expanded internationally. The advantage is a foreign consumer could trust IBM more easily than a brand of which it never heard of, and the disadvantage were that Diebold could not control the attention its products received from Philips and IBM. 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? Why do you think the company favored acquisitions as an entry mode? Diebold faced a saturated domestic market and increasing foreign demand, especially in developing countries like China, India and Brazil. Diebold established a joint venture with IBM rather than setting up its own international because the company felt that it lacked the resources to establish an international presence. Diebold’s switch from Philips to IBM as a distribution partner was driven by a belief that IBM would pursue ATM sales more aggressively. Diebold decide to make acquisitions than Green field investments in order to expand internationally. The acquisition of Brazil’s business gave to the company another perspective at global market. By 2003, Diebold was the global leader in the emerging market for electronic voting machines, with sales of more than $100 million. By acquiring an established enterprise, a firm can rapidly build its presence in the target foreign market. By acquisitions, it is satisfied the need for preemption the competition is particularly great in markets that are rapidly globalizing. Managers may believe acquisitions to be less risky than Greenfield ventures. When a firm makes an acquisition, it buys a set of assets that are producing a known revenue and profit stream. In contrast, the revenue and profit stream that a Greenfield venture might generate is uncertain because it does not yet exist. 3. Diebold entered China via a joint venture, as opposed to wholly owned subsidiary. Why do you think it did this? Diebold purchased IBM’s 30% stake in the Interbold joint venture. The acquisition was by the Diebold’s dissatisfaction with the IBM’s sales efforts, which often fell short of quota. Responsible for this problem was the IBM sales force. Diebold’s ATMs were just part of their product portfolio and not necessarily their top priority. Diebold felt that it could attain a greater market share if it gained direct control over distribution. Furthermore, the company believed that during the previous 15 years it had accumulated enough international business expertise to warrant going it alone. 4. Is Diebold pursuing a global standardization strategy or a localization strategy or a localization strategy? Do you think this choice of strategy has affected its choice of entry mode? Diebold’s managers decided that they would need a local manufacturing presence in a number of regions because local differences in the way ATMs are used required local customization of the product .As an example in Asia, many customers pay their utility bill with cash via ATMs. In order to attract customers Diebold had to design ATMs that both account and stacks of up to 100 currency notes and weed out counterfeits. By locating manufacturing close to key markets would help to facilitate local customization and drive forward sales.
SWOT Analysis for Diebold
Strengths
Powerful and Innovative products
Diversified product/service offering

Weakness
Declining Revenue in the U.S.
Operational inefficiency

Opportunities
Gaining demand for deposit automation solutions
High growth in ATMs business

Threats
Risk of international operations
Global economic conditions