Case study Report International Business – Global Online

Case study Report
International Business – Global Online
SOE 09402
This graded assessment accounts for 90% of your final grade and is based on the
Diebold case study. Read carefully the case study, questions, guidelines and
marking criteria found in your Moodle folder. Answer ALL questions.
Assessment Deadline – Friday 29th April 2016, 11.59pm (UK time).
Integrative Case Study - Diebold
For much of its 144-year history, Diebold Inc. did not worry much about international
business. As a premier name in bank vaults and then automated teller machines
(ATMs), the Ohio-based company found that it had its hands full focusing on U.S.
financial institutions. By the 1970s and 1980s, the company’s growth was been
driven by the rapid acceptance of ATM machines in the United States. The company
first started to sell ATM machines in foreign markets in the 1980s. Wary of going it
alone, Diebold forged a distribution agreement with the large Dutch multinational
electronics company Philips. Under the agreement, Diebold manufactured ATMs in
the United States and exported them to foreign customers after Philips had made the
sale.
In 1990, Diebold pulled out of the agreement with Philips and established a joint
venture with IBM, Interbold, for the research, development, and distribution of ATM
machines worldwide. Diebold, which owned a 70 percent stake in the joint venture,
supplied the machines, while IBM supplied the global marketing, sales, and service
functions. Diebold established a joint venture rather than setting up its own
international distribution system because the company believed it lacked the
resources to establish an international presence. In essence, Diebold was exporting
its machines via IBM’s distribution network. Diebold’s switch from Philips to IBM as a
distribution partner was driven by a belief that IBM would pursue ATM sales more
aggressively.
By 1997, foreign sales had grown from the single digits to more than 20 percent of
Diebold’s total revenues. While sales in the United States were slowing due to a
saturated domestic market, Diebold was seeing rapid growth in demand for ATMs in
a wide range of developed and developing markets. Particularly enticing were
countries such as China, India, and Brazil, where an emerging middle class was
starting to use the banking system in large numbers and demand for ATMs was
expected to surge. It was at this point that Diebold decided to take the plunge and
establish its own foreign distribution network.
As a first step, Diebold purchased IBM’s 30 percent stake in the Interbold joint
venture. In part, the acquisition was driven by Diebold’s dissatisfaction with IBM’s

sales efforts, which often fell short of quota. Part of the problem was that for IBM’s
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. The company also felt that during the prior
15 years it had accumulated enough international business expertise to warrant
going it alone.
Diebold’s managers decided that in addition to local distribution, they would need a
local manufacturing presence in a number of regions. Among the reasons for this
were local differences in the way ATMs are used, which required customization of
the product. In parts of Asia, for example, many customers pay their utility bills with
cash via ATMs. To gain market share Diebold had to design ATMs that both accept
and count stacks of up to 100 currency notes, and weed out counterfeits. In other
countries, ATMs perform multiple functions from filing tax returns to distributing
theatre tickets. Diebold believed that locating manufacturing close to key markets
would help facilitate local customization and drive forward sales.
To jump-start its international expansion, Diebold went on a foreign acquisition
binge. In 1999 it acquired Brazil’s Procomp Amazonia Industria Electronica, a Latin
American electronics company with sales of $400 million and a big presence in
ATMs. This was followed in quick succession by the acquisitions of the ATM units of
France’s Groupe Bull and Holland’s Getronics, both major players in Europe, for a
combined $160 million. In China, where no substantial indigenous competitors were
open to acquisition, Diebold established a manufacturing and distribution joint
venture in which it took a majority ownership position. The result; by 2002 Diebold
had a manufacturing presence in Asia, Europe, and Latin America as well as the
United States and distribution operations in some 80 nations; the majority of these
operations were wholly owned by Diebold. International sales accounted for some 41
percent of the company’s $2.11 billion in revenues in 2003 and were forecasted to
grow at double-digit rates.
Interestingly, the acquisition of Brazil’s Procomp also took Diebold into a new and
potentially lucrative global business. In addition to its ATM business, Procomp had
an electronic voting machine business. In 1999 Procomp won a $105 million
contract, the largest in Diebold’s history, to outfit Brazilian polling stations with
electronic voting terminals. Diebold’s management realized that this might become a
large global business. In 2001, Diebold expanded its presence in the electronic
voting business by acquiring Global Election Systems Inc., a U.S. company that
provides electronic voting technology for states and countries that want to upgrade
from traditional voting technology. By 2003, Diebold was the global leader in the
emerging global market for electronic voting machines, with sales of over $100
million.
(Taken from Hill, C. 2013, pp. 519-520)

Questions
1. As a senior manager with Diebold, carry out a critical evaluation of the
benefits, costs and risks associated with doing business in Brazil. (1000
words)

2. Diebold entered China via a joint venture, as opposed to a wholly owned
subsidiary. Critically evaluate this decision. (1000 words)

3. Diebold has decided to enter the Indian market through joint venture. Use
Geert Hofstede study on international workplace culture to compare and
contrast the cultures of India and United States. Discuss how the cultural
differences would influence business practices. (1000 words)

4. Debate the relative merits of fixed and floating exchange rate regimes. From
the perspective of Diebold, critically appraise the most important criteria in a
choice between the systems. (1000 words)

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